News Column

Tenneco Reports Second Quarter 2014 Results

July 28, 2014

  • Record quarterly revenue of $2.2 billion
  • Record second quarter EBIT of $156 million
  • EPS of $1.32 per diluted share

    LAKE FOREST, Ill.--(BUSINESS WIRE)-- Tenneco Inc. (NYSE: TEN) reported an increase in second quarter net income to $81 million, or $1.32 per diluted share, versus $63 million, or $1.02 per diluted share, in second quarter 2013. Excluding restructuring costs and a tax adjustment this quarter, net income increased 31% to $89 million, or $1.45 per diluted share, compared with $68 million, or $1.10 per diluted share a year ago. Improved results were driven by stronger production volumes, operational performance and a more favorable effective tax rate compared with last year.

    Revenue

    Tenneco’s total revenue in the second quarter increased 8% year-over-year to $2.241 billion, on higher revenue in both product lines with Clean Air revenue increasing 10% and Ride Performance up 6%. Excluding substrate sales and currency, total revenue was up 10% to $1.731 billion.

    Total revenue includes a 6% year-over-year increase in light vehicle OE revenue, a 27% increase in commercial truck and off-highway OE revenue, and a 4% increase in global aftermarket revenue.

    EBIT

    Second quarter EBIT (earnings before interest, taxes and noncontrolling interests) was $156 million, up 11% from $141 million in second quarter 2013. Adjusted EBIT increased 12% to $166 million, reflecting a 9% increase in Clean Air adjusted EBIT to $120 million, and a 29% increase in Ride Performance adjusted EBIT to $75 million.

    “We delivered another strong performance this quarter with well-balanced revenue growth across product lines, end-markets and geographies,” said Gregg Sherrill, chairman and CEO, Tenneco. “Our strategic imperatives for each product line and strong execution are driving this top-line growth and continued profitability improvement.”

    Adjusted second quarter 2014 and 2013 results

    (millions except per share amounts)   Q2 2014   Q2 2013
      EBITDA*   EBIT  

    Net income

    attributable to

    Tenneco Inc.

      Per Share EBITDA*   EBIT  

    Net income

    attributable to

    Tenneco Inc.

      Per Share
    Earnings Measures $ 208 $ 156 $ 81 $ 1.32 $ 191 $ 141 $ 63 $ 1.02
     
    Adjustments (reflects non-GAAP measures):
    Restructuring and related expenses 10 10 7 0.11 7 7 5 0.08
    Net tax adjustments - - 1 0.02 - - - -
     
                   
    Non-GAAP earnings measures $ 218 $ 166 $ 89 $ 1.45 $ 198 $ 148 $ 68 $ 1.10
    * EBITDA including noncontrolling interests (EBIT before depreciation and amortization)
    In addition to the items set forth above, the tables at the end of this press release reconcile GAAP to non-GAAP results.


    Second quarter 2014 adjustments

  • Restructuring and related expenses of $10 million pre-tax, or 11-cents per diluted share.
  • Tax adjustments of $1 million, or 2-cents per diluted share, for adjustments to prior year estimates.

    Second quarter 2013 adjustments

  • Restructuring and related expenses of $7 million pre-tax, or 8-cents per diluted share.

    EBIT Margin

    Tenneco improved its total adjusted EBIT as a percent of value-add revenue to 9.6%.

     

    Q2 2014

     

    Q2 2013

    EBIT as a percent of revenue 7.0% 6.8%
    EBIT as a percent of value-add revenue 9.0% 8.9%
     
    Adjusted EBIT as a percent of revenue 7.4% 7.2%
    Adjusted EBIT as a percent of value-add revenue 9.6% 9.4%


    In the quarter, Clean Air adjusted EBIT as a percent of value-add revenue was 11.7%, driven by stronger light and commercial truck and off-highway volumes, and including $7 million in higher engineering expense. Ride Performance margin was 10.7% due to higher light vehicle and commercial truck revenue in North America, cost savings related to the company's global product cost leadership initiative and strong aftermarket sales in North America and South America.

    Cash

    Cash generated by operations in the quarter was $114 million, versus $133 million a year ago, due to a greater use of cash for working capital investments.

    Capital expenditures in the quarter were $83 million, compared with $47 million in second quarter 2013. The year-over-year comparison included spending timing differences and higher investments to support Clean Air programs in Europe, China and North America.

    Outlook

    For the third quarter, global light vehicle production* is forecasted to increase 5% year-over-year in the regions where Tenneco operates. The increase includes a 9% increase in North America, 11% in China and 9% in India. Europe is forecasted to be flat, and South America is expected to decline 12%. Tenneco expects its light vehicle revenue in the third quarter to grow in line with the forecast for global industry light vehicle production.

    Significant growth will continue in Tenneco's commercial truck and off-highway business as revenue is expected to increase 20% to 25% in the third quarter against a strong year-over-year comparison. The company is launching new business and incremental content on existing platforms to meet off-highway regulations in North America and Europe and expects higher commercial truck revenue in China.

    The global aftermarket is expected to be steady with the third quarter of last year.

    “I am pleased with our performance in the first half of the year and expect volume strength and our manufacturing performance to continue driving profitable growth in the third quarter. We are capitalizing on a strong global light vehicle production environment, our commercial truck and off-highway business continues to expand with excellent growth, and we expect a solid contribution from the global aftermarket,” said Sherrill.

    *IHS and Tenneco July industry production 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

    CONFERENCE CALL

    The company will host a conference call on Monday, July 28, 2014 at 9:00 a.m. ET. The dial-in number is 888 664-9961 (domestic) or 517-308-9332 (international). The passcode is TENNECO. The call and accompanying slides will be available on the financial section of the Tenneco web site at www.tenneco.com. A recording of the call will be available one hour following completion of the call on July 28, 2014 through August 28, 2014. To access this recording, dial 888-445-8680 (domestic) or 203-369-3155(international). The purpose of the call is to discuss the company’s operations for the quarter, as well as other matters that may impact the company’s outlook. A copy of the press release is available on the financial and news sections of the Tenneco web site.

    Tenneco is an $8 billion global manufacturing company with headquarters in Lake Forest, Illinois and approximately 26,000 employees worldwide. Tenneco is one of the world’s largest designers, manufacturers and marketers of clean air and ride performance products and systems for automotive and commercial vehicle original equipment markets and the aftermarket. Tenneco’s principal brand names are Monroe®, Walker®, XNOx™ and Clevite®Elastomer.

    Revenue estimates in this release are based on OE manufacturers’ programs that have been formally awarded to the company; programs where Tenneco is highly confident that it will be awarded business based on informal customer indications consistent with past practices; Tenneco’s status as supplier for the existing program and its relationship with the customer; and the actual original equipment revenues achieved by the company for each of the last several years compared to the amount of those revenues that the company estimated it would generate at the beginning of each year.These revenue estimates are also based on anticipated vehicle production levels and pricing, including precious metals pricing and the impact of material cost changes.Currency is assumed to be constant at $1.33 per Euro throughout the entire period.For certain additional assumptions upon which these estimates are based, see the slides accompanying the July 28, 2014 conference call, which are available on the financial section of the Tenneco website at www.tenneco.com.

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

    (i) general economic, business and market conditions;

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

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

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

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

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

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

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

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

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

    (xi)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;

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

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

    (xiv) product warranty costs;

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

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

    (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, industrialand social condition, including, without limitation, with respect to supply chains and customer demand in the countries where the company operates; and

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

    The company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company's SEC filings, including but not limited to its report on Form 10-K for the year ended December 31, 2013.

    ATTACHMENT 1
    TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
    STATEMENTS OF INCOME

    Unaudited

    THREE MONTHS ENDED JUNE 30,
    (Millions except per share amounts)
     
     
    2014 2013
    Net sales and operating revenues
    Clean Air Division - Value-add revenues $ 1,026 $ 918
    Clean Air Division - Substrate sales 515 488
    Ride Performance Division - Value-add revenues   700     661  
    $ 2,241 $ 2,067
     
    Costs and expenses
    Cost of sales (exclusive of depreciation and amortization shown below) 1,851 (a) 1,736 (c)
    Engineering, research and development 42 (a) 33
    Selling, general and administrative 139 (a) 106 (c)
    Depreciation and amortization of other intangibles   52     50  
    Total costs and expenses   2,084     1,925  
     
    Loss on sale of receivables (1 ) (1 )
    Other income (expense)   -   (a)   -  
    Total other income (expense)   (1 )   (1 )
     

    Earnings before interest expense, income taxes, and noncontrolling interests

    Clean Air Division 115 (a) 107 (c)
    Ride Performance Division 70 (a) 56 (c)
    Other   (29 )   (22 ) (c)
    156 141
     
    Interest expense (net of interest capitalized)   19     20  
    Earnings before income taxes and noncontrolling interests 137 121
     
    Income tax expense   46   (b)   47  
    Net income 91 74
     
    Less: Net income attributable to noncontrolling interests   10     11  
    Net income attributable to Tenneco Inc. $ 81   $ 63  
     
     
    Weighted average common shares outstanding:
    Basic   60.7     60.5  
    Diluted   61.7     61.7  
     
    Earnings per share of common stock:
    Basic $ 1.34   $ 1.04  
    Diluted $ 1.32   $ 1.02  
    (a) Includes restructuring and related charges of $10 million pre-tax, $7 million after tax or $0.11 per diluted share. Of the adjustment, $5 million is recorded in cost of sales, $3 million is recorded in selling, general and administrative expenses, $1 million is recorded in engineering expenses and $1 million is recorded in other income (expense). $5 million is recorded in the Clean Air Division and $5 million is recorded in the Ride Performance Division.
     
    (b) Includes net tax adjustments of $1 million or $0.02 per diluted share for tax adjustments to prior year estimates.
     
    (c) Includes restructuring and related charges of $7 million pre-tax, $5 million after tax or $0.08 per diluted share. Of the adjustment, $4 million is recorded in cost of sales and $3 million is recorded in selling, general and administrative expenses. $3 million is recorded in the Clean Air Division, $2 million is recorded in the Ride Performance Division and $2 million is recorded in Other.


    ATTACHMENT 1
    TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
    STATEMENTS OF INCOME

    Unaudited

    SIX MONTHS ENDED JUNE 30,
    (Millions except per share amounts)
     
     
    2014 2013
    Net sales and operating revenues
    Clean Air Division - Value-add revenues $ 1,986 $ 1,760
    Clean Air Division - Substrate sales 999 942
    Ride Performance Division - Value-add revenues   1,350     1,268  
    $ 4,335 $ 3,970
     
    Costs and expenses
    Cost of sales (exclusive of depreciation and amortization shown below) 3,605 (a) 3,340 (c)
    Engineering, research and development 84 (a) 68
    Selling, general and administrative 271 (a) 225 (c)
    Depreciation and amortization of other intangibles   103     100  
    Total costs and expenses   4,063     3,733  
     
    Loss on sale of receivables (2 ) (2 )
    Other income (expense)   (1 ) (a)   (1 )
    Total other income (expense)   (3 )   (3 )
     

    Earnings before interest expense, income taxes, and noncontrolling interests

    Clean Air Division 200 (a) 182 (c)
    Ride Performance Division 123 (a) 95 (c)
    Other   (54 )   (43 ) (c)
    269 234
     
    Interest expense (net of interest capitalized)   38     40  
    Earnings before income taxes and noncontrolling interests 231 194
     
    Income tax expense   86   (b)   59   (d)
    Net income 145 135
     
    Less: Net income attributable to noncontrolling interests   18     18  
    Net income attributable to Tenneco Inc. $ 127   $ 117  
     
     
    Weighted average common shares outstanding:
    Basic   60.6     60.4  
    Diluted   61.6     61.5  
     
    Earnings per share of common stock:
    Basic $ 2.10   $ 1.94  
    Diluted $ 2.06   $ 1.91  
    (a) Includes restructuring and related charges of $20 million pre-tax, $17 million after tax or $0.28 per diluted share. Of the adjustment, $15 million is recorded in cost of sales, $3 million is recorded in selling, general and administrative expenses, $1 million is recorded in engineering expenses and $1 million is recorded in other income (expense). $13 million is recorded in the Clean Air Division and $7 million is recorded in the Ride Performance Division.
     
    (b) Includes net tax adjustments of $1 million or $0.02 per diluted share for tax adjustments to prior year estimates.
     
    (c) Includes restructuring and related charges of $11 million pre-tax, $8 million after tax or $0.12 per diluted share. Of the adjustment, $7 million is recorded in cost of sales and $4 million is recorded in selling, general and administrative expenses. $6 million is recorded in the Clean Air Division, $3 million is recorded in the Ride Performance Division and $2 million is recorded in Other.
     
    (d) Includes net tax benefits of $13 million or $0.20 per diluted share for tax adjustments to prior year estimates, primarily related to recognizing a U.S. tax benefit for foreign taxes.


    ATTACHMENT 1
    TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
    BALANCE SHEETS
    (Unaudited)
    (Millions)
       
    June 30, 2014December 31, 2013
     
    Assets
     
    Cash and cash equivalents $ 260 $ 275
     
    Restricted cash 5 5
     
    Receivables, net 1,358 (a) 1,060 (a)
     
    Inventories 761 656
     
    Other current assets 345 294
     
    Investments and other assets 357 365
     
    Plant, property, and equipment, net   1,231   1,175
     
    Total assets $ 4,317 $ 3,830
     
     
     
     
    Liabilities and Shareholders' Equity
     
    Short-term debt $ 91 $ 83
     
    Accounts payable 1,494 1,359
     
    Accrued taxes 41 40
     
    Accrued interest 10 10
     
    Other current liabilities 373 346
     
    Long-term debt 1,206 (b) 1,019 (b)
     
    Deferred income taxes 29 28
     
    Deferred credits and other liabilities 426 453
     
    Redeemable noncontrolling interests 22 20
     
    Tenneco Inc. shareholders' equity 589 433
     
    Noncontrolling interests   36   39
     

    Total liabilities, redeemable noncontrolling interests and shareholders' equity

    $ 4,317 $ 3,830
     
     
     
    June 30, 2014December 31, 2013
    (a) Accounts Receivables net of:
    Europe - Accounts receivables securitization programs $ 186 $ 134
     
    June 30, 2014December 31, 2013
    (b) Long term debt composed of:
    Borrowings against revolving credit facilities $ 208 $ 58
    Term loan A (Due 2017) 219 228
    7.75% senior notes (Due 2018) 225 225
    6.875% senior notes (Due 2020) 500 500
    Other long term debt 54 8
       
    $ 1,206 $ 1,019


      ATTACHMENT 1
    Tenneco Inc. and Consolidated Subsidiaries
    Statements of Cash Flows
    (Unaudited)
    (Millions)
     
     
     
    Three Months Ended
    June 30,
    20142013
     
    Operating activities:
    Net income $ 91 $ 74

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

    Depreciation and amortization of other intangibles 52 50
    Stock-based compensation 3 2
    Deferred income taxes (3 ) 21
    Loss on sale of assets 1 2
    Changes in components of working capital-
    (Inc.)/dec. in receivables (69 ) (77 )
    (Inc.)/dec. in inventories (23 ) 22
    (Inc.)/dec. in prepayments and other current assets (14 ) (32 )
    Inc./(dec.) in payables 73 72
    Inc./(dec.) in accrued taxes (5 ) (8 )
    Inc./(dec.) in accrued interest (4 ) (4 )
    Inc./(dec.) in other current liabilities 11 15
    Changes in long-term assets - 3
    Changes in long-term liabilities 3 (10 )
    Other   (2 )   3  
    Net cash provided by operating activities 114 133
     
    Investing activities:
    Cash payments for plant, property & equipment (84 ) (54 )
    Cash payments for software-related intangible assets (2 ) (6 )
    Change in restricted cash   1     4  
    Net cash used by investing activities   (85 )   (56 )
     
    Financing activities:
    Issuance of common shares 1 12
    Purchase of common stock under the share repurchase program - (2 )
    Tax benefit from stock-based compensation 5 -
    Issuance of long-term debt 45 -
    Retirement of long-term debt (7 ) (3 )
    Net inc./(dec.) in bank overdrafts (5 ) 44

     

    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

    (30 ) (84 )
    Net inc./(dec.) in short-term debt secured by accounts receivable (30 ) -
    Capital contribution from noncontrolling interest partner 4 -
    Distribution to noncontrolling interest partners   (23 )   (23 )
    Net cash used by financing activities   (40 )   (56 )
     

    Effect of foreign exchange rate changes on cash and cash equivalents

      4     (19 )
     
    Increase (Decrease) in cash and cash equivalents (7 ) 2
    Cash and cash equivalents, April 1   267     233  
    Cash and cash equivalents, June 30 $ 260   $ 235  
     
    Supplemental Cash Flow Information
    Cash paid during the period for interest (net of interest capitalized) $ 24 $ 23
    Cash paid during the period for income taxes (net of refunds) 53 46
     
    Non-cash Investing and Financing Activities
    Period ended balance of payables for plant, property, and equipment $ 39 $ 24


      ATTACHMENT 1
    Tenneco Inc. and Consolidated Subsidiaries
    Statements of Cash Flows
    (Unaudited)
    (Millions)
       
     
     
    Six Months Ended
    June 30,
    20142013
     
    Operating activities:
    Net income $ 145 $ 135

    Adjustments to reconcile net income to net cash provided (used) by operating activities -

    Depreciation and amortization of other intangibles 103 100
    Stock-based compensation 8 7
    Deferred income taxes (1 ) 16
    Loss on sale of assets 2 2
    Changes in components of working capital-
    (Inc.)/dec. in receivables (303 ) (253 )
    (Inc.)/dec. in inventories (104 ) (18 )
    (Inc.)/dec. in prepayments and other current assets (52 ) (81 )
    Inc./(dec.) in payables 160 149
    Inc./(dec.) in accrued taxes - (13 )
    Inc./(dec.) in accrued interest - -
    Inc./(dec.) in other current liabilities 24 7
    Changes in long-term assets 1 3
    Changes in long-term liabilities (10 ) (20 )
    Other   1     7  
    Net cash provided (used) by operating activities (26 ) 41
     
    Investing activities:
    Proceeds from sale of assets - 2
    Cash payments for plant, property & equipment (167 ) (124 )
    Cash payments for software-related intangible assets (9 ) (12 )
    Change in restricted cash   -     (5 )
    Net cash used by investing activities   (176 )   (139 )
     
    Financing activities:
    Issuance (Repurchase) of common shares (1 ) 13
    Purchase of common stock under the share repurchase program - (2 )
    Tax benefit from stock-based compensation 17 -
    Issuance of long-term debt 45 -
    Retirement of long-term debt (10 ) (8 )
    Net inc./(dec.) in bank overdrafts (1 ) 35

    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

    167 107
    Net inc./(dec.) in short-term debt secured by accounts receivable (10 ) -
    Capital contribution from noncontrolling interest partner 5 -
    Distribution to noncontrolling interest partners   (23 )   (23 )
    Net cash provided by financing activities   189     122  
     

    Effect of foreign exchange rate changes on cash and cash equivalents

      (2 )   (12 )
     
    Increase (Decrease) in cash and cash equivalents (15 ) 12
    Cash and cash equivalents, January 1   275     223  
    Cash and cash equivalents, June 30 $ 260   $ 235  
     
    Supplemental Cash Flow Information
    Cash paid during the period for interest (net of interest capitalized) $ 38 $ 39
    Cash paid during the period for income taxes (net of refunds) 74 71
     
    Non-cash Investing and Financing Activities
    Period ended balance of payables for plant, property, and equipment $ 39 $ 24


    ATTACHMENT 2

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

    Unaudited

    (Millions)
                         
     
    Q2 2014
    Clean Air Division Ride Performance Division
    North Europe, Asia North Europe, Asia
    America SA & India Pacific Total America SA & India Pacific Total Other Total
    Net income attributable to Tenneco Inc. $ 81
     
    Net income attributable to noncontrolling interests   10
     
    Net income 91
     
    Income tax expense 46
     
    Interest expense (net of interest capitalized)   19
     
    EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 74 $ 18 $ 23 $ 115 $ 48 $ 14 $ 8 $ 70 $ (29 ) 156
     
    Depreciation and amortization of other intangibles   17   11   5   33   8   9   2   19   -     52
     
    Total EBITDA including noncontrolling interests (2) $ 91 $ 29 $ 28 $ 148 $ 56 $ 23 $ 10 $ 89 $ (29 ) $ 208
     
     
    Q2 2013
    Clean Air Division Ride Performance Division
    North Europe, Asia North Europe, Asia
    America SA & India Pacific Total America SA & India Pacific Total Other Total
    Net income attributable to Tenneco Inc. $ 63
     
    Net income attributable to noncontrolling interests   11
     
    Net income 74
     
    Income tax expense 47
     
    Interest expense (net of interest capitalized)   20
     
    EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 68 $ 18 $ 21 $ 107 $ 36 $ 14 $ 6 $ 56 $ (22 ) 141
     
    Depreciation and amortization of other intangibles   15   11   5   31   8   9   2   19   -     50
     
    Total EBITDA including noncontrolling interests (2) $ 83 $ 29 $ 26 $ 138 $ 44 $ 23 $ 8 $ 75 $ (22 ) $ 191
     
    (1) Generally Accepted Accounting Principles
     
    (2) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA including noncontrolling interests is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance. In addition, Tenneco believes its investors utilize and analyze our EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.


    ATTACHMENT 2

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

    Unaudited

    (Millions except per share amounts)
                       
     
    Q2 2014 Q2 2013
    EBITDA (3) EBIT

    Net income

    attributable to

    Tenneco Inc.

    Per Share EBITDA (3) EBIT

    Net income

    attributable to

    Tenneco Inc.

    Per Share
    Earnings Measures $ 208 $ 156 $ 81 $ 1.32 $ 191 $ 141 $ 63 $ 1.02
     
    Adjustments (reflect non-GAAP measures):
    Restructuring and related expenses 10 10 7 0.11 7 7 5 0.08
    Net tax adjustments - - 1 0.02 - - - -
                   
    Non-GAAP earnings measures $ 218 $ 166 $ 89 $ 1.45 $ 198 $ 148 $ 68   $ 1.10
     
     
    Q2 2014
    Clean Air Division Ride Performance Division
    North Europe, Asia North Europe, Asia
    America SA & India Pacific Total America SA & India Pacific Total Other Total
    EBIT $ 74 $ 18 $ 23 $ 115 $ 48 $ 14 $ 8 $ 70 $ (29 ) $ 156
    Restructuring and related expenses   -   1   4   5   -   4   1   5   -     10
    Adjusted EBIT $ 74 $ 19 $ 27 $ 120 $ 48 $ 18 $ 9 $ 75 $ (29 ) $ 166
     
     
    Q2 2013
    Clean Air Division Ride Performance Division
    North Europe, Asia North Europe, Asia
    America SA & India Pacific Total America SA & India Pacific Total Other Total
    EBIT $ 68 $ 18 $ 21 $ 107 $ 36 $ 14 $ 6 $ 56 $ (22 ) $ 141
    Restructuring and related expenses   -   3   -   3   -   1   1   2   2     7
    Adjusted EBIT $ 68 $ 21 $ 21 $ 110 $ 36 $ 15 $ 7 $ 58 $ (20 ) $ 148
     
    (1) Generally Accepted Accounting Principles
     
    (2)Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company and other items impacting comparability between the periods. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business. The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period.
     
    (3) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA including noncontrolling interests is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance. In addition, Tenneco believes its investors utilize and analyze our EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.


    ATTACHMENT 2

    TENNECO INC.

    RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA INCLUDING NONCONTROLLING INTERESTS (2)

    Unaudited

    (Millions)
                         
     
    YTD 2014
    Clean Air Division Ride Performance Division
    North Europe, Asia North Europe, Asia
    America SA & India Pacific Total America SA & India Pacific Total Other Total
    Net income attributable to Tenneco Inc. $ 127
     
    Net income attributable to noncontrolling interests   18
     
    Net income 145
     
    Income tax expense 86
     
    Interest expense (net of interest capitalized)   38
     
    EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 130 $ 27 $ 43 $ 200 $ 78 $ 30 $ 15 $ 123 $ (54 ) 269
     
    Depreciation and amortization of other intangibles   33   23   10   66   16   18   3   37   -     103
     
    Total EBITDA including noncontrolling interests (2) $ 163 $ 50 $ 53 $ 266 $ 94 $ 48 $ 18 $ 160 $ (54 ) $ 372
     
     
    YTD 2013
    Clean Air Division Ride Performance Division
    North Europe, Asia North Europe, Asia
    America SA & India Pacific Total America SA & India Pacific Total Other Total
    Net income attributable to Tenneco Inc. $ 117
     
    Net income attributable to noncontrolling interests   18
     
    Net income 135
     
    Income tax expense 59
     
    Interest expense (net of interest capitalized)   40
     
    EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 117 $ 29 $ 36 $ 182 $ 61 $ 24 $ 10 $ 95 $ (43 ) 234
     
    Depreciation and amortization of other intangibles   30   21   10   61   16   19   4   39   -     100
     
    Total EBITDA including noncontrolling interests (2) $ 147 $ 50 $ 46 $ 243 $ 77 $ 43 $ 14 $ 134 $ (43 ) $ 334
     
    (1) Generally Accepted Accounting Principles
     
    (2) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA including noncontrolling interests is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance. In addition, Tenneco believes its investors utilize and analyze our EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.


    ATTACHMENT 2

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

    Unaudited

    (Millions except per share amounts)
                         
     
    YTD 2014 YTD 2013
    EBITDA (3) EBIT

    Net income

    attributable to

    Tenneco Inc.

    Per Share EBITDA (3) EBIT

    Net income

    attributable to

    Tenneco Inc.

    Per Share
    Earnings Measures $ 372 $ 269 $ 127 $ 2.06 $ 334 $ 234 $ 117 $ 1.91
     
    Adjustments (reflect non-GAAP measures):
    Restructuring and related expenses 20 20 17 0.28 11 11 8 0.12
    Net tax adjustments - - 1 0.02 - - (13 ) (0.20 )
                   
    Non-GAAP earnings measures $ 392 $ 289 $ 145 $ 2.36 $ 345 $ 245 $ 112   $ 1.83  
     
     
    YTD 2014
    Clean Air Division Ride Performance Division
    North Europe, Asia North Europe, Asia
    America SA & India Pacific Total America SA & India Pacific Total Other Total
    EBIT $ 130 $ 27 $ 43 $ 200 $ 78 $ 30 $ 15 $ 123 $ (54 ) $ 269
    Restructuring and related expenses   -   9   4   13   -   6   1   7   -     20  
    Adjusted EBIT $ 130 $ 36 $ 47 $ 213 $ 78 $ 36 $ 16 $ 130 $ (54 ) $ 289  
     
     
    YTD 2013
    Clean Air Division Ride Performance Division
    North Europe, Asia North Europe, Asia
    America SA & India Pacific Total America SA & India Pacific Total Other Total
    EBIT $ 117 $ 29 $ 36 $ 182 $ 61 $ 24 $ 10 $ 95 $ (43 ) $ 234
    Restructuring and related expenses   -   4   2   6   -   2   1   3   2     11  
    Adjusted EBIT $ 117 $ 33 $ 38 $ 188 $ 61 $ 26 $ 11 $ 98 $ (41 ) $ 245  
     
    (1) Generally Accepted Accounting Principles
     
    (2)Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company and other items impacting comparability between the periods. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business. The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period.
     
    (3) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA including noncontrolling interests is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance. In addition, Tenneco believes its investors utilize and analyze our EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.


    ATTACHMENT 2

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

    Unaudited

    (Millions)
               
    Q2 2014
    Currency Value-add
    Impact on Revenues
    Substrate Value-add Value-add excluding
    Revenues Sales Revenues Revenues Currency
    Clean Air Division
    North America $ 755 $ 285 $ 470 $ (1 ) $ 471
    Europe, South America & India 523 174 349 9 340
    Asia Pacific   263   56   207   (3 )   210
    Total Clean Air Division 1,541 515 1,026 5 1,021
     
    Ride Performance Division
    North America 364 - 364 (4 ) 368
    Europe, South America & India 280 - 280 (5 ) 285
    Asia Pacific   56   -   56   (1 )   57
    Total Ride Performance Division 700 - 700 (10 ) 710
     
    Total Tenneco Inc. $ 2,241 $ 515 $ 1,726 $ (5 ) $ 1,731
     
    Q2 2013
    Currency Value-add
    Impact on Revenues
    Substrate Value-add Value-add excluding
    Revenues Sales Revenues Revenues Currency
    Clean Air Division
    North America $ 687 $ 272 $ 415 $ - $ 415
    Europe, South America & India 516 184 332 - 332
    Asia Pacific   203   32   171   -     171
    Total Clean Air Division 1,406 488 918 - 918
     
    Ride Performance Division
    North America 324 - 324 - 324
    Europe, South America & India 281 - 281 - 281
    Asia Pacific   56   -   56   -     56
    Total Ride Performance Division 661 - 661 - 661
     
    Total Tenneco Inc. $ 2,067 $ 488 $ 1,579 $ -   $ 1,579
     
    (1) Generally Accepted Accounting Principles
     
    (2) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from the effects of doing business in currencies other than the U.S. dollar. Additionally, substrate sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Tenneco uses this information to analyze the trend in revenues before these factors. Tenneco believes investors find this information useful in understanding period to period comparisons in the company's revenues.


    ATTACHMENT 2

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

    Unaudited

    (Millions)
               
    YTD 2014
    Currency Value-add
    Impact on Revenues
    Substrate Value-add Value-add excluding
    Revenues Sales Revenues Revenues Currency
    Clean Air Division
    North America $ 1,453 $ 549 $ 904 $ (2 ) $ 906
    Europe, South America & India 1,029 346 683 8 675
    Asia Pacific   503   104   399   (3 )   402
    Total Clean Air Division 2,985 999 1,986 3 1,983
     
    Ride Performance Division
    North America 699 - 699 (8 ) 707
    Europe, South America & India 543 - 543 (20 ) 563
    Asia Pacific   108   -   108   (3 )   111
    Total Ride Performance Division 1,350 - 1,350 (31 ) 1,381
     
    Total Tenneco Inc. $ 4,335 $ 999 $ 3,336 $ (28 ) $ 3,364
     
    YTD 2013
    Currency Value-add
    Impact on Revenues
    Substrate Value-add Value-add excluding
    Revenues Sales Revenues Revenues Currency
    Clean Air Division
    North America $ 1,333 $ 532 $ 801 $ - $ 801
    Europe, South America & India 983 353 630 - 630
    Asia Pacific   386   57   329   -     329
    Total Clean Air Division 2,702 942 1,760 - 1,760
     
    Ride Performance Division
    North America 631 - 631 - 631
    Europe, South America & India 533 - 533 - 533
    Asia Pacific   104   -   104   -     104
    Total Ride Performance Division 1,268 - 1,268 - 1,268
     
    Total Tenneco Inc. $ 3,970 $ 942 $ 3,028 $ -   $ 3,028
     
    (1) Generally Accepted Accounting Principles
     
    (2) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from the effects of doing business in currencies other than the U.S. dollar. Additionally, substrate sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Tenneco uses this information to analyze the trend in revenues before these factors. Tenneco believes investors find this information useful in understanding period to period comparisons in the company's revenues.


    ATTACHMENT 2

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

    Unaudited

    (Millions except percents)
                 
    Q2 2014 vs. Q2 2013 $ Change and % Change Increase (Decrease)
    Revenues % Change

    Value-add

    Revenues

    Excluding

    Currency

    % Change
    Clean Air Division
    North America $ 68 10 % $ 56 13 %
    Europe, South America & India 7 1 % 8 2 %
    Asia Pacific   60   30 %   39 23 %
    Total Clean Air Division 135 10 % 103 11 %
     
    Ride Performance Division
    North America 40 12 % 44 14 %
    Europe, South America & India (1 ) 0 % 4 1 %
    Asia Pacific   -   0 %   1 2 %
    Total Ride Performance Division 39 6 % 49 7 %
     
    Total Tenneco Inc. $ 174 8 % $ 152 10 %
     
     
     
    YTD Q2 2014 vs. YTD Q2 2013 $ Change and % Change Increase (Decrease)
    Revenues % Change

    Value-add

    Revenues

    Excluding

    Currency

    % Change
    Clean Air Division
    North America $ 120 9 % $ 105 13 %
    Europe, South America & India 46 5 % 45 7 %
    Asia Pacific   117   30 %   73 22 %
    Total Clean Air Division 283 10 % 223 13 %
     
    Ride Performance Division
    North America 68 11 % 76 12 %
    Europe, South America & India 10 2 % 30 6 %
    Asia Pacific   4   4 %   7 7 %
    Total Ride Performance Division 82 6 % 113 9 %
     
    Total Tenneco Inc. $ 365 9 % $ 336 11 %


    ATTACHMENT 2

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

    Unaudited

    (Millions except ratios)
             
    Quarter Ended June 30,
     
    2014 2013
     
    Total debt $ 1,297 $ 1,278
     
    Total cash 265 240
       
    Debt net of cash balances (1) $ 1,032 $ 1,038
     
     
    Adjusted LTM EBITDA including noncontrolling interests (2) (3) $ 754 $ 651
     
    Ratio of debt net of cash balances to adjusted LTM EBITDA including noncontrolling interests (4) 1.4x 1.6x
     
     
     
     
    Q3 13 Q4 13 Q1 14 Q2 14 Q2 14 LTM
     
    Net income attributable to Tenneco Inc. $ 12 $ 54 $ 46 $ 81 $ 193
     
    Net income attributable to noncontrolling interests 10 11 8 10 39
     
    Income tax expense 30 33 40 46 149
     
    Interest expense (net of interest capitalized) 20 20 19 19 78
     
    EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) 72 118 113 156 459
     
    Depreciation and amortization of other intangibles 51 54 51 52 208
     
    Total EBITDA including noncontrolling interests (2) 123 172 164 208 667
     
    Restructuring and related expenses 58 9 10 10 87
             
    Total Adjusted EBITDA including noncontrolling interest (3) $ 181   $ 181 $ 174 $ 218 $ 754  
     
     
    Q3 12 Q4 12 Q1 13 Q2 13 Q2 13 LTM
     
    Net income attributable to Tenneco Inc. $ 125 $ 33 $ 54 $ 63 275
     
    Net income attributable to noncontrolling interests 7 8 7 11 33
     
    Income tax expense (benefit) (42 ) 22 12 47 39
     
    Interest expense (net of interest capitalized) 21 21 20 20 82
     
    EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) 111 84 93 141 429
     
    Depreciation and amortization of other intangibles 49 57 50 50 206
     
    Total EBITDA including noncontrolling interests (2) 160 141 143 191 635
     
    Restructuring and related expenses 7 3 4 7 21
     
    Pullman recoveries (5) (5 ) - - - (5 )
             
    Total Adjusted EBITDA including noncontrolling interest (3) $ 162   $ 144 $ 147 $ 198 $ 651  
     

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

     
    (2) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA including noncontrolling interests is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance. In addition, Tenneco believes its investors utilize and analyze our EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.
     
    (3) Adjusted EBITDA including noncontrolling interests is presented in order to reflect the results in a manner that allows a better understanding of operational activities separate from the financial impact of decisions made for the long term benefit of the company and other items impacting comparability between the periods. Similar adjustments to EBITDA including noncontrolling interests have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period.
     
    (4) Tenneco presents the above reconciliation of the ratio of debt net of cash to LTM adjusted EBITDA including noncontrolling interests to show trends that investors may find useful in understanding the company's ability to service its debt. For purposes of this calculation, LTM adjusted EBITDA including noncontrolling interests is used as an indicator of the company's performance and debt net of cash is presented as an indicator of our credit position and progress toward reducing our financial leverage. This reconciliation is provided as supplemental information and not intended to replace the company's existing covenant ratios or any other financial measures that investors may find useful in describing the company's financial position. See notes (1), (2) and (3) for a description of the limitations of using debt net of cash, EBITDA including noncontrolling interests and adjusted EBITDA including noncontrolling interests.
     
    (5) Benefit from property recoveries related to transactions originated by The Pullman Company before being acquired by Tenneco in 1996.


    ATTACHMENT 2

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

    Unaudited

    (Millions)
         
    Three Months Ended June 30,
     
    2014 2013
     
    Original equipment light vehicle revenues $ 1,577 $ 1,483
     
    Original equipment commercial truck, off-highway and other revenues 302 237
     
    Aftermarket revenues   362   347
     
    Net sales and operating revenues $ 2,241 $ 2,067
     
     
     
    Six Months Ended June 30,
     
    2014 2013
     
    Original equipment light vehicle revenues $ 3,085 $ 2,871
     
    Original equipment commercial truck, off-highway and other revenues 579 450
     
    Aftermarket revenues   671   649
     
    Net sales and operating revenues $ 4,335 $ 3,970
     

    (1) Generally Accepted Accounting Principles



    ATTACHMENT 2

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

    Unaudited

    (Millions except percents)
                         
     
    Q2 2014
    Clean Air Division Ride Performance Division
    North Europe, Asia North Europe, Asia
    America SA & India Pacific Total America SA & India Pacific Total Other Total
    Net sales and operating revenues $ 755 $ 523 $ 263 $ 1,541 $ 364 $ 280 $ 56 $ 700 $ - $ 2,241
     
    Less: Substrate sales 285 174 56 515 - - - - - 515
                       
    Value-add revenues $ 470   $ 349   $ 207   $ 1,026   $ 364   $ 280   $ 56   $ 700   $ -   $ 1,726  
     
    EBIT $ 74 $ 18 $ 23 $ 115 $ 48 $ 14 $ 8 $ 70 $ (29 ) $ 156
     
    EBIT as a % of revenue 9.8 % 3.4 % 8.7 % 7.5 % 13.2 % 5.0 % 14.3 % 10.0 % 7.0 %
    EBIT as a % of value-add revenue 15.7 % 5.2 % 11.1 % 11.2 % 13.2 % 5.0 % 14.3 % 10.0 % 9.0 %
     
    Adjusted EBIT $ 74 $ 19 $ 27 $ 120 $ 48 $ 18 $ 9 $ 75 $ (29 ) $ 166
     
    Adjusted EBIT as a % of revenue 9.8 % 3.6 % 10.3 % 7.8 % 13.2 % 6.4 % 16.1 % 10.7 % 7.4 %
    Adjusted EBIT as a % of value-add revenue 15.7 % 5.4 % 13.0 % 11.7 % 13.2 % 6.4 % 16.1 % 10.7 % 9.6 %
     
    Q2 2013
    Clean Air Division Ride Performance Division
    North Europe, Asia North Europe, Asia
    America SA & India   Pacific Total America SA & India Pacific Total Other Total
    Net sales and operating revenues $ 687 $ 516 $ 203 $ 1,406 $ 324 $ 281 $ 56 $ 661 $ - $ 2,067
     
    Less: Substrate sales 272 184 32 488 - - - - - 488
                       
    Value-add revenues $ 415   $ 332   $ 171   $ 918   $ 324   $ 281   $ 56   $ 661   $ -   $ 1,579  
     
    EBIT $ 68 $ 18 $ 21 $ 107 $ 36 $ 14 $ 6 $ 56 $ (22 ) $ 141
     
    EBIT as a % of revenue 9.9 % 3.5 % 10.3 % 7.6 % 11.1 % 5.0 % 10.7 % 8.5 % 6.8 %
    EBIT as a % of value-add revenue 16.4 % 5.4 % 12.3 % 11.7 % 11.1 % 5.0 % 10.7 % 8.5 % 8.9 %
     
    Adjusted EBIT $ 68 $ 21 $ 21 $ 110 $ 36 $ 15 $ 7 $ 58 $ (20 ) $ 148
     
    Adjusted EBIT as a % of revenue 9.9 % 4.1 % 10.3 % 7.8 % 11.1 % 5.3 % 12.5 % 8.8 % 7.2 %
    Adjusted EBIT as a % of value-add revenue 16.4 % 6.3 % 12.3 % 12.0 % 11.1 % 5.3 % 12.5 % 8.8 % 9.4 %
     
    (1) Generally Accepted Accounting Principles
     
    (2) Tenneco presents the above reconciliation of revenues in order to reflect EBIT as a percent of both total revenues and value-add revenues. Substrate sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Further, presenting EBIT as a percent of value-add revenue assists investors in evaluating our company's operational performance without the impact of such substrate sales.


    ATTACHMENT 2

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

    Unaudited

    (Millions except percents)
                         
     
    YTD 2014
    Clean Air Division Ride Performance Division
    North Europe, Asia North Europe, Asia
    America SA & India Pacific Total America SA & India Pacific Total Other Total
    Net sales and operating revenues $ 1,453 $ 1,029 $ 503 $ 2,985 $ 699 $ 543 $ 108 $ 1,350 $ - $ 4,335
     
    Less: Substrate sales 549 346 104 999 - - - - - 999
                       
    Value-add revenues $ 904   $ 683   $ 399   $ 1,986   $ 699   $ 543   $ 108   $ 1,350   $ -   $ 3,336  
     
    EBIT $ 130 $ 27 $ 43 $ 200 $ 78 $ 30 $ 15 $ 123 $ (54 ) $ 269
     
    EBIT as a % of revenue 8.9 % 2.6 % 8.5 % 6.7 % 11.2 % 5.5 % 13.9 % 9.1 % 6.2 %
    EBIT as a % of value-add revenue 14.4 % 4.0 % 10.8 % 10.1 % 11.2 % 5.5 % 13.9 % 9.1 % 8.1 %
     
    Adjusted EBIT $ 130 $ 36 $ 47 $ 213 $ 78 $ 36 $ 16 $ 130 $ (54 ) $ 289
     
    Adjusted EBIT as a % of revenue 8.9 % 3.5 % 9.3 % 7.1 % 11.2 % 6.6 % 14.8 % 9.6 % 6.7 %
    Adjusted EBIT as a % of value-add revenue 14.4 % 5.3 % 11.8 % 10.7 % 11.2 % 6.6 % 14.8 % 9.6 % 8.7 %
     
    YTD 2013
    Clean Air Division Ride Performance Division
    North Europe, Asia North Europe, Asia
    America SA & India Pacific Total America SA & India Pacific Total Other Total
    Net sales and operating revenues $ 1,333 $ 983 $ 386 $ 2,702 $ 631 $ 533 $ 104 $ 1,268 $ - $ 3,970
     
    Less: Substrate sales 532 353 57 942 - - - - - 942
                       
    Value-add revenues $ 801   $ 630   $ 329   $ 1,760   $ 631   $ 533   $ 104   $ 1,268   $ -   $ 3,028  
     
    EBIT $ 117 $ 29 $ 36 $ 182 $ 61 $ 24 $ 10 $ 95 $ (43 ) $ 234
     
    EBIT as a % of revenue 8.8 % 3.0 % 9.3 % 6.7 % 9.7 % 4.5 % 9.6 % 7.5 % 5.9 %
    EBIT as a % of value-add revenue 14.6 % 4.6 % 10.9 % 10.3 % 9.7 % 4.5 % 9.6 % 7.5 % 7.7 %
     
    Adjusted EBIT $ 117 $ 33 $ 38 $ 188 $ 61 $ 26 $ 11 $ 98 $ (41 ) $ 245
     
    Adjusted EBIT as a % of revenue 8.8 % 3.4 % 9.8 % 7.0 % 9.7 % 4.9 % 10.6 % 7.7 % 6.2 %
    Adjusted EBIT as a % of value-add revenue 14.6 % 5.2 % 11.6 % 10.7 % 9.7 % 4.9 % 10.6 % 7.7 % 8.1 %
     
    (1) Generally Accepted Accounting Principles
     
    (2) Tenneco presents the above reconciliation of revenues in order to reflect EBIT as a percent of both total revenues and value-add revenues. Substrate sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Further, presenting EBIT as a percent of value-add revenue assists investors in evaluating our company's operational performance without the impact of such substrate sales.





    Tenneco Inc.

    Media inquiries

    Bill Dawson, 847-482-5807

    bdawson@tenneco.com

    or

    Investor inquiries

    Linae Golla, 847-482-5162

    lgolla@tenneco.com

    Source: Tenneco Inc.


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