39
Title of Presentation in This SpaceSpeaker Name or Date in This AreaSpeaker Title or Location in This Area
Alternate area for Month XX, 2013Alternate area for Location
Title of Presentation in This SpaceSpeaker Name or Date in This AreaSpeaker Title or Location in This Area
Alternate area for Month XX, 2013Alternate area for Location
4
This presentation contains confidential information regarding Tenneco Inc. By reviewing this information, the participants agree to treat the information confidentially, not to distribute it and not to use it for any purpose other than evaluating Tenneco Inc. as a potential supplier.
Please see the safe harbor statement and the tables that reconcile GAAP results with non-GAAP results in Tenneco’s corresponding financial results press release, which is incorporated herein by reference.
Confidentiality, Safe Harbor and Non-GAAP Results
5
Clean Airby segment
Global Supplier of Emission and Ride Control Systems
Tenneco Overview
2012 Revenue – $7.4 billion
Ride Performanceby segment
$4.9 billion $2.5 billion
6
‐
Customers - Markets- Geographies - Products
- Solutions to meet emissions regulations- Vehicle ride & handling performance
- Executing with discipline
- Strong alignment globally- Strength at all levels- Talented and dedicated- Passion for winning
• Balance
• Product Technology
• Operational Excellence
• Our People
Tenneco Strengths
Tenneco Strengths
- Customers - Markets- Geographies - Products
- Solutions to meet emissions regulations- Vehicle ride & handling performance
- Executing with discipline
- Strong alignment globally- Strength at all levels- Talented and dedicated- Passion for winning
• Balance
• Product Technology
• Operational Excellence
• Our People
7
HeadquartersEmission Control ManufacturingRide Control ManufacturingEmission Control EngineeringRide Control Engineering
8
Nearly 25,000 employees serving customers globally from 89 manufacturing facilities and 14 engineering and technical centers
Tenneco Global Operations
• 1. 16.9% • 11. 1.8%
• 2. 14.6% • 12. 1.7%
• 3. 7.6% • 13. 1.6%
• 4. 6.2% • 14. 1.6%
• 5. 4.4% • 15. 1.4%
• 6. 3.0% • 16. 1.2%
• 7. 2.6% • 17. 1.2%
• 8. 2.6% • 18. 1.1%
• 9. 2.2% • 19. 1.0%
• 10. 1.9% • 20. 1.0%
9
As a % of Total 2012 Revenues
Balanced Customer Mix
• OE Customer • AM Customer
10
Diversified Platform Mix
As a % of Total 2012 Revenues
EC - Emission Control RC - Ride Control EL - Elastomers
Top 10 Platforms
32%
Full-Year 2012 Results
11
FY 2012 FY 2011 B/(W) % Change
Revenues 7,363 7,205 158 2%
Value-Add Revenue 5,703 5,527 176 3%
SGA&E (% of Sales) 7.5% 7.8% 0.3% 4%
Adjusted EBIT † 443 398 45 11%
Adjusted EBIT † (% of VA Revenue) 7.8% 7.2% 0.6% 8%
Adjusted EBITDA *† 641 605 36 6%
Adjusted Net Income † 203 163 40 25%
Adjusted EPS ($) † 3.32 2.66 0.66 25%
Cash Flow From Operations 370 245 125 51%
Net Debt / Adjusted EBITDA*† 1.5x 1.7x 0.2x 12%* Including noncontrolling interests. † Adjusted for restructuring activities, asset impairment charge, Pullman property recoveries, goodwill impairment charge, costs related to refinancing and tax adjustments. See reconciliations to U.S. GAAP at end of presentation.
$ Millions, except as noted
12
Product Line Focused Strategic Imperatives
STRATEGIC IMPERATIVES
A COMMON FOUNDATION
PROFITABLEGROWTH
CLEAN AIR• Global regulatory expertise• Foundation in core sciences• Total systems integration• Cost-effective global market
solutions– Light vehicle– Commercial vehicle– Large engines
• China specific solutions• Large platform lifecycle services
RIDE PERFORMANCE• Product cost leadership• Superior functionality• Advanced technology• Vehicle dynamics / integrated
systems expertise• NVH solutions provider• Leading aftermarket brands
Healthier Lives Smoother, Quieter, Safer Transportation
Operational Excellence
Financial Strength
• Safety and quality• Tenneco Manufacturing System• Global business processes / capabilities• Optimized global footprint• Strategic supplier partnerships
• Earnings growth• Cash flow• EVA• Balance sheet strength
13
2012 Global Emission Control Business ($ millions)
Clean Air Division
Revenue $4,926
Adjusted EBIT $334
Value-Add Revenue*NA $ 1,509
ESI $ 1,156
AP $ 601
$ 3,266
Strategic Imperatives• Global regulatory expertise• Foundation in core sciences• Total systems integration• Cost-effective global market
solutions– Light vehicle– Commercial vehicle– Large engines
• China specific solutions• Large platform lifecycle services
See reconciliations to U.S. GAAP at end of presentation.
North America #1Europe #2China #2South America #3
OE Light Vehicle Market Positions**
* Value-add revenue is total revenue less substrate sales. See slide 35 for further explanation.
** Tenneco estimates for 2011
2009 2010 2011 2012 2013 2014 2015 2016 2017U.S. US-10 CVS
On-HighwayMotorcycle Rule Tier 2
US Off-Road Tier 4i*
CA CVS Retrofit* R.I.C.E. StationaryUS revised NAAQS
US Off-Road Diesel Tier 4f*Locomotive & Marine Tier 4* CA LEV IIIUS Utility MACT
US Fed Tier 3LVS *,**
Marine Annex VI Tier III
US Fed Tier 3Light Truck *,**
NSPS Stationary NOx**
EUROPE Euro-5 LVS NL Marine OE / Retrofit PM 2.5 & NO2 limits
EU Off-Road Stage 3BEU CO2 / GHG 120g PM # LVS
Motorcycle Euro 4
Euro-6 CVSEU Sound regulation
EU Off-RoadStage 4Euro-6 LVS
Motorcycle Euro 5**
Marine Annex VI Tier III
Euro-6 LVS Final PM#
CHINA Beijing CVS Yellow Label
Euro-4 LVS Euro-5 LVS Euro-4 CVSBeijing Euro-5 CVS
Tier 4i Off-RoadMajor cities**
Euro-5 CVS** Marine Annex VI Tier III
JAPAN Japan-09LVS / CVS
NOx reductionsLVS
JP-13 CVS Marine Annex VI Tier III
JP-16 CVS*
BRAZIL US Tier 2 LVS*Motorcycle Rule*
Euro-5 CVS Euro-6 CVS**
RUSSIA Euro-4 LVS / CVS
Euro-5 LVS/CVS
INDIA Euro-4 LVSMotorcycle Rule*
Euro-4 CVS 11 Cities
Euro-5 CVS**
Stricter Emission Regulations
14
Global Emissions Regulation TimelineCVS - Commercial Vehicle Systems LVS - Light Vehicle Systems * Phased in ** Estimated date
Unprecedented Speed of Change
15
2010 2011 2012 2013 2014 2015 2016 2017Off-Road DieselOxidation Catalyst & DPF························Off-Road Emissions Module························
Fuel Vaporizer······················Fabricated Diesel Manifold······················Retrofit Marine Aftertreatment······················Electronic Exhaust Valve······················Gen 3 Urea Dosing System······················Enhanced 32 bit ECU······················
3 Layer Manifold·························Hydrocarbon Lean NOx Catalyst························Low Backpressure Valve Muffler························Exhaust Gas Heat Exchanger························· ·CVS Vaporizer························T.R.U.E.-Clean®
Mini·························
Euro VI CVS On-Road AftertreatmentSystem·························Stationary Engine Aftertreatment··························Common Rail Urea Dosing System·························SOLID SCRTM
·························Air-Assisted Dosing System·························Integrated Manifold & Turbocharger·························Tier 4 Locomotive Aftertreatment·························
Multiwrap Converter························Gasoline Particulate Filter························
Low Pressure EGR Valve························Combined DPF / SCR Catalyst························Emissions Air Pump·························Hydrocarbon Trap························
Marine SCR System······················Marine DeSOx System······················CVS Fabricated Manifold······················In-tank SCR Dosing Module······················Waste Heat Recovery Generator······················TENNECO Signature Sound System (TS3)························
Large Diameter SCR (24”-30”)······················Rankine Cycle Waste Heat Recovery······················Low Temp deNOx Catalysts······················LEV3 / Tier 3 Diesel Aftertreatment······················D-EGR Manifold······················Pre-Turbo Catalyst······················
Technology Roadmap
In development – production ready in 2014-2017
Regulatory-Driven Clean Air Product Pipeline
In production or production ready
16
Technologies to Meet Evolving Light Vehicle Powertrain Needs
Improving Fuel Economy
Micro, Mild, Full, Plug-in
• Catalytic converter systems• Ultra-thin substrate
converters• Semi-active muffler
valve technology• Fabricated manifolds• Lightweight mufflers
and thin-wall pipes
• Catalytic converter systems
• Ultra-thin substrate converters
• Semi-active muffler valve technology
• Fabricated manifolds• Lightweight mufflers
and thin-wall pipes• Gasoline particulate filters• Heat exchangers• HC-LNC for Lean GDI
• Catalytic converter systems
• Ultra-thin substrate converters
• Diesel aftertreatment• Semi-active muffler
valve technology• Fabricated manifolds• Lightweight mufflers
and thin-wall pipes• Heat exchangers
Gasoline Gas DirectInjection Diesel Gas & Diesel
Hybrids
• Diesel particulate filters• Diesel oxidation catalysts• Selective catalytic
reduction and HC-LNC • NOx adsorber• Fabricated manifolds• Lightweight mufflers
and thin-wall pipes• Heat exchangers• Vaporizers• Electronic valves and
piping for exhaust gas recirculation
Cost-Effective Global Market Solutions
17
Light Vehicle
Large Platform
Commercial Vehicle
18
Migrating Diesel Aftertreatment Expertise
North AmericaOn-Road beginning 2007• Chrysler • General Motors• Ford• Navistar
Off-Road beginning 2011• Caterpillar / Perkins • Deere
EuropeOn-Road beginning 2004• Daimler Trucks• Scania
Off-Road beginning 2011• Caterpillar / Perkins • Deere• Deutz• MAN• Scania• Customer D
BrazilOn-Road beginning 2012• Daimler Trucks • MAN• MWM (Navistar subsidiary)• Scania
IndiaOn-Road beginning 2012• Mahindra• Tata Motors
ChinaOn-Road beginning 2009• China National
Heavy-Duty Truck Co.• FAW• Shanghai Diesel
Engine Co.• YuChai• Customer B
South KoreaOn-Road beginning 2012• Bus manufacturer –
Exported from MWM in Brazil
JapanOn-Road beginning 2011• Caterpillar / Perkins –
Exported from N. America• Kubota
China Specific Solutions
• Aftertreatment solutions tailored for the China market– Sulfur content in fuel– Duty cycle differences– Durability requirements– Cold start
• Utilizing China’s Clean Air technology centers to design aftertreatment solutions to address China market requirements
• Applicability beyond China market for aftertreatment solutions• Opening new large engine aftertreatment technical center in China
– China on-road commercial vehicle needs– Eventual regulation of off-road commercial vehicles and locomotives– Geographic proximity to marine vessel production
19
Tenneco – THE Clean Air Company
Future Market Vision by 2025
• Estimated original equipment market for Clean Air is $100 billionΔ
by 2025
20
Δ
Based on third party analysis and Tenneco estimates
Large Application OE and Lifetime Parts & Services Market Δ
OE Revenue Post-OE Revenue
Emission Control Market
• Average service life for locomotive, marine and stationary engines is 35 to 50 years
– Opportunity for a lifecycle services and parts business in support of our customers
21
2012 Global Ride Control Business ($ millions)
Ride Performance Division
Revenue $2,437
Adjusted EBIT $176
Strategic Imperatives• Product cost leadership• Superior functionality• Advanced technology• Vehicle dynamics / integrated
systems expertise• NVH solutions provider• Leading aftermarket brand
See reconciliations to U.S. GAAP at end of presentation.
North America #1Europe #1South America #2
OE Light Vehicle Market Positions**
** Tenneco estimates for 2011
Product Cost Leadership
• Customers demand highly engineered shocks and struts– Specific to platform ride and handling targets– Often more than one variant per platform
• Challenging pricing environment for highly engineered product
• Tenneco manufactures more than 80 million conventional shocks and struts annually
• Strategic focus on product cost innovation will drive significant opportunity for shareholder value creation
22
Strategic focus on product cost innovation
2323
Advanced Technologies
• Targeting substantial portion of CES benefits for broader market
• Lower total system cost – no dedicated ECU required
• Improved packaging and reduced power consumption
• Production ready in 2015
• Fully-active suspension with ultimate comfort and excellent handling
• Awarded “Innovation of the Year” in 2012 from Vehicle Dynamics International magazine for our ACOCARTM active suspension system
• In testing with several OEMs• Production ready in 2016
Continuously Controlled Electronic Suspension (CES †)Continuously Controlled Electronic Suspension (CES †) Kinetic® + CES (H2CES)Kinetic® + CES (H2CES)
Actively COntrolled CAR (ACOCARTM)Actively COntrolled CAR (ACOCARTM)DRiV TM Digital ValveDRiV TM Digital Valve
IN DEVELOPMENTIN DEVELOPMENT
IN PRODUCTION IN PRODUCTION
• Combination of Kinetic® and CESKinetic® – Independent corner control with a more neutral steering behaviorCES – Semi-active body and wheel hop control with a better compromise between handling and comfort
• Debuted on the McLaren MP4-12C• Awarded “Supplier of the Year” in 2011 from Vehicle
Dynamics International magazine for our Kinetic® H2/CES semi-active suspension
• In testing with other manufacturers
• Continue to win and launch new CES business– In production on 37 models with multiple customers
including Volvo, Audi, Ford Europe, Mercedes / AMG, Volkswagen, BMW
– In development with 9 additional models
• Selling price is about 4-6 times price for a standard shock
†CES is a registered trademark of Ohlins Racing AB CORPORATION SWEDEN. All other trademarks, service marks and logos used herein are the trademarks, service marks, or logos of their respective owners.
2010 2011 2012 2013 2014 2015 2016 2017Plastic Spring Seat························ Kinetic® H2 CES† Combo························ Lightweight Aluminum Tube························
Variable TubeThickness························Velocity Progressive Seat Dampers························
Thin Wall Lightweight Monotube························ CES II External Valve························ Aluminum Dual Tube Seat Damper························ Kinetic® H2 CES with hydraulic leveling························
CVS Double Path Mount (Cab Shock)························Motorbike Electronic Shock························Improved Monotube (Low Temperature) ·······················Global Hydraulic Rebound Stop·······················New Double Tube Base Valve························Global BOCS Valve ·······················
FSD Valving System························35mm LCV Strut························New CVS 45mm Shock························RC2 (Bi- directional Frequency Selective Damping)························ Integrated Height Valve for Cab Shocks························Dual Valve Semi-active Damper························
Aluminum Dual Tube Automotive Damper······················· DRiVTM Digital Valve·······················DRiVTM Cab Shock························Dual ModeInternal Valve························
Semi-activeInternal Valve························ACOCARTM
Full ActiveSuspensionSystem························Low Cost Auto Leveling ························Ultra Low CostDamper for LCC························
Active Suspension with Energy Recuperation························IntelligentSuspension System with Vision························Dual Range Damping System························
24
Ride Performance Product Pipeline
† CES is a registered trademark of Öhlins Racing AB CORPORATION SWEDEN. All other trademarks, service marks and logos used herein are the trademarks, service marks, or logos of their respective owners.
In development – production ready in 2014-2017
Technology Roadmap
In production or production ready
NVH Solutions Provider
Our elastomers business offers a complete line of noise, vibration and harshness control products – driving customer satisfaction• Strategies
– Develop differentiated products for light and commercial vehicles– Retain and grow business, leveraging existing customer base– Implement globally integrated approach for product sourcing and customer
expansion• Example of solutions – HydroelasticTM Body Mount
25
– A new-to-industry device utilizing both fluid hydraulics and elastomeric deflection properties to minimize transmission of frame-to-body oscillations
– 10x damping of a conventional mount
Five-Year OE Revenue Growth
Total OE Revenue Projection† (as of Feb. 2013)
Light VehicleCommercial Vehicle & Specialty (CV&S)Total OE Revenue (2015-2017)
† See slide 33 for a discussion of key assumptions on which our revenue projections are based.
* Percent of Total OE Revenue
Substrate – % of Total OE Revenue 27% 28% 27% 27% 28% 28% 28% 28%
• U.S.Tier 4i Off-road Tier 4f Off-road U.S. Fed Tier 3
Locomotive & Marine Tier 4
• EuropeStage 3B Off-road Stage 4 Off-road
Euro-6 On-road
• China Euro-4On-road
Euro-5 On-road
• Brazil Euro-5 On-road
• Global Treaty Marine Annex VI Tier III
Significant Regulation Phase-in:
$ in billions
Industry light vehicle production forecast through 2017 †
5yr CAGR - 5%
Tenneco OE Revenue †
projection through 2017 5yr CAGR - 10%-12%
2013 capital spending expected to be $260 million - $270 million
Leading Aftermarket Brands
• Tenneco’s brand management, marketing and distribution expertise have resulted in leading aftermarket ride performance market shares
• Leveraging knowledge and capability as car parc grows in new regions– Opportunity to add to our
aftermarket success
27
#1
#1 #1
Tenneco – THE Ride Performance Company
28
Tenneco Manufacturing System (T.M.S.)
TM
• Highly focused on global manufacturing performance– Safety – Process driven quality– Process efficiency – Inventory management
• T.M.S. University Plants in all operating regions– Structured to drive focused development of core competencies
and standardization– Leverage operational leadership and best practices
• Standardization of global processes are key to our success
– Global platform management – Industrialization of new technologies– Supplier management – Total capital efficiency
Driving Consistency Across Global Operations
Over $50 million – Process Excellence
savings in 2011 (Lean and Six Sigma)
29
Health & Safety Strategy
Key elements of Global Safety Management System• T.M.S.S. – Tenneco Machine Safeguarding Standard
– A.U.T.O. (danger zone protection)– Control reliable safety systems – All machines undergo a detailed risk assessment
• Behavioral Safety Process– Peer-to-peer observations to change at-risk behaviors
• HEC – Hazardous Energy Control– Zero tolerance for knowingly circumventing lockout and tag procedure
• Ergonomics– Applied ergo and Engineering Design Guidelines for Engineers (EDGE)
Create an Injury-free Career for All Employees
Operational Excellence – 2012 Update
Safety• Safety is our key priority globally• Total Case Rate (TCR) measures the number of injuries per
100 workers in a year• Focus results in benchmarkable performance• Renewed focus on Behavioral Safety Initiative• 1.17 TCR for 2012 is record low and approaching
world-class (1.0)• Overall, 27% decline in total injury rate from 2011, nearly
60% decline since 2008
Quality• PPM measures the number of defective Parts Per Million
shipped to a customer• Progress attributed to Business Operating System,
linked tightly to the Tenneco Manufacturing System, Six Sigma, Lean tools
• Drivers include standard processes, design improvements, mistake proofing, supplier management
30
* Source: U.S. Bureau of Labor Statistics, NAICS code 3363 – motor vehicle parts manufacturing.
Global Total Case Rate
Global Customer PPM
1.171.62.02.32.73.03.93.4
8.1
5.25.65.26.2
6.97.1
2005 2006 2007 2008 2009 2010 2011 2012
Tenneco TCR U. S. Industry Average*
161
8662
17 1435 34
62
2005 2006 2007 2008 2009 2010 2011 2012
Summary
• History of growth, profitability and deleveraging• Clean Air regulations and technology drive growth opportunities
– Light vehicle content and market share growth– Content and market share growth in on-road and off-road commercial vehicles, and locomotive,
marine and stationary engines – Content and volume growth in emerging markets
• Market leading Ride Performance business– Product cost leadership leveraging scale of business– Semi-active and active damping technologies
• Sound business model with geographic, customer, end-market, product and platform balance
– Leading supplier of Clean Air and Ride Performance products and systems– No. 1 aftermarket supplier driven by leading brands
• Strong operational capabilities and manufacturing footprint• Demonstrated commitment to balance sheet strength and financial stability• Experienced management team
31
32
Tenneco’s OE Revenue Projections
Tenneco’s revenue projections are as of February 2013, and the company does not otherwise intend to update these projections until February 2014. Revenue assumptions are based on projected customer production schedules, IHS Automotive January 2013 forecasts and Power Systems Research January 2013 forecasts. Our currency assumption is $1.27/€ for all years in our projection.
In addition to the information set forth on this slide and slide 26, Tenneco’s OE revenue projections are based on the type of information set forth under “Outlook” in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as set forth in Tenneco’s Annual Report on Form 10-K for the year ended December 31, 2012. Please see that disclosure for further information. Key additional assumptions and limitations described in that disclosure include:
• Revenue projections are based on original equipment manufacturers’ programs that have been formally awarded to the company; programs where the company 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.
• Revenue projections are based on the anticipated pricing of each program over its life.
• Revenue projections assume a fixed foreign currency value. This value is used to translate foreign business to the U.S. dollar.
• Revenue projections are subject to increase or decrease due to changes in customer requirements, customer and consumer preferences, the number of vehicles actually produced by our customers, pricing and foreign currency.
33
34
• Use of Non-GAAP Financial InformationIn addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”) included in this presentation, the company has provided information regarding certain non-GAAP financial measures. These measures include Earnings Before Interest Expense, Income Taxes, Noncontrolling Interests and Depreciation and Amortization (“EBITDA*”), Adjusted EBITDA*, Adjusted Earnings Before Interest Expense, Income Taxes and Noncontrolling Interests (“Adjusted EBIT”), Adjusted Net Income and Adjusted Earnings Per Share.
Reconciliations of these non-GAAP financial measures to the comparable GAAP measure are included in this presentation.
* Including noncontrolling interests.
Financial Results Disclaimer
35
Segment Financials –Reconciliation of Non-GAAP Results
(1) 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 this factor. Tenneco believes investors find this information useful in understanding period to period comparisons in the company's revenues.
(2) Generally Accepted Accounting Principles(3) 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.
$ Millions, Unaudited FY 2012
Clean Air Division Ride Performance DivisionNorth
AmericaEurope
SA & IndiaAsia
Pacific TotalNorth
AmericaEurope
SA & IndiaAsia
Pacific Total Other Total
Total Revenue $ 2,506 $ 1,726 $ 694 $ 4,926 $ 1,213 $ 1,041 $ 183 $ 2,437 $ - $ 7,363
Less: Substrate sales 997 570 93 1,660 - - - - - 1,660
Value-add revenue(1) $ 1,509 $ 1,156 $ 601 $ 3,266 $ 1,213 $ 1,041 $ 183 $ 2,437 $ - $ 5,703
EBIT $ 202 $ 54 $ 71 $ 327 $ 122 $ 41 $ 5 $ 168 $ (67) $ 428
Adjustments (reflect non-GAAP(2) measures)Restructuring and related expenses - 7 - 7 1 5 - 6 - 13
Asset impairment charge - - - - - 7 - 7 - 7
Pullman recoveries - - - - (5) - - (5) - (5)
Adjusted EBIT (non-GAAP Financial Measures)(3) $ 202 $ 61 $ 71 $ 334 $ 118 $ 53 $ 5 $ 176 $ (67) $ 443
36
FY 12 FY 11
Net income attributable to Tenneco Inc. $ 275 $ 157
Net income attributable to noncontrolling interests 29 26
Net income 304 183
Income tax expense 19 88
Interest expense (net of interest capitalized) 105 108
EBIT, earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) 428 379
Depreciation & amortization of other intangibles 205 207
Total EBITDA* $ 633 $ 586
EBITDA* ($ Millions)
EBITDA* represents earnings before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA* is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA* calculation, however, are derived from amounts included in the historical statements of income. In addition, EBITDA* 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* because it regularly reviews EBITDA* as a measure of the company’s performance. In addition, Tenneco believes that its security holders utilize and analyze its EBITDA* for similar purposes. Tenneco also believes EBITDA* 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* measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.* Including noncontrolling interests.
Reconciliation of Non-GAAP Results
37
EBITDA* EBITNet Income
Attributable to Tenneco Inc.
EPS
FY 12 FY 11 FY 12 FY 11 FY 12 FY 11 FY 12 FY 11
Financial measures $633 $586 $428 $379 $275 $157 $4.50 $2.55
Adjustments (reflect non-GAAP(1) measures):
Restructuring and related expenses 13 8 13 8 8 5 0.14 0.09
Asset impairment charge - - 7 - 7 - 0.11 -
Pullman recoveries (5) - (5) - (3) - (0.05) -
Goodwill impairment charge - 11 - 11 - 7 - 0.11
Costs related to refinancing - - - - 12 1 0.19 0.01
Tax adjustments - - - - (96) (7) (1.57) (0.10)
Non-GAAP financial measures(2) $641 $605 $443 $398 $203 $163 $3.32 $2.66
(1) Generally Accepted Accounting Principles(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results of 2012 and 2011 in a manner that allows a better understanding of the
results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. 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. * Including noncontrolling interests.
$ Millions, Unaudited
Financial Accomplishments – Reconciliation of Non-GAAP Results
38
FY 12 FY 11
Total revenue $ 7,363 $ 7205
Less: Substrate sales 1,660 1,678
Value-add revenue $ 5,703 $ 5,527
Adjusted EBIT $ 443 $ 398
Adjusted EBIT as a percentage of value-add revenue(1) 7.8% 7.2%
(1) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenue. 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 adjusted EBIT as a percentage of value-add revenue assists investors in evaluating our company’s operational performance without the impact of such substrate sales.
Adjusted EBIT as a Percentage of Value-Add Revenue – Reconciliation of Non-GAAP Results$ Millions, Unaudited
39
Note: We present debt net of cash balances because management believes it is a useful measure of our credit position and progress toward reducing leverage. The calculation is limited in that we may not always be able to use cash to repay debt on a dollar-for-dollar basis.
* Including noncontrolling interests.
$ Millions, Unaudited
Net Debt / Adjusted EBITDA*– Reconciliation of Non-GAAP Results
2012 2011
Total debt $ 1,180 $ 1,224
Cash and cash equivalents 223 214
Debt net of cash balances 957 1,010
Adjusted EBITDA* $ 641 $ 605
Ratio of net debt to adjusted EBITDA* 1.5x 1.7x
