Form 8-K TENNECO INC For: Oct 31

October 31, 2019 7:32 AM

Exhibit 99.1

Tenneco Reports Third Quarter 2019 Results



- Revenue growth continues to outpace light vehicle industry production.

- Tenneco reports Q3 earnings per diluted share of $0.87; adjusted EPS of $1.23

- Company evaluating multiple strategic options to deleverage and facilitate the separation of the businesses

LAKE FOREST, Ill., Oct. 31, 2019 /PRNewswire/ -- Tenneco Inc. (NYSE: TEN) reported third quarter 2019 revenue of $4.3 billion, an 82% increase versus $2.4 billion a year ago, which includes $1.8 billion from acquisitions. On a constant currency pro forma basis, total revenue increased 3% versus last year, while light vehicle industry production* declined 3% in the quarter. Value-add revenue for the third quarter was $3.5 billion.

The company reported net income for third quarter 2019 of $70 million, or $0.87 per diluted share. Third quarter 2018 net income was $57 million, or $1.11 per diluted share. Third quarter 2019 adjusted net income was $99 million, or $1.23 per diluted share, compared with $85 million, or $1.66 per diluted share last year.

Third quarter EBIT (earnings before interest, taxes and noncontrolling interests) was $148 million including the acquired Federal-Mogul business, versus $112 million last year. EBIT as a percent of revenue was 3.4% versus 4.7% last year.

Third quarter adjusted EBITDA was $387 million versus $366 million last year on a pro forma basis. Adjusted EBITDA as a percent of value-add revenue was 10.9%, a 100 basis point improvement on a pro forma basis, which includes a $13 million impact due to a work stoppage at our largest customer. Cash generated from operations was $164 million.

"Tenneco's revenue growth outpaced industry production by six percentage points, driven by higher light vehicle, off-highway and other revenues," said Roger Wood, co-CEO, Tenneco. "We also delivered year-over-year margin improvement, driven mainly by effective synergy capture actions, operational improvements and disciplined cost management."

OUTLOOK

Fourth Quarter 2019
Light vehicle production in the fourth quarter is expected to be lower year-over-year by 6%, and the commercial truck market is showing signs of softening in the quarter. In this environment, Tenneco expects fourth quarter revenue in the range of $3.95 billion to $4.05 billion. Further, the company expects its fourth quarter adjusted EBITDA to be in the range of $295 million to $315 million, including year-over-year margin improvement of approximately 50 basis points in the DRiV division. The company expects the GM labor stoppage to have a negative impact on EBITDA of approximately $35 million.

Full Year 2019
The company updated its 2019 full year outlook, and now expects:

  • Total revenues in the range of $17.25 billion to $17.35 billion.
  • Value-add revenues in the range of $14.25 billion to $14.35 billion
  • Value-add adjusted EBITDA margin of ~10.0%
  • Adjusted EBITDA of $1,425 million to $1,445 million
  • Interest expense of ~$325 million
  • Cash taxes in the range of $180 million to $190 million
  • Capital expenditures of ~$710 million
  • Net debt/LTM adjusted EBITDA in the range of 3.4x to 3.5x

Separation Update
The company has made significant progress on the administrative separation of the two business divisions into two independent companies including:

  • Earnings synergy capture has been pulled forward ahead of schedule to a full run rate by the end of 2019
  • Both management teams in place and focused on their respective businesses
  • Financial and operating system separation nearing completion
  • Businesses will be ready to operate independently by the end of 2019

Tenneco remains committed to the separation of the businesses and continues to execute its plan for the spin off. Additionally, the company is evaluating multiple strategic options to deleverage and facilitate the separation. Certain of these options could help mitigate the impact of challenging market conditions, which, if current trends were to continue, would likely affect the company's ability to complete a separation in the mid-year 2020 time range.

"For the full year we expect revenue growth will outpace our underlying markets, despite lower global light vehicle production volumes," said Brian Kesseler, co-CEO, Tenneco. "Our actions to manage our cost structure against expected volatility in the fourth quarter and into 2020 are generating positive results, and we expect to deliver solid margin rate performance. The entire management team is preparing for the separation, and believes this is the right path to deliver enhanced shareholder value and create an environment for both businesses to be best positioned for long-term success."

*Source: IHS Markit October 2019 global light vehicle production forecast and Tenneco estimates.

Financial results for the third quarter of 2018 have been revised for certain immaterial adjustments, which are further discussed in Tenneco's Form 10-Q for the quarter ended September 30, 2019.

See "About revenue and EBITDA guidance" below for further information about revenue guidance and forecasted performance measures.

Attachment 1
Statements of Income – 3 Months
Statements of Income – 9 Months
Balance Sheets
Statements of Cash Flows – 3 Months
Statements of Cash Flows – 9 Months

Attachment 2
Reconciliation of GAAP to Non-GAAP Earnings Measures – 3 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures – 9 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 9 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 and 9 Months
Reconciliation of Non-GAAP Measures – Debt Net of Cash/Pro Forma Adjusted LTM EBITDA including noncontrolling interests
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment and Aftermarket Revenue – 3 and 9 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 – 9 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment Commercial Truck, Off-Highway, Industrial and other revenues – 3 and 9 Months
Reconciliation of GAAP revenue to pro forma revenue and Non-GAAP earnings measures – 2018 quarterly
Reconciliation of GAAP revenue to pro forma revenue and Non-GAAP earnings measures – 2018 and 2017 annual
Division Level Q4 and FY 2019 Outlook

CONFERENCE CALL
The company will host a conference call on Thursday, October 31, 2019 at 8:30 a.m. ET. The dial-in number is 833-366-1121 (domestic) or 412-902-6733 (international). The passcode is: Tenneco Inc. The call and accompanying slides will be available on the financial section of the Tenneco web site at www.investors.tenneco.com. A recording of the call will be available one hour following completion of the call on October 31, 2019 through November 7, 2019. To access this recording, dial 877-344-7529 (domestic) or 412-317-0088 (international) or 855-669-9658 (Canada). The replay access code is 10135396. The purpose of the call is to discuss the company's operations for the third fiscal quarter 2019, as well as provide updated information regarding matters impacting the company's outlook, including the plan to separate its businesses to form two new, independent companies, an Aftermarket and Ride Performance company as well as a new Powertrain Technology company. A copy of the press release is available on the financial and news sections of the Tenneco web site.

About Tenneco
Headquartered in Lake Forest, Illinois, Tenneco is one of the world's leading designers, manufacturers and marketers of Aftermarket, Ride Performance, Clean Air and Powertrain products and technology solutions for diversified markets, including light vehicle, commercial truck, off-highway, industrial and the aftermarket, with 2018 revenues of $11.8 billion and approximately 81,000 employees worldwide. On October 1, 2018, Tenneco completed the acquisition of Federal-Mogul, a leading global supplier to original equipment manufacturers and the aftermarket. Additionally, the company expects to separate its businesses to form two independent companies, an Aftermarket and Ride Performance company as well as a Powertrain Technology company.

About DRiV™ - the future Aftermarket and Ride Performance company
Following the expected separation of Tenneco to form two new, independent companies, an Aftermarket and Ride Performance company (DRiV™) as well as a new Powertrain Technology company, DRiV will be one of the largest global multi-line, multi-brand aftermarket companies, and one of the largest global OE ride performance and braking companies. DRiV's principal product brands will feature Monroe®, Öhlins®, Walker®, Clevite®Elastomers, MOOG®, Fel-Pro®, Wagner®, Ferodo®, Champion® and others. DRiV would have 2018 pro-forma revenues of $6.4 billion, with 54% of those revenues from aftermarket and 46% from original equipment customers.

About the new Tenneco - the future Powertrain Technology company
Following Tenneco's expected separation to form two new, independent companies, an Aftermarket and Ride Performance company (DRiV™), as well as a new Powertrain Technology company, the new Tenneco will be one of the world's largest pure-play powertrain companies serving OE markets worldwide with engineered solutions addressing fuel economy, power output, and criteria pollution requirements for gasoline, diesel and electrified powertrains. The new Tenneco would have 2018 pro-forma revenues of $11.4 billion, serving light vehicle, commercial truck, off-highway and industrial markets.

About Revenue and EBITDA Guidance
Revenue estimates and other forecasted information in this release are based on OE manufacturers' programs that have been formally awarded to the company; programs where Tenneco is highly confident that it will be awarded business based on informal customer indications consistent with past practices; and Tenneco's status as supplier for the existing program and its relationship with the customer. This information is also based on anticipated vehicle production levels and pricing, including precious metals pricing and the impact of material cost changes. Unless otherwise indicated, our methodology does not attempt to forecast currency fluctuations, and accordingly, reflects constant currency. Certain elements of the restructuring and related expenses, legal settlements and other unusual charges we incur from time to time cannot be forecasted accurately. In this respect, we are not able to reconcile forecasted adjusted EBITDA (and the related margins) on a forward-looking basis to the most comparable GAAP measures without unreasonable efforts on account of these factors and other factors not in our control. For certain additional assumptions upon which these estimates are based, see the slides accompanying the October 31, 2019 webcast, which will be available on the financial section of the Tenneco website at www.investors.tenneco.com.

About Forward-Looking Statements

This press release contains forward-looking statements. The words "may," "will," "believe," "should," "could," "plan," "expect," "anticipate," "estimate," and similar expressions (and variations thereof), identify these forward-looking statements. These forward-looking statements are based on the current expectations of the company (including its subsidiaries). Because these statements involve risks and uncertainties, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include:

  • general economic, business and market conditions;
  • our ability to source and procure needed materials, components and other products and services in accordance with customer demand and at competitive prices;
  • the cost and outcome of existing and any future claims, legal proceedings or investigations, including, but not limited to, any of the foregoing arising in connection with the ongoing global antitrust investigation, product performance, product safety or intellectual property rights;
  • changes in consumer demand, prices and our ability to have our products included on top selling vehicles, including any shifts in consumer preferences away from historically higher margin products for our customers and us, to other lower margin vehicles, for which we may or may not have supply arrangements, and the cyclical nature of the global vehicle industry, including the performance of the global aftermarket sector;
  • changes in consumer demand for our original equipment products or aftermarket products, or changes in automotive and commercial vehicle manufacturers' production rates and their actual and forecasted requirements for our products, due to difficult economic conditions and/or regulatory or legal changes affecting internal combustion engines and/or aftermarket products;
  • our dependence on certain large customers, including the loss of any of our large original equipment manufacturer 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 customers or any change in customer demand due to delays in the adoption or enforcement of worldwide emissions regulations;
  • new technologies that reduce the demand for certain of our products or otherwise render them obsolete;
  • our ability to introduce new products and technologies that satisfy customers' needs in a timely fashion;
  • the overall highly competitive nature of the automotive and commercial vehicle parts industries, and any resultant inability to realize the sales represented by our awarded book of business (which is based on anticipated pricing and volumes over the life of the applicable program);
  • changes in capital availability or costs, including increases in our cost of borrowing (i.e., interest rate increases), the amount of our debt, our ability to access capital markets at favorable rates, and the credit ratings of our debt;
  • our ability to comply with the covenants contained in our debt instruments;
  • our working capital requirements;
  • our ability to successfully execute cash management and other cost reduction plans, and to realize the anticipated benefits from these plans;
  • risks inherent in operating a multi-national company, including economic conditions, such as currency exchange and inflation rates, and political conditions in the countries where we operate or sell our products, adverse changes in trade agreements, tariffs, immigration policies, political stability, and tax and other laws, and potential disruptions of production and supply;
  • increasing competition from lower cost, private-label products;
  • damage to the reputation of one or more of our leading brands;
  • the effect of improvements in automotive parts on aftermarket demand for some of our products;
  • industrywide strikes, labor disruptions at our facilities or any labor or other economic disruptions at any of our significant customers or suppliers or any of our customers' other suppliers;
  • developments relating to our intellectual property, including our ability to adapt to changes in technology;
  • costs related to product warranties and other customer satisfaction actions;
  • the failure or breach of our information technology systems, including the consequences of any misappropriation, exposure or corruption of sensitive information stored on such systems and the interruption to our business such failure or breach may cause;
  • the effect of consolidation among vehicle parts suppliers and customers on our ability to compete in the highly competitive automotive and commercial vehicle supplier industry;
  • changes in distribution channels or competitive conditions in the markets and countries where we operate;
  • the evolution towards autonomous vehicles and car and ride sharing;
  • customer acceptance of new products;
  • our ability to successfully integrate, and benefit from, any acquisitions we complete;
  • our ability to effectively manage our joint ventures and other third-party relationships;
  • the potential impairment in the carrying value of our long-lived assets, goodwill, or indefinite-lived intangible assets or our inability to realize our deferred tax assets;
  • the negative effect of fuel price volatility on transportation and logistics costs, raw material costs, discretionary purchases of vehicles or aftermarket products, and demand for off-highway equipment;
  • increases in the costs of raw materials or components, including our ability to successfully reduce the effect of any such cost increases through materials substitutions, cost reduction initiatives, customer recovery, and other methods;
  • changes by the Financial Accounting Standards Board or the Securities and Exchange Commission of authoritative generally accepted accounting principles or policies;
  • changes in accounting estimates and assumptions, including changes based on additional information;
  • any changes by the International Organization for Standardization (ISO) or other such committees in their certification protocols for processes and products, which may have the effect of delaying or hindering our ability to bring new products to market;
  • the effect of the extensive, increasing, and changing laws and regulations to which we are subject, including environmental laws and regulations, which may result in our incurrence of environmental liabilities in excess of the amount reserved or increased costs or loss of revenues relating to products subject to changing regulation;
  • potential volatility in our effective tax rate;
  • disasters, such as fires, earthquakes and flooding, and any resultant disruptions in the supply or production of goods or services to us or by us, in demand by our customers or in the operation of our system, disaster recovery capabilities or business continuity capabilities;
  • acts of war and/or terrorism, as well as actions taken or to be taken by the United States and other governments as a result of further acts or threats of terrorism, and the effect of these acts on economic, financial, and social conditions in the countries where we operate;
  • pension obligations and other postretirement benefits;
  • our hedging activities to address commodity price fluctuations; and
  • the timing and occurrence (or non-occurrence) of other transactions, events and circumstances which may be beyond our control.

In addition, important factors related to the acquisition of Federal-Mogul LLC ("Federal-Mogul") and the planned separation of our company into a powertrain technology company and an aftermarket and ride performance company that could cause actual results to differ materially from the expectations reflected in the forward-looking statements, including:

  • the risk the Company may not complete a separation of its powertrain technology business and its aftermarket and ride performance business (or achieve some or all of the anticipated benefits of the separation);
  • the risk the combined company and each separate company following the separation will underperform relative to our expectations;
  • the ongoing transaction costs and risk we may incur greater costs following separation of the business;
  • the risk the spin-off is determined to be a taxable transaction;
  • the risk the benefits of the acquisition of Federal-Mogul, including synergies, may not be fully realized or may take longer to realize than expected;
  • the risk the acquisition of Federal-Mogul may not advance our business strategy;
  • the risk we may experience difficulty integrating or separating employees or operations; and
  • the risk the transaction may have an adverse effect on existing arrangements with us, including those related to transition, manufacturing and supply services and tax matters; our ability to retain and hire key personnel; or our ability to maintain relationships with customers, suppliers or other business partners.

The company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release. Additional information regarding these risk factors and uncertainties is, and will be, detailed from time to time in the company's SEC filings, including but not limited to its annual report on Form 10-K for the year ended December 31, 2018.

Investor inquiries:

Media inquiries:



Linae Golla

Bill Dawson   

847-482-5162

847-482-5807 

lgolla@tenneco.com

bdawson@tenneco.com



Rich Kwas

Steve Blow

248-849-1340

517-262-0655

rich.kwas@tenneco.com

sblow@tenneco.com

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF INCOME (LOSS)

Unaudited

THREE MONTHS ENDED SEPTEMBER 30,

(Millions except per share amounts)















2019


2018*


Net sales and operating revenues:






Clean Air - Value-add revenues


$    997


$ 1,006


Clean Air - Substrate sales


775


596


Powertrain


1,082


-


Motorparts


794


308


Ride Performance


671


461


          Total net sales and operating revenues


$ 4,319


$ 2,371








Costs and expenses:






   Cost of sales


3,653

(e) (g) (j)

2,002


   Selling, general and administrative


249

(b) (c) (h)

138

(n) (p)

   Depreciation and amortization


165

(a)

60


   Engineering, research, and development


78


39


   Restructuring charges, asset impairments, and other


43

(a) (d) (k)

16

(m) (o)

   Goodwill impairment charge


9

(f)

-


          Total costs and expenses


4,197


2,255








Other expense (income):






Non-service pension and other postretirement benefit costs (credits)


2


4


Equity in (earnings) losses of nonconsolidated affiliates, net of tax


(1)

(e)

-


Other expense (income), net


(27)

(i)

-


          Total other expense (income)


(26)


4








Earnings (Loss) before interest expense, income taxes,






 and noncontrolling interests:






Clean Air


131

(a) (d) (h) (i)

106

(m)

Powertrain


35

(a) (e) 

-


Motorparts


82

(d) (e) (g) (i) (k)

48

(m)

Ride Performance


(20)

(a) (e) (f) (i) (j)

(3)

(m) (o) (p)

Corporate


(80)

(b) (c) (d)

(39)

(n) (o) (p)

          Total earnings (loss) before interest expense, income taxes, and noncontrolling interests


148


112








   Interest expense


79

(r)

24

(r)

Earnings (Loss) before income taxes and noncontrolling interests


69


88








   Income tax expense (benefit)


(9)

(l)

22

(q)

Net income (loss)


78


66








   Less: Net income (loss) attributable to noncontrolling interests


8


9


Net income (loss) attributable to Tenneco Inc.


$      70


$      57














Weighted average common shares outstanding:






   Basic


80.9


51.3


   Diluted


80.9


51.4








Earnings (Loss) per share of common stock:






   Basic


$   0.87


$   1.11


   Diluted


$   0.87


$   1.11







* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended September 30, 2019.


(a) Includes restructuring and related charges of $31 million pre-tax, $22 million after tax and noncontrolling interests or $0.30 per diluted share. Of the amount, $28 million is recorded in restructuring charges, asset impairments, and other and $3 million is recorded in depreciation and amortization. $2 million is recorded in Clean Air, $11 million is recorded in Powertrain and $18 million is recorded in Ride Performance.


(b) Includes costs related to cost reduction initiatives of $6 million pre-tax, $5 million after tax or $0.05 per diluted share.


(c) Includes acquisition and expected separation costs of $30 million pre-tax, $23 million after tax or $0.29 per diluted share.


(d) Includes costs to achieve synergies of $7 million pre-tax, $5 million after tax or $0.06 per diluted share. $4 million is recorded in Clean Air, $2 million is recorded in Motorparts and $1 million is recorded in Corporate.


(e) Includes charges related to purchase accounting of $11 million pre-tax, $10 million after tax or $0.12 per diluted share.  Of the amount, $1 million is recorded in cost of sales and $10 million is recorded in equity in (earnings) losses of nonconsolidated affiliates, net of tax. $8 million is recorded in Powertrain, $4 million is recorded in Motorparts and $(1) million is recorded in Ride Performance.


(f) Represents goodwill impairment charges of $9 million pre-tax, $9 million after tax or $0.12 per diluted share.


(g) Includes warranty charge of $1 million pre-tax and $1 million after tax.


(h) Includes antitrust reserve change in estimate of $9 million pre-tax, $7 million after tax or $0.08 per diluted share.


(i) Includes Brazil tax credit of $22 million pre-tax, $14 million after tax or $0.18 per diluted share. Of the amount, $9 million is recorded in Clean Air, $7 million is recorded in Motorparts and $6 million is recorded in Ride Performance.


(j) Includes an out of period adjustment of $5 million pre-tax, $4 million after tax and noncontrolling interests or $0.04 per diluted share.


(k) Includes an impairment on assets held for sale of $8 million pre-tax, $6 million after tax or $0.07 per diluted share.


(l) Includes net tax benefit of $35 million or $0.43 per diluted share for discrete tax adjustments recognized in the period.


(m) Includes restructuring and related charges of $12 million pre-tax, $9 million after tax and noncontrolling interests or $0.17 per diluted share. $1 million is recorded in Clean Air,  $1 million is recorded in Motorparts and $10 million is recorded in Ride Performance.


(n) Includes acquisition costs of $12 million pre-tax, $8 million after tax or $0.17 per diluted share. 


(o) Includes costs to achieve synergies of $4 million pre-tax, $2 million after tax or $0.05 per diluted share. $1 million is recorded in Ride Performance and $3 million is recorded in Corporate.


(p) Includes litigation settlement of $10 million pre-tax, $8 million after tax or $0.15 per diluted share. $9 million is recorded in Ride Performance and $1 million is recorded in Corporate.


(q) Includes net tax expense of $1 million or $0.01 per diluted share for discrete tax adjustments recognized in the period.


(r) Financing charges on sale of receivables are included in interest expense.

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF INCOME (LOSS)

Unaudited

NINE MONTHS ENDED SEPTEMBER 30,

(Millions except per share amounts)















2019


2018*


Net sales and operating revenues:






Clean Air - Value-add revenues


$   3,120


$ 3,183


Clean Air - Substrate sales


2,258


1,869


Powertrain


3,390


-


Motorparts


2,426


953


Ride Performance


2,113


1,480


          Total net sales and operating revenues


$ 13,307


$ 7,485








Costs and expenses:






   Cost of sales


11,310

(e) (g) (h) (k)

6,329

(r)

   Selling, general and administrative


853

(b) (c) (d) (i)

443

(o) (p) (q) (s) (t)

   Depreciation and amortization


503

(a)

180


   Engineering, research, and development


248


118


   Restructuring charges, asset impairments, and other


128

(a) (d) (l)

57

(n) (q)

   Goodwill impairment charge


69

(f)

-


          Total costs and expenses


13,111


7,127








Other expense (income):






Non-service pension and other postretirement benefit costs (credits)


8


10


Equity in (earnings) losses of nonconsolidated affiliates, net of tax


(34)

(e)

-


Other expense (income), net


(43)

(j)

3


          Total other expense (income)


(69)


13








Earnings (Loss) before interest expense, income taxes,






 and noncontrolling interests:






Clean Air


338

(a) (d) (g) (i) (j)

329

(n) (q)

Powertrain


131

(a) (d) (e)

-


Motorparts


166

(a) (c) (d) (e) (g) (h) (j) (l)

138

(n) (q)

Ride Performance


(112)

(a) (d) (e) (f) (j) (k)

7

(n) (o) (q) (r) (t)

Corporate


(258)

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

(129)

(p) (q) (s) (t)

          Total earnings (loss) before interest expense, income taxes, and noncontrolling interests


265


345








   Interest expense


242

(v)

69

(v)

Earnings (Loss) before income taxes and noncontrolling interests


23


276








   Income tax expense (benefit)


5

(m)

73

(u)

Net income (loss)


18


203








   Less: Net income (loss) attributable to noncontrolling interests


39


39


Net income (loss) attributable to Tenneco Inc.


$       (21)


$    164














Weighted average common shares outstanding:






   Basic


80.9


51.2


   Diluted


80.9


51.4








Earnings (Loss) per share of common stock:






   Basic


$    (0.25)


$   3.20


   Diluted


$    (0.25)


$   3.20



* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended September 30, 2019.


(a) Includes restructuring and related charges of $111 million pre-tax, $82 million after tax and noncontrolling interests or $1.03 per diluted share. Of the amount, $102 million is recorded in restructuring charges, asset impairments, and other and $9 million is recorded in depreciation and amortization. $21 million is recorded in Clean Air, $28 million is recorded in Powertrain, $4 million is recorded in Motorparts, $57 million is recorded in Ride Performance and $1 million is recorded in Corporate.


(b) Includes costs related to cost reduction initiatives of $16 million pre-tax, $12 million after tax or $0.14 per diluted share.


(c) Includes acquisition and expected separation costs of $97 million pre-tax, $74 million after tax or $0.91 per diluted share. $1 million is recorded in Motorparts and $96 million is recorded in Corporate.


(d) Includes costs to achieve synergies of $21 million pre-tax, $16 million after tax or $0.20 per diluted share. Of the amount, $18 million is recorded in restructuring charges, asset impairments, and other and $3 million is recorded in selling, general and administrative. $5 million is recorded in Clean Air, $2 million is recorded in Powertrain, $9 million is recorded in Motorparts, $2 million is recorded in Ride Performance and $3 million is recorded in Corporate.


(e) Includes charges related to purchase accounting of $55 million pre-tax, $45 million after tax or $0.56 per diluted share. Of the amount, $45 million is recorded in cost of sales and $10 million is recorded in equity in (earnings) losses of nonconsolidated affiliates, net of tax. $10 million is recorded in Powertrain, $41 million is recorded in Motorparts and $4 million is recorded in Ride Performance.


(f) Represents goodwill impairment charges of $69 million pre-tax, $69 million after tax or $0.86 per diluted share.


(g) Includes process harmonization charge of $10 million pre-tax, $7 million after tax or $0.09 per diluted share, of which $5 million is recorded in Clean Air and $5 million is recorded in Motorparts.


(h) Includes warranty charge of $8 million pre-tax, $6 million after tax or $0.07 per diluted share.


(i) Includes antitrust reserve change in estimate of $9 million pre-tax, $7 million after tax or $0.08 per diluted share.


(j) Includes Brazil tax credit of $22 million pre-tax, $14 million after tax or $0.18 per diluted share. Of the amount, $9 million is recorded in Clean Air, $7 million is recorded in Motorparts and $6 million is recorded in Ride Performance.


(k) Includes an out of period adjustment of $5 million pre-tax, $4 million after tax and noncontrolling interests or $0.04 per diluted share.


(l) Includes an impairment on assets held for sale of $8 million pre-tax, $6 million after tax or $0.07 per diluted share.


(m) Includes net tax benefit of $41 million or $0.51 per diluted share for discrete tax adjustments recognized in the period.


(n) Includes restructuring and related charges of $45 million pre-tax, $31 million after tax and noncontrolling interests or $0.59 per diluted share. $13 million is recorded in Clean Air, $5 million is recorded in Motorparts and $27 million is recorded in Ride Performance.


(o) Includes costs related to cost reduction initiatives of $10 million pre-tax, $7 million after tax or $0.15 per diluted share.


(p) Includes acquisition costs of $43 million pre-tax, $33 million after tax or $0.65 per diluted share. 


(q) Includes costs to achieve synergies of $13 million pre-tax, $9 million after tax or $0.17 per diluted share.  Of the amount, $12 million is recorded in restructuring charges, asset impairments, and other and $1 million is recorded in selling, general and administrative. $6 million is recorded in Clean Air, $1 million is recorded in Motorparts, $1 million is recorded in Ride Performance and $5 million is recorded in Corporate.


(r) Includes warranty charge of $5 million pre-tax, $4 million after tax or $0.07 per diluted share.  


(s) Includes environmental charge of $4 million pre-tax, $3 million after tax or $0.06 per diluted share related to an acquired site whereby an indemnification reverted back to the Company resulting from a 2009 bankruptcy filing of Mark IV Industries.


(t) Includes litigation settlement of $10 million pre-tax, $8 million after tax or $0.15 per diluted share. $9 million is recorded in Ride Performance and $1 million is recorded in Corporate.


(u) Includes net tax expense of $5 million or $0.10 per diluted share for discrete tax adjustments recognized in the period.


(v) Financing charges on sale of receivables are included in interest expense.

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

BALANCE SHEETS

Unaudited

(Millions)













September 30, 2019


December 31, 2018










 Assets
















Cash and cash equivalents


$                           389


$                          697












Restricted cash


6


5












Receivables, net


2,753

 (a) 

2,572

 (a) 











Inventories


2,137


2,245












Prepayments and other current assets


603


590












Other noncurrent assets


4,004


3,622












Property, plant and equipment, net


3,491


3,501












Total assets


$                     13,383


$                    13,232


































Liabilities and Shareholders' Equity
















Short-term debt, including current maturities of long-term debt


$                           161


$                          153












Accounts payable


2,651


2,759












Accrued compensation and employee benefits


378


343












Accrued income taxes


57


64












Accrued expenses and other current liabilities


1,042


1,001












Long-term debt


5,408

 (b) 

5,340

 (b) 











Deferred income taxes


104


88












Pension and postretirement benefits


1,088


1,167












Deferred credits and other liabilities


518


263












Redeemable noncontrolling interests


139


138












Tenneco Inc. shareholders' equity


1,642


1,726












Noncontrolling interests


195


190












Total liabilities, redeemable noncontrolling interests and equity


$                     13,383


$                    13,232
























September 30, 2019


December 31, 2018


(a)

Accounts receivable net of:








Accounts receivable outstanding and derecognized


$                                 1,012


$                               1,011














September 30, 2019


December 31, 2018


(b)

Long-term debt composed of:








Revolver Borrowings


$                                    229


$                                      -




LIBOR plus 1.75% Term Loan A due 2019 through 2023


1,628


1,691




LIBOR plus 3.00% Term Loan B due 2019 through 2025


1,624


1,629




$225 million of 5.375% Senior Notes due 2024


222


222




$500 million of 5.000% Senior Notes due 2026


494


493




€415 million 4.875% Euro Fixed Rate Notes due 2022


467


496




€300 million of Euribor plus 4.875% Euro Floating Rate Notes due 2024


331


349




€350 million of 5.000% Euro Fixed Rate Notes due 2024


403


427




Other Debt, primarily foreign instruments


78


106






5,476


5,413




Less: maturities classified as current


68


73




Total long-term debt


$                                 5,408


$                               5,340


ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CASH FLOWS

Unaudited

(Millions)



























Three Months Ended September 30,




2019


2018*








Operating Activities






Net income (loss)


$                   78


$                  66


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






Goodwill impairment charge


9


-


Depreciation and amortization


165


60


Deferred income taxes


(101)


(12)


Stock-based compensation


7


5


Restructuring charges, asset impairments, and other, net of cash paid


(2)


(2)


Change in pension and other postretirement benefit plans


(17)


1


Equity in earnings of nonconsolidated affiliates


(1)


-


Cash dividends received from nonconsolidated affiliates


18


-


Loss (gain) on sale of assets


1


-


Changes in operating assets and liabilities:






Receivables


(56)


(27)


Inventories


11


(64)


Payables and accrued expenses


51


(52)


Accrued interest and accrued income taxes


54


(3)


Other assets and liabilities


(53)


(13)


Net cash provided (used) by operating activities


164


(41)








Investing Activities






Proceeds from sale of assets


3


1


Cash payments for property, plant and equipment


(162)


(81)


Proceeds from deferred purchase price of factored receivables


56


36


Other


1


(4)


Net cash used by investing activities


(102)


(48)








Financing Activities






Proceeds from term loans and notes


60


3


Repayments of term loans and notes


(88)


(7)


Borrowings on revolving lines of credit


2,279


1,382


Payments on revolving lines of credit


(2,294)


(1,460)


Issuance (repurchase) of common shares


-


(1)


Cash dividends


-


(14)


Net increase (decrease) in bank overdrafts


(4)


2


Other


(2)


170


Distributions to noncontrolling interest partners


1


(16)


Net cash provided (used) by financing activities


(48)


59








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


(9)


(4)


Increase (Decrease) in cash, cash equivalents and restricted cash


5


(34)








Cash, cash equivalents and restricted cash, beginning of period


390


237


Cash, cash equivalents and restricted cash, end of period


$                 395


$               203














Supplemental Cash Flow Information






Cash paid during the period for interest


$                   85


$                  25


Cash paid during the period for income taxes, net of refunds


39


23








Non-cash Investing Activities






Period end balance of accounts payables for property, plant and equipment


$                 118


$                  52


Deferred purchase price of receivables factored in the period


156


34



* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended September 30, 2019.

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CASH FLOWS

Unaudited

(Millions)



























Nine Months Ended September 30,




2019


2018*








Operating Activities






Net income (loss)


$                   18


$               203


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






Goodwill impairment charge


69


-


Depreciation and amortization


503


180


Deferred income taxes


(115)


(21)


Stock-based compensation


20


12


Restructuring charges, asset impairments, and other, net of cash paid


12


8


Change in pension and other postretirement benefit plans


(49)


3


Equity in earnings of nonconsolidated affiliates


(34)


-


Cash dividends received from nonconsolidated affiliates


45


-


Changes in operating assets and liabilities:






Receivables


(457)


(260)


Inventories


112


(115)


Payables and accrued expenses


99


154


Accrued interest and accrued income taxes


(12)


(5)


Other assets and liabilities


(147)


(122)


Net cash provided (used) by operating activities


64


37








Investing Activities






Proceeds from sale of assets


8


6


Net proceeds from sale of business


22


-


Cash payments for property, plant and equipment


(541)


(255)


Acquisition of business (net of cash acquired)


(158)


-


Proceeds from deferred purchase price of factored receivables


203


102


Other


-


(2)


Net cash used by investing activities


(466)


(149)








Financing Activities






Proceeds from term loans and notes


171


12


Repayments of term loans and notes


(278)


(35)


Borrowings on revolving lines of credit


6,804


4,051


Payments on revolving lines of credit


(6,548)


(4,074)


Issuance (repurchase) of common shares


(2)


(2)


Cash dividends


(20)


(39)


Net increase (decrease) in bank overdrafts


(12)


(5)


Other


(3)


148


Distributions to noncontrolling interest partners


(19)


(44)


Net cash provided (used) by financing activities


93


12








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


2


(15)


Decrease in cash, cash equivalents and restricted cash


(307)


(115)








Cash, cash equivalents and restricted cash, beginning of period


702


318


Cash, cash equivalents and restricted cash, end of period


$                 395


$               203














Supplemental Cash Flow Information






Cash paid during the period for interest


$                 230


$                  65


Cash paid during the period for income taxes, net of refunds


139


79








Non-cash Investing Activities






Period end balance of accounts payables for property, plant and equipment


$                 118


$                  52


Deferred purchase price of receivables factored in the period


208


105



* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended September 30, 2019.

ATTACHMENT 2

TENNECO INC.

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

Unaudited

(Millions except per share amounts)








































Q3 2019


Q3 2018*




Net income
attributable to
Tenneco Inc.


Per Share


EBIT


EBITDA (3)


Net income
attributable to
Tenneco Inc.


Per Share


EBIT


EBITDA (3)

Earnings Measures


$            70


$         0.87


$             148


$             313


$            57


$       1.11


$  112


$         172



















Adjustments:


















Restructuring and related expenses(4)


22


0.30


31


28


9


0.17


12


12


Cost reduction initiatives (5)


5


0.05


6


6


-


-


-


-


Acquisition and separation costs(6)


23


0.29


30


30


8


0.17


12


12


Costs to achieve synergies (7)


5


0.06


7


7


2


0.05


4


4


Purchase accounting charges (8)


10


0.12


11


11


-


-


-


-


Goodwill impairment (9)


9


0.12


9


9


-


-


-


-


Warranty charge (10)


1


-


1


1


-


-


-


-


Antitrust reserve change in estimate (11)


(7)


(0.08)


(9)


(9)


-


-


-


-


Brazil tax credit (12)


(14)


(0.18)


(22)


(22)


-


-


-


-


Out of period adjustment (13)


4


0.04


5


5


-


-


-


-


Impairment of assets held for sale


6


0.07


8


8


-


-


-


-


Litigation settlement accrual


-


-


-


-


8


0.15


10


10


Net tax adjustments


(35)


(0.43)


-


-


1


0.01


-


-



















Adjusted Net income, EPS, EBIT, and EBITDA


$            99


$         1.23


$             225


$             387


$            85


$       1.66


$  150


$         210








































Q3 2019






Global Segments










Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total



Net income (loss) attributable to Tenneco Inc.














$    70





















Net income (loss) attributable to noncontrolling interests












8





















Net income (loss)














78





















Income tax expense (benefit)














(9)





















Interest expense














79





















EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests


$          131


$            35


$              82


$             (20)


$          228


$         (80)


$  148





















Depreciation and amortization


38


55


31


40


164


1


165





















Total EBITDA including noncontrolling interests (3)


$          169


$            90


$             113


$              20


$          392


$         (79)


$  313






















Restructuring and related expenses(4)


2


11


-


15


28


-


28




Cost reduction initiatives (5)


-


-


-


-


-


6


6




Acquisition and separation costs(6)


-


-


-


-


-


30


30




Costs to achieve synergies (7)


4


-


2


-


6


1


7




Purchase accounting charges (8)


-


8


4


(1)


11


-


11




Goodwill impairment (9)


-


-


-


9


9


-


9




Warranty charge (10)


-


-


1


-


1


-


1




Antitrust reserve change in estimate (11)


(9)


-


-


-


(9)


-


(9)




Brazil tax credit (12)


(9)


-


(7)


(6)


(22)


-


(22)




Out of period adjustment (13)


-


-


-


5


5


-


5




Impairment of assets held for sale


-


-


8


-


8


-


8





















Adjusted EBITDA


$          157


$          109


$             121


$              42


$          429


$         (42)

(14)

$  387










































Q3 2018*








Global Segments












Clean Air


Motorparts


Ride
Performance


Total


Corporate


Total





Net income (loss) attributable to Tenneco Inc.












$          57























Net income (loss) attributable to noncontrolling interests










9























Net income (loss)












66























Income tax expense (benefit)












22























Interest expense












24























EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests


$          106


$            48


$               (3)


$             151


$           (39)


$        112























Depreciation and amortization


38


5


17


60


-


60























Total EBITDA including noncontrolling interests (3)


$          144


$            53


$              14


$             211


$           (39)


$        172
























Restructuring and related expenses


1


1


10


12


-


12






Acquisition costs (6)


-


-


-


-


12


12






Costs to achieve synergies (7)


-


-


1


1


3


4






Litigation settlement accrual


-


-


9


9


1


10























Adjusted EBITDA


$          145


$            54


$              34


$             233


$           (23)


$        210























* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended September 30, 2019.



















(1)U.S. Generally Accepted Accounting Principles.



















(2)Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company and other items impacting comparability between the periods.  Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods.  Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material.  Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business.  The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period.



















(3) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization.  EBITDA including noncontrolling interests is not a calculation based upon GAAP.  The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data.  In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity.  Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance.  In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes.  Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors.  However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.



















(4)Q3 2019 includes $3 million of accelerated depreciation related to plant closures.



















(5)Costs related to cost reduction initiatives.



















(6)Costs related to acquisitions and costs related to expected separation.



















(7)Costs to achieve synergies related to Federal-Mogul acquisition.



















(8)This primarily relates to a non-cash charge to cost of sales for the amortization of the inventory fair value step-up recorded as part of the Acquisitions.



















(9)Non-cash asset impairment charge related to goodwill.



















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



















(11)Reduction in estimated antitrust accrual.



















(12)Recovery of value-added tax in a foreign jurisdiction.



















(13)Inventory losses attributable to prior periods.


(14)Corporate costs for each division are $21 million for New Tenneco and $21 million for DRiV.

ATTACHMENT 2

TENNECO INC.

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

Unaudited

(Millions except per share amounts)








































YTD 2019


YTD 2018*




Net income
(loss)
attributable
to Tenneco
Inc.


Per Share


EBIT


EBITDA (3)


Net income
attributable
to Tenneco
Inc.


Per Share


EBIT


EBITDA (3)

Earnings (Loss) Measures


$          (21)


$       (0.25)


$           265


$           768


$         164


$      3.20


$   345


$       525



















Adjustments:


















Restructuring and related expenses(4)


82


1.03


111


102


31


0.59


45


45


Cost reduction initiatives (5)


12


0.14


16


16


7


0.15


10


10


Acquisition and separation costs(6)