Tenneco Delivers Strong First Quarter 2021 Results

Revenue

$17.6-18.1B

Revenue

Value-Add Revenue

$13.5-14B

Value-Add Revenue

$3.3-3.5B

Adjusted EBITDA**

$1.35-1.45B

Adjusted EBITDA**

$325-355M

Net Debt ⁽¹⁾

Less than $4.2B

Net Leverage Target

~3.0x

ATTACHMENT 1

TENNECO INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Unaudited

(millions, except per share amounts)

Three Months Ended

March 31,

2021

2020*

Net sales and operating revenues:

Motorparts

$

719

$

706

Performance Solutions

787

669

Clean Air - Value-add revenues

1,036

845

Clean Air - Substrate sales

1,088

700

Powertrain

916

          Total net sales and operating revenues

4,731

3,836

Costs and expenses:

   Cost of sales (exclusive of depreciation and amortization)

4,061

3,339

   Selling, general, and administrative

255

249

   Depreciation and amortization

155

171

   Engineering, research, and development

72

77

   Restructuring charges, net and asset impairments

25

484

   Goodwill and intangible impairment charges

—

383

          Total costs and expenses

4,568

4,703

Other income (expense):

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

3

1

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

22

13

Gain (loss) on extinguishment of debt

8

—

Other income (expense), net

8

8

41

22

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

204

(845)

   Interest expense

(70)

(75)

Earnings (loss) before income taxes and noncontrolling interests

134

(920)

Income tax (expense) benefit

(47)

94

Net income (loss)

87

(826)

Less: Net income (loss) attributable to noncontrolling interests

22

13

Net income (loss) attributable to Tenneco Inc.

$

$

(839)

Basic earnings (loss) per share:

Earnings (loss) per share

$

0.80

$

(10.34)

Weighted average shares outstanding

82.0

81.2

Diluted earnings (loss) per share:

Earnings (loss) per share

$

0.79

$

(10.34)

Weighted average shares outstanding

82.5

81.2

_______________________________________

* Beginning in the first quarter of 2021, the Company made a change to its operating segments. This change consisted of moving a reporting unit within the Powertrain segment to the Ride Performance segment. In addition, with this change to its segments, Ride Performance was renamed Performance Solutions. As such, prior period operating segment results have been conformed to reflect the Company's current operating segments.

ATTACHMENT 1

TENNECO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(dollars in millions)

March 31, 2021

December 31, 2020

Assets

Cash and cash equivalents

$

626

$

798

Restricted cash

5

5

Receivables, net

2,822

(a)

2,528

(a)

Inventories

1,830

1,743

Prepayments and other current assets

589

619

Other noncurrent assets

3,010

3,102

Property, plant, and equipment, net

2,955

3,057

Total assets

$

11,837

$

11,852

Liabilities and Shareholders' Equity

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

$

124

$

162

Accounts payable

3,090

2,917

Accrued compensation and employee benefits

431

365

Accrued income taxes

65

54

Accrued expenses and other current liabilities

1,053

1,188

Long-term debt

5,111

(b)

5,171

(b)

Deferred income taxes

94

89

Pension and postretirement benefits

1,062

1,101

Deferred credits and other liabilities

511

546

Redeemable noncontrolling interests

87

78

Total Tenneco Inc. shareholders' equity (deficit)

(96)

(119)

Noncontrolling interests

305

300

Total liabilities, redeemable noncontrolling interests, and equity

$

11,837

$

11,852

March 31, 2021

December 31, 2020

(a) Accounts receivable net of:

Accounts receivable outstanding and derecognized

$

976

$

956

(b) Long-term debt composed of:

Revolver Borrowings

$

—

$

—

LIBOR plus 2.25% Term Loan A due 2019 through 2023⁽¹⁾

1,490

1,520

LIBOR plus 3.00% Term Loan B due 2019 through 2025

1,610

1,612

$225 million of 5.375% Senior Notes due 2024

223

223

$500 million of 5.000% Senior Notes due 2026

495

494

€300 million of Euribor plus 4.875% Euro Floating Rate Notes due 2024⁽²⁾

—

370

€350 million of 5.000% Euro Fixed Rate Notes due 2024⁽²⁾

—

445

$500 million of 7.875% Senior Secured Notes due 2029

490

489

$800 million of 5.125% Senior Secured Notes due 2029⁽³⁾

786

—

Other Debt, primarily foreign instruments

23

23

5,117

5,176

Less: maturities classified as current

6

5

Total long-term debt

$

5,111

$

5,171

____________________________

(1)

The interest rate on Term Loan A at December 31, 2020 was LIBOR plus 2.50%.

(2)

The Company satisfied and discharged all of its 4.875% Euro Floating Rate Notes due 2024 and 5.000% Euro Fixed Rate Notes due 2024 on March 17, 2021.

(3)

On March 17, 2021, the Company issued $800 million aggregate principal amount of 5.125% senior secured notes due April 15, 2029.

ATTACHMENT 1

TENNECO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(dollars in millions)

Three Months Ended March

31,

2021

Operating Activities

Net income (loss)

$

87

$

(826)

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

Goodwill and intangible impairment charges

—

383

Depreciation and amortization

155

171

Deferred income taxes

(4)

(166)

Stock-based compensation

5

2

Restructuring charges and asset impairments, net of cash paid

—

454

Change in pension and other postretirement benefit plans

(1)

(19)

Equity in earnings of nonconsolidated affiliates

(22)

(13)

Cash dividends received from nonconsolidated affiliates

57

13

Loss (gain) on sale of assets and other

(9)

—

Changes in operating assets and liabilities:

Receivables

(452)

139

Inventories

(120)

(73)

Payables and accrued expenses

240

(136)

Accrued interest and accrued income taxes

8

29

Other assets and liabilities

6

(110)

Net cash (used) provided by operating activities

(50)

(152)

Investing Activities

Proceeds from sale of assets

7

2

Net proceeds from sale of business

1

—

Cash payments for property, plant, and equipment

(95)

(137)

Proceeds from deferred purchase price of factored receivables

115

56

Other

—

2

Net cash (used) provided by investing activities

28

(77)

Financing Activities

Proceeds from term loans and notes

813

67

Repayments of term loans and notes

(862)

(84)

Debt issuance costs of long-term debt

(11)

(8)

Borrowings on revolving lines of credit

1,382

3,161

Payments on revolving lines of credit

(1,394)

(2,659)

Issuance (repurchase) of common shares

(2)

(1)

Net increase (decrease) in bank overdrafts

—

(2)

Distributions to noncontrolling interest partners

(7)

(2)

Other

(49)

11

Net cash (used) provided by financing activities

(130)

483

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

(20)

(50)

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

(172)

204

Cash, cash equivalents, and restricted cash, beginning of period

803

566

Cash, cash equivalents, and restricted cash, end of period

$

631

$

770

Supplemental Cash Flow Information

Cash paid during the period for interest

$

65

$

67

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

$

46

$

41

Lease assets obtained in exchange for new operating lease liabilities

$

15

$

51

Non-cash Investing Activities

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

$

91

$

96

Deferred purchase price of receivables factored in the period

$

135

$

60

Reduction in assets from redeemable noncontrolling interest transaction with owner

$

—

$

53

ATTACHMENT 2

TENNECO INC.

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

Unaudited

(dollars in millions, except per share amounts)

Q1 2021

Q1 2020

Net

income

(loss)

attributable

to Tenneco

Inc.

Per

Share

Net income

(loss)

attributable to

noncontrolling

interests

Income

tax

(expense)

benefit

EBIT

EBITDA

₍₃₎

Net

income

(loss)

attributable

to Tenneco

Inc.

Per

Share

Net income

(loss)

attributable to

noncontrolling

interests

Income

tax

(expense)

benefit

EBIT

EBITDA

₍₃₎

Earnings (Loss) Measures

$

65

$

0.79

$

22

$

(47)

$

204

$

359

$

(839)

$

(10.34)

$

13

$

94

$

(845)

$

(674)

Adjustments:

Restructuring and related expenses ⁽⁵⁾

28

0.33

—

(3)

31

28

31

0.38

—

(8)

39

34

Loss on sale of business

—

0.01

—

(1)

1

1

—

—

—

—

—

—

Other costs (including strategic and transaction related) ⁽⁶⁾

8

0.10

—

—

8

8

19

0.23

—

(6)

25

25

Gain on debt extinguishment

(8)

(0.10)

—

—

(8)

(8)

—

—

—

—

—

—

Goodwill and intangibles impairment charge ⁽⁷⁾

—

—

—

—

—

—

366

4.52

5

(12)

383

383

Asset impairments ⁽⁸⁾

—

—

—

—

—

—

371

4.57

7

(93)

471

471

Noncontrolling interests adjustments ⁽⁹⁾

—

—

—

—

—

—

11

0.14

(11)

—

—

—

Net tax adjustments

(3)

(0.04)

—

(3)

—

—

15

0.19

—

15

—

—

Adjusted Net income, EPS, NCI, Tax, EBIT, and EBITDA ⁽⁴⁾

$

90

$

1.09

$

22

$

(54)

$

236

$

388

$

(26)

$

(0.31)

$

14

$

(10)

$

73

$

239

Q1 2021

Global Segments

Motorparts

Performance

Solutions

Clean Air

Powertrain

Total

Corporate

Total

Net income (loss) attributable to Tenneco Inc.

$

65

Net income (loss) attributable to noncontrolling interests

22

Net income (loss)

87

Income tax (expense) benefit

(47)

Interest expense

(70)

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

204

Depreciation and amortization

155

Total EBITDA including noncontrolling interests ⁽³⁾

$

102

$

43

$

149

$

115

$

409

$

(50)

$

359

Restructuring and related expenses⁽⁵⁾

2

4

9

11

26

2

28

Loss on sale of business

1

—

—

—

1

—

1

Other costs (including strategic and transaction related) ⁽⁶⁾

—

—

(1)

—

(1)

9

8

Gain on debt extinguishment 

—

—

—

—

—

(8)

(8)

Adjusted EBITDA ⁽⁴⁾

$

105

$

47

$

157

$

126

$

435

$

(47)

$

388

Q1 2020*

Global Segments

Motorparts

Performance

Solutions

Clean Air

Powertrain

Total

Corporate

Total

Net income (loss) attributable to Tenneco Inc.

$

(839)

Net income (loss) attributable to noncontrolling interests

13

Net income (loss)

(826)

Income tax (expense) benefit

94

Interest expense

(75)

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

(845)

Depreciation and amortization

171

Total EBITDA including noncontrolling interests ⁽³⁾

$

(40)

$

(674)

$

99

$

27

$

(588)

$

(86)

$

(674)

Restructuring and related expenses⁽⁵⁾

3

25

1

—

29

5

34

Goodwill and intangible impairment charges ⁽⁷⁾

110

232

—

41

383

—

383

Asset impairments ⁽⁸⁾

—

455

—

—

455

16

471

Other costs (including strategic and transaction related) ⁽⁶⁾

—

—

4

—

4

21

25

Adjusted EBITDA ⁽⁴⁾

$

73

$

38

$

104

$

68

$

283

$

(44)

$

239

___________________________________

* Beginning in the first quarter of 2021, the Company made a change to its operating segments. This change consisted of moving a reporting unit within the Powertrain segment to the Ride Performance segment. In addition, with this change to its segments, Ride Performance was renamed Performance Solutions. As such, prior period operating segment results have been conformed to reflect the Company's current operating segments.     

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

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

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

(4) Adjusted results are presented in order to reflect the results in a manner that allows a better understanding of operational activities separate from the financial impact of decisions made for the long term benefit of the company and other items impacting comparability between periods.  Similar adjustments have been recorded in earlier periods and similar types of adjustments can reasonably be expected to be recorded in future periods.  The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period.

(5) Q1 2021 and Q1 2020 includes $3 million and $5 million of accelerated depreciation related to plant closures, respectively.

(6) Amounts in Q1 2020 included costs related to the acquisitions and expected separation.

(7) Non-cash asset impairment charge related to goodwill and intangibles.

(8) Asset impairment charges.

(9) Amount relates to adjustments made to mark certain redeemable noncontrolling interests to their redemption values.

ATTACHMENT 2

TENNECO INC.

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

UNAUDITED

(dollars in millions except percents)

Q1 2021

Global Segments

Motorparts

Performance

Solutions

Clean Air

Powertrain

Total

Corporate

Total

Net sales and operating revenues

$

719

$

787

$

2,124

$

1,101

$

4,731

$

—

$

4,731

Less: Substrate sales

—

—

1,088

—

1,088

—

1,088

Value-add revenues

$

$

787

$

1,036

$

1,101

$

3,643

$

—

$

3,643

 EBITDA

$

102

$

43

$

149

$

115

$

409

$

(50)

$

359

 EBITDA as a % of revenue

14.2%

5.5%

7.0%

10.4%

8.6%

7.6%

 EBITDA as a % of value-add revenue

14.2%

5.5%

14.4%

10.4%

11.2%

9.9%

 Adjusted EBITDA

$

105

$

47

$

157

$

126

$

435

$

(47)

$

388

 Adjusted EBITDA as a % of revenue

14.6%

6.0%

7.4%

11.4%

9.2%

8.2%

 Adjusted EBITDA as a % of value-add revenue

14.6%

6.0%

15.2%

11.4%

11.9%

10.7%

Q1 2020

Global Segments

Motorparts

Performance

Solutions

Clean Air

Powertrain

Total

Corporate

Total

Net sales and operating revenues

$

706

$

669

$

1,545

$

916

$

3,836

$

—

$

3,836

Less: Substrate sales

—

—

700

—

700

—

700

Value-add revenues

$

706

$

669

$

845

$

916

$

3,136

$

—

$

3,136

 EBITDA

$

(40)

$

(674)

$

99

$

27

$

(588)

$

(86)

$

(674)

 EBITDA as a % of revenue

(100.7)%

6.4%

2.9%

(15.3)%

(17.6)%

 EBITDA as a % of value-add revenue

(5.7)%

(100.7)%

11.7%

2.9%

(18.8)%

(21.5)%

 Adjusted EBITDA

$

73

$

38

$

104

$

68

$

283

$

(44)

$

239

 Adjusted EBITDA as a % of revenue

10.3%

5.7%

6.7%

7.4%

7.4%

6.2%

 Adjusted EBITDA as a % of value-add revenue

10.3%

5.7%

12.3%

7.4%

9.0%

7.6%

_____________________________________

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

(2) Tenneco presents the above reconciliation of revenues in order to reflect EBITDA and adjusted EBITDA as a percent of both total revenues and value-add revenues.  Substrate sales include precious metals pricing, which may be volatile.  Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue.  Excluding substrate sales removes this impact.  Further, presenting EBITDA and adjusted EBITDA as a percent of value-add revenue assists investors in evaluating the company's operational performance without the impact of such substrate sales.  See prior pages for a discussion of EBITDA and adjusted EBITDA.

ATTACHMENT 2

TENNECO INC.

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

Unaudited

(dollars in millions except percents)

Q1 2020 Value-

add Revenues

Currency

Volume, Mix

and Other

Q1 2021 Value-

add Revenues

% Change

increase

(decrease)

excluding

currency

Motorparts

$

706

$

9

$

4

$

719

0.6%

Performance Solutions

669

27

91

787

13.6%

Clean Air

845

27

164

1,036

19.4%

Powertrain

916

41

144

1,101

15.7%

Total Tenneco Inc.

$

3,136

$

104

$

403

$

3,643

12.9%

________________________________

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

(2) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from the effects of doing business in currencies other than the U.S. dollar.  Additionally, substrate sales include precious metals pricing, which may be volatile.  Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue.  Excluding substrate sales removes this impact.  Tenneco uses this information to analyze the trend in revenues before these factors.  Tenneco believes investors find this information useful in understanding period to period comparisons in the company's revenues.

ATTACHMENT 2

TENNECO INC.

RECONCILIATION OF NON-GAAP MEASURES

Debt net of total cash / Adjusted LTM EBITDA including noncontrolling interests

Unaudited

(dollars in millions except ratios)

March 31,

2021

March 31,

2020

Total debt

$

5,235

$

6,012

Total cash, cash equivalents and restricted cash (total cash)

631

770

Debt net of total cash balances ⁽¹⁾

$

4,604

$

5,242

Adjusted LTM EBITDA including noncontrolling interests ^{(2) (3)}

$

1,194

$

1,327

Ratio of debt net of total cash balances to adjusted LTM EBITDA including noncontrolling interests ⁽⁴⁾

3.9x

4.0x

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q1 2021 LTM

Net income (loss) attributable to Tenneco Inc.

$

(350)

$

(499)

$

167

$

65

$

(617)

Net income (loss) attributable to noncontrolling interests

10

19

19

22

70

Net income (loss)

(340)

(480)

186

87

(547)

Income tax (expense) benefit

101

(648)

(6)

(47)

(600)

Interest expense

(66)

(68)

(68)

(70)

(272)

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

(375)

236

260

204

325

Depreciation and amortization

159

151

158

155

623

Total EBITDA including noncontrolling interests ⁽²⁾

$

(216)

$

387

$

418

$

359

$

948

Adjustments:

Restructuring and related expenses

105

24

6

28

163

Inventory write-down ⁽⁵⁾

82

(9)

—

—

73

Other costs (including strategic and transaction related) ⁽⁶⁾

8

4

1

8

21

Asset impairments ⁽⁷⁾

29

3

—

—

32

Antitrust reserve change in estimate ⁽⁸⁾

—

—

(11)

—

(11)

(Gain)/Loss on sale of assets or business

—

—

(2)

1

(1)

Gain on extinguishment of debt

—

—

(2)

(8)

(10)

OPEB curtailment ⁽⁹⁾

—

(21)

—

—

(21)

Total Adjusted EBITDA including noncontrolling interests ⁽³⁾

$

8

$

388

$

410

$

388

$

1,194

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q1 2020 LTM

Net income (loss) attributable to Tenneco Inc.

$

26

$

70

$

(313)

$

(839)

$

(1,056)

Net income (loss) attributable to noncontrolling interests

19

8

75

13

115

Net income (loss)

45