Financial Overview

(in million USD)

	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011	Rate of change (%)	Factors
Net Sales	7,363	7,205	2.2	1)
Net Income	304	183	66.1	-
North America
Sales	3,735	3,426	9.0	2)
Europe, South America and India
Sales	2,921	3,169	(7.8)	3)
Asia Pacific
Sales	908	804	12.9	4)

 

Factors
1) Net Sales
-Total revenue for 2012 was USD 7,363 million, a 2.2% increase from USD 7,205 million in 2011. Excluding the impact of currency and substrate sales, revenue was up USD 411 million, from USD 5,527 million to USD 5,938 million, driven primarily by higher year-over-year OE vehicle production volumes, higher North American aftermarket sales and incremental commercial vehicle revenue.

2) North America
-Revenues from North American operations increased in 2012 compared to last year due to higher OE and aftermarket sales of both product lines. The increase in North American OE revenues was primarily driven by improved production volumes, which accounted for USD 254 million of the year-over-year change in revenues, on the Company-supplied platforms. Also contributing to the increase were incremental commercial vehicle revenues. Currency had a USD 1 million unfavorable impact on OE revenue year-over-year.

3) Europe, South America and India
-The Company's European, South American and Indian segment's revenues decreased in 2012 compared to last year, due to unfavorable currency, decreased OE ride control and aftermarket sales in Europe and lower revenues in South America. Excluding negative currency, Europe OE emission control revenues increased on improved volumes due to higher OE production on Company-supplied platforms, as well as the beginning of the ramp-up on commercial vehicle programs which combined contributed to an increase in revenue of USD 73 million. Excluding currency, European OE ride control revenues decreased USD 28 million due to lower volumes.

-Light vehicle production decreased one percent in South America but increased five percent in India in 2012 when compared to 2011. Excluding negative currency, combined South American and Indian revenues were higher in 2012 when compared to the prior year primarily due to improved pricing in South America and stronger volumes in India partially offset by lower volumes in South America, which combined improved revenue by USD 27 million.

4) Asia Pacific
-Revenues from the Asia Pacific segment increased mainly due to higher sales in Asia. Asian revenues for 2012 improved from last year, primarily due to USD 120 million from stronger production volumes, particularly in China on key Company-supplied platforms. Lower OE production volumes in Australia drove a USD 5 million negative impact on revenue for 2012 over 2011.

Contract

-The Company announced that it will supply Scania Group with advanced diesel aftertreatment systems for its European on-road heavy-duty trucks ahead of the 2013 deadline for Euro VI implementation. This is the second on-road business award from Scania. The Company is currently supplying Scania with Euro V aftertreatment systems for South America from its manufacturing facility in Sao Paulo, Brazil. The Euro VI systems will be manufactured at the Company's emission control manufacturing facility in Edenkoben, Germany. (From a press release on November 9, 2012)

-The Company announced that it is supplying key emissions and ride control technologies for the 2012 Ford "Focus" compact car in China. The Company is supplying the cold end exhaust system and front and rear shock absorbers for the "Focus". The exhaust system is manufactured at the Company's Chongqing, China plant, and the shock absorbers at the Company's facility in Beijing. The Company's technical centers in Edenkoben, Germany; Sint Truiden, Belgium; Monroe and Grass Lake, Michigan, the U.S. are providing engineering support and system integration on the "Focus". The Company is a supplier to Ford, supporting the "Focus" platform with global manufacturing and engineering capabilities in key regions around the world, including the U.S., Europe, South Africa, Mexico and Russia. (From a press release on October 18, 2012)

-The Company announced that it is launching ride control business on the all-new 2013 Ford "Escape". Beginning in June 2013, the Company will supply front struts and rear monotube shocks for the "Escape" platform, which will be produced at Ford's Louisville assembly plant in Kentucky, the U.S. Production of the rear shocks for the all-new 2013 Ford Escape will take place at the Company's manufacturing facility in Owen Sound, Ontario, Canada while the struts will be manufactured at the Company's Celaya, Mexico operation. (From a press release on June 13, 2012)

Plant Closure

-The Company announced that it intends to close its emission control plant in Vittaryd, Sweden in response to weak market conditions throughout the European region, which have negatively impacted the Company's aftermarket emissions control sales. The Company expects to complete the closure in the third quarter of 2013. The Company currently employs about 120 associates at the plant and expects a transition of production to other emission control operations in Laval, France; Edenkoben, Germany; Valencia, Spain and Rybnik, Poland, beginning later this year. The Company anticipates annual savings of USD 4 million beginning in late 2013 once this action is complete. (From a press release on September 13, 2012)

Outlook

(in million USD)

	Estimated global OE revenue
2013	6,400-6,800
2014	7,200-7,700
2015	8,300-9,000
2016	9,000-10,000
2017	10,000-11,000

R&D Expenditure

(in million USD)

	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011	FY ended Dec. 31, 2010
Total	126	133	117

-Of the USD 126 million spent on engineering, research and development in 2012, USD 13 million was spent on the research, design and development of new and unproven products or processes. USD 92 million was spent on engineering costs of application of existing products and processes to vehicle platforms. The remainder was spent on improvements and enhancements to existing products and processes.

R&D Facilities

Emission Control Systems
-The Company operates four emission control engineering and technical facilities worldwide and shares three other such facilities with its ride control operations.

Ride Control Systems
-The Company operates seven ride control engineering and technical facilities worldwide and share three other such facilities with its emission control operations.

Capital Expenditure

(in million USD)

	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011	FY ended Dec. 31, 2010
North America	122	88	59
Europe, South America and India	88	95	66
Asia Pacific	53	35	29
Total	263	218	154

Outlook

-The Company expects capital expenditures for 2013 to be between USD 260 million and USD 270 million.

Investment Outside USA

<Japan>
-The Company announced on September 27 that it has opened its first manufacturing plant in Japan in Osaka and started production of emission control systems first for Kubota, a leading Japanese manufacturer of agricultural and industrial equipment. The plant located in Izumisano City, Osaka Prefecture, will produce diesel aftertreatment systems, including diesel oxidation catalysts and diesel particulate filters for commercial vehicles. Jeff Jarrell, vice president and general manager, Japan said, "Establishing our first manufacturing facility in Japan demonstrates Tenneco's commitment to Japan-based customers. We will continue to enhance our capabilities in Japan, as well as to provide excellent engineering support." (From an article in the Nikkan Jidosha Shimbun on Sep. 29, 2012)