Gabelli Automotive Aftermarket Symposium

Transcription

1 X Gabelli Automotive Aftermarket Symposium Las Vegas, NV October 31, 2016 N Y S E : T E N 5893 CORP-11/16 (1) 1

2 Safe Harbor This presentation contains forward-looking statements that involve risks and uncertainties which could cause the company s plans, actions and results to differ materially from its current expectations. The words expect, estimate, will, and similar expressions identify certain of these forward-looking statements. The company cautions that actual results may differ materially from those projected or implied in forward-looking statements due to a variety of factors including, but not limited to, the following: (i) general economic, business and market conditions; (ii) the company s ability to source needed goods and services in accordance with customer demand and at competitive prices; (iii) the cost and outcome of claims, legal proceedings or investigations, including, but not limited to, those arising in connection with the ongoing global antitrust investigation, product safety or intellectual property rights; (iv) the impact of the changing laws and regulations to which we are subject, including environmental laws and regulations, pensions or other regulated activities; (v) the ability of the company to access capital markets on commercially reasonable terms; (vi) changes in consumer demand; (vii) changes in vehicle manufacturers production rates and their requirements for the company s products, including with respect to any delays in the adoption of the current mandated timelines for worldwide emissions regulations; (viii) the overall highly competitive nature of the automobile and commercial vehicle parts industry, and any resultant inability to realize the sales represented by the company s awarded book of business which is based on anticipated pricing for the applicable program over its life; (ix) the loss of any of our large original equipment manufacturer ( OEM ) customers, or the loss of market shares by these customers if we are unable to achieve increased sales to other OEMs; (x) the company s continued success in cost reduction and cash management programs; (xi) economic, exchange rate and political conditions in the countries where we operate or sell our products; (xii) workforce factors such as strikes or labor interruptions; (xiii) increases in the costs of raw materials; (xiv) the negative impact of fuel price volatility on logistics costs and discretionary purchases of vehicles or aftermarket products, and demand for off-highway equipment; (xv) the cyclical nature of the global vehicular industry, including the performance of the global aftermarket sector and longer product lives of automobile parts; (xvi) product warranty costs; (xvii) material developments relating to our intellectual property or the failure or breach of our IT systems; (xviii) the company s ability to develop and profitably commercialize new products and technologies; (xix) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals; and (xx) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond the control of the company. Additional information regarding these and other risk factors and uncertainties is detailed from time to time in the company s SEC filings, including but not limited to its annual report on Form 10-K. Unless otherwise indicated in this presentation, the forward-looking statements in this presentation are made as of the date hereof, and the company does not undertake any obligation to publicly disclose revisions or updates to any forward-looking statements CORP-11/16 (2) 2

3 Tenneco X Strengths Profitable Growth TRACK RECORD Solid Execution 6-year record of value-add adjusted EBIT margin improvement 6.6% 7.2% 7.8% 8.2% 8.9% 9.3% See slide 7 for further discussion EXPECT TO CONTINUE OUTGROWING END MARKETS Criteria Pollutant Regulation Aftermarket Advanced Ride Performance Technology CLEAR STRATEGIC VISION STRONG UNDERLYING BUSINESS COMMITMENT TO FINANCIAL STRENGTH See reconciliations to U.S. GAAP at end of presentation CORP-11/16 (3) 3

4 Tenneco at a Glance 2015 Revenue $8.2 Billion PRODUCT LINES GEOGRAPHY 70% Clean Air 30% Ride Performance 51% North America 34% Europe, South America & India 15% Asia Pacific 73% Light Vehicle Customers 12% Commercial Truck, Off-Hwy & Other Customers 15% Aftermarket Customers Partnering with the world s leading OE and aftermarket customers 5893 CORP-11/16 (4) 4

5 Clear Strategic Vision Our Commitments: Customers Success Shareholder Value Employee Engagement Sustainability Our Markets: Light Vehicle Commercial Vehicle Aftermarket Locomotive Marine Stationary 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 STRATEGIC IMPERATIVES PROFITABLE GROWTH A COMMON FOUNDATION RIDE PERFORMANCE Product cost leadership Superior functionality Advanced technology Vehicle dynamics / integrated systems expertise NVH solutions provider Leading aftermarket brands Healthier Lives Superior Driving Experience A COMMON FOUNDATION Shared Values Accountability Health & Safety Innovation Integrity Passion and a Sense of Urgency Perseverance Results Oriented Teamwork Transparency Trust Operational Excellence Safety and quality Tenneco Manufacturing System Global business processes/ capabilities Optimized global footprint Strategic supplier partnerships Financial Strength Earnings growth Cash flow EVA Balance sheet strength 5893 CORP-11/16 (5) 5

6 One Business Two Product Lines Pioneering global ideas for cleaner air and smoother, quieter and safer transportation CLEAN AIR RIDE PERFORMANCE $ in Millions $ in Millions 5893 CORP-11/16 (6) See reconciliations to U.S. GAAP at end of presentation. * Value-add Revenue is total revenue less substrate sales. See slides 37 and 38 for further explanation. 6

7 Track Record of Solid Execution, Profitable Growth and Value Creation Averaging mid-teen incrementals on adjusted value-add EBIT margin since 2010 * Value-add Revenue is total revenue less substrate sales. See slide 35 for further explanation. See reconciliations to U.S. GAAP at end of presentation. At 2014 constant currency see reconciliation slide CORP-11/16 (7) 7

8 History X of Outpacing Industry Production Aggregate Industry Production* (Units in Millions) Emissions regulations driving higher technology content Tenneco Revenue ($ in Billions) Key Growth Drivers Emissions regulations Light vehicle US Tier 1/Tier 2 Tier 2 Europe Euro 4 Euro 6 China NS 2, Beijing 3 NS 4, Beijing 5 Brazil Euro 2/Euro 3 Euro 5 Commercial truck and bus US US 04 US 10 Europe EU IV Euro VI China NS II, Beijing III NS IV Brazil EU III Euro V Off-highway equipment US Tier 2/Tier 3** Tier 4f Europe Stage 2/Stage 3A** Stage 4 China growth 20% revenue CAGR ( ) * Source: IHS Automotive Jan global light vehicle production, Power Systems Research (PSR) Jan global commercial truck and bus production and PSR off-highway engine production in North America and Europe. ** Engine out requirement, no aftertreatment required 5893 CORP-11/16 (8) Outgrowing market by more than 3 points since

9 Strength: Global Manufacturing and Engineering Footprint 93 manufacturing facilities 15 engineering & technical centers Customers need suppliers with strong global capabilities 5893 CORP-11/16 (9) 9

10 Strength: Balanced Customer Mix As a % of Total 2015 Revenue LV Customer Commercial Truck, AM Customer Off-Hwy & Other Customer 15.2% 13.5% 7.1% 6.2% 4.8% 4.2% 4.1% 3.6% 3.6% 2.6% 2.1% 2.0% 2.0% 1.9% 1.5% 1.3% 1.3% 1.2% 1.1% 1.0% 5893 CORP-11/16 (10) 10

11 Strength: Balanced Platform Mix As a % of Total 2015 Revenue 5893 CORP-11/16 (11) 11

12 Global Emissions Regulations Driving Growth LV - Light Vehicles CTrk - Commercial Trucks Off-Hwy - Off-Highway Vehicles * Phased in ** Estimated date *** Possible harmonization with Stage CORP-11/16 (12) 12

13 Clean Air Technology Roadmap Criteria Pollutants Hydrocarbon Lean NOx Catalyst (ethanol reductant) T.R.U.E.-Clean Mini Multiwrap Converter Mat Euro VI CTrk On-Road Aftertreatment System Stationary Engine Aftertreatment Common Rail Urea Dosing System Tier 4 Locomotive Aftertreatment Natural Gas Aftertreatment Gasoline Particulate Filter Retrofit Marine Aftertreatment System Air-Assisted Dosing System China Low-Cost SCR System Large 24 Diameter SCR XNOx Gen 3 Large Engine Turnkey SCR System Large Engine Urea Dosing (<3 MW) Large Engine Soot Blower XNOx Gen 4 Low Pressure EGR Valve Mixers for Compact Designs Advanced Controls for SCR Coated DPF Large Engine Air Assisted Lance for Urea injection Gaseous Ammonia Generator High Performance SCR Mixer Large Engine Urea Dosing (<10 MW) EURO VI+ CTrk Aftertreatment System XNOx Next GEN Active Diesel Thermal Management HC-LNC (ULSD reductant) Low Pressure EGR / cgpf Ultra High Efficiency SCR System Selective NOx Adsorber (SNA) Low Temp denox Catalyst Alternative SCR Advanced Diesel Aftertreatment Controls with OBD Fuel Economy / Greenhouse Gases Fabricated Manifold Low Backpressure Valve Muffler Integrated Manifold & Turbocharger China Low-Cost Light Vehicle System E-Valve for Cylinder Deactivation Waste Heat Recovery Heat-2-Heat (HEX) CTrk Fabricated Manifold Ultra Lightweight Aftertreatment System Waste Heat Recovery Organic Rankine Cycle CTrk Modular E-Valve Natural Gas Aftertreatment System for Methane Slip Waste Heat Recovery Thermoelectric Generator (TEG) Waste Heat Recovery Thermoacoustic Converter (TAC) Acoustics Low Backpressure Valve Muffler E-Valve for Acoustics Software-based Signature Sound System Exhaust Isolator Cartridge Mount Mini Shear Hub Exhaust Isolator Modular Coulomb Exhaust Damper Next Gen Exhaust Isolators Next Gen High Performance Acoustic Valve Modular Acoustic E-Valve Active Noise Cancellation 5893 CORP-11/16 (13) 13

14 Light X Vehicle Powertrain Evolution Internal combustion engine (ICE) expected to continue as dominant powertrain well into future Tenneco products offer emissions solutions to 97% of the projected powertrain applications in 2027 GDI + GDI Hybrid, at 50% of production, is leading powertrain by 2027, requiring 3-way catalyst, gasoline particulate filter (GPF) and advanced thermal management US Tier 3 fully in effect, requiring an average 81% reduction in NOx + NMOG compared to 2015 fleet average EU Real Driving Emissions and US Tier 3 will require compact mixing and high efficiency SCR for diesel applications Source: IHS Automotive, June CORP-11/16 (14) * Includes Start/Stop ICE 14

15 New Light Vehicle Regulations Additional X Tenneco Content U.S. Fed Tier 3 Fleet Average (NMOG + NOx) Euro-6c / Real Driving Emissions (RDE) Particulate Number and Conformity Factor mg/mi per FTP Conformity factor Particulate number PNx10^12 Additional content required Combined NOx+NMOG reduction of 80%-91% Significantly improved cold start emissions Same tailpipe limits for diesel and gasoline light vehicles $72 / vehicle = EPA cost estimate Estimated $1.4 billion annualized additional available market by 2025 Additional content required Particulate number (PN) requirement RDE test cycles requiring more efficient systems and improved transient emissions performance Improved on-board diagnostics (OBD-II) Tenneco estimates similar cost impact as U.S. Fed Tier CORP-11/16 (15) 15

16 Advanced Ride Performance Technology Product Cost Leadership Thin Wall Lightweight Monotube Aluminum Dual Tube Seat Damper Best Cost CVSA Shock RV+ (New Global Rod-Displaced Valving) HD LCV Strut Ultra Low Cost Damper Superior Functionality Thin Wall Lightweight Monotube CVS Double Path Mount (Cab Shock) Improved Monotube (Low Temperature) Global Hydraulic Rebound Stop New Double Tube Base Valve Global BOCS Valve Lightweight Heavy- Duty Torque Rods Lightweight Top Mounts Frequency Dependent Damping (FDD)* Valving System New CVS 45mm Shock Plastic Spring Seat (for Struts) Exhaust Isolator Cartridge Mount Mini Shear Hub Exhaust Isolator Modular Coulomb Exhaust Damper RV+ (New Global Rod-Displaced Valving) MTV+ (Improved MTV Valve) Comfortmax Monotube Controlled Torque TM Spring and Shackle Bushings Aluminum Dual Tube Automotive Damper Hydroelastic TM Subframe Mounts CTrk Hydroelastic TM Cab Mount Next Gen Exhaust Isolators Adaptive Top Mounts Decoupled Hydroelastic TM Mounts Lightweight LV Elastomer NVH Solutions Lightweight CTrk Elastomer NVH Solutions Advanced Technology CVSA2/Kinetic with hydraulic leveling CVSA2 External Valve Gen2 Hydroelastic TM Body Mount Motorbike Electronic Shocks Dual Valve Semi-active Damper RC1 & RC2 (Uni- & Bi-directional ride comfort) Integrated Height Valve (for Cab) Dual Mode Damper Smart Damper for Aftermarket NVH System Analysis Tools Semi-active Internal Valve Low-Cost Load & Aero Leveling DRiV Digital Valve ACOCAR Active Suspension System Smart Actuator for Passenger Car Intelligent Suspension System with Vision CVSA Next Generation Air Suspension Next Generation * Valves purchased from Koni B.V CORP-11/16 (16) 16

17 MONROE Intelligent Suspension Electronic suspension is expected to grow from 2% to more than 15% of the light vehicle market by 2025, with adoption led by global OEMs. Key drivers include: Increasing consumer expectations around vehicle comfort, safety, stability, and control Demand for fuel economy and associated vehicle weight reduction strategies OEM desire for innovative products to achieve vehicle differentiation Content per Vehicle RIDE PERFORMANCE Hydraulic, pneumatic or electromagnetic driven actuators actively control the suspension System actively detects road irregularities and constantly adjusts the chassis and wheel assemblies Damping coefficient is discrete settings or varied continuously by an electronic control unit (ECU) ECU determines level of damping based on a control strategy and automatically adjusts the damper Semi-active Active More than 6x Average 4x Fixed damper setting Passive $50-$60 A segment B segment C segment D segment E segment F segment 5893 CORP-11/16 (17) 17

18 MONROE Intelligent Suspension Product X Portfolio Comprehensive portfolio of advanced technologies ACOCAR Fully active hydraulic system providing smooth control for wheel and body motion to deliver the ultimate level in ride and handling experience. Active R I D E P E R F O R M A N C E CVSA2/Kinetic Combines CVSA2 comfort with hydraulic roll control for ultimate track performance or proven off-road terrain performance. CVSA2 Lightweight semi-active dampers further enhance a vehicle s tuning range to maximize ride comfort. CVSA Continuously sensing the road and driving conditions to adjust the dampers in real time for a more comfortable and controlled ride. DRiV Intelligent sensing provides improved body control and steering along with ride comfort. Dual Mode Select your preferred ride experience. With the touch of a button, simply switch between comfort and a more sporty ride. Semiactive 5893 CORP-11/16 (18) 18

19 Leading Aftermarket Brands Powerful global brands and expertise in marketing and distribution Stable, countercyclical business with strong margins and cash flow #1 Ride Performance #1 Clean Air #1 Ride Performance #1 Ride Performance #1 Clean Air Leveraging knowledge and capabilities as car parc grows in new regions 5893 CORP-11/16 (19) 19

20 Aftermarket Opportunity in X Growing Regions Aftermarket Vehicles in Operation by Region Bubbles: 2020 car parc volume in millions 2020 Vehicles in Operation: 1.3 billion Western Europe, 227 Canada, Russia, 45 Eastern Europe, 60 China, 263 Japan, 65 Average Age 10.9 years United States, 272 Western & Eastern Europe Average Age 9.3 years Average Age 4.5 years Mexico, 25 By 2020, the Americas, Europe, China and India will account for 77% of the 1.3 billion vehicles in operation Rest of Americas, 17 Argentina, 13 Brazil, 54 South Africa, 8 India, 44 Rest of A/P, 205 Australia, 18 Source: Frost & Sullivan 5893 CORP-11/16 (20) North America 322 million Europe, South America, South Africa and India 468 million Asia-Pacific & Middle East 551 million 4 20

21 Revenue Outlook at Constant Currency Revised 2016 Revenue Outgrowth (April 2016) Tenneco Total Revenue Outgrowth (January 2016) Aggregate Industry Production* Expect 2016 total revenue growth of 6% based on 3% outgrowth expectation Expect outgrowth to accelerate in 2017 and 2018 as new light vehicle regulations start to phase-in Aggregate Industry 3% 3% 4% Production* Includes: Light Vehicle 3% 3% 3% Production Commercial Truck and Off-Highway -1% 1% 3% Production 2016 Currency Sensitivity Revenue growth outpacing market Impact vs Euro RMB Real $1.10 $0.159 $0.300 (2.5%) $1.05 $0.152 $0.250 (5%) $1.00 $0.144 $0.200 * IHS Automotive December 2015 light vehicle production forecast in the regions where Tenneco operates, Power Systems Research (PSR), January 2016 forecast global commercial truck and buses, PSR off-highway engine production in North America and Europe and Tenneco estimates. See slide 29 for further key assumptions related to our revenue projections CORP-11/16 (21) 21

22 Delivering Growth Exceeding Industry X Production in 2016 Light Vehicle Revenue Drivers Incremental Clean Air revenue from 2015 new launches with Daimler, Jaguar Land Rover, Porsche, GM and Nissan, and from new platform launches in 2016, including with Jaguar Land Rover, GM, VW and Ford Incremental revenue from MONROE Intelligent Suspension programs with four new launches in 2016 and the benefit from the continued ramp up on programs launched in 2015, including the Volvo XC90 and Ford Focus RS Commercial Truck and Off-Highway Revenue Drivers Benefit from mid-year 2015 launches for Kubota off-highway equipment and Ford medium-duty commercial trucks in North America Remaining content additions for 2015 off-highway Tier 4f and Stage 4 regulations in North America and Europe Increasing market share with commercial truck customers in China Initial launches with India commercial truck customers as BS IV begins in 50 cities 5893 CORP-11/16 (22) 22

23 Balance Sheet Strength $ Millions Target Operating Leverage ~1x ** ** * Including noncontrolling interests. Reconciliations to U.S. GAAP included at end of presentation. Leverage Target Allows Growth Opportunity in a Cyclical Business ** In April 2015, the FASB issued Accounting Standard Update , Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated liability. Tenneco adopted this standard for the first quarter of 2015 and applied retrospectively to The balance for unamortized debt issuance costs was $12 million and $14 million at December 31, 2015 and December 31, 2014, respectively CORP-11/16 (23) 23

24 Capital Allocation Priorities to Drive Shareholder Value 1. Fund organic growth 2. Restructuring activities to improve cost competitiveness 3. Balance sheet strength consistent with target leverage ratio of 1x 4. Strategic opportunities Core sciences foundation, technology, customer, geographic and aftermarket growth opportunities 5. Capital returns to shareholders Share repurchases out of free cash flow after all other investing & strategic needs are satisfied Total repurchases authorized of $550 million; $359 million completed through September 30, 2016 Repurchased 7.0 million shares since beginning of 2015 or 11% of shares outstanding 5.0% $ % $ Working Capital (Receivables + Inventory - Payables) as a % of Revenue 5.5% 5.5% $ $ % 2.6% $ $ Working Capital ($ Millions) Working Capital as % of Revenue 5.6% $ % $ $ % 4.8% $ CapEx ($ Millions) CapEx as % of Revenue 3.6% 3.0% $ % $ $404 $ TEN averaged 5.3% over the past 8 years Capital Expenditures as a % of Revenue 3.8% $ TEN averaged 3.3% over the past 8 years 5.1% % $ CORP-11/16 (24) 24

25 XA Compelling Investment A track record of solid execution, profitable growth and value creation Growth outlook continues to outpace market Expect continued margin improvement Strong underlying business with clear strategic vision supported by: Balanced market segment, customer and platform mix Large and growing global footprint Robust operational and engineering capabilities Three key drivers to outgrow end market: Increasing regulation of criteria pollutant emissions Increasing demand for advanced ride performance technology Increasing demand for aftermarket products, especially in growing markets Demonstrated commitment to generating cash flow for growth investment, balance sheet strength and shareholder returns A strong, experienced executive team 5893 CORP-11/16 (25) 25

26 5893 CORP-11/16 (26) 26

27 Appendix: Light X Vehicle Emissions Regulations Criteria Pollutants CO HC NOx PM PN NMOG Since Clean Air Act in 1968, regulators have reduced allowable levels to counter harmful effects of by-products of carbonbased energy combustion CO 2 Emissions Improved fuel efficiency drives CO 2 emissions reduction Catalytic and diesel oxidation converters Diesel particulate filters Selective catalytic reduction Urea dosing system Fuel vaporizers Gasoline particulate filters Powertrain GDI, Diesel, Hybrid Engine efficiency enhancements boosting, variable valve timing, cylinder deactivation, idle start/stop Friction reduction and aerodynamic improvement Improved aftertreatment efficiency Vehicle mass reduction Waste heat recovery Balance of engine, aftertreatment and fuel achieves emissions reduction 5893 CORP-11/16 (27) 27

28 Appendix: Commercial Truck and Off-Highway Title Diesel X Aftertreatment Customers North America Europe China Truck Chrysler (LV 3/4 ton +) GM (LV 3/4 ton +) Ford (LV 3/4 ton +, CTrk Med-duty) Customer A (CTrk) Off-Highway Caterpillar/Perkins Deere Brazil Commercial Truck Daimler Trucks IVECO MAN MWM Scania Commercial Truck Daimler Trucks Scania Customer B Off-Highway AGCO Caterpillar/Perkins Deere Deutz MAN Scania Commercial Truck China National Heavy-Duty Truck Co. Dalian Diesel Engine Co. FAW JND Shanghai Diesel Engine Co. Weichai YuChai India Commercial Truck Daimler Trucks Mahindra MAN Trucks India (MTI) Tata Motors VE Commercial Vehicles Volvo Trucks Japan Off-Highway Caterpillar/Perkins Exported from N. America Kubota 5893 CORP-11/16 (28) 28

29 Tenneco s X Revenue Projections Tenneco s revenue projections for 2016 are as of July Revenue assumptions are based on projected customer production schedules, IHS Automotive July 2016 forecasts and Power Systems Research July 2016 forecasts. Tenneco s revenue projections for 2017 and 2018 are as of January Revenue assumptions are based on projected customer production schedules, IHS Automotive December 2015 forecasts and Power Systems Research January 2016 forecasts. In addition to the information set forth on this slide and slide 21, Tenneco s 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, 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; and Tenneco s status as supplier for the existing program and its relationship with the customer. 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 and pricing. Tenneco s revenue projections constitute forward-looking statements. We also refer you to the cautionary language regarding our forward-looking statements set forth in the Safe Harbor statement on slide CORP-11/16 (29) 29

30 Financial Results Disclaimer Use of Non-GAAP Financial Information In 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* ), Net Debt, Working Capital, Value-Add Revenue, Adjusted EBITDA*, and Adjusted Earnings Before Interest Expense, Income Taxes and Noncontrolling Interests ( Adjusted EBIT ). Reconciliations of these non-gaap financial measures to the comparable GAAP measure are included in this presentation. * Including noncontrolling interests CORP-11/16 (30) 30

31 EBITDA* Reconciliation of Non-GAAP Results $ Millions, Unaudited Net income (loss) attributable to Tenneco Inc. $247 $226 $183 $ 275 $ 157 $ 39 $(73) $(415) $ (5) $ 49 $ 56 $ 9 $ 25 $(189) $(131) $ (41) Cumulative effect of change in accounting principle, net of income tax Net income attributable to noncontrolling interests Income tax expense (benefit) (21) (6) (6) 50 (27) Interest expense (net of interest capitalized) EBIT, earnings before interest expense, income taxes & noncontrolling interests (GAAP measure) (3) Depreciation & amortization of other intangibles EBITDA* $ 722 $ 700 $ 629 $ 633 $ 586 $497 $313 $219 $457 $380 $394 $347 $334 $ 311 $ 243 $273 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 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 CORP-11/16 (31) 31

32 Adjusted EBITDA* Reconciliation of Non-GAAP Results $ Millions, Unaudited EBITDA* $722 $700 $ 629 $633 $ 586 $ 497 $ 313 $ 219 $ 457 $ 380 $ 394 $ 347 $ 334 $ 311 $ 243 $ 273 Adjustments (reflect non-gaap (1) measures): Restructuring & related expenses Environmental reserve Pension/post retirement charges Bad debt charge New aftermarket customer changeover costs Pullman recoveries (5) Goodwill impairment Reserve for receivables from former affiliate Change to defined contribution pension plan (7) Consulting fees indexed to stock price Gain on sale of York (11) - - Other non-operational items Adjusted EBITDA* (non-gaap financial measure) (2) $785 $784 $707 $641 $605 $517 $335 $ 380 $ 487 $ 409 $416 $399 $342 $ 304 $ 298 $ 338 (1) Generally Accepted Accounting Principles (2) Tenneco presents the above reconciliation of non-gaap results in order to reflect the results for full years 2000 through 2015 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 measure 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. * Including noncontrolling interests CORP-11/16 (32) 32

33 Net Debt /Adjusted EBITDA* Reconciliation of Non-GAAP Results $ Millions, Unaudited 2015 ** 2014 ** Total debt $1,210 $ 1,115 $ 1,102 $1,180 $ 1,224 $1,223 $1,220 $ 1,451 $1,374 $1,385 $1,383 $1,421 $1,430 $ 1,445 $ 1,515 $1,527 Total cash Debt net of cash balances , ,053 1,325 1,186 1,183 1,242 1,207 1,285 1,391 1,462 1,492 Adjusted EBITDA* $ 785 $ 784 $ 707 $ 641 $ 605 $ 517 $ 335 $ 380 $ 487 $ 409 $ 416 $ 399 $ 342 $ 304 $ 298 $ 338 Ratio of net debt to adjusted EBITDA* 1.2x 1.1x 1.2x 1.5x 1.7x 1.9x 3.1x 3.5x 2.4x 2.9x 3.0x 3.0x 3.8x 4.6x 4.9x 4.4x 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. ** In April 2015, the FASB issued Accounting Standard Update , Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated liability. Tenneco adopted this standard for the first quarter of 2015 and applied retrospectively to The balance for unamortized debt issuance costs was $12 million and $14 million at December 31, 2015 and December 31, 2014, respectively CORP-11/16 (33) 33

34 Working Capital as a Percentage of Revenue Reconciliation of Non-GAAP Results $ Millions, Unaudited Receivables $1,112 $1,088 $ 1,060 $ 986 $ 980 $ 826 $ 596 $ 574 Inventory Less: Payables 1,376 1,372 1,359 1,186 1,171 1, Working Capital $ 418 $ 404 $ 357 $ 467 $ 401 $ 325 $ 258 $ 297 Revenue $8,209 $8,420 $ 7,964 $ 7,363 $ 7,205 $ 5,937 $4,649 $ 5,916 Percentage of Revenue 5.1% 4.8% 4.5% 6.3% 5.6% 5.5% 5.5% 5.0% Tenneco presents the above reconciliation for purposes of computing working capital as a percentage of revenue. We include total receivables, inventory and payables in the calculation as these are the components of working capital that we have the most direct control over and because they are most closely related to the cash flow performance of our operations CORP-11/16 (34) 34

35 Adjusted EBIT as a Percentage of Value-Add Revenue Reconciliation of Non-GAAP Results $ Millions Ride Performance revenue $ 2,486 $ 2,609 $ 2,520 $ 2,437 $ 2,444 $ 2,112 $ 1,730 $ 1,938 $ 1,853 $ 1,706 Clean Air revenue $ 5,723 $ 5,811 $ 5,444 $ 4,926 $ 4,761 $ 3,825 $ 2,919 $ 3,978 $ 4,331 $ 2, CORP-11/16 (35) Total revenue $ 8,209 $ 8,420 $ 7,964 $ 7,363 $ 7,205 $ 5,937 $ 4,649 $ 5,916 $ 6,184 $ 4,682 Less: Substrate sales 1,916 1,934 1,835 1,660 1,678 1, ,492 1, Value-add revenues (1) $ 6,293 $ 6,486 $ 6,129 $ 5,703 $ 5,527 $ 4,653 $ 3,683 $ 4,424 $ 4,511 $ 3,755 EBIT $ 519 $ 492 $ 424 $ 428 $ 379 $ 281 $ 92 $ (3) $ 252 $ 196 Adjustments (reflect non-gaap (2) measures) Restructuring and related expenses Pullman recoveries (5) Asset impairment charge Goodwill impairment Bad debt charge Pension/post retirement charges (7) Environmental reserves New aftermarket customer changeover costs Reserve for receivables from former affiliate Adjusted EBIT (non-gaap Financial Measures) (3) $ 586 $ 577 $ 502 $ 443 $ 398 $ 306 $ 118 $ 158 $ 282 $ 225 Adjusted EBIT as a % of value-add revenue (4) 9.3% 8.9% 8.2% 7.8% 7.2% 6.6% 3.2% 3.6% 6.3% 6.0% (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. (4) Tenneco presents adjusted EBIT as a percentage of value-add revenue to assist investors in evaluating our company s operational performance without the impact of substrate sales. 35

36 Adjusted EBIT as a Percentage of Value-Add Revenue Currency Impact Reconciliation of Non-GAAP Results X $ Millions 2015 Total Revenue Value-add Revenue Adjusted EBIT Adjusted EBIT as a % of Value-add Revenue (1) Total $ 8,209 $ 6,293 $ % Currency adjustment to 2014 constant currency (638) (508) (64) Total after currency adjustment $ 8,847 $ 6,801 $ % (1) Tenneco presents the above reconciliations in order to reflect total revenue, value-add revenue and adjusted EBIT separately from the effects of doing business in currencies other than the U.S. dollar. Presenting adjusted EBIT as a percent of value-add revenue excluding currency assists investors in evaluating the company s operational performance CORP-11/16 (36) 36

37 Adjusted EBIT as a Percentage of Value-Add Revenue Clean Air Division Reconciliation of Non-GAAP Results $ Millions Total revenue $ 5,723 $ 5,811 $ 5,444 $ 4,926 $ 4,761 $ 3,825 Less: Substrate sales 1,916 1,934 1,835 1,660 1,678 1,284 Value-add revenues (1) $ 3,807 $ 3,877 $ 3,609 $ 3,266 $ 3,083 $ 2,541 EBIT $ 417 $ 397 $ 370 $ 327 $ 298 $ 217 Adjustments (reflect non-gaap (2) measures) Restructuring and related expenses Goodwill impairment Bad debt charge Pension/post retirement charges Adjusted EBIT (non-gaap Financial Measures) (3) $ 427 $ 418 $ 381 $ 334 $ 304 $ 228 Adjusted EBIT as a % of value-add revenue (4) 11.2% 10.8% 10.6% 10.2% 9.9% 9.0% (1) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from substrate sales. 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. (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. (4) Tenneco presents adjusted EBIT as a percentage of value-add revenue to assist investors in evaluating the company s operational performance without the impact of substrate sales CORP-11/16 (37) 37

38 Adjusted EBIT as a Percentage of Value-Add Revenue Ride Performance Division Reconciliation of Non-GAAP Results $ Millions Total revenue $ 2,486 $ 2,609 $ 2,520 $ 2,437 $ 2,444 $ 2,112 Less: Substrate sales Value-add revenues (1) $ 2,486 $ 2,609 $ 2,520 $ 2,437 $ 2,444 $ 2,112 EBIT $ 189 $ 219 $ 139 $ 168 $ 139 $ 145 Adjustments (reflect non-gaap (2) measures) Restructuring and related expenses Pullman recoveries (5) - - Asset impairment charge Goodwill impairment Pension/post retirement charges Adjusted EBIT (non-gaap Financial Measures) (3) $ 242 $ 248 $ 204 $ 176 $ 152 $ 159 Adjusted EBIT as a % of value-add revenue (4) 9.7% 9.5% 8.1% 7.2% 6.2% 7.5% (1) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from substrate sales. 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. (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. (4) Tenneco presents adjusted EBIT as a percentage of value-add revenue to assist investors in evaluating the company s operational performance without the impact of substrate sales CORP-11/16 (38) 38