Annual Meeting of Stockholders

Transcription

1 X Annual Meeting of Stockholders Lake Forest, IL May 18, 2016 N Y S E : T E N 5846 CORP-5/16 (1) 1

2 Safe Harbor The foregoing 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. Such risks and uncertainties include, but are not limited to, the following: (i) general economic, business and market conditions; (ii) the company s ability to source and procure needed goods and services in accordance with customer demand and at competitive prices; (iii) 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 safety or intellectual property rights; and the impact of the extensive, increasing and changing laws and regulations to which we are subject, including environmental laws and regulations; (iv) changes in capital availability or costs, including increases in the company s costs of borrowing, the amount of the company s debt, the ability of the company to access capital markets at favorable rates, and the credit ratings of the company s debt; (v) changes in consumer demand and preferences and changes in automotive and commercial vehicle manufacturers production rates and their actual and forecasted requirements for the company s products including, with respect to any delays in the adoption of the current mandated timelines for worldwide emissions regulations; (vi) 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; (vii) 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; (viii) the company s continued success in cost reduction and cash management programs and its ability to execute and realize anticipated benefits from these plans; (ix) economic, exchange rate and political conditions in the countries where we operate or sell our products; (x) workforce factors such as strikes or labor interruptions; (xi) increases in the costs of raw materials, including the company s ability to successfully reduce the impact of any such cost increases; (xii) the negative impact of fuel price volatility on logistics costs and discretionary purchases of vehicles or aftermarket products, and demand for off-highway equipment ; (xiii) the cyclical nature of the global vehicular industry, including the performance of the global aftermarket sector and longer product lives of automobile parts; (xiv) product warranty costs; (xv) material developments relating to our intellectual property or the failure or breach of our IT systems; (xvi) the company s ability to develop and profitably commercialize new products and technologies; (xvii) changes by the Financial Accounting Standards Board or other accounting regulatory bodies to authoritative generally accepted accounting principles or policies; (xviii) changes in accounting estimates and assumptions, including changes based on additional information; (xix) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals, as well as the impact of changes to and compliance with laws and regulations, including those pertaining to environmental concerns, pensions or other regulated activities; (xx) natural disasters, acts of war, riots or terrorism and the impact of these occurrences or acts on economic, financial, manufacturing and social conditions, including, without limitation, with respect to supply chains or customer demand, in the countries where the company operates; and (xxi) 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 risk factors and uncertainties is detailed from time to time in the company s SEC filings, including but not limited to its report on Form 10-K. The company does not undertake any obligation to publicly disclose revisions or updates to any forward-looking statements CORP-5/16 (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-4/16 (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 5846 CORP-5/16 (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 5846 CORP-5/16 (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 5846 CORP-5/16 (6) See reconciliations to U.S. GAAP at end of presentation. * Value-add Revenue is total revenue less substrate sales. See slides 27 and 28 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 26 for further explanation. See reconciliations to U.S. GAAP at end of presentation. at 2014 constant currency 5846 CORP-5/16 (7) 7

8 Full-Year X 2015 Results $ Millions, except as noted FY 2015 FY 2014 B/(W) % Change Revenues 8,209 8,420 (211) (3%) Value-Add Revenue 6,293 6,486 (193) (3%) Adjusted SGA&E (% of Sales) 7.6% 7.7% 0.1% 1% Adjusted EBIT % Adjusted EBIT(% of VA Revenue) 9.3% 8.9% 0.4% 4% Adjusted EBITDA* Adjusted Net Income % Adjusted EPS ($) % Cash Flow from Operations % Net Debt/Adjusted EBITDA* # 1.2x 1.1x (0.1x) (9%) 5846 CORP-5/16 (8) * Including noncontrolling interests. Adjusted for restructuring activities, bad debt charge, pension/post retirement medical charges, costs related to refinancing and tax adjustments. See reconcilations to U.S. GAAP at end of presentation. # 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. The balance for unamortized debt issuance costs was $12 million at December 31, 2015 and $14 million at December 31,

9 First X Quarter 2016 Results $ Millions, except as noted Q Q B/(W) % Change Revenues 2,136 2, % Value-Add Revenue 1,626 1, % Adjusted SGA&E (% of Sales) 8.4% 8.2% (0.2%) (2%) Adjusted EBIT % Adjusted EBIT (% of VA Revenue) 8.5% 8.0% 0.5% 6% Adjusted EBITDA* % Adjusted Net Income % Adjusted EPS ($) % Cash Flow from Operations (29) (50) 21 42% Net Debt/Adjusted LTM EBITDA* 1.3x 1.3x - - * Including noncontrolling interests. Adjusted for restructuring activities and tax adjustments. See reconcilations to U.S. GAAP at end of presentation CORP-5/16 (9) 9

10 Highlights X Revenue growth continues to outpace aggregate industry production growth Records: Adjusted EBIT for 2015 and Q Adjusted net income for 2015 and Q Adjusted earnings per share for 2015 and Q Margin improvement: Twelve consecutive quarters of improved value-add adjusted EBIT margins Six consecutive years of improved value-add adjusted EBIT margins Returns to shareholders: Repurchased $229 million in common shares since January 2015 authorization announcement Expect to complete remaining $321 million authorization by December 2017 Confirming strength of strategic direction 5846 CORP-5/16 (10) 10

11 Strength: Global Manufacturing and Engineering Footprint Customers need suppliers with strong global capabilities 5846 CORP-5/16 (11) 11

12 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% 5846 CORP-5/16 (12) 12

13 Strength: Balanced Platform Mix As a % of Total 2015 Revenue 5846 CORP-5/16 (13) 13

14 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-5/16 (14) 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-5/16 (15) 15

16 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 5846 CORP-5/16 (16) 16

17 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 5846 CORP-5/16 (17) 17

18 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 revised outgrowth expectation Expect accelerated growth 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 23 for further key assumptions related to our revenue projections CORP-5/16 (18) 18

19 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 5846 CORP-5/16 (19) 19

20 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; $229 million completed through March 31, 2016 Repurchased 6.5 million shares or 11% of shares outstanding since % $ % $ Working Capital (Receivables + Inventory - Payables) as a % of Revenue 5.5% 5.5% $ Working Capital ($ Millions) Working Capital as % of Revenue 6.3% $ % 2.6% 2009 $ % $ $ % 4.8% $ CapEx ($ Millions) CapEx as % of Revenue 3.6% 3.2% 3.0% $263 $254 $ $404 $ TEN averaged 5.3% over the past 8 years $118 Capital Expenditures as a % of Revenue 3.8% $ TEN averaged 3.3% over the past 8 years 5.1% % $ CORP-5/16 (20) 20

21 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 5846 CORP-5/16 (21) 21

22 5846 CORP-5/16 (22) 22

23 Tenneco s X Revenue Projections Tenneco s revenue projections for 2016 are as of April 2016 and 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 18, 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 CORP-5/16 (23) 23

24 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 ), Adjusted Net Income and Adjusted Earnings Per Share. Reconciliations of these non-gaap financial measures to the comparable GAAP measure are included in this presentation. * Including noncontrolling interests CORP-5/16 (24) 24

25 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-5/16 (25) 25

26 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-5/16 (26) 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. 26

27 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-5/16 (27) 27

28 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-5/16 (28) 28

29 Financial Results Reconciliation X of Non-GAAP Results $ Millions, Unaudited EBITDA* EBIT Net Income Attributable to Tenneco Inc. EPS Financial measures $ 722 $ 700 $ 519 $ 492 $ 247 $ 226 $ 4.11 $ 3.66 Adjustments (reflect non-gaap (1) measures) Restructuring and related expenses Pension/post retirement charges Bad debt charge Costs related to refinancing Net tax adjustments (15) (11) (0.25) (0.18) Non-GAAP financial measures (2) $ 785 $ 784 $ 586 $ 577 $ 293 $ 288 $ 4.87 $ 4.65 (1) Generally Accepted Accounting Principles (2) Tenneco presents the above reconciliation of GAAP to non-gaap earnings measures primarily to reflect the results 2015 and 2014 in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-gaap earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-gaap earnings measures reflected above to understand and analyze the results of the business. * Including noncontrolling interests CORP-5/16 (29) 29

30 EBITDA* Reconciliation X of Non-GAAP Results $ Millions, Unaudited Q2 15 Q3 15 Q4 15 Q1 16 LTM Q1 16 Net income attributable to Tenneco Inc. $ 78 $ 52 $ 68 $ 57 $ 255 Net income attributable to noncontrolling interests Income tax expense Interest expense (net of interest capitalized) EBIT, earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) Depreciation & amortization of other intangibles EBITDA* $ 206 $ 169 $ 177 $ 178 $ 730 EBITDA* represents earnings before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA* is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA* calculation, however, are derived from amounts included in the historical statements of income. In addition, EBITDA* should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company s operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA* because it regularly reviews EBITDA* as a measure of the company s performance. In addition, Tenneco believes that its security holders utilize and analyze its EBITDA* for similar purposes. Tenneco also believes EBITDA* assists investors in comparing a company s performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA* measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. * Including noncontrolling interests CORP-5/16 (30) 30

31 Adjusted EBITDA* Reconciliation X of Non-GAAP Results $ Millions, Unaudited Q2 15 Q3 15 Q4 15 Q1 16 LTM Q1 16 EBITDA* $ 206 $ 169 $ 177 $ 178 $ 730 Adjustments (reflect non-gaap (1) measures) Restructuring and related expenses Pension charges (3) Adjusted EBITDA* (non-gaap financial measures) (2) $ 213 $ 200 $ 197 $ 189 $ 799 (1) Generally Accepted Accounting Principles (2) Tenneco presents the above reconciliation of non-gaap results in order to reflect the results for LTM Q in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-gaap earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-gaap earnings measures reflected above to understand and analyze the results of the business. (3) Charges related to pension derisking. * Including noncontrolling interests CORP-5/16 (31) 31

32 EBITDA* Reconciliation X of Non-GAAP Results $ Millions, Unaudited Q2 14 Q3 14 Q4 14 Q1 15 LTM Q1 15 Net income attributable to Tenneco Inc. $ 81 $ 78 $ 21 $ 49 $ 229 Net income attributable to noncontrolling interests Income tax expense Interest expense (net of interest capitalized) EBIT, earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) Depreciation & amortization of other intangibles EBITDA* $ 208 $ 192 $ 136 $ 170 $ 706 EBITDA* represents earnings before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA* is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA* calculation, however, are derived from amounts included in the historical statements of income. In addition, EBITDA* should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company s operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA* because it regularly reviews EBITDA* as a measure of the company s performance. In addition, Tenneco believes that its security holders utilize and analyze its EBITDA* for similar purposes. Tenneco also believes EBITDA* assists investors in comparing a company s performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA* measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. * Including noncontrolling interests CORP-5/16 (32) 32

33 Adjusted EBITDA* Reconciliation X of Non-GAAP Results $ Millions, Unaudited Q2 14 Q3 14 Q4 14 Q1 15 LTM Q1 15 EBITDA* $ 208 $ 192 $ 136 $ 170 $ 706 Adjustments (reflect non-gaap (1) measures) Restructuring and related expenses Bad debt charge (3) Pension/post retirement charges (4) Adjusted EBITDA* (non-gaap financial measures) (2) $ 218 $ 204 $ 188 $ 175 $ 785 (1) Generally Accepted Accounting Principles (2) Tenneco presents the above reconciliation of GAAP to non-gaap earnings measures primarily to reflect the results for LTM Q in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-gaap earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-gaap earnings measures reflected above to understand and analyze the results of the business. (3) Charge related to the bankruptcy of an aftermarket customer in Europe. (4) Charges related to pension derisking and post retirement medical true-up. * Including noncontrolling interests CORP-5/16 (33) 33

34 Net Debt /Adjusted EBITDA* Reconciliation X of Non-GAAP Results $ Millions, Unaudited LTM Q LTM Q ** 2014** Total debt $ 1,408 $ 1,272 $ 1,210 $ 1,115 Total cash Debt net of cash balances 1, Adjusted EBITDA* $ 799 (1) $ 785 (1) $ 785 $ 784 Ratio of net debt to adjusted EBITDA* 1.3x (1) 1.3x (1) 1.2x 1.1x 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. (1) Last 12 months calculation 5846 CORP-5/16 (34) 34

35 Financial Accomplishments Reconciliation X of Non-GAAP Results $ Millions, Unaudited EBITDA* EBIT Net Income Attributable to Tenneco Inc. EPS Q1 16 Q1 15 Q1 16 Q1 15 Q1 16 Q1 15 Q1 16 Q1 15 Financial measures $ 178 $ 170 $ 124 $ 120 $ 57 $ 49 $ 0.99 $ 0.80 Adjustments (reflect non-gaap (1) measures) Restructuring and related expenses Net tax adjustments (3) 1 (0.05) 0.01 Non-GAAP financial measures (2) $ 189 $ 175 $ 138 $ 125 $ 67 $ 54 $ 1.17 $ 0.88 (1) Generally Accepted Accounting Principles (2) Tenneco presents the above reconciliation of GAAP to non-gaap earnings measures primarily to reflect the results of first quarter 2016 and 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 measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-gaap earnings measures reflected above to understand and analyze the results of the business. * Including noncontrolling interests CORP-5/16 (35) 35

36 Adjusted EBIT as a Percentage of Value-Add Revenue Reconciliation of Non-GAAP Results X $ Millions, Unaudited Q1 16 Q1 15 Total revenue $ 2,136 $ 2,023 Less: Substrate sales Value-add revenue $ 1,626 $ 1,599 Adjusted EBIT $ 138 $ 125 Adjusted EBIT as a percentage of value-add revenue (1) 8.5% 8.0% (1) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenue. Substrate sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Further, presenting adjusted EBIT as a percentage of value-add revenue assists investors in evaluating our company s operational performance without the impact of such substrate sales CORP-5/16 (36) 36

37 Adjusted SGA&E as a Percentage of Sales Reconciliation X of Non-GAAP Results Q1 16 Q1 15 FY 15 FY 14 SGA&E $ 186 $ 166 $ 637 $ 688 Adjustments (reflect non-gaap (1) measures) Restructuring and related expenses (6) (1) (12) (16) Bad debt charge (2) Pension/post retirement charges - - (4) (25) Adjusted SGA&E (non-gaap financial measures) (2) $ 180 $ 165 $ 621 $ 645 Adjusted SGA&E (% of Sales) 8.4% 8.2% 7.6% 7.7% (1) Generally Accepted Accounting Principles (2) Tenneco presents the above reconciliation of GAAP to non-gaap financial 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 financial 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 financial 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 CORP-5/16 (37) 37