KeyBanc Capital Markets Industrial, Automotive & Transportation Conference

Transcription

1 KeyBanc Capital Markets Industrial, Automotive & Transportation Conference Boston, MA May 31, 2017 NYSE: TEN

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 forwardlooking 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. 2

3 Strong Foundation Consistent Strategic Focus Our Commitments: Customers Success Shareholder Value Employee Engagement Sustainability Our Markets: Light Vehicle Commercial Truck Off-Highway / Large Engine Aftermarket STRATEGIC IMPERATIVES 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 PROFITABLE GROWTH 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 and Safety Innovation Integrity Passion and a Sense of Urgency Perseverance Results Oriented Teamwork Transparency Trust Operations Excellence Safety and quality Manufacturing optimization Global business processes / capabilities Optimized global footprint Strategic supplier partnerships Financial Strength Earnings growth Cash flow EVA Balance sheet strength 3

4 Appealing Investment Opportunity Built to Outperform Proven track record of growth Revenue growth outpacing industry production Margin expansion and double-digit EPS growth Diversified business profile Accelerating Core Growth Positive market trends in both product lines Expansion in high growth markets Technology and capability leadership Focused Strategic Priorities & Objectives 4

5 Sustainable Growth Drivers Outpacing Industry Production Pioneering Global Ideas for Cleaner Air and Smoother, Quieter and Safer Transportation Strong position on light vehicle platforms globally Regulatory-driven Clean Air content Increasing demand for advanced suspension systems * Source IHS Automotive January 2017 global light vehicles ** CAGR Global aftermarket leadership Over past 10 years, TEN outpaced industry production by 2x 5

6 Built to Outperform Proven Track Record of Growth Since 2006, Tenneco has delivered: Annual revenue growth doubles industry production Margin expansion of 370 bps Annual adjusted EPS growth of 18% Seven-year record of value-add adjusted EBIT margin improvement * Value-add Revenue is total revenue less substrate sales. See slide 52 for further explanation. See reconciliations to U.S. GAAP at end of presentation. 6

7 Built to Outperform Margin Expansion Expect continuing annual margin improvement driven by: Increasing content with higher technology products Growing aftermarket Commercial truck and off-highway Increasing Clean Air content in China and India as regulations tighten Mature market recovery Best delivered cost Optimizing product designs and manufacturing processes Flexible global manufacturing and supply chain networks Since 2006, Tenneco has delivered margin* expansion of 370bps Continuous improvement * Adjusted EBIT as a % of VA revenue. See reconciliations to U.S. GAAP at end of presentation. 7

8 Built to Outperform Diversified Profile Leading Product Lines CLEAN AIR Products and technologies designed to meet global emissions regulations anywhere in the world RIDE PERFORMANCE Products and technologies that meet the increasing demand for enhanced vehicle comfort and handling Our diversified business profile is a competitive advantage See reconciliations to U.S. GAAP at end of presentation. * Value-add Revenue is total revenue less substrate sales. See slides 53 and 54 for further explanation. 8

9 Built to Outperform Diversified Profile End-Market Applications TOTAL TENNECO CLEAN AIR LV 83% Light vehicle 75% Aftermarket 14% Commercial truck and off-highway 11% LV 55% RIDE PERFORMANCE * LV segment Manage cyclicality with balance across end-market applications 9

10 Built to Outperform Diversified Profile Customers and OE Platforms LEADING CUSTOMERS OE PLATFORMS 623 Customers Light vehicle OEMs 32 Commercial truck OEMs 29 Off-highway & other OEMs 15 Aftermarket 426 Tenneco as Tier k Ship to locations 435 OE platforms Light vehicle 238 Commercial truck 130 Off-highway & other 67 Enabling aftermarket growth Strong Customer Partnerships and Platform Mix Globally 10

11 Built to Outperform Diversified Profile Global Footprint MANAGING CYCLICAL MARKETS WITH FLEXIBLE NETWORK Demand-driven network design Utilization-driven capacity management Flex capacity partnerships Manufacture where we sell 2016 Revenue 24 Countries of Operation 158 Countries Served Powered by People 31,000 Team Members 91 Manufacturing Facilities 15 Engineering & Technology Centers 11

12 Appealing Investment Opportunity 12

13 Market Landscape 0-5 yrs 5-10 yrs >10 yrs Market Trends Light vehicle growth (Global) Accelerating car parc in high growth markets (China and India) Agriculture and construction production recovery (U.S. and Europe) Differentiate vehicles with ride performance Diesel / gasoline powertrain mix (Europe) Regulatory Drivers Tightening emissions regulations criteria pollutants CO 2 emissions Asia Pacific CT & OH regulations criteria pollutants Technology Trends Strong investments in ICE powertrain Electrification Hybrid BEV penetration Autonomous driving Mobility models Trends Driving Current and Future Opportunities with Existing Core Portfolio 13

14 Ride Performance Overview Growing demand for advanced suspension technologies that enhance vehicle performance RIDE PERFORMANCE by the Numbers #1 Market position for ride control products CUSTOMERS SERVED Light Vehicle Conventional shocks and struts PRODUCTS Advanced suspension systems 90+ million OE and AM Shocks and struts sold globally in Manufacturing locations 10 Engineering centers 572 Customers served $2.5 billion 2016 Revenue Commercial Truck Aftermarket NVH solutions Success driven by application engineering, product leadership and global capabilities 14

15 Ride Performance Core Capabilities Global product and application engineering expertise Ride tuning Systems integration Vehicle dynamics Noise, Vibration, Harshness (NVH) Light weighting Tenneco Tuning Truck Global program management Global integrated supply chain High volume manufacturing Continuous improvement 15

16 Core Suspension Products MILLION TODAY SHOCKS AND STRUTS SOLD ANNUALLY By 2030: The Asia Pacific region will account for 70% of the global light vehicle production growth China and India light vehicle growth opportunity Strong presence and capabilities 5 manufacturing locations 3 technical centers Diverse portfolio of customers Optimized damper designs for fast growing segments Well positioned for advanced suspension products Source: IHS database Broad product portfolio and tuning expertise differentiate vehicle ride 16

17 NVH Solutions Isolation Combined with Light Weighting Light Weighting Original 2-hole Isolator Mini-shear-hub in Plastic Bracket Conventional Steel-Based Partial Metal-to-Plastic Conversion Manufacturing Technical Center Market leading technology NVH management Durability and corrosion protection Mass reduction Opportunity to grow market presence in Europe and APAC Extend our NVH expertise and capabilities globally 17

18 Advanced Suspension Technology Expected to grow from 2% to more than 15% of light vehicle production by 2025 with adoption led by global OEMs With higher content, advanced suspension represents more than 40% of the available market revenue by 2025 Content per Vehicle RIDE PERFORMANCE Semi-active Suspension Active Suspension More than 6x Average 4x Conventional Suspension $50-$60 A segment F segment Install rate and content growth results in 25% revenue CAGR opportunity Source: IHS database and Tenneco analysis 18

19 New Opportunities Autonomous Driving / Mobility Trends Opportunities for Tenneco SAE levels of automation for on-road vehicles Existing portfolio of technical solutions to capture ADAS/AD trend Comfort / train-like ride Improved handling Noise, vibration, harshness reduction Light weighting Continuing to invest in developing market leading products and technology Source: ADAS Advanced Driver Assistance Systems AD Automated Driving 19

20 Clean Air Overview Products and systems designed to meet global emissions regulations anywhere in the world CLEAN AIR by the Numbers Leading market positions globally CUSTOMERS SERVED Light Vehicle Catalytic converter PRODUCTS Gasoline Particulate Filter (GPF) 63 Manufacturing locations Commercial Truck Full exhaust system 8 Engineering centers XNOx dosing system for SCR Diesel particulate filter (DPF) 123 Customers served Off-Highway and Large Engine $6.1 billion 2016 Revenue Electronic Valve Success driven by regulatory expertise, product leadership and global capabilities 20

21 Clean Air Core Capabilities Global product and application engineering expertise Regulatory Expertise Core Science Expertise Noise, vibration and harshness Acoustics Light weighting System integration Core Science Expertise Global program management Global integrated supply chain and footprint 21

22 Regulatory Drivers Regulations Driving Technology Roadmap and Content Growth Key Regulations Light Vehicle US Tier Euro 6c/6d Real Driving Emissions 2019 China CN 6a** 2020 India BS 6 (skipping BS 5) ** Proposed or estimated date Commercial Truck 2019 China CN VI** 2020 India BS VI (skipping BS V) 2023 CARB Low NOx regulation Off-Highway 2019 EU Stage V TBD US Stage V equivalent 2019 China CN IV** 2019 Brazil Stage 3B** India BS IV** 22

23 Regulatory Drivers Key Technologies and Products Driver System Solution Technologies and Products EMISSIONS and THERMAL MGMT Reduce Criteria Pollutants Advanced Aftertreatment Dosing System, Advanced Mixing, Thermal Unit, Selective Catalytic Reduction, Ammonia Generator, Gasoline and Diesel Particulate Filter, Catalytic Converter XNOx Dosing System GPF LIGHTWEIGHTING and THERMAL MGMT Improve Fuel Economy Waste Heat Recovery Rankine Cycle PowerPack, Thermoelectric Generator, Thermoacoustic Converter, Heat Exchanger, Lightweight Aftertreatment System, Electric Valve, Fabricated Manifold CT 1 Box ATS with Rankine Evaporator LV Heat Exchanger ACOUSTICS Acoustic Performance Sound Creation, Sound Cancellation Active Noise Cancellation, Signature Sound, Electronic Valve, Passive Valve Passive Valve Signature Sound NVH Noise, Vibration and Harshness Elastomer interfaces for Clean Air Solutions Exhaust System Isolator, Modular Exhaust Damper Exhaust Isolator 23

24 Light Vehicle Asia Pacific Growth By 2030, APAC represents 70% of global unit growth and 53% of global market China and India increase technology needs through tightening regulations Clean Air global capabilities meet new regional customer needs Strong regional APAC presence / capabilities 23 manufacturing locations 4 engineering centers Technology transfer from proven Euro 6,VI solutions Low cost solutions 2030 LV Production RoW NA China NA RoW China India SA India EU EU SA Leveraging content into high growth markets 24

25 Technology Trends Investment in Light Vehicle ICE Powertrains Toyota In December 2016, Toyota announced an ambitious road map to new engines. Toyota will embark on a sweeping engine and drivetrain overhaul to replace at least 60% of its line up by the end of 2021, with nine new engines, four new transmissions and six new hybrid systems because they expect ICE technology to remain relevant for many more years. autonews.com December 12, 2016 Over $20 billion in announced OEM investment in ICE powertrains since

26 Commercial Truck and Off-Highway Asia Pacific Growth Americas EMEA Asia Pacific North America , China Japan/Korea India 1, Commercial Truck Off-Highway & Engines South America Asia Pacific accounts for +67% of global CT & OH production by CTOH Production: 1.0M Regulated 2015: 86% Regulated 2030: 100% 2030 CTOH Production: 1.5M Regulated 2015: 89% Regulated 2030: 93% 2030 CTOH Production: 5.2M Regulated 2015: 57% Regulated 2030: 90% More engines will come under regulation between today and 2030 than are regulated today Source: Power Systems Research, Tenneco analysis 26

27 Technology Trends Powertrains in Regulated Regions Total regulated powertrains light vehicle, commercial truck and off-highway* (in millions) Light Vehicle BEVs/Fuel Cells Regulated ICEs 93 CURRENT PROJECTIONS* 123 4% LV BEV penetration* BEV PENETRATION SENSITIVITY ANALYSIS % LV BEV penetration But will have 25% to 30% higher regulatory content than today Clean Air content is expected to be 25% - 30% higher in 2030; even if BEV penetration almost 7x greater than projected * IHS Automotive, Power Systems Research and Tenneco estimates

28 Aftermarket Overview AFTERMARKET by the Numbers BRANDS Shock and Struts PRODUCTS Suspension Parts #1 Market position for ride performance North America, Europe and South America #1 Market position for clean air North America and Europe Exhaust Pipes & Mufflers Diesel Particulate Filter (DPF) 90+ million OE and AM Shocks and struts sold globally in 2016 Catalytic converter $1.2 billion 2016 Revenue (Included in our Ride Performance and Clean Air product lines) Countercyclical business with strong margins and cash flow emerging high growth opportunities 28

29 Aftermarket Capabilities Established Markets North America Europe #1 Ride Performance #1 Ride Performance #1 Clean Air #1 Clean Air South America #1 Ride Performance History of strong aftermarket, Monroe & Walker brands are 100 years strong Product Lifecycle OE AM Powerful brands to attract and retain customers/consumers Innovative and cost-effective product coverage solutions Distribution cost-effective, accurate, on-time Marketing/selling expertise that leverages training, tools and data Tenneco Aftermarket capabilities are second to none 29

30 Market Trends Aftermarket Car Parc Growth Global Vehicles in Operation (VIO) 60 years of gradual growth Unprecedented car parc growth over next 20 years led by China Source: OCIA, Frost & Sullivan Between 2015 and 2030, the global car parc nearly doubles 30

31 Market Trends Accelerating Car Parc in High Growth Markets Vehicle Parc Unit Growth (2015 to 2025) Established Markets High-Growth Markets 47 2 North America 42 3 Europe Average age 8.5 years 1 China India 1 4 ROW South America Source: Frost & Sullivan 2015, IHS Worldview May 2016 Light Vehicle Commercial Truck Light Vehicle Parc: 455M Light Vehicle Parc: 337M Light Vehicle Parc: 835M 10-year CAGR: 2% 10-year CAGR: 1% 10-year CAGR: 9% CTOH Vehicle Parc: 20M CTOH Vehicle Parc: 12M CTOH Vehicle Parc: 21M 10-year CAGR: 4% 10-year CAGR: 3% 10-year CAGR: 9% China s car parc will grow by 328M vehicles over next 10 years 31

32 China: Brand, Product and Market Coverage Mobile APP Mobile App Events Event Advertising Campaigns AD Brand building - underway Product coverage - by 2019 Channel Relationships - underway Branded Installer Installer Seminars Outlet Coverage - underway Branded Installer Seminar Footprint - underway 32

33 Global Market Opportunity $114B Opportunity in 2030 Revenue in $B $114 8 $ Aftermarket Ride Performance Clean Air $ $ % LV Production CAGR yr CAGR Global Markets 4% 5% 5% IHS LV Production 2% 2% 2% Global opportunity CAGR of 5% through 2030; 2.5x faster than LV production CAGR of 1.8% Source: IHS database; Power Systems Research, Tenneco analysis 33

34 Key Takeaways Built to Outperform Accelerating Core Growth Focused Strategic Objectives RIDE PERFORMANCE Core Suspension Growth driven by APAC LV production NVH Elastomers extend expertise and capabilities globally Advanced Suspension Technology Install rate and content growth drives 25% revenue CAGR opportunity CLEAN AIR Continued tightening emissions regulations Over $20 billion in announced global OEM investment in ICE powertrains in past 2 years Commercial truck and off-highway more engines will come under regulation by 2030 than are regulated today AFTERMARKET Proven market leader in North America and Europe Global vehicles in operation nearly doubles by 2030 Mobility models higher vehicle utilization drives increased replacement rate 34

35 Focused Strategic Priorities & Objectives Continue outpacing industry production by 3% to 5+% Drive margin expansion Strengthen technology investment and product positions Increase aftermarket revenue mix Build financial strength and flexibility 35

36 Balance Sheet Strength Leverage Ratio (Net Debt / Adjusted EBITDA*) Target leverage of around 1x: Provides financial flexibility Stable balance sheet for business cycles Opportunity for deploying capital to accelerate growth and shareholder returns Since 2011, repurchased 10.4 million shares for $521 million Working Capital Investment (Receivables + Inventory - Payables) as a % of Revenue Capital Expenditures as a % of Revenue TEN averaged 5.4% over the past 9 years Capex range of 3.5% - 4.0% * Including noncontrolling interests. Reconciliations to U.S. GAAP at end of presentation. 36

37 Capital Allocation Priorities Driving Shareholder Value 1. Fund organic growth 2. Activities to improve cost competitiveness 3. Balance sheet strength consistent with target leverage ratio of 1x Well-positioned with flexibility to pursue strategic opportunities and capital returns to shareholders 4. Strategic opportunities 4. Strategic opportunities 5. Capital returns to shareholders Technology Initiated quarterly dividend for urea dosing and injection capabilities; digital valve technology sustainable returns Customer regional players with specific target customers $400M repurchase program over Geographic expand NVH elastomer global reach; accelerate Aftermarket growth in China next 3 years out of free cash flow Aftermarket growth growth increase Aftermarket revenue mix; enhance product portfolio 37

38 What It Means to Tenneco Growth Trajectory Short- and mid-term growth in all areas Mid-term to long-term accelerating growth in Ride Performance and Aftermarket Long-term, moderating growth in Clean Air Aftermarket Ride Performance (OE) Clean Air (OE) Current View Source: IHS database; Power Systems Research, Tenneco analysis Long-term growth outpacing industry production Long-term View 38

39 Appealing Investment Opportunity Built to Outperform Proven track record of growth Revenue growth outpacing industry production Margin expansion and double-digit EPS growth Diversified business profile Accelerating Core Growth Positive market trends in both product lines Expansion in high growth markets Technology and capability leadership Focused Strategic Priorities & Objectives 39

40 40

41 Global Emissions Regulations LV - Light Vehicles CTrk - Commercial Trucks Off-Hwy - Off-Highway Vehicles * Phased in ** Proposed or Estimated date *** Some mfrs harmonizing US Tier 4f engines with Stage 5 Up to & later U.S., Canada & Mexico Tier 4i Off-Hwy (2011) CARB CTrk Retrofit* (2012) Mex Euro 4 LV or EPA Tier 2 Bin 10 RICE Stationary US revised NAAQS Tier 4f* Off-Hwy Marine Tier 4f* CARB Off-Hwy Large Fleets* US Utility MACT CARB LEV III* Tier 4 Locomotive NSPS Stationary NOx* CARB Off-Hwy Medium Fleets* Tier 3 LV Pass Cars* Tier 3 Light Truck* Mex Tier 2 LV (full impl.)** Mex EPA2007 or EU-V CTrk** CARB Off-Hwy Small Fleets* Tier 4f Off-Hwy*** CARB CTrk Low NOx (2023)** EPA CTrk Low NOx (2024)** Mex Tier 3 LV** (2025) Mex EPA2010 or EU-VI CTrk** (2020) Europe EU Off-Hwy Stage 3B* (2011) EU CO2 /GHG 120g & PM # LV (2011) EU Sound regulation EU-VI CTrk Euro-6b LV EU Off-Hwy Stage 4* Euro-6c LV (no RDE) EU-6d TEMP LV RDE CF2.1* ( ) EU VI D CTrk In-service conformity EU Stage V Off-Hwy EU-6d LV RDE CF1.5* (2020-1) China China 5 LV* (Major Cities) (2012) China IV CTrk* National (MEP) China 3 Off-Hwy is equivalent to EU Stage 3A China 4 Off-Hwy is equivalent to EU Stage 3B Beijing V CTrk Beijing 4 Off-Hwy China 3 Off-Hwy China 5 LV (Eastern Provinces) China 5 LV National Sl* China V CTrk*,** China 5 LV National Cl* China 6a LV*,** National China VI CTrk*,** China 4 Off-Hwy*,** Stage 4* Locomotive** China 6b LV*,** National (2023) Japan JC08 (2009) JP-13 CTrk Off-Hwy Tier 4B JP-16 CTrk* WLTP LV South America Peru EU-3 LV EC, UR, VEN EU-1 LV Brazil EU-V CTrk (2012) Chile EU-5 LV Colombia EU-4 LV Brazil Proconve L-6 LV Argentina EU-5 LV Brazil Stage 3A Off-Hwy (construction) Brazil Stage 3A Off-Hwy (farming) Brazil EU-VI CTrk** Brazil Stage 3B** Off-Hwy Brazil Proconve L-7 LV** (2026) Russia EU-4 LV EU-IV CTrk EU-5 LV EU-V CTrk India BS-4 LV/CTrk (13 Cities) (2011) BS-IIIA Off-Hwy (2011) BS-IV CTrk* (50 Cities) BS-4 LV BS-IV CTrk BS-6 LV (2020) BS-VI CTrk (2020) BS-IV* Off-Hwy (2022)** Global Treaty Marine Annex VI Tier III NOx Marine Annex VI Tier III SOx 41

42 Clean Air: New Light Vehicle Regulations Adding Content U.S. Fed Tier 3 Fleet Average (NMOG + NOx) Euro-6c/6d Real Driving Emissions (RDE) Particulate Number and Conformity Factor 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 3 42

43 Commercial Truck and Off-Highway Diesel 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 43

44 Balanced Customer Mix As a % of Total 2016 Revenue 16.6% 13.0% 7.2% 6.4% 4.8% 4.3% 4.2% 4.0% 3.9% 2.3% LV Customer Commercial Truck, AM Customer Off-Hwy & Other Customer 1.9% 1.7% 1.5% 1.5% 1.5% 1.5% 1.4% 1.4% 1.3% 1.0% 44

45 Robust Platform Mix As a % of Total 2016 Revenue 45

46 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, Value-Add Revenue, Adjusted EBITDA*, Adjusted Earnings Before Interest Expense, Income Taxes and Noncontrolling Interests ( Adjusted EBIT ), 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. 46

47 Tenneco s Revenue Outlook Tenneco s revenue outlook is 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 outlook constitutes a forward-looking statement. We also refer you to the cautionary language regarding our forward-looking statements set forth in the Safe Harbor statement on slide 2. 47

48 EBITDA* Reconciliation of Non-GAAP Results $ Millions, Unaudited Net income (loss) attributable to Tenneco Inc. $ 363 $ 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* $ 740 $ 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. 48

49 Adjusted EBITDA* Reconciliation of Non-GAAP Results $ Millions, Unaudited EBITDA* Adjustments (reflect $ 740 $ 722 $ 700 $ 629 $ 633 $ 586 $ 497 $ 313 $ 219 $ 457 $ 380 $ 394 $ 347 $ 334 $ 311 $ 243 $ 273 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) $ 844 $ 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 2016 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. 49

50 Net Debt /Adjusted EBITDA* Reconciliation of Non-GAAP Results $ Millions, Unaudited Total debt $1,384 $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 1, , ,053 1,325 1,186 1,183 1,242 1,207 1,285 1,391 1,462 1,492 Adjusted EBITDA* Ratio of net debt to adjusted EBITDA* $ 844 $ 785 $ 784 $ 707 $ 641 $ 605 $ 517 $ 335 $ 380 $ 487 $ 409 $ 416 $ 399 $ 342 $ 304 $ 298 $ x 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. 50

51 Working Capital as a Percentage of Revenue Reconciliation of Non-GAAP Results $ Millions, Unaudited Receivables $ 1,294 $ 1,112 $ 1,088 $ 1,060 $ 986 $ 980 $ 826 $ 596 $ 574 Inventory Less: Payables 1,496 1,376 1,372 1,359 1,186 1,171 1, Working Capital $ 528 $ 418 $ 404 $ 357 $ 467 $ 401 $ 325 $ 258 $ 297 Revenue $ 8,599 $ 8,209 $ 8,420 $ 7,964 $ 7,363 $ 7,205 $ 5,937 $ 4,649 $ 5,916 Percentage of Revenue 6.1% 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. 51

52 Adjusted EBIT as a Percentage of Value-Add Revenue Reconciliation of Non-GAAP Results $ Millions Ride Performance revenue $ 2,530 $ 2,486 $ 2,609 $ 2,520 $ 2,437 $ 2,444 $ 2,112 $ 1,730 $ 1,938 $ 1,853 $ 1,706 Clean Air revenue $ 6,069 $ 5,723 $ 5,811 $ 5,444 $ 4,926 $ 4,761 $ 3,825 $ 2,919 $ 3,978 $ 4,331 $ 2,976 Total revenue $ 8,599 $ 8,209 $ 8,420 $ 7,964 $ 7,363 $ 7,205 $ 5,937 $ 4,649 $ 5,916 $ 6,184 $ 4,682 Less: Substrate sales 2,028 1,916 1,934 1,835 1,660 1,678 1, ,492 1, Value-add revenues (1) $ 6,571 $ 6,293 $ 6,486 $ 6,129 $ 5,703 $ 5,527 $ 4,653 $ 3,683 $ 4,424 $ 4,511 $ 3,755 EBIT $ 528 $ 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) $ 636 $ 586 $ 577 $ 502 $ 443 $ 398 $ 306 $ 118 $ 158 $ 282 $ 225 Adjusted EBIT as a % of value-add revenue (4) 9.7% 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. 52

53 Adjusted EBIT as a Percentage of Value-Add Revenue Clean Air Division Reconciliation of Non-GAAP Results $ Millions Total revenue $ 6,069 $ 5,723 $ 5,811 $ 5,444 $ 4,926 $ 4,761 $ 3,825 Less: Substrate sales 2,028 1,916 1,934 1,835 1,660 1,678 1,284 Value-add revenues (1) $ 4,041 $ 3,807 $ 3,877 $ 3,609 $ 3,266 $ 3,083 $ 2,541 EBIT $ 478 $ 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) $ 485 $ 427 $ 418 $ 381 $ 334 $ 304 $ 228 Adjusted EBIT as a % of value-add revenue (4) 12.0% 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, 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. (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. 53

54 Adjusted EBIT as a Percentage of Value-Add Revenue Ride Performance Division Reconciliation of Non-GAAP Results $ Millions Total revenue $ 2,530 $ 2,486 $ 2,609 $ 2,520 $ 2,437 $ 2,444 $ 2,112 Less: Substrate sales Value-add revenues (1) $ 2,530 $ 2,486 $ 2,609 $ 2,520 $ 2,437 $ 2,444 $ 2,112 EBIT $ 238 $ 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) $ 265 $ 242 $ 248 $ 204 $ 176 $ 152 $ 159 Adjusted EBIT as a % of value-add revenue (4) 10.5% 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, 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. (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. 54

55 Adjusted Earnings Per Share Reconciliation of Non-GAAP Results Earnings Per Share $ 6.44 $ 1.05 Adjustments (reflect non-gaap measures): Restructuring and related expenses Pension / post retirement charges 0.83 (0.10) New aftermarket customer changeover costs Reserve for receivables from former affiliate Costs related to refinancing Net tax adjustments (1.96) (0.31) Adjusted Earnings Per Share $ 6.15 $