Baird 2018 Global Industrial Conference Chicago, IL November 8, 2018 NYSE: TEN
2 Safe Harbor Forward-Looking Statements This communication contains forward-looking statements. These forward-looking statements include, but are not limited to, (i) all statements, other than statements of historical fact, included in this communication that address activities, events or developments that we expect or anticipate will or may occur in the future or that depend on future events and (ii) statements about our future business plans and strategy and other statements that describe Tenneco s outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. These forward-looking statements are included in various sections of this communication and the words may, will, believe, should, could, plan, expect, anticipate, estimate, and similar expressions (and variations thereof) are intended to identify forwardlooking statements. Forward-looking statements included in this communication concern, among other things, benefits of the Federal-Mogul acquisition; the combined company s plans, objectives and expectations; future financial and operating results; and other statements that are not historical facts. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to materially differ from those described in the forward-looking statements, including the outcome of any legal proceeding that may be instituted against Tenneco and others following the announcement of the transaction; the possibility that the combined company may not complete the spin-off of the Aftermarket & Ride Performance business from the Powertrain Technology business (or achieve some or all of the anticipated benefits of such a spin-off); the possibility that the transaction may have an adverse impact on existing arrangements with Tenneco, including those related to transition, manufacturing and supply services and tax matters; the ability to retain and hire key personnel and maintain relationships with customers, suppliers or other business partners; the risk that the benefits of the transaction, including synergies, may not be fully realized or may take longer to realize than expected; the risk that the transaction may not advance the combined company s business strategy; the risk that the combined company may experience difficulty integrating or separating all employees or operations; the potential diversion of Tenneco management s attention resulting from the transaction; as well as the risk factors and cautionary statements included in Tenneco s periodic and current reports (Forms 10-K, 10-Q and 8-K) filed from time to time with the SEC. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Unless otherwise indicated, the forward-looking statements in this release are made as of the date of this communication, and, except as required by law, Tenneco does not undertake any obligation, and disclaims any obligation, to publicly disclose revisions or updates to any forward-looking statements. In addition, please see Tenneco s financial results press release for factors that could cause Tenneco s future performance to vary from the expectations expressed or implied bythe forward-lookingstatements herein.
3 Transformation in the Auto Space Autonomous Driving Mobility Aftermarket Electrification/Hybridization Emissions Regulations Tenneco is well-positioned to benefit from industry trends
Proven Track Record of Growth Since 2000, Tenneco has delivered: Value-add (VA) Revenue * growth outpacing LV industry production Tenneco Revenue (billion) Industry Production (million) 6% CAGR (Tenneco only) Margin expansion of over 300 bps Double-digit annual adjusted EPS growth $7.1B 6% CAGR VA Revenue ($ billions) Adjusted EBIT as a % of VA Revenue $4.7B $6.3B 3% CAGR 2% CAGR $3.1B 6.0% $3.8B 6.4% 6.6% 9.1% 9.1% Over past 10+ years, TEN outpaced industry production by 2x Expect 3x outperformance through 2020 Leading ROIC Performance Total Revenue $ 3.5 $ 4.4 $ 5.9 $ 8.2 $ 9.3 Substrate Sales $ 0.4 $ 0.6 $ 1.2 $ 1.9 $ 2.2 5-year average 22.8% Source IHS Automotive January 2018 global light vehicles Built to outperform revenue growth and investment returns * Value-add (VA) Revenue is total revenue less substrate sales. See slide 37 for further explanation. See reconciliations to U.S. GAAP at end of presentation. 4
5 Transaction Unlocks Significant Value acquired Acquisition closed October 1, 2018; separation expected to be complete late 2019 This acquisition builds on Tenneco s long-term strategy: Positions us to realign and then separate Tenneco s and Federal-Mogul s lines of business, allowing them to be managed according to their unique value propositions Enhances our ability to serve customers in both lines Opens up new opportunities to drive growth with products that are complementary to Tenneco s current product offering Building upon the strength, depth and industry experience of the combined teams Significant synergies will drive shareholder value Focused strategic objectives moving faster and further to unlock value
Creating Two Focused Companies Transformational acquisition of Federal-Mogul complete; plan to separate into two focused, industry-leading, publicly traded companies Expect annual run-rate earnings synergies of at least $200M and one time working capital synergies of at least $250M expected within 24 months after closing Realignment and separation to unlock significant shareholder value 1. The Clean Air Aftermarket business is intended to be allocated to the Ride Performance business 6
Aftermarket & Ride Performance Company One of the largest global multi-line, multi-brand aftermarket suppliers, with an outstanding strategic position to capture Asia Pacific aftermarket growth with a broad range of products. Strong systems capabilities will capitalize on OE market trends in mobility, electrification/autonomous driving. PRO FORMA 2017 REVENUE $6.4B EMEA 37% Revenue by Geography* APAC 12% North America 51% Leading positions in established markets Americas & EMEA Motorparts (OE) 15% Ride Performance (OE) 28% Revenue by Product Clean Air (AM) 5% 57% aftermarket Motorparts (AM) 37% Ride Performance (AM) 15% Other 56% Revenue by Customer Volkswagen 7% AAP / Carquest 6% NAPA / Alliance 6% Ford 5% O Reilly 5% General Motors 5% Pep Boys / Auto Plus 3% The Group 3% Daimler 2% FCA 2% Very diversified customer base * EMEA includes Tenneco South America and APAC includes Federal-Mogul South America 7
Aftermarket & Ride Performance Aftermarket Well Positioned to Win in All Markets Products Shocks and struts Suspension systems Steering, hubs Driveline Brake pads, shoes, linings Rotors and drums Gaskets Seals Underhood service Ignition Position #1 Globally #1 North America #3 EMEA #1 North America #1 Globally #3 Globally Well-positioned to win in China Combined strong house of brands expected to capture growth in China Shared investments in salesforce & distribution Combined brand power & OE pedigree Product line & coverage Wear and tear products (e.g. brake pads, wipers) can provide earlier entry into market Brake pads, shoes, linings Emission control products Suspension links, bushings, mounts, exhaust isolators Shocks and struts #2 EMEA #1 NA & EMEA #1 South America Global Vehicles in Operation Unprecedented growth expected over next 15 years led by China Trends in Americas and EMEA Vehicles in operation continue to grow and age Vehicle miles traveled increasing in Americas Growing demand for advanced suspension products 1950 1960 1970 1980 1990 2000 2010 2020 2025 2030 China forecast to be largest AM market by 2025 Source: OCIA, Frost & Sullivan 8
Aftermarket & Ride Performance Complete Around the Wheel Offering Comprehensive ride performance product portfolio Strut top mount Upper control arm Ball joint Leader in shocks, struts and NVH/elastomers Strut assembly Inner and outer tie rods Hub assembly Leader in steering, suspension and braking Focused on Suspension, including the intelligent suspension portfolio Dampers (not shown) Brake pads Focused on Chassis and Braking Bushings Linkages Lower control arm Brake rotors Improved system level capability to capture intelligent suspension growth trends Note: AM brands represented here; however, OE offerings are typically branded "Tenneco" or Federal-Mogul" for respective components Source: Company websites 9
Powertrain Technology Company Full Exhaust Systems Pistons Bearings Catalytic Converters One of the largest pure play powertrain suppliers globally positioned to capture content growth due to tightening fuel economy and criteria pollutant regulations, light vehicle hybridization trends and commercial truck and off-highway expansion opportunities Gasoline Particulate Filters Electronic Valve Ignition System Protection Valves Sealing / Heat Shields PRO FORMA 2017 REVENUE $10.7B VA REVENUE $8.5B Revenue by Geography* APAC 20% North America 41% Revenue by End Market Industrial 9% CTOH 15% Revenue by Customer Other 39% General Motors 15% VW 10% EMEA 39% Leading positions in all geographies * EMEA includes Tenneco South America and APAC includes Federal-Mogul South America ~25% non-light vehicle Light Vehicle 76% Cummins 2% Jaguar 2% FCA 8% BMW 2% Daimler 6% Renault Nissan Caterpillar 3% 3% Well represented across all global OEMs Ford 10% 10
Powertrain Technology Complementary Portfolio Brings Unique Competitive Position 11 Delivering an optimized trade-off between fuel economy and emission control from the cylinder to the tailpipe MANAGES: Friction / performance Combustion temperature Ignition timing CO NO x PM MANAGES: Conversion efficiency Thermal management Precious metal loading Greenhouse Gases / Fuel Economy FULL SYSTEM EMISSION CONTROL Criteria Pollutants Regulation Driven F-M Engine Components Tenneco Hot End Components System capabilities enable better powertrain efficiency at a lower total system cost
Powertrain Technology Significant Ongoing Light Vehicle Opportunity 12 Global light vehicle sales volume (M) 120 100 80 60 40 20 0 90 97% 2016 91 94 1% 3% 97 96% 95% 94% 93% 92% 89% 85% 83% 79% 2017 2018 99 102 1% 5% 105 109 110 4% 14% 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 1. Includes mild hybrid electric vehicle Note: ICE = internal combustion engine, HEV = hybrid electric vehicle, BEV = battery electric vehicle Source: BCG estimates 111 6% 15% 112 7% 18% 76% 114 8% 19% 73% 115 9% 21% 70% 116 11% 23% 66% 118 13% 26% 61% BEV HEV ICE 1 87% HEV or ICE in 2030 ICE and hybrids expected to be 85%+ of vehicle sales through 2030 ICEs are a significant portion of vehicles moving forward Powertrain technology components support hybridization; increased complexity and content vs. ICE Increasing CO 2 and criteria pollutant emissions regulations provide organic growth opportunities Content per vehicle increases in both cylinder and aftertreatment systems
Powertrain Technology Significant Commercial Truck and Off-Highway Opportunity Americas 2030 CTOH Production: 1.3 million Regulated Diesel 2018: 57% Regulated Diesel 2030: 93% EMEA 2030 CTOH Production: 1.8 million Regulated Diesel 2018: 62% Regulated Diesel 2030: 94% Asia Pacific 2030 CTOH Production: 6.6 million Regulated Diesel 2018: 15% Regulated Diesel 2030: 89% 504 537 North America Europe 757 1,026 China 1,180 239 1,578 1,399 Japan/Korea 460 2030 Units (thousands) Commercial Truck Off-Highway Engines 133 129 South America India 1,530 CTOH regulated diesel volume may increase by nearly 6 million units by 2030, driven mainly by APAC Source: PSR April 2018 & Tenneco forecasts, Fuel type = Diesel, NG/LPG, excluding emissions compliance = None 13
Significant Synergy Potential At Least $200M 1 Earnings Synergies Expected Within 24 Months ($ in millions) Separate, dedicated integration management team in place Aftermarket & Ride Performance $115 Supply Chain G&A and Engineering $35 $50 Estimated costs to achieve of ~$80 million Sales and Go-To Market $30 Complementary product portfolio reduces level of integration complexity 80% - 85% of employees unaffected by integration No revenue synergies included No manufacturing synergies included (footprint/process) Powertrain Technology $85 Supply Chain $40 Sales, G&A and Engineering $45 Reduction from three to two corporate structures generates majority of G&A savings Estimated costs to achieve of ~$70 million Expect 75% synergy run rate within one year of close In addition, one time working capital synergies expected of at least $250M 1. Net of estimated public company costs. 14
Key Transaction Progress Acquisition Closed on October 1, 2018 Antitrust clearance received from all jurisdictions On September 12, 2018, shareholders approved all proposals necessary to complete the acquisition of Federal-Mogul CEOs named to lead two future independent companies Brian Kesseler CEO, Aftermarket and Ride Performance Company Roger Wood CEO, Powertrain Technology Company Powertrain Technology is the RemainCo and will retain the Tenneco name Communicated net leverage expectation of future companies at separation Expect Aftermarket & Ride Performance company (SpinCo) net leverage (net debt/adjusted EBITDA) around 3.0x at separation future net leverage goal of 1.5x to 2.0x Expect Powertrain Technology company (RemainCo) net leverage around 2.3x at separation future net leverage goal of 1.0x to 1.5x Completed syndication of new credit facility Revolver $1.5B (see pricing grid) Term Loan A $1.7B (see pricing grid) Term Loan B $1.7B (L + 275 @ 99.0 OID) Revolving Credit Facility & TLA Pricing Net Leverage* <1.50x >= 1.50x and <2.50x >=2.50x Spread L+125 L+150 L+175 Separation into two publicly traded companies expected to be complete late 2019 *Net leverage as defined in credit agreement 15
Substantial Value Creation Opportunity (EV / 2018E EBITDA)* 16.0x 12.0x Reducing multiple gap generates value creation opportunity Aftermarket & Ride Performance Comparables 9.9x Powertrain Technology Comparables 8.0x 7.0x 4.0x 4.4x 0.0x Tiger Auto Aftermarket Suppliers Powertrain Systems Suppliers *FactSet and Company Filings as of April 6, 2018. Separation provides investors with distinct investment opportunities Note: Multiples shown represent medians of respective comp sets. Auto Aftermarket Suppliers includes MPAA, DORM and SMP. Powertrain Systems Suppliers includes BWA, CMI and DLPH. 16
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Key Terms of the Acquisition Transaction Terms Financing Ownership Other Purchase price of $5.4 billion; represents Enterprise Value / 2017 Adjusted EBITDA of 7.2x (5.4x 1 including earnings and working capital synergies) Consideration funded with a combination of cash and Tenneco equity Cash portion of transaction financed through new senior credit facility Expected pro forma Net Debt / Adjusted EBITDA of approximately 3x at closing Targeting net leverage profile of ~2.5x by the end of 2019 through profitable growth and debt reduction funded by cash flow Icahn Enterprises, LP ( Seller ) received: 5.65M Class A Voting Shares, representing 9.9% of Class A shares outstanding 23.79M Class B Non-Voting Shares, together representing 36.4% of total shares outstanding Seller will have one board member from close to separation and on Powertrain Technology after the separation Seller's Board representation will not transfer to the Aftermarket Ride Performance business on separation As part of the transaction, the Seller will enter into a customary lock-up and standstill agreement Timeline Acquisition closed on October 1, 2018 1. Calculation: Purchase price less working capital synergies ($250M) / Federal-Mogul EBITDA plus earnings synergies ($200M) 18
Federal-Mogul Overview Revenue by Geography* EMEA 41% Federal-Mogul 2017 Revenue: $7.8B EBITDA: $753M APAC 15% North America 44% Motorparts 42% Revenue by Segment Powertrain 58% Revenue by End Market CTOH 11% Aftermarket 30% Industrial 10% Light Vehicle 49% Motorparts Over 20 strong market-leading brands in the global vehicle aftermarket Sells and distributes a broad portfolio of aftermarket products globally Strong market position in OE braking Operates 33 manufacturing sites in 15 countries and 33 distribution centers in 12 countries Powertrain One of the world s leading powertrain component and assembly providers Market leading positions across product categories Operates 87 manufacturing sites in 19 countries Federal-Mogul is a leading global supplier to OEMs and the aftermarket * APAC includes Federal-Mogul South America 19
Tenneco Pro Forma Financial Overview Tenneco Pro Forma Financial Overview Pro Forma FY 2017 Total Revenue ($B) Value-add Revenue ($B) Adjusted EBITDA ($M) Earnings Synergies ($M) (2)(3) EBITDA (w/ synergies) ($M) Ride Performance (Plus CA AM) (1) $3.1 $3.1 $335 10.8% - - F-M Motorparts 3.3 3.3 260 7.9% - - Aftermarket & Ride Performance Company $6.4 $6.4 $595 $115 $710 Value-add EBITDA margin (w/ synergies) 9.3% (11.1%) Clean Air (Less CA AM) (1) $6.2 $4.0 $533 13.3% - - F-M Powertrain 4.5 4.5 493 11.0% - - Powertrain Technology Company $10.7 $8.5 $1,025 $85 $1,110 Value-add EBITDA margin (w/ synergies) 12.1% (13.1%) Pro Forma Tenneco $17.1 $14.9 $1,620 $200 $1,820 1. The Clean Air Aftermarket business is intended to be allocated to the Ride Performance business. 2. Represents annual run rate synergies expected to be achieved within 24 months. 3. Additional one time working capital synergies of at least $250M expected. 20
21 Unique Strategic Combination Aftermarket & Ride Performance Company Powertrain Technology Company RIDE PERFORMANCE One of the world s leading multi-line aftermarket and OE suppliers Premier aftermarket brands, broad product coverage and strong distribution Strong portfolio of OE braking and advanced suspension technologies and capabilities Outstanding strategic position to 1. Improve go-to-market capabilities in Americas & EMEA 2. Capture Asia Pacific aftermarket growth with a broad range of products 3. Capitalize on new OE trends in mobility and electrification / autonomous driving CLEAN AIR One of the largest global pure play powertrain suppliers Portfolio of engine-to-tailpipe products and system solutions Excellent position to capture content growth from: 1. Demand for improved engine performance 2. Tightening fuel economy and criteria pollutant regulations 3. Light vehicle hybridization trends 4. Commercial truck and off-highway expansion opportunities Well positioned to further build out the product portfolio in an evolving powertrain market Creates two strong businesses with scale and strategic and financial flexibility to drive long-term value creation
Strong Balance Sheet Pro Forma Capitalization Tenneco Transaction Pro Forma ($ in millions) 12/31/2017 Adjustments 12/31/2017 Cash & Equivalents $318 $460 $778 Undrawn Revolver 1,356 144 1,500 Liquidity $1,674 $604 $2,278 Revolving Credit Facility 244 (244) - Term Loan A 390 1,310 610 1,700 1,000 Term Loan B - 1,700 2,400 1,700 2,400 Tenneco Notes 725-725 Federal-Mogul Notes - 1,278 1,278 Other Debt 95 160 255 Less: Unamortized Debt Issuance Costs (13) (98) (111) Total Debt $1,441 $4,106 $5,547 Net Debt $1,123 $3,646 $4,769 Adj. EBITDA (before synergies) $868 $753 $1,620 Net Leverage 1.3x - 2.9x Net Leverage (after run rate synergies) - - 2.6x Pro Forma Shares Outstanding Class A Shares Outstanding 51.4 5.7 57.1 Class B Shares Outstanding - 23.8 23.8 Total Shares Outstanding (1) 51.4 29.4 80.9 1. Represents undiluted shares outstanding; pro forma ownership not adjusted for Tenneco s Funding Adjustment Right. Debt financing in place Robust liquidity over $2 billion Cash flow generation enables rapid deleveraging Appropriate capital structure for each company will be determined prior to separation $mm 2,400 2,000 1,600 1,200 800 400 0 $102 $102 $145 $685 $1,250 $1,022 $1,598 $500 2019 2020 2021 2022 2023 2024 2025 2026 TLA Notes due 2022 (FM) Notes due 2024 (FM) Notes due 2026 (TEN) Maturity Schedule TLB Floating Notes due 2024 (FM) Notes due 2024 (TEN) 22
Transformational Step Compelling Strategic Rationale 23 Strategically positions each company Increases scale and broadens portfolio for respective markets Enhances capabilities to capture growth with focused investments Significant synergy potential in both new companies Provides investors with distinct investment opportunities AM & RP PT Extends existing strategy and accelerates long-term value creation
Stronger Together Expanded Aftermarket and Ride Performance Product Offering 24 1 2 Tenneco Ride Performance Suspension Systems Exhaust Systems 3 Elastomers 2 1 3 1 2 2 1 3 1 2 1 3 1 2 3 4 5 6 2 1 3 1 2 Federal-Mogul Motorparts 1 2 3 5 Chassis Engine (Pistons, Bearings, Valves) Ignition 4 6 Not shown: wipers Brake pads & Rotors Sealing & Gaskets Underhood Service Key Brands Legend Tenneco Ride Performance Federal-Mogul Motorparts Key Brands Extensive portfolio of leading global and regional aftermarket brands
Aftermarket & Ride Performance Scale Top Global AM Supplier Benefits of Scale 6 ~6 5.6 Aftermarket 2017 Revenues, Global ($B) Broad product portfolio enables differentiated customer and channel support 4 2 0 Includes services, diagnostics, etc. Batteries only 3.7 3.6 2.3 1.8 1.5 1.3 1.2 1.1 1.0 1.0 0.9 Cross-category sales incentives with retailers and warehouse distributors Scale to support investments in digital and China, and focused AM branding/marketing capabilities Rationalization of distribution networks for improved service at lower cost Bosch (est.) JCI ZF AM/Ride Performance Federal-Mogul Valvoline Mahler Tenneco Tiger KYB SMP SKF Delphi Tech. Dorman Best practice sharing in go-to-market, manufacturing and distribution Leading global multi-line aftermarket supplier with a broad product portfolio Source: Company estimates 25
Aftermarket & Ride Performance...Providing a Platform to Capture Growth in AV Trends and Ride Differentiation The future of mobility is being re engineered T O D A Y T O M O R R O W Vehicle Systems Chassis Interior Control Systems Vision and Sensing Road Detection Sensor Fusion ADAS System AR/VR Physical Infrastructure Roads and Highways Vehicle to Infrastructure Energy Connected 5G Vehicle to Vehicle Cybersecurity Over the air Intelligent Suspension: Reinventing the Ride of the Future 26
Aftermarket & Ride Performance Intelligent Suspension Expect advanced suspension to grow from 2% to more than 15% of LV production by 2025, representing >40% of available market in 2025 25% revenue CAGR opportunity for advanced suspension growth through 2025 Autonomous trend drives additional opportunities Content per Vehicle ACTIVE SUSPENSION More than 6x RIDE PERFORMANCE SEMI-ACTIVE SUSPENSION CONVENTIONAL SUSPENSION Average 4x $50-$60 A segment F segment Increasing demand for advanced suspension technologies to differentiate ride Source: IHS database and Tenneco analysis 27
Stronger Together Expanded Powertrain Product Offering 28 Tenneco Clean Air Federal-Mogul Powertrain 1 Catalytic Converters Key Trends Full Exhaust Systems 3 4 Gasoline Particulate Filters Electronic Valve 2 Diesel Particulate Filters 7 Selective Catalytic Reduction 6 5 Diesel Oxidation Catalyst Tightening emissions regulations Electrification / Hybridization Strong OEM investments in ICE powertrain 2 6 Legend 4 Tenneco Clean Air 1 2 3 4 5 6 One of the largest pure powertrain suppliers with engine to tailpipe solutions, addressing both greenhouse gas and criteria pollutant emissions 3 7 1 5 6 Federal-Mogul Powertrain 1 Bearings Ignition Valves Pistons 2 3 4 5 6 System Protection Key Trends Sealing / Heat Shields CO2 / Fuel economy regulations Engine performance downsized, higher output engines Strong OEM investments in ICE powertrain
Stronger Together Enhanced Commercial Truck and Off Highway Product Offering 29 Tenneco Clean Air Federal-Mogul Powertrain 1 Catalytic Converters Key Trends Hydrocarbon Manifold Dosing 3 4 Gasoline Diesel Particulate Particulate Filters Filters 2 5 6 Selective Catalytic Reduction (SCR) Systems Mixers Tightening emissions regulations, especially in India and China More newly regulated powertrains through 2025 than regulated today CTOH industry consolidation Global engine programs 3 4 5 6 Legend Tenneco Clean Air Federal-Mogul Powertrain 2 1 1 2 3 4 5 1 Bearings Systems Protection 2 3 Valves 4 5 Sealing / Heat Shields Key Trends Steel pistons Tightening emissions regulations, especially diesel NOx emissions Technology: alternative fuels, dual fuel, friction reduction CTOH industry consolidation Global engine programs Enhanced capabilities to provide products and systems solutions for the CTOH markets
Controlled Power Technologies (CPT) Increases Electrification and Hybridization Systems Capability Provides inroads into the hybrid market and powertrain efficiency technology that will enable new growth opportunities for PT Tech in the future Sample Products Description Application CPT SpeedStart Substitute for standard alternator or starter motor in some applications Relevant for hybrid and start/stop vehicles Recuperates kinetic energy lost during deceleration Additional CPT variant Speedtorq offers torque profiling Light vehicle COBRA Stands for Controlled Boosting for Rapid Response Application Industrial Recently secured a $100M OE contract launching in 2021 for development and series production of advanced starter generator systems TIGERS Type of water cooled electric supercharger Capable of increasing air supply to internal combustion engines Additional Cobra variant FC designed for fuel cell vehicles Stands for Turbo-generator Gas Energy Recovery System Converts exhaust gas energy into electrical energy Key component in Clean Air s Rankine systems and heat exchangers designed for CTOH markets Commercial Light Vehicle Heavy duty Source: Federal-Mogul 30
Tightening Emissions Regulations Regulatory-driven growth accelerates through the next decade Commercial Truck 2020-21 / 2023 China VIa/VIb** 2020 India BS VI (skipping BS V) 2023-2027 CARB & EPA Low NOx** Growth of Powertrains Under Regulation (millions) 2016 2020 2025 CAGR Off-Highway 2019 EU Stage V 2020 China 4R (equiv. EU Stage 3B + DPF) 2020/2024 India BS IV/India BS V Light Vehicle 2017-2025 US Tier 3 2017-2021 Euro 6c/6d Real Driving Emissions 2020/2023 China 6a /6b** 2020 India BS 6 (skipping BS 5) CT: Euro VI (equivalent) 1.1 2.2 3.2 Regulated Off-Hwy 1.1 2.1 4.3 Total 2.2 4.3 7.5 Source: PSR production forecast and Tenneco estimates 13% 16% 15% CTOH market expands with increasing number of vehicles under regulation ** Tenneco estimates 31
Clean Air Hybrid Growth Continuing Growth in Electrified Powertrains Increasing space System Design scarcity in hybrids drives higher engineering complexity and tougher packaging requirements Average Value-Add Content EU6 Hybrid * Time Driver Example Gasoline System Design CPV expected to increase 30%-40% by 2025 2015 $110 - $120 $135 - $145 $155 - $165 Nomination GPF 2015 2020 2025 Euro 6c GPF + Resonator Incremental CPV $35 - $45 2017: 17 hybrid programs in production 2018: 11 hybrid program launches Performance Secured Hybrid Program Wins Pre-2016 28 programs Hybridization High Voltage Li-Ion Battery Incremental CPV 10% - 15% 2016 2017 YTD Q3 2018 16 programs 20 programs 9 programs Program wins in hybrid electrified powertrains drive future Clean Air growth * Market weighted average 32
33 Diversified Business Profile As a % of 2017 Revenue Product Applications (VA Revenue) Chang'an 0.9% Geely 1.2% O'Reilly 1.2% BMW 1.4% Beijing Automotive 1.5% Advance 1.8% NAPA/Alliance 2.0% John Deere 2.0% PSA 2.1% Caterpillar 2.6% Renault/ Nissan 3.4% Toyota 3.4% Other 16.6% FAW 4.3% More than 600 customers (Total Revenue) SAIC 4.3% FCA 5.0% GM 13.9% Tata 5.0% Daimler 6.3% Ford 13.2% VW Group 7.9% Aftermarket 18% CTOH 11% Ride Performance LV 22% China 15% Europe 30% 2017 Regions (VA Revenue) Rest of AP 5% 2017 South America 4% Clean Air LV 49% North America 46% Diversified business profile enables long-term growth
34 Diversified Profile Robust Platform Mix As a % of Total 2017 Revenue
35 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 ), Adjusted Earnings Per Share, and Return on Invested Capital. Reconciliations of these non-gaap financial measures to the comparable GAAP measure are included in this presentation. * Including noncontrolling interests.
36 Tenneco Projections Tenneco s revenue outlook for 2018 is as of January 2018. Revenue assumptions are based on projected customer production schedules, IHS Automotive January 2018 forecasts, Power Systems Research January 2018 forecasts and Tenneco estimates. Tenneco s revenue outlook for 2020 is as of January 2018. Revenue assumptions are based on projected customer production schedules, IHS Automotive January 2018 forecasts, Power Systems Research January 2018 forecasts and Tenneco estimates. In addition to the information set forth on slide 4, 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, 2017. 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. Except as otherwise indicated, 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. Certain elements of the restructuring and related expenses, legal settlements and other unusual charges we incur from time to time cannot be forecasted accurately. In this respect, we are not able to forecast EBIT (and the related margins) on a forward-looking basis without unreasonable efforts on account of these factors and the difficulty in predicting GAAP revenues (for purposes of a margin calculation) due to variability in production rates and volatility of precious metal pricing in the substrates that we pass through to our customers. Tenneco s revenue projection 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.
Adjusted EBIT as a Percentage of Value-add Revenue Reconciliation of Non-GAAP Results $ Millions 2017 2015 2010 2006 2005 2000 Value-add revenue (1) $ 7,087 $ 6,293 $ 4,653 $ 3,755 $ 3,759 $ 3,127 Clean Air substrate sales $ 2,187 $ 1,888 $ 1,284 $ 927 $ 681 $ 401 Total revenue $ 9,274 $ 8,181 $ 5,937 $ 4,682 $ 4,440 $ 3,528 EBIT $ 417 $ 508 $ 281 $ 196 $ 217 $ 122 Adjustments (reflect non-gaap (2) measures) Restructuring and related expenses 72 63 19 27 12 61 Pension / post retirement charges 13 4 6 (7) - - New aftermarket customer changeover costs - - - 6 10 - Goodwill impairment 11 - - - - - Reserve for receivables from former affiliate - - - 3 - - Antitrust settlement accrual 132 - - - - - Warranty settlement 7 - - - - - Gain on sale of unconsolidated JV (5) - - - - - Other non-operational items - - - - - 4 Adjusted EBIT (non-gaap Financial Measures) (3) $ 647 $ 575 $ 306 $ 225 $ 239 $ 187 Adjusted EBIT as a % of value-add revenue (4) 9.1% 9.1% 6.6% 6.0% 6.4% 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. 37
Adjusted Earnings Per Share Reconciliation of Non-GAAP Results $ Millions 2017 2000 Earnings Per Share $ 3.91 $ (1.18) Adjustments (reflect non-gaap measures): Restructuring and related expenses 1.12 1.21 Antitrust settlement accrual 1.61 - Goodwill impairment 0.20 - Warranty settlement 0.09 - Gain on sale of unconsolidated JV (0.08) - Pension / post retirement charges 0.17 - Costs related to refinancing 0.02 - Tax adjustments from US tax reform 0.28 - Net tax adjustments (0.43) - Other non-operational items - 0.07 Adjusted Earnings Per Share (1) $ 6.89 $ 0.10 (1) 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. 38
Return on Invested Capital Reconciliation of Non-GAAP Results $ Millions, Unaudited 2012 Dec 31 Short-term Debt $ 113 $ 83 $ 60 $ 86 $ 90 $ 83 Long-term Debt 1,052 1,006 1,055 1,124 1,294 1,358 Redeemable Noncontrolling Interests 15 20 34 41 40 42 Tenneco Inc. Shareholders' Equity 246 432 495 425 573 686 Noncontrolling Interests 45 39 40 39 47 46 Invested Capital $ 1,471 $ 1,580 $ 1,684 $ 1,715 $ 2,044 $ 2,215 Average Invested Capital $ 1,526 $ 1,632 $ 1,700 $ 1,880 $ 2,130 EBIT $ 422 $ 489 $ 508 $ 516 $ 417 Adjustments (reflect non-gaap (1) measures) (2) 2013 Dec 31 Restructuring and related expenses 78 49 63 36 72 Antitrust settlement accrual - - - - 132 Goodwill impairment - - - - 11 Warranty settlement - - - - 7 Gain on sale of unconsolidated JV - - - - (5) Bad debt charge - 4 - - - Pension / post retirement charges / Stock vesting - 32 4 72 13 Adjusted EBIT (non-gaap financial measure) (2) 500 574 575 624 647 Effective Tax Rate 35.7% 33.7% 32.9% 26.6% 24.5% Tax effected Adjusted EBIT $ 321 $ 381 $ 386 $ 458 $ 488 Return on Invested Capital (ROIC) (3) (non-gaap financial measure) (2) 21.1% 23.3% 22.7% 24.4% 22.9% 2014 Dec 31 2015 Dec 31 2016 Dec 31 2017 Dec 31 5 year Average Invested Capital $ 1,785 5 years Average tax effected Adjusted EBIT 407 5 year Average ROIC 22.8% (1) Generally accepted Accounting Principles (2) Tenneco presents the above reconciliation of non-gaap results in order to allow a better understanding of our performance. (3) We consider Return on Invested Capital (ROIC) to be a meaningful indicator of our operating performance, and we evaluate ROIC because it measures how effectively we use the capital we invest in our operations. Tenneco defines ROIC as tax effected Adjusted EBIT divided by Average Invested Capital, which is the beginning and ending balances of debt, equity and noncontrolling interests. See the tabular calculation above. 39
Adjusted EBITDA Reconciliation of Non-GAAP Results $ Millions Year Ended December 31, 2017 Tenneco Federal Mogul Pro Forma Net Income $274 $361 $635 Interest Expense 73 148 221 Income Tax Expense / (Benefit) 70 (190) (120) Depreciation and Amorization 224 398 622 EBITDA $641 $717 $1,357 Adjustments (reflect non-gaap (1) measures) Restructuring and related expenses 69 37 106 Pension and post retirement charges 13-13 Goodwill and intangible asset impairment 11 11 22 Antitrust settlement accrual 132-132 Warranty settlement 7-7 Gain on sale of unconsolidated JV (5) - (5) Loss on debt extinguishment - 4 4 Gain on sale of assets - (7) (7) Gain from termination of customer contract - (6) (6) Warranty release - (4) (4) Release of deferred purchase price payment - (3) (3) EBITDA contribution of pending asset sales - (2) (2) Other - 6 6 Adjusted EBITDA (non-gaap Financial Measure) (2) $868 $753 $1,620 1. Generally Accepted Accounting Principles. 2. Tenneco presents the above reconciliation of GAAP to non-gaap earnings measures primarily to reflect the results in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company and other items impacting comparability between the periods. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-gaap earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-gaap earnings measures reflected above to understand and analyze the results of the business. The company believes investors find the non-gaap information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company s financial results in any particular period. 40
Reallocation of Clean Air Aftermarket Reconciliation of Non-GAAP Results Year Ended December 31, 2017 $ Millions Clean Air Ride Performance Other Total Total Revenue $ 6,517 $ 2,757 - $ 9,274 Less: Clean Air Substrates (2,187) - - (2,187) Reported Value Add Revenue $ 4,330 $ 2,757 - $ 7,087 Less: Reallocation of Clean Air AM (302) 302 - - Value Add Revenue (post Reallocation of Clean Air AM) $ 4,028 $ 3,059 - $ 7,087 Adjusted EBIT $ 478 $ 255 ($86) $ 647 Plus: D&A 147 77-224 Less: Restructuring adjustments included in Other segment - - (3) (3) Adjusted EBITDA $ 625 $ 332 ($89) $ 868 Less: Allocation of Other segment (54) (35) 89 - Less: Reallocation of Clean Air AM (38) 38 - - Adjusted EBITDA (post Reallocation of Clean Air AM) (non-gaap Financial Measure) 1 $ 533 $ 335 - $ 868 (1) 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. 41