Deutsche Bank Global Auto Industry Conference Detroit, MI January 17, 2018 NYSE: TEN
Safe Harbor This presentation contains forward-looking statements that involve risks and uncertainties which could cause the company s plans, actions and results to differ materially from its current expectations. The words expect, estimate, will, and similar expressions identify certain of these forward-looking statements. The company cautions that actual results may differ materially from those projected or implied in forward-looking statements due to a variety of factors including, but not limited to, the following: (i) general economic, business and market conditions; (ii) the company s ability to source needed goods and services in accordance with customer demand and at competitive prices; (iii) the cost and outcome of claims, legal proceedings or investigations, including, but not limited to, those arising in connection with the ongoing global antitrust investigation, product safety or intellectual property rights; (iv) the impact of the changing laws and regulations to which we are subject, including environmental laws and regulations, pensions or other regulated activities; (v) the ability of the company to access capital markets on commercially reasonable terms; (vi) changes in consumer demand; (vii) changes in vehicle manufacturers production rates and their requirements for the company s products, including with respect to any delays in the adoption of the current mandated timelines for worldwide emissions regulations; (viii) the overall highly competitive nature of the automobile and commercial vehicle parts industry, and any resultant inability to realize the sales represented by the company s awarded book of business which is based on anticipated pricing for the applicable program over its life; (ix) the loss of any of our large original equipment manufacturer ( OEM ) customers, or the loss of market shares by these customers if we are unable to achieve increased sales to other OEMs; (x) the company s continued success in cost reduction and cash management programs; (xi) economic, exchange rate and political conditions in the countries where we operate or sell our products; (xii) workforce factors such as strikes or labor interruptions; (xiii) increases in the costs of raw materials; (xiv) the negative impact of fuel price volatility on logistics costs and discretionary purchases of vehicles or aftermarket products, and demand for off-highway equipment; (xv) the cyclical nature of the global vehicular industry, including the performance of the global aftermarket sector and longer product lives of automobile parts; (xvi) product warranty costs; (xvii) material developments relating to our intellectual property or the failure or breach of our IT systems; (xviii) the company s ability to develop and profitably commercialize new products and technologies; (xix) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals; and (xx) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond the control of the company. Additional information regarding these and other risk factors and uncertainties is detailed from time to time in the company s SEC filings, including but not limited to its annual report on Form 10-K/A. 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
N Y S E TEN Why Invest in Tenneco Accelerating Core Growth Technology-driven growth New market growth Content growth Market expansion growth Built to Outperform Diversified business profile Proven track record of growth Leading ROIC performance Focused Priorities Outpace industry production Invest in new technologies and markets Margin expansion and improved cash flow Positioned to drive long-term shareholder value 3
Accelerating Core Growth Transformation in the Auto Space Autonomous Driving Mobility Electrification / Hybridization Emissions Regulations Tenneco is well-positioned to benefit from industry trends 4
Accelerating Core Growth Long-term Growth Drivers Product Applications VA Revenue Technology-driven Growth 12% Monroe Intelligent Suspension Noise Vibration and Harshness (NVH) Solutions New Market Growth China aftermarket opportunity Opportunity to add new aftermarket product category 20% 18% 11% 2017 Q3 YTD 49% 45% Content Growth Light vehicle hybridization of the fleet Tightening emissions regulations globally Market Expansion Growth Increasing number of commercial truck and off-highway powertrains under regulation 22% 23% Clean Air Light Vehicle Ride Performance Light Vehicle Aftermarket 2020 Projection Commercial Truck and Off-Highway Multiple growth drivers further diversify the business profile 5
R I D E P E R F O R M A N C E Accelerating Core Growth Technology-driven Monroe 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 AC TIVE SUSPENSION More than 6x S EMI-ACTIVE S USPENSION Average 4x CONVENTIONAL S USPENSION $50-$60 A segment F segment Increasing demand for advanced suspension technologies to differentiate ride Source: IHS database and Tenneco analysis 6
Accelerating Core Growth New Markets Significant Aftermarket Opportunities China car parc grows and ages over the next decade #1 market position in Americas and Europe Aftermarket Car Parc Growth Global Vehicles in Operation Unprecedented growth over next 15 years led by China Market-leading aftermarket capabilities New mobility models create demand for replacement parts Countercyclical business with strong margins and cash flow 1950 1960 1970 1980 1990 2000 2010 2020 2025 2030 Source: OCIA, Frost & Sullivan Investing for Growth in China Brand building Product coverage Distributor Development Supply Chain Footprint Bringing market-leading capabilities to new, high-growth markets Source: IHS database and Tenneco analysis 7
Accelerating Core Growth Content Hybridization Driving Clean Air Growth Hybrid production grows at a 32%* CAGR through 2025 Hybrids forecasted to be almost 90%* of electrified production in 2025 EU6 Hybrid value-add CPV expected to increase 30% - 40%** by 2025; at par with ICE CPV Plug-in hybrids offer additional content opportunity; packaging, engineering, acoustics and thermal management Electrification of Light Vehicles BEV/FC CAGR 28% Hybrid CAGR 32% (millions) 2016 2020 2025 BEV/FC 0.5 2.2 4.6 Hybrid 2.7 12.0 33.3 Total build 93 102 110 Strong TEN content growth on hybrid powertrains * Source: IHS Automotive October 2017 global production forecast ** Tenneco estimates 8
Accelerating Core Growth Market Expansion Tightening Emissions Regulations Regulatory-driven growth accelerates through the next decade Commercial Truck 2020-21 / 2023 China CN VIa/VIb** 2020 India BS VI (skipping BS V) 2023-2027 CARB & EPA Low NOx CTOH Growth of Vehicles Under Regulation (millions) 2016 2020 2025 CAGR Off-Highway 2019 EU Stage V & China CN IV** 2020 Brazil Stage 3B** 2020/2023 India BS IV**/India BS V** Light Vehicle 2017-2025 US Tier 3 2017-2021 Euro 6c/6d Real Driving Emissions 2020-2023 China CN 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 9
Accelerating Core Growth Clean Air Clean Air Outpaces Industry Growth $ billions billions CLEAN AIR VA REVENUE Total Clean Air Light Vehicle CTrk & Off-Hwy VA MARKET SIZE Light Vehicle CTrk & Off-Hwy TEN Clean Air 2030 VA Revenue Growth Projection 2016 $3.7 $3.3 $0.5 $12.6 $5.4 2030 Projections*: 4.7% CAGR 4.0% CAGR @16% LV full BEV penetration @25% LV full BEV penetration Industry forecasts for 2030 BEV penetration average 16% Boston Consulting Group 14% Bloomberg New Energy Finance 14% Morgan Stanley 16% Roland Berger 20% IHS Automotive 6% $7.0 $5.1 $1.9 $17.0 $9.2 $6.4 $4.5 $1.9 $15.1 $9.2 Assumptions: CPV held at 2025 levels Market share (2016/2030) - CTOH 9% / 20% - LV 26% / 30% LV BEV PENETRATION @ 16% @ 25% 1.7% CAGR 4.7% CAGR 4.0% CAGR 1.7% CAGR Tenneco Clean Air VA Revenue Global LV Build (Industry)* Clean Air growth projected to outpace industry production through 2030 *Source: IHS Automotive forecast and Tenneco estimates 10
Built to Outperform Diversified Profile Product lines Ride Performance and Clean Air Product applications Light vehicle, commercial truck, off-highway and aftermarket Customers 623 OE and AM customers Platforms 435 OE platforms; enabling aftermarket growth Global footprint 91 manufacturing facilities, 15 engineering centers Headquarters Clean Air Manufacturing Ride Performance Manufacturing Engineering Diversified business profile enables long-term growth 11
Built to Outperform Proven Track Record of Growth Since 2000, Tenneco has delivered: Value-add (VA) Revenue * growth outpacing LV industry production Margin expansion of 350 bps Double-digit annual adjusted EPS growth VA Revenue ($ billions) Adjusted EBIT as a % of VA Revenue $3.1B 6.0% $3.8B 6.4% $4.7B 6.6% $6.3B 9.1% $6.6B 9.5% Over past 10 years, TEN outpaced industry production by 2x Tenneco VA Revenue ($ billions) Industry Production* (million vehicles) Source IHS Automotive January 2017 global light vehicles ** CAGR Leading ROIC Performance Total Revenue $ 3.5 $ 4.4 $ 5.9 $ 8.2 $ 8.6 5-year average 22.6% Substrate Sales $ 0.4 $ 0.6 $ 1.2 $ 1.9 $ 2.0 Built to outperform revenue growth and investment returns * Value-add (VA) Revenue is total revenue less substrate sales. See slide 22 for further explanation. See reconciliations to U.S. GAAP at end of presentation. 12
Focused Priorities Revenue Outlook 2018 Revenue Outlook (in 2017 constant currency) Expecting organic growth of 5%, outpacing industry production by 3% driven by content growth in light and commercial vehicles and continued recovery in regulated off-highway regions Organic Growth 5% 2018 Assumptions Global light vehicle production +2%* Global commercial truck production about flat** Off-highway engine production for regulated regions expected up low double-digits*** Organic growth is net of OE price downs Substrates estimated at 24% - 25% of total revenue 2018 Currency Sensitivity Impact vs. 2017 Euro/USD RMB/USD Real/USD + 2.5% 1.20 0.156 0.328-1.14 0.149 0.313-2.5% 1.08 0.141 0.297 Mid-term Revenue Outlook Expect to outperform industry production by: 4% - 6% in 2019 3% - 5% in 2020 * IHS Automotive December 2017 global light vehicle production and Tenneco estimates. ** Power Systems Research (PSR) January 2018 global commercial truck and bus production and Tenneco estimates. *** Customer schedules and Tenneco estimates for off-highway engine production in North America and Europe. See slide 18 for further key assumptions related to our revenue projections. Strong organic revenue growth outpacing industry production 13
Focused Priorities Balance Sheet Strength 4.4x Leverage Ratio (Net Debt/Adjusted EBITDA*) 3.0x Returns to Shareholders 1.9x Quarterly dividend initiated in 2017 1.2x 2000 2005 2010 2015/2016 Since 2015, repurchased 10.7 million shares for $569M, or 18% of shares outstanding Disciplined Capital Allocation Strategy 1. Fund organic growth Working capital investment ~ 5.5% of revenue Capital expenditure range of 3.5% to 4.0% of revenue 2. Improve cost competitiveness 3. Balance sheet strength consistent with leverage ratio target range of 1x to 1.5x 4. Strategic opportunities Technology Geographic expansion Aftermarket 5. Capital returns to shareholders Shareholder value creation deploying capital to accelerate growth and shareholder returns * Including noncontrolling interests. Reconciliations to U.S. GAAP at end of presentation. 14
Focused Priorities Strategic Objectives Continue outpacing industry production by 3% to 5+% Drive margin expansion and improve cash flow performance Invest to continue diversifying portfolio to capture growth and become more light vehicle powertrain agnostic Build financial strength and maximize flexibility Aftermarket Ride Performance (OE) Clean Air (OE) Current Value-add Revenue Long-term Value-add Revenue Diversified portfolio drives organic growth and shareholder value Source: IHS database; Power Systems Research, Tenneco analysis 15
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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. 17
Tenneco Projections In addition to the information set forth on this slide and slide 10 and 13, 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/A for the year ended December 31, 2016. 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. No inflation assumed. Certain elements of our GAAP revenue cannot be forecasted accurately over long periods of time on account of the variability and volatility of precious metal pricing in the substrates that we pass through to our customers. In this respect, we are not able to forecast GAAP revenue on a forward-looking basis for the time periods provided herein on slide 10 without unreasonable efforts. 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. 18
EBITDA * Reconciliation of Non-GAAP Results $ Millions, Unaudited 2016 2015 2010 2005 2000 Net income (loss) attributable to Tenneco Inc. $ 356 $ 241 $ 39 $ 56 $ (41) Net income attributable to noncontrolling interests 68 54 24 2 2 Income tax expense (benefit) - 146 69 26 (27) Interest expense (net of interest capitalized) 92 67 149 133 188 EBIT, earnings before interest expense, income taxes & noncontrolling interests (GAAP measure) 516 508 281 217 122 Depreciation & amortization of other intangibles 212 203 216 177 151 EBITDA* $ 728 $ 711 $ 497 $ 394 $ 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. 19
Adjusted EBITDA * Reconciliation of Non-GAAP Results $ Millions, Unaudited 2016 2015 2010 2005 2000 EBITDA* $ 728 $ 711 $ 497 $ 394 $ 273 Adjustments (reflect non-gaap (1) measures): Restructuring & related expenses 32 59 14 12 61 Pension/post retirement charges 72 4 6 - - New aftermarket customer changeover costs - - - 10 - Other non-operational items - - - - 4 Adjusted EBITDA* (non-gaap financial measure) (2) $ 832 $ 774 $ 517 $ 416 $ 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, 2005, 2010, 2015 and 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. 20
Net Debt / Adjusted EBITDA * Reconciliation of Non-GAAP Results $ Millions, Unaudited 2016 2015 2010 2005 2000 Total debt $ 1,384 $ 1,210 $ 1,223 $ 1,383 $ 1,527 Total cash 349 288 233 141 35 Debt net of cash balances 1,035 922 990 1,242 1,492 Adjusted EBITDA* $ 832 $ 774 $ 517 $ 416 $ 338 Ratio of net debt to adjusted EBITDA* 1.2x 1.2x 1.9x 3.0x 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. 21
Adjusted EBIT as a Percentage of Value-add Revenue Reconciliation of Non-GAAP Results $ Millions 2016 2015 2010 2006 2005 2000 Value-add revenue (1) $ 6,571 $ 6,293 $ 4,653 $ 3,755 $ 3,759 $ 3,127 Clean Air substrate sales $ 2,028 $ 1,888 $ 1,284 $ 927 $ 681 $ 401 Total revenue $ 8,599 $ 8,181 $ 5,937 $ 4,682 $ 4,440 $ 3,528 EBIT $ 516 $ 508 $ 281 $ 196 $ 217 $ 122 Adjustments (reflect non-gaap (2) measures) Restructuring and related expenses 36 63 19 27 12 61 Pension / post retirement charges 72 4 6 (7) - - New aftermarket customer changeover costs - - - 6 10 - Reserve for receivables from former affiliate - - - 3 - - Other non-operational items - - - - - 4 Adjusted EBIT (non-gaap Financial Measures) (3) $ 624 $ 575 $ 306 $ 225 $ 239 $ 187 Adjusted EBIT as a % of value-add revenue (4) 9.5% 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. 22
Value-add Revenue Reconciliation of Non-GAAP Results Q3 YTD 2017 Total revenue $ 6,883 Less: Clean Air substrate sales $ 1,610 Value-add revenue (1) $ 5,273 Clean Air light vehicle value-add revenue $ 2,553 Ride Performance light vehicle value-add revenue $ 1,158 Commercial truck & off-highway value-add revenue $ 595 Aftermarket value-add revenue $ 967 Value-add revenue $ 5,273 (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. 23
Adjusted Earnings Per Share Reconciliation of Non-GAAP Results 2016 2000 Earnings Per Share $ 6.31 $ (1.18) Adjustments (reflect non-gaap measures): Restructuring and related expenses 0.57 1.21 Pension / post retirement charges 0.83 - Costs related to refinancing 0.27 - Net tax adjustments (1.96) - Other non-operational items - 0.07 Adjusted Earnings Per Share $ 6.02 $ 0.10 24
Return on Invested Capital Reconciliation of Non-GAAP Results $ Millions, Unaudited 2011 Dec 31 2012 Dec 31 Short-term Debt $ 66 $ 113 $ 83 $ 60 $ 86 $ 90 Long-term Debt 1,138 1,052 1,006 1,055 1,124 1,294 Redeemable Noncontrolling Interests 12 15 20 34 41 40 Tenneco Inc. Shareholders' Equity - 246 432 495 425 573 Noncontrolling Interests 43 45 39 40 39 47 Invested Capital $ 1,259 $ 1,471 $ 1,580 $ 1,684 $ 1,715 $ 2,044 Average Invested Capital $ 1,365 $ 1,526 $ 1,632 $ 1,700 $ 1,880 EBIT $ 428 $ 422 $ 489 $ 508 $ 516 Adjustments (reflect non-gaap (1) measures) (2) Restructuring and related expenses 13 78 49 63 36 Pullman recoveries (5) - - - - Asset impairment charge 7 - - - - Bad debt charge - - 4 - - Pension / post retirement charges - - 32 4 72 Adjusted EBIT (non-gaap financial measure) (2) 443 500 574 575 624 Effective Tax Rate 34.8% 35.7% 33.7% 32.9% 26.6% Tax effected Adjusted EBIT $ 289 $ 321 $ 381 $ 386 $ 458 Return on Invested Capital (ROIC) (3) (non-gaap financial measure) (2) 21.1% 21.1% 23.3% 22.7% 24.4% 2013 Dec 31 2014 Dec 31 2015 Dec 31 2016 Dec 31 5 year Average Invested Capital $ 1,626 5 years Average tax effected Adjusted EBIT 367 5 year Average ROIC 22.6% (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. 25