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TRANSCRIPT
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This presentation contains confidential information regarding Tenneco Inc. By reviewing this information, the participants agree to treat the information confidentially, not to distribute it and not to use it for any purpose other than evaluating Tenneco Inc. as a potential supplier.
Please see the safe harbor statement and the tables that reconcile GAAP results with non-GAAP results in Tenneco’s corresponding financial results press release, which is incorporated herein by reference.
Confidentiality, Safe Harbor and Non-GAAP Results
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Product, Market and Geographic Balance
2011 Revenues – $7,205MM
2010 Revenues – $5,937MM
47%NorthAmerica
42%Europe,S. America& India
11%AsiaPacific
2011 2010
Emission Control / Ride Control 66 / 34 64 / 36
Original Equipment / Aftermarket 82 / 18 80 / 20
Global Supplier – Emission and Ride Control Systems
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Segment
Driving balance across many dimensions
Global Supplier – Emission & Ride Control Systems
Product
End Market
2011 Revenue – $7.2 billion
5
‐
Customers - Markets- Geographies - Products
- Solutions to meet emissions regulations- Vehicle ride & handling performance
- Executing with discipline
- Strong alignment globally- Strength at all levels- Talented and dedicated- Passion for winning
• Balance
• Product Technology
• Operational Excellence
• Our People
Tenneco Strengths
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Tenneco Strengths
- Customers - Markets- Geographies - Products
- Solutions to meet emissions regulations- Vehicle ride & handling performance
- Executing with discipline
- Strong alignment globally- Strength at all levels- Talented and dedicated- Passion for winning
• Balance
• Product Technology
• Operational Excellence
• Our People
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HeadquartersEmission Control ManufacturingRide Control ManufacturingEmission Control EngineeringRide Control Engineering
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Approximately 24,000 employees serving customers globally from 87 manufacturing facilities and 14 engineering and technical centers
Tenneco Global Operations
8
Product Category Region
Market Position*
Key Competitors in Market-Share Order
Emission Control
North America #1 Faurecia, Eberspächer
Europe #2 Faurecia, Eberspächer
China #2 Faurecia, Sejong Industrial
South America #3 Faurecia, Magneti Marelli
Ride Control
North America #1 ZF Sachs, Hitachi, Beijing West
Europe #1 ZF Sachs, VW Braunschweig, Beijing West
South America #2 Magneti Marelli, ZF Sachs, KYB
* Tenneco estimates for 2011
Leading OE Light Vehicle Market Positions – 2011
9* Tenneco estimates for 2011** Excludes OE Service
Product Category Region
Market Position*
Key Competitors in Market-Share Order
Original Equipment Emission Control
North America #1 Faurecia, Eberspächer
Europe #2 Faurecia, EberspächerChina #2 Faurecia, Sejong IndustrialSouth America #3 Faurecia, Magneti Marelli
Original Equipment Ride Control
North America #1 ZF Sachs, Hitachi, Beijing West
Europe #1 ZF Sachs, VW Braunschweig, Beijing West South America #2 Magneti Marelli, ZF Sachs, KYB
AftermarketEmission Control
North America #1 AP Exhaust Products, Car Sound Exhaust Systems, IMCO
Europe ** #1 Bosal, Klarius Group
AftermarketRide Control
North America #1 KYB, Ride Control LLC
Europe ** #1 KYB, ZF Sachs South America #1 Magneti Marelli, Corven, Affinia
Leading Market Positions – 2011
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Top 20 CustomersAs a % of Total 2011 Revenues, with Geographic Distribution
%NA ESI AP
1. General Motors 18.6% 73 22 5
2. Ford Motor 14.5% 72 26 2
3. Volkswagen Group 7.9% 9 90 1
4. Daimler AG 5.8% 4 93 3
5. Toyota Motor 3.7% 77 8 15
6. SAIC Motor 2.9% – – 100
7. BMW 2.7% – 99 1
8. PSA Peugeot Citroën 2.4% – 100 –
9. Fiat-Chrysler 2.3% 92 8 –
10. Navistar 2.1% 100 – –
Balanced Customer Mix
%NA ESI AP
11. First Auto Works 1.8% – – 100
12. NAPA 1.8% 100 – –
13. Nissan Motor 1.5% 40 38 22
14. Caterpillar 1.5% 98 2 –
15. Geely Automobile 1.3% – 94 6
16. Tata Motors 1.1% – 100 –
17. Temot 1.1% – 100 –
18. Advance Auto Parts 1.1% 100 – –
19. Changan Automobile 1.0% – – 100
20. O’Reilly Automotive 0.9% 100 – –
Top 5 Customers by SegmentNorth America1.General Motors2.Ford Motor3.Toyota Motor4.Fiat-Chrysler5.Navistar
Europe, South America, India1.Volkswagen Group2.Daimler AG3.General Motors4.Ford Motor5.BMW
Asia Pacific 1.SAIC Motor2.First Auto Works3.Changan Automobile4.General Motors5.Toyota Motor
NA North AmericaESI Europe, South America, IndiaAP Asia Pacific
OE CustomerAM Customer
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Top 20 CustomersAs a % of Total 2011 Revenues, with Geographic Distribution
%NA ESI AP
1. General Motors 18.6% 73 22 5
2. Ford Motor 14.5% 72 26 2
3. Volkswagen Group 7.9% 9 90 1
4. Daimler AG 5.8% 4 93 3
5. Toyota Motor 3.7% 77 8 15
6. SAIC Motor 2.9% – – 100
7. BMW 2.7% – 99 1
8. PSA Peugeot Citroën 2.4% – 100 –
9. Fiat-Chrysler 2.3% 92 8 –
10. Navistar 2.1% 100 – –
Balanced Customer Mix
%NA ESI AP
11. First Auto Works 1.8% – – 100
12. NAPA 1.8% 100 – –
13. Nissan Motor 1.5% 40 38 22
14. Caterpillar 1.5% 98 2 –
15. Geely Automobile 1.3% – 94 6
16. Tata Motors 1.1% – 100 –
17. Temot 1.1% – 100 –
18. Advance Auto Parts 1.1% 100 – –
19. Changan Automobile 1.0% – – 100
20. O’Reilly Automotive 0.9% 100 – –
NA North AmericaESI Europe, South America, IndiaAP Asia Pacific
OE CustomerAM Customer
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Diversified Light Vehicle Platform Mix
Ford P4735%EC, RC, EL
GMT9005%EC, RC, EL
GM GlobalEpsilon4%EC, RC, EL
Ford C14%EC, RC, EL
Ford P4153%EC, RC, EL
• Products on 267 platforms • Average annual platform revenue $18MM
GM THETA2%EC, RC, EL
GM Lambda2%EC, EL
GM Global Delta2%EC, RC, EL
VW PQ352%EC, RC
BMW L21%EC, RC
Top 10 LV Platformsas a Percent of Total 2011 Revenues
EC - Emission ControlRC - Ride ControlEL - Elastomers
Top 10 Platforms
30%
Full Year 2011 Financial Results
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FY 2011 FY 2010 B/(W) % Change
Total Revenue 7,205 5,937 1,268 21%
Value-Add Revenue 5,527 4,653 874 19%
SGA&E (% of Sales) 7.8% 9.0% 1.2% 13%
Adjusted EBIT† 398 306 92 30%
Adjusted EBIT† (% of VA Revenue) 7.2% 6.6% 0.6% 9%
Adjusted EBITDA*† 605 517 88 17%
Adjusted Net Income† 163 96 67 70%
Adjusted EPS ($)† 2.66 1.57 1.09 69%
Cash Flow From Operations 245 244 1 -
Net Debt / Adjusted EBITDA*† 1.7x 1.9x 0.2x 11%
* Including noncontrolling interests.† Adjusted for restructuring activities, goodwill impairment charge, costs related to refinancing, pension charges and tax adjustments. See reconciliations to U.S. GAAP at end of presentation.
$ Millions, except as noted
Second Quarter 2012 Financial Results
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Q2 2012 Q2 2011 B/(W) % Change
Total Revenue 1,920 1,888 32 2%
Value-Add Revenue 1,491 1,453 38 3%
SGA&E (% of Sales) 7.1% 8.1% 1.0% 12%
Adjusted EBIT† 139 115 24 21%
Adjusted EBIT† (% of VA Revenue) 9.3% 7.9% 1.4% 18%
Adjusted EBITDA*† 189 169 20 12%
Adjusted Net Income† 70 50 20 40%
Adjusted EPS ($)† 1.14 0.81 0.33 41%
Cash Flow From Operations 86 67 19 28%
Net Debt / Adjusted LTM EBITDA*† 1.9x 2.0x 0.1x 5%
* Including noncontrolling interests.† Adjusted for restructuring activities, costs related to refinancing and tax adjustments. See reconciliations to U.S. GAAP at end of presentation.
$ Millions, except as noted
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• Leading emission control technologies to meet regulations• Adjacent markets for new revenue opportunities• Advanced technology for improved ride performance• BRIC+T markets for rapid growth • Enhance customer mix • Leverage aftermarket premium brands and distribution strength
• Continuous productivity improvements with Tenneco Manufacturing System
• Standardized global processes and capabilities• Optimize global footprint• Improvements in safety and quality worldwide
• Capitalize on cash flow and EVA discipline• Focus on reducing leverage• Target net debt/adjusted mid-cycle EBITDA* ratio of 2.0X
* Including noncontrolling interests
Invest in growing markets with proprietary technologies
Advanceoperationalexcellence
Improvefinancialstrength
Strategic Initiatives
2008 2009 2010 2011 2012 2013 2014 2015 2016U.S. Locomotive &
Marine Tiers 0-2
US-10 CVS On-HighwayMotorcycle Rule Tier 2
US Off-Road Tier 4i*
Locomotive & Marine Tier 3CA CVS Retrofit*
R.I.C.E. StationaryUS revised NAAQS
US Off-Road Diesel Tier 4f*Locomotive & Marine Tier 4* CA LEV IIIUS Utility MACT
US Fed Tier 3LVS *,**
IMO Global Marine 3 NOx
EUROPE Euro-5 CVS Euro-5 LVS NL Marine OE / Retrofit PM 2.5 & NO2 limits
EU Off-Road Stage 3BEU CO2 / GHG 120g PM # LVS
Motorcycle Euro 4
Euro-6 CVSEU Sound regulation
EU Off-RoadStage 4Euro-6 LVS
Motorcycle Euro 5**
IMO Global Marine 3 NOx
CHINA Euro-3 Two-Wheel Beijing Euro-4 LVS
Beijing CVS Yellow Label
Euro-4 LVS Euro-5 LVS Euro-4 CVSBeijing Euro-5 CVS
Tier 4i Off-RoadMajor cities**
Euro-5 CVS** IMO Global Marine 3 NOx
JAPAN Cold-startrestrictions LVS
Japan-09LVS / CVS
NOx reductionsLVS
JP-13 CVS
IMO Global Marine 3 NOxJP-16 CVS*
BRAZIL US Tier 2 LVS*Motorcycle Rule*
Euro-5 CVS Euro-6 CVS**
RUSSIA Euro-3 LVS Euro-4 LVS / CVS
Euro-5 LVS/CVS
INDIA Euro-4 LVSMotorcycle Rule*
Euro-4 CVS 11 Cities
Euro-5 CVS**
Stricter Emission Regulations
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Regulatory-Driven Growth Opportunities
Global Emissions Regulation Timeline CVS - Commercial Vehicle Systems * Phased inLVS - Light Vehicle Systems ** Estimated date
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2009 2010 2011 2012 2013 2014 2015 2016
Turnkey SCR System························Urea Injection and Dosing Module························Retrofit LocomotiveAftertreatment························
Off-Road Diesel Oxidation Catalyst & DPF························Off-Road Emissions Module························
Fuel Vaporizer······················Hydrocarbon Injector······················Fabricated Diesel Manifold······················Retrofit Marine Aftertreatment······················Electronic Exhaust Valve······················Gen 3 Urea Dosing System······················Enhanced 32 bit ECU······················
3 Layer Manifold·························Hydrocarbon Lean NOx Catalyst························Low Backpressure Valve Muffler························Air Assist Dosing System························Exhaust Gas Heat Exchanger··························CVS Vaporizer························T.R.U.E.-Clean®
Mini·························
Euro VI CVS On-Road AftertreatmentSystem·························Stationary Engine Aftertreatment··························Common Rail Urea Dosing System·························SOLID SCRTM
·························CVS Air-Assisted Dosing System·························Integrated Manifold & Turbocharger·························Tier 4 Locomotive Aftertreatment·························
Multiwrap Converter························Gasoline Particulate Filter························
Low Pressure EGR Valve························Combined DPF / SCR Catalyst························Emissions Air Pump·························Hydrocarbon Trap························
Marine SCR System······················Marine DeSOx System······················CVS Fabricated Manifold······················Fabricated EGR Cooler······················In-tank SCR Dosing Module······················Waste Heat Recovery Generator······················TENNECO Signature Sound System (TS3)························
Technology Roadmap
In production or production ready In development – production ready in 2013-2016
Regulatory-Driven Emission Control Product Pipeline
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Technologies to Meet Evolving Light Vehicle Powertrain Needs
Improving Fuel Economy
Micro, Mild, Full, Plug-in
• Catalytic converter systems• Ultra-thin substrate
converters• Semi-active muffler
valve technology• Fabricated manifolds• Lightweight mufflers
and thin-wall pipes
• Catalytic converter systems
• Ultra-thin substrate converters
• Semi-active muffler valve technology
• Fabricated manifolds• Lightweight mufflers
and thin-wall pipes• Gasoline particulate filters• Heat exchangers• HC-LNC for Lean GDI
• Catalytic converter systems
• Ultra-thin substrate converters
• Diesel aftertreatment• Semi-active muffler
valve technology• Fabricated manifolds• Lightweight mufflers
and thin-wall pipes• Heat exchangers
Gasoline Gas DirectInjection Diesel Gas & Diesel
Hybrids
• Diesel particulate filters• Diesel oxidation catalysts• Selective catalytic
reduction and HC-LNC • NOx adsorber• Fabricated manifolds• Lightweight mufflers
and thin-wall pipes• Heat exchangers• Vaporizers• Electronic valves and
piping for exhaust gas recirculation
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Linking Regulations to Full Suite of Technologies
2011 2012 2013 2013 2014 2014 2014 2016 2016US -Tier 4i
CVS Off-roadEU Stage 3B CVS Off-road
Brazil Euro-5CVS On-road
China – Euro-4CVS On-road
EU Euro-6CVS On-road
EU Euro-6LVS
US -Tier 4fCVS Off-roadEU Stage 4
CVS Off-road
US Locomotive / Marine Tier 4
US Fed Tier 3LVS
(Estimated)
IMOGlobal Marine 3
Reduction in Diesel
ParticulatesReduction in
NOxReduction in
NOx
Reduction in Diesel
Particulates and NOx
Reduction in Particulates and NOx
Reduction in NOx
Reduction in Diesel
Particulates and NOx
Reduction in HC, NMOG and
Particulates (Non-Methane Organic Gas)
Reduction in Diesel
Particulates, NOx and SOx
Off-road Diesel Oxidation
Catalyst & DPF
Turnkey Urea SCR System with Dosing
Module
Turnkey Urea SCR System with Dosing
Module
Turnkey Urea SCR System with Dosing
ModuleFuel Vaporizer
Turnkey Urea SCR System with Dosing
Module
Turnkey Urea SCR System
Electronic Exhaust Valve
Marine Urea SCR System with Dosing
Module
Hydrocarbon Injector
Hydrocarbon Injector
Hydrocarbon Injector
Hydrocarbon Injector
Hydrocarbon Injector
Hydrocarbon Injector
Off-road Diesel Oxidation Catalyst
& DPF
Fabricated 3-Layer Manifold
Marine DeSOx System
Off-road Emissions
Module
Hydrocarbon Lean NOx Catalyst
CVS VaporizerT.R.U.E.-
Clean® Thermal Management
T.R.U.E.- Clean® Thermal
Management
T.R.U.E.- Clean® Thermal
Management
T.R.U.E.- Clean® Thermal
Management
Gasoline Particulate
Filter
Marine T.R.U.E.- Clean® Thermal
Management
T.R.U.E.- Clean® Thermal
ManagementCVS Vaporizer CVS Vaporizer
Fabricated 3-Layer Manifold
CVS Vaporizer Retrofit Aftertreatment
Emissions Air Pump
Electronic Bypass Valve
T.R.U.E.- Clean® Mini
Hydrocarbon Lean NOx Catalyst
Gasoline Particulate
Filter
Hydrocarbon Lean NOx Catalyst
Hydrocarbon Lean NOx Catalyst
Hydrocarbon Trap
SOLID SCR™ SOLID SCR™ Common Rail Urea Dosing SOLID SCR™
Modular Tier 4 Locomotive
Aftertreatment
Tenn
eco’s
Full
Suit
e of
Tec
hnolo
gies
Regu
lation
s
In production or currently ready for production In development
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Commercial Vehicle Diesel Aftertreatment Business
North America• Caterpillar OFF-ROAD
• Deere OFF-ROAD
• Navistar ON-ROAD (4-7)
Brazil• Daimler Trucks ON-ROAD
• MAN ON-ROAD
• MWM (Navistar subsidiary) ON-ROAD
• Customer A ON-ROAD
China• China National
Heavy-Duty Truck Co. ON-ROAD
• FAW ON-ROAD
• Shanghai Diesel Engine Co. ON-ROAD
• Weichai ON-ROAD
• YuChai ON-ROAD
• Customer B ON-ROAD
South Korea• Bus manufacturer –
Exported from MWM in Brazil ON-ROAD
Japan• Caterpillar –
Exported from North America OFF-ROAD
• Customer C OFF-ROAD
30%to
35%11%
2011A 2016*
Percent ofOE revenuegenerated bycommercial vehicle& specialty business
* See slide 36 for a discussion of key assumptions on which our revenue projections are based.
India• Tata Motors ON-ROAD
Europe• Caterpillar/Perkins OFF-ROAD
• Daimler Trucks ON-ROAD
• Deere OFF-ROAD
• Deutz OFF-ROAD
• MAN OFF-ROAD
• Customer A ON-ROAD
• Customer D OFF-ROAD
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• Utilizing modular strategy to expand into locomotive diesel aftertreatment
– Bundling commercial vehicle aftertreatment components for large engines
• Began shipping prototypes to customers in 2010
• Tenneco, GE Transportation and Umicore are jointly developing Hydrocarbon LNC technology
– Tenneco awarded development contract for GE locomotive applications
– Positioned to become long-term strategic supplier to GE Transportation
• Aftertreatment systems designed for locomotive engine can be adapted for use with marine engines and stationary power
Locomotive and Marine Emission Control Opportunities
2009 2010 2011 2012 2013 2014 2015 2016Multi Tunable Valve (Global Valve)························Hollow Piston Rod························Blow Off Disc Spring Valve························BOCS Valve························
Plastic Spring Seat························ Kinetic® H2 CES† Combo························ Lightweight Aluminum Tube························
Variable TubeThickness························Velocity Progressive Seat Dampers························ High-Velocity Compression Damping························
Thin Wall Lightweight Monotube························ CES II External Valve························ Aluminum Dual Tube Seat Damper························ Kinetic® H2 CES with hydraulic leveling························
FSD Valving System························CVS Double Path Mount Cab Shock························Motorbike Electronic Shock························Improved Monotube (Low Temperature) ·······················Global Hydraulic Rebound Stop·······················Green Shock with Bio-oil························DRiVTM Digital Valve·······················Global Valve II ·······················
Dual Mode Internal Valve························35mm LCV Strut························New CVS 45mm Shock························Bi-Drectional Frequency Selective Damping························ New Double Tube Base Valve························Integrated Height Valve for Cab Shocks························
Semi-active Internal Valve······················· ACOCARTM
Active System·······················Integrated CVS Regenerative Damper·······················Automotive Aluminum Dual Tube························ DRiVTM Cab Shock························
ACOCARTM
Active System with Energy Recuperation························Low Cost Auto Leveling ························
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Ride Control Product Pipeline
Technology Roadmap
In production or production ready In development – production ready in 2013-2016† CES is a registered trademark of Öhlins Racing AB CORPORATION SWEDEN. All other trademarks, service marks and logos used herein are the trademarks, service marks, or logos of their respective owners.
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Electronic Damping Technologies for Improved Ride Performance & Safety
European Electronic Dampers Market Evolution and Tenneco Growth (In Millions of Units)
• Continue to win and launch new CES business– In production on 33 models
with multiple customers including Volvo, Audi, Ford Europe, Mercedes/AMG, Volkswagen, BMW
– In development with 8 additional models
• Selling price is about 4-6 times price for a standard shock
• Targeting substantial portion of CES benefits for broader market
• Lower total system cost – no dedicated ECU required
• Improved packaging and reduced power consumption
• Production ready in 2013
• Fully-active suspension with ultimate comfort and excellent handling
• Awarded “Innovation of the Year” in 2012 from Vehicle Dynamics International magazine for our ACOCARTM active suspension system
• In development with a global OEM• Production ready in 2015
Continuously Controlled Electronic Suspension (CES) Kinetic® + CES (H2CES)
Actively COntrolled CAR (ACOCARTM)DRiV TM Digital Valve
IN DEVELOPMENTIN DEVELOPMENT
IN PRODUCTION IN PRODUCTION
• Combination of Kinetic® and CESKinetic® – Independent corner control with a more neutral steering behaviorCES – Semi-active body and wheel hop control with a better compromise between handling and comfort
• Debuted on the McLaren MP4-12C• Awarded “Supplier of the Year” in 2011 from Vehicle
Dynamics International magazine for our Kinetic® H2/CES semi-active suspension
• In testing and development for another manufacturer0
0.5
1
1.5
2
2.5
3
3.5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Tenneco CES Volume
Total Semi-ActiveDamping Market
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Advanced Ride Technologies Driving Growth
• Improves fuel economy and CO2 reduction through reduced weight
– Hollow rod– Aluminum tube– Variable tube thickness– Plastic spring seat
• In production or development with several customers, including GM, Volkswagen, Audi, Mercedes, PSA, BMW and another high performance sports car
Lightweight Components Elastomer Growth
• Highly engineered noise, vibration and harshness solutions
• Continued growth in commercial vehicle market
• Integration of EC and RC capabilities; exhaust isolators
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Significant Growth Opportunities in BRIC+T MarketsWell-positioned with manufacturing and engineering facilities to capture growth
ChinaSince 1995
Source: IHS Automotive, January 2012
CAGR: Projected 5-year Compounded Average Growth Rate through 2016 for industry light vehicle production in the applicable country
8% CAGR
EC Plant
RC Plant
Engineering Facility
Regional Headquarters
IndiaSince 1995
9% CAGR
BrazilSince 1977
6% CAGR
ThailandSince 2001
12% CAGRRussiaSince 2003
5% CAGR
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China Growth
Tenneco serves global OEMs as well as domestic manufacturers in China
• Emission Control– Six majority-owned JVs, including
a JV with FAW Sihuan for commercial and light vehicles
– Wholly-owned emission control manufacturing in Guangzhou
– Advanced emission control engineering center in Shanghai
• Ride Control– One majority-owned JV production facility in Beijing– Wholly-owned elastomer production facility for domestic and export business
Continued capacity expansion
China
27
Light VehicleCommercial Vehicle & Specialty (CV&S)Total OE Revenue (2014-2016)
$ in Billions
Substrate – % of Total OE Revenue 27% 28% 29% 30% 31% 32% 32%
• U.S. Tier 4i Off-road Tier 4f Off-road
Locomotive & Marine Tier 4
• Europe Stage 3B Off-road Stage 4 Off-road
Euro-6 On-road
• China Euro-4 On-road
• Brazil Euro-5 On-road
Five-Year OE Revenue Growth
Significant Commercial Vehicle Regulation Phase-in:
Total OE Revenue Projection† (as of Feb. 2012)
Q2 Status: ΔRevenue Projection
† See slide 36 for a discussion of key assumptions on which our revenue projections are based.
* Percent of Total OE Revenue△
Based on build rates and currency exchange rates as of July 2012, as compared to Feb. 2012 assumptions
Light Vehicle Production• North America
• Europe
• South America
• China ON TRACK
Commercial Vehicle Production• North America
• Europe
• Brazil
Expect CV&S revenue closer to $900 million than original projection
Currency
2012
2012
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Tenneco Strengths• Strong global brands• Premium products• Distribution
Growth• Maintaining premium brand position and
growing market share with core products
• Expanding core product offerings
• Leveraging brands and distribution for non-core product lines – brake pads, steering and suspension
• BRIC+T markets
Excellent Profitability and Cash Generation
Global Aftermarket
2011 Market PositionCategory Region Position* Key Competitors
Emission Control N. America #1 AP Exhaust Products, CarSound Exhaust Systems, IMCO
Europe** #1 Bosal, Klarius Group
Ride Control N. America #1 KYB, Ride Control LLC
Europe** #1 KYB, ZF Sachs
S. America #1 Magneti Marelli, Corven, Affinia
* Tenneco estimates for 2011** Excludes OE service
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Tenneco Manufacturing System (T.M.S.)
TM
• Highly focused on global manufacturing performance– Safety – Process driven quality– Process efficiency – Inventory management
• T.M.S. University Plants in all operating regions– Structured to drive focused development of core competencies
and standardization– Leverage operational leadership and best practices
• Standardization of global processes are key to our success
– Global platform management – Industrialization of new technologies– Supplier management – Total capital efficiency
Driving Consistency Across Global Operations
Over $50 million – Process Excellence
savings in 2011 (Lean and Six Sigma)
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Health & Safety Strategy
Key elements of Global Safety Management System• T.M.S.S. – Tenneco Machine Safeguarding Standard
– A.U.T.O. (danger zone protection)– Control reliable safety systems – All machines undergo a detailed risk assessment
• Behavioral Safety Process– Peer-to-peer observations to change at-risk behaviors
• HEC – Hazardous Energy Control– Zero tolerance for knowingly circumventing lockout and tag procedure
• Ergonomics– Applied ergo and Engineering Design Guidelines for Engineers (EDGE)
Create an Injury-free Career for All Employees
31
• Safety– Safety is our key priority globally– Total Case Rate (TCR) measures the number
of injuries per 100 workers in a year – Focus results in benchmarkable performance– Renewed focus on Behavioral Safety Initiative
• Quality– PPM measures the number of defective
Parts Per Million shipped to a customer
– Progress attributed to Business Operating System, linked tightly to the Tenneco Manufacturing System, Six Sigma, Lean tools
– Drivers include standard processes, design improvements, mistake proofing, supplier management
* Source: U.S. Bureau of Labor Statistics, NAICS code 3363 – motor vehicle parts manufacturing.
Global Total Case Rate
Global Customer PPM
99
161
62 62
17 14
86
2004 2005 2006 2007 2008 2009 2010
2.02.32.73.03.93.43.4
6.45.65.2
6.26.97.1
8.1
2004 2005 2006 2007 2008 2009 2010
Tenneco TCR U. S. Industry Average*
Continuous Improvements in Safety and Quality
32
• Advanced technology leadership
• Strong operational capabilities
• Well-positioned for emission control technology-driven growth– Content growth in established markets– Market share growth in adjacent markets – on- and off-road commercial vehicle, locomotive– Geographic growth in expanding markets with environmental mandates
• Sound business model with geographic, customer, end-market, product and platform diversification
– Leading Tier 1 OE supplier positioned on top selling platforms– No. 1 aftermarket supplier driven by leading brands
• Demonstrated commitment to balance sheet strength and financial stability
• Experienced management team
Tenneco Highlights
33
Tenneco’s revenue projections are as of February 2012. Tenneco provides revenue projections annually and does not otherwise intend to update these projections until February 2013.
In addition to the information set forth on this slide, slide 15 and slide 22, Tenneco’s OE 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, 2011. 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; Tenneco’s status as supplier for the existing program and its relationship with the customer; and the actual original equipment revenues achieved by the company for each of the last several years compared to the amount of those revenues that the company estimated it would generate at the beginning of each year.
• 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, pricing and foreign currency.
APPENDIX: Tenneco OE Revenue Projections
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Assumptions:
Light Vehicle Production** (Millions)
2011A 2012 2013 2014 2015 2016
N. America 13.1 13.9 14.7 15.8 16.7 16.8Europe 20.1 18.5 19.6 20.5 22.0 22.5China 17.2 18.4 20.4 22.4 24.0 25.8S. America 4.3 4.6 5.0 5.3 5.7 5.9Worldwide 5 yr CAGR of 5% (2011-2016)
On-Road Commercial Vehicle Production△
(Thousands) (Class 4-8)
2011A 2012 2013 2014 2015 2016
N. America 416 467 512 498 483 477Europe 558 655 753 726 756 790China 1,095 1,154 1,214 1,288 1,408 1,300S. America 204 184 196 196 211 223Worldwide 5 yr CAGR of 4% (2011-2016)
Off-Road Commercial Vehicle Production△
(Thousands) (Agriculture, Construction, Mining & Forestry)
2011A 2012 2013 2014 2015 2016
U.S. (≥25 hp) 218 217 229 239 244 247Europe (≥50 hp) 426 440 458 470 467 459U.S. & Europe 5 yr CAGR of 2% (2011-2016)
Currency Assumption = $1.27/€, as of Jan. 11, 2012** IHS Automotive, Jan. 2012 △Power Systems Research, Jan. 2012
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• Use of Non-GAAP Financial InformationIn 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*”), Adjusted EBITDA*, Adjusted Earnings Before Interest Expense, Income Taxes and Noncontrolling Interests (“Adjusted EBIT”), Adjusted Net Income and Adjusted Earnings Per Share.
Reconciliations of these non-GAAP financial measures to the comparable GAAP measure are included in this presentation.
* Including noncontrolling interests.
Financial Results Disclaimer
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FY 11 FY 10
Net income attributable to Tenneco Inc. $ 157 $ 39
Net income attributable to noncontrolling interests 26 24
Net income 183 63
Income tax expense 88 69
Interest expense (net of interest capitalized) 108 149
EBIT, earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) 379 281
Depreciation & amortization of other intangibles 207 216
Total EBITDA* $ 586 $ 497
EBITDA* ($ Millions)
EBITDA* represents earnings before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA* is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA* calculation, however, are derived from amounts included in the historical statements of income. In addition, EBITDA* should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company’s operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA* because it regularly reviews EBITDA* as a measure of the company’s performance. In addition, Tenneco believes that its security holders utilize and analyze its EBITDA* for similar purposes. Tenneco also believes EBITDA* assists investors in comparing a company’s performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA* measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.* Including noncontrolling interests.
Reconciliation of Non-GAAP Results
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EBITDA* EBITNet Income
Attributable to Tenneco Inc.
EPS
FY 11 FY 10 FY 11 FY 10 FY 11 FY 10 FY 11 FY 10
Financial measures $586 $497 $379 $281 $157 $39 $2.55 $0.63
Adjustments (reflect non-GAAP(1) measures):
Restructuring and related expenses 8 14 8 19 5 12 0.09 0.20
Goodwill impairment charge 11 - 11 - 7 - 0.11 -
Pension charges - 6 - 6 - 4 - 0.07
Costs related to refinancing - - - - 1 18 0.01 0.29
Tax adjustments - - - - (7) 23 (0.10) 0.38
Non-GAAP financial measures(2) $605 $517 $398 $306 $163 $96 $2.66 $1.57
(1) Generally Accepted Accounting Principles(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results of 2011 and 2010 in a manner that allows a better understanding of the
results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business. * Including noncontrolling interests.
$ Millions, Unaudited
Financial Accomplishments – Reconciliation of Non-GAAP Results
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FY 11 FY 10
Total revenue $ 7,205 $ 5,937
Less: Substrate sales 1,678 1,284
Value-add revenue $ 5,527 $ 4,653
Adjusted EBIT $ 398 $ 306
Adjusted EBIT as a percentage of value-add revenue(1) 7.2% 6.6%
(1) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenue. Substrate sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Further, presenting adjusted EBIT as a percentage of value-add revenue assists investors in evaluating our company’s operational performance without the impact of such substrate sales.
Adjusted EBIT as a Percentage of Value-Add Revenue – Reconciliation of Non-GAAP Results$ Millions, Unaudited
EBITDA* – Reconciliation of Non-GAAP Results
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Q3 11 Q4 11 Q1 12 Q2 12 LTM Q2 12
Net income attributable to Tenneco Inc. $ 30 $ 30 $ 30 $ 87 $ 177
Net income attributable to noncontrolling interests 6 8 6 8 28
Income tax expense 21 23 18 21 83
Interest expense (net of interest capitalized) 27 27 42 21 117
EBIT, earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) 84 88 96 137 405
Depreciation & amortization of other intangibles 51 51 49 50 201
EBITDA* $ 135 $ 139 $ 145 $ 187 $ 606
EBITDA* represents earnings before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA* is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA* calculation, however, are derived from amounts included in the historical statements of income. In addition, EBITDA* should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company’s operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA* because it regularly reviews EBITDA* as a measure of the company’s performance. In addition, Tenneco believes that its security holders utilize and analyze its EBITDA* for similar purposes. Tenneco also believes EBITDA* assists investors in comparing a company’s performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA* measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.* Including noncontrolling interests.
$ Millions, Unaudited
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(1) Generally Accepted Accounting Principles(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results for LTM Q2 2012 in a manner that allows a better understanding
of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business. * Including noncontrolling interests.
$ Millions, Unaudited
Adjusted EBITDA*– Reconciliation of Non-GAAP Results
Q3 11 Q4 11 Q1 12 Q2 12 LTM Q2 12
EBITDA* $ 135 $ 139 $ 145 $ 187 $ 606
Adjustments (reflect non-GAAP(1) measures):
Restructuring and related expenses 4 1 1 2 8
Goodwill impairment charge 11 - - - 11
Adjusted EBITDA* (non-GAAP financial measure)(2) $ 150 $ 140 $ 146 $ 189 $ 625
EBITDA* – Reconciliation of Non-GAAP Results
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Q3 10 Q4 10 Q1 11 Q2 11 LTM Q2 11
Net income (loss) attributable to Tenneco Inc. $ 10 $ (18) $ 47 $ 50 $ 89
Net income attributable to noncontrolling interests 6 7 5 7 25
Income tax expense 15 24 14 30 83
Interest expense (net of interest capitalized) 36 49 28 26 139
EBIT, earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) 67 62 94 113 336
Depreciation & amortization of other intangibles 55 53 51 54 213
EBITDA* $ 122 $ 115 $ 145 $ 167 $ 549
EBITDA* represents earnings before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA* is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA* calculation, however, are derived from amounts included in the historical statements of income. In addition, EBITDA* should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company’s operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA* because it regularly reviews EBITDA* as a measure of the company’s performance. In addition, Tenneco believes that its security holders utilize and analyze its EBITDA* for similar purposes. Tenneco also believes EBITDA* assists investors in comparing a company’s performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA* measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.* Including noncontrolling interests.
$ Millions, Unaudited
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(1) Generally Accepted Accounting Principles(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results for LTM Q2 2011 in a manner that allows a better understanding
of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business. * Including noncontrolling interests.
$ Millions, Unaudited
Adjusted EBITDA*– Reconciliation of Non-GAAP Results
Q3 10 Q4 10 Q1 11 Q2 11 LTM Q2 11
EBITDA* $ 122 $ 115 $ 145 $ 167 $ 549
Adjustments (reflect non-GAAP(1) measures):
Restructuring and related expenses 3 4 1 2 10
Pension charges 4 2 - - 6
Adjusted EBITDA* (non-GAAP financial measure)(2) $ 129 $ 121 $ 146 $ 169 $ 565
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EBITDA* EBITNet Income
Attributable to Tenneco Inc.
EPS
Q2 12 Q2 11 Q2 12 Q2 11 Q2 12 Q2 11 Q2 12 Q2 11
Financial measures $187 $167 $137 $113 $87 $50 $1.42 $0.81
Adjustments (reflect non-GAAP(1) measures):
Restructuring and related expenses 2 2 2 2 1 1 0.02 0.02
Costs related to refinancing - - - - 1 - 0.01 -
Net Tax adjustments - - - - (19) (1) (0.31) (0.02)
Non-GAAP financial measures(2) $189 $169 $139 $115 $70 $50 $1.14 $0.81
(1) Generally Accepted Accounting Principles(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results of second quarter 2012 and 2011 in a manner that allows a better understanding
of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business. * Including noncontrolling interests.
$ Millions, Unaudited
Financial Accomplishments – Reconciliation of Non-GAAP Results
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Q2 12 Q2 11
Total revenue $ 1,920 $ 1,888
Less: Substrate sales 429 435
Value-add revenue $ 1,491 $ 1,453
Adjusted EBIT $ 139 $ 115
Adjusted EBIT as a percentage of value-add revenue(1) 9.3% 7.9%
($ Millions, unaudited)
(1) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenue. Substrate sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Further, presenting adjusted EBIT as a percentage of value-add revenue assists investors in evaluating our company’s operational performance without the impact of such substrate sales.
Adjusted EBIT as a Percentage of Value-Add Revenue – Reconciliation of Non-GAAP Results
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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.(1) Last 12 months calculation
$ Millions, Unaudited
Net Debt / Adjusted EBITDA*– Reconciliation of Non-GAAP Results
LTM Q2 2012
LTM Q2 2011 2011 2010
Total debt $ 1,366 $ 1,294 $ 1,224 $ 1,223
Cash and cash equivalents 181 161 214 233
Debt net of cash balances 1,185 1,133 1,010 990
Adjusted EBITDA* $ 625(1) $ 565(1) $ 605 $ 517
Ratio of net debt to adjusted EBITDA* 1.9x(1) 2.0x(1) 1.7x 1.9x