Investor Presentation March, 2020 NYSE: TEN
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 forward-looking statements. Forward-looking statements included in this communication concern, among other things, the proposed separation of DRiV™ from the Powertrain Technology business; future performance improvement plans;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 possibility that Tenneco may not complete the separation of the Aftermarket & Ride Performance business from the Powertrain Technology business; the impact of the coronavirus epidemic on our operations; the possibility that Tenneco will be unable to execute on its strategy to improve operations and maintain compliance with the covenants in its Credit Agreement; the possibility that the separation 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 separation may not be fully realized or may take longer to realize than expected; the risk that the separation may not advance Tenneco's business strategy; the potential diversion of Tenneco management's attention resulting from the separation; 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. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company's SEC filings, including but not limited to its annual report on Form 10-K for the year ended December 31, 2019. In addition, please see Tenneco’s press release issued February 20, 2020 for factors that could cause Tenneco’s future performance to vary from the expectations expressed or implied by the forward-looking statements herein and Tenneco’s press release issued March 2, 2020 for certain reconciliations of GAAP to non-GAAP results. References to financial guidance refer to such guidance as provided by Tenneco on February 20, 2020. 2
Tenneco 2019 Overview 19% 78,000 global team members OE CTOH & Industrial Product 63% Applications OE Light 18% Revenue Vehicle $17.5B Revenue Aftermarket $14.4B VA Revenue $8.5B $5.9B New DRiV TM Divisions Tenneco VA Revenue Rest of AP 5% 43% North America 13% China Regions Revenue 36% 3% Europe South America Diversified business profile enables long-term growth 3
Executing on Strategic Priorities • Process and systems separation essentially complete Making strong progress towards separation • Solid operational performance in challenging market conditions Executing Accelerate • Acquisition related synergies achieved $200M run rate at the end of 2019 program, incremental cost • Accelerate program has identified additional $200M run rate cost savings savings initiatives opportunities expected by the end of 2021 Reducing capex and working Adjusted free cash flow expected to be positive in 2020 capital in both divisions Gaining flexibility through Max leverage ratio increased to 4.5x through Q1 2021 covenant relief • Priority on maximizing shareholder value creation Evaluating strategic options • Options range from the sale of individual product lines to complete divisions 4
Value Creation Opportunity Key factors reinforce continued commitment to separation of the 2 business divisions Strategy Each business possesses a different opportunity set to create long-term enterprise value Operations 25% OE and aftermarket businesses function differently Aftermarket EBITDA (complexity, capital requirements, etc.) and have as % of Total different financial return profiles TEN FY2019 Cyclicality Adj EBITDA Aftermarket demand characteristics are less volatile than OE demand 75% Value Businesses with significant aftermarket exposure OE EBITDA tend to trade at higher valuation multiples than as % of Total pure OE businesses Material opportunity to unlock shareholder value through a separation 5
2020 Focus and Goals Cost reduction, cash generation and balance sheet improvement Execute Accelerate Program Improve Capital Efficiency Reduce Leverage Incremental $200M in cost reduction Disciplined working capital reduction Improve net leverage ratio opportunities identified Targeting lower net debt to EBITDA, progressing • Additional $250M improvement opportunity toward ultimate separation target <3x • Run-rate improvement expected to be • 50% of benefit estimated by 2020 year end achieved by end of 2021; roughly equivalent Lower capex Active review of strategic alternatives value in each division • 2 year cost to achieve expected to be Enterprise capex expected to be reduced Asset sales could accelerate net debt reduction approximately $250M $100M YOY in 2020 and speed up separation timeline • Expect YOY cost savings of $100M in 2020, inclusive of carryover projects Better positioning both divisions for planned separation 6
Debt and Covenant Update 12/31/2019 ($ in millions) Liquidity strong $1.5B available at year end Total Debt $5,556 • No significant near-term maturities Cash Balances (1) 566 Net Debt $4,990 Amended terms of debt covenant on February 14, 2020 LTM Adjusted EBITDA $1,415 • Maximum leverage ratio increased to 4.50x through Q1 2021 Net Leverage Ratio 3.5x (1) Includes restricted cash 7
Actions to Drive Value Creation Achieved acquisition synergies run-rate almost one year early • $200M earnings run-rate and $250M working capital run-rate Secured covenant amendment to provide further flexibility • Max leverage ratio increased to 4.5x through Q1 2021 Strategic Focus in 2020 aimed at positioning both divisions for separation • Targeted growth investments: • Accelerate program focused on: ‒ APAC Commercial Truck/Off Highway ‒ Incremental cost reduction ‒ Advanced Suspension Technologies ‒ Improving capital efficiency ‒ NVH Performance Materials ‒ Reducing leverage ‒ China Aftermarket Continuing evaluation of strategic alternatives • Asset sale(s) could accelerate net leverage reduction and separation timeline 8
Businesses are Operating Independently, Ready for Separation Global scale, a stable of well-respected and enduring By building more efficient, more powerful and more sophisticated aftermarket brands and longtime partnerships with the world’s powertrain systems, Tenneco’s advanced solutions reduce leading OE manufacturers give DRiV a unique competitive emissions in traditional and hybrid applications. It will realize growth advantage. DRiV is strategically positioned for long term growth, from increased emission regulations, hybridization and commercial capitalizing on secular trends such as the expansion of vehicles truck and off-highway expansion opportunities. in operation globally, as well as growth in advanced suspension, electrification, new mobility models and autonomous driving. Reporting Segments Reporting Segments • Motorparts • Clean Air • Ride Performance • Powertrain Unique strategic combination building upon the strength, depth and industry experience of the combined teams 9
New Tenneco Powertrain Technology Company 10
New Tenneco Overview Driving Progress Toward Cleaner, More Efficient Mobility 50,000 $11.5B 144 21 Global team Globally networked 2019 Revenue Manufacturing members engineering & sites worldwide technical centers Global pure-play powertrain supplier, positioned to capture opportunities 11
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