deutsche bank global auto industry conference/media/files/t/tenneco-ir/... · 2019-01-14 · from...
Post on 06-Jun-2020
1 Views
Preview:
TRANSCRIPT
Safe Harbor
2
This communication contains forward-looking statements. These forward-looking statements include, but are not limited to, (i) all statements, other than statements ofhistorical 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 dependon future events and (ii) statements about our future business plans and strategy and other statements that describe Tenneco’s outlook, objectives, plans, intentions orgoals, and any discussion of future operating or financial performance. These forward-looking statements are included in various sections of this communication and thewords “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, benefits of the Federal-Mogul acquisition; the combinedcompany’s plans, objectives and expectations; future financial and operating results; and other statements that are not historical facts. Forward-looking statements aresubject to a number of risks and uncertainties that could cause actual results to materially differ from those described in the forward-looking statements, including thepossibility that the combined company may not complete the spin-off of the Aftermarket & Ride Performance business from the Powertrain Technology business (orachieve some or all of the anticipated benefits of such a spin-off); the possibility that the acquisition of Federal-Mogul or spin-off may have an adverse impact on existingarrangements with Tenneco, including those related to transition, manufacturing and supply services and tax matters; the ability to retain and hire key personnel andmaintain relationships with customers, suppliers or other business partners; the risk that the benefits of the acquisition of Federal-Mogul or spin-off, including synergies,may not be fully realized or may take longer to realize than expected; the risk that the acquisition of Federal-Mogul or spin-off may not advance Tenneco’s businessstrategy; the risk that the combined company may experience difficulty integrating or separating all employees or operations; the potential diversion of Tennecomanagement’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 aprediction of actual results. Unless otherwise indicated, the forward-looking statements in this release are made as of the date of this communication, and, except asrequired 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 orimplied by the forward-looking statements herein.
Forward-Looking Statements
From 2000 - 2017, Tenneco has delivered:• Value-add (VA) Revenue* growth outpacing LV industry production• Margin expansion of over 300 bps• Double-digit annual adjusted EPS growth
Proven Track Record of Growth
4
Consistent, better-than-market revenue growth and top quartile 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
VA Revenue ($ billions)
Adjusted EBIT† as a % of VA Revenue
Leading ROIC† Performance
5-year average 22.8%
◆ Source IHS Automotive January 2018 global light vehicles
$7.1B
$6.3B
$4.7B
$3.8B$3.1B
9.1%9.1%
6.6%6.4%6.0%
* 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.
Over past 10+ years, TEN outpaced industry production by 2x
Tenneco Revenue (billion)
Industry Production◆
(million) 6%CAGR
3%CAGR
North America
46%
South America4%
Europe30%
China15%
Rest of AP5%
Regions2017
VA Revenue
Clean Air LV
49%
Ride Performance LV
22%
Aftermarket18%
CTOH11%
ProductApplications
2017VA Revenue
GM13.9%
Ford 13.2%
VW Group7.9%
Daimler 6.3% Tata
5.0% FCA5.0%
SAIC 4.3%
FAW4.3%
Toyota 3.4%
Renault/Nissan 3.4%
Caterpillar 2.6%
PSA 2.1%John Deere 2.0%
NAPA/Alliance 2.0%Advance 1.8%
Other 22.8%
Top Customers2017 Revenue
Diversified Business ProfileLegacy Tenneco
5
• Leading manufacturer and distributor of ride performance and clean air products to aftermarket distribution channels
• Leading market position in NA & Europe• Operates 6 manufacturing sites and 27
distribution centers
Aftermarket - $1.3B (2017 Revenue)
• Leading supplier of ride performance products and systems, serving light vehicle and commercial truck customers
• Operates 28 manufacturing sites and 10 engineering centers
Ride Performance - $1.8B (2017 Revenue)
• Leading supplier of clean air products and systems, serving light vehicle, commercial truck and off-highway customers
• Operates 64 manufacturing sites and 8 engineering centers
Clean Air - $6.2B (2017 Revenue)
• One of the world’s leading powertrain component and assembly providers
• Market leading positions across product categories• Operates 87 manufacturing sites
Powertrain - $4.5B (2017 Revenue)
Volkswagen8.7%
General Motors
7.5%Ford
Motor6.3%
Daimler AG5.2%
FCA5.1%
Renault/Nissan3.5%
BMW, 3.1%
Advance Auto Parts 2.8%
O'Reilly Auto Parts 2.5%
PSA Peugeot Citroen 2.5%
NAPA/Alliance 2.3%Cummins 2.3%
ATR 1.8%Toyota 1.4%
Caterpillar 1.4%
Other43.6%
Customers2017 Pro Forma
Revenue
Acquisition of Federal-MogulTransformational, Highly Complementary Asset
7
Federal-Mogul acquisition completed on October 1, 2018
Light Vehicle
49%
Aftermarket30%
CTOH & Industrial
21%
Product Applications2017 Pro Forma
Revenue
North America
44%
South America1%
Europe41%
China8%
India 3%
ROA 3%
Regions2017 Pro Forma
Revenue
• Over 20 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 and 33 distribution centers
Motorparts - $3.3B (2017 Revenue)
GM10.9%
Ford 10.0%
VW Group8.2%
Daimler AG5.8%
FCA 5.1%
Renault/Nissan3.5%
Tata Motors3.1%
Toyota 2.5%
SAIC 2.5%
FAW 2.4%Advance Auto Parts 2.2%
PSA Peugeot Citroen 2.2%BMW 2.2%NAPA/Alliance 2.1%
Caterpillar 2.0%
Other 35.3%
Top Customers2017 Pro Forma
Revenue
Diversified Business ProfilePro Forma Combined Tenneco
8
Diversified business profile enables long-term growth
Light Vehicle
62%
Aftermarket21%
CTOH & Industrial
17%
North America
45%
South America3%
Europe36%
China11%
Rest of AP5%
Product Applications
Regions
Top Platforms (Models)
5% VW MQB/PQ35 (Golf, Jetta, Audi A3 pass cars)
3% Ford T3/P558 HD (Super Duty truck)
2% GM K2XX HD (HD Silverado and Sierra trucks)
2% Ford T3/P552 LD (F-150 truck)
2% GM K2XX LD (LD Silverado and Sierra trucks)
2% GM D2XX/Delta (Cruze pass car, Verano SUV)
2% Daimler MFA (A and B class pass cars)
2% Ford C1 (Focus, Escape and Kuga)
2% Daimler MRA (E and C class pass cars)
1% GM C1XX/Lambda (Enclave and Acadia SUVs)
1% Land Rover PLA-D7u (Range Rover, RR Sport, Discovery)
1% Jaguar PLA-D7a (XF and XS pass cars, F-Pace SUV)
1% GM E2XX/Epsilon (Malibu, Lacrosse, Insignia)
1% VW PQ25/26 (Polo and Jetta pass cars)
1% VW MLB B (Audi A4 pass car, Q5 SUV)
2017Pro FormaRevenue
2017Pro FormaRevenue
The Combined Tenneco
Realignment and separation unlocks significant shareholder value9
PRE-CLOSEPRE-OCTOBER 1, 2018
POST-CLOSEOCTOBER 1, 2018
AFTER SEPARATIONEXPECTED H2 2019
Powertrain Technology AM & Ride Performance
$10.7 (VA $8.5)
Tenneco CombinedCoTenneco Federal-Mogul
RP
CA
Motorparts
PowertrainCA
Powertrain
Motorparts
RP
Powertrain
Motorparts(AM/OE)
RP (OE)
$9.3 (VA $7.1)
$ Billions$17.1 (VA $14.9)
$6.4
$7.8
Powertrain: $4.5BMotorparts: $3.3B
Federal-Mogul 2017 Revenues
Clean Air (CA): $6.2BRide Performance (RP): $1.8B Aftermarket (AM) $1.3B
Tenneco 2017 Revenues AM
AM
CA
AM
Plan to separate into two focused, industry-leading companies
2 0 1 7 P R O F O R M A R E V E N U E
AMRP segments will be reported as:• Aftermarket• Original Equipment
Driving Towards Realignment and Separation
10C O N F I D E N T I A L A N D P R O P R I E T A R Y
Next steps to complete spin:
• January 2019‒ CEOs and leadership teams named and in place‒ Reporting as Combined Tenneco, operating
internally as two separate companies
• Q1 2019 – SpinCo to be named at Q4 earnings
• Q2/Q3 2019 – SEC approval of Form 10 targeted
H2 2019 – expected separation into two publicly traded companies
New Tenneco –Powertrain Technology Company
• Driving progress toward cleaner, more efficient mobility
SpinCo –Aftermarket & Ride Performance Company
• Driving solutions enabling people to move more safely, efficiently and responsibly
SpinCoAftermarket and Ride Performance Company
Introducing Two Focused, Purpose-Built Companies
11
Unique strategic combination building upon the strength, depth and industry experience of the combined teams
With its world-leading stable of automotive brands ranging from the highest level of performance to the broadest everyday use, SpinCo is dedicated to helping drivers experience the perfect ride. As a global leader serving both manufacturers and the aftermarket, SpinCo is dedicated to help its customers innovate the ride experience in an emerging age of shared mobility and autonomous driving.
The new Tenneco combines the expertise of two companies to create a pure-play powertrain company dedicated to driving cleaner mobility around the globe. The company is committed to building more efficient, more powerful, more sophisticated engines and developing advanced systems to reduce emissions in traditional and hybrid applications. It will realize growth from increased emission regulations, hybridization and commercial truck and off-highway expansion opportunities.
New TennecoPowertrain Technology Company
Reporting Segments*• Motorparts (all AM business)• Ride Performance (all OE business)
Reporting Segments*• Clean Air• Powertrain
*Beginning with Q1 2019 financials
Significant Synergy PotentialAt Least $200M1 Earnings Synergies Expected Within 24 Months
12
Integration on track to achieve forecasted earnings and working capital synergies
Estimated costs to achieve of ~$70 million
1. Net of estimated public company costs.
($ in millions)
Estimated costs to achieve of ~$80 million
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)
Earnings Synergies• Reduction from 3 to 2 corporate structures
generates majority of G&A savings• Expect 75% earnings synergy run-rate within
one year of close
Working Capital Synergies• Additional one-time working capital synergies
expected of at least $250M• Expect 50% working capital synergy run-rate
within one year of close
Supply Chain
$35G&A and Engineering
$50
Sales and Go-To Market
$30
SpinCo –Aftermarket &
Ride Performance$115
Supply Chain
$40Sales, G&A and Engineering
$45
New Tenneco –Powertrain Technology
$85
Leverage and Financing Expectations
13
SpinCo financing activities on track, according to plan
Leverage Expectations
• Targeting Combined Tenneco net leverage* of ~2.5x by the end of 2019
• Net leverage expectation of future companies at separation (measured at end of 2019)
‒ Expect SpinCo around 3.0x; mid to long-term net leverage goal of 1.5x to 2.0x
‒ Expect New Tenneco around 2.3x; mid to long-term net leverage goal of 1.0x to 1.5x
SpinCo Financing Update
• Current credit facility and bonds will remain with New Tenneco
• Proceeds from SpinCo financing will be primarily used to reduce debt on New Tenneco
• SpinCo financing plan in Q2 2019‒ Bank facility consisting of revolver and
term loan(s)‒ Bond
* Leverage ratio is net debt/LTM Adjusted EBITDA
New Tenneco OverviewDriving Progress Toward Cleaner, More Efficient Mobility
15
2017 Pro Forma Revenue $10.7 Billion
Global pure-play powertrain supplier, positioned to capture significant opportunities
Catalytic Converters
Gasoline Particulate Filters Electronic Valve
Pistons
System Protection
Sealing / Heat Shields
Bearings
Ignition
Valves
Full Exhaust Systems
LEADING PORTFOLIO OF PRODUCTS & TECHNOLOGIESINVESTMENT APPEALS
• Pure play creates focus and specialty
• Positioned to capture opportunity from tightening emission standards and regulations
• Positioned to capture significant commercial truck and off-highway opportunity
• Strong cash generation potential provides attractive cash opportunity
GLOBAL FOOTPRINT
• ~50,000 global team members
• 151 manufacturing locations worldwide
• 22 globally networked technology centers
Diversified Business ProfileNew Tenneco – Powertrain Technology Company
16
Expected growth in CTOH & Industrial further diversifies the business profile
GM14.7%
Ford 12.7%
VW Group8.8%
Daimler 7.8%
FCA6.7%
Renault/Nissan4.3%
Tata Motors
3.8%
Toyota 3.6%
FAW3.3%
PSA Peugeot Citroen3.2%
Caterpillar 3.2%
SAIC 3.1%
BMW 2.6%
John Deere 2.2%
Cummins 1.7%
Other 18.3%
Top Customers2017 Pro Forma
Revenue
Light Vehicle
78%
CTOH & Industrial
22%
North America42%
South America2%
Europe38%
China13%
India 2%
Rest of AP 3%
Product Applications
Regions
2017Pro FormaRevenue
Top Platforms (Models)
6% VW MQB/PQ35 (Golf, Jetta, Audi A3 pass cars)
4% Ford T3/P558 HD (Super Duty truck)
4% GM K2XX HD (HD Silverado, Sierra trucks)
3% Ford T3/P552 LD (F-150 truck)
3% GM D2XX/Delta (Cruze pass car)
3% Daimler MFA (A and B class pass cars)
2% GM C1XX/Lambda (Acadia and Traverse SUVs)
2% Daimler MRA (E and C class pass cars)
2% GM K2XX LD (LD Silverado, Sierra trucks)
2% Land Rover PLA-D7u (Range Rover, RR Sport SUVs)
1% Jaguar PLA-D7a (XF and XS pass cars)
1% Ford C1 (Focus pass car)
1% FCA DS LD (Ram truck)
1% VW PQ25/26 (Polo pass car)
1% GM E2XX/Epsilon (Malibu, Lacrosse pass cars)
2017Pro FormaRevenue
Criteria PollutantsGreenhouse Gases / Fuel Economy FULL SYSTEM
EMISSION CONTROL
Complementary Portfolio Brings Unique Competitive Position
17
System capabilities enable better powertrain efficiency at a lower total system cost
F-M Engine Components Tenneco Hot End Components
Delivering an optimized trade-off between fuel economy and emission control from the cylinder to the tailpipe
MANAGES:• Friction / performance• Combustion temperature• Ignition timing
MANAGES:• Conversion efficiency• Thermal management• Precious metal loading
Regulation Driven
CO PM
NOx
Significant Ongoing Light Vehicle OpportunityNew Tenneco – Powertrain Technology Company
120
100
80
60
40
20
0
97
94%
2018
94
95%
2017
91
96% 79%
15%
6%
2024
110
83%
14%
4%
2023
109
85%
3%1%
2016
90
97%
ICE1
HEV
BEV
Global light vehicle sales volume (M)
2022
105
89%
116
66%
23%
11%
2028
115
70%
21%
9%
20272021
102
92%
2020
99
93%
5%1%
2019 2030
118
61%
26%
13%
2029
114
73%
19%
8%
2026
112
76%
18%
7%
2025
111
1. Includes mild hybrid electric vehicleNote: ICE = internal combustion engine, HEV = hybrid electric vehicle, BEV = battery electric vehicleSource: BCG estimates
• ICEs are a significant portion of vehicles moving forward
• Powertrain technology components support hybridization; increased complexity and content vs. ICE
• Increasing CO2 and criteria pollutant emissions regulations provide organic growth opportunities
• Content per vehicle increases in both cylinder and aftertreatment systems
87% HEV or ICE in 2030
ICE and hybrids expected to be 85%+ of vehicle sales through 2030 18
Significant Expansion OpportunityCommercial Truck and Off-Highway
19
CTOH regulated diesel volume to increase by nearly 6 million units by 2030, driven mainly by APAC
North America
South America
China537
504
Americas Asia Pacific2030 CTOH Production: 1.3 millionRegulated Diesel 2018: 57%Regulated Diesel 2030: 93%
2030 CTOH Production: 1.8 millionRegulated Diesel 2018: 62%Regulated Diesel 2030: 94%
2030 CTOH Production: 6.6 millionRegulated Diesel 2018: 15%Regulated Diesel 2030: 89%
EMEA
India
Japan/Korea
Commercial Truck
Off-Highway Engines
129133
757239
Europe
2030 Units (thousands)
Source: PSR April 2018 & Tenneco forecasts, Fuel type = Diesel, NG/LPG, excluding emissions compliance = None
1,180
460
1,0261,578 1,399
1,530
Asia Pacific production is 2x the Americas and EMEA regions combined
Opportunities to Capture Growth
20
Well positioned to further build out the product portfolio in an evolving powertrain market
Demand for improved engine
performance
• Better fuel economy
Tightening criteria pollutant
regulations
• Light vehicle• CTOH
Light vehicle hybridization
trends
• Volume growth
SUMMARY
Commercial truck and off-highway
expansion opportunities
21
Roger Wood• Chief Executive Officer• Over 30 years of experience in the
automotive industry with prior roles including president and Chief Executive Officer of Dana Holding Corporation and president of BorgWarner’s engine group
• Serves on Tenneco Board of Directors and Brunswick Corporation Board of Directors
Rainer Jueckstock• EVP, Powertrain Division• Global responsibility for all aspects of
the Powertrain business including sales, operations and finance
• More than 20 years experience in leadership positions with Federal-Mogul’s global operations, most recently Co-CEO of Federal-Mogul and CEO of Federal-Mogul Powertrain
Patrick Guo• EVP, Clean Air Division• Responsible for continuing Tenneco’s
regulatory-driven growth with light vehicle, commercial truck and off-highway customers worldwide
• Previously EVP, Asia Pacific, for both Clean Air and Ride Performance businesses
Americas37%
EMEA41% Asia Pacific
22%
~50,000 Global Employees % by Region
Ron Hundzinski• Chief Financial Officer, with oversight
of global financial operations• Previously served as Chief Financial
Officer and Executive Vice President of BorgWarner Inc. and has held leadership positions in finance at Emerson Electric, GKN and Meridian Automotive
Proven, Experienced Corporate Team New Tenneco* – Powertrain Technology Company
* Titles reflect our current expectations for the roles that each individual would fulfill, subject to the spinoff occurring and applicable approvals
New Tenneco Financial Profile
22
2019 guidance to be provided at Q4 earnings
1. Represents annual run rate synergies expected to be achieved within 24 months.
Pro Forma 2017 Revenue and Earnings
Pro Forma 2017
Total Revenue
($B)
Value-add Revenue
($B)Adjusted EBITDA
($M)
Tenneco Clean Air $6.2 $4.0 $533 13.2%
F-M Powertrain 4.5 4.5 493 11.0%
Powertrain Technology Company $10.7 $8.5 $1,025 12.1%
Earnings synergies (1) 85
Adjusted EBITDA with synergies $1,110 13.1%
SpinCo – A Driving Force to “Move” People
24
Elevating the Ride Experience
INVESTMENT APPEALS
• Global reach and scale
• System level capabilities for “around the wheel”
• Diversified business profile –60% AM / 40% OE
• Asia Pacific presence and positioning
• Leading AM product lines, brands and services
• OE market trend for ride differentiation technologies drives outsized growth opportunity
Brake pads
Upper control arm
Lower control arm
Strut assembly
Ball joint
Bushings
Inner and outer tie rodsHub assembly
Strut top mount
Linkages Brake rotors
Dampers (not shown)
COMPLETE “AROUND THE WHEEL” PRODUCT OFFERING
2017 Pro Forma Revenue $6.4 Billion
GLOBAL FOOTPRINT
• ~31,000 global team members
• 63 manufacturing locations worldwide
• 66 distribution centers
• 29 globally networked technology centers
SOLUTIONS PROVIDED FOR
VW Group7.2%
Advance Auto Parts
6.1%
NAPA/Alliance5.7%
Ford5.5%
O'Reilly Auto Parts4.9%
General Motors4.6%
ATR 3.2%
The Group2.6%
Daimler AG2.5%
FCA 2.2%
ADI 2.1%
Renault/Nissan 2.0%
AutoZone 2.0%Tata Motors 1.9%
PepBoys 1.9%
Other 45.6%
Top Customers2017 Pro Forma
Revenue
Diversified Business ProfileSpinCo – Aftermarket and Ride Performance Company
25
Diversified business profile with nearly 60% aftermarket
Light Vehicle
37%
Aftermarket56%
CTOH7%
North America
51%
South America4%
Europe33%
China7%
India 3%
Rest of AP2%
Product Applications
Regions
2017Pro Forma Revenue
2017Pro Forma Revenue
Top Platforms (Models)
4% VW MQB/PQ35 (Golf, Jetta, Audi A3 pass cars)
2% Ford C1 (Focus, Escape pass cars)
2% GM K2XX LD (Silverado and Sierra trucks)
1% GM E2XX/Epsilon (Malibu pass car)
1% Jaguar PLA-D7a (XF pass car)
1% VW MLB B (Audi A4 pass car)
1% Ford T3/P558 HD (Super Duty truck)
1% FCA Small/SUSW (Jeep Compass SUV)
1% VW PQ75 (Transporter van)
<1% Suzuki Motor B (Swift, Baleno pass cars)
<1% Daimler NCV2 (Vito van)
<1% BMW L7 (2 and 4 Series pass cars)
<1% VW P25/26 (Polo pass car)
<1% Ford C2 (Escort pass car)
<1% Geely SPA (V90 pass car, XC90 SUV)
Accelerating Asia Pacific GrowthSignificant Growth Opportunity for Both AM and OE
26
• Combined strong “house of brands” expected to capture growth in China‒ Shared investments in salesforce & distribution
‒ Product line & coverage
‒ Combined brand power & OE pedigree
‒ Wear and tear products (e.g. brake pads) can provide earlier entry into market
• Investing for growth in China through brand building, distributor development and supply chain footprint
1950 1960 1970 1980 1990 2000 2010 2020 2025 2030
Global Vehicles in Operation (VIO)Unprecedented growth expected over next 15 yearsled by China
Source: OCIA, Frost & Sullivan
Bringing market-leading capabilities to new, high-growth markets
Well-positioned for growth in China
Aftermarket – Motorparts Segment Original Equipment – Ride Performance Segment
China forecast to be largest AM market by 2025
• Leverage global “around the wheel” product portfolio, including advanced suspension as the market matures
• Expand manufacturing presence and capabilities to meet market demand
‒ Competitive supply chain footprint‒ Continued investment for better than end
market growth
China and India light vehicle growth opportunity
Motorparts Division: Leading AM Product Lines, Brands and Services
27
Training and ServicesChassis and BrakesAround the Wheel Coverage
Underhood and MaintenanceEngine to Tailpipe Solutions
Global multi-line, multi-brand product and service portfolio
Brands that Elevate the Ride Experience for Aftermarket Installers and Consumers
28
PREMIER AFTERMARKET “HOUSE OF BRANDS” PERFORMANCE SOLUTIONS AND TECHNOLOGY
High performance solutions delivered through technology and performance brands, including
Monroe Intelligent Suspension and Öhlins
Products Position• Shocks and struts• Suspension systems #1 Globally
• Steering, hubs• Driveline
#1 North America#3 EMEA
• Brake pads, shoes, linings• Rotors and drums #1 North America
• Gaskets• Seals #1 Globally
• Underhood service• Ignition #3 Globally
• Brake pads, shoes, linings #2 EMEA
• Emission control products #1 NA & EMEA
• Suspension links, bushings, mounts, exhaust isolators
• Shocks and struts#1 South America
Built on more than a century of brand strength – tailoring solutions to markets and customers
The Ride Performance division helps drivers experience the perfect ride, delivering advanced suspension technologies that offer performance, comfort and the power to differentiate vehicles.
Ride Performance Division: Elevating the OE Ride Experience
29
NVH Performance MaterialsSpinCo offers a suite of noise vibration and harshness (NVH) solutions that are critical to electric vehicle development.
Conventional Ride ControlA global leader in conventional suspension solutions, SpinCosells more than 75 million OE shocks and struts globally.
Advanced SolutionsMonroe® Intelligent Suspension products meet the growing demand from manufacturers and consumers for advanced suspension systems.
Scalable architecture
Advanced Suspension Technologies
BrakingSpinCo offers one of the broadest product portfolios of friction products in the market, including solutions for zero-copper friction materials.
Performance TechnologiesPremium OE automotive and motorsports performance products that offer enhanced portfolios in the broader mobility market.
External valves
Internal valves
Capitalizing on OE Secular Trends –Intelligent Suspension, Autonomous Driving and Mobility
30
25% revenue CAGR opportunity for advanced suspension growth through 202530Source: IHS database and Tenneco analysis
Increasing demand for advanced suspension technologies to differentiate ride• Expect advanced suspension to grow from 2% to more than 15% of LV production by 2025,
representing >40% of available market in 2025
• Autonomous driving trend drives additional opportunities
RID
E P
ERFO
RM
AN
CE
More than6xAC TIVE S US PENSION
Average4xS EMI-ACTIVE S US PENSION
$50-$60CON VENTIONAL S US PENSION
A segment F segment
Content per Vehicle
Proven, Experienced Executive Leadership TeamSpinCo* – Aftermarket and Ride Performance Company
31
Dr. Ben Patel• SVP and Chief Technology
Officer• Responsible for developing
the global technology and product leadership strategy
• Joined Tenneco from GE, serving in leadership roles as chemist and senior scientist
Brad Norton• EVP and President, Ride Performance• Leads sales and operations for global
OE ride performance business• More than 25 years global automotive
experience in OE and aftermarket, most recently as CEO of Federal-Mogul Motorparts
Ernie Keith• SVP and Chief Supply Chain
Officer• Responsible for supply
chain global excellence• Significant experience with
global companies with complex supply chain organizations
Scott Usitalo• SVP and Chief Marketing Officer• Leads brand and marketing
strategies for global business• More than 30 years of brand
marketing experience, most recently with The Kimberly-Clark Company and previously in global marketing roles with Proctor & Gamble
Americas53%
EMEA34%
Asia Pacific13%
~31,000 Global Team Members % by Region
Our Driving Force is Our People
Brian Kesseler• Chief Executive Officer, previously
Chief Operating Officer of Tenneco• Distinguished career within the
automotive industry; prior roles include former president of Johnson Controls Power Solutions with a focus on aftermarket
• Serves on Tenneco Board of Directors
Jason Hollar• EVP and Chief Financial Officer • Previously served as Chief
Financial Officer of Sears Holdings Corporation, and vice president, finance of Delphi Automotive’s powertrain systems division
* Titles reflect our current expectations for the roles that each individual would fulfill, subject to the spinoff occurring and applicable approvals
SpinCo Financial Profile
32
2019 guidance to be provided at Q4 earnings
1. Represents annual run rate synergies expected to be achieved within 24 months.
Pro Forma 2017 Revenue and Earnings
Pro Forma 2017Total
Revenue ($B) Adjusted EBITDA ($M)
TEN Ride Performance $1.8 $142 7.9%
TEN Aftermarket 1.3 193 15.4%
F-M Motorparts 3.3 260 7.9%
Aftermarket & Ride Performance Company $6.4 $595 9.3%
Earnings synergies (1) 115
Adjusted EBITDA with synergies $710 11.1%
Creating Two Focused, Purpose-Built Companies
34
Unlocking value and creating a compelling investment opportunity
INVESTMENT APPEALS
• Global reach and scale
• System level capabilities for “around the wheel”
• Diversified business profile – 60% AM / 40% OE
• Asia Pacific presence and positioning
• Leading AM product lines, brands and services
• OE market trend for ride differentiation technologies drives outsized growth opportunity
INVESTMENT APPEALS
• Pure play creates focus and specialty
• Positioned to capture opportunity from tightening emission standards and regulations
• Positioned to capture significant commercial truck and off-highway opportunity
• Strong cash generation potential provides attractive cash opportunity
SpinCoAftermarket and Ride Performance Company
New TennecoPowertrain Technology Company
Financial Results Disclaimer
36
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*”), 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.
Adjusted EBIT as a Percentage of Value-add Revenue –Reconciliation of Non-GAAP Results
37
(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 thecompany'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.
$ 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%
Adjusted Earnings Per Share –Reconciliation of Non-GAAP Results
38
(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.
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
$ Millions
2012Dec 31
2013Dec 31
2014Dec 31
2015Dec 31
2016Dec 31
2017Dec 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)
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%
5 year Average Invested Capital $ 1,785
5 years Average tax effected Adjusted EBIT 407
5 year Average ROIC 22.8%
Return on Invested Capital –Reconciliation of Non-GAAP Results
39
(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.
$ Millions, Unaudited
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.
Adjusted EBITDA –Reconciliation of Non-GAAP Results
40
$ Millions Year Ended December 31, 2017Tenneco Federal Mogul Pro Forma
Net Income $274 $361 $635Interest Expense 73 148 221Income 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 106Pension and post retirement charges 13 - 13Goodwill and intangible asset impairment 11 11 22Antitrust settlement accrual 132 - 132Warranty settlement 7 - 7Gain on sale of unconsolidated JV (5) - (5)Loss on debt extinguishment - 4 4Gain 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 $1,620Powertrain $493Motorparts $260
Reallocation of the Other Segment –Reconciliation of Non-GAAP Results
41
Year Ended December 31, 2017
$ Millions Clean Air Ride Performance Aftermarket Other Total
Total Revenue $ 6,216 $ 1,807 $ 1,251 - $ 9,274Less: Clean Air Substrates (2,187) - - - (2,187)
Value-Add Revenue $ 4,029 $ 1,807 $ 1,251 - $ 7,087
EBIT $ 421 $ 61 $ 178 $ (243) $ 417 Restructuring and related expenses 29 29 10 4 72 Antitrust settlement accrual - - - 132 132 Warranty settlement - 7 - - 7 Gain on sale of unconsolidated JV - - - (5) (5)Goodwill impairment - 7 4 - 11 Pension charges / Stock vesting - - - 13 13
Adjusted EBIT $ 450 $ 104 $ 192 ($99) $ 647Plus: D&A 141 64 19 - 224Less: Restructuring adjustments included in D&A (2) (1) - - (3)
Adjusted EBITDA $ 589 $ 167 $ 211 ($99) $ 868Less: Allocation of Other segment (56) (25) (18) 99 -
Adjusted EBITDA (non-GAAP Financial Measure)1 $ 533 $ 142 $ 193 - $ 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.
top related