May 9, 2019 SOURCE: PR NewsWire
Tenneco Reports First Quarter 2019 Results
LAKE FOREST, Ill., May 9, 2019 /PRNewswire/ -- Tenneco Inc. (NYSE: TEN) reported first quarter 2019 revenue** of $4.5 billion, a 74% increase versus $2.6 billion a year ago. On a constant currency basis, organic revenue grew 4% and net revenue growth from acquisitions and divestitures was 75%, while the impact of exchange rates was negative 5%. On a constant currency pro forma basis, total revenue increased 1% versus last year, while light vehicle industry production declined 7%. Value add revenue for the first quarter was $ 3.8 billion.
The company reported a net loss for first quarter 2019 of $117 million, or a loss of $1.44 per diluted share. First quarter 2018 net income** was $60 million, or $1.17 per diluted share. First quarter 2019 adjusted net income was $42 million, or 52-cents per diluted share, compared with $83 million, or $1.62 per diluted share last year.(**)
First quarter EBIT (earnings before interest, taxes and noncontrolling interests) was $(24) million, versus $122 million last year. EBIT as a percent of revenue was -0.5% versus 4.7% last year.
First quarter adjusted EBITDA was $327 million versus $212 million last year. Adjusted EBITDA as a percent of value-add revenue was 8.7% compared with 11.0% a year ago. In addition to the inclusion of the acquired Federal-Mogul business, the comparison includes the unfavorable mix impact on earnings of weaker aftermarket and China OE volumes and related operational inefficiencies.
Cash used by operations was $150 million, excluding proceeds from the deferred purchase price of factored receivables of $60 million. Capital investments in the quarter were $173 million. During the quarter, the company returned $20 million to shareholders through a dividend payment of 25-cents per common share.
"Tenneco delivered organic revenue growth that outpaced industry production by eight percentage points, driven by higher light vehicle, commercial truck and off-highway revenues," said Roger Wood, co-CEO Tenneco. "While lower aftermarket sales and China volume declines impacted earnings in the quarter, we are confident in the strength of our growth drivers and actions underway to reduce cost and improve cash generation."
OUTLOOK
Second Quarter Outlook
Tenneco expects second quarter revenue in the range of $4.45 billion to $4.55 billion, about flat with the first quarter. Further, the company expects its second quarter adjusted EBITDA to be in the range of $375 - $395 million, nearly a 20% sequential improvement from the prior quarter at the range midpoint, with aftermarket revenues returning to expected levels and the ramping up of synergies and other initiatives.
Full year 2019
The company has revised its 2019 full year outlook, and now expects total revenues in the range of $17.7 billion to $18.1 billion, including 3% pro forma organic revenue growth, and outpacing light vehicle industry production* by 6 percentage points.
The following table summarizes the full year guidance.
Total revenue
$17.7-$18.1B
Value-add revenue
$14.95-$15.35B
Adjusted EBITDA
$1,500 -$1,620M
VA Adjusted EBITDA margin 10.0-10.6%
Pro forma organic revenue growth 3%
Currency translation impact -2%
---
See "About revenue and EBITDA
guidance" below for further
information about revenue
guidance and forecasted
performance measures.
Leverage and Spin Update
The company anticipates year-end 2019 leverage (net debt/adjusted EBITDA) to be approximately 3.3x, based on the midpoint of its adjusted EBITDA guidance. As a result, and due in part to the current weak market environment, the company has revised its timing target for the separation of the business into two standalone companies, and now expects the DRiV(TM) spinoff to occur mid-2020. The additional time will allow the two new organizations to align and stabilize business processes and systems, solidify margin and cash flow performance metrics, and strengthen their balance sheets.
"We expect revenue to continue to outperform industry production in the second quarter and deliver sequential improvements in profitability," said Brian Kesseler, co- CEO. "The global market and technology trends driving demand remain positive, and customers are enthusiastic about the two new companies' unique capabilities to deliver value through tailored solutions. We continue to believe significant value can be unlocked by separating the current Tenneco portfolio into two, purpose-built businesses and remain committed to the separation as soon as favorable conditions exist."
*Source: IHS Markit April 2019 global light vehicle production forecast and Tenneco estimates.
**Financial results for the first quarter of 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended March 31, 2019.
Attachment 1
Statements of Income - 3 Months
Balance Sheets
Statements of Cash Flows - 3 Months
Attachment 2
Reconciliation of GAAP to Non-GAAP Earnings Measures - 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - 3 Months
Reconciliation of Non-GAAP Measures - Debt Net of Cash/Pro Forma Adjusted LTM EBITDA including noncontrolling interests
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - Original Equipment and Aftermarket Revenue - 3 Months
Reconciliation of GAAP Revenue and Earnings to Non-GAAP Revenue and Earnings Measures - 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - Original Equipment Commercial Truck, Off-Highway, Industrial and other revenues - 3 Months
Reconciliation of GAAP revenue to pro forma revenue and Non-GAAP earnings measures - 2018 quarterly
Reconciliation of GAAP revenue to pro forma revenue and Non-GAAP earnings measures - 2018 and 2017 annual
Division Level Q2 and FY 2019 Outlook
CONFERENCE CALL
The company will host a conference call on Thursday, May 9, 2019 at 9:30 a.m. ET. The dial-in number is 833-366-1121 (domestic) or 412-902-6733 (international). The passcode is: Tenneco Inc. The call and accompanying slides will be available on the financial section of the Tenneco web site at www.investors.tenneco.com. A recording of the call will be available one hour following completion of the call on May 9, 2019 through May 16, 2019. To access this recording, dial 877-344-7529 (domestic) or 412-317-0088 (international) or 855 669-9658 (Canada). The replay access code is 10130965. The purpose of the call is to discuss the company's operations for the first fiscal quarter 2019, as well as provide updated information regarding matters impacting the company's outlook. A copy of the press release is available on the financial and news sections of the Tenneco web site.
ANNUAL MEETING
The Tenneco Board of Directors has scheduled the company's annual meeting of shareholders for Wednesday, May 15, 2019 at 1:00 p.m. ET. The meeting will be held at the Detroit Foundation Hotel, 250 W Larned Street, Detroit, Michigan. The record date for shareholders eligible to vote at the meeting is March 18, 2019.
About Tenneco
Headquartered in Lake Forest, Illinois, Tenneco is one of the world's leading designers, manufacturers and marketers of Aftermarket, Ride Performance, Clean Air and Powertrain products and technology solutions for diversified markets, including light vehicle, commercial truck, off-highway, industrial and the aftermarket, with 2018 revenues of $11.8 billion and approximately 81,000 employees worldwide. On October 1, 2018, Tenneco completed the acquisition of Federal-Mogul, a leading global supplier to original equipment manufacturers and the aftermarket. Additionally, the company expects to separate its businesses to form two new, independent companies, an Aftermarket and Ride Performance company as well as a new Powertrain Technology company.
About DRiV(TM) - the future Aftermarket and Ride Performance Company
Following the expected separation of Tenneco to form two new, independent companies, an Aftermarket and Ride Performance company (DRiV(TM)) as well as a new Powertrain Technology company, DRiV will be one of the largest global multi-line, multi-brand aftermarket companies, and one of the largest global OE ride performance and braking companies. DRiV's principal product brands will feature Monroe®, Öhlins®, Walker®, Clevite®Elastomers, MOOG®, Fel-Pro®, Wagner®, Ferodo®, Champion® and others. DRiV would have 2018 pro-forma revenues of $6.4 billion, with 54% of those revenues from aftermarket and 46% from original equipment customers.
About the new Tenneco - the future Powertrain Technology company
Following Tenneco's expected separation to form two new, independent companies, an Aftermarket and Ride Performance company (DRiV(TM)), as well as a new Powertrain Technology company, the new Tenneco will be one of the world's largest pure-play powertrain companies serving OE markets worldwide with engineered solutions addressing fuel economy, power output, and criteria pollution requirements for gasoline, diesel and electrified powertrains. The new Tenneco would have 2018 pro-forma revenues of $11.4 billion, serving light vehicle, commercial truck, off-highway and industrial markets.
About Revenue and EBITDA Guidance
Revenue estimates and other forecasted information in this release are based on OE manufacturers' programs that have been formally awarded to the company; programs where Tenneco is highly confident that it will be awarded business based on informal customer indications consistent with past practices; and Tenneco's status as supplier for the existing program and its relationship with the customer. This information is also based on anticipated vehicle production levels and pricing, including precious metals pricing and the impact of material cost changes. Unless otherwise indicated, our methodology does not attempt to forecast currency fluctuations, and accordingly, reflects constant currency. Certain elements of the restructuring and related expenses, legal settlements and other unusual charges we incur from time to time cannot be forecasted accurately. In this respect, we are not able to reconcile forecasted EBITDA (and the related margins) on a forward-looking basis to GAAP measures without unreasonable efforts on account of these factors and the difficulty in predicting GAAP revenues (for purposes of a margin calculation) due to variability in production rates and volatility of precious metal pricing in the substrates that we pass through to our customers. For certain additional assumptions upon which these estimates are based, see the slides accompanying the May 9, 2019 webcast, which will be available on the financial section of the Tenneco website at www.investors.tenneco.com.
About Forward-Looking Statements
This press release contains forward-looking statements. The words "may," "will," "believe," "should," "could," "plan," "expect," "anticipate," "estimate," and similar expressions (and variations thereof), identify these forward-looking statements. These forward-looking statements are based on the current expectations of the company (including its subsidiaries). Because these statements involve risks and uncertainties, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include:
-- general economic, business and market conditions;
-- our ability to source and procure needed materials, components and other
products and services in accordance with customer demand and at
competitive prices;
-- the cost and outcome of existing and any future claims, legal
proceedings or investigations, including, but not limited to, any of the
foregoing arising in connection with the ongoing global antitrust
investigation, product performance, product safety or intellectual
property rights;
-- changes in consumer demand, prices and our ability to have our products
included on top selling vehicles, including any shifts in consumer
preferences away from historically higher margin products for our
customers and us, to other lower margin vehicles, for which we may or
may not have supply arrangements, and the cyclical nature of the global
vehicle industry, including the performance of the global aftermarket
sector;
-- changes in consumer demand for our OE or aftermarket products, or
changes in automotive and commercial vehicle manufacturers' production
rates and their actual and forecasted requirements for our products, due
to difficult economic conditions and/or regulatory or legal changes
affecting internal combustion engines and/or aftermarket products;
-- our dependence on certain large customers, including the loss of any of
our large original equipment manufacturer ("OE") customers (on whom we
depend for a substantial portion of our revenues), or the loss of market
shares by these customers if we are unable to achieve increased sales to
other OE customers or any change in customer demand due to delays in the
adoption or enforcement of worldwide emissions regulations;
-- new technologies that reduce the demand for certain of our products or
otherwise render them obsolete;
-- our ability to introduce new products and technologies that satisfy
customers' needs in a timely fashion;
-- the overall highly competitive nature of the automotive and commercial
vehicle parts industries, and any resultant inability to realize the
sales represented by our awarded book of business (which is based on
anticipated pricing and volumes over the life of the applicable
program);
-- changes in capital availability or costs, including increases in our
cost of borrowing (i.e., interest rate increases), the amount of our
debt, our ability to access capital markets at favorable rates, and the
credit ratings of our debt;
-- our ability to comply with the covenants contained in our debt
instruments;
-- our working capital requirements;
-- our ability to successfully execute cash management and other cost
reduction plans, and to realize the anticipated benefits from these
plans;
-- risks inherent in operating a multi-national company, including economic
conditions, such as currency exchange and inflation rates, and political
conditions in the countries where we operate or sell our products,
adverse changes in trade agreements, tariffs, immigration policies,
political stability, and tax and other laws, and potential disruptions
of production and supply;
-- increasing competition from lower cost, private-label products;
-- damage to the reputation of one or more of our leading brands;
-- the effect of improvements in automotive parts on aftermarket demand for
some of our products;
-- industrywide strikes, labor disruptions at our facilities or any labor
or other economic disruptions at any of our significant customers or
suppliers or any of our customers' other suppliers;
-- developments relating to our intellectual property, including our
ability to changes in technology;
-- costs related to product warranties and other customer satisfaction
actions;
-- the failure or breach of our information technology systems, including
the consequences of any misappropriation, exposure or corruption of
sensitive information stored on such systems and the interruption to our
business that such failure or breach may cause;
-- the effect of consolidation among vehicle parts suppliers and customers
on our ability to compete in the highly competitive automotive and
commercial vehicle supplier industry;
-- changes in distribution channels or competitive conditions in the
markets and countries where we operate;
-- the evolution towards autonomous vehicles and car and ride sharing;
-- customer acceptance of new products;
-- our ability to successfully integrate, and benefit from, any
acquisitions that we complete;
-- our ability to effectively manage our joint ventures and other
third-party relationships;
-- the potential impairment in the carrying value of our long-lived assets
and goodwill, other intangible assets or our deferred tax assets;
-- the negative effect of fuel price volatility on transportation and
logistics costs, raw material costs, discretionary purchases of vehicles
or aftermarket products and demand for off-highway equipment;
-- increases in the costs of raw materials or components, including our
ability to successfully reduce the effect of any such cost increases
through materials substitutions, cost reduction initiatives, customer
recovery and other methods;
-- changes by the Financial Accounting Standards Board or the Securities
and Exchange Commission of authoritative generally accepted accounting
principles or policies;
-- changes in accounting estimates and assumptions, including changes based
on additional information;
-- any changes by the International Organization for Standardization (ISO)
or other such committees in their certification protocols for processes
and products, which may have the effect of delaying or hindering our
ability to bring new products to market;
-- the effect of the extensive, increasing and changing laws and
regulations to which we are subject, including environmental laws and
regulations, which may result in our incurrence of environmental
liabilities in excess of the amount reserved or increased costs or loss
of revenues relating to products subject to changing regulation;
-- potential volatility in our effective tax rate;
-- disasters, such as fires, earthquakes and flooding, and any resultant
disruptions in the supply or production of goods or services to us or by
us, in demand by our customers or in the operation of our system,
disaster recovery capabilities or business continuity capabilities;
-- acts of war and/or terrorism, as well as actions taken or to be taken by
the United States and other governments as a result of further acts or
threats of terrorism, and the effect of these acts on economic,
financial and social conditions in the countries where we operate;
-- pension obligations and other postretirement benefits;
-- our hedging activities to address commodity price fluctuations; and
-- the timing and occurrence (or non-occurrence) of other transactions,
events and circumstances which may be beyond our control.
In addition, important factors related to the acquisition of Federal-Mogul LLC ("Federal-Mogul") and the planned separation of our company into a powertrain technology company and an aftermarket and ride performance company that could cause actual results to differ materially from the expectations reflected in the forward-looking statements, including:
-- the risk that the benefits of the acquisition of Federal-Mogul,
including synergies, may not be fully realized or may take longer to
realize than expected;
-- the risk that the acquisition of Federal-Mogul may not advance our
business strategy;
-- the risk that we may experience difficulty integrating or separating
employees or operations;
-- the risk that the transaction may have an adverse effect on existing
arrangements with us, including those related to transition,
manufacturing and supply services and tax matters, our ability to retain
and hire key personnel or our ability to maintain relationships with
customers, suppliers or other business partners;
-- the risk that the company may not complete a separation of its
powertrain technology business and its aftermarket and ride performance
business (or achieve some or all of the anticipated benefits of such a
separation);
-- the risk that the combined company and each separate company following
the spin-off will underperform relative to our expectations;
-- the ongoing transaction costs and risk that we may incur greater costs
following the spin-off; and
-- the risk that the spin-off is determined to be a taxable transaction.
The company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release. Additional information regarding these risk factors and uncertainties is, and will be, 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, 2018.
Investor inquiries:
Media inquiries:
Linae Golla
Bill Dawson
847-482-5162
847-482-5807
lgolla@tenneco.com
bdawson@tenneco.com
Rich Kwas
Steve Blow
248-849-1340
517-262-0655
rich.kwas@federalmogul.com
sblow@tenneco.com
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
---
THREE MONTHS ENDED MARCH 31,
(Millions except per share amounts)
2019
2018*
Net sales and operating revenues:
Clean Air - Value-add revenues $1,073 $1,104
Clean Air - Substrate sales 706 652
Powertrain 1,175
Motorparts 797 312
Ride Performance 733 513
Total net sales and operating revenues $4,484 $2,581
Costs and expenses:
Cost of sales 3,864
(e) (g) 2,193
(k)
Selling, general and administrative 316
(b) (c) 151
(j)
Depreciation and amortization 169
(a) 60
Engineering, research, and development 92 40
Restructuring charges and asset impairments 24
(a) (d) 12
(i)
Goodwill impairment charge 60
(f)
Total costs and expenses 4,525 2,456
Other expense (income):
Non-service pension and other postretirement benefit costs (credits) 2 3
Equity in (earnings) losses of nonconsolidated affiliates, net of tax (16)
Other expense (income), net (3)
Total expense (income) (17) 3
Earnings (Loss) before interest expense, income taxes, and noncontrolling interests:
Clean Air 94
(a) (d) (g) 120
(i)
Powertrain 54
(a) (e)
Motorparts 9
(a) (d) (e) (g) 39
(i)
Ride Performance (81)
(a) (d) (e) (f) 7 (i) (k)
Corporate (100)
(a) (b) (c) (44)
(j)
Total earnings (loss) before interest expense, income taxes, and noncontrolling interests (24) 122
Interest expense 81
(l) 23
(l)
Earnings (Loss) before income taxes and noncontrolling interests (105) 99
Income tax expense -
(h) 25
Net income (loss) (105) 74
Less: Net income attributable to noncontrolling interests 12 14
Net income (loss) attributable to Tenneco Inc. $(117) $60
Weighted average common shares outstanding:
Basic 80.9 51.2
Diluted 80.9 51.5
Earnings (Loss) per share of common stock:
Basic $(1.44) $1.17
Diluted $(1.44) $1.17
* Financial results for 2018 have
been revised for certain
immaterial adjustments, which will
be further discussed in Tenneco's
Form 10-Q for the quarter ended
March 31, 2019.
(a) Includes restructuring and
related charges of $20 million
pre-tax, $16 million after tax
and noncontrolling interests or
$0.19 per diluted share. Of the
amount, $17 million is recorded in
restructuring charges and asset
impairments and $3 million is
recorded in depreciation and
amortization. $4 million is
recorded in Clean Air, $1 million
is recorded in Powertrain, $1
million is recorded in Motorparts,
$13 million is recorded in Ride
Performance and $1 million is
recorded in Corporate.
(b) Includes costs related to cost
reduction initiatives of $8
million pre-tax, $6 million after
tax or $0.07 per diluted share.
(c) Includes acquisition and
expected spin costs of $40 million
pre-tax, $32 million after tax or
$0.39 per diluted share.
(d) Includes costs to achieve
synergies of $7 million pre-tax,
$6 million after tax or $0.08 per
diluted share. $1 million is
recorded in Clean Air, $3 million
is recorded in Motorparts and $3
million is recorded in Ride
Performance.
(e) Includes purchase accounting
adjustments of $41 million pre-
tax, $34 million after tax or
$0.42 per diluted share, of which
$2 million is recorded in
Powertrain, $36 million is
recorded in Motorparts and $3
million is recorded in Ride
Performance.
(f) Represents goodwill impairment
charges of $60 million pre-tax,
$60 million after tax or $0.74 per
diluted share.
(g) Includes process harmonization
charge of $9 million pre-tax, $7
million after tax or $0.09 per
diluted share, of which $4 million
is recorded in Clean Air and $5
million is recorded in Motorparts.
(h) Includes net tax benefit of $2
million or $0.02 per diluted share
for discrete tax adjustments
recognized in the period.
(i) Includes restructuring and
related charges of $12 million
pre-tax, $8 million after tax and
noncontrolling interests or $0.16
per diluted share. $1 million is
recorded in Clean Air, $2 million
is recorded in Motorparts and $9
million is recorded in Ride
Performance.
(j) Includes acquisition costs of
$13 million pre-tax, $11 million
after tax or $0.21 per diluted
share.
(k) Includes warranty charge of $5
million pre-tax, $4 million after
tax or $0.08 per diluted share.
(l) Financing charges on sale of
receivables are included in
interest expense.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
Unaudited
---
(Millions)
March 31, 2019
December 31, 2018
Assets
Cash and cash equivalents $357 $697
Restricted cash 6 5
Receivables, net 2,843 (a) 2,572
(a)
Inventories 2,266 2,245
Prepayments and other current assets 553 590
Other noncurrent assets 4,070 3,622
Property, plant and equipment, net 3,519 3,501
Total assets $13,614 $13,232
Liabilities and Shareholders' Equity
Short-term debt, including current maturities of long-term debt $159 $153
Accounts payable 2,861 2,759
Accrued compensation and employee benefits 363 343
Accrued income taxes 30 64
Accrued expenses and other current liabilities 992 1,001
Long-term debt 5,417 (b) 5,340
(b)
Deferred income taxes 110 88
Pension and postretirement benefits 1,138 1,167
Deferred credits and other liabilities 564 263
Redeemable noncontrolling interests 153 138
Tenneco Inc. shareholders' equity 1,628 1,726
Noncontrolling interests 199 190
Total liabilities, redeemable noncontrolling interests and equity $13,614 $13,232
March 31, 2019
December 31, 2018
(a)
Accounts receivable net of:
Accounts receivable outstanding and derecognized $1,124 $1,011
March 31, 2019
December 31, 2018
(b)
Long-term debt composed of:
Revolver Borrowings $132
$ -
LIBOR plus 1.75% Term Loan A due 2019 through 2023 1,670 1,691
LIBOR plus 2.75% Term Loan B due 2019 through 2025 1,628 1,629
$225 milion of 5.375% Senior Notes due 2024 222 222
$500 million of 5.000% Senior Notes due 2026 493 493
415 million 4.875% Euro Fixed Rate Notes due 2022 483 496
300 million of Euribor plus 4.875% Euro Floating Rate Notes due 2024 341 349
350 million of 5.000% Euro Fixed Rate Notes due 2024 417 427
Other Debt, primarily foreign instruments 104 106
5,490 5,413
Less: maturities classified as current 73 73
Total long-term debt $5,417 $5,340
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
Unaudited
---
(Millions)
Three Months Ended March 31,
2019
2018*
---
Operating Activities
Net income (loss) $(105) $74
Adjustments to reconcile net income (loss) to cash used by operating activities:
Goodwill impairment charge 60
Depreciation and amortization 169 60
Deferred income taxes (8) (1)
Stock-based compensation 7 5
Restructuring charges and asset impairments, net of cash paid (14) (4)
Change in pension and other postretirement benefit plans (17)
Equity in earnings of nonconsolidated affiliates (16)
Cash dividends received from nonconsolidated affiliates 15
Loss (gain) on sale of assets (1)
Changes in operating assets and liabilities:
Receivables (312) (220)
Inventories 11 (32)
Payables and accrued expenses 157 185
Accrued interest and income taxes (65) (4)
Other assets and liabilities (31) (63)
Net cash used by operating activities (150)
Investing Activities
Proceeds from sale of assets 1 2
Net proceeds from sale of business 22
Cash payments for property, plant and equipment (210) (89)
Acquisition of business (net of cash acquired) (158)
Proceeds from deferred purchase price of factored receivables 60 34
Other 2
Net cash used by investing activities (283) (53)
Financing Activities
Proceeds from term loans and notes 28 6
Repayments of term loans and notes (64) (13)
Borrowings on revolving lines of credit 2,119 1,267
Payments on revolving lines of credit (1,981) (1,189)
Issuance (repurchase) of common shares (2) (2)
Cash dividends (20) (13)
Net increase (decrease) in bank overdrafts (1) (4)
Other (3) (30)
Distributions to noncontrolling interest partners (1)
Net cash provided by financing activities 75 22
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash 19 3
Decrease in cash, cash equivalents and restricted cash (339) (28)
Cash, cash equivalents and restricted cash, beginning of period 702 318
Cash, cash equivalents and restricted cash, end of period $363 $290
Supplemental Cash Flow Information
Cash paid during the period for interest $74 $23
Cash paid during the period for income taxes, net of refunds 43 25
Non-cash Investing Activities
Period end balance of accounts payables for property, plant and equipment $101 $55
Deferred purchase price of receivables factored in the period 58 37
* Financial results for 2018
have been revised for certain
immaterial adjustments, which
will be further discussed in
Tenneco's Form 10-Q for the
quarter ended March 31, 2019.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1)TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
---
(Millions except per share amounts)
Q1 2019
Q1 2018*
--- ---
Net income
Per Share
EBIT
EBITDA (3)
Net income
Per Share
EBIT
EBITDA (3)
(loss) attributable
attributable to Tenneco
to Tenneco Inc.
Inc.
Earnings (Loss) Measures $(117) $(1.44) $(24) $145 $60 $1.17 $122 $182
Adjustments:
Restructuring and related expenses(4) 16 0.19 20 17 8 0.16 12 12
Cost reduction initiatives (5) 6 0.07 8 8 -
Acquisition and spin costs (6) 32 0.39 40 40 11 0.21 13 13
Costs to achieve synergies (7) 6 0.08 7 7 -
Purchase accounting adjustments (8) 34 0.42 41 41 -
Goodwill impairment charge (9) 60 0.74 60 60 -
Process harmonization (10) 7 0.09 9 9 -
Warranty charge (11) 4 0.08 5 5
Net tax adjustments (2) (0.02) -
Adjusted Net income, EPS, EBIT, and EBITDA $42 $0.52 $161 $327 $83 $1.62 $152 $212
Q1 2019
---
Global Segments
Clean Air
Powertrain
Motorparts
Ride
Total
Corporate
Total
Performance
Net loss attributable to Tenneco Inc. $(117)
Net income attributable to noncontrolling interests 12
Net loss (105)
Income tax expense
Interest expense 81
EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests $94 $54 $9 $(81) $76 $(100) $(24)
Depreciation and amortization 37 59 36 36 168 1 169
Total EBITDA including noncontrolling interests (3) $131 $113 $45 $(45) $244 $(99) $145
Restructuring and related expenses(4) 4 1 1 10 16 1 17
Cost reduction initiatives (5) 8 8
Acquisition and spin costs (6) 40 40
Costs to achieve synergies (7) 1 3 3 7 7
Purchase accounting adjustments (8) 2 36 3 41 41
Goodwill impairment charge (9) 60 60 60
Process harmonization (10) 4 5 9 9
Adjusted EBITDA $140 $116 $90 $31 $377 $(50) $327
Q1 2018*
Global Segments
Clean Air
Motorparts
Ride
Total
Corporate
Total
Performance
Net income attributable to Tenneco Inc. $60
Net income attributable to noncontrolling interests 14
Net income 74
Income tax expense 25
Interest expense 23
EBIT, Earnings before interest expense, income taxes and noncontrolling interests $120 $39 $7 $166 $(44) 122
Depreciation and amortization 37 6 17 60 60
Total EBITDA including noncontrolling interests (3) $157 $45 $24 $226 $(44) $182
Restructuring and related expenses 1 2 9 12 12
Acquisition and spin costs (6) 13 13
Warranty charge (11) 5 5 5
Adjusted EBITDA $158 $47 $38 $243 $(31) $212
* Financial results for 2018 have been
revised for certain immaterial
adjustments, which will be further
discussed in Tenneco's Form 10-Q for
the quarter ended March 31, 2019.
(1)U.S. 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.
(3) EBITDA including noncontrolling
interests represents income before
interest expense, income taxes,
noncontrolling interests and
depreciation and amortization. EBITDA
including noncontrolling interests is
not a calculation based upon GAAP.
The amounts included in the EBITDA
including noncontrolling interests
calculation, however, are derived from
amounts included in the historical
statements of income data. In
addition, EBITDA including
noncontrolling interests should not be
considered as an alternative to net
income 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 including
noncontrolling interests because it
regularly reviews EBITDA including
noncontrolling interests as a measure
of the company's performance. In
addition, Tenneco believes its
investors utilize and analyze the
company's EBITDA including
noncontrolling interests for similar
purposes. Tenneco also believes
EBITDA including noncontrolling
interests 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
including noncontrolling interests
measure presented may not always be
comparable to similarly titled
measures reported by other companies
due to differences in the components
of the calculation.
(4)Q1 2019 includes $3 million of
accelerated depreciation related to
plant closures.
(5)Costs related to cost reduction
initiatives.
(6)Costs related to acquisitions and
costs related to expected spin.
(7)Costs to achieve synergies related
to Federal-Mogul acquisition.
(8)Purchase accounting adjustments
related to acquisitions.
(9)Non-cash asset impairment charge
related to goodwill.
(10)Charge due to process
harmonization.
(11)Charge related to warranty.
Although Tenneco regularly incurs
warranty costs, this specific charge
is of an unusual nature in the period
incurred.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP (1)REVENUE TO NON-GAAP REVENUE MEASURES(2)
Unaudited
---
(Millions)
Q1 2019
---
Currency
Value-add
Impact on
Revenues
Substrate
Value-add
Value-add
excluding
Revenues
Sales
Revenues
Revenues
Currency
Clean Air $1,779 $706 $1,073 $(51) $1,124
Powertrain 1,175 1,175 1,175
Motorparts 797 797 (18) 815
Ride Performance 733 733 (31) 764
Total Tenneco Inc. $4,484 $706 $3,778 $(100) $3,878
===
Q1 2018*
---
Currency
Value-add
Impact on
Revenues
Substrate
Value-add
Value-add
excluding
Revenues
Sales
Revenues
Revenues
Currency
Clean Air $1,756 $652 $1,104
$ - $1,104
Motorparts 312 312 312
Ride Performance 513 513 513
Total Tenneco Inc. $2,581 $652 $1,929
$ - $1,929
===
* Financial results for 2018 have
been revised for certain
immaterial adjustments, which will
be further discussed in Tenneco's
Form 10-Q for the quarter ended
March 31, 2019.
(1)U.S. Generally Accepted
Accounting Principles.
(2) Tenneco presents the above
reconciliation of revenues in
order to reflect value-add
revenues separately from the
effects of doing business in
currencies other than the U.S.
dollar. Additionally, 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. Tenneco uses this
information to analyze the trend
in revenues before these factors.
Tenneco believes investors find
this information useful in
understanding period to period
comparisons in the company's
revenues.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP (1)REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
---
(Millions except percents)
Q1 2019 vs. Q1 2018 $ Change and % Change Increase
(Decrease)
Revenues
% Change
Value-add
% Change
Adjusted
Revenues
Excluding
Currency
Clean Air $23 1% $20 2%
Powertrain 1,175
NM 1,175
NM
Motorparts 485 155% 503 161%
Ride Performance 220 43% 251 49%
Total Tenneco Inc. $1,903 74% $1,949 101%
===
(1)U.S. Generally Accepted
Accounting Principles.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF NON-GAAP MEASURES
Debt net of total cash / Pro Forma Adjusted LTM EBITDA including noncontrolling interests
Unaudited
---
(Millions except ratios)
March 31, 2019
December 31, 2018
Total debt $5,576 $5,493
Total cash, cash equivalents and restricted cash (total cash) 363 702
Debt net of total cash balances (1) $5,213 $4,791
Pro forma Adjusted LTM EBITDA including noncontrolling interests(2) (3) (5) $1,542 $1,627
Pro forma ratio of debt net of total cash balances to Pro forma Adjusted LTM EBITDA including noncontrolling interests (4) (5)
3.4x
2.9x
Q1 18*
Q2 18*
Q3 18*
Q4 18
Q1 19
---
Net income (loss) attributable to Tenneco Inc. $60 $47 $57 $(109) $(117)
Net income attributable to noncontrolling interests 14 16 9 17 12
Net income (loss) 74 63 66 (92) (105)
Income tax expense (benefit) 25 26 22 (10) -
Interest expense 23 22 24 79 81
EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests 122 111 112 (23) (24)
Depreciation and amortization 60 60 60 165 169
Total EBITDA including noncontrolling interests (2) $182 $171 $172 $142 $145
---
Adjustments:
Restructuring and related expenses 12 23 12 17 17
Cost reduction initiatives (6) - 8 8 8
Acquisition and spin costs (7) 13 18 12 53 40
Warranty charge (8) 5 -
Costs to achieve synergies(9) - 9 4 49 7
Purchase accounting adjustments (10) - 106 41
Goodwill impairment charge (11) - 3 60
Process harmonization (12) - 9
Anti-dumping duty charge (13) - 16
Environmental charge (14) - 4
Litigation settlement accrual - 10
Loss on debt modification (15) - 10
Pension charges (16) - 3
Total Adjusted EBITDA including noncontrolling interests (3) $212 $233 $210 $407 $327
===
Legacy Federal-Mogul Reconciliation of Non-GAAP earnings measures
---
Q1 18
Q2 18
Q3 18
Net income attributable to Federal-Mogul $26 $25 $35
Net income attributable to noncontrolling interests 3 3 1
Net income 29 28 36
Income tax expense 15 13 16
Interest expense 48 52 49
EBIT, Earnings before interest expense, income taxes and noncontrolling interests 92 93 101
Depreciation and amortization 100 96 99
Total EBITDA including noncontrolling interests (2) $192 $189 $200
Adjustments:
Restructuring charges and asset impairments, net - 15
Purchase price contingency 5
Transaction related costs 1 13
Cost to exit a multiemployer pension plan - 5
Gain (loss) on sale of assets - (65)
Charge for extinguishment of dissenting shareholders shares - 5
Other 2 2 1
Total Adjusted EBITDA including noncontrolling interests (3) $200 $209 $156
Q1 18*
Q2 18*
Q3 18*
Q4 18
Q1 19
---
Pro forma Adjusted EBITDA including noncontrolling interests(2) (3) (5) $412 $442 $366 $407 $327
Q4 2018 Pro forma Adjusted LTM EBITDA including noncontrolling interests(2) (3) (5) $1,627
Q1 2019 Pro forma Adjusted LTM EBITDA including noncontrolling interests(2) (3) (5) $1,542
* Financial results for the first three
quarters of 2018 have been revised for
certain immaterial adjustments as
discussed in Tenneco's Form 10-K for
the year ended December 31, 2018.
(1) Tenneco presents debt net of total
cash balances because management
believes it is a useful measure of
Tenneco's credit position and progress
toward reducing leverage. The
calculation is limited in that the
company may not always be able to use
cash to repay debt on a dollar-for-
dollar basis.
(2) EBITDA including noncontrolling
interests represents income before
interest expense, income taxes,
noncontrolling interests and
depreciation and amortization. EBITDA
including noncontrolling interests is
not a calculation based upon GAAP.
The amounts included in the EBITDA
including noncontrolling interests
calculation, however, are derived from
amounts included in the historical
statements of income data. In
addition, EBITDA including
noncontrolling interests 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 including noncontrolling
interests because it regularly reviews
EBITDA including noncontrolling
interests as a measure of the
company's performance. In addition,
Tenneco believes its investors utilize
and analyze the company's EBITDA
including noncontrolling interests for
similar purposes. Tenneco also
believes EBITDA including
noncontrolling interests 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
including noncontrolling interests
measure presented may not always be
comparable to similarly titled
measures reported by other companies
due to differences in the components
of the calculation.
(3) Adjusted EBITDA including
noncontrolling interests is presented
in order to reflect the results in a
manner that allows a better
understanding 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. Similar adjustments to
EBITDA including noncontrolling
interests have been recorded in
earlier periods, and similar types of
adjustments can reasonably be expected
to be recorded in future periods. 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 the above
reconciliation of the ratio of debt
net of total cash to LTM Adjusted
EBITDA including noncontrolling
interests to show trends that
investors may find useful in
understanding the company's ability to
service its debt. For purposes of
this calculation, Adjusted LTM and Pro
Forma adjusted LTM EBITDA including
noncontrolling interests is used as an
indicator of the company's performance
and debt net of total cash is
presented as an indicator of the
company's credit position and progress
toward reducing the company's
financial leverage. This
reconciliation is provided as
supplemental information and not
intended to replace the company's
existing covenant ratios or any other
financial measures that investors may
find useful in describing the
company's financial position. See
notes (1), (2) and (3) for a
description of the limitations of
using debt net of total cash, EBITDA
including noncontrolling interests and
Adjusted EBITDA including
noncontrolling interests.
(5) Tenneco is providing Pro Forma
Adjusted LTM EBITDA and the ratio of
debt net of cash balances to Pro Forma
Adjusted LTM EBITDA to show the
company's Adjusted LTM EBITDA as if
Federal-Mogul had been consolidated
with Tenneco for the entirety of 2018
and LTM Q1 2019 (and the resultant
impact on the net debt ratio).
Tenneco believes this supplemental
information is useful to investors who
are trying to understand the results
of the entire enterprise, including
Federal-Mogul, for 2018 and 2019 and
the ability of the company to service
its debt.
(6)Costs related to cost reduction
initiatives.
(7)Costs related to acquisitions and
costs related to expected spin.
(8)Charge related to warranty. Although
Tenneco regularly incurs warranty
costs, this specific charge is of an
unusual nature in the period incurred.
(9)Costs to achieve synergies related
to Federal-Mogul acquisition.
(10)Purchase accounting adjustments
related to acquisitions.
(11)Non-cash asset impairment charge
related to goodwill.
(12)Charge due to process
harmonization.
(13)Charge due to retroactive
application of anti-dumping duty on a
supplier's products.
(14)Environmental charge related to an
acquired site whereby an
indemnification reverted back to the
Company resulting from a 2009
bankruptcy filing of Mark IV
Industries.
(15)Loss on debt modification.
(16)Charges related to pension
derisking and the acceleration of
restricted stock vesting in accordance
with the long-term incentive plan.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP (1)REVENUE TO NON-GAAP REVENUE MEASURES(2)
Unaudited
---
(Millions)
Q1 2019
Revenues
Currency
Revenues
Substrate Sales
Value-add
Excluding Excluding Revenues
Currency Currency Excluding
Currency
---
Original equipment light vehicle revenues $2,817 $(89) $2,906 $614 $2,292
Original equipment commercial truck, off-highway, industrial and other revenues 870 (20) 890 119 771
Aftermarket revenues 797 (18) 815 815
Net sales and operating revenues $4,484 $(127) $4,611 $733 $3,878
===
Q1 2018*
Revenues
Currency
Revenues
Substrate Sales
Value-add
Excluding Excluding Revenues
Currency Currency Excluding
Currency
---
Original equipment light vehicle revenues $1,893
$ - $1,893 $543 $1,350
Original equipment commercial truck, off-highway, industrial and other revenues 376 376 109 267
Aftermarket revenues 312 312 312
Net sales and operating revenues $2,581
$ - $2,581 $652 $1,929
===
* Financial results for 2018 have
been revised for certain
immaterial adjustments, which will
be further discussed in Tenneco's
Form 10-Q for the quarter ended
March 31, 2019.
(1)U.S. Generally Accepted
Accounting Principles.
(2) Tenneco presents the above
reconciliation of revenues in
order to reflect value-add
revenues separately from the
effects of doing business in
currencies other than the U.S.
dollar. Additionally, 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. Tenneco uses this
information to analyze the trend
in revenues before these factors.
Tenneco believes investors find
this information useful in
understanding period to period
comparisons in the company's
revenues.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP (1)REVENUE AND EARNINGS TO NON-GAAP REVENUE AND EARNINGS MEASURES(2)
Unaudited
---
(Millions except percents)
Q1 2019
Global Segments
Clean Air
Powertrain
Motorparts
Ride
Total
Corporate
Total
Performance
---
Net sales and operating revenues $1,779 $1,175 $797 $733 $4,484
$ - $4,484
Less: Substrate sales 706 706 706
Value-add revenues $1,073 $1,175 $797 $733 $3,778
$ - $3,778
===
EBITDA $131 $113 $45 $(45) $244 $(99) $145
EBITDA as a % of revenue 7.4% 9.6% 5.6% -6.1% 5.4% 3.2%
EBITDA as a % of value-add revenue 12.2% 9.6% 5.6% -6.1% 6.5% 3.8%
Adjusted EBITDA $140 $116 $90 $31 $377 $(50) $327
Adjusted EBITDA as a % of revenue 7.9% 9.9% 11.3% 4.2% 8.4% 7.3%
Adjusted EBITDA as a % of value-add revenue 13.0% 9.9% 11.3% 4.2% 10.0% 8.7%
Q1 2018*
Global Segments
Clean Air
Motorparts
Ride
Total
Corporate
Total
Performance
Net sales and operating revenues $1,756 $312 $513 $2,581
$ - $2,581
Less: Substrate sales 652 652 652
Value-add revenues $1,104 $312 $513 $1,929
$ - $1,929
EBITDA $157 $45 $24 $226 $(44) $182
EBITDA as a % of revenue 8.9% 14.4% 4.7% 8.8% 7.1%
EBITDA as a % of value-add revenue 14.2% 14.4% 4.7% 11.7% 9.4%
Adjusted EBITDA $158 $47 $38 $243 $(31) $212
Adjusted EBITDA as a % of revenue 9.0% 15.1% 7.4% 9.4% 8.2%
Adjusted EBITDA as a % of value-add revenue 14.3% 15.1% 7.4% 12.6% 11.0%
* Financial results for 2018 have
been revised for certain
immaterial adjustments, which will
be further discussed in Tenneco's
Form 10-Q for the quarter ended
March 31, 2019.
(1)U.S. Generally Accepted
Accounting Principles.
(2) Tenneco presents the above
reconciliation of revenues in
order to reflect EBITDA and
adjusted EBITDA as a percent of
both total revenues and value-add
revenues. 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 EBITDA and
adjusted EBITDA as a percent of
value-add revenue assists
investors in evaluating the
company's operational performance
without the impact of such
substrate sales.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1)REVENUE TO NON-GAAP REVENUE MEASURES(2)- Original equipment commercial truck, off-highway, industrial and other revenues
Unaudited
---
(Millions)
2019
Q1
Substrate
Value-add
Revenues
Sales
Revenues
Clean Air $319 $115 $204
Powertrain 426 426
Ride Performance 125 125
Total Tenneco Inc. $870 $115 $755
===
2018
Q1
Substrate
Value-add
Revenues
Sales
Revenues
Clean Air $307 $109 $198
Ride Performance 69 69
Total Tenneco Inc. $376 $109 $267
===
(1)U.S. Generally Accepted
Accounting Principles.
(2) 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 these factors. Tenneco
believes investors find this
information useful in
understanding period to period
comparisons in the company's
revenues.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) REVENUE TO PRO FORMA(2) REVENUE AND NON-GAAP EARNINGS MEASURES - 2018 Quarterly
Unaudited
---
(Millions except percents)
Q1 2018
---
Pro forma New Tenneco
Pro forma DRiV
Clean Air
Powertrain
Corporate -
New
Motorparts
Ride
Corporate -
DRiV
Other/Elim
Total Pro
New Tenneco Performance DRiV forma
Tenneco Tenneco
Net sales and operating revenues $1,756 $1,260
$ - $3,016 $903 $761
$ - $1,664
$ - $4,680
Less: Substrate sales 652 652 652
Value-add revenues (3) 1,104 1,260 2,364 903 761 1,664 4,028
EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests 119 60 179 96 (18) 78 (51) 206
Depreciation and amortization 37 61 98 24 38 62 160
Total EBITDA including noncontrolling interests(4) 156 121 277 120 20 140 (51) 366
Financing charges on sale of receivables reclass 1 1 1 3 5 5 8
Segment change impact 2 12 (16) (2) (19) 17 (32) (34) 36
Total EBITDA including noncontrolling interests after reclass and segment change(4) 159 134 (15) 278 106 37 (32) 111 (15) 374
Adjustments:
Restructuring and related expenses 1 1 2 7 9 10
Cost reduction initiatives 2 2 2
Acquisition and spin costs 13 13
Warranty charge 5 5 5
Purchase price contingency 5 5 5
Transaction related costs 1 1
Other 1 1 1 2
Adjusted EBITDA(5) $160 $140 $(15) $285 $108 $51 $(32) $127
$ - $412
Adjusted EBITDA as a percent of value-add revenue(6) 14.5% 11.1% 12.1% 12.0% 6.7% 7.6% 10.2%
Q2 2018
---
Pro forma New Tenneco
Pro forma DRiV
Clean Air
Powertrain
Corporate -
New
Motorparts
Ride
Corporate -
DRiV
Other/Elim
Total Pro
New Tenneco Performance DRiV forma
Tenneco Tenneco
Net sales and operating revenues $1,694 $1,243
$ - $2,937 $930 $753
$ - $1,683
$ - $4,620
Less: Substrate sales 621 621 621
Value-add revenues (3) 1,073 1,243 2,316 930 753 1,683 3,999
EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests 103 70 173 109 (19) 90 (65) 198
Depreciation and amortization 39 61 100 21 34 55 1 156
Total EBITDA including noncontrolling interests(4) 142 131 273 130 15 145 (64) 354
Financing charges on sale of receivables reclass 1 1 5 5 6
Segment change impact 3 13 (16) (17) 14 (24) (27) 27 -
Total EBITDA including noncontrolling interests after reclass and segment change(4) 145 144 (15) 274 118 29 (24) 123 (37) 360
Adjustments:
Restructuring and related expenses 11 1 12 1 10 11 23
Cost reduction initiatives 8 8 8
Acquisition and spin costs 18 18
Costs to achieve synergies 6 6 1 1 2 9
Environmental charge 4 4
Transaction related costs 13 13
Cost to exit a multiemployer pension plan 5 5 5
Other (2) (2) 5 (1) 4 2
Adjusted EBITDA(5) $162 $148 $(15) $295 $125 $46 $(24) $147
$ - $442
Adjusted EBITDA as a percent of value-add revenue(6) 15.1% 11.9% 12.7% 13.4% 6.1% 8.7% 11.1%
Q3 2018
---
Pro forma New Tenneco
Pro forma DRiV
Clean Air
Powertrain
Corporate -
New
Motorparts
Ride
Corporate -
DRiV
Other/Elim
Total Pro
New Tenneco Performance DRiV forma
Tenneco Tenneco
Net sales and operating revenues $1,602 $1,122
$ - $2,724 $867 $690
$ - $1,557
$ - $4,281
Less: Substrate sales 596 596 596
Value-add revenues (3) 1,006 1,122 2,128 867 690 1,557 3,685
EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests 105 21 126 102 28 130 (51) 205
Depreciation and amortization 38 62 100 22 35 57 2 159
Total EBITDA including noncontrolling interests(4) 143 83 226 124 63 187 (49) 364
Financing charges on sale of receivables reclass 1 1 1 3 5 5 8
Segment change impact 4 13 (18) (1) (16) 16 (28) (28) 29
Total EBITDA including noncontrolling interests after reclass and segment change(4) 148 97 (17) 228 113 79 (28) 164 (20) 372
Adjustments:
Restructuring and related expenses 1 8 9 8 10 18 27
Acquisition and spin costs 12 12
Costs to achieve synergies 1 1 3 4
Litigation settlement accrual 9 9 1 10
Gain (loss) on sale of assets (65) (65) (65)
Charge for extinguishment of dissenting shareholders shares 5 5
Other 4 4 (3) 1 (2) (1) 1
Adjusted EBITDA(5) $149 $109 $(17) $241 $118 $35 $(28) $125
$ - $366
Adjusted EBITDA as a percent of value-add revenue(6) 14.8% 9.7% 11.3% 13.6% 5.1% 8.0% 9.9%
Q4 2018
---
Pro forma New Tenneco
Pro forma DRiV
Clean Air
Powertrain
Corporate -
New
Motorparts
Ride
Corporate -
DRiV
Other/Elim
Total Pro
New Tenneco Performance DRiV forma
Tenneco Tenneco
Net sales and operating revenues $1,655 $1,112
$ - $2,767 $827 $684
$ - $1,511
$ - $4,278
Less: Substrate sales 631 631 631
Value-add revenues (3) 1,024 1,112 2,136 827 684 1,511 3,647
EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests 116 33 149 (31) (47) (78) (102) (31)
Depreciation and amortization 40 59 99 29 37 66 165
Total EBITDA including noncontrolling interests(4) 156 92 248 (2) (10) (12) (102) 134
Financing charges on sale of receivables reclass 1 1 6 1 7 8
Segment change impact 3 1 (4) (17) 12 (19) (24) 24 -
Total EBITDA including noncontrolling interests after reclass and segment change(4) 159 93 (3) 249 (13) 3 (19) (29) (78) 142
Adjustments:
Restructuring and related expenses (2) (2) (4) 2 19 21 17
Cost reduction initiatives 8 8
Acquisition and spin costs 53 53
Costs to achieve synergies (3) (3) 35 10 45 7 49
Purchase accounting adjustments 44 44 57 5 62 106
Anti-dumping duty charge 16 16 16
Loss on debt modification 10 10
Pension charges / Stock vesting 3 3 3
Goodwill impairment charge 3 3 3
Adjusted EBITDA(5) $154 $135 $(3) $286 $97 $43 $(19) $121
$ - $407
Adjusted EBITDA as a percent of value-add revenue(6) 15.0% 12.1% 13.4% 11.7% 6.3% 8.0% 11.2%
(1)U.S. Generally Accepted Accounting
Principles.
(2) Tenneco presents pro forma
revenues and earnings measures to show
what the company's performance would
have been had Federal-Mogul been
consolidated with Tenneco for each
quarter of 2018. We believe this
supplemental information is useful to
investors who are trying to understand
the results of the entire enterprise,
including Federal-Mogul. The
Motorparts segment reflects the
company's historical Aftermarket
segment plus the Motorparts
aftermarket business acquired in the
Federal-Mogul acquisition. The Ride
Performance segment reflects the
company's historical Ride Performance
segment plus the Motorparts OE
business acquired in the Federal-
Mogul acquisition.
(3) Tenneco presents the above
reconciliation of revenues in order to
reflect value-add revenues separately
from substrate sales. 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.
Tenneco uses this information to
analyze the trend in revenues before
these factors. Tenneco believes
investors find this information useful
in understanding period to period
comparisons in the company's revenues.
(4) EBITDA including noncontrolling
interests represents income before
interest expense, income taxes,
noncontrolling interests and
depreciation and amortization. We
have also presented EBITDA including
noncontrolling interests to give
effect to the reclassification of
financing charges on sale of
receivables that took place in the
first quarter 2019 and to give
effective to the impact of the segment
changes that occurred in the first
quarter of 2019. EBITDA including
noncontrolling interests is not a
calculation based upon GAAP. The
amounts included in the EBITDA
including noncontrolling interests
calculation, however, are derived from
amounts included in the historical
statements of income data. In
addition, EBITDA including
noncontrolling interests 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 including noncontrolling
interests because it regularly reviews
EBITDA including noncontrolling
interests as a measure of the
company's performance. In addition,
Tenneco believes its investors utilize
and analyze the company's EBITDA
including noncontrolling interests for
similar purposes. Tenneco also
believes EBITDA including
noncontrolling interests 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
including noncontrolling interests
measure presented may not always be
comparable to similarly titled
measures reported by other companies
due to differences in the components
of the calculation.
(5)"Adjusted EBITDA" is EBITDA
including noncontrolling interests
(after giving effect to the
reclassification and segment change
described above) and is presented in
order to reflect the results in a
manner that allows a better
understanding 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. Similar adjustments to
EBITDA including noncontrolling
interests have been recorded in
earlier periods, and similar types of
adjustments can reasonably be expected
to be recorded in future periods. 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.
(6) Tenneco presents the above
reconciliation in order to reflect
Adjusted EBITDA as a percent of both
value-add revenues. Presenting
Adjusted EBITDA as a percent of value-
add revenue assists investors in
evaluating the company's operational
performance without the impact of
substrate sales, which can be
volatile.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) REVENUE TO PRO FORMA(2) REVENUE AND NON-GAAP EARNINGS MEASURES - 2018 and 2017 Annual
Unaudited
---
(Millions except percents)
FY 2018
---
Pro forma New Tenneco
Pro forma DRiV
Clean Air
Powertrain
Corporate -
New
Motorparts
Ride
Corporate -
DRiV
Other/Elim
Total Pro
New Tenneco Performance DRiV forma
Tenneco Tenneco
Net sales and operating revenues $6,707 $4,737
$ - $11,444 $3,527 $2,888
$ - $6,415
$ - $17,859
Less: Substrate sales 2,500 2,500 2,500
Value-add revenues (3) 4,207 4,737 8,944 3,527 2,888 6,415 15,359
EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests 443 184 627 276 (56) 220 (269) 578
Depreciation and amortization 154 243 397 96 144 240 3 640
Total EBITDA including noncontrolling interests(4) 597 427 1,024 372 88 460 (266) 1,218
Financing charges on sale of receivables reclass 2 2 4 8 21 1 22 30
Segment change impact 12 39 (54) (3) (69) 59 (103) (113) 116
Total EBITDA including noncontrolling interests after reclass and segment change(4) 611 468 (50) 1,029 324 148 (103) 369 (150) 1,248
Adjustments:
Restructuring and related expenses 11 7 18 13 46 59 77
Cost reduction initiatives 10 10 8 18
Acquisition and spin costs 96 96
Costs to achieve synergies 3 3 36 11 47 12 62
Purchase accounting adjustments 44 44 57 5 62 106
Anti-dumping duty charge 16 16 16
Environmental charge 4 4
Warranty charge 5 5 5
Litigation settlement accrual 9 9 1 10
Loss on debt modification 10 10
Pension charges / Stock vesting 3 3 3
Goodwill impairment charge 3 3 3
Purchase price contingency 5 5 5
Transaction related costs 14 14
Cost to exit a multiemployer pension plan 5 5 5
Gain (loss) on sale of assets (65) (65) (65)
Charge for extinguishment of dissenting shareholders shares 5 5
Other 3 3 2 2 5
Adjusted EBITDA(5) $625 $532 $(50) $1,107 $448 $175 $(103) $520
$ - $1,627
Adjusted EBITDA as a percent of value-add revenue(6) 14.9% 11.2% 12.4% 12.7% 6.1% 8.1% 10.6%
FY 2017
---
Pro forma New Tenneco
Pro forma DRiV
Clean Air
Powertrain
Corporate -
New
Motorparts
Ride
Corporate -
DRiV
Other/Elim
Total Pro
New Tenneco Performance DRiV forma
Tenneco Tenneco
Net sales and operating revenues $6,216 $4,573
$ - $10,789 $3,678 $2,686
$ - $6,364
$ - $17,153
Less: Substrate sales 2,187 2,187 2,187
Value-add revenues (3) 4,029 4,573 8,602 3,678 2,686 6,364 14,966
EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests 420 234 654 394 (42) 352 (272) 734
Depreciation and amortization 142 254 396 92 132 224 4 624
Total EBITDA including noncontrolling interests(4) 562 488 1,050 486 90 576 (268) 1,358
Financing charges on sale of receivables reclass 2 2 4 16 1 17 21
Segment change impact 7 54 (71) (10) (67) 75 (114) (106) 116
Total EBITDA including noncontrolling interests after reclass and segment change(4) 571 544 (71) 1,044 435 166 (114) 487 (152) 1,379
Adjustments:
Restructuring and related expenses 23 16 39 21 23 44 1 84
Cost reduction initiatives 4 4 3 12 15 3 22
Loss on debt modification 5 5
Pension charges / Stock vesting 13 13
Goodwill impairment charge 11 11 4 7 11 22
Warranty settlement 7 7 132 139
Gain on sale of unconsolidated JV (5) (5)
Gain from termination of customer contract (6) (6) (6)
Warranty release (4) (4) (4)
Release of deferred purchase price payment (3) (3) (3)
EBITDA contribution of pending asset sales (2) (2) (2)
Transaction related costs 3 3 1 1 3 7
Gain (loss) on sale of business (3) (3) (3)
Gain (loss) on sale of nonconsolidated affiliates 2 2 2
Gain (loss) on sale of assets (6) (6) (1) (1) (7)
Adjusted EBITDA(5) $598 $563 $(71) $1,090 $462 $205 $(114) $553
$ - $1,643
Adjusted EBITDA as a percent of value-add revenue(6) 14.8% 12.3% 12.7% 12.6% 7.6% 8.7% 11.0%
(1)U.S. Generally Accepted Accounting
Principles.
(2) Tenneco presents pro forma
revenues and earnings measures to show
what the company's performance would
have been had Federal-Mogul been
consolidated with Tenneco for the
entirety of 2017 and 2018. We believe
this supplemental information is
useful to investors who are trying to
understand the results of the entire
enterprise, including Federal-Mogul.
The Motorparts segment reflects the
company's historical Aftermarket
segment plus the Motorparts
aftermarket business acquired in the
Federal-Mogul acquisition. The Ride
Performance segment reflects the
company's historical Ride Performance
segment plus the Motorparts OE
business acquired in the Federal-
Mogul acquisition.
(3) Tenneco presents the above
reconciliation of revenues in order to
reflect value-add revenues separately
from substrate sales. 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.
Tenneco uses this information to
analyze the trend in revenues before
these factors. Tenneco believes
investors find this information useful
in understanding period to period
comparisons in the company's revenues.
(4) EBITDA including noncontrolling
interests represents income before
interest expense, income taxes,
noncontrolling interests and
depreciation and amortization. We
have also presented EBITDA including
noncontrolling interests to give
effect to the reclassification of
financing charges on sale of
receivables that took place in the
first quarter 2019 and to give
effective to the impact of the segment
changes that occurred in the first
quarter of 2019. EBITDA including
noncontrolling interests is not a
calculation based upon GAAP. The
amounts included in the EBITDA
including noncontrolling interests
calculation, however, are derived from
amounts included in the historical
statements of income data. In
addition, EBITDA including
noncontrolling interests 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 including noncontrolling
interests because it regularly reviews
EBITDA including noncontrolling
interests as a measure of the
company's performance. In addition,
Tenneco believes its investors utilize
and analyze the company's EBITDA
including noncontrolling interests for
similar purposes. Tenneco also
believes EBITDA including
noncontrolling interests 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
including noncontrolling interests
measure presented may not always be
comparable to similarly titled
measures reported by other companies
due to differences in the components
of the calculation.
(5)"Adjusted EBITDA" is EBITDA
including noncontrolling interests
(after giving effect to the
reclassification and segment change
described above) and is presented in
order to reflect the results in a
manner that allows a better
understanding 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. Similar adjustments to
EBITDA including noncontrolling
interests have been recorded in
earlier periods, and similar types of
adjustments can reasonably be expected
to be recorded in future periods. 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.
(6) Tenneco presents the above
reconciliation in order to reflect
Adjusted EBITDA as a percent of both
value-add revenues. Presenting
Adjusted EBITDA as a percent of value-
add revenue assists investors in
evaluating the company's operational
performance without the impact of
substrate sales, which can be
volatile.
ATTACHMENT 2
TENNECO INC.
Division Level Q2 and FY 2019 Outlook
Unaudited
---
(Millions except percents)
DRiV(TM) 2019 Expectations
---
Q2 Outlook:
Revenue expected up 4% to 5% sequentially
Expect Q2 sequential VA adjusted EBITDA margin rate improvement of approximately 200 bps
Full Year Outlook:
Revenue growth about flat(1)year over year
Adjusted EBITDA margin about flat(1)year over year
Capital Expenditures in the range of $250 million to $275 million
New Tenneco 2019 Expectations
---
Q2 Outlook:
VA Revenue expected down 1% to 2% sequentially
Expect Q2 sequential VA adjusted EBITDA margin rate improvement of approximately 100 bps
Full Year Outlook:
Revenue expected up 3% to 4%(1)
Adjusted EBITDA margin down between 30 to 50 bps (1)year over year
Capital Expenditures in the range of $480 million to $495 million
(1) Pro Forma revenue and earnings growth is measured at 2018 constant currency rates and includes FM acquisition in prior periods
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SOURCE Tenneco Inc.
