Tenneco Reports First Quarter 2020 Results
LAKE FOREST, Ill., May 8, 2020 /PRNewswire/ -- Tenneco (NYSE: TEN) reported first quarter 2020 revenue of $3.8 billion, versus $4.5 billion( )a year ago. Excluding unfavorable currency of $97M, total revenue decreased 12% versus last year, while light vehicle industry production* declined 23% in the quarter. Value-add revenue for the first quarter was $3.1 billion. The Company estimates the COVID-19 crisis represented approximately a $340 million negative impact on first quarter value-add revenue.
https://mma.prnewswire.com/media/878310/Tenneco_Inc_Logo.jpg
Including non-cash impairments of $854 million, $737 million after tax, the Company reported a net loss for first quarter 2020 of $839 million, or $(10.34) per diluted share, compared with a first quarter net loss of $117 million, or $(1.44) per diluted share in 2019. First quarter EBIT (earnings before interest, taxes and noncontrolling interests) was a loss of $845 million, versus a loss of $24 million last year. EBIT as a percent of revenue was -22.0% versus -0.5% last year.
First quarter 2020 adjusted net loss was $26 million, or $(0.31) per diluted share, compared with income of $42 million, or 52-cents per diluted share last year. First quarter adjusted EBITDA was $239 million versus $327 million last year. Adjusted EBITDA as a percent of value-add revenue was 7.6% versus 8.7% last year. Cash flow used in operations was $152 million, on par with last year despite the COVID-19 driven impact of lower earnings.
"Tenneco responded quickly to the COVID-19 crisis to protect our team members' health and safety while taking aggressive actions to mitigate the financial impact of the pandemic on the company," said Brian Kesseler, Tenneco's Chief Executive Officer. "We expanded on the structural cost reductions introduced last quarter, and implemented a range of temporary cost reductions including plant closures, deferment of discretionary spending and the reduction of capital expenditures. We have amended the terms of the company's debt covenants to help us navigate the COVID-19-driven economic downturn, and adopted a shareholder rights plan to help protect the availability of Tenneco's tax assets."
Liquidity Update
As of March 31, 2020, Tenneco had liquidity of $1.57 billion, comprised of $770 million cash and $800 million undrawn on the Company's revolving credit facility. The Company has acted to further bolster its liquidity position by drawing the remaining amount available under this revolving facility. Based on available industry forecasts and Company estimates, the Company believes it has adequate liquidity to weather the current downturn.
Operations Update
Throughout the Company's operations, incremental health and safety precautions have been implemented, including rigorous cleaning and sanitation protocols, wellness checks for team members and changes within facilities to comply with social distancing requirements. In China, all of the Company's production facilities, distribution centers and offices are now open and operating at near pre-crisis levels. As of the first week of May, approximately 75% of the Company's plants and distribution centers worldwide are operating at various levels of production, up from a low of 47% during the first week of April.
"I appreciate the extraordinary effort made by our team members and their families, including helping the company safely maintain operations during the crisis to provide products and services that are considered vital to public security, health and safety," Kesseler added. "Our focus continues to be on protecting the wellbeing of our team members as we prepare to support our customers in the restart of production globally. In every part of our business, we've implemented enhanced operating protocols that will support a safe and efficient ramp up of our operations as customer demand grows."
Outlook
Tenneco continues to monitor the effects of the COVID-19 pandemic, which is impacting the global automotive industry. Due to uncertainty related to the crisis, the Company is not providing financial guidance for the balance of 2020 at this time.
In response to the lower demand environment related to the COVID-19 crisis, Tenneco will implement additional structural cost reductions expected to achieve an incremental $65 million in annual run rate cost savings by the end of 2020.
Recently, the Company also implemented a number of temporary cost reductions and actions to further mitigate the COVID-19 -related profit pressures and optimize cash performance. These actions include temporarily suspending or reducing operations, salary reductions and furloughs, reducing capital spending and lowering the Board of Director's retainer fees.
*Source: IHS Markit April
V2 2020 global light
vehicle production
forecast.
Attachment 1
Statements of Income (Loss) - 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 Non-GAAP Measures - Debt Net of Cash/Adjusted LTM and 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 - quarterly
CONFERENCE CALL
The company will host a webcast conference call on Friday, May 8, 2020 at 9:30 a.m. ET. The purpose of the call is to discuss the company's financial results for the first quarter and full year 2020, as well as to provide other information regarding matters that may impact the company's outlook. For a "listen only" broadcast and access to the presentation materials, go to the company's website www.investors.tenneco.com. To participate by telephone, please dial: 1-833-366-1121 (domestic) or 1-412-902-6733 (international), using the passcode "Tenneco Inc." A call playback will be available for one week, starting approximately one hour after the conclusion of the call. To connect, please dial 1-877-344-7529 (domestic), 1-412-317-0088 (international), 855-669-9658 (Canada), using the replay access code 10138628.
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 2019 revenues of $17.45 billion and approximately 78,000 employees worldwide. On October 1, 2018, Tenneco completed the acquisition of Federal-Mogul, a leading global supplier to original equipment manufacturers and the aftermarket. In the future, the company expects to separate its divisions to form two new, independent companies: DRiV, an Aftermarket and Ride Performance company, and New Tenneco, a Powertrain Technology company.
About DRiV(TM) - the future Aftermarket and Ride Performance Company
Following the separation, 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 2019 revenues of $5.9 billion, with 53% of those revenues from aftermarket and 47% from original equipment customers.
About the new Tenneco - the future Powertrain Technology Company
Following the separation, 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 2019 revenues of $11.5 billion, serving light vehicle, commercial truck, off-highway and industrial markets.
Safe Harbor
This press release contains forward-looking statements. The words "will," "would," "could," "plan," "expect," "anticipate," "estimate," "opportunities," 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, including the effect
of the COVID-19 pandemic;
-- disasters, local and global public health emergencies or other
catastrophic events, such as fires, earthquakes, and flooding, pandemics
or epidemics (including the COVID-19 pandemic), where we or other
customers do business, 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;
-- our ability (or inability) to successfully execute cost reduction,
performance improvement and other plans, including our plans to respond
to the COVID-19 pandemic and our previously announced accelerated
performance improvement plan ("Accelerate"), and to realize the
anticipated benefits from these plans;
-- 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 and our financial flexibility to respond to
COVID-19 pandemic;
-- our ability to maintain compliance with the agreements governing our
indebtedness and otherwise have sufficient liquidity through the
COVID-19 pandemic;
-- our ability to comply with the covenants contained in our debt
instruments;
-- our working capital requirements;
-- 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 for our OE products or aftermarket products,
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;
-- the cyclical nature of the global vehicle industry, including the
performance of the global aftermarket sector and the impact of vehicle
parts' longer product lives;
-- 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 OE manufacturer customers (on whom we depend for a significant
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);
-- risks inherent in operating a multi-national company, including economic
conditions, such as currency exchange and inflation rates, political
conditions in the countries where we operate or sell our products,
adverse changes in trade agreements, tariffs, immigration policies,
political instability, 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 impact of improvements in automotive parts on aftermarket demand for
some of our products;
-- industry-wide 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 and the availability and effectiveness
of legal protection for our innovations and brands;
-- 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 impact 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,
goodwill, and other intangible assets or the inability to fully realize
our deferred tax assets;
-- the negative impact 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 impact of any such cost increases
through materials substitutions, cost reduction initiatives, customer
recovery and other methods;
-- changes by the Financial Accounting Standards Board ("FASB") or the
Securities and Exchange Commission ("SEC") of generally accepted
accounting principles or other authoritative guidance;
-- 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 impact 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;
-- 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 impact 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, this release includes forward-looking statements regarding the Company's ongoing review of strategic alternatives and the planned separation of the Company into a powertrain technology company and an aftermarket and ride performance company. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include (in addition to the risks set forth above):
-- the ability to identify and consummate strategic alternatives that yield
additional value for shareholders;
-- the timing, benefits and outcome of the Company's strategic review
process;
-- the structure, terms and specific risk and uncertainties associated with
any potential strategic alternative;
-- potential disruptions in our business and stock price as a result of our
exploration, review and pursuit of any strategic alternatives;
-- the possibility that the Company may not complete the separation of the
aftermarket and ride performance business from the powertrain technology
business (or achieve some or all of the anticipated benefits of such a
separation);
-- the ability to retain and hire key personnel and maintain relationships
with customers, suppliers or other business partners;
-- the potential diversion of management's attention resulting from the
separation;
-- the risk that the combined company and each separate company following
the separation will underperform relative to our expectations;
-- the ongoing transaction costs and risk we may incur greater costs
following the separation of the business;
-- the risk the spin-off is determined to be a taxable transaction;
-- the risk the benefits of the separation may not be fully realized or may
take longer to realize than expected;
-- the risk the separation may not advance our business strategy; and
-- the risk the transaction may have an adverse effect on existing
arrangements with us, including those related to transition,
manufacturing and supply services and tax matters.
The risks included here are not exhaustive. 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, 2019.
Investor inquiries:
Linae Golla
847-482-5162
lgolla@tenneco.com
Rich Kwas
248-849-1340
rich.kwas@tenneco.com
Media inquiries:
Bill Dawson
847-482-5807
bdawson@tenneco.com
ATTACHMENT 1
TENNECO INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Unaudited
(dollars in millions, except share and per share amounts)
Three Months Ended
March 31,
2020 2019
---
Net sales and operating revenues:
Clean Air - Value-add revenues $
845 $
1,073
Clean Air - Substrate sales 700 706
Powertrain 997 1,175
Motorparts 706 797
Ride Performance 588 733
Total net sales and operating revenues 3,836 4,484
Costs and expenses:
Cost of sales (exclusive of depreciation and
amortization) 3,339 3,870
Selling, general, and administrative 249 318
Depreciation and amortization 171 169
Engineering, research, and development 77 92
Restructuring charges and asset impairments 484 16
Goodwill and intangible impairment charge 383 60
Total costs and expenses 4,703 4,525
Other income (expense):
Non-service pension and other postretirement
benefit (costs) credits 1 (2)
Equity in earnings (losses) of nonconsolidated
affiliates, net of tax 13 16
Other income (expense), net 8 3
22 17
Earnings (loss) before interest expense,
income taxes, and noncontrolling interests (845) (24)
Interest expense (75) (81)
Earnings (loss) before income taxes and
noncontrolling interests (920) (105)
Income tax (expense) benefit 94
Net income (loss) (826) (105)
Less: Net income (loss) attributable to
noncontrolling interests 13 12
Net income (loss) attributable to Tenneco Inc. $
(839) $
(117)
Basic earnings (loss) per share:
Earnings (loss) per share $
(10.34) $
(1.44)
Weighted average shares outstanding 81.2 80.9
Diluted earnings (loss) per share:
Earnings (loss) per share $
(10.34) $
(1.44)
Weighted average shares outstanding 81.2 80.9
ATTACHMENT 1
TENNECO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(dollars in millions)
March 31, December 31,
2020 2019
Assets
Cash and cash equivalents $
767 $
564
Restricted cash 3 2
Receivables, net 2,242 (a) 2,538 (a)
Inventories 2,001 1,999
Prepayments and other
current assets 623 632
Other noncurrent assets 3,576 3,864
Property, plant and
equipment, net 3,012 3,627
Total assets $
12,224 $
13,226
Liabilities and Shareholders' Equity
Short-term debt, including
current maturities of
long-term debt $
175 $
185
Accounts payable 2,443 2,647
Accrued compensation and
employee benefits 294 325
Accrued income taxes 96 72
Accrued expenses and other
current liabilities 968 1,070
Long-term debt 5,837 (b) 5,371 (b)
Deferred income taxes 84 106
Pension and postretirement
benefits 1,109 1,145
Deferred credits and other
liabilities 497 490
Redeemable noncontrolling
interests 72 196
Tenneco Inc. shareholders'
equity 384 1,425
Noncontrolling interests 265 194
Total liabilities,
redeemable noncontrolling
interests, and equity $
12,224 $
13,226
March 31, December 31,
2020 2019
(a) Accounts receivable net of:
Accounts receivable
outstanding and
derecognized $
1,061 $
1,037
(b) Long-term debt composed of:
Revolver Borrowings $
700 $
183
LIBOR plus 1.75% Term Loan
A due 2019 through 2023 1,584 1,608
LIBOR plus 3.00% Term Loan
B due 2019 through 2025 1,619 1,623
$225 million of 5.375% Senior Notes due 2024 222 222
$500 million of 5.000% Senior Notes due 2026 494 494
EUR415 million 4.875% Euro
Fixed Rate Notes due 2022 470 479
EUR300 million of Euribor
plus 4.875% Euro Floating
Rate Notes due 2024 334 340
EUR350 million of 5.000%
Euro Fixed Rate Notes due
2024 405 413
Other Debt, primarily
foreign instruments 12 13
5,840 5,375
Less: maturities classified
as current 3 4
Total long-term debt $
5,837 $
5,371
ATTACHMENT 1
TENNECO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(dollars in millions)
Three Months Ended
March 31,
2020 2019
---
Operating Activities
Net income (loss) $
(826) $
(105)
Adjustments to reconcile net income (loss) to cash provided
(used) by operating activities:
Goodwill and intangible impairment charge 383 60
Depreciation and amortization 171 169
Deferred income taxes (166) (8)
Stock-based compensation 2 7
Restructuring charges and asset impairments,
net of cash paid 454 (14)
Change in pension and other postretirement
benefit plans (19) (17)
Equity in earnings of nonconsolidated
affiliates (13) (16)
Cash dividends received from nonconsolidated
affiliates 13 15
Changes in operating assets and liabilities:
Receivables 139 (312)
Inventories (73) 11
Payables and accrued expenses (136) 157
Accrued interest and income taxes 29 (38)
Other assets and liabilities (110) (59)
Net cash (used) provided by operating
activities (152) (150)
Investing Activities
Acquisitions, net of cash acquired - (158)
Proceeds from sale of assets 2 1
Net proceeds from sale of business - 22
Cash payments for property, plant and equipment (137) (210)
Proceeds from deferred purchase price of
factored receivables 56 60
Other 2 2
Net cash (used) provided by investing
activities (77) (283)
Financing Activities
Proceeds from term loans and notes 67 28
Repayments of term loans and notes (84) (64)
Debt issuance costs of long-term debt (8)
Borrowings on revolving lines of credit 3,161 2,119
Payments on revolving lines of credit (2,659) (1,981)
Issuance of common shares (1) (2)
Cash dividends - (20)
Net increase (decrease) in bank overdrafts (2) (1)
Other 11 (3)
Distributions to noncontrolling interest
partners (2) (1)
Net cash (used) provided by financing
activities 483 75
Effect of foreign exchange rate changes on
cash, cash equivalents and restricted cash (50) 19
Increase (decrease) in cash, cash equivalents
and restricted cash 204 (339)
Cash, cash equivalents and restricted cash,
beginning of period 566 702
Cash, cash equivalents and restricted cash, end
of period $
770 $
363
Supplemental Cash Flow Information
Cash paid during the period for interest $
67 $
74
Cash paid during the period for income taxes,
net of refunds $
41 $
43
Lease assets obtained in exchange for new
operating lease liabilities $
51 $
19
Non-cash Investing and Financing Activities
Period end balance of trade payables for
property, plant and equipment $
96 $
101
Deferred purchase price of receivables factored
in the period $
60 $
58
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
(dollars in millions, except per share amounts)
Q1 2020
Q1 2019
Net income Per Share Net income Income tax EBIT EBITDA Net income
Per Net income Income EBIT EBITDA
(loss) (loss) (expense) (3) (loss) Share (loss) tax (3)
attributable attributable benefit attributable attributable
to to (expense)
to Tenneco noncontrolling to Tenneco noncontrolling benefit
Inc. interests Inc. interests
---
Earnings (Loss)
Measures $
(839) $
(10.34) $
13 $
94 $
(845) $
(674) $
(117) $
(1.44) $
12
$ $
(24) $
145
Adjustments:
Restructuring and
related expenses
(5) 31 0.38 (8) 39 34 16 0.19 1 (3) 20 17
Goodwill and
intangible
impairment charge
(6) 366 4.52 5 (12) 383 383 60 0.74 60 60
Asset impairments
(7) 371 4.57 7 (93) 471 471
Acquisition and
expected separation
costs (8) 19 0.23 (6) 25 25 32 0.39 (8) 40 40
Cost reduction
initiatives (9) - 6 0.07 (2) 8 8
Costs to achieve
synergies (10) - 6 0.08 (1) 7 7
Purchase accounting
charges (11) - 34 0.42 (7) 41 41
Process
harmonization (12) - 7 0.09 (2) 9 9
Noncontrolling
interests
adjustments (13) 11 0.14 (11)
Net tax adjustments 15 0.19 15 (2) (0.02) (2)
Adjusted Net income,
EPS, NCI, Tax,
EBIT, and EBITDA
(4) $
(26) $
(0.31) $
14 $
(10) $
73 $
239 $
42 $
0.52 $
13 $
(25) $
161 $
327
Q1 2020
Global Segments
Clean Powertrain Motorparts Ride Total Corporate Total
Air Performance
---
Net income (loss) attributable to
Tenneco Inc. $
(839)
Net income (loss) attributable to
noncontrolling interests 13
Net income (loss) (826)
Income tax (expense) benefit 94
Interest expense (75)
EBIT, Earnings (Loss) before interest
expense, income taxes and
noncontrolling interests (845)
Depreciation and amortization 171
Total EBITDA including
noncontrolling interests
(3) $
99 $
(70) $
(40) $
(577) $
(588) $
(86) $
(674)
Restructuring and related
expenses(5) 1 3 25 29 5 34
Goodwill and intangible
impairment charge (6) - 160 110 113 383 383
Asset impairments (7) - 455 455 16 471
Acquisition and expected
separation costs (8) 4 4 21 25
Adjusted EBITDA (4) $
104 $
90 $
73 $
16 $
283 $
(44) $
239
Q1 2019
Global Segments
Clean Powertrain Motorparts Ride Total Corporate Total
Air Performance
---
Net income (loss) attributable to
Tenneco Inc. $
(117)
Net income (loss) attributable to
noncontrolling interests 12
Net income (loss) (105)
Income tax (expense) benefit
Interest expense (81)
EBIT, Earnings (Loss) before interest
expense, income taxes and
noncontrolling interests (24)
Depreciation and amortization 169
Total EBITDA including
noncontrolling interests
(3) $
131 $
113 $
45 $
(45) $
244 $
(99) $
145
Restructuring and related
expenses(5) 4 1 1 10 16 1 17
Cost reduction
initiatives (9) - 8 8
Acquisition and expected
separation costs (8) - 40 40
Costs to achieve
synergies (10) 1 3 3 7 7
Purchase accounting
charges (11) - 2 36 3 41 41
Goodwill impairment
charge (6) - 60 60 60
Process harmonization
(12) 4 5 9 9
Adjusted EBITDA (4) $
140 $
116 $
90 $
31 $
377 $
(50) $
327
_________________________________
(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) Adjusted results are 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 periods. Similar adjustments 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.
(5) Q1 2020 includes $5 million and Q1 2019 includes $3 million of
accelerated depreciation related to plant closures.
(6) Non-cash asset impairment charge related to goodwill and
intangibles.
(7) Asset impairment charges.
(8) Costs related to acquisitions and costs related to expected
separation.
(9) Costs related to cost reduction initiatives.
(10) Costs to achieve synergies related to the Acquisitions.
(11) This primarily relates to a non-cash charge to cost of sales
for the amortization of the inventory fair value step-up recorded
as part of the Acquisitions.
(12) Charge due to process harmonization.
(13) Amount relates to adjustments made to mark certain redeemable
noncontrolling interests to their redemption values.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP REVENUE MEASURES(2)
Unaudited
(dollars in millions except percents)
Q1 2020
Revenues Substrate Sales Value-add Currency Value-add
Revenues Impact on Revenues
Value-add excluding
Revenues Currency
---
Clean Air $
1,545 $
700 $
845 $
(19) $
864
Powertrain 997 997 (26) 1,023
Motorparts 706 706 (19) 725
Ride Performance 588 588 (17) 605
Total Tenneco
Inc. $
3,836 $
700 $
3,136 $
(81) $
3,217
Q1 2019
Revenues Substrate Sales Value-add Currency Value-add
Revenues Impact on Revenues
Value-add excluding
Revenues Currency
---
Clean Air $
1,779 $
706 $
1,073
$ $
1,073
Powertrain 1,175 1,175 1,175
Motorparts 797 797 797
Ride Performance 733 733 733
Total Tenneco
Inc. $
4,484 $
706 $
3,778
$ $
3,778
Q1 2020 vs. Q1 2019 $ Change and % Change Increase (decrease)
Revenues % Change Value-add Adjusted % Change
Revenues excluding
Currency
Clean Air $
(234) (13) $
(209) (19)
% %
Powertrain (178) (15) (152) (13)
% %
Motorparts (91) (11) (72) (9)
% %
Ride Performance (145) (20) (128) (17)
% %
Total Tenneco Inc. $
(648) (14) $
(561) (15)
% %
__________________________________
(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.
Error occurred while generating ASCII Content for table
Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q1 2020
LTM
---
Net income (loss) attributable to
Tenneco Inc. $
26 $
70 $
(313) $
(839) $
(1,056)
Net income (loss) attributable to
noncontrolling interests 19 8 75 13 115
Net income (loss) 45 78 (238) (826) (941)
Income tax (expense) benefit (14) 9 (14) 94 75
Interest expense (82) (79) (80) (75) (316)
EBIT, Earnings (Loss) before
interest expense, income taxes
and noncontrolling interests 141 148 (144) (845) (700)
Depreciation and amortization 169 165 170 171 675
Total EBITDA including
noncontrolling interests (2) $
310 $
313 $
26 $
(674) $
(25)
Adjustments:
Restructuring and related expenses 57 28 36 34 155
Goodwill and intangible impairment
charge (6) 9 172 383 564
Asset impairments (7) 471 471
Acquisition and expected
separation costs (8) 27 30 30 25 112
Cost reduction initiatives (9) 2 6 (1) 7
Costs to achieve synergies (10) 7 7 8 22
Purchase accounting charges (11) 3 11 2 16
Process harmonization (12) 1 16 17
Warranty charge (13) 7 1 8
Antitrust reserve change in
estimate (14) (9) (9)
Brazil tax credit (15) (22) (22)
Out of period adjustment (16) 5 5
Impairment of assets held for sale 8 8
Pension charges/adjustments (17) (2) (2)
Total Adjusted EBITDA including
noncontrolling interests (3) $
414 $
387 $
287 $
239 $
1,327
Q2 2018* Q3 2018* Q4 2018 Q1 2019 Q1 2019 LTM
---
Net income (loss) attributable to
Tenneco Inc. $
47 $
57 $
(109) $
(117) $
(122)
Net income (loss) attributable to
noncontrolling interests 16 9 17 12 54
Net income (loss) 63 66 (92) (105) (68)
Income tax (expense) benefit (26) (22) 10 (38)
Interest expense (22) (24) (79) (81) (206)
EBIT, Earnings (Loss) before
interest expense, income taxes
and noncontrolling interests 111 112 (23) (24) 176
Depreciation and amortization 60 60 165 169 454
Total EBITDA including
noncontrolling interests (2) $
171 $
172 $
142 $
145 $
630
Adjustments:
Restructuring and related expenses 21 12 17 17 67
Goodwill impairment charge (6) 3 60 63
Acquisition and expected
separation costs (8) 18 12 53 40 123
Cost reduction initiatives (9) 10 8 8 26
Costs to achieve synergies (10) 9 4 49 7 69
Purchase accounting charges (11) 106 41 147
Process harmonization (12) 9 9
Anti-dumping duty charge (18) 16 16
Pension charges/adjustments (17) 3 3
Environmental charge (19) 4 4
Litigation settlement accrual 10 10
Loss on debt modification (20) 10 10
Total Adjusted EBITDA including
noncontrolling interests (3) $
233 $
210 $
407 $
327 $
1,177
Legacy Federal-Mogul Reconciliation of Non-GAAP earnings measures
---
Q2 2018 Q3 2018
Net income (loss) attributable to
Federal-Mogul $
25 $
35
Net income (loss) attributable to
noncontrolling interests 3 1
Net income (loss) 28 36
Income tax (expense) benefit (13) (16)
Interest expense (52) (49)
EBIT, Earnings (Loss) before
interest expense, income taxes
and noncontrolling interests 93 101
Depreciation and amortization 96 99
Total EBITDA including
noncontrolling interests (2) $
189 $
200
Adjustments:
Restructuring charges and asset
impairments, net 15
Transaction related costs 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 1
Total Adjusted EBITDA including
noncontrolling interests (3) $
209 $
156
Q2 2018* Q3 2018* Q4 2018 Q1 2019 Q1 2019 LTM
---
Adjusted EBITDA and Pro forma
Adjusted EBITDA including
noncontrolling interests (2) (3)
(5) $
442 $
366 $
407 $
327 $
1,542
_______________________________
* Financial results for Q2 and Q3 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 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) Non-cash asset impairment charge related to goodwill and
intangibles.
(7) Asset impairment charges.
(8) Costs related to acquisitions and costs related to expected
separation.
(9) Costs related to cost reduction initiatives.
(10) Costs to achieve synergies related to the Acquisitions.
(11) This primarily relates to a non-cash charge to cost of sales
for the amortization of the inventory fair value step-up recorded
as part of the Acquisitions.
(12) Charge due to process harmonization.
(13) Charge related to warranty. Although Tenneco regularly incurs
warranty costs, this specific charge is of an unusual nature in
the period incurred.
(14) Reduction in estimated antitrust accrual.
(15) Recovery of value-added tax in a foreign jurisdiction.
(16) Inventory losses attributable to prior periods.
(17) Charges related to pension derisking and other adjustments.
(18) Charge due to retroactive application of anti-dumping duty on
a supplier's products.
(19) 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.
(20) Loss on debt modification.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP REVENUE MEASURES(2)
Unaudited
(dollars in millions)
Q1 2020
Revenues Currency Revenues Substrate Value-add
Excluding Sales Revenues
Currency Excluding Excluding
Currency Currency
---
Original
equipment
light vehicle
revenues $
2,394 $
(50) $
2,444 $
598 $
1,846
Original
equipment
commercial
truck, off-
highway,
industrial and
other revenues 736 (28) 764 118 646
Aftermarket
revenues 706 (19) 725 725
Net sales and
operating
revenues $
3,836 $
(97) $
3,933 $
716 $
3,217
Q1 2019
Revenues Currency Revenues Substrate Value-add
Excluding Sales Revenues
Currency Excluding Excluding
Currency Currency
---
Original
equipment
light vehicle
revenues $
2,792
$ $
2,792 $
591 $
2,201
Original
equipment
commercial
truck, off-
highway,
industrial and
other revenues 895 895 115 780
Aftermarket
revenues 797 797 797
Net sales and
operating
revenues $
4,484
$ $
4,484 $
706 $
3,778
__________________________________
(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
(dollars in millions except percents)
Q1 2020
Global Segments
Clean Air Powertrain Motorparts Ride Total Corporate Total
Performance
---
Net sales
and
operating
revenues $
1,545 $
997 $
706 $
588 $
3,836
$ $
3,836
Less:
Substrate
sales 700 700 700
Value-add
revenues $
845 $
997 $
706 $
588 $
3,136
$ $
3,136
EBITDA $
99 $
(70) $
(40) $
(577) $
(588) $
(86) $
(674)
EBITDA as a
% of % % % % % %
revenue 6.4 (7.0) (5.7) (98.1) (15.3) (17.6)
EBITDA as a
% of % % % % % %
value-add
revenue 11.7 ` (7.0) (5.7) (98.1) (18.8) (21.5)
Adjusted
EBITDA $
104 $
90 $
73 $
16 $
283 $
(44) $
239
Adjusted
EBITDA as % % % % % %
a % of
revenue 6.7 9.0 10.3 2.7 7.4 6.2
Adjusted
EBITDA as % % % % % %
a % of
value-add
revenue 12.3 9.0 10.3 2.7 9.0 7.6
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
___________________________
(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. See prior
pages for a discussion of EBITDA and adjusted EBITDA.
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
(dollars in millions)
Q1 2020
Revenues Substrate Sales Value-add Revenues
---
Clean Air $
276 $
114 $
162
Powertrain 344 344
Ride Performance 116 116
Total Tenneco Inc. $
736 $
114 $
622
Q1 2019
Revenues Substrate Sales Value-add Revenues
---
Clean Air $
319 $
115 $
204
Powertrain 426 426
Ride Performance 150 150
Total Tenneco Inc. $
895 $
115 $
780
______________________________
(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.
View original content:http://www.prnewswire.com/news-releases/tenneco-reports-first-quarter-2020-results-301055375.html
SOURCE Tenneco Inc.
