Barclays Global Automotive Conference - November 18, 2020 NYSE: TEN - Tenneco
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Barclays Global Automotive Conference November 18, 2020 NYSE: TEN
Safe Harbor
Forward-Looking Statements
This communication contains forward-looking statements. These forward-looking statements include, but are not limited to, (i) all statements, other than
statements of historical fact, included in this communication that address activities, events or developments that we expect or anticipate will or may occur in the
future or that depend on future events and (ii) statements about our future business plans and strategy and other statements that describe Tenneco’s outlook,
objectives, plans, intentions or goals, and any discussion of future operating or financial performance. These forward-looking statements are included in various
sections of this communication and the words “may,” “will,” “believe,” “should,” “could,” “plan,” “expect,” “anticipate,” “estimate,” and similar expressions (and
variations thereof) are intended to identify forward-looking statements. Forward-looking statements included in this communication concern, among other things,
future performance improvement plans; future financial and operating results; and other statements that are not historical facts. Forward-looking statements are
subject to a number of risks and uncertainties that could cause actual results to materially differ from those described in the forward-looking statements, including
the course of the COVID-19 pandemic and its impact on general economic, business and market conditions: our ability (or inability) to execute on our plans to
respond to the COVID-19 pandemic and our previously announced Accelerate plan and to realize the anticipated benefits of these actions; our financial flexibility
in addressing the impact of the COVID-19 pandemic; our ability to maintain compliance with the agreements governing our indebtedness and otherwise have
sufficient liquidity through the COVID-19 pandemic; the possibility that Tenneco may not complete a separation of the Aftermarket & Ride Performance business
from the Powertrain Technology business; the possibility that Tenneco will be unable to execute on its strategy and maintain compliance with the covenants in its
Credit Agreement; the ability to retain and hire key personnel and maintain relationships with customers, suppliers or other business partners; as well as the risk
factors and cautionary statements included in Tenneco's periodic and current reports (Forms 10-K, 10-Q and 8-K) filed from time to time with the SEC. Given these
risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Unless otherwise indicated, the
forward-looking statements in this presentation are made as of the date of this communication, and, except as required by law, Tenneco does not undertake any
obligation, and disclaims any obligation, to publicly disclose revisions or updates to any forward-looking statements. Additional information regarding these risk
factors and uncertainties is detailed from time to time in the company's SEC filings, including but not limited to its annual report on Form 10-K for the year ended
December 31, 2019 and quarterly reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020.
In addition, please see Tenneco’s press release issued November 2, 2020 for factors that could cause Tenneco’s future performance to vary from the expectations
expressed or implied by the forward-looking statements herein. Please see Tenneco’s press releases issued November 2, 2020 and March 2, 2020 for certain
reconciliations of GAAP to non-GAAP results.
2
Tenneco Overview
Scale and diversification in product lines, end markets and regions
CTOH, Industrial
& Other
14%
40%
Clean Air EMISSIONS/
Ride ENGINE
Performance Product
OE Light
$2.7 Applications 54%
Vehicle
Aftermarket VA Revenue
32%
$4.1 & OES 14%
SUSPENSION/
Clean Air/ Operating CHASSIS
DRiV
TM
Powertrain
DIVISION Segments DIVISION
VA Revenue
$3.2
$4.4 China
Powertrain Motorparts 11% 43% North America
ROW 9% Regions
VA Revenue
2019 Revenue
$17.5B Revenue
$14.4B Value-add (VA) Revenue 37%
Europe
3
Building a Stronger Tenneco
Performance Focus - Margin Expansion & Cash Generation
Reduce Lower Capital Optimize Business Invest in
Structural Cost Intensity Line Portfolio Growth Targets
• Execute Accelerate+ • Improve capex/revenue • Value Stream Simplification • Motorparts – top 3 markets
program ratio - 80/20 value analytics • Advanced Suspension
• Lean corporate & operating • Expand working capital • Align business lines to Technologies
group structure turns portfolio positions • NVH Performance Materials
– Inventory driven • Divest/discontinue non- • Large Engine Solutions
core business lines (CTOHI)
Optimizing shareholder value creation through debt reduction focus
and targeted growth investments
4
Accelerate+ and Other Cost Reductions
Accelerate+ structural cost actions; program on track for expected $265M
annual run rate savings* by end of 2021; $250M cost to achieve
• End of 2020, $165M run rate savings ($150M cost to achieve)
• End of 2021, $265M run rate savings (additional $100M cost to achieve)
Accelerate+ working capital improvements; on track for one-time $250M
improvement by end of 2021
• Half to be realized in 2020
Temporary actions taken in Q3 to mitigate COVID-19 impacts
• Q3 salary costs reduced at least 10% (salary reductions or unpaid furloughs)
• Temporary and other one-time benefits of ~$50M in Q3 will not repeat
Structural cost savings build and continue to benefit operating performance
over the long-term
*Run rate savings measured from 2019 base year. 5
Liquidity and Debt Position
Paid down revolver, reduced Addressing next significant
Optimize cash performance
net debt, increased liquidity debt maturity (April 2022)
• Paid down revolver by $1.1B in Q3; • Focused on reducing capital intensity • On November 13, 2020, announced
balance drawn of $0.4B at quarter end ‒ Continue to expect 2020 capex pricing of new $500M 7.875%
• Net debt of $5.1B; reduced by $429M ~$380M; significant reduction from Senior Secured Notes due 2029
in Q3 as we work to optimize cash $744M in 2019 • Redeeming FM €415M Senior
performance • Flex trade working capital and execute Secured Notes due April 2022 on
• Liquidity of $1.8B at quarter end cost actions December 14, 2020
‒ Improved from $1.4B at 6/30/20
‒ Net trade working capital • Remain fully compliant on all debt
improvements despite production covenants, with significant cushion
Q2’20: $5.5B
COVID impact ramp through Q3
H2 Target
$5.2B o Net trade working capital See Pro Forma debt maturity
$5.1B efficiency improved ~250 bps YoY
$5.0B schedule and more details
‒ Expect positive adjusted free cash
flow in Q4 on next page
Net
Debt:
Made significant progress in Q3 toward year end target
of net debt even with or better than YE 2019
YE 2019 Q1 Q2 Q3 YE 2020
See reconciliations of GAAP to non-GAAP financial metrics in Tenneco’s press release issued November 2, 2020. 6
Pro Forma Debt Maturity Profile
Debt maturities excluding subsidiary debt (Pro Forma for transaction):
$ millions
$1,800 New Notes Offering priced on
$1,678
$1,598 November 13, 2020
$1,600
• Tenneco has agreed to issue $500 million of
$1,400
7.875% Senior Secured Notes due January
2029 (the “Notes Offering”) with proceeds to
$1,200
be used to redeem the existing Federal-Mogul
$1,000 $987 Senior Secured Notes due 2022 (€415 million)
at the current call price of 101.219
$800
• The Notes Offering is expected to be leverage
$600
$500 $500 neutral, with bank covenant Pro Forma Net
Secured Leverage and Net Leverage of 4.6x
$400
and 5.5x, respectively
$187
$200 $145
$102 • This opportunistic refinancing will extend the
$0
Company’s maturity profile, resulting in the
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 nearest term maturity of 2023
TLA due Oct. 2023 TLB due Oct. 2025 • The Offering is expected to close on
Revolver Borrowings due Oct. 2023 4.875% Notes due Apr. 2022 (FM) November 30, 2020, subject to customary
4.875% FR Notes due Apr. 2024 (FM) 5% Notes due Jul. 2024 (FM) closing conditions.
5.375% Notes due Dec. 2024 (TEN) 5% Notes due Jul. 2026 (TEN)
New Sec. Notes due Jan. 2029
7Near-Term Performance Focus
Margin expansion and
Debt reduction
increased cash flow generation
• Executing Accelerate+ program • Confident that we will maintain
(by end of 2021) significant cushion on debt covenants,
‒ $265M run rate savings based on current macro outlook
‒ $250M working capital reduction
• Free cash flow will continue to be
• Lowering both capex and working used to pay down debt
capital intensity
• Every $800M of debt reduction would
• Portfolio optimization add $10/share, all else equal
‒ Value Stream Simplification
‒ Opportunities to monetize non-core
product lines
• Continued investments in targeted
growth areas
Building a stronger Tenneco and enhancing shareholder value
8Appendix
9Appendix:
Tenneco Projections
Tenneco’s outlook for the fourth quarter of 2020 is as of November 2, 2020. Outlook assumptions are based on projected customer production
schedules, IHS Markit light vehicle production October 2020 forecasts, IHS Markit commercial truck August 2020 forecasts, Power Systems Research
October 2020 forecasts and Tenneco estimates. Furthermore:
• Projections are based on original equipment manufacturers’ programs that have been formally awarded to the company; programs where the
company is highly confident that it will be awarded business based on informal customer indications consistent with past practices; and Tenneco's
status as supplier for the existing programs and its relationship with customers.
• Projections are based on the anticipated pricing of each program over its life.
• Except as otherwise indicated, projections assume a fixed foreign currency value. This value is used to translate foreign business to the U.S. dollar.
• Projections are subject to increase or decrease due to changes in customer requirements, customer and consumer preferences, the number of
vehicles actually produced by our customers, and pricing.
In addition to the information set forth herein, Tenneco’s projections are based on the type of information set forth under “Order Fulfillment” in Item 1 –
“Business” as set forth in Tenneco’s Annual Report on Form 10-K for the year ended December 31, 2019. Please see that disclosure for further
information.
Certain elements of the restructuring and related expenses, legal settlements, substrate pricing, and other unusual charges we incur from time to time
cannot be forecasted accurately. In this respect, we are not able to forecast corresponding GAAP measures without unreasonable efforts on account of
these factors and other factors not in our control.
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