FY 2019 First Quarter Earnings Call Improving the experience of a world in motion February 7, 2019
Important information Adient has made statements in this document that are forward-looking and, therefore, are subject to risks and uncertainties. All statements in this document other than statements of historical fact are statements that are, or could be, deemed “forward - looking statements” within the meaning of th e Private Securities Litigation Reform Act of 1995. In this document, statements regarding Adient’s future financial position, sales, costs, earnings, cash flows, other me asures of results of operations, capital expenditures or debt levels and plans, objectives, outlook, targets, guidance or goals are forward-looking statements. Words suc h as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “forecast,” “project” or “plan” or terms of similar meaning are also generally intended to identify forward-looking statements. Adient cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, som e of which are beyond Adient’s control, that could cause Adient’s actual results to differ materially from those expressed or implied by such forward -looking statements, including, among others, risks related to: the impact of tax reform legislation through the Tax Cuts and Jobs Act, uncertainties in U.S. administrative policy regarding trade agreements, tariffs and other international trade relations, the ability of Adient to execute its SS&M turnaround plan, the ability of Adient to identify, recruit and retain key leadership, the ability of Adient to meet debt service requirements, the ability and terms of financing, general economic and business conditions, the strength of the U.S. or other economies, automotive vehicle production levels, mix and schedules, energy and commodity prices, the availability of raw materials and component products, currency exchange rates, the ability of Adient to effectively integrate the Futuris business, and cancellation of or changes to commercial arrangements. A detailed disc ussion of risks related to Adient’s business is included in the section entitled “Risk Factors” in Adient’s Annual Report on Form 10 -K for the fiscal year ended September 30, 2018 filed with the SEC on November 29, 2018 and quarterly reports on Form 10-Q filed with the SEC, available at www.sec.gov. Potential investors and others should consider these factors in evaluating the forward-looking statements and should not place undue reliance on such statements. The forward-looking statements included in this document are made only as of the date of this document, unless otherwise specified, and, except as required by law, Adient assumes no obligation, and disclaims any obligation, to update such statements to reflect events or circumstances occurring after the date of this document. In addition, this document includes certain projections provided by Adient with respect to the anticipated future performance of Adient’s businesses. Such projections reflect various assumptions of Adient’s management concerning the future performance of Adient’s businesses, which may or may not prove to be correct. The actual results may vary from the anticipated results and such variations may be material. Adient does not undertake any obligation to update the projections to reflect events or circumstances or changes in expectations after the date of this document or to reflect the occurrence of subsequent events. No representations or warranties are made as to the accuracy or reasonableness of such assumptions or the projections based thereon. This document also contains non- GAAP financial information because Adient’s management believes it may assist investors in evaluating Adient’s on -going operations. Adient believes these non-GAAP disclosures provide important supplemental information to management and investors regarding financial and business trends relating to Adient’s financial condition and results of operations. Investors should not consider these non -GAAP measures as alternatives to the related GAAP measures. A reconciliation of non-GAAP measures to their closest GAAP equivalent are included in the appendix. Reconciliations of non-GAAP measures related to FY2019 guidance have not been provided due to the unreasonable efforts it would take to provide such reconciliations. FY 2019 First Quarter Earnings Call / Feb 7, 2019 2 Adient – Improving the experience of a world in motion
Agenda Introduction Mark Oswald Vice President, Global Investor Relations Business update Douglas Del Grosso President and Chief Executive Officer Financial review Jeffrey Stafeil Executive Vice President and Chief Financial Officer Q&A FY 2019 First Quarter Earnings Call / Feb 7, 2019 3 Adient – Improving the experience of a world in motion
Recent developments Q2 2018 key takeaways > Internal and external challenges faced in FY18 continued into Q1FY19; actions taken to improve ADNT’s financial performance should become visible as we progress through FY19 ‒ Q1 revenue of $4.2B, down $46M y-o-y ‒ Q1 Adjusted-EBITDA of $176M 1 , down $90M y-o-y ‒ Q1 Adjusted-EPS of $0.31 1 ‒ Cash and cash equivalents of $406M at Dec. 31, 2018 ‒ Gross and net debt totaled $3,409M and $3,003M, respectively, at Dec. 31, 2018 1 > Amended ADNT’s credit facility, to move to a Net Secured Leverage covenant ‒ The change from a Total Net Leverage covenant was well supported by the ADNT bank group ‒ The amendment is expected to provide stability and flexibility as we evaluate refinancing options > Customer and platform diversification continues to strengthen with new business wins and replacement business; recently secured complete seat business for the next generation Ford F-150, BMW 7-Series, a significant program with a Japanese manufacturer and various programs in China > ADNT continues to receive accolades in the seat quality category, receiving 21 J.D. Power China Initial Quality Study awards in 2018 1 – For Non-GAAP and adjusted results, see appendix for detail and reconciliation to U.S. GAAP FY 2019 First Quarter Earnings Call / Feb 7, 2019 4 Adient – Improving the experience of a world in motion
Margin potential and CEO observations from first 100 days CEO observations of 100-day assessment Benchmarking our performance 12% > Leading customer position • Diversified revenue with #1 market share in largest markets (NA & China) Closest peer 8.5 – 9% 2 • #1 or 2 position in most other markets 8% > Capability to selectively vertically integrate in major Adjusted EBITDA % Gap to markets 7.4% closest peer 6.8% ~ 400 bps 3 > Extremely attractive JV mix in China with strong cash capitalization (monetize where possible) 4.7% 4% > Structural ROIC disadvantage through higher complexity in SS&M business > Significant operational challenges (i.e., launches & uncompetitive cost structure) 0% > Focus on growth has reduced focus on commercial FY 2016 FY 2017 FY 2018 1 ADNT (excl. Equity Inc) recoveries from things like program scope changes 1 - For Non-GAAP and adjusted results, see appendix for detail and reconciliation to U.S. GAAP and economic recoveries 2 - Based on external reports revised to align with ADNT fiscal year and Adjusted EBITDA 3 – Components of margin gap include; ~ 200-250 bps SS&M recovery/downsize, ~ 100-150 bps core seating improvements, and ~ 50 bps China JV infrastructure, There are no structural reasons ADNT’s margins should not be comparable to its peers; however, it will take time to correct the past and close the gap FY 2019 First Quarter Earnings Call / Feb 7, 2019 5 Adient – Improving the experience of a world in motion
Key actions - transitioning from CEO 100-day plan Fix and prevent Commercial Strengthen Focus on core operational / launch Downsize SS&M “back -to- basics” discipline balance sheet problems > Re-establish business > Problem plant focus > Anticipated new credit > Focus on tier 1 business > Economics / surcharge / mindset with clear agreement with flexibility tariff / FX recoveries > Redirect resources to > Downsize tier 2 business accountability and liquidity to manage eliminate operational (today 55% - 60% tier 2) > Re-establish VA/VE through turnaround > Reduce / eliminate waste activities to drive material > Achieve cash flow > China JVs have over $1B non-essential spending costs down neutrality by 2021 at a > Tighter / true assessment in net cash – implement > Divest non-core of future launch risks minimum > Replace / exit bad monetization ideas businesses / assets customers / programs > Selective outsourcing > Focus on cash flow > Cut / downsize side > Focus on profitable improvements across investment growth / ROIC with company (tooling, capex, product / customer / working capital, etc.) region strategy First 180+ days Day 181+ FY 2019 First Quarter Earnings Call / Feb 7, 2019 6 Adient – Improving the experience of a world in motion
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