TEN - Earnings call transcript Q1 2018

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Operator

Good morning, ladies and gentlemen. And welcome to the Tenneco Inc.

First Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. that is note recorded. Please Instructions] this being event [Operator to would conference President At I like of hand Relations. Vice this time, Golla, now the Linae over Investor to ahead. go Please

Linae Golla

first section On our Trammell, today morning. related of we This are Hollar, Thank the questions. you Chief call Senior website. and the on Executive Vice Brian you. information. released to Financial Kesseler, to slides Good Chief our our financial Jason related The quarter available up prepared through and comments, morning, results take Officer; earnings Ken the our Finance. Investors our After open we are comments President, will for call Officer;

that press are available we earnings reconciled which will discussion attachments are today on release release GAAP and website. all our Before aware include in measures attachments. of please with begin, The our our non-GAAP be on information financial measures,

statements. our over from Additionally, in with include will in forward-looking statements. call will forward-looking some that, materially differ Brian. keep could And I that our turn of those of results our the Please mind to any comments projected actual

Brian Kesseler

Good for morning, and call. our Linae. joining Thanks, thanks

include product Air, Aftermarket and change Performance Before our to Performance our results, global to lines a Air first aftermarket organization. in a Clean to and segment, aftermarket our in Ride Clean along reporting recently structured I I mention and operations which includes segments Ride want quarter into get both change We results. made

structure. So align these current segments our with management

combine Ride and be two will facilitate our In will the of segments and powertrain separation acquisition into Performance, will companies, one addition, new help other focused. Federal-Mogul, reporting these the since after Aftermarket

Performance production we strong in constant the Slide highlights on by Revenue and first gains. Clean Ride & and Advanced Ride revenue currency quarter on X, technologies Air fueled to Off-Highway growth. X% revenue, both up once outpaced again, in Performance now drove up growth a value-add was quarter Truck delivering a record, first growth organic Turning and double-digit suspension X% industry in basis. Commercial

EBIT, per the for higher records growth We also OE earnings that EBITDA, first all quarter on adjusted all in income applications. net and end-market revenue delivered strength of included top-line share,

the after our is a first $XX flow great million performance cash seasonally improved of quarter although, - we quarter of the use, first cash year. versus Finally, quarter on by last

customers returns X%, of the The X to Performance. up fourth down We Air closer was aftermarket in quarter. in by look very X, realigning strong sales also first a million revenue couple Ride global major quarter. Slide dividends continued with production industry a on to $XX percentage Taking America, the Clean outpacing in in due a their was shareholders, add at buying affected by positions levels value quarter gains points, in paying that and retail revenue X%, in inventory Europe North and

portfolio our truck revenue with balance growth continue end-market in commercial strong Our including favor, vehicle, off-highway. applications to and work light in

For continue. expect the to product diversification the value-add to we by see application. And contributions you this revenue quarter, can portfolio

by higher driven quarter. the Turning items vehicle Clean and incremental on year, three adjusted stronger light countered positive with were These margins on in to revenue. X, CTOH was Slide even and drivers EBIT earnings by last revenues, Air

driven quarter's margins. steel as this higher on at had of discussed year, last First, beginning we the year impact the tariff from an costs

we the As year. was improvement impact of quarters, expected, than that the end on trend to we're progress so expect continue and less making previous the through recovery mechanisms,

truck for had year. and a up higher relocating in to second program major our we production Ride related the Performance this Second, half launch ramp costs of

Tenneco to our improve capture future quarter, we last said competitiveness As these position opportunities. investments planned and

South China, aftermarket basis sales margin global had a impact. in growth America, aftermarket double-digit point the XX overall despite India Third, and lower

global team execute work on improvement our call the over to they our turn expectations every day do Before and I for Jason, plans. growth meet and to the thank our to want customers' I

excitement with on determination I'm XXXX a acquisition With this the call team's future is that, of split to to there unwavering of While the we for proud about and lot our into Tenneco's the deliver plan I'll year. turn new two focus Federal-Mogul set and over on goals purpose-built organizations. eventual the Jason.

Jason Hollar

Thanks, Brian.

up with the calculated performance with results Slide the the Clean are reminder revenue Air X% Beginning review that we numbers As results, quarter. constant X, year-over-year currency. segment revenue in all was in in value-add,

Development million launch system receiving in in Some Product hybrid programs, Supplier include: the as new $XX the annual winning India; selected being Deere's representing for Clean General quarter for the John the products; the and five revenue. of by Motors highlights for Air award New of treatment Year after new

at to contributed higher we for three programs Americas. revenue & the new The first Higher MAN, launched regulatory-driven all had a higher Commercial Truck off-highway growth drove and gains ramp-up content Looking Daimler, driven revenues and regions, by Tier revenue recently systems of for for X Deutz stronger combination and Off-Highway, volumes Deere program with Final Caterpillar John on Europe, and in in growth. geographic Deere, in volumes, launches EMEA. volumes Caterpillar and of John

New Air slightly content existing in down the revenue reflecting revenues lower for Pacific America, in year, light last X% industry Asia industry platforms North production Bharat region. year-over-year. In our Clean versus Japan vehicle and growth. were was IV programs India on those largest down Stage geographic off-highway with production higher drove in meet to regulations Kubota volumes

SVW as revenue an year. models Jetta Diesel in of changeover platform. new production EMEA improved lower Range the against X% Terrain increased launch ramp production. China. BMW industry In including region, volumes progress Clean A XX% in last ongoing quarter, This programs volumes also quarter. EBIT improve the region reflect Light driven on industry vehicle Daimler. These to due all Daimler was with and Asia the X% China reflecting revenue the OE $XXX but Pacific the revenue adjusted versus slightly, and VW CTOH the higher class, was incremental margin Golf, in by the decline were in overall Our B overall programs regions, SUV of outpacing several and including volumes revenue margin Air XX.X%. and Tiguan results by in with the on content were up to and flat impact recoveries Higher last in on performance and XX and X%, adjusted revenues actions SGM, growth on ending profitability, solid Equinox Discovery EBIT timing drove and the our GM alloy India million continued quarter in were year Ford current the Rover industry increased mainly in Australia. as models was outperformance customers Asia results of Pacific driven and to the higher with and VW higher well production the down on new F-XXX and

content we talked XX% in is which included ICE example Clean vehicles XXXX. to to hybrid a is grow is content majority hybridization in vehicle production application. opportunities. are typical Air growth XX%, now, similar have XX time how projected powertrains for Slide through electrified These hybrids. as growth. increase to expected at Furthermore, powertrains content an growth X XX% to value-add The creating is Euro CAGR about some For We've of a light

more the opportunities, as emissions underwriting battery is space packs, with running see system, Air plug-in engineered program you content. a a engine devoted X% performance content the addition, remember, acoustics. unique customer have as is doesn't time. and in incremental value-add of of so with the for regulation, our due XX% systems requirements. of to listed added content our amount offer requirements emissions to plug-in requires And Clean of driving to which highly the matter ICE more number to are here. hybrids significant regulations hybrids it meet In can whether comply has Both control And packaging engine must The time or well and the growth. hybrid wins hybrid it the It

Now, in was turning in Ride up quarter XX, to Slide XX%. Performance revenue the

include quarter, annual million highlights program the representing suspension in five wins Ride Performance quarter First $XX intelligent in revenue. from

a growth market and outperformed the very this Rover, on mainly EMEA electric with with battery new platforms second driven quarter, growth growth by overall suspension the mainly Americas, of growth vehicle. geographic Land higher new And content content FCA. is intelligent platforms, revenue again driven and General light our by volumes, recently content elastomer stronger Year with revenue this launched Ford delivered in VW we award, our NVH And with Motors quarter electric In on outpaced intelligent three higher for PSA. suspension for battery Continued VW. production new Supplier strong quarter and regions, content with Consistent the of a in gains higher each revenue. growth last new programs the with business. vehicle NVH vehicle, revenue NVH our one and on

and launched outpaced Ride with margin growth Daimler Truck, Asia X.X%. VW. and Paccar, to We production revenue quarter, million with in India current in China in higher EMEA by we strength with Hendrickson South also by Year-over-year in as in Volvo was Americas, and was continued Daimler. increased as EBIT growth recently FCA supported CTOH the with America. and business $XX EBIT volume was this double-digits revenue again in well grow volumes by and driven Performance Paccar as Pacific adjusted programs

Europe. continuing preparation second cost reflects the just margin strong both increases mainly launch and steel growth, in this driven half America platform of of they're truck year. and America, relocation the for Brian to And related major in top costs North the items, quarter North Our line results, The by mentioned. tariff-driven production the

were down included XX. results last in quarter - reminder, on was results and the the reporting revenue X% the with for Aftermarket The the segments, a segments Performance. longer new Slide Clean no versus for quarter year. new As Aftermarket Air reporting Aftermarket Ride

we XX% Walker During new growth, the numbers; North Installers. XX in mature revenue emission expanding shock boosting our with and wholesalers on XXX future including roughly new and in and coverage expand market in Monroe our numbers, control China, new and XXX presence North product quarter, coverage during investing strut accelerated continue Monroe distributor part new America markets by quarter, the adding quarter. market to and with In XX America, the customers part

total due couple major to retail of our their However, was revenue a lower realigning inventory positions. customers

order rates on slightly lower EMEA quarter mainly buying revenue South last improving in quarter. the However, fourth was revenues strong impacted Africa and were year-over-year conditions. timing due first to economic versus up year Aftermarket

and to Aftermarket in that, we adjusted America million to we're lower by see We networks in build China EBIT Asia-Pacific and Aftermarket North Earnings I'll revenues the Ken. from were in driven mainly to brands, margin and turn EBIT begin and the $XX call distribution over was XX.X%. solid our EMEA. continue was With results as to revenue see investments India. making growth

Kenneth Trammell

of acquisition $XX XX, Thanks, in Jason. year-over-year comparability. adjustments On Slide the I'll with quarter. incurred million the the affecting related costs start We to

we addition, million, expense accelerated in $XX In costs Beijing of recorded related Performance plant. including the Ride to move of restructuring related our

of facility We complete into the end expect to new by the XXXX. transition the

Lastly, to a North charge million, warranty $X related a issue America. we of recorded in

guidance Turning quarter that's an $XX the in to of rate expense quarter $XXX million. million before payments rate tax of was XX tax at year still the the our and payments adjustments, first quarter for to million XX%. effective full tax of effective expect $XX were the to $XXX tax XX% Cash million of we in for XX% Slide tax midpoint in the range year, cash full

point we for XXXX totaling well. million, we $XX million an cash the shareholders that expect FASB $XX number CapEx are accordance compared million range still been flow presented Capital million. out Slide full XX. million cash interpretation. to of to with relatively $X.XX in receivable want this operating performance year was of year-over-year. And $XX operating to to as in investing by the our were first and Brian have cash flow year. year to quarter reclassified from $XXX would strong I improving million. operations collections paid had on and $XXX million the quarter with reported million improved $XX investing expenditures said, of flow receivable to $XX flow quarter flow as comparable in last these collections, turning cash dividend this differently the in has $XX in Now, We cash Including by cash

net debt with Moving and to last $XX it's interest about up rate floating primarily that's was year. million, from rates expense Interest even year, due at quarter debt. end, million to higher Slide our $X,XXX was on last XX,

$XX of We expense continue million. interest million full range expect to $XX the year in to

a Our leverage X.X back the was ratio with ratio to that, And with year-ago. me times call Brian. let even turn

Brian Kesseler

for Ken. to Thanks, on Starting second quarter. XX our now Slide outlook the

outpace will XX% global production forecasted X% of That by current. revenue constant or expect growth in We light growth vehicle X%. industry

to about Air I expected to last about outpace Ride did to Global the growth at Aftermarket Clean roughly with Performance the will We rate to by revenue expected quarter anticipate flat pass-through is from increase year. expect and first We X% by outpace same industry revenue with as X% second be year. last industry

second in Today, full production and the with improvement from the revenue similar cadence year. our of our year margins with XXXX we currency, we quarter, to sequential Regarding reaffirming also outlook expect constant outpacing first the last second forecasted quarter X% in are first organic growth quarter, X%. industry by margin

new and China the off-highway launches, the in and for half due revenues. for CTOH year's strong future primarily products year-over-year investments year, to aftermarket, and technologies, continue position moderates program second build the the team time, comparison this advanced new to Our with markets. dedicated in of the outpace our truck At with commercial the suspension last and same we

investments revenue remain these to with year. expect anticipated our for and XXXX we continue last in roughly year growth, full line With margins to

now leaders on recap Through and strong we two Slide industry respective Federal-Mogul will purpose-built This their Turning two scale combination XX. strategic ultimate greater in drive our financial to markets. with long-term beginning ago transformational creation. flexibility value and each unique a strategic create announcement acquisition separation, this to two brief weeks focused with businesses the and creates of

Wagner, must treatment. Powertrain both will capabilities ride be safety. Technology growth in-cylinder will combustion on brands Aftermarket the Aftermarket company electrification, drive industry, criteria well Criteria pollutants Air complementary Slide business, to will OE in new company excellent create. more and in gases, an gears after one many to innovations Looking benefit braking, ride you first from premier established efficiently including industry. explosive it of globally This MOOG, for ultimately both Tenneco expertise to pollutant comfort the the differentiation The and future the both XX, the of portfolio how The by is and regulations. address XX, with the have the at suppliers that one the Performance Fel-Pro, most managed creates Ride a position. ride these world's have that of reinvent strong driving meeting on leading combined total established concurrently for the will from XXXX. capabilities the be the efficiency of of enable known a pure-play well of expected offering and steering Federal-Mogul processes Monroe, advanced the performance broad pollutants side putting Slide and multiline companies components world's and that two Switching foundation cost. China powertrain combined in and be behind with in distribution growth offering of around the capabilities position now options, a economy those can largest These Customers improve lines, and that competitive which the capturing capture see product in and channel as product multiple with and the foundation around powertrain major trends. be solutions braking markets, and It Clean and now strategically, architectures. more coverage enhanced it greenhouse strengths our largest of customers the company channels. development XX. will and Walker, for On it businesses is changing complete unique offering, technologies and fuel are by Powertrain set meet address to we'll suspension the aftermarket, wheel Slide fit at the will suspension as companies brands, strong the go-to-market strong will requirements system have The outstanding portfolio autonomous and lower the will while system capabilities optimizing criteria elevate

the on investor XX. XX Before past helpful meetings open questions, our answer the we thought questions Slide over frequently call we weeks and the be from it'd ask of two for to some

to I'll hand over first, The Jason.

Jason Hollar

key in with in integration of dedicated a questions process a integration We're integration the by to XX% to office underway to and transaction, two functional required application that already in engineering note product had of expect number structures lot due of work will when A We the unaffected business. we million team after around at and with standalone the of The leads process synergies already tasked to XX combined employees strong synergy to would $XXX rate complementary months to of I management those the Federal-Mogul the a are two, XX% closing. independent companies. manufacturing lines. anticipate identified the businesses end this are each is to of corporate work eventually at reduce with is start primarily and this to I earnings by Tenneco three the achieving least receive off about team nature separate The XX% place. transaction. potential and be and run

that we are revenue to We run best company, synergies $XXX additional and practice rate around combination The manufacturing which expect Performance these in Ride achieve $XX million. sharing of of supply the is on chain will are to and synergies and more through in SG&A million, come cost Aftermarket opportunities, achieve estimated the including In mid-term synergies. a the process. achievable working also

synergies the $XX supply-chain about cost and Powertrain Technology of will synergies also $XX from For business, million. to of a rate expect with we million run come SG&A That achieve.

Kenneth Trammell

number the questions of leverage about had transaction. this also a with We've

debt capital $XXX which to potential, significant is million reduced working synergy will least there go at including First, in synergies, levels. onetime

about averaged XX%. when Tenneco's any the payments, cash three conversion last look at free over flow it's Second, trust excluding we years,

mind the this resulted made doubled free of flow comfortable cash production. to that forward it's in growth quickly three think industry in buy back million that We're important to to we we reduce I underlying used use with investments free shares out to flow our cash our flow Also cash expect ability that and going over $XXX years. keep leverage. revenue that we generate during last to period point the

Brian Kesseler

to continue we if finally, changes due And anything and this questions electrification, on get to transaction.

will Aftermarket have evolve. electrification, as will to continue the leading positioned hybrid growth, with least capture The opportunities First, with technology company powertrain XXXX. new and powertrains agnostic powertrain to particularly also be opportunities company through Ride Performance content at electrification and

hybrid have recently programs cylinder meet content plug-in are content hybrid capabilities By new the for we have the technologies regulations will packaging the new hybrids, technology. are already also the innovative hybrid system acquired As available cost. said the bringing to to doing is to combustion treatment these we earlier, and and improve fuel we'll Federal-Mogul efficiency, ability same, business booked to optimize company winning after new together, treatment having reduce from after requirements and that and

every see your revenue new the we're Finally questions. Tenneco of company the industry-leading hard applications foundation on work truck, the closing, with exciting from will profitability new to and across that growth expected the the with We a in powertrain company's integration launch we'll around to growth across put companies. and our ahead new will trends. an diversified end With results position I plans. industry see roughly the be working industrial will that, And XX% for lay strong In strategies and working our work team believe its guide take aligned to begin customers. business. smart We they This diversification, we the portfolio future day. as two our of improve content of commercial off-highway and coupled capitalize the be hybrid is focused

Operator

Thank you.

now Goldman Instructions] session. of ahead. from And We first will [Operator question your Sachs. Please be Tamberrino the will go David begin question-and-answer

David Tamberrino

Thanks for our Thank taking you. morning. questions. Good

seeing first higher markets continue organic strong about guidance. is Just for off truck at about demand the for your that the the talking me, think the the to push you're in so off-highway should and end further. one revenue your pretty and seeing I - underlying tail some commercial it's and back-half we've of the of quarter, first But trends year. some been excuse first know I been least

because it So bit your and in little just, growth second caution, an as is quarter first abundance the of just well? organic strong looks a guide of quarter

Brian Kesseler

came David, it growth comps quarter, the half I are the year think launches last some a particularly in overall, in CTOH was of Europe. - that good year. third in on had versus We good the the second

balance now and transitions down comp we some And what in customers. And what half, CTOH in forward. happened ramp that so equally see hear going replace. up got from hear due the they our in to launches We've we with marketplace, vehicle it's - light kind the that plus we that as we that ramps the second of

So half second that's why bit. we a moderating see of that kind

David Tamberrino

are of impacted the you the looks for steel back-half? Is the The confidence for give implied And there it the you looks Got What coming? margins be guidance then throughout year. incremental us where year entire on shouldn't from it full quarter. a you from seeing commodities? an ramp this it. continue It that commodity your can headwind giving of the like update flat remainder is And a that's year? are then, the you be nice But there what updated the for kind guidance again recoveries headwind to calls the headwinds? is like towards -

Brian Kesseler

what to half of of last talked year, the what we so beginning we year. very similar we or at the about headwinds Yeah, about saw similar, saw

million of our we in range, locked still So XX% the see steel about for year. in buy that. $XX We've the

seeing negotiations with to got range, marketplace. be XX% running we in reasonable to recovery be get year. between we're making And the but and kind year very or standpoint, But as will in overall once be Actually, managed completed them, a enough expected. so of agreed not still mentioned we a about we'll progress indexed through We a got the two XX% through we've about XXX%, what we're left From year. North America Europe. customers we close we this some steel

that half I We'll of the the lapping second the we're start think of in year. making some increase progress. So year-over-year right

truck launching the thing launch we're major our ramps margin costs half relocation second start it the year starts from the from standpoint, that The this incurring for relocation of we'll standpoint, year. the and a a also in production through platform, other of

David Tamberrino

then to And now, be to the that Obviously, proposed transaction, you've there I on level? that together. if put lastly may, is the Okay. had just synergies outlined the for upside businesses

an you some. I level identify understand into think trying to might baked I'm just of opportunity may have then to have the figures. you those conservatism

Brian Kesseler

we million capital Yeah, what at the delivering million after them the into earnings in synergies we synergies have XX% rate $XXX the - XX close. on the put in in things side XX that getting $XXX or working in timeframe in and run earnings and that worked month very months run about rate, confident

actively process best mentioned sharing and some long-term. practice the kind now of initial will more that we will potentially look Jason that include synergy the the the we didn't of at we in As and midterm those - think also potential, primarily commentary, that come would manufacturing revenue synergies we're generate also communicated opportunities. inside those in but through looking really And additional

So to possible, work we're make still sure continue unpacking we're cost - we'll competitive of as course. and as just

David Tamberrino

Thank the you it. taking for Got questions.

Brian Kesseler

David. Thanks,

Operator

from The Securities. go next ahead. of Wells question will Kwas Please Fargo be Rich

Richard Kwas

Hi, good everyone. morning,

Kenneth Trammell

morning. Good

Brian Kesseler

Rich. morning, Good

Richard Kwas

course they complete trajectory we general? year year? of in are at think look down course or at over this as over And the point? this On inventory Is point you so X%, the the Aftermarket, largely China, adjustments of any meaningful Thanks. at this when what's complete contribution the the

Kenneth Trammell

got tale me grab one, of two of kind stories North Yeah, America. for here a as aftermarket we the - in let

distribution adjusting. couple holding to channel pretty whole it's of gains, and America well Our be really up North retailers seems that the in are making

first have it's which adjusted would gotten thought we over saw still in but the already, One fully of we quarter.

the being we a flattish installer forward. XXXX China see that distributor and the good QX materializing decade a market of perspective, growth beginning can aftermarket market the in going going really in will we As from we start see perspective. meaningfully From overall mentioned forward. XX% presence But mentioned, you growth, -

all generating it distribution, that much also we're into we're of all product pretty there coverage, money taking putting the and remember, Now, brands, that. back

won't we're a the for But there back, it. satisfied from getting with and are from while. it we before perspective, we from So margin contribution we see margins revenue reinvest a

Richard Kwas

Brian, I huge? on a the and in that coverage not But or it's is what's comment, there assume current what China, percentage a - coverage is recovery…?

Brian Kesseler

XX XX end now, by expect be between and XX-plus. we but in to We're at XXXX, the of

Richard Kwas

Okay, all right.

lifting is so, here happening year the of lot next over - months. the XX or heavy So

Brian Kesseler

Yes.

Richard Kwas

this really you Okay. that interim until bigger that me deal process, to is when And able closures. should to the about seem to do the deal But of so here, emerge? then probably are with the next we question, year to the think on can in or start a for the for in you how as Federal-Mogul terms the between systems. would and what's opportunities, once content would that combined market and separations then, consolidated just go made, It picture closed, customers programs to now system a between bid

Brian Kesseler

Motorparts, of where we're closed, Tenneco will - It half that's get Performance doing front right to Aftermarket call away of lot right to right in Well, opportunities - standpoint, the we'll going manner. Ride we in going portion that with second away. the actually, on And will market operating be we're work combined year, our business of and the Federal-Mogul portion, which that, expecting go-to-market this customer once from of away can't between we in we from we're be can a But it And do go-to-market now a to on out strategic base. already able months we're to investigations eight and being Powertrain some our projects from aftermarket. as the six up businesses. we projects, line have

Richard Kwas

this see would protection you think starting on standpoint timeframe, program timeframe basis, timing should from the about of think a we it? to basis, when combined kind to a is way system going that about the it's is So, is, right to XXXX programs

Brian Kesseler

brand programs, awards the being are for that's launch. is XXXX for made think, XXXX new where XXXX, be would about I right usually

from However, we treatment system for helps more in after efficiency do costs. some perspective. fuel more from it opportunities costs repositioning, believe, there's lower We're customers our overall system if covering opportunities a or mid-cycle VA/VE and/or and

between be opportunities benefit. a So more we customer probably, for revenue combined meaningful and nothing in able from of might gain, but both company to the be to there, the

Richard Kwas

Okay, Thanks for great. the color.

Brian Kesseler

problem. No

Operator

will UBS. ahead. Colin question of Please next go be Langan from The

Colin Langan

Great. Thanks for taking my question.

owning said On the overall is Any rate, the there the would Boys is the also, competitor of is, Federal-Mogul reason, is in then deal, less at aftermarket. initial a presentation, lower. low? bit there, least that Any there? one questions the complex questions from think, why And because in to complex in opportunity Is color I a be your think, particular, there there? on there [ph], Is history an growth gotten a of so similar iconstructure Pep you you creates so - color Federal-Mogul's the rate. growth [ph] maybe it's I I've whether it

Kenneth Trammell

- cover yeah, maybe in me two. that Let

side, there serve retail entire lower thing side, primarily from maybe and channel the brands we brakes there. more zip faster On - chassis there, and that of X%, lines we in and opportunities the Powertrain product Aftermarket next gains an Federal-Mogul. the optimizing Same distribution and Powertrain X% a the They're programs outpace more as bring and To out Air, of perceived they're at making in conflict a to a on aftermarket in think, the a X%, we remember, Powertrain bring the and and get more growth in side, they From we've Clean secured in three Ride to that's serve opportunity looking OE OE Performance years. channel big kind side, wholesale side, as the both from strong it's to is are over growth see an Asia, the talked and as definitely our code same - from the really is cost. Federal-Mogul the always we channel about have side position. to we one value network from

Colin Langan

would indicated value-added you've Got Slide that understand $XX that. XX, is past, to it. with On in more that like to or range. Euro in want or $XX sure I I The like make something content? just little what's sure the different. Xd in Wasn't be thought content, $XX

Kenneth Trammell

That's content. our value-add

Colin Langan

Okay.

be all-in, $XX would So future but there. value-add it'd be show like

Brian Kesseler

Colin. question, the understand I sure make to want I

I it up - - that the then baseline and to between XXXX. So high-end you $XXX the in about pick value-add on $XXX see hot-end all-in XXXX projection part a in right and increments, content. $XXX $XXX can it, a those so if upper value cold-end And of moving in graph, of content XXXX five-year hand

Colin Langan

it. Got

Okay. the… just type think I Because talked - some concept, you've with the of of past, in I but I about that's think $XX

Brian Kesseler

might that just at that might been cold-end the, time. discussing think in or point hot-end have have been either the one of that I

Colin Langan

Got it.

Jason Hollar

of metals revenue, that And have, the the Powertrain. with acquisition combination included probably the we opportunities is included - which value-add obviously in non-value-add total one this probably platinum content, with

Brian Kesseler

I might think, Colin, estimate. the EPA would to Yeah, you be - referring is EPS

Colin Langan

the That's the Yeah. similar Thought to right. is benchmark. I that thought something said you've euro. past the in

Brian Kesseler

specific Yeah, This the ICE. overall, including to is that of hybrids. was very kind

Jason Hollar

value-add was Yeah, total and content. regulations, obviously meet clearly and that to it would both the as estimated content, by take which EPA content as was the substrate well include that would what

Brian Kesseler

another in Powertrain up way system content, activity, which the all business. the great overall again for opportunity the Technology is And engine

Colin Langan

And a just then the of of it. lastly should and we the that timing finishing being benefit, those issues. actually plant relocation sort see? second What is Got half

Brian Kesseler

launch and program kind in that launching at second programs then the steps of throughout has Yeah, that come to in half. the different QX, very beginning - begins

at - as systems requirements. going basically And we to the in plant mean, and So go the also corrosion launch repositioned I with two we the supply system. will for for we're new cost in the new better away to put from used to relocation total cost launch. paint the that the new launch plants delivered had two cost

a And for it. familiar systems with get are little in, paint can tuning them those tricky, so that

did doing first the what quarter we this doing be that's what through that's we'll through, obviously, two be will for in so be quarter, starting - production. then And and ready

Colin Langan

Got it. for question. Thank taking you my

Brian Kesseler

you. thank Yeah,

Operator

question be of next ahead. will John The Please go Nomura. Sykes from

John Sykes

Yeah, morning. hi, good

Brian Kesseler

morning. Good

John Sykes

Question for you.

XX, from Looking out? if come what Does back at electrification. - full take we to that Slide entire hybridization piece that

Brian Kesseler

all. treatment after required at you is When full to get no there electrification,

a growth vehicle vehicle. at So of you that would I is, content the look per think, where if at projections out from last slide with of But the look the the through if the come XXXX. and you end entire

XX% But electric only full forecasted primarily the that's can - in we announcement, - battery of had be XXXX. a discussion, that see through vehicles to Federal-Mogul You built XXXX, vehicle. previous the acquisition globe at to the are or the around

vehicle that the kind So if hybrids more growth than and do rate, light ICE still are you of built today. just that there's powertrains are being

John Sykes

I I point is is the it's electrification right. XX%. in Because a would where long if argument flip But like, to a the aftermarket realized business base, installed get Right. the terms look is… of way everybody off. But suppose long-term we thinks the what

Brian Kesseler

sure. For

John Sykes

Yeah, okay.

Brian Kesseler

sure. For

the now The and other like business even specific the ICEs that is, outgrow on is is driving Air will new the have business And that we - growth the But vehicle. content hybrids new the XX% is install of and APAC rate already Clean has related coming with in thing, - today forget business Clean light by production, commercial XXXX. what's other obviously vehicle also side, XX%. off-highway to remain one, specifically Air now The huge XX% the full region. between out in and that don't not revenue past, this in done company the are that powertrain coming the in to truck of regulations the time under

in opportunity get perspective lot a revenue vehicle. to So more Technology business Powertrain the great combined their the often - earnings even for go of non-light and of

John Sykes

Right.

base, are do installed regulations Let that, that basically me the say on - - just changed and there they have product to the government Is are out already inefficient? car efficient. took let's a taking wanted that ask the the cars that emissions the the - you could achieve to base where put pretty you more just like this. - point, be emissions on to Is installed be if

Brian Kesseler

Well, I retrofit content, our outstanding could it Tier Euro it. that X and and be an X happened. mean, would you technically, mean, event, if take I

Jason Hollar

not Having that and John, the would engineering vehicle of resulting performance the work. characteristics probably the said,

going efficiently older treatment, more opposed after older incent there the cleanup - versions of retrofit. is to get scrappage do off In to the the governments a to be something I'm or as programs market call for vehicles trying to to it to if a fact, desire to do would it

John Sykes

would Okay, because it, just… retrofit the be I got

Kenneth Trammell

It expensive. would be pretty

John Sykes

too be expensive. would It

Brian Kesseler

Yeah.

John Sykes

just I impact had, other you the Ford guys with announcement, does any question or on that The Federal-Mogul? have

Brian Kesseler

- is towards limited business We have trucks. more tilted SUVs, a our CUVs North of and pretty America

XX% So And so that impact and the with the very that to minimal them way. we're The SUV is we've good is on balanced over platform, Ford truck business Focus something And remaining, remaining. Mustang us. and relationships the got similar. represents

John Sykes

much. appreciate very it. you Thank Great. Okay, I

Brian Kesseler

you. Thank

Operator

question will next Stanley. from Morgan Sinkevicius be The of Armintas

Armintas Sinkevicius

Good morning. Thank you for taking the question.

Brian Kesseler

morning. Good

Armintas Sinkevicius

to about and than Just close Federal-Mogul - company sense any we at the When think the on trying in is will assuming of transaction, moment. more the sense the like will as company it how look of in first entity I'm the well, after goes - what of make all the just quarter? a how half up that the aggregate get looks performed

Kenneth Trammell

they're so still Yeah, private a company.

see said, certainly don't opportunity forward today in obviously look the of the release good with their improve the to talked have their about that so obviously, we've call we into That lot other what improve about and we're results And combined don't being with looking can performance. our or talk things that them, on on visibility anything to that like. us a looks, combine And to as performance the - combining to we have with synergies, now. opportunity

future. really we're So more focused on the

Armintas Sinkevicius

remains an then, how for on update provide And can much Okay. you anti-trust?

Kenneth Trammell

us say was, $XX was recorded at year. of there to reserve that, the anticipate folks we yet. about not by poke and that continue we But who we'll for end resolved. of There able again, the can left, the probably to second it's So around quarter we - Obviously, try with end that the what the and I things on what in work being did million anxious fourth work ones get of last to the the complete and We said year. to it same that this we're think as haven't get quarter. asked

Armintas Sinkevicius

Got it.

you Thank very Okay. much.

Brian Kesseler

you. Thank

Operator

Gabelli Brian question The go Please will next ahead. from Sponheimer of be & Company.

Brian Sponheimer

Hi, good morning, everyone.

Brian Kesseler

Good morning, Brian.

Kenneth Trammell

Good morning.

Brian Sponheimer

know coming First X.X where for from? and Any might that about management be teams idea businesses will been question, have particular the primarily weeks. I it

Brian Kesseler

of QX line Yeah, Brian, a that end have is driven that and our the on going fully to goal, to bettered we're put out.

work process. in So still kind that's of a

Brian Sponheimer

And on just there any the the Okay. for change incremental you then, operations, truck going got vehicle changeover. platform? new the in content to major Is

Brian Kesseler

that think don't lot a particular on platform. I

Brian Sponheimer

to launch you one would platform of this chance platform. scratch, you're better? last from would in better little one manufacturing that, only your guess, that obviously it own operations that design is I and have But if profitability the given because Okay, it's - of just able you bit kind think granted the be of to

Brian Kesseler

is putting this and And the for indexed we're Yes. the better platform situated particular steel programs commodity. as already

Brian Sponheimer

Thank All right, much. very terrific. you

Brian Kesseler

Thank you.

Kenneth Trammell

Thanks, Brian.

Operator

come Tom next go The Brown will Bandurowski question Please from ahead. of Advisory.

Tom Bandurowski

for discussion along longer lines? more pro the assets liabilities, of cap Any those thanks. the dated of align anything what the forma would some Hi, on dated separate structures you like Would longer entities? with look some the

Kenneth Trammell

time so I you've period longer a than a for I assets you normally, announce Yeah, when Tom, of guess, mean, spin, we owned have.

you on about given do So just weeks to going significant - ago, call we revenue Performance I'm we're a couple if level Ride what you've some been of business anticipating. about Aftermarket is - talked planning. of it's a that the more of think it, given able a We've it to business of little bit generate. it aftermarket foot the time have stable, we've XX,XXX or when cycle, bit here to it the call the will The information because

cyclical So to we essentially has original and originally probably content, equipment little the a has all bit it. nature And will of be business, of said or obviously that mostly bit that a leveraged Technology which more the higher. a Powertrain equipment

out. basis. have companies be we're that get we'll specific, successful to that as we we as And to far we make total more I it, as we'll go-forward setting good information as do obviously, about look of that's up able liabilities to mean, both a information a gone. at be certainly more getting start closely sure job very on So about very

Tom Bandurowski

Thanks. Great.

Kenneth Trammell

Thank you.

Operator

next The will from come question Spak Markets. RBC go Please Joe Capital of ahead.

Joseph Spak

you. Good Thank morning.

Brian Kesseler

Joe. Hi,

Joseph Spak

how look sort the question the was was maybe guess, - a you it of restated. segments, seems looks if left it over With with the of year-over-year in or more it higher quarter a and because the at of was of allocated then like, there of But change also some first just, costs, sort I change anything. of I sort sort in technical other, the like like

there there So why - the allocation just so going corporate or sort understand was on what want something or to was of I otherwise high?

Jason Hollar

different the assumptions Yeah, there some in the more cost more those will we were Q comes with allocated detailed of small when overlaid of changes that the can be answer some questions. we how so in Certainly, changes out you overhead. corporate differences can see that

Joseph Spak

be on in months? then as in Fed-Mogul the the we a combination, Clean of to pending in and these Fed-Mogul. of spin that how with Okay. the from other realignment segments, Air expect so this another going the aftermarket. co that the just will then going remain about go stuff Are And reporting then new to comes sort keep sort we OE you're plus two sort co, think change And business plus should of sort the or of to segments you powertrain couple report of global

Brian Kesseler

there Clean Federal-Mogul Clean also it's now side and because it. merge parts And motor separated. Aftermarket that sure co, and two in then weak have parts I with business some their talking the segments the will Air, we'll when Yeah, Powertrain then in in about, intent realignment, motor Air motor is has the our combination we're at Performance Ride a parts. keep Eventually, for content be think on to

report got through that drives parts And on to of the look we what that and way out manage the to work public we'll businesses. those so, to the exactly And obviously how right business. that at

Joseph Spak

And sort underperforming early one. call some of for of on levels Were had those get But initial to - sort to more areas or just last some of sort what's like know highlighted also the maybe you provide there of still or learn Fed-Mogul of aftermarket opportunities able up products. sort more, to aftermarket Okay. any are? products you I days. any it's that your disclosure sort then

Brian Kesseler

others businesses any that There some that are it's with are some underperforming. got well lines. pretty as are there think products I do multiple Yeah, and

just profitability deeper, positioned those to As get in well a some or are open. we're for are there identifying very all bit from it. And love portfolio options where like those the are, opportunities those that as get we dig of we aren't be on we'll also, you'd - a seeing where back if obviously looking perspective, little the kind

So that's what take at. go to we go a look

Joseph Spak

you. Thank Okay.

Brian Kesseler

you. Thank

Operator

questions. [Operator Instructions] no showing additional I'm And

will hand remarks. conclude would the for to closing I back session. like We question-and-answer the conference Linae Golla any to

Linae Golla

available be concludes call. This audio our will an our on you. in Thank replay An website hour. about

playback You in also press our The us this a is access telephone. release. call can recording available information by joining Thank today. of you for

Operator

has disconnect your the At Thank concluded. you. and conference time, gentlemen, Ladies this today's you you lines. for Thank may attending presentation.

Tenneco (TEN) 27 Apr 182018 Q1 Earnings call transcript