Tenneco (TEN) 9 May 192019 Q1 Earnings call transcript

Company Profile

Participants

Linae Golla	VP, IR
Roger Wood	Co-CEO & Director
Ronald Hundzinski	EVP, Finance
Jason Hollar	CFO & EVP
Brian Kesseler	Co-CEO & Director
Armintas Sinkevicius	Morgan Stanley
James Picariello	KeyBanc Capital Markets
David Tamberrino	Goldman Sachs Group
Joseph Spak	RBC Capital Markets
Rajat Gupta	JPMorgan Chase & Co.

Call transcript

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Operator

Good morning, and welcome to the Tenneco Inc.

First Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Linae Golla, Vice President, Investor Relations. ahead. go Please

Linae Golla

prepared who co-Chief the remarks morning, also result Vice This to President our quarter Hundzinski, corresponding Roger first Relations the for new the Financial Hollar, Investors division. our Thank the and to available section to Officer; call we related we welcome financial for earnings of Ron Wood, and website. comments Kesseler and are Finance. call Officers; information. XXXX is Jason named results Chief open our today on the After questions. I'd was recently you. EVP the line Rich Brian released this Executive presentation Tenneco Kwas, like On will A discuss of Investor morning, today's our to

begin, release comparisons pro periods. all are of information include that today our The Before be on rates in currency measures and are Also our which press earnings the all at available attachments. aware note measures, Federal-Mogul and website. discussion attachments prior forma in on acquisition financial we are will please measured our XXXX non-GAAP constant GAAP release reconciled with include that

segment results our pro make actual into projected our historical which will keep statements. include the will mind that reporting investors four Also note, from recast in statements. forward-looking help segments match the have appropriate forma have our of forward-looking our in we new some results Additionally, revised materially comparisons. comments differ of and could Please those to any segmentation, quarter this

it Roger turn co-CEO. to over will I Now Wood,

Roger Wood

off joined Ron I by will outlook. conclude morning, from all. good Kesseler. pleased Brian and will on with company's details and my start the position, and cover segments Jason the thoughts Brian co-CEO, quarter. reporting and highlights financial Linae, be the to updated the will our you, and the Thank I'm

Tenneco and two to just into over to we're excited ago be the just it both businesses. were benefits the independent will acquisition two ago, as shareholders. transform a for Today, creation was of we April announced purpose-built we the our the just a strategic for in and companies, designed fact, will it committed that that to industry-leading year know, employees year as You generated XX, the opportunity bring that as new

in seen to timing We've as adjusted release timing. for and soon our occur. sheet. made spin allow or margins, press as flow cash You've balance this our improve to spinning adjustment the set mid-XXXX that to the we've strengthen the businesses processes, our forward favorable looking on conditions further generate We're up expectations

Looking at the first some quarter. which we did challenges, were most which few a not. We had of anticipated,

anticipated we light-vehicle we declined, were continued aftermarket profile, softer as to from than production quarter, our production particularly in business industry the benefited Even North America. organic outpace volumes global growth our while as diverse in

now organic Turning in QX pro generated Page a to year-over-year. X% QX, represented growth on forma billion $X.X revenue. this highlights performance X. basis, Tenneco In On

grew DRiV X% Tenneco organically declined and New year-over-year, revenues X%. revenues

XXX by slide, on outperformed organic North production aftermarket X% an see X% declined headwind. we expected. We the than but more EBITDA impacted year-over-year. of China X.X%, softness, points America down market volume volumes much basis overall margin anticipated aftermarket was decline, by in XXX were light-vehicle this was on year-over-year revenues Currency X% global CTOH X% bps. can and you increased light-vehicle at increased As and basis.

Adjusted $X.XX EPS $X.XX we costs. Jason X, expense the addition, depreciation was and XXXX. was Federal-Mogul, was acquisition not on all and influenced completed of some interest discuss Ron the unanticipated the by which $X.XX in forma year. represents Please comparison. presentation. later more legacy and will amortization, the action results and related operating decline Tenneco nonrecurring note, and inefficiencies versus pro detail count, in experienced and In October last also that margin plans a share higher to is The

During for future. and business improving the focus our strong technology, a innovation to continued demonstrate the on we quarter,

teams First, launched the new who serial let awards for me new into innovative, congratulate Tenneco production. PACE from received products recently X

continue opportunities DRiV portfolio wiper the right closed to to strengthen and we did sold Öhlins when divisions both as quarter look for this also We acquisition the the for business. we the for

As mentioned businesses. X as investors, on calls we prior with are stand-alone operating

much want As following each such, performance as will we relevant discuss slides the as work we investors separation. in to offer transparency The to segments. division's towards

posted In currency $X.X a X. on of Page constant billion to flat turn QX, Tenneco year-over-year a forma revenue, basis. nearly please So and new pro

CTOH production global business. the experienced and growth Tenneco in New light-vehicle good outperformed

the decline left, revenues. from EBITDA to the caused down margin $XXX XX.X%, XX.X% was in declined year-over-year XX% division's ago see year can and FX On most year-over-year of period. the you lower in the million

to Tenneco right, new the decline. operating discussion to turn of segments. a we Ron? run most On lower the costs we caused incremental weaker business the performance of Ron a incurred and year-over-year for over build Also, as infrastructure the public I'll stand-alone company. it its corporate as

Ronald Hundzinski

you, over Thank and everyone. Roger new good has Roger, gone Tenneco. total just morning, the

our Clean OEM more and X% year-over-year increased revenues and On performance. performance Page Powertrain a on Air's in outperformance light vehicle segments. strong Clean We provide CTOH currency good X, The in I'll on Now saw constant details Air growth. basis. we show

does bankruptcy adjusted exclude contribution recovery. The adjusted currency. higher in price, XX.X% sales. from engineering EBITDA by million, performance down while in down to $XXX in than Adjusted revenues prior we on million period. left, volume compared and a $X lower of year-over-year. million benefit were expect When year-over-year was EBITDA in which impacted EBITDA should adjusted These FX. mix in by go underperformance QX, offset margin QX. not was EBITDA sales. see supplier -- related items $XX the was million EBITDA $XX positive was the year increase XX.X% more on to Normally, we'd lower the you and two repeat XX% On impact we an positive $X segment This timing million Adjusted

which in margins. have labor costs Europe, performance headwinds in steel Additional included lower higher inefficiencies and sales China,

Powertrain global CTOH its we X, revenues $XXX Value-add down year-over-year. the representing revenue show slightly rate XX.X% down healthy. year-over-year. growth was $X.XX Page EBITDA segment in was negative and was performance. a the decrease billion from X.X%, X% year XXX approximately market, million, were outperformed Adjusted XX% Adjusted ago basis on EBITDA Light-vehicle revenue points Now margin the period.

unfavorable Excluding EBITDA the pistons sales the of of About a from decrease in to was $X decrease million $XX a million gasoline. related impact $XX currency, in we million. diesel adjusted experienced on of EBITDA to mix drop of

than in our down Europe business profitable Our light-vehicle diesel diesels our away margins. pistons from petrol and weighed is shift more the business

next a at We pace. moderating expect quarters this couple dynamic to continue the of for

by quarter sales, China geographic higher anticipate restructuring of carry was the and relative reduce Another infrastructure costs caused year-over-year We've to the the realized in year. the second margins half areas $X serve. in decline these benefits actions overhead to incremental million we in commenced which other to be

and you DRiV business Ride Motor segment to the look in at Jason. Now Parts turn over I'll its results, Performance call to the

Jason Hollar

production you'll North Thanks, EBITDA last China. combined On reporting to and in for revenue DRiV's Page adjusted lower Ron. of in in America versus mainly for down quarter also two adjusted the overview due and sales light-vehicle segments. X, volumes the X% was EBITDA find lower lower revenue DRiV year-over-year year, and was aftermarket Total

growth needs. and on drivers remain strong, fundamental we focused remain satisfying Our our customers'

channel aftermarket quarter due X Year North team was The perceived Vendor we Warehouse. as buying groups, of the Parts with in recaptured the Some of include: by lost previously to highlights American Motorparts conflict. recognized the business

for General group. luxury time by the third Clevite And one in Motors. the Supplier a Year performance won CVSAX NVH sports our years, band OE four Europe, For was group another and new in of electric and past X team suspension the on business the named the kinetic awards vehicle our performance incremental materials on technology the

higher quarter growing with new The number and in in year-over-year vehicle vehicle Ride right Page applications. from of synergies These in the Performance closer Overall some results revenue look pro sales segment partially to XXXX side continued versus Asia was The light on as materials lower trucks, was region offset mainly EBITDA mix key segment. inventory up Revenue delivered Motorparts the charts and performance XXXX performance both with earnings content impacted up you growth can battery-electric acquisitions. for drivers year. and are NVH weakness recent in volume well X% of adjust X on to both headwinds truck by a show vehicle and China customers quarter America Turning results. growth loss are and XX. India. a both were mix the Pacific And in to North platforms. actuals, forma main Page and market the of see revenue volume last at QX results. adjusted QX Europe, with in lower improvements. and of the commercial North in out-the-door other light and as Year-over-year first operating following America the Revenue the commercial

addition, on is our the completed X.X%. will cash completed primarily up the manufacturing with sold our QX been In was leverage end in third underway on quarter. performance the from actions our for shows Ride at million, net ramping second ratio $XX and the manufacturing compared processes America China partially that of acquisition be through March XXXX. revenues the remaining our of year-end adjusted relocation to XX. North adjusted side left footprint the Margin Öhlins related and of of position The was value-added margin page recently offset efficiencies forma update Page pro on the position Performance impacted by and China. to EBITDA business table The wiper quarter net first included, quarter inefficiencies X. EBITDA have and in was by An is debt the the operational debt

that includes was classified is quarter, discount prior interest first the expense factored expense in in periods. million, $XX which now and During this receivables, interest on as and the

senior In facility. scheduled no profile, near-term term of under significant except maturities, debt of loans are the amortization there terms credit our for

of on of liquidity later. the available. long-term the to income of adjusted are that was the impacted not quarter, seasonality and rate XX% payable would and our I geographic ratio quarter out the by but of principal like partially flow billion tax slide impacted quarter. payments until It XXXX in the the is first the normal at effective The $X.X had mix Our first point debt leverage end not of company cash is by

remains turn to I'll at guidance full call XX% rate our XX%. year the Brian. that, With over tax to However,

Brian Kesseler

Jason. you, Thank

aftermarket thank to thanks and to Tenneco, through do, members Most simplify around eliminating XX% basis pro outlook, they of the X% revenue sequential second by $XXX complexity. all, $X.XX a returning all X% to in on range. the mainly we XX. to in of each right sequentially our revenues and the take a $X.XX profitability EBITDA And, range have team with we million a businesses to in everything a our Before down initiatives. successful. returning our a I improvement to in companies care in take is about Starting go everyday revenue levels. million, sequentially expected quarter, the Tenneco Across expect base fixed-cost sequentially, for up team. to be other non-value-added do DRiV be shortcuts. at we of on the make forma of We world me continuing second business improved to minute the synergies focus Tenneco the our let my X% levels lowering the both expect billion heightened updated to In lower anticipate expect the revenues and way and of X% midpoint things $XXX adjusted the quarter, the of range waste ramping with light-vehicle is with to businesses no with Page Europe. to expected by flat do second we of with that on to The and driven new again, with production nearly In aftermarket outlook billion revenues which enterprise customers we quarter, we

due million a decline to be year, growth the full of year-over-year, billion modest revising which production to X% revenue our or in of year-over-year. range to expect commercial lower now the inclusion $XX.X European in For markets in and light-vehicle the of $XX.X we we're vehicle part outlook slightly,

to We by industry light-vehicle outpace expect production X%.

the outlook for is in or value-add expect billion be to $X.XX Page The XX% of billion adjusted the to XX.X%. on $X.X XX. We EBITDA for DRiV year specifically full between and range

revenue of For sequential the performance. X% the expect growth on quarter, second aftermarket X% better we to

points, from in We manufacturing higher improvement also QX expect and improvements quarter. margin basis basis sequential of to improvement XXX other year's XXX approximately benefit the second of points. higher growth the of Margin last will than revenues, actions synergy QX come

revenues anticipate be we about to full the flat For year, year-over-year.

begin business of Our full EBITDA lap flat, we expect about Motorparts OE And in adjusted expected as we the to production. is confident Ride We slightly expect outpace the that versus with year Performance to margin XX% year. year-over-year flat actions be be for we in we're business achieve last throughout the QX about up further industry a for to XXXX, business the a in to the run half related be rate XXXX. earning and continuing last synergies year. improvement lost light-vehicle to second year anticipate to phased transaction runway By be to will

relocation mentioned, QX, ramp-up Jason and expected be will in As in QX. production volumes to China stabilize the Ride finalized Performance are and

North in investment for the plant relocation Performance in year. capacity Europe the of We footprint This CapEx the than our expand is we the to be as in in expect Eastern driven $XXX China. and implement America million and the million heavier normal, consolidation, range Ride by finalize $XXX

it turn I'll new to the Tenneco back outlook. for Now Roger

Roger Wood

Thank to you, Brian. Page XX. Please turn

value-added yield estimate revenues in We versus decline contribution and growth the dissipate to start margin CTOH Tenneco market are XXX to midpoint more Europe our We speaking. believe and to Clean increase For supplier impacts QX, sequentially around QX should from relative QX, new related QX exceed the will we the adjustments. also expected new Air will revenue bankruptcies from momentum. X% actions productivity due the Tenneco's points commercial synergy basis subdued Powertrain. the light-vehicle on year production will sequentially incremental X% benefits, estimate pressure approximately growth of in to at gain to and to XX.X%. to segment activities The Incremental largely should

to production to primary European forecast growth modest $XX.XX growth Lower versus we've to our X% a from full negative and to estimate our On light-vehicle initial global For billion. dollar to a the estimate be year, are to billion reduced we X% the constant revenues vehicle revenue total revenue our value-added currency basis, adjustment $XX.XX X% production X%. commercial guidance. changes

year-over-year On XX adjusted figures. point decrease to in expect a the front, margin we basis newly XX recasted value-added margin, relative XXXX to our EBITDA

XX.X% range to Our XX.X%. is

turn our CapEx Please the year range guidance. leverage to new $XXX We $XXX million. for to the million anticipate EBITDA be XX. X.Xx XXXX using midpoint of expect the ratio year-end Page our approximately in to We of

in the guidance for was the EBITDA primary X.Xx. is prior Our reason outlook. reduction change the

flow of to over balance the diligently year. improve working are We margin and cash the

our margins, We will the spin to flow you us the have up did emerge. anticipated as have to shift any into conditions before time and Brian, the soon we sheet We balance spin mid-XXXX. call believe cash strengthen decided extra allow time to thoughts open complete as improve our questions? further favorable conversions,

Brian Kesseler

Yes. Thanks, Roger.

and number deal was businesses, challenges this expect, of everything the it a lower tough like mentioned over entire temporary been in trade industry quarters light-vehicle last challenges aftermarket business. of and an quarters we've has that around of some volumes revenue worked issues the enthusiastic year beginning, in a from closed we And working just and began arms I'm you, couple couple didn't seen combination. was our these tariff from you over through and announced the as just as now the I As have great drop operational China, a we behind we've with. standpoint, combining Since ago on we've wrestling then. we in the With us, a

multi-brand, our continued benefits continuing ramp in businesses that first and we lines increasing Yes, behind in advanced like products from place will and confidence economy And as With sharing last and can synergies businesses with For acquisitions starting the aftermarket being technology solutions speed. quarters growing We're some DRiV the and in both full the profitability. a of portfolio We're to companies the are questions. separation. that, future, operating pains The divestitures help X industry the open continued we moving world. on Thank new cylinder with the for to to tailpipe. combining line us, optimize our positioned for and strategic our to we the the improvements. results, both are seeing but improvements after leadership an Tenneco global look this for leader we growing is largest business OE up driving to our multi-line, of and focused operational the progress believe We engaged these are other and time, with highly independent you quarter-after-quarter system for have with were teams margin exciting the uniquely your forward teams forward fuel expect next there OEMs morning. us suspension quarter. Tenneco as the each have new will for and we in interest in couple set with partner joining we success the top as and and you emission and

Operator

Instructions]. [Operator

comes question UBS. from first Our Colin Langan with

Unidentified Analyst

on Latimer Jean morning. [ph] is Colin This for this

year the the we thinking if QX be margin margin With to so guide, meaningful lower you end the suggests in The could through walk pretty cadence guide low throughout be the year? just should fiscal improvement about of about guide appears wondering XH. how

wondering Just be drivers what big the there? would

Brian Kesseler

Probably that see ramp about Yes. QX the the think you then the to is overall -- synergy year to start the that of second good flat QX, to improvement balance of way half best can in, level out in to outlook. as and the

that improvement half You the should be expect the each in to -- to that year. of the quarters able of back to in see reach meaningful X of

Unidentified Analyst

well? as color you And it going implemented we then you expected? should be the where about on that thinking for could Is some about guys quarter? forward had how And give us burn Okay. the cash

Jason Hollar

at legacy type say businesses, seasonality Yes. both relatively What of businesses, had both a you similar the about element. when I'd that look both is,

to cash other our lower a first quarter other than a the tends So lot quarter of peers, be quarters. similar to the

And that, expect basis. fairly so historical you'd consistent it's with a within what on

Operator

question comes Our Sinkevicius Stanley. Morgan from Armintas next with

Armintas Sinkevicius

for we middle when March, it was understand, to what guidance looking visibility like. was the on the of was wanted there Just the first XXXX, received presumably, quarter

this we versus why So quarter? what last -- now are getting

Brian Kesseler

than Yes. bit stronger The thought one was that than a a America weaker North we changed thing thought aftermarket. or we bit

market end listen out-the-door some if at was be. basis. at tough you where you sales, see year-over-year March most to a back expected to customers, of looked a it If The started was January looked from we the month. the you of slip to February overall about And and our

move the of And quarter, look really the And you was were that so near bridges, our talking short down a the middle were we the dramatic can bit with and on or it bit did catching There at moves. impact And move bigger we we some expected. as a little has that further light-vehicle overall those tick little earnings. aftermarket. didn't if see you downtime anticipate than industry so that

We've that these there. those aligned them as Our to flexes. back, level ideally We've revenues made out wasn't And of flex up. ability come capacity. really chase to we'll

Armintas Sinkevicius

pains I And business the the that the pains seemed XX-K, with delayed It -- Federal-Mogul like to where hear what businesses. to? combining yours growing of was sort Okay. well. referring and a how complemented growing pieces straightforward combination hiccups of, expense to of And how you outside pretty, the surprised the the are what to pretty

Brian Kesseler

business perspective, together was kind the little a the the aftermarkets that influence, up wouldn't the around on businesses in lot react the to -- that drop but OE getting operations issue run bigger of, was performance, really the really it could the operational and side together. operational Well, most the setup biggest From as the but chalk to. and in have see a the did realigned that It revenue some an we so change to we, the system ability -- of we I DRiV was where business a happened more bit impacted. wasn't of realigned the had way. what issue to common more aligned

Armintas Sinkevicius

push the to what spin timing? then you And out Okay. drove

Roger Wood

grounded bit as the -- that of the in the where outlined in in mentioned, to had said we we we the Brian rest think sure a for in of I got gives going the little we're sequence it that go-forward. forward, get the are opportunity, call and Well, that we've as year have make an us confidence

we quarters that. just moving the And said, real That's get lot good, us of a better of last do our us in them opportunity the are forward sheet that now confidence we As we to couple straighten operating spin behind where haven't at behind been up a Brian around the it to a date way. that our gives we're that think got things need balance it a confidence positive have us arms gives but little bit, the some we a line, get fashion performance in efficiencies in us be. and and

Operator

comes question next KeyBanc. from James The with Picariello

James Picariello

Ride on Tenneco out Motorparts? Performance, Performance focusing to can Performance performed kind Just OE segment, we, the how legacy and for business of, Ride new parse Ride the the the relative portion

Brian Kesseler

Yes.

think the by lot product of America a of businesses, some A in China. to But in the the and North going related Performance. that influenced also were on I Both both volumes, pressure the have China the Ride to most wasn't the inefficiencies and to year legacy have and relocation our moves year-over-year So on a the year-over-year sure, control we we we that the footprint ride lines, for basis. knew -- going for braking the we were saw on both surprise.

there. look Not side? at, be we us, Ride if the going on what much. inefficiencies as anything, knew mean I to So were surprised Performance these we

in see guidance We You that also can guidance. stayed on our margins. our for

North some we'll aftermarket And through stuff. so moving lap America that, of this

starting see first and Quarter-over-quarter, confidence comps to that's April QX here the outlook. our the May. of are part good in We given us in out-the-door

James Picariello

regarding China the did have move? the And inefficiencies -- quantified Okay. plant you you

Brian Kesseler

haven't. those hard -- be it's so volume one moves, through -- all split with supply we to then into there the the a in They're and down mix location of kind was to chain. It's out. there the plant No,

of both of those. combination a really it's So

James Picariello

get getting was to the wondering issue financing broadly just just it to just and an completed it question -- or Got back -- the your margin what delaying is any XX the the there, stabilizing, you curious, it both waiting macro it it. is you you if decision. just do DRiV then? I happening businesses next played a several comfortable And And overall better the to for tied more on with you want Ride months here, spin role. Performance's to that actually things to for is environment? then, see Maybe spin over go mean

Brian Kesseler

Yes. I'll getting want stabilize of that separated. the show saying. confidence get our to margins the them trajectory make Roger kind those systems what echo We give to was we stakeholders those we gives to a expect bit that that where combined we're are expect we time and the a sure sure upward market are lock be, to that in and be, make and more us little the on to

an point. mean them the to be be out in from And right where just both when have in that's about So it the financing I the the that's be the the are to environment the when to place all expect And then we spin trigger. the that to of to pull and successful your coming where and there. would separation, let's spin, to perspective, conditions be place. we'll get operational but businesses we're balance got are not right, again, going we us macro sheet, leave balance to sheet has expect

James Picariello

didn't you So not mean enough move financing forward, the that assume I plan? tested was as you that -- I reception did was something the you to that market, healthy -- the was

Jason Hollar

it's of upon I that that all. for entirely laid it's reception we say based would out. Brian still at good channels for And and really financing the Not prospective And all a that. Roger at. No. with what looked we'd had great environment

Operator

Tamberrino The comes with next David from Goldman Sachs. question

David Tamberrino

the to some that want the of the into pull-forward transpired better right in of the any demand? continued side and channel? much into March. seeing a couple noise inventory a what's Is or that And of Is Just positivity? early the has to you driven April seeing May, weak because of there's just market One, been could there of and how were what of, not, that there weakness seeing you've sense in better just you're then, aftermarket understand Has a bit do over? stocking? different February a in kind really little and, what's I you're seen companies. trying think de-stocking last? longer it from now lot If get signs

Brian Kesseler

Yes.

that parts mean, door I'll that overall cold see QX, single-digit pretty channel I QX, especially in to customer all the retail market, couple that a every answer, the categories. and back our saw Let The half and aren't David. down me two the comps There on sell of in customer -- out dramatically go every those were high than out-the-door but ours. in of maybe give categories we channels in snaps traditionally you better the others,

and have low We seen, April, door. May into continuing back in single-digit comps come out the positive. We see that

raised of a there similarly, but seems effect I the think is talk a there lag So in do never was weather, bit some in there. to aftermarket there I about there. was --

across back in like April the than impact. So increase given the low perspective macro board, and half seeing and digits And the single that a returns confident May, would early we're the I why less the from be the said, outlook market we're of in that in we've QX, you. that's

As one going favorably through more you've that -- comped anybody group. who's -- the aftermarket, customers be largest of following to our their to inventory realignment is an peer there is

but anticipated work in the the so giving. puts going year, and takes the to probably some as outlook that's that, with our be of that through customer, balance to we've to we that there's And

David Tamberrino

issues course? of have level near-term a and interval as least, and And from Okay. I mean, and handle line confidence you've transpired top the due to can them correctly seeing, address facing in how understand that that but a you've you is what identified in your trends, them then, margin the you're on at much standpoint, have the confidence in what I or

Brian Kesseler

that for the agreements we Yes, going before, little hand last economics, were the then I'll got and perspective, the place speak the we're footprint. ground, the this year, and with China the hits confident DRiV side perspective, the through the a we're finally, within the at early relocation, had But to we've wrestling right in North our year From dialogue as year and operationally, Roger. those margin -- beginning at. margin and America it that guidance coming see that wrestled of a we of the to bit And we'll end to steel to end I'm we've customers. on next over start to from where an with given, benefits our overall of outlook then quarter. -- We're on

Roger Wood

of sides I those. And part in a equally handle am on a Yes. David. over business good here, business, the of experienced from The here, have are portfolio the our we've that issues that Powertrain the both of we confident side

One And to is to on and bit Europe know we time actions we kind to done performance supplier upon. that took for business that. we taking improve is us, place focus that interruptions the and that of know out the to a behind sticks they're to base. of behind That but that know over what's to what Europe the that, know do we be areas in bankruptcy got first-quarter some that. in We of a to one we've got our got that's of We continue accomplish without of customer to them, of actions get through have us, we and we've lot money and them have now do believe, issue. was a us it over. us

bit everybody on chain. our the As chain that in all as pay be a said, work the have to value is are issue It in one to customers. economics quite something little continue to Tariffs we as any can't that, material in well economics an and of of it. material on resting place going with the frankly, Brian supply

So we'll have our in that work in continue good we're those on that to there. make to we with to sure on with front customers customers, share all sharing receptivity our have actually what

line. to market of in fluctuations we again, the sequential year. and confident while first the And off we increase to quarter into in the significant sure line focus sure can't the quarter that a place. it fortunate in the If second -- so, of sales and a line, decremental And and the that upside. a through hold actions the holding subject that gain we'll see top we basis income improvement if it's bottom can are all coming on We're a improvement and got rest enough we we're top make on make to the the control sequential line, the are decline the we bottom

David Tamberrino

I as to just as forma you And me, could you down perspective, -- just you the businesses targeting? perspective, where, were look going the think where the what for originally given were think, from different like spin I backtracking or would end any bit from little break last post just were leverage about a a updated year Okay. a how you're supposed of from there is a leverage think thinking to -- one pro

Brian Kesseler

Yes.

Board our making get to the and to is I medium decision to -- term. it's it's out, business long is think for shake here's set call each we the the when make up on right short, going success the get financing, the to and sure it'd way in we to going spin continue

So little early call. early probably -- a too to

of a around I but still divided new the than carrying too think theme but early up, because true profiles, differences X will to how between probably the still on to think cyclicality end it'll as thoughts just the where it true. is are probably I get call business DRiV bit little it's Tenneco the heavier

David Tamberrino

do just probably I see up end XXXX. to we markets guess, rebounding an how And, the OE enter Okay. you're as from into fair. waiting That's if -- perspective

Brian Kesseler

we're obviously, then possible down as that to as ratio and aggressively leverage Yes, possible. going move fast as Yes.

Operator

RBC The next Joseph comes Markets. Instructions]. Capital Spak with question [Operator from

Joseph Spak

little to on the a maybe new around bit Tenneco side. wanted poke I

million on million issues Ron, that mean, higher you'd would incrementals million Air, but to I still you in negative Clean maybe the EBITDA $XX think, I So identified. -- million of on $X still about be or $X Think up, expect $XX volume normal so.

the besides So color gap on there the of the on and what's engineering bankruptcy is some there other to going timing? any

Ronald Hundzinski

But items Right, I we some headwind the basically, analysis. that was for I give any labor Of I Joe. numbers. qualitative all was In one us. you we're Europe, the basically. of numbers, -- the Air in we that mix gave, but a then script any say, out difference, Roger was I the got efficiencies gave bips, didn't in costs the headwinds navigating through, color give well didn't That as you in unfavorable China had we Clean as product made also some and on well. steel up had

of All math much value, equal the would were I that would performance. them about say. pretty some gap Actually, in the of the close

Joseph Spak

there the also sort is a for this I years. gasoline, diesel midterm be sort of pistons? diesel mix outlook on a assumptions gas to structurally to And guess, commentary, as is go seeing pistons you're Or needs just business? what of, versus lower-margin it, a then you so pistons If what as year for path get to and of, Roger, to And some a out also couple done? maybe diesel Okay. for

Roger Wood

Yes.

bit you part know, typically had that it's We're although, So as in year. happen because talk the of decline, had on if his on moderated the we a a of seen, engines see slower higher moderating, the which we displacement fairly call, engines, the as decent Ron in rest will, displacement than We the throughout have you been the engines. said decline, to that during that business. lower of a be the

those mix, think around points, I bit. a in-house, the somewhere the will of have the with if gasoline or that So a the in be will, penetration. a range, a for a pace it mid-XX% employed drop From diesel there basis for product for is technologies another think you but those. bit if and maybe opportunities could moderating deployed, business. will, versus to lower gasoline XXX business, will, our you diesel actually year that working we're of technology customers and And side the to on exit you We decline XXX said, total of be it we are if margin

will, been we to gasoline way back get the diesel where probably can from all if has it perspective, but improve EBITDA the you won't the an performance, So historically.

Joseph Spak

Okay. And then last one for me.

total gave assuming for I year? and side, light-vehicle are think CTOH X% like number, up quarter, Tenneco assumptions in and on what but some but industrial, first that about this was is the was you market I it looks so up color a for good the guess, the probably a you

Brian Kesseler

looking a coming at, a single off lot call That's Yes. low Probably and I down what of of China that would India digits -- that. we're is the driver. primary

Joseph Spak

a flat so from, to So quarter? growth in first year, the the of, for big the first half down the -- in reversal sort

Brian Kesseler

good against pretty very comping were We year. Yes. half last second a

Operator

Ryan question JPMorgan. with from next comes The Brinkman

Rajat Gupta

on for This is Gupta Rajat Ryan.

clarify XXXX? to want bit flow a see on could I in little the forma on correctly? leverage free I cash just wanted cash baseline pro mean, just I we sure make your Based flow year. have that Just this target, free to positive

Jason Hollar

Yes.

we leverage provided the for costs XXXX of cash those So tax course, as costs other -- guidance was down as some last this because to, the going the of like some the transaction well delay some associated of quarter costs. costs into have that that estimate of the year-end ancillary a with course the over the That the bit of is from come little cover year. --

communicated the being this that's free over well cash investments $XXX its the synergies. investments flow course spent and to into achieve course the So is those those as a of lot the total types offset million of year. of by the synergies We've over year the of

to types of of the into generated investments transaction back is business is the cash by is then the that those there So being flow fund process. being used the

Rajat Gupta

Got it.

year, much does $XXX think think Is a next you million the next ballpark? $XXX not fair year, So in assumption? million, should mean, of if that somewhere onetimers how repeat I we about

Jason Hollar

Yes.

$XX the the end X as 'XX so think onetime so little those would to $XXX quarter that year. we this going in and that is we've tax this 'XX, those what out, of we probably the Of the And million portion impacts, will are be very biggest come of between well then million of a a million, I year and of going last broken be of of the but greater heavier little $XXX years, be, a bit would advisory. like 'XX, that said course, had not I into about said, bit the numbers $XX is down -- course. and million

saw this Over the the of capital from going into having year we first start a of starting working in there's so actually that did are much fourth had a a million capital working lot better course the quarter we the less lot because much achieve a the to that we synergy last quarter our $XXX of results, -- working quarter 'XX had of fourth point. stronger we meaning capital of year you in

the the smaller but bit but actual sale of of then, coming this cash looking more the into a $XXX bit in partial year there'll extent. of So cash that $XXX when business the capital little wiper's working cash, flow much of a And had balance a There's remember transaction just the million to that a actual we that cash flow about of Öhlins million quarter. at be little operating you're closed be offset. of the outside for inflow in to

Brian Kesseler

Yes.

The heavier will expansion The talked We'll synergies China is that about way The behind ramp-up East year. year CapEx this I Europe come than investment Öhlins. other relo year. think our in us to on be through will normal. the DRiV footprint the this side, mentioned Jason this

cash this heavier bit usage our will repeated than little forward, sure. business year Ride going a for there's So Performance be on

Rajat Gupta

can Got much it. next flow be better Looks year. like free cash

on be much businesses? for Just break the between year them? both two margins a of could full help you that out should expecting follow-up across EBITDA 'XX, the we How

Brian Kesseler

Yes.

Tenneco on a I basis. -- to think if outlook flat to the XX the around DRiV margin in new you XX was go year-over-year forma the year, about pro and rate full for

Operator

today's concluded. Thank has and conference session attending This concludes question-and-answer now also you our presentation. the for

may disconnect. You now

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