TEN - Earnings call transcript Q3 2019

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Operator

Good morning everyone and welcome to the Third Quarter 2019 Tenneco Inc. Earnings Conference Call. [Operator Instructions] Please also note that today's event is being recorded.

At this time I'd like to turn the conference call over to Linae Golla Vice President of Investor Relations. Please go ahead.

Linae Golla

you. Thank released XXXX we related results third information. financial our morning earnings quarter and This to quarter Chief discuss and call today's On the Co-Chief Ron EVP Officers; and Roger are Executive Jason Officer; Hollar Financial Hundzinski Finance. Wood Kesseler Brian is prepared of to the website. on remarks corresponding Investors available Presentation our section our will comments there question-and-answer be our After morning session. a this

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

a available We The EBITDA Unless forma margin. basis. otherwise on release value-add will comparisons specifically attachments and our adjusted discuss earnings on website. are pro margin year-over-year described refers to

our in keep materially of of statements. some could mind those that comments our projected will forward-looking differ actual in any results statements. from include Please Additionally forward-looking our

will to I it over Roger. turn Now

Roger Wood

Thank delivered solid everyone you Tenneco of results General the in the strike page quarter uneven at and turn face to labor Linae. Motors. welcome. demand third four. and Please Good industry morning

a we revenues light enterprise an production. and billion. and constant outperformed On revenue basis of pro vehicle forma As increased currency and $X.X year-over-year X% generated global commercial

and revenues New Tenneco QX fell grew revenues of DRiV X% X% compared XXXX. to

XX.X%. forma to and margin XXX increased basis year-over-year million a EBITDA was adjusted quarter $XXX pro EBITDA Third adjusted basis points on

approximately million basis At adjusted the points. enterprise level by reduced by GM the XX and EBITDA strike EBITDA margin adjusted $XX

midpoint revenue at of guidance. and QX Excluding adjusted impact EBITDA the our from were the our strike results

Automotive contribution emission new to PACE quarter of award for took third in standards X China year. the named realize the IROX finalist X during value-added that include highlights XXXX technology. vehicle were business we We key this bearing effect News middle that light began from revenue Our

our call Brian updated win and details Later On continue fourth the five enterprise and pertains will new provided divisions and quarter advanced in Jason NVH provide platforms. outlook Tenneco vehicle full suspension page Ron particularly today's we specifically. and on as we more electric outlook have for the technology to year. DRiV it And to the business around on

vehicle be by midpoint. at the showing decline expected in signs the $X.XX the production range billion truck lower softening. currency is revenue we X% to a year-over-year Light market billion X% commercial expect to in quarter. fourth of at and In $X.XX QX of the Looking representing enterprise is constant year-over-year

$XX.XX EBITDA flat full our the the is versus For $XX.XX to revenue our revenue constant in basis. XXXX. currency value-added to translates regards million to range to XXXX for will XXXX we billion year range a on GM EBITDA by guidance X.X% billion a of adjusted growth estimate enterprise at the million forecast of the X% midpoint. With total to reduce which QX about strike profitability $XXX be We $XXX margin

fourth we enterprise an On points. the our approximately basis by basis strike XX will adjusted affect quarter EBITDA negatively GM margin estimate

$X.XXX to project unfavorable XXXX range and billion billion of demand mix billion the $X.XXX For prior $X.XXX adjusted the GM to in EBITDA the be of down in impact billion year quarter. the we to $X.XXX as well strike from fourth as full guidance reflecting

expense interest guidance. our expenditures We prior tax taxes are improving outlook relative capital our for to cash and rate

driven to volumes the in range production the ratio. prior reduced from net X.X X.Xx expectation our increase and adjusted the for Lower and to mix year-end our expectation. X.Xx XXXX debt-to-EBITDA has less EBITDA business favorable expectation Our at increased has

more this strategic than to the members We will Tenneco to around world. the thank of working Brian separation facilitate DRiV hard on want later. the are new XXXXX evaluating team options in and Tenneco I touch

grow on the the year-over-year a page find six. to and forma passion our to our work our constant quality customers turn efficiency to processes pro Please Tenneco of and In commitment and new new create revenue for to They business shareholders. ultimately currency and day flat value basis. improve basis every QX bring satisfy generated their value-added billion of ways $X.X

outperformed of global light production slightly adjusted growth revenues XX.X% million the X% and X% modest basis basis. a FX versus industrial experienced in business. to XX and Tenneco and adjusted headwind EBITDA New vehicle up was grew margin EBITDA XXXX. and year-over-year to a points year-over-year on QX was $XXX forma CTOH Pro

implementing reduced improve also quarter are The division $XX generation. focusing adjusted EBITDA million cost near cash in actions In term Tenneco's margin and the new stoppage company's approximately to basis on the by points. GM the by while additional we work XX structure

and We are China India in XXXX. in to in gains solid XXXX and realize content good position

it will Ron? turn I new to for segments. Ron Now of Tenneco a over review

Ron Hundzinski

Thank morning you Roger everyone. and to good

geographies. currency We Light Regional basis X%. increased revenues grew Adjusted will the segment Air Clean largely vehicle value-add revenues increased margins year-over-year $XXX consecutive million Clean of quarter begin value-added Tenneco second performance adjusted year-over-year. page our segment constant a delivered Air and and margin EBITDA Value-added down growth were basis across review On similar was flat. of expansion. points of on and strong The seven. X% EBITDA revenues X% year-over-year. new XX.X% million was CTOH was expanded revenues $XXX XX

in QX. EBITDA Clean of and million operation volume increase from basis division's currency sales. majority your the EBITDA trend operating business and revenue and constant To contributed Air from Air million GM the Clean benefited EBITDA growth the models $X with of help experienced against The continue impact that -- $XX strike a On in efficiencies. should

discuss to Let's turn to eight powertrain. page

$X.XX Our were decline. declined billion China in EBITDA the in and sales measured Lower and year-over-year. chain Europe year-over-year $XXX demand declines period. volume QX basis softening industrial truck the were of India X% currency of prior in flat constant diesel principal markets in On the a Adjusted volume from the and million heavy-duty X% QX drivers down XXXX. sales with

a XX powertrain $XX profit basis decreased year-over-year than adjusted basis points favorable revenues performance performance increased second and quarter. and margin. XX.X% expectations decremental constant of decline benefit FX. more powertrain currency expected operating and representing in EBITDA the year-over-year sales better was versus negative $X a margin EBITDA from Adjusted particularly On million an half in moderated the Relative million initial XX% to and

back orders margins truck customers and and the the tend later in above-average powertrain commercial those industrial to on cut relative carry quarter Our end segment markets average. to

QX. have details On updated we page nine provided Tenneco's guidance and year new full on

the X.X% estimate value-added sales of approximate to impact the decline Motors strike. QX $X.X negative range constant year-over-year billion. $XX For from we the fourth basis. XX.X% Sales million of currency to in a on We anticipate revenues in will General quarter

for points not recovery experienced. At is any the to year-over-year. factoring the value-add lost in XXX production basis margin our XX% volume we midpoint a decrease which are approximate QX expect We EBITDA

On is negatively light in vehicle by from recoveries we production apart a our year-end. the America expect revenues. negatively timing certain Incremental decrease of being declines strike margin our year-over-year GM declining and stoppage affected demand. are a industrial Further impacting as also the past North commercial Europe well labor to and basis vehicle in extend

the the relative trimmed On to our by million another $XX forecast we prior guidance. have CapEx front

to Brian? to Brian like DRiV. for review of I'd over turn a Now it

Brian Kesseler

Ron. Thanks

solutions the XX. which due higher third which Total content NVH closed quarter. FX of turn advanced inventory to X% for revenue reductions currency Motorparts growth revenues both and points X% quarter. technology includes and impact in and revenues Performance constant division on the and X customer sale Ride conflict up in to percentage the of Ohlins production by comparison mainly quarter. of was was product to in the segment were the line the for acquisition revenue This revenue. America Europe down results X% lower during suspension channel to industry the Let's North DRiV year-over-year outpaced page our due X% past the first Wipers issues. a mainly was DRiV In the headwind

of actions improvement to to annual synergy actions third the the North of was forma this quarter basis in a have increase by $XXX in up year-over-year in track positive the year. a of savings earnings On run benefits dollar Strong points and stabilization was EBITDA signs schedule on EBITDA basis effective note ahead million Adjusted began mainly million and XX% driven remain controls This was synergy XXX see the each pro X.X%. continued a to aftermarket. earnings improvement quarter. We margin America portfolio $XXX performance the we on by end rate and on our in of actions of full rationalization capturing cost segment. the in

the in business by For million negatively impacted the third $X Ride GM quarter. Performance the strike EBITDA

margin the with Motorparts the results Ride diversification deliver product OE Performance combining to quarter of solutions growth. highlight this of and aftermarket mix businesses Our and strong DRiV's

Overall and and EBITDA. to aftermarket our Motorparts left than to unique As third strong continue drivers deliver the more shown quarter graph our of the growth services outlook the in top needs. XX% remain of the brands technologies customers' segment represented set for our of on page satisfy a we the

the Performance technologies of which platforms work. our our a highlights business portion and to drive Some capitalize of our include NVH on electric to powertrain continues suspension particularly team development wins represent advanced on Ride new growing

During NVH battery-electric American programs. customers their business new the several for third solutions quarter we won with North large

will NVH be with struts addition that In in advanced we and suspension front Ohlins PoleStar announced be XX on launching Ride our new from all-electric that XXXX. adjustable to we a model vehicle team rear in secured business Volvo. offered first new absorbers X will shock control is automaker. And all-electric programs This both and incremental July U.S.-based the the our

the creating be combine Ohlins and the And This Advanced future opportunities XXXX group. with we've to work to opportunities addition Suspension for mobility Technologies is growth our trends electrification by a business profitability. the begun to for on in and focused preparation great and shared will the Intelligent create growth Monroe connectivity macro significant The are our in team team product autonomy Suspension solely group Ohlins unique portfolio. our afforded

secured. next Technologies the that digits customers launching double expect several business all In over revenues win new gaining years We business has to products to in Advanced been on and we the new regions. new aftermarket grow already continue Suspension Motorparts group

the In has progress channel been North America previous conflict. due winning lost we good are back that making to business

made improving financial track and are end we to by that product the year. lines categories continue that of XX% product that we on business secure are We performance. year to related to the roughly of future our highlighted expected have decisions lost This

and Ride product America our Wipers business. line North divestiture the For Control programs example in

The category both product and Motorparts region Performance. DRiV our portfolio Ride rationalize line by and category region team continues to in by

in decisions While line likely actions. the affect rate any margin from flow and will expect improvement near performance top these we fully term our sustained cash meaningful

on will our enabler key invested a capital. objectives: Focusing in on each business return to product and primary specific top-quartile group in accelerate one and and attaining stronger fewer region our is team's growth capital performance lines people financial deliver profitable and of

to Performance Now I'd Jason segment Motorparts in the a results little like invite and to Ride us take detail. through more

Jason Hollar

the walk Thanks, chart a segment XXXX to quarter customers EMEA Similar the of parts the with page chart right mix actual. inventory look Europe. the a Western to QX a large to And drivers for XX in and XXXX America. the results. mainly overall as the retail distribution on closer soft pro QX revenue volume levels showing of Brian, customers market last from in forma main The turning saw at reduced were couple Motor inventory North with in we adjustments continued conditions

and conflict impacted around Brian X%. the as business revenue the portfolio changed mentioned loss addition Federal-Mogul-related channel by In

Earnings XXX effective in XX. basis Ride results are third adjusted Solid improved up cost were margin segment improvement driven control. synergy results margin mainly achievement performance continued year-over-year XX.X%. and quarter the points by Performance page to with operating on EBITDA

currency Third and vehicle planned constant a North and Commercial in and production declined suspension up NVH on forma benefit Light revenue X% was was light pro strongly revenue quarter addition XX% global up vehicle in by our the basis revenue advanced versus outpacing of content. off-highway was the last technology that other included includes Ohlins impacted rationalization year. program the business. growth and America truck of X%

operating driven quick X.X% X and million Performance. A improved points update margin adjusted XXX by Performance $XX improved and adjusted pro on basis restructuring synergy achievement. performance a initiatives forma basis EBITDA on mainly was recent to in Ride Ride EBITDA

$XX moving processes comments the like are by DRiV We've the manufacturing XXXX to to relocation the about one page and quarter in down North improve all under softness X X% America GM of to million the in XX% up rationalization Control quarter as EMEA North shock America including headwind from on cost manufacturing strike. Ride I'd in completed outlook manufacturing on X planned. revenue and year XX. roof. OE full We're footprint QX of wrap competitiveness. to constant expect in consolidation the sites also currency our with operations aftermarket. Starting impact with our continue end from help we And program In with a fourth now our track expect revenue fourth revenue $X.XX billion of will China to and continued the we the

For estimated be in the to currency revenue down full X%. an year around we $X.X or now to constant anticipate currency includes billion of which about headwind X%

of million year-over-year points anticipate strike from profitability EBITDA improvement adjusted points a quarter around negative XX or terms in of XX we the including $XX about margin of GM the impact fourth In basis basis

X.X% For in points of expect range our our year-over-year top previous raising of margin an to EBITDA year the the full margin for adjusted are we XXXX. basis guidance XX of rate and rate improvement

is range of million $XX improvement million to which from we year the the million CapEx $XXX Finally full $XXX prior in be guidance. a to expect

over turn I'll call to that Brian. the With

Brian Kesseler

Thanks Jason.

XX we to give a before take comments me page few let Turning questions.

a to want costs behalf margin come performance. thank work team long-term many members results Roger's Tenneco strong every members optimizing delivered the comments the On for our support delivering our for revenue to lines and our solid want success. the driving strengths about I product solutions and for fundamental at commitment. continued echo team demonstrated entire I that managing for leadership that their and First stronger of find who quarter to one of team Tenneco day

weakness. against synergies points This to and improving outperforming margins capital execution and expected GM year-over-year weakness year market strong market the our and ramp structure cash our strong end fourth managing a and into to and to industry full flow and continue industry to continue performance and delivering through committed XXX volatile volatility. remain focus through strike maintain is showed continue continued and We of XXXX. the the cost We despite a quarter working we the year. basis Earnings expected on increased

the separation to new sound. strong of receive status the of continue investors support the as business the Tenneco the separation of update on remains an to As DRiV from rationale our we logic and

We and purpose-built allowing long-term to as focus strategic structure creating specific market value. X capital financial optimal allocate are And as are business with well based each drive we operational creating flexibility business an on leaders its to financial needs.

to Financial been separate separation In We pulled on of of the end divisions have end synergy be and has of to the operationally operating of earnings made administrative ready separation system forward the progress year. particular expect a significant is schedule ahead nearing the this full by this and by year. capture to run rate completion.

Consistent original advance. optimized costs significant to time costs purposely costs being separation. approach acquisition without the properly unnecessary related in to integration this are XXXX until we've With plan incurring our we and the of stages in the incurred Federal-Mogul transactional we of the majority the cost additional incremental additional flexibility with separation management deferred final believe the have

is of for to and the for environment that believe deliver to separation value to create the the businesses both path an positioned continue We be success. enhanced best right shareholder DRiV long-term business

further leverage facilitate As discussed evaluate last the we continue we additional to quarter of to businesses. reduce the to separation alternatives

scenarios. date costs to work in most alternatives our has The begun paths friction to have are several that that reinforced believe additional we we achieve evaluation view tax and of manageable our has Our already objective.

aggressively likely complete if range. were to to continues could some Certain conditions our continue ability support midyear we market Tenneco mitigate to a the in pursue As plan. options time for separation of execute the of challenging the intend our current affect to its alternatives of these spinoff would trends XXXX impact to plan which help more these

of and timing market execute will conditions option the we potential be strategic Ultimately market coincide a separation the will when with executed. those to a and/or appropriate conditions ready supportive separation is are

provide to as progress continue on will We appropriate. our updates further

As always this continued joining morning. in interest Tenneco thank for for you your and us

And with your questions. take ready that we to are

Operator

from Sinkevicius your ahead from comes today question first Our Instructions] Stanley. [Operator Please go Armintas question. Morgan with

Armintas Sinkevicius

you the morning. taking the at Thank question. I Good for guidance for When Great. look

you $XX significant General explained EBITDA Motors. results million. of expectations at remaining with consensus me includes XXXX here third line by you're million. gap? Because all Motors bridge were implies General and not quarter step-down the in Can That reducing by about seems it in a help fourth adjusted it quarter to $XXX about so the be

Ron Hundzinski

Armintas, Yes. I this portion is say the Ron, that more of on would guidance Tenneco side. -- the significant EBITDA a new is the reduction

another a There's vehicle America I $XX there's light General CTOH of to in Motors side is in lower approximately of million. market. that on million our and continued North EMEA little So We've addition say industrial. and seen bit $XX about softness would

unfavorable X million venture joint incomes as FX lower about have We about powertrain in some mix $X well.

scattering amounts General So smaller Motors it's of and after a CTOH.

Armintas Sinkevicius

got with I facilitate things the contextualize can strategic considering? Okay. regards the separation to that you're options to any the us you then And That's it. way helpful. of help some

Roger Wood

this Roger. right say I think really the We too about much -- now. can't is that

thing introduced And this the been I the those response we with this call. the take then to of that think quarter from in and away earnings interest market is statements. we've favorably impressed the second since

So detail we will as but any at we this soon can't as really provide point can. more we

Armintas Sinkevicius

update one with timing the the what is side last of leverage the need help And or -- covenants facilitate in the Tenneco around then to spin Okay. those the flexibility your at order if new ability on to separation? you my here,

Jason Hollar

think you right Yes words as use the I there.

and I look in what come alternatives and those highlighted That's understanding a get remarks. focus the across spend something we in Brian think is like. already that of this on primary We that and want to this prepared wanted some flexibility. Roger the call what But we have time release better to

to allows And current one of as alternatives that could available have through rest this pretty to us of to process. but flexible you're tools that this the it's spin that referencing then to relates manage that We be credit facility it us is something have covenant manage process. also addressed other that we many through

Armintas Sinkevicius

Great. Appreciate you. it. Thank

Operator

Our go from your ahead from next Please comes JPMorgan. Ryan with Brinkman question. question

Ryan Brinkman

wanted up Hi, a spin. these and follow more to deliver to Great, I facilitate the functions thanks. just little bit strategic on multiple

noncore business you'd can there to potential color but as know I any the I certain the provide? not characteristics going that you're at? core quarter then assets. of what an your the noncore? businesses include could options name noncore at or to of strategic also? asset are only being further dispositions on you for make think core you confirm able are today more potentially dispositions And last assets it Or addressed categorization Is versus looked others

Brian Kesseler

spectrum Yes, always opportunities core lines We'll noncore a Brian, just this business is of look of is think or pretty course. as the I wide. at assets matter

call to as action and evaluations. alternatives I obviously could around that's spectrum a as From has others something the match we we good a middle to as wouldn't as some than understand core well you special. a business So kind are actions, bunch of that come of to so Anything the opportunities that trends. couple of prospects of in put bigger there for one context growth some and any with of or macro a fruition several the be up are scale is us different the to of contribute believe long-term combination a or of it's difficult able that

Roger Wood

said could we X just second and this build to hurt that had Brian he sure quarter we earnings of said. when either anything Maybe said to businesses. at were Roger. Ryan what what do these call make we this We introduced X didn't the I going that on is complement

-- at are forward. so of day So and to necessarily going portfolio don't not said parts as large to maybe some be both fit. we businesses going quite the But businesses some going end good are of the large. But the are Brian and of that the at look these robust

Ryan Brinkman

the next combined free Okay. there how updated at combination help XXXX not expect flow targeted over granularity are tax least relative with what the of conversion XXXX But of puts the versus view outlook latest restructuring an the could you And time? a flow forma have on you be to year? discuss and to to advisory there for separation able cash costs in with for company provide including that And and is pieces in cash want business to for you earnings terms then that is costs? and sure for working potential capital EBITDA in higher much versus you I And course. is XXXX? separated I'm a But know and pro costs the moving free level inflect of XXXX. you into takes there to

Jason Hollar

that Sure. Yes. I we This is has cost additional on would detail think last about the not some When Jason. we transaction in changed total through went say the call. much expected at we which hundred $XXX year. roughly and that transaction costs million time is that highlighted then next this million a of half of since from about dollars couple is year

can As to was highlighted just are postpone opening alternatives we are remarks we so of money through depending of any could we and be ensure work in upon alternatives much that as later these that needless that like. those doing outcomes and the look we what all spending not can that what the process end until

probably year. said for So $XXX little I with that this million see that a being heavy do

outcome will XXXX. I we some into the that probably upon then But could aggregate think But depending off right. overall underspend I then it think about part number that. it's pushed of be

we The consolidation. to Ride CapEx then expect amount that's And carryover. we footprint year of $XX to -- lower relocation restructuring North a DRiV that cash flow highlighted XXXX other our happening of be plant move China the million course related there's to $XXX free and of side in this And is or the America China our highlighted plant significant would elements restructuring to especially that relative XXXX, we've fairly and for by million.

a those expect down couple cash lead is will a year-over-year. to but where are run XXXX. you volume. free of and a we we in see flow a not shake the to of carryover call. hundred-million-dollar guidance But effect industry understanding into path in included that to certainly in revenue rate need in of Whatever better low the goes going that XXXX elements there's the synergies next And year be in can a the this XXXX out and provide elements to get of improvement And we place

Roger Wood

X could maybe to One going I be separation. the Jason's of to is transaction comments. tied really fee things add other the Yes on on majority cost more to advisory really there's decision cost

So to and to be whenever in done of that the the it's going the the execute friction highly decision with prepared of go some manageable. majority made now the at work Two one. it is are we strategic variable is I very looking we the other alternatives mentioned on the thing and we've cost remarks alternatives right on tax

And flexibility. to ability so pleased our that increase the are with from we

hope I So you what gives that need. you

Ryan Brinkman

you. very Thank Yes, helpful.

Operator

and I'm questions. ladies closing this at for remarks. I'd to And turn any over no gentlemen additional call back management showing time the like to conference

Linae Golla

Thank call. the everyone for conclude does us. joining that think you I So

Operator

today's gentlemen has now presentation, attending and conference may concluded you Ladies disconnect the you thank we for lines. your

Tenneco (TEN) 31 Oct 192019 Q3 Earnings call transcript