Q2 2020 Tenneco Inc Earnings Call
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I would now like to turn the conference over to Rich Clos Vice President Investor Relations. Please go ahead.
Thank you and good morning earlier today, we released our second quarter 2020 earnings results and related financial information.
In patient corresponding to our prepared remarks is available on the investor section of our website.
Please be aware that our discussion today will include information on non-GAAP financial measures.
All of which are reconciled with GAAP measures in our press release attachment.
Other earnings materials.
When we say EBITDA they means adjusted EBITDA.
Revenue year over year comparisons are measured at 2019 constant currency rate.
Unless specifically described otherwise margin or first the value add adjusted EBITDA margin.
The earnings release and other earnings materials are available on our website.
Additionally summer comments include forward looking statements.
Please keep in mind that our actual results could differ materially from those projected in any of our forward looking statement.
Well the next several weeks, what we book participating in three virtual conferences, including the JP Morgan.
Auto Conference 2020.
The Morgan Stanley Virtual Laguna Conference.
In the RBC 2020, global industrials virtual copper.
We look forward to connecting virtually with many of the.
Our agenda for today starts with CEO, Brian Kessler, giving an update on our business and leadership team.
Summary of Q2 enterprise warrants and our current liquidity position.
Interim CFO can trammell were view, our Q2 segment performance, we provide additional color on our balance sheet and liquidity.
Well and are prepared remarks, with our views on Q3 kind of summary of our strategic priorities.
Now, we'll turn it over to Brian.
Right.
Thank you rich good morning, everyone and welcome.
Everyone continues to remain safe and healthy.
Please turn to page four.
Let me start with a few comments on some key areas of focus.
We navigated a challenging quarter.
Our first priority continues to be the health and safety about <unk>.
Instead of a pandemic.
We're continuing to improve and adapt all of our facilities.
And offices with our team member health and safety in mind, including following a strip center protocols for cleaning.
Also this insane and seeking metal medical attention when needed.
Also in forming team members how to keep themselves healthy outside the work twice what their families that.
And in the community.
From an operational standpoint, North American Europe business operations ramp steadily in May and June and China was fully functional during the quarter.
Second the resiliency of our team really came true has value add revenue improved sequentially across all segments throughout the quarter.
In addition, our cost actions, both temporary and structural enable us to achieve positive adjusted EBITDA on a core.
Our Q2 decremental margin performance on a year over year basis was 24%.
Had we not taken temporary cost actions part decremental margin would have about a 500 to 600 basis points higher.
In the second half of the year, we'll see are temporary action start to moderate bought or shrink structural cost reductions are anticipated to be more significant.
Third our liquidity was $1.37 billion as of June Thirtyth.
Modestly from Q1.
In addition to lower capital spending we achieved meaningful inventory reductions in the quarter.
We recognize the <unk> working capital pressures our business faces a sales rates increase and are confident in our ability to manage as production rates normalize.
I will discuss in more detail later on the call.
Turning now to page five for an update on our cost reduction initiatives.
Our structural cost actions continue to build momentum we have reaffirmed our expectation to achieve a run rate of $265 million of cost savings by the end up 2021.
By the end of 2020, we anticipate <unk> hundred 65 million dollar savings run right.
For 2020 cost to achieve are expected to remain at $150 million.
In Q2 are temporary cost actions, including salary reductions of furloughs were meaningful benefiting our performance and helping to preserve our liquidity.
Our temporary cost actions have begun to moderate in Q3, I look forward to fully restoring salary and benefits to our team members as soon as business conditions permit.
Hi, Thank our team members for the sacrifices they and their families have made during this difficult period.
I think six you'll see we have added two new members to our senior leadership team.
Well they are not with us on the call today I expect to be hearing from them at our upcoming conferences and on next quarter's call.
Kevin Bear joined the company earlier this week as well.
Recall, historically tenneco with how to COO as part of the executive leadership team and we have reestablished acquisition.
Kevin comes the telco regarding glass a subsidiary of Koch industries, where he served as president and CEO.
Kevin has deep experience in automotive manufacturing operations and has a private equity Blackrock.
Yes, familiarity with some of our operations given his experience legacy federal mogul early in his career.
We welcome Kevin to the organization and look forward to his contributions.
Also matti Masanovich has was recently appointed CFO and will join the organization next week.
He comes to us from superior industries, where he served as CFO.
Many of his broad experience working in finance roles at automotive and manufacturing companies and we look forward to his strong leadership of our finance organization.
Can travel will stay on through the end of August to ensure a smooth transition I want to thank Ken again for stepping back again over the last several months.
Turning to thanks.
Let's discuss our Q2 results at a high level.
It is worth, noting our end market and geographic diversification benefit in our operating performance during this volatile time.
Total revenues were $2.6 billion in the quarter and value add revenues were $2 billion.
Klein of 43% on a year over year basis.
EBITDA was slightly positive in the quarter and down significantly from a year ago.
Adjusted EPS was a loss of $2.15 compared to adjusted earnings per share of $1.20 in Q2 2019.
The decline was largely attributable to the negative impact of cobot 19 on the major developed economies.
Our aftermarket and original equipment service sales comprised almost 40% of our Q2 value add sales.
Graphically, our China business was strong throughout the quarter exceeded 20% of our total value add revenue.
Hey, Thanks shows more details about our Q2 performance as mentioned our value add revenues declined to $2 billion in the quarter volume and mix were approximately $1.6 billion lower compared to Q2 2019.
But the light vehicle production down 45%, we saw all our CTO age and aftermarket or we asked revenues declined at a more moderate pace that might vehicle revenues.
Adjusted EBITDA was positive $8 million in the quarter as aggressive cost flexing allowed us to mitigate some of the negative impact from loss by.
There were approximately $100 million of temporary cost reductions in the quarter the benefit from temporary actions and programs are expected to be lower and the balance of the year.
I'll now turn it over to Ken to discuss the business segment results and our balance sheet position.
Okay.
Thanks, Brian.
Even with the challenges we faced in the quarter, we continue to see strong execution on our strategies, including wedding and launching new programs and strengthening our product portfolio for the future.
I'll share a few examples of this as we review the business segment results.
Starting out with clean air on page 10.
Clean air value add revenues were $517 million and they decreased 49% year over year on a constant currency basis.
Like vehicle revenues fell 56% as the geographic mix of global light vehicle production changed this quarter.
Commercial truck off highway and other revenues declined 24%.
And how we service revenues decreased 17%.
Segment, EBITDA was $38 million.
Down approximately 77% from the prior year period.
Adjusted EBITDA margin was 7.4% versus 16% in Q2 2019.
The decline in profitability was driven by cobot related production shutdowns in North America in Europe, with a small positive offset from China.
The clean air team made good progress advancing our targeted growth strategy.
Particularly in the Asia Pacific region.
China delivered a strong performance with $26 million in the annual incremental business launched.
And $23 million incremental annualized new business one in the quarter.
Unlike last quarter. The team continue to busy launch schedule with a number of new commercial truck and off highway programs in India.
Please see page 11 for a summary of powertrain.
Segment revenues were $602 million, that's down 44% year over year constant currency.
Light vehicle revenue decreased 49%.
Commercial truck off highway industrial and other revenues fell 42% year over year, and we service revenues dropped 28%.
Segment, EBITDA was a loss of $21 million.
Adjusted EBITDA margin was negative 3.5%.
Powertrain has a higher mix of revenue in North America in Europe relative to our other OE segments and was impacted a bit more by the significant production declines that occurred in those markets.
Also profitability was negatively impacted.
By lower joint venture income on a year over year basis.
Exceeding customers expectations is important to all the business groups.
And in the second quarter. The powertrain team's efforts were recognized when they were named a supplier of the year by General Motors.
This is the third consecutive year Tenneco business group has won this prestigious award.
The clean air and NVH performance materials teams being higher in 2017 in 2018.
The Motorparts segment is next on page 12.
Second quarter aftermarket revenue decreased 30% year over year at constant currency.
Faring better than our end markets this quarter.
Our ongoing strategic decisions to exit certain product lines in certain regions are part of our value stream simplification actions and impacted the revenue comparison by $13 million in the quarter.
Motorparts revenue increased month by month through the quarter with a strong focus on serving the customer inefficient quarter fill rates.
Similar to last quarter. The team continued to win new business with more than $30 million, an incremental revenue added in North America and EMEA during the quarter.
Margins more resilient in the quarter with segment EBITDA of $71 million and adjusted EBITDA margin at 12.7%.
Down only 240 basis points year over year.
The motorparts groups tight cost control and the carryover a synergy savings during the quarter helped mitigate the negative impact from lower demand.
This quarter, we recorded non cash charges of $113 million.
Most of which related to an accelerate plus project in our North America aftermarket distribution network to write down certain inventory.
Property plant and equipment.
In real estate that will no longer be utilized.
The program is expected to lower our operational costs by rationalizing our supply chain and distribution network to achieve supply chain efficiencies and improved throughput to our customers.
The total expected accelerate plus savings this project represents $10 million, which should be in the run rate by the end of 2021.
Please turn to slide 13 for details on ride performance.
Second quarter revenue was down 50% year over year in constant currency.
The volume decline included program rationalization headwinds of $26 million.
The rationalization of low performing programs from the portfolio enabled on North American footprint reduction, which is ahead of schedule as we close the second and final plant during the quarter.
This program is expected to be 80 $20 million to $25 million savings run rate by the end of 2020 and is included in the overarching accelerate plus program.
Segment, EBITDA was a loss of $41 million and margin was negative 12.2%.
Operating performance, including reductions NSG any helped offset a portion of the pandemic impact.
We continue to focus on targeted growth investments that are advanced suspension technology unit, which includes the lanes business.
Revenue continues to ramp up on the new Pollstar to electric vehicle, where buyers can choose suspensions with our conventional or advanced technologies.
Also during the quarter holdings was named exclusive suspension technology partner to a new right tuning performance center here the famous Nurburgring motor sport complex in Germany.
Finally, we have provided an update on our debt and liquidity position on page 14.
We believe we have adequate liquidity and flexibility to navigate the current market uncertainty.
With $1.37 billion available as of June Thirtyth.
Liquidity from receivable factoring contracted by $188 million due to lower sales.
Which we anticipate will recover as volumes in sales improve.
Taking the temporary reduction at factoring out of the equation.
Our net debt increased by only around $50 million in what has to be what are the most difficult quarters in my career.
Based on current market expectations, we remain confident in our liquidity position.
In light of the current environment, we continue to take actions to optimize our cash performance and further bolster our liquidity.
In the second quarter capital spending was down more than 50% year over year.
We further tightened our capital spending expectations and now plan to spend around $380 million this year.
Versus the less than $400 million, we targeted as of last quarter.
We remain focused on lowering our inventory investment and in the second quarter, we reduced inventory by $365 million.
As a reminder, we do not have any material near term debt maturities. Our first significant maturity is April 2022.
And our senior credit facility matures in October 2023.
We continue to actively monitor credit market conditions to identify opportunities from both the shareholder and company perspective.
At the end of Q2, our total net leverage ratio was approximately 5.95 times on a trailing 12 month basis.
You'll recall, we completed the Covenant amendment with our bank group to address the Covidien related downturn.
Men that runs through the end of 2022.
We continue to believe this covenant amendment provides us with the flexibility required to execute our operating plan amid the current volatile environment.
Our performance against the revised debt covenants with strong, leaving us with significant room to operate in a substantially more negative environment than what we are experiencing today.
Now I will turn it back over to Brian for views in the third quarter and closing comments.
Ryan.
Thanks, Kim please turn to page 16.
Given the continued uncertainty on the global production environment, we will not be providing full year 2020 financial guidance.
With a slight improvement third quarter visibility, we are providing some added color on value add revenue for the quarter.
For Q3, we expect substantial sequential improvement in value add revenue compared to what we saw in Q2, but still down year over year similar to the year over year percentage decline we saw in Q1.
Nope at our expectations are based on lower OE production rates than what is currently forecasted by Hs in both North America and Europe.
Also anticipate aftermarket revenue will decline, 10% to 15% year over year, mostly outside North America.
Our accelerate plus structural cost reductions are taking hold and we expect to see the benefit from this program build momentum in the second half 2020 and continue into 2021.
Near term, we believe the savings from our accelerate plus program will more than to replace the loss benefit from the temporary cost actions, we took last quarter as we use those actions in the third quarter.
We also expect year over year decremental margin performance to be consistent with Q2.
In Q3.
Taking into account to successfully actions, we've taken to preserve our liquidity and further improve our cost structure, we expect cash flow from operations to improve sequentially through the second half of 2020.
The execution of our strategy is on track to ensure tenneco emerged as a stronger and healthier company.
Turning now to page 17.
I'd like to provide a few additional comments before we open the line for your questions.
As we look towards the second after 2020, we are focused on driving margin expansion and cash flow improvement actions.
This commitment we believe will ultimately build a stronger tenneco and optimize ish shareholder value through debt reduction and targeted growth investments.
We expect that are focused on accelerating the improvement in cash generation and deployment to debt reduction would ship enterprise value from our debt holders to our shareholders for example.
$800 million of debt reduction, we achieve could generate $10 per share value for our shareholders. While other factors may impact our actual equity value. We see this focus is a clear path to drive shareholder value.
To that end, we're concentrating on four main areas.
First we are focused on reducing structural cost as I have previously discussed as part of our accelerate plus program and we will continue to look for more opportunities a lower our overall structural cost to improved margins and returns.
Second we aim to lower our capital intensity from both our capital expenditure and working capital standpoint, as Ken mentioned, we've lowered our 2020 capital expenditure forecast and continue to expect improving working capital turns as we deliver on accelerate plus working capital improvement target.
Third we will continue to optimize our business line portfolio, we have instituted a value stream simplification process across our operations using 80 20 value analytics. This assesses each and every one of our business lines in term of those that are creating the most value and those who is margin and cash performance we can.
Further enhance through prioritize complexity optimization.
Or elimination.
The fourth focus areas surrounds investing in our growth targets. These areas, having demonstrated higher return on capital as well the capability to grow faster than they are underlying markets. You can see motorparts is a large part of our growth plan in the top three markets North America, Europe and China.
We have seen advanced suspension technologies, which we formed this year as we brought the Orleans business together with Monroe intelligent suspension deliver solutions to improve ride performance and help Oems differentiate vehicle ride and handling characteristics in an increasingly competitive market.
Our NVH performance materials business continues to win new business, particularly with battery electric vehicles.
Lastly, we see significant opportunity in the large engine commercial truck off highway and industrial space, primarily in the Asia Pacific region as more of those powertrain come under regulation similar to what we've seen in North America and Europe.
Despite the difficult times facing our industry I remain confident tenneco's ability to whether the current economic downturn and emerge stronger than when we entered.
In closing I'd like to thank our global Tenneco team for their hard work and resilience in such a challenging environment I'm humbled by the extraordinary efforts of our team members and their families who have played a critical role and allowing the organization to safely maintain operations during the crisis to provide products and services that are consider.
Third vital to public security health and safety.
And as always I'd like to thank you for joining our call. This morning for your continued interest in tenneco with that we're ready to take your questions.
We will now begin the question and answers section you asked the question.
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At this time, we will pause momentarily to assemble our roster.
The first question comes from James Pirrello of Keybanc capital markets. Please go ahead.
Hey, good morning, guys.
Good morning.
Can we dig into cleaners resiliency during the quarter, both from a revenue and decremental standpoint, how much.
It's attributed to strengthen China, maybe break that out by light vehicle in commercial vehicle and what are your expectations for the remainder of the year there based on what you're saying.
Well I have to clean air team.
With their decremental margin performance, obviously that was somewhere to to ride performance in the quarter.
And I know that the powertrain decremental margins show a bit higher thats, primarily all driven from the JV income that we don't consolidate revenue on that's primarily out of Turkey, and India Jvs that we have.
Just for that $11 million of lower.
The income they're hanging in that 25% Ranger mid 20 range also.
But I think all the although we have businesses and and the Motorparts group.
Did a nice job of flexing down hard right at beginning right at the beginning in the quarter.
The temporary cost actions, obviously benefited all of them.
From an outlook perspective.
As we mentioned, we're we're a bit more conservative.
In Q3 on light vehicle production in Europe, and North America.
Commercial trucks, obviously pretty bank.
Part of both powertrain and clean air and we see that kind of holding still down year over year, but similar to kind of with the rest of the industry. It looks as looking at from.
Big markets North America, Europe, China is we do expect to be up year over year in the quarter from us commercial truck off highway perspective, and maintain we're probably right around the same estimates on light vehicle production in China.
You want to add back, yes, I'll, just say James in the quarter.
I think you keyed in on it right the commercial truck and off highway for clean Air was only down 24% in the quarter and that was because commercial truck was particularly strong in China in the quarter.
And just an update maybe on the regulatory backdrop in China, because I know that's a nice content.
Opportunity.
For Tenneco based on the emissions that are put getting put through there just an update on the timing and what that benefited my team.
Yeah, we're seeing those China, six benefit now and continuing to build and.
As Ken mentioned in his update on the segment.
Starting to come out with a broad brought six implementation. There. So we're pleased with the progress there and and the enforcement in the China market is better than has traditionally been.
Got it and just one final one from me.
Based on the Guy the second half guidance for improved sequential.
Cash flow do we think free cash flow can maybe.
Finished positively for the for the full year or.
We think how do you think about that.
Thats got a lot to depend on how Q4 shapes up.
As you know were like a lot of the other.
Automotive based suppliers Theres, a strong cash flow in Q4 generally normal cyclicality. So we would expect that if I ever that kind of holds where we expect the margins.
If the bill rates continue to.
Hold pretty study.
That's obviously our goal, but I think it's too early to call with the uncertainty of what we might see even late September into into Q4.
Anyone guiding on that one I think you covered it pretty well Brian.
Thanks, guys.
The next question comes from Joe.
RBC capital markets. Please go ahead.
Thanks, Good morning, Iran.
So look about about breakeven EBITDA for the quarter, but clearly.
You know June looked a lot different than April so maybe you could help us.
With what sort of profitability look like maybe in June or really even in into July where the recovery sort of continue.
Yes, I would.
As part of the cadence inside the.
Quarter, Obviously April was worse than May and May was worse than June.
The temporary cost actions really started to take effect and stayed in effects of the whole quarter.
With our structural costs savings kind of.
Driving momentum there.
When we talk about the decremental margins maintaining in Q2 levels are expected to be maintained a Q2 Q2 levels. In Q3 is really about ratcheting down those temporary cost actions and then that is getting replaced in those temporary actions give time for our structural cost actions the gain momentum.
Thats, where we see.
And why we're comfortable inside that.
Common or similar decremental margin performance Q3 Q2.
So is it.
And I know, there's a lot of puts and takes is it fair to assume that as we started gotten into this June July timeframe, where volumes are little bit more normalize it looks maybe something closer to.
The first quarter.
Ill.
But I would say it was closer to the first quarter certainly the ramp up.
Was was good there were certainly happy to see the increase in the volumes I would also point out that it wasn't smooth right that there's been a number of shifts and I'll tell you that number of suppliers us included.
These are changing patterns simply because of the fact that.
Some others have people on warranty right and so.
They are working very hard to try and keep production smooth, but sometimes there's a shift in mix or something else that may.
It will be in response to.
The fact that we're all working hard to make sure we keep our team member safe.
And that sometimes has given us some ups and downs in terms of production levels and rates and that sort of stuff. So I think I think it's hard to generalize and say it looked like Q2, but we certainly happy to see the increase and like you said July.
So far looks reasonably good as well.
And at least early returns are that.
August and September are still seemed relatively strong although.
Our estimates for the third quarter or sell a bit below where I CESARS.
Okay.
Just on the temporary actions at 100 million.
How much of that was sort of I guess not under tenneco control like the government programs at does that stay in the third quarter as well.
The mix of it was.
Korean government programs around the world and the temporary actions that we took on salary adjustments that step down into Q3, I think the maybe the best way to think about it is.
Half of them.
Half of the benefit in Q3 versus what we saw in Q2, and then stepping down.
Through the year to pick that temporary actions away, but more and more so on tenneco control than maybe up.
Government program control, there I think ever programs were fairly small percentage of 100 million Joe.
Okay great.
Last one and I know this is sort of mostly housekeeping, but.
Substrate as a percent of clean air was up in your mid Fiftys. It's been a low fortys I know there's been a lot of price increases their budgets is that started the proportion we should think about.
For the third quarter.
I think going forward its.
Obviously with the pricing on the precious metals that that drives.
A significant increase but also the commercial truck off highway.
Mix will drive and Theres, a lot more substrate content in that larger engines solution than.
Additional light vehicle solution.
Thank you.
The next question comes from Ryan Brinkman of JP Morgan. Please go ahead.
Mr. Brinkman. Your line is open on this is that actually needed on your side.
Okay.
Okay. Thank guys solid maybe you on muted your line. Please go ahead with your question.
Okay in that case, we'll go to the next questioner.
Again, if you have a question. Please press Star then one.
Next question comes from our misses.
Thank you.
Kevin This is excuse me of Morgan Stanley. Please go ahead.
Great. Good morning, Thank you for taking the question.
One accelerate program.
I know, it's a bit back half weighted and you mentioned the decremental margins will be consistent with the second quarter.
And in Great commentary with regards to how those temporary cost actions made but maybe you can give it depends on where you are with accelerate and how those.
How that ramps into year end.
Yeah listen arm. If this were pretty much on track with what we've talked about at the beginning of the year remember at the beginning of the year. We had expected to had 100 million a run rate and not in the first quarter. We added another 65. So the 165 run rate by the end of the fourth quarter is is pretty much on track and like Brian said, just a minute ago call.
At roughly half, maybe a little bit more of those temporary cost actions come out in the third quarter with.
Most of that decent percentage of that replaced by the run rate on accelerate plus coming back end.
Okay. So if you get let's say 100 million goes the 50 million on the.
Barry caught then you get Neil 50 million coming in from from accelerate.
Does that imply kind of a 200 million annual run rate.
Well it so.
Remember to 65 run rate by the time, we get to 2021.
Right, Yes, yes, yes that makes sense okay.
And then just just the last one year.
During the two top of mind at the moment, given the environment, but maybe you can update us on on the separation.
That being completely put on hold for now.
Any discussion that all there or.
Just how you're thinking about it here.
Well, obviously with what we're seeing in in the market environment today, and kind of a whole capital market.
Structure as it's been put on hold we're always looking at our portfolio from a strategic standpoint. In fact, we had two we had a meaningful.
Opportunity and we had the.
Pause at mid flight as as this pandemic hit.
So we'll be looking to pick that conversation backup at the right time, we've got to we've got a real reestablish the.
The margin profile and make sure we get the right value, but with our focus right now on accelerating that accelerate cash generation than.
Matt to work on.
That paydown and targeted investments.
We think that.
It is where we need to be concentrate to get that position now that's going to be critical in any of the decision, making we may on.
Any other strategic options, including.
Separating the businesses.
Yep, Okay, great. Thank you for taking the questions.
And we ask that question from mine Brinkman from JP Morgan. Please go ahead Sir.
Hey, Thanks for fitting me back in sorry about that could you just talked about the visibility into improved cash flows in the back half of the year is it primarily a function of better earnings or how would you expect working capital and capital expenditures to track in the back half versus the first.
Yes so.
On.
Getting into the into the cash flows certainly there is a headwind from increasing the ramp up enough and production. That's a headline we're happy to have we'll see more receivables comment from that but we'll also see some more recovering from receivable factoring.
As well as we head into the to the second half of the of the year.
Again.
Spend about $380 million in Capex for the year, and I think or a little under halfway into that so you would expect.
The rest of that to come here in the second half of the year.
And so that'll that'll come in as well.
And then like you said right the increasing sales the increasing.
Profits from the fact that we've got.
Got production to to actually to actually make money on.
Certainly helps as we went through the second half as well.
And we leased Theres, a very seasonal pattern it stretches back for many years.
And what the business looks like from a working capital into cash flow standpoint, the first quarter is usually usage as well a cash flow.
Since they usually I should say always.
Second quarter is usually this year will be an exception source of cash a small source of cash third quarter.
Oscillates plus or minus.
I believe this year, we'll see.
A better third quarter than we have in the past and thats simply because of the of the pattern of sort of returning from production here. We saw the same thing in 2009.
And then fourth quarter is always in this year should be I'd like Brian said assuming.
Production levels. All then should be good strong cash flow quarter for us.
Okay. Thanks, that's helpful and I realize you would just asked about business separation, but maybe if I get asked differently about.
Divestiture discontinuation of noncore business lines.
What are your current thoughts about divestitures smaller divestitures, along the lines of wipers et cetera in that is the current environment caused you to want to accelerate.
Stitcher to facilitate the leverage or are you more price conscious you feel like your ear liquidity.
As you too I don't know maybe wait until a rebounding industry backdrop in 2021 to allow for better proceeds.
Right I would say it's more the latter we're we're comfortable with where we're at from a from a liquidity standpoint, and as I mentioned, we we kind of halted one opportunity but flight.
Code 19 situation.
May not make any sense for anybody.
Noncore noncore assets will for short take take a look at.
Assets that we believe we can get a higher multiple for than what we're currently trading of course make the most sense and we'll continue to look at all those at the right time, but value is what we're going to be focused on we if we think we can get the right value event that is one we'll do it but we're not in a fire sale mode at all and.
So thats, what we will keep.
Keep in front of us as options and get that debt pay down.
Get the.
Continue to make tenneco stronger shrunk company I think Brian said, it well right I mean, certainly if somebody is willing to pay the right multiple on normalized EBITDA, but I don't will then you might expecting due to that right now so.
We're certainly in a good and a good place to wait until the value is is there an appropriate.
Okay. That's helpful color too and then just last question you provided that decremental margin outlook for the back half just curious, though given the cost cuts and the austerity measures some of which are temporary that you're taking this year to contain decrementals. What do you think that means for incrementals when revenue growth does return presumably beginning.
In the second quarter of next year should we think about you generating higher than typical incrementals.
Yes, I think thats going to be kind of a mixed bag here for the next several quarters as weak as we lap us and establish that new normal.
This is fast forward into Q2, those temporary cost actions.
They are going to go away now.
We committed to another downturn may go right back in so we've got those contingency plans.
Laid out I think it's going to be.
Kind of a quarter to quarter.
As we kind of flat through Q3 next year.
As our structural cost reductions ramp.
As we kind of last through the.
Temporary cost reductions I think it'll be a little lumpy.
Coming into Q1 Q2.
Hopefully stabilize more was weak when we're going to Q3.
Hey, Ryan I just wanted to plant one thing the guidance. We gave the estimates we gave for decremental margins are purely just Q3 as opposed to the back half. We don't we don't have anything out there for Q4 right now.
Alright, Thank you very much.
This concludes our question and answer session I would like to turn the conference back over to rich costs for any closing remarks.
Thank you everyone for participating in today's call.
You have any follow up questions. Please feel free to reach out in the Investor Relations team. We look forward to speaking to you in the coming weeks.
Great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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