TEN Q4 2020 Earnings Call
Operator: Good morning and welcome to the Tenneco Inc. Fourth Quarter and Full Year 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Rich Kwas, Vice President, Investor Relations.
Rich Kwas: Thank you and good morning. Earlier today we released our fourth quarter 2020 earnings results and related financial information. The presentation corresponding to our prepared remarks is available on the Investors 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 attachments and other earnings materials. When we say EBITDA it means adjusted EBITDA. Unless specifically described otherwise, margin refers to value-add adjusted EBITDA margin. The earnings release and other earnings materials are available on our website. Additionally, some of our comments will include forward-looking statements. Please keep in mind that our actual results could differ materially from those projected in any of our forward-looking statements. In the near term, we will be participating in two virtual conferences including the Wolfe Research Autos Conference on February 25 and the J.P. Morgan Global High Yield & Leveraged Finance Conference on March 3. We look forward to speaking with many of you. Our agenda for today starts with CEO, Brian Kesseler summarizing our accomplishments and business performance in 2020. CFO, Matti Masanovich will provide an overview of our fourth quarter enterprise performance. And COO, Kevin Baird will discuss our segment results. Matti will then review our balance sheet and 2021 outlook. Brian will provide concluding remarks before we take your questions. Now, I will turn it over to Brian. Brian?
Brian Kesseler: Thank you, Rich. Good morning, everyone, and welcome. Starting on page four. We ended the year on a strong note, largely driven by a number of actions we took during the year, aimed at accelerating shareholder value creation and to further the development of our performance-driven culture. Let me quickly provide you with an overview of some of these actions. First, we revitalized our leadership team, with a single CEO appointed to oversee the total enterprise and the addition of a new Chief Operating Officer, Kevin Baird; and appointment of a new Chief Financial Officer, Matti Masanovich. We also refreshed our Board, with four new independent directors, with both industry and financial expertise. This refresh also included the appointment of a new independent Board Chair and new Committee Chairs. These are meaningful enhancements for both a leadership and governance standpoint. Under this refreshed team we are unifying the organization with a clear mission to drive enhanced customer and shareholder value, both in the near and long term. Second, our Accelerate+ program initiated in 2020 continues to prove successful, yielding structural cost savings, margin expansion and cash generation benefits, with all projects on or ahead of schedule. We continue to target $265 million in run rate savings by the end of 2021 and the team generated significant cash flow and improved our net debt position by nearly $500 million in 2020. This was accomplished in an operating environment where year-over-year VA revenue declined 17%, as a result of the pandemic spreading across the regions we serve. Third, I am proud of the resilience of our global team, which allowed us to successfully manage COVID-19-related impacts to our business operations. Since the onset of the pandemic, we have remained focused on ensuring the health and safety of our workforce, both in and outside of our facilities. We rapidly implemented a range of actions, aimed at reducing operational costs, coupled with the implementation of temporary SG&A cost measures. Supported by these actions, the Tenneco team delivered solid 2020 results in a challenging and volatile operating environment. Turning to page five. Let me walk through an overview of our full year 2020 performance. Our 2020 total revenue was $15.4 billion, with $12 billion of value-add revenue. As you can see, we have broken down our annual value-add revenue by operating segments, end markets and regions. Our scale and diversification of product lines, end markets and regions continue to be an advantage for us, allowing Tenneco to effectively weather the pandemic as it spread across geographies and impacted our end markets in different cycles through the year. North America was our largest value-add revenue contributor at 42% followed closely by Europe at 36%. China contributed 14% and the other regional markets making up approximately 8%. You can see the breakdown of value-add revenue by product applications on the bottom-left chart. OE light vehicle emissions and engine made up 41% of value-add revenue. Aftermarket and OES made up 32%. CTOH and industrial made up 14% and OE light vehicle suspension and chassis made up 13%. It is important to highlight that approximately 60% of our 2020 value-add revenue was unrelated to OE light vehicle internal combustion engine product lines. Supported by strong operational performance in the fourth quarter, we generated significant cash flow and year-over-year debt reduction for the year, as well as meaningful improvements to the company's liquidity position and leverage ratio. Year-over-year margin performance for the second half of 2020 was up 190 basis points over the prior year period. And at year-end, net debt was $4.5 billion, a reduction of nearly $500 million compared with 2019 year-end. Total liquidity was $2.3 billion, up from $1.8 billion at the end of the 2020 third quarter. At year-end, the team delivered a run rate savings of $165 million from the Accelerate+ program with the cost to achieve at about $150 million. Additionally, our working capital efficiency target improvement of $250 million has been fully realized at year-end and is a full year ahead of schedule. I will now turn it over to Matti to walk through our fourth quarter financial performance. Matti?
Matti Masanovich: Thank you, Brian. Turning to page 7 for a brief overview of our fourth quarter performance. We benefited from our diversified portfolio and delivered margin expansion generating strong cash flow and reduced net debt. Revenue was up 10% year-over-year excluding a currency impact of $99 million. This is inclusive of substrate revenue of approximately $1.1 billion. Our value-added revenue was $3.6 billion in the quarter, up 4% year-over-year excluding currency. This compares to light vehicle industry production, up 2% in the fourth quarter. Adjusted EBITDA was $410 million in the quarter, up $123 million from the fourth quarter of 2019. We delivered an 11.5% adjusted EBITDA margin on value-added revenue, an increase of 300 basis points year-over-year and $521 million of free cash flow available for debt service. This strong free cash flow and margin performance drove a reduction in leverage to 4.3 times and a reduction in net debt to $4.5 billion. Two charts breaking down our Q4 value-added revenue by product application and region highlight the strength and the diversification of our portfolio. Now let's turn to page 8 for a look at our fourth quarter enterprise performance. As I mentioned previously, we saw value-added revenue of $3.6 billion in the quarter, up 4% from the fourth quarter of 2019. Global light vehicle value-added revenue grew 7% and commercial truck off-highway and industrial and the aftermarket were essentially flat. Volume and mix positively impacted our value-added revenue in the quarter. Again, we saw a strong improvement in adjusted EBITDA year-over-year driven by solid operating leverage on higher volumes and the benefit of Accelerate+ savings. Our operating performance also includes non-recurring benefits of approximately net $30 million in the fourth quarter, primarily asset sales tooling recoveries and lower aftermarket rebates. Our adjusted EBITDA figure includes $41 million in corporate costs. Now I'll turn it over to our Chief Operating Officer, Kevin Baird for more details regarding our segment performance. Kevin?
Kevin Baird: Thanks, Matti. I'll start with our Motorparts business on Page 9. Fourth quarter aftermarket revenue was $730 million. On a year-over-year basis sales volumes were about flat at constant currency excluding the strategic decision to exit certain product lines in certain regions. On a sequential basis, revenue was also flat, representing stronger-than-normal seasonality for the fourth quarter. During 2020 the Motorparts team maintained a strong focus on serving customers securing incremental annual revenue of about $100 million. Adjusted EBITDA was $110 million and adjusted EBITDA margin was 15.1%, up 480 basis points year-over-year, driven by operating performance of $49 million in the quarter including restructuring savings in manufacturing, distribution, and SGA&E, and the non-recurring benefit from the prior year inventory adjustment. We also managed through late Q4 supply chain challenges. The Motorparts business was able to drive down inventory days on hand in Q4 and was a significant contributor to meeting our company's working capital reduction target a year ahead of plan. Please turn to page 10 for details on Ride Performance. Fourth quarter revenue of $683 million was up 4% year-over-year in constant currency, driven by growth in light vehicle sales as well as aftermarket and OES volume. Adjusted EBITDA was $29 million with an adjusted EBITDA margin of 4.2% in the quarter. Conversion on the higher volumes was strong, driven by higher volumes in the noise, vibration, and harshness business and the Advanced Suspension Technology business. Lower year-over-year operating performance primarily came from the North American ride control business. While the second of two plants was closed at the end of the second quarter, stabilization of the North American ride control network is a challenging journey and COVID has made it even more difficult. We expect operations to improve in 2021 and to begin to realize restructuring savings. During 2020, we continued to invest in and secure business wins in our core growth platforms. We launched 16 Advanced Suspension Technology programs and one incremental NVH business with three global battery electric vehicle manufacturers. Turning to page 11, Clean Air value-add revenues were $1.05 billion and grew 5% year-over-year on a constant currency basis. Light vehicle value-add revenues increased 2% and OES sales were up 17%. Commercial truck and off-highway value-add revenue expanded 19% year-over-year fueled by content gains related to new emissions regulations in China and India. In 2020, we launched 37 programs in support of China VI regulations and 33 programs related to Bharat VI regulations. Clean Air revenues will continue to benefit from the regulatory content gains in both China and India during 2021. Adjusted EBITDA was $160 million, which represented a 13% increase from the prior year period. Value-add adjusted EBITDA margin increased 70 basis points year-over-year. Operating leverage on increased volume and strong cost control and restructuring savings were the primary drivers of the performance. Please turn to page 12 for details on Powertrain. Powertrain posted strong Q4 results. At constant currency, revenues increased 7% versus the prior year led by strength in light vehicle sales. The ongoing ramp-up of steel piston volumes for gas applications, launches of new technology advancements in bearings, and continuing light-vehicle inventory replenishment benefited growth. Commercial truck, off-highway, and industrial sales declined 11% year-over-year, while OE service revenues fell 6%. Adjusted EBITDA measured $152 million, an increase of 85% versus the prior year period with a 550 basis point improvement. Profit performance was boosted by strong volume leverage, savings from restructuring projects initiated earlier in 2020, and a couple of one-time items. Powertrain closed two facilities in 2020 and continues to pursue opportunities to lean out its asset base. I'll now turn the call back to Matti to discuss our liquidity and debt position.
Matti Masanovich: Thanks Kevin. At year end liquidity increased to $2.3 billion compared to $1.8 billion on September 30th, 2020 and consisted of total cash balances of $800 million and available revolving credit facilities of $1.5 billion. In the fourth quarter, we fully paid down our revolver with the cash generated from operations driven by working capital improvements, disciplined capital spending, and expanded margin performance. As of December 31st, net debt was $4.5 billion, a reduction of almost $500 million compared to the prior year. Our relentless focus on improving capital efficiency allowed us to achieve the one-time $250 million working capital reduction as part of Project Accelerate and enabled us to significantly reduce net debt this year. As part of our goal to optimize cash performance, we made progress reducing capital intensity this year. Trade working capital as a percentage of sales improved 200 basis points to 8.8% as compared to the prior year end driven by inventory reduction across the segments with our Motorparts business leading the way. We made capital investments of $394 million in 2020, a reduction of almost 50% compared to 2019. We will continue to invest in our core growth platforms, while tightly managing our overall level of capital expenditures. In the fourth quarter, we improved our debt maturity profile by issuing new $500 million senior secured notes due in January 2029 and used the proceeds to redeem our 2022 notes. We will continue to be opportunistic and actively monitor credit conditions to further extend our maturity schedule. Turning to page 15. We have resumed providing formal financial guidance. We expect good revenue growth and margin expansion in 2021. Our value-added revenue guidance is $13.2 billion to $13.8 billion. At the midpoint, this represents growth of 12% year-over-year. Our revenue range employs a global light vehicle production assumption of approximately 80 million units. We are using the February IHS Global Light Vehicle Production Forecasts for the first half of the year. However, we have embedded more conservative assumptions than IHS for the second half, particularly, in Europe. We expect our OE-centric businesses to modestly outgrow our Motorparts business. Our 2021 adjusted EBITDA range is $1.3 billion to $1.4 billion. At the midpoint, the forecast reflects a 10% value-added EBITDA margin, a 130 basis point increase year-over-year. As you think about modeling the year, our quarterly incremental margin is anticipated to be the strongest in Q1. Recall our China sales declined significantly in the first quarter of 2020 and our North America and Europe OE businesses saw reductions in the back half of March 2020 all related to the start of the pandemic spread. Further our cost base comparison was relatively normal in the first quarter of 2020. There were no special cost-savings measures that were effective. Beyond Q1 2020, please keep in mind that there were $150 million of temporary savings that benefited our margin performance in Q2 and Q3 of 2020 that will normalize in 2021. We expect continued year-over-year savings from the Accelerate+ program on our way to achieving the $265 million run rate by year end. We forecast our net debt to fall to $4.2 billion by year end 2021. We estimate our capital expenditures will be in the range of $450 million to $500 million. We expect cash taxes to fall between $140 million and $160 million in 2021. As a reminder, our cash flow is seasonal with a typical outflow in the first half followed by a significant inflow in the second half. In the middle of the page, you'll see our Q1 outlook. At the midpoint, we estimate $3.5 billion of value-added revenues up almost 12% year-over-year. We expect our OE-centric businesses to post strong year-over-year revenue growth in Q1. Motorparts is expected to be relatively flat primarily due to the recent adverse US weather patterns and its related supply chain challenges. Last year's revenue was not directly impacted by the pandemic until the second quarter. Our adjusted EBITDA range is $325 million to $355 million. The midpoint of the range translates to 9.7% value-added EBITDA margin reflecting more than a 200 basis point increase year-over-year as we carry our positive performance momentum from 2020 into 2021. I'll now turn the call back to Brian for concluding remarks.
Brian Kesseler: Thanks, Matti. Please turn to page 16. In closing, I once again want to thank the global Tenneco team for all they did in the face of so many challenges to help deliver strong fourth quarter and full year 2020 results. Since the onset of the pandemic the health and safety of our workforce both inside and outside of our facilities has been and will continue to be our major focus. Looking ahead, we continue to build positive performance momentum. Our disciplined performance focus proved successful in 2020 with our Accelerate+ program yielding structural cost savings margin expansion and cash generation benefits. We have strengthened our balance sheet by reducing and optimizing capital intensity, improving our liquidity position and leverage ratio and enhancing our debt maturity profile. We have resumed providing formal financial guidance and in 2021, we anticipate a gradual recovery from the pandemic. And consistent with industry forecasts we expect by 2023 that light vehicle production will return to 2019 levels. Our diversified and balanced portfolio and leading global market positions in each operating segment enable us to drive shareholder value creation, which is a top priority for our organization. We are well positioned to capitalize on our positive momentum, as we further invest in our long-term core growth opportunities in our Motorparts and Ride Performance segments. We are continuing our focus on business line optimization with Clean Air and Powertrain generating significant cash to fund our core growth investments and debt reduction. At the same time, we see significant near-term potential as we continue to focus on margin expansion, cash generation and debt reduction. And I am confident we have the team, the core assets and strategic advantages to deliver long-term customer and shareholder value. We appreciate you taking the time to join us today. And operator, we will now answer any questions.
Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question will be from James Picariello of KeyBanc Capital Markets. Please go ahead.
James Picariello: Hey, good morning guys.
Brian Kesseler: Good morning.
James Picariello: Just starting with your market assumptions, do you feel as though IHS has the global chip shortage appropriately accounted for as of its February forecast? And I'm thinking about just for the first half. I know you have embedded conservatism for the second half. And then can you remind us what the regional breakout is within your commercial vehicle and off-highway sales mix? And how are you thinking about those markets for this year? Thanks.
Brian Kesseler: So the chip shortage in IHS, I think it's still a little bit hard to tell. Obviously, we're sitting here near the end of February. So for the first quarter we've got at least a pretty good window. So we think for the first quarter it's going to be close. I know that the industry and many of our customers have been believing that this semiconductor issue would be behind us maybe by the end of the first quarter. We see that flowing into the second. So there might be a little bit of downside on IHS, and we're a little more conservative than the IHS in the second quarter not substantially. But then as we noted in our second half, we're probably most conservative on Europe recovering at the pace that IHS shows. As far as the commercial vehicle space, Europe is heavier for us in commercial truck. Commercial truck is not that big of a makeup for us in North America. And China is becoming larger and larger with the China VI and as we mentioned the Bharat VI coming in for both Powertrain and Clean Air.
James Picariello: Got it. No, no that's helpful. And then yes how should we be thinking about the Motorparts business aftermarket demand for this year? And then we also have to consider that business has recaptured share gains right? So, yes, just the backdrop for Motorparts.
Brian Kesseler: Yes. Well as Kevin highlighted in his commentary, our fourth quarter revenue was about flat with Q3 which is -- which signals a bit higher demand generally from a cyclicality standpoint. Usually Q4 is a little bit lower demand. The one we're watching real carefully is miles driven. Miles drivens, miles drivens were down quite a bit in 2020 primarily because of the miles into work being so greatly reduced, but Q1 about flat. We didn't really see a lot of the COVID impact in our Motorparts business until Q2. But we did -- the team in North America specifically booked some good business globally. As Kevin highlighted, we added about $100 million of revenue incremental to the book last year and we continue to kind of drive that momentum as we go. So we're still very bullish on our Motorparts business.
James Picariello: And that was -- the comment on the first quarter flat was that demand or for your revenue? And was that year-over-year or sequential? Thanks.
Brian Kesseler: That was -- yes, that was year-over-year about flat, which -- last year's Q1 wasn't so bad comparatively. It was really the very, very, very end of March where we started to see the impacts primarily in Europe in the beginning and then it moved over to North America. But all of our major impacts was in Q2 for the Motorparts group. So we'd expect to get back up to normal. And Q2 is generally our strongest quarter in the Motorparts from a cyclical standpoint.
James Picariello: Thanks.
Operator: The next question will be from Joseph Spak of RBC Capital Markets.
Joseph Spak: Hi. Good morning, everyone. Maybe just the first one sort of point of clarification. I think you said in the quarter, there was about $30 million that helped performance that was non-recurring including asset sales. So I was wondering if you could just maybe tell us sort of how that sort of broke down between the segments. And I guess I'm curious about the asset sales because when I saw the reconciliations in the filing, I noticed there were some adjustments that were taken out. So why were some left in the number?
Matti Masanovich: Well, it depends on what we're selling. So if it's a routine asset sale PP&E it stays in. But if it's a facility sale it gets removed. And so essentially that's where it came from. One of the segments that benefited was Powertrain in the period. There's -- and obviously, we mentioned the -- one of the other non-recurring items was rebates -- aftermarket rebates. So obviously Motorparts benefited as well.
Joseph Spak: Okay. Thanks for that clarification. And then you talked about some of the headwinds in Ride performance. I guess I just want to sort of zoom out bigger picture on that segment since it's still lagging some of the other margin -- some of the segments diluted to margins. So what's the bigger-picture plan with that segment to get them higher? And what's the real acceptable target margin level that you're looking for?
Brian Kesseler: So there are two challenges inside the Ride performance segment and then two really solid growth opportunities that we see. I'll start with the growth opportunities and -- that are really positioned very well for the megatrends. Our NVH performance materials business here Kevin highlight a lot of business wins there very relevant and specifically relevant in our growth story on battery electric vehicles. And Advanced Suspension Technology growth is very positive. For Ride control business which is more the conventional shock business it's really a North American footprint story. We've taken four plants down to two, so essentially cut our capacity in half, rationalized a lot of business out of there over the last 1.5 years. We shut down the first facility at the very, very beginning of the year in 2020, the second facility at the end of the second quarter. And as you can imagine any time where you're moving two plants' worth of production into the remaining plants it's a challenge in normal operating times. When we couple that with what the team had to deal with during the COVID periods especially in Q2, Q3 and very end -- very beginning of Q4, but that's really what drove margins. We expect to see meaningful improvement in our ride control North America business starting this year. And when we move up -- and then our braking business, again there's a couple of hotspots in there from a regional perspective that were -- that will get addressed. From an overall position, we would expect kind of the lower-technology-type businesses ride control and braking to kind of be in that normal 7-ish percent EBIT range and then be higher on the two technology-driven businesses. And so as you mix those out and as more and more of our AST and NVH business grows we might get above that 7% number in the longer term.
Joseph Spak: Okay. Thanks a lot. If I could ask one more and just on sort of the bigger-picture strategy right of business line optimization and debt reduction. And I guess I just wanted to better understand how you and maybe the Board sort of holistically think about this because you're effectively using Clean Air and Powertrain to fund some of that growth investment, but also the debt reduction. And that theoretically and I agree with this should create equity value, but it does rely on the market not contracting the multiple on some of those -- on those businesses. And it looks like we're in a world where the pace of electrification is increasing. I know a good portion of businesses you highlighted in your prepared remarks is not tied to light vehicle ICE et cetera. But how do you weigh the risk of I guess holding onto the businesses to fund that potential migration versus the potential for continued multiple contraction which may actually lead to value destruction?
Brian Kesseler: Yeah. Well, as you can imagine that's a – it's a topic pretty much every day as we're looking at our portfolio makeup. Every part of our portfolio today has strategic value to us for what it's doing in the portfolio today. As you mentioned, our Powertrain and our Clean Air businesses are really our cash engines of the business. And with where we're at today and the focus we have on net debt reduction, they bring a lot of value to us to drive that net debt reduction down significantly here in the near to midterm. Also, we've got great core growth platforms that we highlighted in NVH AST and our Motorparts business. And so they're helping to also fund that growth and really pick up that from a higher-growth percentage into our business. Now, inside both of those Clean Air and Powertrain businesses the commercial truck off-highway is really growing significantly. Again, that's going to be a lot slower pace of technology evolution than light vehicle. But we do not have our heads stuck in the sand on light vehicle, ICE pace and the electrification of the fleet. Hybrids are good for us, but we've got a very clear view of what we see and what we hear in the marketplace for what the adoption rates and the penetration rates are going to be for full BEV in 2030 and 2035 going forward. We've got – we believe we've got the right portfolio mix for what we need to accomplish now in the near term, which we see significant potential in shareholder value creation through that debt reduction, one. But also, we've got the wherewithal in our plans and our portfolio to make sure we have a durable long-term growth business with Motorparts and Ride Performance at its nucleus at its core as we move forward. As the value of different parts of our portfolio evolve, we are prepared to, and we will make the decisions to change the mix in our portfolio over time.
Joseph Spak: Thank you very much for that, Brian.
Operator: The next question will be from Ryan Brinkman of JPMorgan.
Ryan Brinkman: Hi. Congrats on the quarter. Thanks for taking my questions. It looks like you're guiding to net debt rounding to $4.2 billion at the end of 2021 versus rounding to $4.5 billion at the end of 2020 suggesting a net leverage at the midpoint of guidance, I think around 3.1 down from 4.3 in today. I realize these are book net leverage figures and the calculation for your secured leverage ratio is different. But just, how do you think about – or how to think about moving from close to four to three in the context of optionality around the separation of the businesses that has been discussed on earlier calls? Can you remind us again of the leverage that you're looking for prior to separation via a spin? And then just given the stronger FCF in 4Q and then the guidance here for 2021, does that maybe take pressure off of evaluating the sale of certain businesses to accelerate the leverage, or is that something that is still being seriously considered at this point?
Brian Kesseler: Well, a lot there. So let me pick up here from the end and move forward. And if I miss a part, please just remind me. So we have very clearly established some non-core businesses in our portfolio. Just because we're getting a little bit better in our – a bit better in our leverage ratio doesn't mean that it should sit in the portfolio long term. We will put non-core asset sales to work for debt reduction, when the markets get a little bit more amenable to the deal structures and we see more strategics coming in. But in the meantime, we'll keep using those businesses to reduce debt. That's one. Two. As we kind of looked at the original intent of the strategic direction related to and I'm going to address the spin question, we were hovering the target somewhere in the 2.5 to 3 leverage ratio. But I will tell you coming out of last year in the COVID-related downturn and the severity of the downturn we actually were advantaged by having the business together in its current state. And that ratio for us now, if we were going to consider, as one of the options a spin or separation of the business, I believe, it's more prudent to get the debt down below two before that option becomes more realistic. But we will always be looking for different avenues to enhance shareholder value and to make sure that different parts and asset sales create more shareholder value in the nearer term then that's what we'll do. It all goes through the lens of that near-term and long-term shareholder value-creation capability of the enterprise. We're in this for the long haul. And so we want to make sure we're making the right decisions for the shareholders both now and for the future. Did I miss any part of that question, Ryan?
Ryan Brinkman: No. That was great a comprehensive response. Thank you. And then just next question I wanted to ask around the performance of your internal combustion-related business relative to the change in global light vehicle production. And I think at the onset of the call you might have mentioned that something like 60% of your business is not directly related to internal combustion. Just adding up your Powertrain and Ride Performance and Clean Air segments, would result in about 80% of your revenue in those three divisions. So clearly there's some aspects of those that are not related to internal combustion. Maybe you can just remind us of the non-internal-combustion-engine-related sort of non-Ride Performance businesses. But even if I just did look at that 80% of the business seems like that 80% of the business from a volume mix perspective increased its revenue kind of like 4.5% year-over-year in the fourth quarter versus the change in global light vehicle production, I'm noting was 3.2%. So just trying to figure out where the melting ice cube is, what the melt rate is, what you're expecting for 2021 for your internal-combustion-related businesses relative to the change in production. And then going forward, I don't know if you intend to communicate about longer-term targets anytime soon, but anything you wanted to share on the call today relative to your ability to track even in line or modestly below et cetera, the change in light vehicle production? It seems like you weren't especially pressured in the fourth quarter. Be curious your thoughts on that.
Brian Kesseler: Yes. So let me maybe separate the internal combustion engine discussion in – kind of carve it in two. One is light vehicle, internal combustion engine and the Powertrain technology shift to full battery electric vehicle. That is the 40% of our revenue in those light vehicle OE internal combustion engine product lines. Our commercial truck off-highway businesses that are in both Clean Air and Powertrain are – continue to just have great growth, strength, margins and booked business through the middle and into the back half of the decade. And so the commercial truck off-highway space when you look for the outpace of content, as Kevin highlighted, six – 30-plus launches in both India and in China, each for commercial truck off-highway China VI, and Bharat VI programs that came up that content is better for us and better margins cash flow for us. So that's where a lot of that content is growing. Obviously Ride Performance is agnostic to Powertrain technology. And our core growth platforms in Advanced Suspension Technology and NVH are a meaningful part of where we are driving our investment up for those core growth platforms. So that's the makeup. As we grow commercial truck off-highway more, as we grow the Ride Performance side more and Motorparts more, we would expect that 40% to continue to shrink over time. And then as we get our leverage ratio where we're more comfortable, we've talked about a range of 1.5 to two is where we like to see this portfolio, as we get there then our options really get much broader for different strategic alternatives.
Ryan Brinkman: Okay. Great. And then just lastly for me. Of course you've taken a number of steps on the balance sheet side that have been popularly received including the push-out of those 2022 maturities. Just looking at the debt distribution profile then on Slide 20. Maybe just first update us on what the sort of normalized interest expense. Maybe you did say that during the call but if you could remind we can assume going forward might be. And then yes, looking at that debts deck on Slide 20 maybe just update in terms of what might be next. I don't know if it's a the Term Loan A or if there's anything else that might need or could be done here, given the really much more conducive environment relative to nine months ago et cetera.
Matti Masanovich: Hey Ryan, it's Matti. Our interest expense is in and around the $235 million to $250 million a year. So that's what we would expect in 2021. As far as -- what I can say is, we will be opportunistic with the high-yield market, the way it is. And so -- and as we look at our debt maturities, like we did, taking out the '22s moving to '29, we'll continue to be opportunistic and look at as we've always done if the markets are open, we'll try to get some of these maturities further addressed. And so, I think that will I think only benefit us and our shareholders as well. So that's as far as I can go at this point.
Ryan Brinkman: Okay. Very helpful. Thank you.
Operator: [Operator Instructions] The next question is from Bob Amenta of JPMorgan.
Bob Amenta: Yeah, hi, thanks. Just a real couple of quick ones. Matti, when you were going through slide 15, sorry, I heard you say $140 million to $160 million for cash taxes, but things you might have said right before that I missed, maybe CapEx, pension, cash reorg. Can you just repeat those cash uses this year?
Matti Masanovich: Yes. I think, I said that it was a CapEx of $450 million to $500 million, $450 million to $500 million. And that's the only other guidance we gave on cash flow.
Bob Amenta: Okay. And then, just so I'm making sure I'm talking about the same thing. A while back and I can't remember if it was pre-COVID or not, when you guys mentioned cash restructuring $250 million over two years. Is the $150 million you cite on cost to achieve, is that apples-to-apples? Does that mean that there's $100 million left to go in 2021, or is that not the same thing?
Matti Masanovich: We've got about $125 million more of restructuring investment to make to get to our $265 million exit run rate at the end of 2021 from an EBITDA perspective. So, from a restructuring cash perspective, I think is the question you're asking would it be around that $125 million marker in 2021.
Brian Kesseler: Yes. And so that's a little bit higher as we prioritize in 2020, the quicker payback period. So, as we're now jumping into it, it's a little bit higher, but not much, and so the $150 million would correlate to the original $250 million, which is now probably closer to $270 million $275 million.
Bob Amenta: Okay. And then just lastly, the pensions with the CARES Act, I had -- like that for last year you only might have spent $40 million and I had more like $100 million this year. Is that in the right ballpark, or is this year going to be bigger than that due to the deferral?
Matti Masanovich: We did not take advantage of the CARES Act deferral into 2021, so we made our normal pension payments in 2020. So, our normal run rate on pensions is approximately $100 million of cash, half of that being borne up in EBITDA and the other half coming via the balance sheet.
Bob Amenta: Okay. So starting with EBITDA, it'd really just be a $50 -- or $50 million reduction? Okay.
Matti Masanovich: Right.
Bob Amenta: All right. That’s all I had. Thank you.
Operator: Being no further questions, this concludes the question-and-answer session and also concludes our conference call for today. We want to thank you for attending today's presentation. You may now disconnect. Have a great day.