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Edited Transcript of TEN earnings conference call or presentation 8-May-20 1:30pm GMT

Q1 2020 Tenneco Inc Earnings Call

LAKE FOREST Jun 6, 2020 (Thomson StreetEvents) -- Edited Transcript of Tenneco Inc earnings conference call or presentation Friday, May 8, 2020 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Brian J. Kesseler

Tenneco Inc. - CEO & Director

* Kenneth R. Trammell

Tenneco Inc. - Interim CFO & Executive VP

* Linae Golla

Tenneco Inc. - VP of IR

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Conference Call Participants

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* Armintas Sinkevicius

Morgan Stanley, Research Division - Associate

* Clark J. Orsky

Alcentra NY LLC - Senior High Yield Analyst

* James Albert Picariello

KeyBanc Capital Markets Inc., Research Division - Analyst

* Joseph Robert Spak

RBC Capital Markets, Research Division - Analyst

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Presentation

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Operator [1]

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Good day and welcome to the Tenneco Inc. First Quarter 2020 Earnings Conference Call. (Operator Instructions) Please note that this event is being recorded.

I would now like to turn the conference over to Linae Golla. Please go ahead, ma'am.

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Linae Golla, Tenneco Inc. - VP of IR [2]

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Thank you and good morning. Earlier today, we released our first quarter 2020 earnings results and related financial information. A 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. When we say EBITDA, it means adjusted EBITDA. Revenue year-over-year comparisons are measured at 2019 constant currency rate. Unless specifically described otherwise, margin refers to value-add adjusted EBITDA margin. The earnings release and attachments 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.

Over the next month, we will be participating in 3 virtual conferences, including the KeyBanc Capital Markets Industrials and Basic Materials Virtual Conference, the Wolfe Research (inaudible) auto summit and the Deutsche Bank Global Auto Industry Conference. We look forward to connecting with many of you.

Our agenda for today starts with CEO, Brian Kesseler, giving an overview of our COVID-19 response, our current liquidity position and Q1 enterprise performance and highlights. Then, Interim CFO, Ken Trammell, will review segment performance and will drill down a bit more into our balance sheet, liquidity and the recent covenant amendments. Brian will then provide color on our business outlook and make closing comments before taking your questions.

Now I will turn it over to Brian.

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Brian J. Kesseler, Tenneco Inc. - CEO & Director [3]

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Thank you, Linae. Good morning, everyone, and welcome. I hope everyone is staying safe and healthy.

Before we begin, I'd like to take a moment to welcome back Ken Trammell who rejoined Tenneco as Interim CFO on April 1. I'm pleased to have his experience and expertise back on the leadership team and to have him on today's call.

This morning, we reported Tenneco's results for the first quarter, and the company delivered solid performance in a truly extraordinary business environment.

To start, let's turn to Page 4 and a summary of Tenneco's response to the COVID-19 crisis and highlight some of the actions we're taking to mitigate its impact. We are focused on 3 key areas. First, we began our response to the crisis with a focus on the health and safety of our team members and the communities where we live and work. We've implemented rigorous cleaning protocols, wellness checks and social distancing measures at all of our facilities, many of which continued operations as they supported critical essential business customers in each region.

We're also proud to partner with General Motors by supplying components to increase the production of ventilators needed to support the medical community. The first of these ventilators were delivered to hospitals the week of April 14, just 3 weeks after the project began. Supporting this effort to help mitigate the widespread lack of vital equipment aligns well with our values and who we are as a company.

Second, in the early stages of the crisis, we aggressively flexed our cost structure by temporarily suspending or reducing operations across the Americas, EMEA and most of the APAC regions in response to governmental requirements and production suspensions taken by some of our customers. Tenneco safely continued work in our manufacturing sites and distribution centers to meet the demands of our OE and aftermarket customers who were still operating.

Today, all Tenneco production facilities, distribution centers and offices in China are now open and operating at near precrisis levels. And as of the first week of May, approximately 75% of the company's plants and distribution centers globally are operating at various levels of production, up from a low of 47% during the first week of April.

We continue daily coordination with our customers, our supply chain partners and government and public health officials as we work to safely restore operations to our facilities as they support our customers in the restart of their businesses globally.

Finally, we have taken action to preserve our liquidity and further improve our cost structure in order to optimize cash flow. I'll discuss these financial steps in greater detail, but the bottom line is this: based on available industry forecast and our estimates, we believe Tenneco has adequate liquidity to weather the current downturn and emerge strong, and we are ready for the recovery.

Turning now to Page 5 for an update on our cost reduction initiatives. As you recall, we initiated the Accelerate program at the beginning of the year to further reduce operating cost and improve cash flow generation. The Accelerate program targets $200 million of annual run rate cost savings and $250 million of working capital improvements by the end of 2021. We remain on track to achieve $100 million savings run rate from Accelerate by year-end 2020. For calendar 2020, we continue to expect that the combined benefit from Accelerate and the carryover synergy project benefits will yield $100 million of cost improvement.

Regarding working capital improvements, we anticipate achieving about half of the improvement in our targeted working capital metrics this year, also consistent with our original outlook.

Further, we have taken incremental steps to adjust our cost structure since COVID-19 expanded its reach beyond China. We have initiated additional restructuring actions expected to yield $65 million of annualized savings. On a structural basis, these actions should benefit our mid- to long-term margin as we anticipate a small fraction of these costs will be added back after global production normalizes. The majority of these actions and associated savings are expected to improve 2020 cost performance and are spread relatively evenly across the 4 business segments and corporate.

We have also implemented a number of temporary actions to reduce costs, including salary reductions, unpaid furloughs and decreasing director fees. These actions will help support our business in 2020, but we do not intend that they will continue beyond the current year. However, if the demand environment were to remain depressed for an extended period of time, we would reevaluate and make the appropriate adjustments. As a reference point, the company's cost base is largely variable, with materials and labor accounting for approximately 75% of our cost of goods sold, giving us the ability to flex our cost base to adjust to the demand environment.

You'll see an update on our debt and liquidity position on Page 6. Earlier this week, we announced the completion of a covenant amendment agreement with our bank group through the end of 2022. We believe the updated terms give us the flexibility required to execute our operating plan in the current volatile environment. Ken will discuss the terms of the amendment and offer additional color about the state of our balance sheet and liquidity in a few minutes.

At quarter end, we had $1.57 billion of liquidity, including $770 million of cash on hand and $800 million of undrawn capacity on our revolving credit facility. Operationally, we've taken a number of actions to fortify our liquidity. We've lowered our capital expenditure target by 45% year-over-year. Our current plan is to spend less than $400 million compared to the well over $700 million in 2019. We are flexing our working capital, including a high emphasis on reducing inventory. Further, we are deferring cash outlays where possible, including leveraging country-specific business support programs. As a reminder, we do not have any material near-term debt maturities, and our credit facility matures in late 2023.

Now turning to Page 7. I'd like to discuss some of our business highlights for the first quarter. In January, we implemented a streamlined leadership structure to enhance operational performance and leverage the strength of a single senior leadership team across the enterprise. We continue to make significant progress on our ongoing Board refreshment process, which is designed to add fresh perspectives and leadership to the Board. Our newest Board members, Aleks Miziolek, Roy Armes and Chuck Stevens, all bring significant industry and business experience as well as leadership to the team. They have hit the ground running, and I look forward to continue working with each of them and the entire Board of Directors to better position Tenneco for success.

In addition, in April, we adopted a shareholder rights plan to protect the availability of our tax assets, preserving long-term value for the benefit of all of Tenneco shareholders.

Across the business in every region, we saw examples of good execution on growth strategies during the first quarter. We continued to win and launch new programs and strengthen our product portfolio for the future, which continues to garner recognition and accolades across the industry. A few examples include: the Ride Performance advanced suspension technology team added a new kinetic program win during the quarter. This is in addition to the 10 advanced technology programs launching in 2020. Our Motorparts group continued to win new business in North America and EMEA, securing more than $20 million in annual revenue during the quarter as they continued portfolio and complexity optimization actions to improve profitability across key product categories. Commercial truck and off-highway continues to drive growth as the Clean Air team captured new business wins in EMEA and China and launched a number of new CTOH programs in India. And the Powertrain team was once again recognized for product innovation when they were awarded a 2020 Automotive News PACE Award for IROX 2 bearing technology. Our Powertrain business group has had a successful history with PACE, earning 17 awards since 2006, something we are very proud of.

Page 8 is an overview of our performance this quarter. Total revenues were $3.8 billion, and excluding unfavorable currency of $97 million, declined just 12% year-over-year, while global light vehicle production was down 23%. Value-add revenue was $3.1 billion. I would like to point out that 43% of our value-add revenue this quarter comes from aftermarket and commercial truck, off-highway and industrial markets and is not related to OE light vehicle production. Our diversified end markets helped lessen the impact of the COVID-19 crisis, which we estimate had a negative impact on value-add revenue of $340 million or 9%.

EBITDA was $239 million and translated to a 7.6% margin on value-add revenues. Aggressive cost flexing in the quarter delivered better-than-anticipated decremental margin performance. Adjusted EPS was a loss of $0.31 per share.

Now I'll turn the call over to Ken who will review the business segments and our balance sheet.

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Kenneth R. Trammell, Tenneco Inc. - Interim CFO & Executive VP [4]

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Thanks, Brian. I'll start out with Clean Air on Page 10. In this segment, we estimate COVID-related demand declines reduced our sales by almost $150 million in the quarter. Clean Air value-add revenues were $845 million and decreased 19% year-over-year on a constant currency basis. Light vehicle revenues fell 20% year-over-year and outperformed global light vehicle production by approximately 300 basis points. Commercial truck and off-highway and other revenues declined 19% year-over-year.

Segment EBITDA was $104 million, approximately 26% below the prior year period. Adjusted EBITDA margin was 12.3% versus 13% in first quarter of 2019. Year-over-year profit performance was negatively affected by the significant year-over-year production decline in China, a market where Clean Air has significant presence. Further, the downtime experienced late in the quarter in the developed markets, particularly North America, had a negative effect on our margin performance versus the prior year period.

Please see Page 11 for a review of Powertrain. Segment revenues were $997 million, down 13% year-over-year at constant currency. We estimated COVID-related demand pressures decreased sales by $70 million. Light vehicle revenues fell 12%, strongly outperforming global light vehicle production. The segment's regional mix contributed a good portion of the outperformance this quarter. On a consolidated basis, Powertrain is below our average representation in China and, therefore, was less affected by that market's substantial year-over-year decline in the first quarter. Segment EBITDA was $90 million, and adjusted EBITDA margin was 9%, a decrease of about 90 basis points versus the first quarter of 2019. Similar to Clean Air, this segment's leadership team managed the business well against a volatile backdrop. Carryover benefit from SG&A cost reductions benefited year-over-year margin performance and mitigated some of the negative profit impact from volume declines.

Turning now to Page 12 for the Motorparts segment, where we estimate COVID-related demand pressures decreased sales by $55 million. First quarter revenue decreased 9% year-over-year at constant currency. Strategic decisions to exit certain product lines impacted the revenue comparison by $26 million and included our sale of the Wiper product line in the first quarter of 2019. In addition, segment EBITDA was $73 million, and adjusted EBITDA margin was 10.3%, down 100 basis points year-over-year. Tight cost control and the carryover synergy savings helped mitigate the negative impact from lower demand.

Please turn to Page 13 for details on Ride Performance. First quarter revenue was down 17% year-over-year at constant currency, included portfolio changes of $19 million. We estimated COVID-related demand pressures decreased sales by $65 million. Light vehicle revenue was down 17%, which was 600 basis points better than the decline in global light vehicle production in the quarter. Commercial truck, off-highway and other revenue was down 21%. Segment EBITDA was $16 million, and margin was 2.7% compared to 4.2% last year. Operating performance, including reductions in SGA&E, helped offset some of the pandemic impact. We're making progress as expected on capacity reduction in our Ride Performance manufacturing footprint in North America, going from 4 plants to 2. Operations at 1 of the 2 plants slated for closing have now ended, with the second to be closed before the end of the year.

Turning now to Page 14 for updates on a couple of key financials. Before I discuss our updated covenant and liquidity situation, we booked noncash impairments of $854 million pretax, $737 million after tax, which were entirely precipitated by the near-term impacts of COVID-19-driven demand decline. A little more than half of the impact related to asset write-downs and goodwill and intangible impairment charges make up most of the balance. These charges have no impact on the long-term strategic value or the growth prospects of these businesses.

On this page, I'll review our balance sheet items, debt covenant terms we secured from our lenders and liquidity position. Starting with our current leverage ratio and updated credit amendment. At the end of Q1, our total net leverage ratio on a trailing 12-month basis was approximately 4x. The covenant amendment to our senior credit facility we secured earlier this week provide us with additional headroom to operate in the current economic environment. The major changes you should be aware of include: our leverage ratio will be measured using senior secured debt, which will exclude our unsecured notes and foreign debt; the maximum allowed senior secured net leverage ratio occurs in Q3 at 9.5x and steps down to 4x by the fourth quarter of 2021. Starting with the first quarter of 2022, our net leverage covenant ratio will revert back to a total net leverage covenant ratio, commencing with a 5.25x threshold and then declining to 3.75x effective Q4 of 2022. Our interest coverage ratio has been changed to 2x for the second quarter of 2020 and declines to 1.5x beginning with the third quarter of 2020. The interest coverage ratio tightens to 2.75x effective with the second quarter of 2021 and stays at that level thereafter. In addition, we can apply a maximum of $750 million of cash against our total debt balance until the fourth quarter of 2021. That allowance drops back to $500 million effective with the first quarter of 2022.

In return for the amendment, the spread on credit facility and Term Loan A increases 50 basis points to LIBOR plus 250 as long as our consolidated net leverage ratio exceeds 6x. The spread declines as our leverage ratio improves. For more details, please reference our Form 8-K filed with the SEC on May 6.

Next, the chart on the right shows that we have no material debt maturities until 2022. And finally, we believe we have adequate liquidity to manage through the current low-production environment, and more importantly, support working capital requirements when our unit production recovers. At March 31, we had $770 million of cash on the balance sheet and $800 million available under our credit facility. We further bolstered the company's liquidity position by drawing the remaining amount available under this revolving credit facility.

Now I'll turn it back over to Brian for our views on the second quarter and closing comments. Brian?

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Brian J. Kesseler, Tenneco Inc. - CEO & Director [5]

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Thanks, Ken. Please turn to Page 16. Due to the uncertainty and volatility in the global production environment, we withdrew our financial guidance in early April. We plan on resuming offering revenue and EBITDA guidance when the macro environment stabilizes. However, we want to help you understand how we are thinking about industry dynamics in the near term.

For Q2, given the substantial light vehicle production downtime being incurred by our customers, we believe our business will experience meaningful sequential deterioration in revenue and EBITDA compared to Q1. On a year-over-year basis, IHS currently forecasts a 47% decrease in global light vehicle unit production in Q2. We're taking a more conservative view and are planning for a mid- to high 50s percent range decrease year-over-year for global light vehicle production and commercial vehicle production in the major markets we serve. We do believe production activity will improve month-to-month in the quarter but at a gradual rate.

The North America and EMEA aftermarket industry demand decline appears to have bottomed out but is down significantly on a year-over-year basis. We have seen improving trends since mid-April and anticipate gradual demand improvement as the quarter evolves. Our various cost reduction initiatives will start to contribute in Q2, with the majority of the benefits realized during the second half of the year. In general, we expect demand trends to improve soon but are monitoring business trends carefully and stand ready to take additional cost actions, if necessary.

In many ways, the current downturn is unlike the last major economic downturn in 2008 and 2009. However, there are similarities in the challenges facing the business today. We are fortunate that each member of our senior management team successfully managed businesses through that previous downturn, either here or somewhere else in the industry. And today, we are employing best practices from those experiences and implementing playbooks to navigate the business through the current environment.

While there are similarities in this current challenge, there is a significant difference in strength in Tenneco's global composition and overall scale. Each operating segment and the total company has a stronger regional presence and higher mix of end markets it serves in light vehicle OEM, commercial truck, off-highway, industrial and the aftermarket. This scale, presence and mix provides revenue and [profit] diversification unlike many in our peer group. This is a key difference I see in Tenneco operating in the current environment versus the '08, '09 downturn. We intend to capitalize on our past experiences and leverage our current strength in composition and scale to emerge from this crisis a stronger Tenneco.

Turning now to Page 17. I'd like to provide a few additional comments before we open the line up to your questions. Despite the unprecedented challenges facing our industry, I'm confident in the long-term differentiators of our business that will deliver profitable growth and support resiliency and flexibility. As I said, today, we benefit from 2 diversified divisions, DRiV and New Tenneco, that are both well positioned to generate long-term value. In these current times, we believe the diversification and scale of the business will benefit us as a consolidated entity. Longer term, we continue to view a separation of the divisions as the best potential value proposition for all shareholders. We are cognizant of the market conditions and highly focused on reducing our leverage metrics as demand recovers and before we move forward with any separation. In the meantime, we will continue to opportunistically review strategic alternatives that could be executed once industry and finance market trends stabilize.

Last, but certainly not least, I want to take a moment to thank our global Tenneco team for their toughness and resiliency amid today's difficult environment. I'm truly grateful for the extraordinary efforts from our team members and their families, including helping the company safely maintain operations during the crisis to provide products and services that are considered vital to public security, health and safety. And as always, I'd like to thank you all for joining our call this morning and for your continued interest in Tenneco.

With that, we're ready to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question will come from Joseph Spak with RBC Capital Markets.

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Joseph Robert Spak, RBC Capital Markets, Research Division - Analyst [2]

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I guess to start, on the CapEx cuts, which you mentioned were significant or are expected to be significant, can you talk a little bit more about that? Is that program-related or maybe there's some areas or some things you thought you were going to do or planning to do from a footprint perspective or maybe even from a tooling perspective that now maybe doesn't get done or outsourced? And what does that really mean for the company's sort of future growth opportunities?

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Brian J. Kesseler, Tenneco Inc. - CEO & Director [3]

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Yes. Joe, this is Brian. Let me start with that one, and I'll get Ken's thoughts after. That reduction primarily would be the delays in CapEx that we would do in the future. If you remember, we did guide that we were going to be spending about $100 million less from that $700 million plus level last year anyway as part of our initial plan. So we've delayed and cut some of those projects.

From a program perspective, we really don't see significant delays or cancellations of programs, so it's not really related to -- program-related. It's more some of the items that we can choose to push out and/or delay until we see something stabilize here.

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Joseph Robert Spak, RBC Capital Markets, Research Division - Analyst [4]

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Okay. And then maybe just on the rest of the free cash flow sort of factors. If you could help us a little bit on maybe sort of working capital over the coming quarters, and particularly with, I guess, factored receivables, like that still helped the cash a little bit here. My guess is that should be going down and maybe working the other way as your -- the receivable balance goes lower. But if you could help us a little bit more with the free cash flow outlook, that would be helpful.

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Kenneth R. Trammell, Tenneco Inc. - Interim CFO & Executive VP [5]

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Sure, Joe. It's Ken. Yes, so you mentioned the factoring program, and the factoring program is one of our sources of liquidity. A couple of facts about it, about half of what we had outstanding at the end of the year was related to the aftermarket. And so as you know, those are long-dated receivables and factoring programs. They're really our customers' factoring programs. And given the timing on those, they'll have some minor impact but not very significant. The OE, which is the remaining, obviously, will have a short-term impact. But as production begins to ramp up here later this month and into June and July, the factoring opportunity will come back. So we feel like, given the liquidity that we have from the revolver and the pattern of production that it's a -- while it's a short-term impact, I don't think it'll be a significant long-term impact.

On the rest, I mean, you heard Brian talk about the impact on improving our working capital metrics, and significantly, that's on inventory. We have a lot of inventory, very -- the company, but by the time I joined was very highly focused on the opportunity to reduce that inventory. Given what happened with the rapid decline in production in -- right near the end of the first quarter, there is certainly some inventory that the company has available to use as production ramps back up before we have to start to replenish that. So again, I would expect inventory to be a bit of a tailwind to us, especially in the second quarter but certainly for the full year as well.

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Operator [6]

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Our next question will come from James Picariello with KeyBanc.

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James Albert Picariello, KeyBanc Capital Markets Inc., Research Division - Analyst [7]

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Just broadly on the quarter's decrementals and thinking about the rest of the year, what were the key factors in driving the quarter's solid conversion? And how would you expect decrementals to trend through the rest of the year? It does sound as though, yes, the second quarter might be a little worse and then better performance in the back half. So any color there would be helpful.

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Brian J. Kesseler, Tenneco Inc. - CEO & Director [8]

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Yes. Maybe let me start, and then I'll turn it over to Ken. So we obviously had been talking about the carryover benefit from the synergy work that we completed last year ahead of time. And so that obviously helped us in the first quarter from a comparison standpoint. The team got in early, at least from the China perspective of our ability to flex out some of the cost, so some, I would say, good execution operationally on flexing the cost down there.

It's kind of across the board operationally is where we flexed. Yes, Q2 will be -- won't have that same decremental performance. If you had to think about it with that sharp of a downturn quarter-to-quarter, I would say, probably in the mid- to high 20% would be the decrementals in Q2, and then that would start to lift as the volume continues to come back for us.

Ken, you want -- do you have any other thoughts on that?

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Kenneth R. Trammell, Tenneco Inc. - Interim CFO & Executive VP [9]

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No. I think you said it well, Brian. I mean just to reiterate, certainly good performance in the first quarter. The year-over-year comps, there were some unusual things in the first quarter of last year like a supplier bankrupts and a couple of things like that, that certainly helped make this look a little bit better. But to your point, the decrementals will certainly be back in the normal range, maybe a little bit higher from what we've seen in the past as you move into the second quarter.

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James Albert Picariello, KeyBanc Capital Markets Inc., Research Division - Analyst [10]

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Got it. That's helpful. And then just to confirm, I guess, regarding the $65 million in additional run rate cost savings, how much do you think you can achieve this year? And maybe how are those actions dispersed across the segments? So is it targeted across just 2 business units? Or is it pretty broad based?

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Brian J. Kesseler, Tenneco Inc. - CEO & Director [11]

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It's pretty well split evenly across the 3 -- the 4 business groups and corporate. A good majority of that is going to be realized in the fiscal year, in the calendar year of 2020. And we would expect -- as I mentioned a little bit earlier, we would expect a meaningful portion of that to remain in our run rate going forward. So that, coupled with the $200 million Accelerate program from a margin perspective, I think, sets the stage for pretty good cost control and margin performance going forward.

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James Albert Picariello, KeyBanc Capital Markets Inc., Research Division - Analyst [12]

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Got it. And then just 2 things on free cash flow inputs, let's say. The -- can you kind of give us color on what you expect G&A to be given the lower CapEx now for the year? That would be helpful.

And then how are you thinking about restructuring spend -- cash spend this year? I think you had outlined maybe $125 million in incremental cash spend. So I just wonder if anything has changed there.

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Brian J. Kesseler, Tenneco Inc. - CEO & Director [13]

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Yes. Ken, maybe you want to maybe hit the free cash flow, and I'll talk about the restructuring.

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Kenneth R. Trammell, Tenneco Inc. - Interim CFO & Executive VP [14]

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Yes. You bet. Again, like we said earlier, right, I think that the free cash flow will be obviously impacted by what's going on. I don't think the CapEx impact on depreciation will be very significant. I guess I would point out that with the impairment charges we took, there will be an impact on depreciation as we move forward. Kind of hard to give you a really solid estimate of that right now because that has to be allocated to the individual assets. But if we sort of took an average, I would guess that actually depreciation related to the impairments will be lower by something in the neighborhood of $50 million on an annual basis once we get that all pushed down to the appropriate assets.

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Brian J. Kesseler, Tenneco Inc. - CEO & Director [15]

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Yes. And James, as we took a look at the incremental savings, that $65 million we talked about, we shuffled the deck a little bit and really re-prioritize the faster-payback projects. So I don't know that we'll be meaningfully higher than the original $125 million in the year. We put back in the Qs maybe some of the longer payback ones until we could see this environment stabilize for us a little bit.

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Operator [16]

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Our next question will come from Armintas Sinkevicius with Morgan Stanley.

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Armintas Sinkevicius, Morgan Stanley, Research Division - Associate [17]

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First, on the leverage side, when you were able to renegotiate those covenant terms, any changes to the leverage for New Tenneco, assuming a spin? It was previously 2.9x, and I'm just wondering if there are any changes to that.

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Kenneth R. Trammell, Tenneco Inc. - Interim CFO & Executive VP [18]

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Yes. No, no changes to that.

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Armintas Sinkevicius, Morgan Stanley, Research Division - Associate [19]

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Okay. And then from a strategic standpoint, I'm guessing, as you continue to evaluate transactions, those have sort of been put on hold given the environment. Or have you continued to have discussions here?

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Brian J. Kesseler, Tenneco Inc. - CEO & Director [20]

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Well, I mean, as I think of the way you started that, with the environment we're going on right now, I think everybody's hit the pause button on any strategic alternative assessments until we see our way through this.

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Operator [21]

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The next question will come from Clark Orsky with Alentra (sic) [Alcentra].

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Clark J. Orsky, Alcentra NY LLC - Senior High Yield Analyst [22]

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Yes. Just circling back on the factoring facilities. Any change to any of those terms on those facilities?

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Kenneth R. Trammell, Tenneco Inc. - Interim CFO & Executive VP [23]

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No. No changes to any of the terms. I know that in the first quarter, there were -- because their funding costs went up, there were a couple of fairly minor changes in the -- of spread on those facilities. But we're talking a few basis points, not anything that would be a significant impact.

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Clark J. Orsky, Alcentra NY LLC - Senior High Yield Analyst [24]

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Okay. And then I may have missed it, did you quantify the run rate cost savings for the salary and other adjustments you made in SG&A?

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Brian J. Kesseler, Tenneco Inc. - CEO & Director [25]

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No, we didn't. The temporary ones, by definition, we don't intend carrying through, but not a lot of that factored into Q1. And so obviously, we're still flexing hard as we don't see the production here -- coming here until mid-April from a ramp-up perspective.

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Operator [26]

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This concludes our question-and-answer session as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.