Tenneco Automotive Inc. (ticker: TEN, exchange: New York Stock Exchange) News Release

April 29, 2010

 
TENNECO REPORTS FIRST QUARTER RESULTS
  • Total OE revenue up 42% year-over-year; global aftermarket revenue up 15%
  • Gross margin of 18.5%, up from 14.5% a year ago and 17.4% in fourth quarter 2009
  • EPS up at 11-cents per diluted share; includes 6-cents for restructuring costs and 8-cents for tax charges
  • Total debt net of cash balances improved $328 million year-over-year

Lake Forest, Illinois, April 29, 2010 – Tenneco Inc. (NYSE: TEN) reported first quarter net income of $7 million, or 11-cents per diluted share, compared with a net loss of $49 million, or $1.05 per diluted share in the first quarter of 2009. Adjusted for the items below, net income was $15 million, or 25-cents per diluted share, versus a net loss of $29 million, or 61-cents per diluted share, a year ago. The tables in this press release reconcile GAAP results to non-GAAP results.

EBIT (earnings before interest, taxes and noncontrolling interests) was $59 million, up from a loss of $13 million in first quarter 2009. Adjusted EBIT was $64 million, versus a loss of $10 million a year ago. The EBIT increase was primarily driven by higher OE production volumes globally and related manufacturing efficiency improvements, an increase in higher-margin aftermarket sales, materials cost management and the positive impact of currency.

EBITDA including noncontrolling interests (EBIT before depreciation and amortization) was $114 million, up from $39 million the prior year. Adjusted EBITDA including noncontrolling interests was $118 million, compared with $41 million in first quarter 2009.

"Globally, we are converting stronger production volumes and year-over-year revenue growth to the bottom-line as we continue to benefit from cost structure changes and ongoing operational improvements," said Gregg Sherrill, chairman and CEO, Tenneco. We’re also seeing strengthening in our global aftermarket, which provides good balance to our business."
 
Adjusted first quarter 2010 and 2009 results:
 
    Q1 2010   Q1 2009
    EBITDA EBIT Net income attributable to Tenneco Inc. Per Share EBITDA EBIT Net loss attributable to Tenneco Inc. Per Share
Earnings Measures $ 114 $ 59 $ 7 $ 0.11   $ 39 $ (13) $ (49) $ (1.05)
Adjustments
(reflects non-GAAP measures):
     
  Restructuring and related expenses   4   5   3   0.06     2   3   2   0.05
  Net tax adjustments   -   -   5   0.08     -   -   18   0.39
Non-GAAP earnings measures $ 118 $ 64 $ 15 $ 0.25   $ 41 $ (10) $ (29) $ (0.61)
 
First quarter 2010 adjustments:
  • Restructuring and related expenses of $5 million pre-tax, or 6-cents per diluted share;
  • Non-cash tax charges of $5 million, or 8-cents per diluted share, primarily related to the impact of not benefiting tax losses in the U.S. and certain foreign jurisdictions.
 
First quarter 2009 adjustments:
  • Restructuring and related expenses of $3 million pre-tax, or 5-cents per diluted share;
  • Non-cash tax charges of $18 million, or 39-cents per diluted share, primarily related to the impact of not benefiting tax losses in the U.S. and certain foreign jurisdictions.
 
REVENUE
First quarter revenue was $1.316 billion, up 36% from $967 million a year ago. Excluding substrate sales and positive currency of $61 million, revenue was $999 million, up 31% from $765 million in first quarter 2009. Revenue increased as a result of higher OE production volumes across all regions and in both product lines, new platform launches, and higher aftermarket sales in North America and South America.

GROSS MARGIN AND SGA&E
First quarter gross margin was 18.5%, up from 14.5% a year ago. The increase was driven by stronger OE production volumes, related manufacturing efficiency improvements and materials cost management. An increase in higher-margin aftermarket sales, which globally were up 15% from a year ago, also contributed to the improvement. Gross margin included $4 million in restructuring costs and first quarter 2009 gross margin included $2 million in restructuring costs. Gross margin also increased from 17.4% in fourth quarter 2009.

SGA&E (selling, general, administrative and engineering) expense in the quarter was $127 million, compared with $99 million a year ago. The increase was due to salaried employee furloughs in the first quarter of 2009; restoring the company’s 401(k) match in North America as of January 1, 2010; and higher year-over-year expense related to performance-based compensation plans for employees at all levels. Tenneco remains disciplined in its engineering spending with expense $6 million higher than a year ago, reflecting timing on engineering cost recoveries as well as planned expenses for upcoming new business launches. Tenneco leveraged higher year-over-year revenues with SGA&E as a percent of sales improving to 9.7% from 10.2% a year ago.

CASH FLOW
Cash flow from operations improved $86 million year-over-year after applying a previously announced 2010 accounting rule change to last year’s cash performance as detailed in the following chart and in the attachments to this press release.
($ millions) Three Months Ended March 31,
  2010   2009
       
Net cash used by operating activities $ (57)   $ (81)
Receivables adjustment (Pro forma for accounting change)   -       (62)
       
Net cash used by operating activities (Pro forma for accounting change) $ (57)   $ (143)


DEBT
Tenneco ended the quarter with net debt at $1.146 billion, a $328 million reduction from $1.474 billion a year ago. As a comparison, net debt was down $390 million if the accounting change for accounts receivable securitization programs had been in effect last year as shown below.
($ millions) March 31
  2010   2009
       
Total Debt $ 1,339   $ 1,587
Cash Balances   193     113
       
Net Debt $ 1,146   $ 1,474
A/R Secured Borrowings (Pro forma for accounting change)   -       62
       
Net debt (Pro forma for accouting change) $ 1,146   $ 1,536


"Generating cash and reducing debt remain top priorities for Tenneco and we made excellent progress this quarter in further strengthening our balance sheet," said Sherrill. "Our cash performance was driven by improved earnings and efficiently managing all components of working capital in a stronger production environment. Beyond the benefit from our common stock offering in the fourth quarter of 2009, we significantly improved our financial position as a result of this strong cash performance."

The ratio of net debt to adjusted EBITDA including noncontrolling interests was 2.8x, down significantly from 4.6x at March 31, 2009.

At March 31, 2010, Tenneco’s leverage ratio under its senior credit facility was 2.77, below the maximum level of 5.50. The interest coverage ratio was 3.04, above the minimum of 2.00. This performance would meet the company’s tightest covenant ratios through expiration of the senior credit facility in 2012.

Capital expenditures incurred in the quarter were $27 million, compared with $25 million a year ago. Tenneco continues to efficiently manage capital expenditures to support customer programs and new growth opportunities by redeploying assets and using existing manufacturing capacity to support new business launches.

NORTH AMERICA
  • North America OE revenue was $454 million, up from $333 million a year ago. Excluding substrate sales and the impact of currency, revenue increased 42% to $313 million, versus $219 million in first quarter 2009. The increase was driven by stronger production volumes on emissions control and ride control platforms including the Ford Expedition/Navigator, the GMT900 half-ton pick-up trucks and GM crossover vehicles, partially offset by key light truck platforms in launch.
  • North America aftermarket revenue rose to $151 million, compared with $136 million in first quarter 2009. Excluding currency, revenue increased to $148 million. The 9% revenue gain was driven by strong ride control sales.
  • EBIT for North America operations was $36 million, up from $4 million in first quarter 2009. Adjusted for the items below, EBIT increased to $40 million from $6 million a year ago.
  • The EBIT improvement was driven by higher OE production volumes, related manufacturing efficiency improvements and an increase in higher-margin aftermarket sales. EBIT included $12 million in positive currency due to the Canadian dollar and Mexican peso.
  • First quarter 2010 EBIT includes $4 million in restructuring and related expenses and first quarter 2009 EBIT includes $2 million in restructuring and related expenses.

EUROPE, SOUTH AMERICA, INDIA
  • Europe OE revenue was $385 million, up from $278 million in first quarter 2009. Excluding substrate sales and the impact of currency, revenue increased 28% to $281 million from $220 million a year ago. Revenue increased due to higher production volumes on emissions control and ride control platforms including the Ford Focus, Opel Astra, VW Golf and BMW 1 and 3 Series. New ride control platform launches such as the Renault Scenic also contributed to the revenue gain but were partially offset by the continuing decline in the two-wheeler market.
  • Europe aftermarket revenue was $66 million, up from $60 million a year ago. Excluding the impact of currency, revenue was $61 million. Higher ride control sales were partially offset by lower emissions control sales.
  • South America and India revenue was $110 million, an increase from $68 million in first quarter 2009. Excluding substrate sales and the impact of currency, revenue rose 43% to $82 million from $59 million a year ago. The increase was driven by higher OE production volumes and aftermarket sales, primarily in South America.
  • EBIT for Europe, South America and India was $12 million, versus a loss of $17 million in first quarter 2009. Adjusted for the items below, EBIT was $13 million, up from a loss of $16 million the prior year.
  • The EBIT improvement was driven by stronger production volumes in all regions and related manufacturing efficiency improvements, a more favorable platform mix in Europe, and materials cost management. First quarter 2010 includes $1 million in positive currency.
  • First quarters 2009 and 2010 EBIT include $1 million in restructuring and related expenses.

ASIA PACIFIC
  • Asia revenue was $111 million, up from $67 million in first quarter 2009. Excluding substrate sales and the impact of currency, revenue was $85 million, a 75% year-over-year increase from $48 million. Higher production volumes in China including on key GM and VW platforms, as well as new platform launches drove the revenue gain.
  • Australia revenue was $39 million, up from $25 million a year ago. Excluding substrate sales and the impact of currency, revenue was $29 million. The 26% increase over the prior year was driven by stronger production volumes.
  • Asia Pacific EBIT was $11 million, versus breakeven a year ago. Stronger OE production volumes, particularly in China, and manufacturing efficiencies drove the increase. First quarter 2010 EBIT includes $1 million in negative currency.

OUTLOOK
As forecasted by Global Insight at the beginning of the year, the OE production environment in North America is strengthening, now on track to be about 10.9 million units in 2010. Projections for Europe OE production remain fairly stable at about 17.6 million units this year and China continues to expand at a rapid pace with production estimates of 15.6 million units this year.

"The industry continues to recover and customer production schedules are meeting forecasted rates, which will help drive our top-line growth as we leverage stronger OE production volumes globally and benefit from the strength of our global aftermarket," said Sherrill. "We will continue our drive to improve profitability as we operate from a lower cost structure and maintain our relentless focus on operational excellence. This focus along with executing on our commercial vehicle launches beginning later this year are key to us taking full advantage of all our growth opportunities."
 
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CONFERENCE CALL
The company will host a conference call on Thursday, April 29, 2010 at 10:30 a.m. EDT. The dial-in number is 888-847-6591 (domestic) or 415-228-5024 (international). The passcode is TENNECO. The call and accompanying slides will be available on the financial section of the Tenneco web site at www.tenneco.com. A recording of the call will be available one hour following completion of the call on April 29, 2010 through May 29, 2010. To access this recording, dial 888-484-8241 (domestic) or 402-998-1379 (international). The purpose of the call is to discuss the company’s operations for the quarter, as well as other matters that may impact the company’s outlook. A copy of the press release is available on the financial and news sections of the Tenneco web site.

Tenneco is a $4.6 billion global manufacturing company with headquarters in Lake Forest, Illinois and approximately 21,000 employees worldwide. Tenneco is one of the world’s largest designers, manufacturers and marketers of emission control and ride control products and systems for the automotive original equipment market and the aftermarket. Tenneco markets its products principally under the Monroe®, Walker®, Gillet™ and Clevite®Elastomer brand names.

This press release contains forward-looking statements. Words such as "may," "expects," "anticipate," "projects," "will," and "outlook" and similar expressions identify forward-looking statements. These forward-looking statements are based on the current expectations of the company (including its subsidiaries). Because these forward-looking statements involve risks and uncertainties, the company's plans, actions and actual results could differ materially. Among the factors that could cause these plans, actions and results to differ materially from current expectations are:
(i) changes in automotive manufacturers' production rates and their actual and forecasted requirements for the company's products such as recent and significant production cuts by automotive manufacturers in response to difficult economic conditions;
(ii) the company's resultant inability to realize the sales represented by its awarded book of business which is based on anticipated pricing for the applicable program over its life, and is subject to increases or decreases due to changes in customer requirements, customer and consumer preferences, and the number of vehicles actually produced by customers;
(iii) increases in the costs of raw materials, including the company’s ability to successfully reduce the impact of any such cost increases through materials substitutions, cost reduction initiatives, customer recovery and other methods;
(iv) the cyclical nature of the global vehicular industry, including the performance of the global aftermarket sector, and changes in consumer demand and prices, including longer product lives of automobile parts and the cyclicality of automotive production and sales of automobiles which include the company's products, and the potential negative impact on the company's revenues and margins from such products;
(v) the company's continued success in cost reduction and cash management programs and its ability to execute restructuring and other cost reduction plans and to realize anticipated benefits from these plans;
(vi) the general political, economic and competitive conditions in markets and countries where the company and its subsidiaries operate, including the strength of other currencies relative to the U.S. dollar and currency fluctuations and other risks associated with operating in foreign countries;
(vii) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals;
(viii) changes in capital availability or costs, including increases in the company's costs of borrowing (i.e., interest rate increases), the amount of the company's debt, the ability of the company to access capital markets at favorable rates, and the credit ratings of the company’s debt;
(ix) the cost and outcome of existing and any future legal proceedings, and the impact of changes in and compliance with laws and regulations, including environmental laws and regulations and the adoption of the current mandated timelines for worldwide emissions regulations;
(x) workforce factors such as strikes or labor interruptions;
(xi) the company's ability to develop and profitably commercialize new products and technologies, and the acceptance of such new products and technologies by the company's customers and the market;
(xii) further changes in the distribution channels for the company's aftermarket products, further consolidations among automotive parts customers and suppliers, and product warranty costs;
(xiii) changes by the Financial Accounting Standards Board or other accounting regulatory bodies to authoritative generally accepted accounting principles or policies;
(xiv) changes in accounting estimates and assumptions, including changes based on additional information;
(xv) acts of war, riots or terrorism, including, but not limited to the events taking place in the Middle East, the current military action in Iraq and the continuing war on terrorism, as well as actions taken or to be taken by the United States or other governments as a result of further acts or threats of terrorism, and the impact of these acts on economic, financial and social conditions in the countries where the company operates; and
(xvi) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond the control of the company and its subsidiaries.
The company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company's SEC filings, including but not limited to its report on Form 10-K for the year ended December 31, 2009.
 


CONTACT:
Jane Ostrander
Media Inquiries
(1) 847 482-5607
jostrander@tenneco.com

Linae Golla
Investor Inquiries
(1) 847 482-5162
lgolla@tenneco.com
 

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