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

October 28, 2010

  • Total revenue up 23%
  • OE revenue up 27%; global aftermarket revenue up 10% year-over-year
  • EBIT increased 90% year-over-year
  • Net income rose $18 million; EPS up 34-cents year-over-year

Lake Forest, Illinois, October 28, 2010 – Tenneco Inc. (NYSE: TEN) reported third quarter net income of $10 million, or 17-cents per diluted share, up from a net loss of $8 million, or 17-cents per diluted share, in third quarter 2009. Adjusted for the items below, net income increased to $24 million, or 39-cents per diluted share, from $3 million, or 7-cents per diluted share, a year ago, on a higher share count. The tables in this press release reconcile GAAP results to non-GAAP results.

EBIT (earnings before interest, taxes and noncontrolling interests) was $67 million, up 90% from $35 million a year ago. Adjusted EBIT was $77 million, up 64% from $46 million in third quarter 2009.

"We delivered another strong performance this quarter. Our results reflect our ability to take advantage of higher OE production volumes, which together with an increase in global aftermarket sales drove strong revenue growth and higher earnings," said Gregg Sherrill, chairman and CEO, Tenneco. "Our results also show our commitment to ongoing actions that drive profitability improvement including managing costs and continuing to improve operational efficiency."

EBITDA including noncontrolling interests (EBIT before depreciation and amortization) was $122 million, a 35% increase from $90 million the prior year. Adjusted EBITDA including noncontrolling interests was $129 million, a 28% increase from $101 million a year ago.
Adjusted third quarter 2010 and 2009 results:

    Q3 2010   Q3 2009
    EBITDA EBIT Net income attributable to Tenneco Inc. Per Share EBITDA EBIT Net income (loss) attributable to Tenneco Inc. Per Share
Earnings Measures $ 122 $ 67 $ 10 $ 0.17   $ 90 $ 35 $ (8) $ (0.17)
(reflects non-GAAP measures):
  Restructuring and related expenses   3   6   4   0.06     11   11   7   0.16
  Pension charge   4   4   2   0.04     -   -   -   -
  Costs related to refinancing   -   -   4   0.06     -   -   -   -
  Net tax adjustments   -   -   4   0.06     -   -   4   0.08
Non-GAAP earnings measures $ 129 $ 77 $ 24 $ 0.39   $ 101 $ 46 $ 3 $

Third quarter 2010 adjustments:
  • Restructuring and related expenses of $6 million pre-tax, or 6-cents per diluted share;
  • A charge of $4 million pre-tax, or 4-cents per diluted share, related to an actuarial loss for a lump-sum pension payment;
  • Costs of $5 million pre-tax, or 6-cents per diluted share, related to refinancing the company’s 10.25 percent notes with new 7.75 percent notes;
  • Non-cash tax charges of $4 million, or 6-cents per diluted share, primarily related to the impact of recording a valuation allowance against our tax benefit for losses in certain foreign jurisdictions.

Third quarter 2009 adjustments:
  • Restructuring and related expenses of $11 million pre-tax, or 16-cents per diluted share;
  • Non-cash tax charges of $4 million, or 8-cents per diluted share, primarily related to the impact of recording a valuation allowance against our tax benefit for losses in the U.S. and certain foreign jurisdictions.

Revenue in the third quarter rose to $1.542 billion, a 23% increase from $1.254 billion a year ago. Excluding substrate sales and the impact of $22 million in negative currency, revenue increased to $1.201 billion, up 20% from $999 million in third quarter 2009. The revenue increase was driven by higher OE production volumes across all regions – particularly North America - and increased global aftermarket sales.

Gross margin in the quarter improved to 17.0% from 16.8% a year ago. The improvement was driven by stronger OE production volumes and related manufacturing efficiencies. Gross margin improved in both the OE and aftermarket businesses but was partially offset by a higher mix of OE generated revenue, including a higher mix of substrate sales, which together reduced gross margin by 1.1 percentage points.

SGA&E (selling, general, administrative and engineering) expense as a percent of sales decreased to 9.0% from 9.3% on higher year-over-year revenues. SGA&E expense increased to $139 million, versus $117 million in third quarter 2009, primarily due to higher performance-based compensation costs, restoring last year’s salary and benefit cuts and the $4 million charge for a lump-sum pension payment.

Cash generated by operations in the quarter was $17 million, versus $77 million in third quarter 2009. Inventory days-on-hand and days sales outstanding metrics improved in the quarter; however, the 23% increase in revenues drove a greater year-over-year use of cash for operations as the cash demand for accounts receivables and inventories increased.

Tenneco ended the third quarter with net debt at $1.113 billion, down from $1.331 billion a year ago.

Stronger earnings drove the company’s leverage ratio – net debt to adjusted EBITDA including noncontrolling interests – to 2.2x, an all-time low and down significantly from 5.0x at September 30, 2009.

Capital expenditures in the quarter were $34 million, up from third quarter 2009 spending of $22 million. Capital expenditures this quarter include investments in light and commercial vehicle customer programs and vehicle launches, and expanding in emerging markets such as India, China and Thailand. In the third quarter, Tenneco opened new facilities in Chennai, India and Guangzhou, China to support future business, beginning with the launch of Nissan’s new global small car platform.

Overall, the industry is recovering and that trend is continuing in the fourth quarter. However, the speed of the recovery varies by region. According to IHS Automotive fourth quarter production estimates, light vehicle production in North America is expected to rise 3% year-over-year but projected to decline in Europe by 5% and in South America by 2%. Light vehicle production in India is projected to increase 32% and China is expected to be relatively even with last year’s production level.

Tenneco’s revenue growth will be driven by global OE light vehicle production volume recovery; increasing ride and emission control content on light vehicle platforms; expanding business in fast-growing automotive markets; and the launch and ramp-up of new higher-content emission control business with commercial vehicle customers, particularly for off-road applications. In the third quarter, the company launched new emission control business with Caterpillar in North America and Deutz in Europe.

Tenneco is launching programs – beginning in the fourth quarter 2009 and through 2011 - with 11 different commercial vehicle customers to meet new diesel emissions regulations in China, North America, Europe and South America. Driving this growth is the company’s full suite of diesel aftertreatment solutions, which provides a range of options for different applications and customer powertrain strategies.

"Although the pace of the industry recovery continues to vary by region, Tenneco is well-positioned globally. We are benefiting from the balance across our operations in terms of markets, geography, customers, products and platform mix," said Sherrill. "We are staying focused and aligned on our three-pillar strategy – technology-driven growth, operational excellence and balance sheet strength. Strong execution on these strategies continues to drive our performance as we launch new business and capture additional growth opportunities."


    Q3 10 Revenues % Change vs. Q3 09   Q3 10 Revenues Excluding Currency & Substrate Sales % Change vs. Q3 09
North America Original Equipment                  
  Ride Control $ 133   25%   $ 131   23%
  Emission Control $ 457   42%   $ 240   38%
  Total North America Original Equipment $ 590   38%   $ 371   32%
North America Aftermarket                  
  Ride Control $ 125   13%   $ 125   13%
  Emission Control $ 47   20%   $ 47   19%
  Total North America Aftermarket $ 172   15%   $ 172   14%
Total North America $ 762   32%   $ 543   26%

  • Stronger volumes on vehicles such as the Ford F-150 and Super-Duty pick-ups, GM’s crossover models and the GMT900 platform drove the increase in OE revenue, outpacing a 25% increase in industry light vehicle production*.
  • Aftermarket revenue increased due to higher sales volumes in both product lines, driven by customer demand.
  • North America EBIT rose to $42 million from $17 million a year ago, driven by higher OE production and aftermarket sales volumes and related manufacturing efficiencies, partially offset by the year-over-year increase in SGA&E expense. Third quarter 2010 EBIT includes $1 million in positive currency.
  • Adjusted for the following items, EBIT increased to $51 million from $28 million.
    • Third quarter 2010 EBIT includes $5 million in restructuring and related expenses and $4 million for the pension charge. Third quarter 2009 EBIT includes $11 million in restructuring and related expenses.

    Q3 10 Revenues % Change vs. Q3 09   Q3 10 Revenues Excluding Currency & Substrate Sales % Change vs. Q3 09
Europe Original Equipment                  
  Ride Control $ 110   3%   $ 120   12%
  Emission Control $ 270   15%   $ 193   18%
  Total Europe Original Equipment $ 380   11%   $ 313   16%
Europe Aftermarket                  
  Ride Control $ 50   1%   $ 53   7%
  Emission Control $ 40   (12%)   $ 43   (4%)
  Total Europe Aftermarket $ 90   (5%)   $ 96   2%
South America & India $ 143   38%   $ 116   27%
Total Europe, South America & India $ 613   13%   $ 525   15%

  • Tenneco’s position on better-selling vehicles such as the Ford Focus, VW Polo, Opel Astra, Ford Mondeo and the Daimler Sprinter drove an increase in Europe OE revenue, significantly above industry light vehicle production, which was up 2% year-over-year.*
  • The increase in Europe aftermarket revenue excluding currency was the result of higher ride control sales including an increase in heavy duty sales, partially offset by a decline in emission control sales.
  • South America and India revenue increased on stronger OE production volumes in both regions.
  • Europe, South America and India EBIT increased to $15 million from $10 million a year ago. The increase was driven by a better mix on higher OE production volumes and materials management, partially offset by the year-over-year increase in SGA&E expense. Third quarter 2010 EBIT includes $2 million in negative currency.

    Q3 10 Revenues % Change vs. Q3 09   Q3 10 Revenues Excluding Currency & Substrate Sales % Change vs. Q3 09
Asia $ 127   25%   $ 100   24%
Australia $ 40   16%   $ 33   2%
Total Asia Pacific $ 167   23%   $ 133   18%

  • Asia revenue was up, primarily due to strong production volumes in China on key Tenneco-supplied GM, VW and Audi platforms. Industry light vehicle production in China increased 14% year-over-year.*
  • Australia revenue increased on stronger OE volumes. Industry light vehicle production was up 6% year-over-year.*
  • Asia Pacific EBIT rose to $10 million from $8 million a year ago, driven by higher OE production volumes, mostly in China, and manufacturing efficiencies, partially offset by the higher year-over-year SGA&E expense.
  • EBIT adjusted for the following item was $11 million, versus $8 million.
    • Third quarter 2010 EBIT includes $1 million in restructuring and related expenses.

*IHS Automotive production estimates, October 2010; Federation of Automotive Products Manufacturers for Australia production estimates, October 2010.
Attachment 1:

Attachment 2:

These files are provided in a PDF format.
Acrobat Reader® required. Download the latest version for free:
Get Acrobat Reader

The company will host a conference call on Thursday, October 28, 2010 at 10:30 a.m. EDT. The dial-in number is 800-369-3130 (domestic) or 312-470-7157 (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 October 28, 2010 through November 29, 2010. To access this recording, dial 866-373-1992 (domestic) or 203-369-0266 (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 and/or 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.

Jane Ostrander
Media Inquiries
(1) 847 482-5607

Linae Golla
Investor Inquiries
(1) 847 482-5162