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

February 8, 2016

 
TENNECO REPORTS FOURTH QUARTER AND FULL-YEAR 2015 RESULTS
  • 4Q and full-year revenue outpace industry production
  • Record high 4Q and full-year EBIT
  • Eleventh consecutive quarter and sixth consecutive year of margin improvement
  • Record high 4Q net income and earnings per share
  • $176 million improvement in cash from operations in 2015
  • Repurchased 4.2 million shares of common stock in 2015

Lake Forest, Illinois, February 9, 2016 – Tenneco (NYSE: TEN) reported fourth quarter net income of $68 million, or $1.17 per diluted share, compared with $21 million, or 33-cents per diluted share in fourth quarter 2014.  Adjusted net income rose to a fourth quarter record high of $80 million, or $1.39 per diluted share, versus $65 million or $1.05 per diluted share last year.

Revenue

Total revenue in the fourth quarter was $2.031 billion, up 1% year-over-year against significant currency headwinds.    Excluding a negative currency impact of $142 million, total revenue in the fourth quarter increased 8% to $2.173 billion.  Tenneco’s total revenue, excluding currency, outgrew aggregate global industry production in the quarter driven by:

  • Light vehicle revenue growth of 11%, led by Europe, China and North America, which was more than twice the light vehicle industry production growth of 4%; 
  • Commercial truck and off-highway revenue increase of 1%, or 3% on a value-add basis, due to incremental content even as unit demand declined about 16% versus last year;
  • A 3% increase in global aftermarket revenue on higher sales in Europe, South America and North America.

“I am pleased with our fourth quarter and full-year results as our revenue growth continued to outpace global industry production.  We also delivered record-high EBIT as well as margin improvement and an outstanding cash performance,” said Gregg Sherrill, chairman and CEO, Tenneco.   “These results demonstrate the strengths of our underlying business including a clear strategic direction, effective structural growth drivers, balance across our operations and a track record of solid execution.”

EBIT

Fourth quarter EBIT (earnings before interest, taxes and noncontrolling interests) was $128 million, versus $83 million last year.  Adjusted EBIT rose 9% to $148 million, a record high for the fourth quarter.   Adjusted EBIT includes $15 million in negative currency. 

Adjusted fourth quarter 2015 and 2014 results

 
    Q4 2015   Q4 2014
  (millions except per share amounts) EBITDA* EBIT Net income attributable to Tenneco Inc. Per Share EBITDA* EBIT Net income  attributable to Tenneco Inc. Per Share
 
Earnings Measures $ 177 $ 128 $ 68 $ 1.17   $ 136 $ 83 $ 21 $ 0.33
 
Adjustments (reflects non-GAAP measures):      
  Restructuring and related expenses   16   16   15   0.26     20   21   18   0.29
  Pension/Postretirement charges   4   4   3   0.05     32   32   20   0.32
  Costs related to refinancing   -   -   -   -     -   -   8   0.13
  Net tax adjustments   -   -   (6)   (0.09)     -   -   (2)   (0.02)
 
Non-GAAP earnings measures $ 197 $ 148 $ 80 $ 1.39   $ 188 $ 136 $ 65 $ 1.05
 
 * EBITDA including noncontrolling interests (EBIT before depreciation and amortization)
 
In addition to the items set forth above, the tables at the end of this press release reconcile GAAP to non-GAAP results.

Fourth quarter EBIT margin

In the fourth quarter 2015, Tenneco delivered its eleventh consecutive quarter of EBIT margin improvement.

 

 

Q4 2015   Q4 2014
 
EBIT as a percent of revenue 6.3% 4.1%
EBIT as a percent of value-add revenue 8.3% 5.4%
 
Adjusted EBIT as a percent of revenue 7.3% 6.8%
Adjusted EBIT as a percent of value-add revenue 9.6% 8.8%
 

Clean Air adjusted EBIT as a percent of value-add revenue was up 130 basis points to 12.3%, driven by higher light vehicle volumes globally, commercial truck and off-highway content growth, and higher aftermarket revenue in North America.  Ride Performance adjusted EBIT margin was 8.8%, about even with a year ago with stronger light vehicle volumes in Europe and China and higher aftermarket sales, offset by market weakness in South America.   Both Clean Air and Ride Performance margins include the benefit of restructuring and manufacturing cost savings.

Cash

Cash generated by operations in the fourth quarter was $329 million, up 31% compared with $252 million in fourth quarter 2014.  The improvement was driven by higher earnings, lower interest and tax payments and strong working capital management.   

FULL-YEAR 2015 RESULTS

 

Adjusted full year 2015 and 2014 results

 
    2015   2014
  (millions except per share amounts) EBITDA* EBIT Net income attributable to Tenneco Inc. Per Share EBITDA* EBIT Net income  attributable to Tenneco Inc. Per Share
 
Earnings Measures $ 722 $ 519 $ 247 $ 4.11   $ 700 $ 492 $ 226 $ 3.66
 
Adjustments (reflects non-GAAP measures):      
  Restructuring and related expenses   59   63   58   0.96     48   49   42   0.67
  Pension/Postretirement charges   4   4   3   0.05     32   32   20   0.32
  Bad debt charge   -   -   -   -     4   4   3   0.05
  Costs related to refinancing   -   -   -   -     -   -   8   0.13
  Net tax adjustments   -   -   (15)   (0.25)     -   -   (11)   (0.18)
 
Non-GAAP earnings measures $ 785 $ 586 $ 293 $ 4.87   $ 784 $ 577 $ 288 $ 4.65
 
 * EBITDA including noncontrolling interests (EBIT before depreciation and amortization)
 
In addition to the items set forth above, the tables at the end of this press release reconcile GAAP to non-GAAP results.

Full year revenue

For the full year, Tenneco reported total revenue of $8.209 billion.  Excluding the impact of $638 million in negative currency, revenue increased 5% to $8.847 billion, with growth in both the Clean Air and Ride Performance product lines. 

Excluding currency, Tenneco revenue growth continued to outpace aggregate industry production in 2015 with OE light vehicle revenue improving 6% versus 1% industry growth, and commercial truck and off-highway revenue down 3%, or 1% on a value-add basis, versus a unit demand decline of 23%.  Global aftermarket revenue increased 6% versus last year.   

Full year EBIT

Full-year EBIT increased to $519 million, versus $492 million a year ago.  Adjusted EBIT rose 2% to $586 million.  Earnings were driven by leveraging higher light vehicle volumes globally, incremental commercial truck and off-highway content, and higher global aftermarket sales.  On the cost side, EBIT also benefited from manufacturing efficiencies and savings related to restructuring activities.  Excluding $64 million in negative currency, adjusted EBIT was up 13%.

Full year EBIT margin

Tenneco delivered its sixth consecutive year of improved adjusted EBIT as a percent of value-add revenue.  

 

 

2015   2014
 
EBIT as a percent of revenue 6.3% 5.8%
EBIT as a percent of value-add revenue 8.2% 7.6%
 
Adjusted EBIT as a percent of revenue 7.1% 6.9%
Adjusted EBIT as a percent of value-add revenue 9.3% 8.9%
 

Cash

For the full year, cash generated by operations in 2015 was $517 million, a 52% improvement versus $341 million a year ago, primarily due to strong working capital management, lower interest and tax payments and higher earnings.

Tenneco continues to invest in growth with total capital spending in 2015 of $295 million, primarily for new programs in Europe, North America and China.

Share Repurchase

Tenneco continued to return value to shareholders through the repurchase of common stock.   For the full year, Tenneco repurchased a total of 4.2 million shares for $213 million.  As of year-end, Tenneco has authorization to make additional share repurchases of $337 million, which the company expects to complete by the end of 2017. 

2016 – 2018 OUTLOOK

First quarter 2016

Excluding currency, Tenneco expects total revenue growth of 5% in the first quarter 2016, outpacing aggregate industry production growth of 2%.*  The revenue increase will be driven by higher light vehicle volumes and the ramp up of recently launched programs, additional content on commercial truck and off-highway programs to meet emissions regulations, and year-over-year growth in the aftermarket.  The company anticipates a currency headwind in the first quarter of approximately 2% based on current exchange rates.

Aggregate industry production growth of 2% in the quarter includes global light vehicle production growth of 2%, and combined commercial truck and off-highway equipment production flat compared with a year ago.

Full year 2016

As previously announced, the company expects total revenue to grow 5% in 2016, excluding the impact of currency, driven by:

  • Incremental light vehicle Clean Air revenue from 2015 launches and new launches in 2016;
  • Incremental revenue from Monroe® Intelligent Suspension programs with four new launches in 2016 and the continued ramp-up on programs launched in 2015;
  • Commercial truck and off-highway emissions regulations with additional content on off-highway Tier 4f and Stage 4 programs in North America and Europe, incremental revenue from 2015 launches of a North America medium-duty commercial truck and an off-highway program in Japan, increasing market share with commercial truck customers in China, and initial launches with commercial truck customers in India to comply with BS IV regulations.

The company’s revenue growth estimate for 2016 assumes aggregate industry production growth of 3% including a 3% increase in global light vehicle production, and a 1% decline in commercial truck and off-highway equipment production.  

In 2016, Tenneco expects:

  • Capital expenditures between $300 and $330 million;
  • Annual interest expense of about $75 million;
  • Cash taxes between $140 million and $160 million;
  • Full year tax rate between 31% to 32%.

Three year revenue outlook

In 2017 and 2018, Tenneco expects annual revenue growth of 6% to 8%, and 7% to 9% respectively, outpacing production by 3% to 5% each year as new light vehicle emissions regulations begin to phase-in in North America and Europe.  These estimates also exclude the impact of currency.           

2016_Revenue_Outlook_chart2

“We expect solid revenue growth of 5% in 2016 based on what we see in the markets today and accelerating revenue growth in 2017 and 2018 as new light vehicle emissions regulations begin to take effect in North America and Europe.  With these revenue estimates, we expect to continue outpacing industry production in our end markets, all driven by emissions regulations, and growing demand for Tenneco’s advanced Ride Performance technologies and aftermarket products," said Sherrill.  “We also expect continued margin improvement and remain very focused on generating cash for growth investments, balance sheet strength and returns to our shareholders.”

*Aggregate Industry Production:  IHS Automotive January 2016 global light vehicle production forecasts, Power Systems Research (PSR), January 2016 forecast for global commercial truck and buses, PSR off-highway engine production in North America and Europe and Tenneco estimates.

 

Click here to download Q4 and Full Year 2015 release including all attachments listed below

Attachment 1

Statements of Income – 3 Months

Statements of Income – 12 Months

Balance Sheets

Statements of Cash Flows – 3 Months

Statements of Cash Flows – 12 Months

 

Attachment 2

Reconciliation of GAAP Net Income to EBITDA including noncontrolling interests – 3 Months

Reconciliation of GAAP to Non-GAAP Earnings Measures – 3 Months

Reconciliation of GAAP Net Income to EBITDA including noncontrolling interests – 12 Months

Reconciliation of GAAP to Non-GAAP Earnings Measures – 12 Months

Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 Months

Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 12 Months

Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 Months and 12 Months

Reconciliation of Non-GAAP Measures – Debt Net of Cash/Adjusted LTM EBITDA including noncontrolling interests

Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment and Aftermarket Revenue – 3 Months and 12 Months

Reconciliation of GAAP Revenue and Earnings to Non-GAAP Revenue and Earnings Measures – 3 Months

Reconciliation of GAAP Revenue and Earnings to Non-GAAP Revenue and Earnings Measures – 12 Months

Reconciliation of GAAP Revenue and Earnings to Non-GAAP Revenue and Earnings Measures – adjusted EBIT as a percentage of value-add revenue – Annual

Reconciliation of Non-GAAP Revenue and Earnings Measures – 12 Months

Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment Commercial Truck, Off-Highway and other revenues – 3 Months and 12 Months

 

 

CONFERENCE CALL

The company will host a conference call on Tuesday, February 9, 2016 at 9:00 a.m. ET.  The dial-in number is 888-790-3159 (domestic) or 415-228-4939 (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 February 9, 2016 through March 9, 2016.  To access this recording, dial 888-566-0133 (domestic) or 203-369-3422 (international).  The purpose of the call is to discuss the company’s operations for last fiscal quarter and year ending 2015, as well as provide updated information regarding matters impacting the company’s outlook.  A copy of the press release is available on the financial and news sections of the Tenneco web site.

 

 

ANNUAL MEETING

The Tenneco Board of Directors has scheduled the corporation’s annual meeting of shareholders for Wednesday, May 18, 2016 at 10:00 a.m. CT. The meeting will be held at the corporate headquarters, 500 North Field Drive, Lake Forest, Illinois. The record date for shareholders eligible to vote at the meeting is March 21, 2016.

 

Tenneco is an $8.2 billion global manufacturing company with headquarters in Lake Forest, Illinois and approximately 30,000 employees worldwide.  Tenneco is one of the world’s largest designers, manufacturers and marketers of clean air and ride performance products and systems for automotive and commercial vehicle original equipment markets and the aftermarket.  Tenneco’s principal brand names are Monroe®, Walker®, XNOx™ and Clevite®Elastomer. 

 

Revenue estimates in this release are based on OE manufacturers’ programs that have been formally awarded to the company; programs where Tenneco is highly confident that it will be awarded business based on informal customer indications consistent with past practices; and Tenneco’s status as supplier for the existing program and its relationship with the customer.  These revenue estimates are also based on anticipated vehicle production levels and pricing, including precious metals pricing and the impact of material cost changes. For certain additional assumptions upon which these estimates are based, see the slides accompanying the February 9, 2016 webcast, which will be available on the financial section of the Tenneco website at www.tenneco.com.

 

This press release contains forward-looking statements.  Words such as “may,” “expects,” “anticipate,” ”projects,” “will,” “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) general economic, business and market conditions;

(ii) the company’s ability to source and procure needed materials, components and other products and services in accordance with customer demand and at competitive prices;

(iii) the cost and outcome of existing and any future claims, legal proceedings, or investigations, including, but not limited to, any of the foregoing arising in connection with the ongoing global antitrust investigation, product performance, product safety or intellectual property rights;

(iv) 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;

(v) changes in consumer demand, prices and the company’s ability to have our products included on top selling vehicles, including any shifts in consumer preferences to lower margin vehicles, for which we may or may not have supply arrangements;

(vi) changes in automotive and commercial vehicle manufacturers' production rates and their actual and forecasted requirements for the company's products such as the significant production cuts during recent years by automotive manufacturers in response to difficult economic conditions;

(vii) the overall highly competitive nature of the automobile and commercial vehicle parts industries, and any resultant inability to realize the sales represented by the company’s awarded book of business which is based on anticipated pricing and volumes over the life of the applicable program;

(viii) the loss of any of our large original equipment manufacturer (“OEM”) customers (on whom we depend for a substantial portion of our revenues), or the loss of market shares by these customers if we are unable to achieve increased sales to other OEMs or any change in customer demand due to delays in the adoption or enforcement of worldwide emissions regulations;

(ix) the company's continued success in cost reduction and cash management programs and its ability to execute restructuring and other cost reduction plans, including our current European cost reduction initiatives, and to realize anticipated benefits from these plans;

(x) economic, exchange rate and political conditions in the countries where we operate or sell our products;

(xi) workforce factors such as strikes or labor interruptions; 

(xii) 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; 

(xiii) the negative impact of fuel price volatility on transportation and logistics costs, raw material costs, discretionary purchases of vehicles or aftermarket products, and demand for off-highway equipment;

(xiv) the cyclical nature of the global vehicular industry, including the performance of the global aftermarket sector and longer product lives of automobile parts;

(xv) product warranty costs;

(xvi) the failure or breach of our information technology systems and the consequences that such failure or breach may have to our business;

(xvii) 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; 

(xviii) changes by the Financial Accounting Standards Board or other accounting regulatory bodies to authoritative generally accepted accounting principles or policies;

(xix) changes in accounting estimates and assumptions, including changes based on additional information;

(xx) the impact of the extensive, increasing and changing laws and regulations to which we are subject, including environmental laws and regulations, which may result in our incurrence of environmental liabilities in excess of the amount reserved; 

(xxi) natural disasters, acts of war and/or terrorism and the impact of these occurrences or acts on economic, financial, industrial  and social condition, including, without limitation, with respect to supply chains and customer demand in the countries where the company operates; and

(xxii) 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 annual report on Form 10-K for the year ended December 31, 2014, and its quarterly report on Form 10-Q for the quarter ended September 30, 2015. 

 

Investor inquiries:
Linae Golla
847-482-5162
lgolla@tenneco.com

 

Media inquiries:
Bill Dawson
847-482-5807
bdawson@tenneco.com

 

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