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

October 28, 2013

 
TENNECO REPORTS THIRD QUARTER RESULTS
 
·         Record-high third quarter revenue
·         Record-high third quarter EBIT before restructuring charges
 
Lake Forest, Illinois, October 28, 2013 – Tenneco Inc. (NYSE:TEN) reported third quarter net income of $12 million, or 19-cents per diluted share, which includes $59 million in restructuring expense. Third quarter 2012 net income was $125 million, or $2.05 per diluted share. On an adjusted basis, net income rose to $62 million, or 99-cents per diluted share, from $52 million or 85-cents per diluted share a year ago. 
 
Revenue
Total revenue was $1.963 billion, up 10% from the prior year on higher revenues in all segments. Clean Air revenue increased 12% to $1.328 billion and Ride Performance revenue was up 7% to $635 million. Total value-add revenue (revenue excluding substrate sales) was $1.532 billion, a 10% increase versus a year ago. 
 
Global OE light vehicle revenue increased 10% to $1.394 billion, versus an overall 5% increase in global industry light vehicle production in the third quarter. OE commercial and specialty vehicle revenue increased 28% year-over-year to $236 million, and global aftermarket revenue was up 3% to $333 million.
 
"Our results demonstrate the strength and balance of our operations across end markets, regions, customers and product lines as we delivered record high third quarter revenue and adjusted EBIT, resulting in year-over-year margin improvement in both product lines," said Gregg Sherrill, chairman and CEO, Tenneco. "Our teams are executing well on plans for top-line growth while continuing to drive profitability with excellent operational performance."
 
EBIT
EBIT (earnings before interest, taxes and noncontrolling interests) was $72 million, versus $111 million in third quarter 2012. Adjusted EBIT was $130 million, up 15% from $113 million a year ago. The year-over-year comparison includes $6 million in negative currency.
 
The higher adjusted EBIT reflects year-over-year improvement in both product divisions with Clean Air increasing 22% and Ride Performance up 20%. The improvement was driven by new light vehicle platforms and stronger volumes, higher year-over-year commercial vehicle revenue and higher aftermarket sales.
 
Adjusted third quarter 2013 and 2012 results
 
    Q3 2013   Q3 2012
  (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 $ 123 $ 72 $ 12 $ 0.19   $ 160 $ 111 $ 125 $ 2.05
 
Adjustments (reflects non-GAAP measures):      
  Restructuring and related expenses   58   58   59   0.95     7   7   4   0.07
  Pullman Recoveries   -   -   -   -     (5)   (5)   (3)   (0.05)
  Net tax adjustments   -   -   (9)   (0.15)     -   -   (74)   (1.22)
 
Non-GAAP earnings measures $ 181 $ 130 $ 62 $ 0.99   $ 162 $ 113 $ 52 $ 0.85
 
 * 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.
 
Third quarter 2013 adjustments:
·         Restructuring and related expenses of $58 million pre-tax, or 95-cents per diluted share;
·         Net tax benefits of $9 million, or 15-cents per diluted share for tax adjustments to prior year estimates.
 
Third quarter 2012 adjustments:
·         Restructuring and related expenses of $7 million pre-tax, or 7-cents per diluted share;
·         EBIT benefit of $5 million, or 5-cents per diluted share, from property recoveries related to transactions originated by The Pullman Company before being acquired by Tenneco in 1996;
·         Net tax benefit of $74 million, or $1.22 per diluted share, primarily related to the reversal of the tax valuation allowance on the company’s U.S. net operating loss position and recording a tax valuation allowance in Spain for tax credits that may not be utilized due to tax losses there.
 
EBIT Margin
Tenneco capitalized on new light vehicle launches and stronger volumes globally, a year-over-year increase in commercial vehicle revenue and continuous operational improvement to deliver a 40 basis point increase in adjusted EBIT as a percent of value-add revenue.
 
The company reported the following EBIT as a percent of revenue and EBIT as a percent of value-add revenue.
 
  
  Q3 2013   Q3 2012
 
EBIT as a percent of revenue 3.7% 6.2%
EBIT as a percent of value-add revenue 4.7% 8.0%
 
Adjusted EBIT as a percent of revenue 6.6% 6.4%
Adjusted EBIT as a percent of value-add revenue 8.5% 8.1%
 
  
 
 
 
Cash
Cash generated by operations in the third quarter was $50 million, versus $125 million a year ago. Increased working capital investments on higher revenues and timing on collecting certain receivables accounted for the decrease this quarter.   
 
Capital expenditures in the quarter were $57 million, versus $65 million a year ago, primarily to support Clean Air programs in North America, Europe and China.   The company now expects, due to the timing of expenditures, that its capital spending will be about $250 million for the full year.
 
Taxes
The year-to-date tax rate is 36% and for the full year, the company still expects a tax rate in the range of 36% to 38%.  2013 cash taxes are expected to be approximately $110 million.
 
Restructuring
During the quarter, Tenneco announced specific actions that are part of its broader initiative announced earlier this year to reduce structural costs in Europe by $60 million annually with related restructuring costs of approximately $120 million. The company has now announced $80 million of these costs. Tenneco is still on plan to reach a full savings run rate in 2016.   
 
Fourth Quarter Outlook
In the fourth quarter, IHS Automotive forecasts a 3% increase in global light vehicle production versus a year ago, which includes a 6% increase in North America and an 8% increase in China. Industry production is expected to decline 5%* in South America and 11% in India. Estimates for Europe indicate that production will be about even with last year.
 
Tenneco’s outlook for its commercial vehicle business remains unchanged from last quarter with strong year-over-year revenue growth expected in the fourth quarter and for the full year, despite continuing weakness in commercial vehicle volumes overall. The company expects its fourth quarter commercial and specialty revenue to be about even with the third quarter and full year commercial vehicle revenue to be toward the lower end of the company’s 2013 revenue guidance. 
 
 In the fourth quarter, the global aftermarket is expected to be relatively flat with last year with solid contributions from North America and continued stabilization in Europe.
 
"Tenneco is well-positioned to finish the year strong by capitalizing on a stronger global light vehicle production environment, launching new light vehicle programs and continuing to deliver year-over-year commercial vehicle revenue growth," said Sherrill. "In addition, we are focused on launching new commercial vehicle programs to meet U.S. Tier 4 final and Europe Stage 4 off-road emissions regulations, which will drive higher content and incremental revenue growth in 2014."
 
*IHS, Sindipecas and Tenneco estimates
 
Attachment 1
 
Attachment 2
 
 
CONFERENCE CALL
The company will host a conference call on Monday, October 28, 2013 at 8:30 a.m. ET. The dial-in number is 877-918-6718 (domestic) or 415-228-3901 (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, 2013, through November 28, 2013. To access this recording, dial 866-360-3307 (domestic) or 203-369-0162 (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 $7.4 billion global manufacturing company with headquarters in Lake Forest, Illinois and approximately 25,000 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. 
 
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) 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;
(iv) 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;
(v) 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;
(vi) 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;
(vii) 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;
(viii) workforce factors such as strikes or labor interruptions; 
(ix) 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; 
(x) the negative impact of higher fuel prices on transportation and logistics costs, raw material costs and discretionary purchases of vehicles or aftermarket products;
(xi) the cyclical nature of the global vehicular industry, including the performance of the global aftermarket sector and longer product lives of automobile parts;
(xii) 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;
(xiii) product warranty costs;
(xiv) the cost and outcome of existing and any future legal proceedings;
(xv) the failure or breach of our information technology systems and the consequences that such failure or breach may have to our business;
(xvi) economic, exchange rate and political conditions in the countries where we operate or sell our products;
(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) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals, as well as the impact of the enforcement of, changes to or compliance with laws and regulations, including those pertaining to environmental concerns, pensions or other regulated activities; 
(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 report on Form 10-K for the year ended December 31, 2012. 
 
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Contacts:
Bill Dawson                                        
Media inquiries                             
847 482-5807         
bdawson@tenneco.com                
 
Linae Golla
Investor inquiries
847 482-5162
lgolla@tenneco.com  
 
 
 
 
 
 
 

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