- Revenue of $2.023 billion
- Record high first quarter EBIT
- Continued year-over-year margin improvement
- Cash from operations improved $90 million versus prior year
Lake Forest, Illinois, April 27, 2015 – Tenneco Inc. (NYSE: TEN) reported first quarter net income of $49 million, or 80-cents per diluted share, compared with $46 million, or 75-cents per diluted share, in first quarter 2014. Excluding expenses for restructuring and tax adjustments, net income was $54 million, or 88-cents per diluted share, versus $56 million, or 91-cents per diluted share a year ago.
Tenneco reported quarterly revenue of $2.023 billion. Excluding a negative currency impact of $160 million, revenue in the quarter was up 4% to $2.183 billion, driven by growth in both the Clean Air and Ride Performance businesses, with OE light vehicle revenue improving 5%, commercial truck and off-highway revenue up 1%, and aftermarket revenue increasing 4% versus last year.
First quarter EBIT (earnings before interest, taxes and noncontrolling interests) rose 6% to $120 million, versus $113 million last year. Adjusted EBIT for the first quarter rose to $125 million. The year-over-year EBIT comparison includes $8 million in unfavorable currency.
“Tenneco delivered a four percent revenue increase excluding currency with growth across our business driven by higher light vehicle volumes including new program launches, incremental commercial truck and off-highway content and higher North America aftermarket sales,” said Gregg Sherrill, chairman and CEO, Tenneco. “Our focus on cost leadership and operational excellence continued to drive higher earnings including record high first quarter EBIT, continued margin expansion and strong cash performance.”
Adjusted first quarter 2015 and 2014 results:
|Q1 2015||Q1 2014|
|(millions except per share amounts)||EBITDA*||EBIT||Net income attributable to Tenneco Inc.||Per Share||EBITDA*||EBIT||Net income attributable to Tenneco Inc.||Per Share|
|Adjustments (reflects non-GAAP measures):|
|Restructuring and related expenses||5||5||4||0.07||10||10||10||0.16|
|Net tax adjustments***||-||-||1||0.01||-||-||-||-|
|Non-GAAP earnings measures||$||175||$||125||$||54||$||0.88||$||174||$||123||$||56||$||0.91|
Tenneco continued a trend of margin expansion in the quarter with year-over-year improvement in each product division for total adjusted EBIT as a percent of value-add revenue of 8.0%. Clean Air adjusted EBIT as a percent of value-add revenue increased to 9.9% from 9.7% a year ago, and Ride Performance rose to 9.1% from 8.5% last year. Margin improvement was driven by higher light vehicle volumes including new platforms, stronger North America aftermarket sales, the benefit of product cost leadership initiatives and continued strong operational performance.
|Q1 2015||Q1 2014|
|EBIT as a percent of revenue||5.9%||5.4%|
|EBIT as a percent of value-add revenue||7.7%||7.0%|
|Adjusted EBIT as a percent of revenue||6.2%||5.9%|
|Adjusted EBIT as a percent of value-add revenue||8.0%||7.6%|
Cash used by operations in the quarter was $50 million, an improvement of $90 million compared with a cash use of $140 million a year ago. Working capital improvements, lower interest payments and lower tax payments contributed to the improved cash performance versus last year.
In the quarter, capital expenditures to support structural growth were $70 million versus $71 million last year.
Tenneco expects growth will continue to be driven by well-established structural growth drivers which include:
- Increasing global light vehicle industry production;
- Emissions regulations which require new content to meet more stringent requirements;
- Increased demand for MONROE® Intelligent Suspension technologies;
- The growing global car parc, which the company serves with industry-leading aftermarket brands.
In the second quarter, global light vehicle industry production is expected to increase 3% in the regions where Tenneco operates. The company is well-positioned to leverage higher light vehicle volumes with its strong platform position with leading global OEMs. Tenneco also expects continued regulatory-driven, incremental content growth on commercial truck and off-highway programs to meet global emissions requirements, and a solid contribution from its global aftermarket business.
Excluding currency, Tenneco anticipates total revenue growth of about 5% in the second quarter. Based on current exchange rates, the company anticipates a currency headwind in the second quarter of approximately 9%.
The company also reaffirms its full-year revenue guidance for total revenue growth of 5% to 8%, excluding currency.
“Tenneco's growth opportunities are outstanding, supported by strong structural drivers and exceptional balance in terms of geography, end-markets, customers and products,” said Sherrill. “We remain focused on our organic growth opportunities and cost leadership initiatives to drive earnings and improve profitability.”
Statements of Income – 3 Months
Statements of Cash Flows – 3 Months
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 Revenue to Non-GAAP Revenue Measures – 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 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
Reconciliation of GAAP Revenue and Earnings to Non-GAAP Revenue and Earnings Measures – 3 Months
The company will host a conference call on Monday, April 27, 2015 at 10:00 a.m. ET. The dial-in number is 888-324-9357 (domestic) or 773-756-0169 (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 27, 2015 through May 27, 2015. To access this recording, dial 888-568-0807 (domestic) or 402-998-0235 (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.
The Tenneco Board of Directors has scheduled the corporation’s annual meeting of shareholders for Wednesday, May 13, 2015 at 10:00 a.m. CT. The meeting will be held at the corporate headquarters, 500 North Field Drive, Lake Forest, Illinois.
Tenneco is an $8.4 billion global manufacturing company with headquarters in Lake Forest, Illinois and approximately 29,000 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; Tenneco’s status as supplier for the existing program and its relationship with the customer; and the actual original equipment revenues achieved by the company for each of the last several years compared to the amount of those revenues that the company estimated it would generate at the beginning of each year. 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 April 27, 2015 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.