• Record third quarter revenue of $2.1 billion
• Record third quarter EBIT of $152 million
• Record third quarter net income and EPS
• Record cash from operations of $139 million
• Continued year-over-year margin improvement

Lake Forest, Illinois, October 28, 2016 – Tenneco (NYSE: TEN) reported third quarter net income of $180 million, or $3.21 per diluted share, which included the benefit of a foreign tax credit adjustment, compared with net income of $52 million, or 88-cents per diluted share in third quarter 2015.  Adjusted net income increased 18% to $86 million, or $1.53 per diluted share, versus $73 million or $1.22 per share a year ago. 

Revenue

Total revenue in the third quarter was $2.1 billion, up 4% year-over-year on strong global light vehicle revenues, driven by both the Clean Air and Ride Performance product lines.   

On a constant currency basis, total revenue increased 5% to $2.1 billion, driven by a 9% increase in global light vehicle revenue, outpacing 5% growth in global light vehicle industry production.  Tenneco’s OE commercial truck and off-highway revenue was down due to a significant off-highway market decline in North America.  Global aftermarket revenue was slightly lower versus a year ago. Value-add revenue was up 6% versus last year.

"We delivered another record quarter, driven by the strength of our light vehicle business globally where we have an outstanding platform position across a broad base of customers.  Strong volumes on key platforms and the launch of new light vehicle programs fueled our top-line growth. While light vehicle revenue nearly doubled industry growth, we saw a sharp decline in off-highway revenue as a result of weaker than expected off-highway market conditions in North America,” said Gregg Sherrill, chairman and CEO, Tenneco.  “We also delivered record high earnings and did an excellent job converting earnings to cash, which contributed to a very strong third quarter cash performance.”

EBIT

Third quarter EBIT (earnings before interest, taxes and noncontrolling interests) increased 31% to $152 million, versus $116 million a year ago.    

Adjusted EBIT rose 5% year-over-year to $159 million compared with $151 million.  Both EBIT and adjusted EBIT were record high results for the third quarter, driven by higher global light vehicle volumes and the strength of Tenneco’s light vehicle platform position including new platform launches and operational improvements in China and Europe. 

Adjusted third quarter 2016 and 2015 results

 

Third quarter EBIT margin

In the third quarter 2016, Tenneco EBIT as a percent of revenue was 7.3%, an improvement of 160 basis points year-over-year, and adjusted EBIT as a percent of value-add revenue increased by 20 basis points to 9.9%.   The improvement was primarily driven by capitalizing on light vehicle growth in excess of industry production.

 

Cash

Tenneco generated record third quarter cash from operations of $139 million by converting earnings growth to cash and managing working capital.

During the quarter the company repurchased approximately 1.7 million shares of common stock for $89 million.  Since announcing its share repurchase program in 2015, Tenneco has repurchased a total of 7.0 million shares of common stock for $359 million, representing 11% of shares outstanding at that time.

OUTLOOK

(Note: all forward looking revenue estimates reflect constant currency.)

In the fourth quarter, Tenneco expects total revenue growth of 3% versus a year ago.  Higher light vehicle revenue is expected to outpace global light vehicle industry production.  Commercial truck revenue will be roughly in line with industry truck production and off-highway revenue is expected to be down year-over-year, reflecting further weakness in the Europe and North America off-highway markets compared with a year ago.  In total, OE commercial truck and off-highway revenue is expected to be similar to third quarter revenues.  The global aftermarket is expected to make a solid contribution in the fourth quarter. 

For the full year, Tenneco expects to outpace aggregate industry production* by 3% for total revenue growth of 6% versus a year ago.  The company also expects revenue growth outpacing industry production in 2017 and 2018 as indicated in Tenneco’s January 2016 revenue estimates.

“We expect continued revenue growth in the fourth quarter and we’re on pace to meet our revenue expectations for the full year.  In addition to a strong revenue performance, we expect to deliver full-year margin improvement in 2016,” said Sherrill.  “Looking beyond this year, we are capitalizing on growth opportunities in both product lines and we’re confident that we’ll continue our track record of delivering profitable growth.”

*Aggregate Industry Production:  IHS Automotive October 2016 global light vehicle production forecasts, Power Systems Research (PSR) October 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 Q3 2016 release including all attachments listed below

Attachment 1

Statements of Income – 3 Months

Statements of Income – 9 Months

Balance Sheets

Statements of Cash Flows – 3 Months

Statements of Cash Flows – 9 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 – 9 Months

Reconciliation of GAAP to Non-GAAP Earnings Measures – 9 Months

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

Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 9 Months

Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 Months and 9 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 9 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 – 9 Months

Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment Commercial Truck, Off-Highway and other revenues – 3 Months and 9 months

CONFERENCE CALL

The company will host a conference call on Friday, October 28, 2016 at 8:30 a.m. ET.  The dial-in number is 888-606-7037 (domestic) or 630-395-0149 (international).  The passcode is TENNECO.  The call and accompanying slides will be available on the “Investors” section of the Tenneco web site at www.investors.tenneco.com.  A recording of the call will be available one hour following completion of the call on October 28, 2016 through November 28, 2016.  To access this recording, dial 866-415-8413 (domestic) or 203-369-0706 (international).  The purpose of the call is to discuss the company’s operations for the third fiscal quarter of 2016, as well as provide updated information regarding matters impacting the company’s outlook. 

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®Elastomers. 

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. Unless otherwise indicated, our revenue estimate methodology does not attempt to forecast currency fluctuations, and accordingly, reflects constant currency.  For certain additional assumptions upon which these estimates are based, see the slides accompanying the October 28, 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, 2015.  

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

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