• Record third quarter revenue of $2.3 billion, up 8%
• Double-digit growth in commercial truck and off-highway revenue
• Returned $85 million to shareholders in dividends and share repurchases

Lake Forest, Illinois, October 27, 2017 – Tenneco (NYSE: TEN) reported third quarter net income of $77 million, or $1.45 per diluted share, compared with net income* of $179 million, or $3.19 per diluted share, which included the benefit of a foreign tax credit adjustment in third quarter 2016.   

Adjusted net income increased to $88 million, or $1.67 per diluted share, versus $85 million, or $1.51 per diluted share a year ago*, an 11% improvement on a per share basis.  

Revenue

Total revenue in the third quarter was a record high $2.274 billion, up 8% year-over-year, driven by increases in both the Ride Performance and Clean Air product lines. On a constant currency basis, total revenue increased 6% to $2.223 billion, driven by incremental content, new program launches, and the company’s strong position on leading platforms globally. 

In constant currency, value-add revenue grew 6% versus last year to $1.7 billion, with Ride Performance increasing 8% and Clean Air up 5%. Tenneco’s value-add revenue growth outpaced underlying industry production growth** in all OE applications. Global aftermarket revenue was slightly lower versus a year ago.

"We delivered record third quarter revenue, driven by light vehicle top-line growth that continues to outpace industry production and double-digit increases in commercial truck and off-highway revenue. Our diversified portfolio continues to bolster organic growth across end-market applications, geographic regions, customers and platforms,” said Brian Kesseler, Tenneco CEO. “Looking forward, our entire organization remains focused on accelerating performance with revenue growth, margin improvement in both product lines and cash generation to support long-term shareholder value.”

Adjusted third quarter 2017 and 2016 results

EBIT and EBIT margin*

Third quarter EBIT (earnings before interest, taxes and noncontrolling interests) was $134 million, versus $150 million a year ago. Adjusted EBIT was $154 million compared with $157 million last year.

In the third quarter 2017, Tenneco EBIT as a percent of revenue was 5.9%, and adjusted EBIT as a percent of value-add revenue was 8.8%.

EBIT this quarter reflects the benefit from the ramp up of light vehicle programs, higher commercial truck and off- highway revenues and operational cost improvements. These positive drivers were largely countered by the timing of steel economics recoveries.

Third quarter EBIT margin

 

Cash

Cash generated by operations in the quarter was $53 million, after paying $45 million to resolve certain antitrust claims and incremental investments in working capital to support growth.

During the quarter, the company repurchased approximately 1.3 million shares of common stock for $71 million, and paid a dividend of 25-cents per share, for $14 million. Tenneco has repurchased 3.7 million shares of common stock for $210 million, and paid $40 million in dividends over the past 12 months.

Outlook

In the fourth quarter, Tenneco expects year-over-year revenue growth of approximately 7%, or 3% in constant currency, outpacing estimated light vehicle industry production growth** of 1%. The company expects continued strong double-digit growth in commercial truck and off-highway revenue, light vehicle revenue in line with industry production and a steady contribution from the global aftermarket. 

Tenneco also expects fourth quarter value-add adjusted EBIT margin to be about even with prior year fourth quarter.* 

For the full year, Tenneco expects revenue growth of approximately 7%, in constant currency 6%, outpacing estimated light vehicle industry production growth** of 2%.

Tenneco updated its anticipated tax rate, and now expects a tax rate between 26-27% for 2017, due to continued focus on global tax planning.

*Year-over-year earnings comparisons reflect revisions to prior period financial results for certain immaterial adjustments as described in Tenneco’s form 10K/A for the year ended December 31, 2016. 

**Source: IHS Automotive October 2017 global light vehicle production forecast, Power Systems Research October 2017 commercial truck forecast, and/or Tenneco estimates.

Click here to download Q3 2017 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

CONFERENCE CALL

The company will host a conference call on Friday, October 27, 2017 at 9:00 a.m. ET.  The dial-in number is 866-807-9684 (domestic) or 412-317-5415 (international).  The passcode is TENNECO.  The call and accompanying slides will be available on the “Investors” section of the Tenneco web site at investors.tenneco.com.  A recording of the call will be available one hour following completion of the call on October 27, 2017 through November 27, 2017.  To access this recording, dial 877-344-7529 (domestic) or 412-317-0088 (international).  The replay access code is 10112867.   The purpose of the call is to discuss the company’s operations for the third fiscal quarter of 2017, as well as provide updated information regarding matters impacting the company’s outlook. 

Tenneco is an $8.6 billion global manufacturing company with headquarters in Lake Forest, Illinois and approximately 31,000 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. Certain elements of the restructuring and related expenses, legal settlements and other unusual charges we incur from time to time cannot be forecasted accurately.  In this respect, we are not able to forecast EBIT (and the related margins) on a forward-looking basis without unreasonable efforts on account of these factors and the difficulty in predicting GAAP revenues (for purposes of a margin calculation) due to variability in production rates and volatility of precious metal pricing in the substrates that we pass through to our customers. For certain additional assumptions upon which these estimates are based, see the slides accompanying the October 27, 2017 webcast, which will be available on the financial section of the Tenneco website at investors.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 cost reduction initiatives, and to realize anticipated benefits from these plans;

(x) risk inherent in operating a multi-national company, including economic, exchange rate and political conditions in the countries where we operate or sell our products, adverse changes in trade agreements, tariffs, immigration policies, political stability, and tax and other laws, and potential disruption of production and/or supply;

(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/A for the year ended December 31, 2016. 

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

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