- Record quarterly revenue of $2.2 billion
- Record second quarter EBIT of $156 million
- EPS of $1.32 per diluted share
Tenneco Inc. (NYSE: TEN) reported an increase in second quarter net income to$81 million, or $1.32 per diluted share, versus $63 million, or $1.02 per diluted share, in second quarter 2013. Excluding restructuring costs and a tax adjustment this quarter, net income increased 31% to $89 million, or $1.45 per diluted share, compared with $68 million, or $1.10per diluted share a year ago. Improved results were driven by stronger production volumes, operational performance and a more favorable effective tax rate compared with last year.
Revenue
Tenneco’s total revenue in the second quarter increased 8% year-over-year to $2.241 billion, on higher revenue in both product lines with Clean Air revenue increasing 10% and Ride Performance up 6%. Excluding substrate sales and currency, total revenue was up 10% to$1.731 billion.
Total revenue includes a 6% year-over-year increase in light vehicle OE revenue, a 27% increase in commercial truck and off-highway OE revenue, and a 4% increase in global aftermarket revenue.
EBIT
Second quarter EBIT (earnings before interest, taxes and noncontrolling interests) was $156 million, up 11% from $141 million in second quarter 2013. Adjusted EBIT increased 12% to $166 million, reflecting a 9% increase in Clean Air adjusted EBIT to $120 million, and a 29% increase in Ride Performance adjusted EBIT to $75 million.
“We delivered another strong performance this quarter with well-balanced revenue growth across product lines, end-markets and geographies,” said Gregg Sherrill, chairman and CEO, Tenneco. “Our strategic imperatives for each product line and strong execution are driving this top-line growth and continued profitability improvement.”
Adjusted second quarter 2014 and 2013 results
| (millions except per share amounts) | Q2 2014 | Q2 2013 | |||||||||||||||||||||||||
| EBITDA* | EBIT | Net income attributable to Tenneco Inc. |
Per Share | EBITDA* | EBIT | Net income attributable to Tenneco Inc. |
Per Share | ||||||||||||||||||||
| Earnings Measures | $ | 208 | $ | 156 | $ | 81 | $ | 1.32 | $ | 191 | $ | 141 | $ | 63 | $ | 1.02 | |||||||||||
| Adjustments (reflects non-GAAP measures): | |||||||||||||||||||||||||||
| Restructuring and related expenses | 10 | 10 | 7 | 0.11 | 7 | 7 | 5 | 0.08 | |||||||||||||||||||
| Net tax adjustments | – | – | 1 | 0.02 | – | – | – | – | |||||||||||||||||||
| Non-GAAP earnings measures | $ | 218 | $ | 166 | $ | 89 | $ | 1.45 | $ | 198 | $ | 148 | $ | 68 | $ | 1.10 | |||||||||||
| * 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. |
Second quarter 2014 adjustments
- Restructuring and related expenses of $10 million pre-tax, or 11-cents per diluted share.
- Tax adjustments of $1 million, or 2-cents per diluted share, for adjustments to prior year estimates.
Second quarter 2013 adjustments
- Restructuring and related expenses of $7 million pre-tax, or 8-cents per diluted share.
EBIT Margin
Tenneco improved its total adjusted EBIT as a percent of value-add revenue to 9.6%.
| Q2 2014 | Q2 2013 | |||
| EBIT as a percent of revenue | 7.0% | 6.8% | ||
| EBIT as a percent of value-add revenue | 9.0% | 8.9% | ||
| Adjusted EBIT as a percent of revenue | 7.4% | 7.2% | ||
| Adjusted EBIT as a percent of value-add revenue | 9.6% | 9.4% |
In the quarter, Clean Air adjusted EBIT as a percent of value-add revenue was 11.7%, driven by stronger light and commercial truck and off-highway volumes, and including $7 million in higher engineering expense. Ride Performance margin was 10.7% due to higher light vehicle and commercial truck revenue in North America, cost savings related to the company’s global product cost leadership initiative and strong aftermarket sales in North America and South America.
Cash
Cash generated by operations in the quarter was $114 million, versus $133 million a year ago, due to a greater use of cash for working capital investments.
Capital expenditures in the quarter were $83 million, compared with $47 million in second quarter 2013. The year-over-year comparison included spending timing differences and higher investments to support Clean Air programs in Europe, China and North America.
Outlook
For the third quarter, global light vehicle production* is forecasted to increase 5% year-over-year in the regions where Tenneco operates. The increase includes a 9% increase in North America, 11% in China and 9% in India. Europe is forecasted to be flat, and South Americais expected to decline 12%. Tenneco expects its light vehicle revenue in the third quarter to grow in line with the forecast for global industry light vehicle production.
Significant growth will continue in Tenneco’s commercial truck and off-highway business as revenue is expected to increase 20% to 25% in the third quarter against a strong year-over-year comparison. The company is launching new business and incremental content on existing platforms to meet off-highway regulations in North America and Europe and expects higher commercial truck revenue in China.
The global aftermarket is expected to be steady with the third quarter of last year.
“I am pleased with our performance in the first half of the year and expect volume strength and our manufacturing performance to continue driving profitable growth in the third quarter. We are capitalizing on a strong global light vehicle production environment, our commercial truck and off-highway business continues to expand with excellent growth, and we expect a solid contribution from the global aftermarket,” said Sherrill.
*IHS and Tenneco July industry production estimates
