- 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
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.
Revenue
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.
EBIT
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 higherNorth 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:
| (millions except per share amounts) | Q1 2015 | Q1 2014 | |||||||||||||||||||||||
| Net income | Net income | ||||||||||||||||||||||||
| attributable to | attributable to | ||||||||||||||||||||||||
| EBITDA* | EBIT | Tenneco Inc. | Per Share | EBITDA* | EBIT | Tenneco Inc. | Per Share | ||||||||||||||||||
| Earnings Measures | $ | 170 | $ | 120 | $ | 49 | $ | 0.80 | $ | 164 | $ | 113 | $ | 46 | $ | 0.75 | |||||||||
| 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 | |||||||||
* EBITDA including noncontrolling interests (EBIT before depreciation and amortization)
**Net tax adjustments of $1 million, or 1-cent per diluted share for adjustments to prior year estimates.
EBIT Margin
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
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.
Outlook
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 Tennecooperates. 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.”
