Tenneco Reports First Quarter Earnings of 13-Cents Per Diluted Share; Up 18% Year-Over-Year

Business Wire,  April 24, 2008  

• E-mail
• Print
• Link

LAKE FOREST, Ill. -- Tenneco (NYSE: TEN):

* Total revenue up 12% year-over-year to $1.56 billion

* Europe segment EBIT improves 78% year-over-year

* Cash flow from operations improves $26 million

* North America profitability impacted by American Axle strike, general economic conditions

Tenneco (NYSE: TEN) reported first quarter net income of $6 million, or 13-cents per diluted share, compared with $5 million, or 11-cents per diluted share, in first quarter 2007. Adjusted for the items below, net income was $10 million, or 20-cents per diluted share, even with a year ago. The tables in this press release reconcile GAAP results to non-GAAP results and the comparative 2007 results reflect adjustments made in Tenneco's restated financial statements filed in August 2007.

EBIT (earnings before interest, taxes and minority interest) was $39 million, versus $49 million a year ago. Adjusted EBIT was $43 million, compared with $51 million in first quarter 2007. EBITDA (EBIT before depreciation and amortization) was $94 million versus $97 million the previous year. Adjusted EBITDA was slightly down at $98 million versus $99 million a year ago.

"We faced the most challenging North American industry conditions we have seen in a long time, marked by lower OE volumes including the impact of the American Axle strike on significant Tenneco-supplied GM platforms. We took immediate steps to flex down our operations in response to these volume declines," said Gregg Sherrill, chairman and CEO, Tenneco. "Our results also reflect our continued progress toward greater geographic balance - highlighted by significant profit improvement in our Europe segment and ongoing growth in Asia - and the benefit of our variable rate debt strategy that lowered interest expense."

Adjusted first quarter 2008 and 2007 results:

[TABLE OMITTED]

First quarter 2008 adjustments:

* Restructuring related expenses of $4 million pre-tax, or 6-cents per diluted share;

* Non-cash tax adjustments of $1 million, or 1-cent per diluted share, mostly for changes in the company's estimates for tax matters subject to audit.

First quarter 2007 adjustments:

* Restructuring related expenses of $2 million pre-tax, or 2-cents per diluted share;

* Charges of $5 million pre-tax, $4 million after-tax, or 7-cents per diluted share, associated with refinancing the senior credit facility.

First quarter revenue increased 12% to $1.56 billion, driven by favorable currency exchange rates and growth in the Asia Pacific and South America regions. Revenue in the quarter was negatively impacted by industry production volume declines in North America and the American Axle strike. The company estimates the strike resulted in lost revenue of approximately $50 million on key Tenneco-supplied GM platforms. The quarterly revenue growth included an increase in substrate sales to $421 million from $343 million in first quarter 2007. Excluding substrate sales and the benefit of $114 million in favorable currency -- primarily the strong Euro -- revenue decreased 1% from a year ago.

The company's Europe segment continued to strengthen its EBIT margin performance with a 56% improvement year-over-year in the quarter. However, lower profitability in the North American operations as a result of lower OE volumes on light vehicle platforms and ride control commercial vehicle platforms as well as the American Axle strike drove consolidated EBIT margin down to 2.5% from 3.5% in first quarter 2007. Lower global aftermarket sales, which typically carry higher margins, also impacted EBIT margin.

In spite of the economic conditions in North America, cash from operations in the quarter improved $26 million to a use of $67 million versus $93 million a year ago, primarily on the strength of working capital improvements.

At quarter-end, debt net of cash balances was $1.302 billion, compared with $1.322 billion at the end of first quarter 2007. Cash balances were $161 million versus $136 million the prior year. Total debt was $1.463 billion versus $1.458 billion a year ago. At the end of the quarter, the ratio of debt net of cash balances to adjusted LTM (last twelve months) EBITDA improved to 2.7x, compared with 3.2x at the end of first quarter 2007.

Gross margin in the quarter was 15.0% compared with 15.8% in first quarter 2007. Industry production volume declines in North America, including the impact of the American Axle strike, higher substrate sales (27% of total revenue compared with 25% a year ago) and a lower percentage of revenue generated from aftermarket sales accounted for the decrease.

Steel costs in the quarter increased $10 million year-over-year. As successfully done in the past, Tenneco is working to offset these costs with low-cost country sourcing, material substitutions and cost reductions as well as recovery through aftermarket price increases and with OE customers. Steel recovery negotiations with some OE customers are already complete and the company anticipates having nearly all the agreements done by the end of the second quarter.