Tenneco Reports Fourth Quarter and Full-Year 2012 Financial Results

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Tenneco Reports Fourth Quarter and Full-Year 2012 Financial Results

  • Highest-ever full-year revenue of $7.4 billion
  • Record net income and EPS for Q4 and full year
  • Record fourth quarter cash from operations up $43 million to $244 million
  • Record low full-year leverage ratio of 1.5x

LAKE FOREST, Ill.--(BUSINESS WIRE)-- Tenneco Inc. (NYS: TEN) reported fourth quarter net income of $33 million, or 54-cents per diluted share, compared with net income of $30 million, or 49-cents per diluted share a year ago. On an adjusted basis, net income rose to $40 million, or 66-cents per diluted share, compared with $32 million, or 53-cents per diluted share, a year ago.


EBIT (earnings before interest, taxes and noncontrolling interests) was $84 million versus $88 million in the fourth quarter 2011. Adjusted EBIT was $94 million versus $89 million. The benefit from incremental new light vehicle platforms and higher light vehicle volumes, and effectively controlling operational costs drove the company's highest-ever fourth quarter adjusted EBIT.

These results include $5 million in fourth quarter expense, representing 6-cents per diluted share, for deferred and long-term compensation indexed to the company's stock price which rose 25% during the quarter.

"Despite volume weakness late in the year, we recorded our highest-ever annual revenue and continued to deliver year-over-year adjusted EBIT margin improvement in the fourth quarter and the full year," stated Gregg Sherrill, chairman and CEO, Tenneco. "Our focus on operational excellence drove our earnings improvement as we effectively converted on light vehicle revenues in North America and China, and benefitted from strong execution on the launch of commercial vehicle programs. I'm also pleased with the strong cash generation driven by higher earnings and effective working capital management."

 

Adjusted Fourth Quarter 2012 and 2011 Results

(millions except per share amounts) Q4 2012 Q4 2011
  Net income   Net income 
attributable toattributable to
EBITDA*EBITTenneco Inc.Per ShareEBITDA*EBITTenneco Inc.Per Share
Earnings Measures$141$84$33$0.54$139$88$30$0.49
 
Adjustments (reflects non-GAAP measures):
Restructuring and related expenses3320.0411-0.01
Asset impairment charge-770.11----
Net tax adjustments--(2)(0.03)--20.03
 
        
Non-GAAP earnings measures$144$94$40 $0.66 $140$89$32$0.53
 
* 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.

 

Fourth Quarter 2012 Adjustments

  • Restructuring and related charges of $3 million before tax, or 4-cents per diluted share.
  • Non-cash asset impairment charge of $7 million, or 11-cents per diluted share, related to the European ride control business.
  • Tax adjustments of $2 million, or 3-cents per diluted share, due to adjustments of prior year estimates.

Fourth Quarter 2011 Adjustments

  • Restructuring and related charges of $1 million before tax, or 1-cent per diluted share.
  • Tax adjustments of $2 million, or 3-cents per diluted share primarily related to recording a valuation allowance against the foreign losses and withholding taxes on foreign dividends, mostly offset by adjustments to prior year estimates.

Revenue

Total revenue in the quarter was $1.753 billion compared with $1.784 billion in fourth quarter 2011. Revenue excluding substrate sales and currency increased 2% to $1.390 billion versus $1.364 billion a year ago. The increase was driven by strong light vehicle volumes in North America and China and slightly higher North American aftermarket sales, which offset declines in Europe OE volumes and aftermarket sales. Currency had an unfavorable impact of $31 million in the quarter.

EBIT Margin

For the quarter, the company reported the following EBIT as a percent of revenue and EBIT as a percent of value-add revenue (revenue excluding substrate sales).

  
Q4 2012Q4 2011
 
EBIT as a percent of revenue4.8%4.9%
EBIT as a percent of value-add revenue6.2%6.5%
 
Adjusted EBIT as a percent of revenue5.4%5.0%
Adjusted EBIT as a percent of value-add revenue6.9%6.5%
 

Cash

Cash generated from operations was $244 million, up from $201 million a year ago, driven by higher earnings and effective working capital management.

Capital expenditures in the quarter were $77 million versus $80 million a year ago, primarily to support customer programs and growth in China and the North America emission control business.

FULL-YEAR 2012 RESULTS

Tenneco reported total annual revenue of $7.363 billion, up from $7.205 billion in 2011. Excluding substrate sales and the impact of currency, revenue increased 7% to $5.938 billion versus $5.527 billion the prior year. Higher light vehicle production in North America, China and India, strong aftermarket sales in North America, and incremental revenue from commercial vehicle business drove record-high revenue despite lower OE volumes and aftermarket sales in Europe and South America. Total OE commercial and specialty vehicle revenue increased 22% year-over-year to $804 million.

The company reported net income of $275 million, or $4.50 per diluted share, compared with net income of $157 million, or $2.55 per diluted share a year ago. Adjusted for the items in the table below, net income rose to $203 million, or $3.32 per diluted share, compared with $163 million, or $2.66 per diluted share, a year ago.

For the year, Tenneco EBIT increased to $428 million from $379 million in 2011. Adjusted for the items below, EBIT was up 11% to $443 million versus $398 million a year ago. Earnings were driven by managing operational costs on higher year-over-year OE light vehicle volumes, efficient execution on the launch of commercial vehicle programs, and higher North American aftermarket volumes.

 

Adjusted 2012 and 2011 Results

(millions except per share amounts) 2012 2011
  Net income   Net income 
attributable toattributable to
EBITDA*EBITTenneco Inc.Per ShareEBITDA*EBITTenneco Inc.Per Share
Earnings Measures$633$428$275$4.50$586$379$157$2.55
 
Adjustments (reflects non-GAAP measures):
Restructuring and related expenses131380.148850.09
Asset impairment charge-770.11----
Pullman recoveries(5)(5)(3)(0.05)----
Goodwill impairment charge----111170.11
Costs related to refinancing--120.19--10.01
Net tax adjustments--(96)(1.57)--(7)(0.10)
 
        
Non-GAAP earnings measures$641 $443 $203 $3.32 $605$398$163 $2.66 
 
* 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.

 

For the full year, the company reported the following EBIT as a percent of revenue and EBIT as a percent of value-add revenue (revenue excluding substrate sales).

        
20122011
EBIT as a percent of revenue5.8%5.3%
EBIT as a percent of value-add revenue7.5%6.9%
 
Adjusted EBIT as a percent of revenue6.0%5.5%
Adjusted EBIT as a percent of value-add revenue7.8%7.2%
 

Cash

For the full year 2012, the company generated $370 million in cash from operations compared with $245 million in 2011, driven by higher earnings and $54 million in working capital improvement. Total capital spending for the full year was $263 million.

During the year, Tenneco completed a stock buyback plan, repurchasing 600,000 shares of its outstanding common stock for $18 million to offset dilution from shares issued to employees in 2012.

Debt

At December 31, 2012, Tenneco's debt net of cash was $957 million, compared with $1.01 billion at the end of 2011. The company's continued earnings improvement and strong cash generation resulted in a new all-time low net debt to adjusted EBITDA ratio of 1.5x.

Fourth quarter reporting segments

 

NORTH AMERICA

(millions except percents)     Q4 12  
Revenues
Excluding
Currency &
Q4 12% Change vs.Substrate% Change vs.
Revenues  Q4 11Sales  Q4 11
North America Original Equipment
Ride Control$1567%$1556%
Emission Control 526  (2%) 302  5%
Total North America Original Equipment6820%4575%
 
North America Aftermarket
Ride Control1163%1163%
Emission Control 48  (2%) 48  (2%)
Total North America Aftermarket1641%1641%
 
Total North America$8460%$6214%
 

North America EBIT increased to $54 million from $46 million one year ago. On an adjusted basis, EBIT rose 17% to $55 million from $47 million. EBIT performance was driven by leveraging volumes in both OE businesses, higher aftermarket sales, and effectively controlling operational costs.

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EUROPE, SOUTH AMERICA, INDIA

(millions except percents)     Q4 12  
Revenues
Excluding
Currency &
Q4 12% Change vs.Substrate% Change vs.
Revenues  Q4 11Sales  Q4 11
Europe Original Equipment
Ride Control$115(17%)$119(14%)
Emission Control 338