- Reported higher fourth quarter and full-year revenue on strong growth with light vehicle and commercial truck and off-highway customers
- Completed acquisition of Federal-Mogul on October 1, 2018
- On track to achieve acquisition synergy goals
Tenneco reported a fourth quarter net loss of $109 million, or $(1.35) per diluted share. Fourth quarter 2017 net income was $62 million, or $1.19 per diluted share. Adjusted net income was $105 million, or $1.30 per diluted share, versus $91 million or $1.75 per diluted share last year.
All figures in USD.
Fourth Quarter Results
Total revenue in the fourth quarter was $4.3 billion, up 79% year-over-year, driven mainly by the completion of the Federal-Mogul acquisition on October 1, 2018. Excluding the acquisition and on a constant currency basis, revenue increased 4%, outpacing light vehicle industry production*by 10 percentage points. The outperformance was driven by volume and content growth with commercial truck and off-highway as well as light vehicle customers. Including Federal-Mogul results, value-add revenue was $3.6 billion, up more than 100% compared to last year.
“Tenneco’s strong organic growth continued in the fourth quarter, outpacing industry production by ten percentage points, enabled by our diverse business profile in terms of products, geographic regions and end-markets served,” said Brian Kesseler, Tenneco co-CEO. “We closed the Federal-Mogul transaction, accelerating the transformation of the combined businesses into two purpose-built, industry leading companies, and our acquisition of Öhlins will fuel the growth of advanced suspension technology and enhance our portfolio in broader mobility markets.”
Adjusted fourth quarter 2018 and 2017 results▲
Fourth quarter EBIT (earnings before interest and taxes) was a loss of $31 million, primarily due to restructuring expenses and costs associated with the acquisition and expected spin. EBITDA** (earnings before interest, taxes, noncontrolling interests, depreciation and amortization) was $134 million, versus $192 million a year ago. Adjusted EBITDA increased 77% to $399 million compared with $225 million last year, driven by the completion of the Federal-Mogul acquisition.
|Q4 2018||Q4 2017|
|EBIT as a percent of revenue||-0.7%||5.5%|
|EBITDA as a percent of revenue||3.1%||8.0%|
|EBITDA as a percent of value-add revenue||3.7%||10.6%|
|Adjusted EBITDA as a percent of revenue||9.3%||9.4%|
|Adjusted EBITDA as a percent of value-add revenue||10.9%||12.4%|
Cash generated by operations in the quarter was $402 million, versus $431 million last year.
During the quarter, the company returned $20 million to shareholders through a dividend payment of 25-cents per share.
(**Including noncontrolling interests )
For the full year, total revenue was a record high $11.8 billion, including Federal-Mogul revenues since October 1. Excluding the acquisition and the impact of currency exchange rates, Tenneco delivered full-year organic revenue growth of 6%, outpacing industry production*by 7 percentage points, driven by 24% growth in commercial truck and off-highway and 5% light vehicle growth versus last year. Including Federal-Mogul results, value-add revenue was $9.3 billion, up 31% compared to last year.
Full-year EBIT was $306 million, versus EBIT of $408 million a year ago. EBITDA** was $651 million, versus $634 million a year ago. Adjusted EBITDA increased 21% to $1,046 million.
|EBIT as a percent of revenue||2.6%||4.4%|
|EBITDA as a percent of revenue||5.5%||6.8%|
|EBITDA as a percent of value-add revenue||7.0%||8.9%|
|Adjusted EBITDA as a percent of revenue||8.9%||9.3%|
|Adjusted EBITDA as a percent of value-add revenue||11.3%||12.2%|
(**Including noncontrolling interests )
Cash generated by operations for the full year was $439 million, compared with $517 million last year.
In 2018, the company returned $59 million to shareholders through quarterly dividend payments of 25-cents per share.
Full year 2019
2019 revenue is expected in the range of $18.2 billion to $18.4 billion. On a pro forma basis the company expects constant dollar revenue growth in the range of 4% to 5%, outpacing light vehicle industry production*by 6 to 7 percentage points. Global light vehicle production is forecast to be down 2% in 2019. For the segments that will comprise the New Tenneco, we expect pro forma constant dollar revenue growth in the range of 6% to 7%, and for DRiV™ segments we anticipate pro forma constant dollar revenue growth of approximately 1%. We anticipate currency to have a negative 2% year-over-year impact on 2019 revenue.
2019 Financial Outlook Summary
|Revenue||$18.2 billion to $18.4 billion|
|VA adjusted EBITDA** margin||~Flat|
|Interest expense||$300 million to $320 million|
|Full year effective tax rate||28% to 30%|
|Cash taxes||$190 million to $220 million|
|Capital expenditures||$730 million to $780 million|
|Depreciation and amortization||~$635 million|
|Substrate revenue||~$2.8 billion|
First quarter 2019
On a pro forma basis, the company expects constant dollar revenue to be about even with last year, outpacing a forecasted light vehicle production decline of 6% in the first quarter.
“In 2019, we expect continued revenue growth that outpaces global industry production, powered by diverse and sustainable growth drivers across our business,” said Roger Wood, Tenneco co-CEO. “Our global teams are executing well against the integration plans and are on track to fully achieve our financial synergy targets for earnings and working capital.”
*Source: IHS Markit February 2019 global light vehicle production forecast and Tenneco estimates.
▲ Year-over-year revenue and earnings comparisons reflect revisions to prior period financial results for certain immaterial errors relating to capitalization of certain SG&A costs into inventory that did not constitute inventoriable costs, capitalization related to construction-in-process, estimation of warranty and rebate liabilities, and currency on certain non-income tax transactions. Further information will be provided in Tenneco’s Form 10-K for the year ended December 31, 2018.
Conference call replay
The conference call and accompanying slides will be available on the financial section of the Tenneco web site at www.investors.tenneco.com. A recording of the call will be available one hour following completion of the call on March 14, 2019 through March 21, 2019. To access this recording, dial 877-344-7529 (domestic) or 412-317-0088 (international) or (855) 669-9658 (Canada). The replay access code is 10129530