Tenneco Inc. has reported a profit in the first quarter of this year, a significant improvement over the loss registered for the same quarter in 2009.
The company reported first quarter net income of US$7 million, or 11-cents per diluted share, compared with a net loss of US$49 million, or US$1.05 per diluted share in the first quarter of 2009.
Adjusted net income was US$15 million, or 25-cents per diluted share, versus a net loss of US$29 million, or 61-cents per diluted share, a year ago.
EBIT (earnings before interest, taxes and noncontrolling interests) was US$59 million, up from a loss of US$13 million in first quarter 2009. Adjusted EBIT was US$64 million, versus a loss of US$10 million a year ago. The EBIT increase was primarily driven by higher OE production volumes globally and related manufacturing efficiency improvements, an increase in higher-margin aftermarket sales, materials cost management and the positive impact of currency.
EBITDA including noncontrolling interests (EBIT before depreciation and amortization) was US$114 million, up from US$39 million the prior year. Adjusted EBITDA including noncontrolling interests was US$118 million, compared with US$41 million in first quarter 2009.
“Globally, we are converting stronger production volumes and year-over-year revenue growth to the bottom-line as we continue to benefit from cost structure changes and ongoing operational improvements,” said Gregg Sherrill, chairman and CEO, Tenneco. We’re also seeing strengthening in our global aftermarket, which provides good balance to our business.”
First quarter revenue was US$1.316 billion, up 36% from US$967 million a year ago. Excluding substrate sales and positive currency of US$61 million, revenue was US$999 million, up 31% from US$765 million in first quarter 2009. Revenue increased as a result of higher OE production volumes across all regions and in both product lines, new platform launches, and higher aftermarket sales in North America and South America.
Gross Margin and SGA&E
First quarter gross margin was 18.5%, up from 14.5% a year ago. The increase was driven by stronger OE production volumes, related manufacturing efficiency improvements and materials cost management. An increase in higher-margin aftermarket sales, which globally were up 15% from a year ago, also contributed to the improvement. Gross margin included US$4 million in restructuring costs and first quarter 2009 gross margin included US$2 million in restructuring costs. Gross margin also increased from 17.4% in fourth quarter 2009.
SGA&E (selling, general, administrative and engineering) expense in the quarter was US$127 million, compared with US$99 million a year ago. The increase was due to salaried employee furloughs in the first quarter of 2009; restoring the company’s 401(k) match in North America as of January 1, 2010; and higher year-over-year expense related to performance-based compensation plans for employees at all levels.
Tenneco remains disciplined in its engineering spending with expense US$6 million higher than a year ago, reflecting timing on engineering cost recoveries as well as planned expenses for upcoming new business launches. Tenneco leveraged higher year-over-year revenues with SGA&E as a percent of sales improving to 9.7% from 10.2% a year ago.
North America OE revenue was US$454 million, up from US$333 million a year ago. Excluding substrate sales and the impact of currency, revenue increased 42% to US$313 million, versus US$219 million in first quarter 2009. The increase was driven by stronger production volumes on emissions control and ride control platforms including the Ford Expedition/Navigator, the GMT900 half-ton pick-up trucks and GM crossover vehicles, partially offset by key light truck platforms in launch.
North America aftermarket revenue rose to US$151 million, compared with US$136 million in first quarter 2009. Excluding currency, revenue increased to US$148 million. The 9% revenue gain was driven by strong ride control sales.
EBIT for North America operations was US$36 million, up from US$4 million in first quarter 2009. Adjusted for the items below, EBIT increased to US$40 million from US$6 million a year ago.
The EBIT improvement was driven by higher OE production volumes, related manufacturing efficiency improvements and an increase in higher-margin aftermarket sales. EBIT included US$12 million in positive currency due to the Canadian dollar and Mexican peso.
First quarter 2010 EBIT includes US$4 million in restructuring and related expenses and first quarter 2009 EBIT includes US$2 million in restructuring and related expenses.
“The industry continues to recover and customer production schedules are meeting forecasted rates, which will help drive our top-line growth as we leverage stronger OE production volumes globally and benefit from the strength of our global aftermarket,” said Sherrill. “We will continue our drive to improve profitability as we operate from a lower cost structure and maintain our relentless focus on operational excellence. This focus along with executing on our commercial vehicle launches beginning later this year are key to us taking full advantage of all our growth opportunities.”