LAKE FOREST, Ill. -- Tenneco has reported higher first quarter net income of $47 million, or 75 cents per diluted share, versus net income of $7 million, or 11-cents per diluted share in first quarter 2010. Adjusted for the items below, net income was $39 million, or 63 cents per diluted share, up from $15 million, or 25 cents per diluted share a year ago.

EBIT (earnings before interest, taxes and non-controlling interests) increased to $94 million from $59 million in first quarter 2010. Adjusted EBIT was $95 million, up 48 percent versus $64 million the prior year. The EBIT increase was driven by higher OE volumes and aftermarket sales, and stronger margins on new light and commercial vehicle launches.

EBITDA including non-controlling interests (EBIT before depreciation and amortization) was $145 million, compared with $114 million a year ago. Adjusted EBITDA including non-controlling interests rose to $146 million, up 24 percent versus $118 million in first quarter 2010.

“We are off to a strong start in 2011 with our highest-ever quarterly revenue and strong first quarter earnings. These results demonstrate the progress we’re making in executing on our growth opportunities and driving operational excellence,” said Gregg Sherrill, chairman and CEO, Tenneco.

Tenneco reported a 34 percent increase in revenue to $1.760 billion from $1.316 billion a year ago. The increase was driven by higher OE production volumes and aftermarket sales, and incremental revenue from new light and commercial vehicle launches.

Commercial and specialty vehicle OE revenue increased 54 percent year-over-year to 10 percent of global OE revenue as a result of stronger volumes and launching new diesel after treatment business. Aftermarket revenue, with typically higher margins, was 17 percent of total revenue, versus 20 percent a year ago. Excluding substrate sales and $42 million in currency, revenue was $1.299 billion, up 23 percent from $1.055 billion in first quarter 2010.

Tenneco’s cash performance is seasonal with a greater use of cash in the first quarter as the company prepares for OE platform launches and the aftermarket selling season. In the first quarter, Tenneco used $103 million in cash for operations, versus using $57 million a year ago, driven by a $75 million greater demand on working capital to support higher revenues.

Capital expenditures in the quarter were $41 million, compared with $27 million a year ago. The year-over-year increase includes investments to support customer launch programs and expansion in fast-growing markets.

DEBT
Tenneco’s net debt was $1.132 billion at March 31, 2011, down from $1.146 billion a year ago. The leverage ratio (net debt to adjusted EBITDA including non-controlling interests) was 2.1x, also down from a year ago at 2.8x.

OUTLOOK
Industry production in the second quarter will see some impact from the crisis in Japan. Prior to these events, IHS Automotive forecasted a 9 percent increase in light vehicle production in the regions where Tenneco operates. However, the current forecast, while still up in most regions, has been adjusted to an overall 3 percent increase in light vehicle production to account for temporary customer disruptions. This includes an 11 percent year-over-year increase in North America, 6 percent in China, 16 percent in India and 7 percent in South America. The Japan impact has now lowered Europe production estimates to a 6 percent year-over-year decrease in the second quarter but still up for the year. In addition, weaker industry conditions – separate from the Japan crisis – are continuing in Australia with a forecasted 3 percent decline.

Despite the temporary disruptions to customer production, volumes are expected to recover by the end of the year. According to IHS Automotive, full-year production in the regions where Tenneco operates is still predicted to increase 7 percent versus last year, unchanged from previous forecasts.

On the commercial vehicle side of Tenneco’s business, the company is launching diesel aftertreatment programs with 13 commercial vehicle and engine manufacturers globally through 2012. These programs are launching in North America, Europe, China and South America. Today, Tenneco is adding Daimler and MAN, both in South America, to its list of nine previously announced commercial vehicle customers.

Tenneco also recently announced new aftermarket business in North America with seven customers, expected to generate more than $15 million in annual revenue. In the second quarter, the company anticipates incurring $12 million in changeover costs, primarily in the form of customer credits, related to this new business.

“There are uncertainties regarding OE production in the second quarter due to the Japan crisis. However, we expect the impact on our revenue will be partially offset in the quarter by overall stronger volumes globally and the lost production will fully recover by the end of the year,” said Sherrill. “We are on track with our growth strategies including investments and initiatives to expand in emerging markets and launch significant new emission control programs with our commercial vehicle customers. I am pleased with the execution on our commercial vehicle programs, involving new technologies and manufacturing processes.”