Tenneco reported fourth quarter net income of $40 million, or 73 cents per diluted share, which includes an after-tax pension charge of $47 million. Fourth quarter 2015 net income was $68 million, or $1.17 per diluted share. Adjusted net income rose to $92 million, or $1.67 per diluted share, versus $80 million or $1.39 per diluted share last year.
Fourth Quarter Results
Total revenue in the fourth quarter was $2.155 billion, up 6 percent year-over-year on stronger global light vehicle revenues, driven by both the Clean Air and Ride Performance product lines.
On a constant currency basis, total revenue increased 9 percent to $2.212 billion, driven by a 13 percent increase in light vehicle revenue, nearly doubling global light vehicle industry production growth of 7 percent. Tenneco’s fourth quarter OE commercial truck and off-highway revenues declined 7 percent year over year, remaining essentially even with the third quarter. The company’s global aftermarket revenue was up 1 percent versus a year ago. Value-add revenue increased 9 percent versus last year.
“We finished the year with a solid fourth quarter and another year of record results, with full-year total revenue again outpacing industry production,” said Gregg Sherrill, chairman and CEO, Tenneco. “We also continued to do an excellent job converting this top line growth to drive record-high earnings for 2016 and greater profitability with our seventh consecutive full year of value-add adjusted EBIT margin improvement.
Full Year Results
For the full year, total revenue was $8.599 billion. In constant currency, revenue increased 7 percent to $8.819 billion.
Revenue growth was driven by a 10 percent increase in light vehicle revenue and a 2 percent increase in aftermarket sales. Commercial truck and off-highway revenue was down 4 percent, which included a 2-percent increase in Clean Air revenue due to incremental content growth, offset by lower Ride Performance revenue due to weak industry commercial truck production and the sale of the Marzocchi specialty business.
Full-year EBIT increased to $528 million, versus $519 million a year ago. Adjusted EBIT rose 9 percent to $636 million.
Cash generated by operations in the fourth quarter was $250 million, compared with $329 million in fourth quarter 2015. For the full year, cash generated by operations was $489 million, down from $517 million a year ago, due to the timing of revenue growth at the end of the year and the resulting impact on accounts receivable.
During the quarter the company repurchased approximately 1.4 million shares of common stock for $79 million. For the full year, the company repurchased a total of 4.2 million shares for $225 million.
Tenneco continues to invest in growth with total capital spending in 2016 of $343 million, primarily for new programs in Europe, North America and China.
Tenneco expects total revenue growth of 7 percent in the first quarter 2017, outpacing forecasted light vehicle industry production* growth of 3 percent. The company expects to better the industry with 4 percent organic growth, driven by incremental content to meet Tier 3 and Euro 6 emissions regulations, the ramp up of recently launched programs and Tenneco’s strong position on light vehicle platforms globally. Tenneco also expects a slight increase in commercial truck and off-highway revenues and a solid contribution from the global aftermarket. The company anticipates a currency headwind in the first quarter of approximately 2 percent based on current exchange rates.
Full year 2017
The company expects total revenue growth to outpace light vehicle industry production by 4 percentage points, resulting in 5 percent growth in 2017.
The company’s revenue growth estimate assumes light vehicle industry production growth* of 1 percent, global commercial truck production** growth of about 2 percent, and growth in off-highway engine production** in regulated regions (North America and Europe) of about 2 percent.
*IHS Automotive January 2017 global light vehicle production and Tenneco estimates.
**Power Systems Research January 2017 global commercial truck and bus production, PSR off-highway engine production in North America and Europe and Tenneco estimates.