LAKE FOREST, ILLINOIS, JANUARY 24, 2008 – Tenneco (NYSE: TEN) reported a fourth quarter net loss of $72 million, or $1.57 per diluted share, versus net income of $15 million, or 31-cents per diluted share in fourth quarter 2006. The loss was due to previously announced charges taken in the fourth quarter for actions that advance Tenneco’s financial strategy. These include costs for refinancing a portion of the company’s debt, which will reduce interest expense, and non-cash tax charges for realigning the European ownership structure, which more effectively aligns the company’s U.S. and European assets and revenues with liabilities and expenses. This action will reduce cash taxes and accelerates the use of U.S. net operating losses.

After adjusting for charges below, net income was $15 million, or 34-cents per diluted share, up from net income of $3 million, or 5-cents per diluted share a year ago. The tables in this press release reconcile GAAP results to non-GAAP results and the comparative 2006 results reflect adjustments made in Tenneco’s restated financial statements filed in August 2007.

EBIT (earnings before interest, taxes and minority interest) was $43 million versus $39 million a year ago. Adjusted EBIT was $61 million, up 53% from $41 million in fourth quarter 2006. EBITDA (EBIT before depreciation and amortization) was $98 million, up from $87 million the previous year. Adjusted EBITDA was $116 million, a 30% increase over $89 million a year ago.

Adjusted fourth quarter 2007 and 2006 results:

	Q4 2007									Q4 2006
	EBITDA		EBIT		Net Income		Per Share			EBITDA		EBIT		Net Income		Per Share
Earnings Measures	$	98	$	43	$	(72)	$	(1.57)		$	87	$	39	$	15	$	0.31
Adjustments (reflects non-GAAP measures)
Restructuring/restructuring related expenses		18		18		11		0.26			6		6		4		0.08
Charges related to refinancing		-		-		14		0.31			-		-		-		-
Net tax Adjustments		-		-		62		1.34			-		-		(13)		(0.28)
Pension replacement		-		-		-		-			(7)		(7)		(5)		(0.10)
Reserve for receivables from former affiliate		-		-		-		-			3		3		2		0.04
Non-GAAP earnings measures	$	116	$	61	$	15	$	0.34		$	89	$	41	$	3	$	0.05
Download and print this summary table (PDF)   • Adjusted fourth quarter 2007 and 2006 results

Fourth quarter 2007 adjustments:

• Restructuring and restructuring related expenses of $18 million pre-tax, or 26-cents per diluted share, primarily related to a previously announced facility closing;
• Charge of $21 million pre-tax, or 31-cents per diluted share, for refinancing a portion of the company’s debt;
• Net tax expenses of $62 million, or $1.34 per diluted share, including $66 million in non-cash expenses to realign the European ownership structure and a net benefit of $4 million primarily related to adjustments for prior year income tax returns.

Fourth quarter 2006 adjustments:

• Restructuring and restructuring related expenses of $6 million pre-tax, or 8-cents per diluted share;
• A reserve of $3 million pre-tax, or 4-cents per diluted share, for receivables from a former affiliate;
• Benefit of $7 million pre-tax, or 10-cents per diluted share, from replacing the defined benefit pension plans in the U.S. with an enhanced defined contribution plan;
• Tax benefits of $13 million or 28-cents per diluted share, related to an investment income tax credit in the Czech Republic and final adjustments related to prior year income tax returns.

“Tenneco delivered excellent results this quarter thanks to technology-driven growth and our global geographic balance, particularly in expanding markets like China and South America,” said Gregg Sherrill, chairman and CEO, Tenneco. “A relentless focus on working capital improvements drove strong cash performance in the quarter. Our execution on managing accounts receivable and inventories helped convert earnings into strong cash flow.”

Fourth quarter revenues increased 29% to $1.565 billion versus $1.209 billion a year ago. Substrate sales grew to $440 million from $297 million in fourth quarter 2006. Excluding substrate sales and favorable currency, revenue was $1.054 billion, up 16% from $912 million the previous year. The revenue increase was driven by higher volumes on new diesel platforms in North America, volume increases on key European emission control platforms and growth in China.

EBIT margin declined to 2.8% versus 3.2% in fourth quarter 2006, primarily due to a 48% increase in substrate sales, higher restructuring costs and a lower percentage of revenue generated from aftermarket sales, which typically carry higher margins. These factors also negatively impacted gross margin, which was 14.3% compared with 15.7% in fourth quarter 2006. The negative impact of these factors was partially offset by the sale of higher margin OE emission control technologies in the quarter.

Adjusted EBIT as a percent of value-added sales (revenue excluding substrate sales) grew to 5.4% from 4.4%, an indication that the company is realizing the margin benefit from its advanced hot-end and diesel aftertreatment technologies.

Cash generated by operations in the quarter was $200 million, up significantly from $138 million a year ago. The increase was driven by higher earnings and working capital improvements. The company generated $175 million in cash from working capital versus $130 million a year ago.

“Our ability to generate cash flow in the quarter helped us to end the year with a 45% increase in cash from operations, resulting in nearly flat year-over-year net debt,” Sherrill said. “This was particularly outstanding given that we made significant investments throughout the year to fund our business growth with higher spending on engineering, capital expenditures and an emissions control technology acquisition.”

At quarter-end, debt net of cash balances was $1.186 billion, compared with $1.183 billion at the end of fourth quarter 2006. Cash balances were $188 million versus $202 million the prior year. Total debt was $1.374 billion, versus $1.385 billion a year ago. At the end of the quarter, the ratio of debt net of cash balances to adjusted annual EBITDA was 2.4x, down from 2.9x at the end of fourth quarter 2006.

Total steel costs in the quarter increased $17 million year-over-year. These costs were offset by material substitutions, low-cost country sourcing, steel cost recovery from customers and other cost reductions.

The rate of revenue growth in the quarter continued to outpace overhead spending to support that growth. SGA&E (selling, general, administrative & engineering) costs as a percent of sales decreased to 8.1% versus 8.7% a year ago despite an increase in engineering spending to support technology development and future new business launches.

NORTH AMERICA

• OE revenue was $592 million, up 63% from $363 million a year ago. Excluding substrate sales and currency, revenue was $342 million, a 26% year-over-year increase from $272 million. The increase was driven by incremental volume from diesel pick-up truck platforms like the Ford SuperDuty, GM Duramax engine vehicles and International’s medium duty commercial trucks. Emission control content on GM crossover vehicles, the Toyota Tundra and ride control business on GM platforms that include the Suburban, Yukon, Silverado, Sierra, Trailblazer and Envoy also drove the increase. The increase was partially offset by volume declines on existing platforms.
• Aftermarket revenue was $122 million, up 5% from $115 million in fourth quarter 2006. New business and increases in both ride control and exhaust sales drove the increase.
• EBIT for North America operations was $16 million versus $18 million in fourth quarter 2006. Fourth quarter 2007 EBIT includes $2 million in restructuring costs. Fourth quarter 2006 EBIT includes $3 million in restructuring costs, a $3 million reserve for receivables from a former affiliate and a $7 million benefit for the U.S. pension plan replacement. Adjusted for these items, EBIT was $18 million, up $1 million year-over-year.
• The EBIT benefit from higher volumes on new emission and ride control platforms was mostly offset by:
  • $5 million in higher net engineering spending due to customer recovery timing;
  • $2 million for inventory shrinkage on substrates at one Mexican emissions control facility;
  • $3 million in accelerated depreciation on OE service-part equipment; and
  • The impact of lower commercial vehicle ride control production volumes.

EUROPE, SOUTH AMERICA, INDIA

• OE revenue was $511 million, a 13% increase from $452 million a year ago. Excluding substrate sales and the impact of favorable currency, revenue was $337 million versus $285 million, an 18% increase. The increase was driven by higher volumes on platforms with hot-end and diesel aftertreatment technology like the Daimler Sprinter, the BMW 1 and 3 Series and the Audi A4.
• Aftermarket revenue was $96 million, up from $90 million a year ago. Excluding favorable currency, revenue was $87 million. Lower exhaust sales more than offset increases in ride control sales.
• South America and India revenue increased to $96 million from $71 million in fourth quarter 2006. Excluding substrate sales and the impact of favorable currency, revenue was $74 million compared with $63 million. The increase was due to higher OE volumes in South America.
• EBIT for Europe, South America and India was $19 million, up from $16 million a year ago. Favorable currency benefited EBIT by $2 million.
• Adjusted EBIT was up 84% to $35 million from $19 million a year ago. The EBIT increase was driven by strong manufacturing performance and OE volume increases, which more than offset higher material costs and lower aftermarket emission control sales.
• Fourth quarter 2007 EBIT includes $16 million in restructuring and restructuring related costs and fourth quarter 2006 includes $3 million in restructuring and restructuring related costs.

ASIA PACIFIC

• Asia revenue increased 35% to $98 million from $73 million a year ago. Excluding substrate sales and favorable currency, revenue was up 18% to $55 million from $47 million. The increase was due to growth in China with new OE business and higher OE volumes.
• Australia revenue increased 12% to $50 million compared with $45 million in fourth quarter 2006. Excluding substrate sales and the impact of favorable currency, revenue was $37 million versus $40 million a year ago, primarily the result of lower aftermarket sales.
• Asia Pacific EBIT was $8 million, a 59% increase over $5 million a year ago. Favorable currency benefited EBIT by $1 million. Operational efficiencies and strong OE volumes in China drove the EBIT increase.

FULL YEAR 2007 RESULTS
Tenneco reported record high annual revenue of $6.2 billion, a 32% increase over $4.7 billion in 2006. Substrate sales grew to $1.673 billion from $927 million in 2007. Excluding substrate sales and favorable currency, revenue was up 15%. New diesel aftertreatment business on pick-up truck platforms in North America, growth in China and strong OE volumes in Europe drove the significant increase.

The company reported a net loss of $5 million, or 11-cents per diluted share, compared with net income of $49 million, or $1.05 per diluted share in 2006.

Adjusted for the items below, including $66 million in non-cash tax charges to realign the European ownership structure, net income was up 69% to $86 million, or $1.82 per diluted share, from $51 million, or $1.12 per diluted share in 2006.

Full year EBIT was $252 million, a 28% increase over $196 million a year ago. Adjusted EBIT was $282 million, a 25% increase from $225 million in 2006. 2007 EBITDA was $457 million, up from $380 million in 2006. Adjusted EBITDA was $487 million, a 19% increase from $409 million a year ago.

EBIT margin for the year declined to 4.1% versus 4.2% in 2006 due to an increase in substrate sales and a lower percentage of revenue generated from aftermarket sales, which typically carry higher margins. These factors also negatively impacted gross margin, which was 15.8% compared with 18.1% in 2006. The negative impact of these factors was partially offset by the sale of higher margin OE emission control technologies.

Adjusted EBIT as a percent of value-added sales (revenue excluding substrate sales) grew to 6.2% from 6.0%, which reflects the improved margin benefit from sales of the company’s advanced hot-end and diesel aftertreatment technologies.

SGA&E as a percent of sales for 2007 was 8.3%, a significant improvement from 9.8% in 2006.

Adjusted full-year 2007 and 2006 results:

	YTD 2007									YTD 2006
	EBITDA		EBIT		Net Income		Per Share			EBITDA		EBIT		Net Income		Per Share
Earnings Measures	$	457	$	252	$	(5)	$	(0.11)		$	380	$	196	$	49	$	1.05
Adjustments (reflects non-GAAP measures)
Restructuring/restructuring related expenses		25		25		16		0.35			27		27		17		0.39
New aftermarket customer changeover costs		5		5		3		0.06			6		6		4		0.08
Charges related to refinancing		-		-		18		0.37			-		-		-		-
Net tax Adjustments		-		-		54		1.15			-		-		(16)		(0.34)
Pension replacement		-		-		-		-			(7)		(7)		(5)		(0.10)
Reserve for receivables from former affiliate		-		-		-		-			3		3		2		0.04
Non-GAAP earnings measures	$	487	$	282	$	86	$	1.82		$	409	$	225	$	51	$	1.12
Download and print this summary table (PDF)   • Adjusted full-year 2007 and 2006 results

Full-year 2007 adjustments:

• Restructuring and restructuring related expenses of $25 million pre-tax, or 35-cents per diluted share;
• Aftermarket customer changeover costs of $5 million pre-tax, or 6-cents per diluted share;
• Refinancing charges of $26 million pre-tax, or 37-cents per diluted share;
• Net tax expenses of $54 million, or $1.15 per diluted share, which includes $66 million in non-cash tax expenses to realign the company’s European ownership structure, and net tax benefits of $12 million related to a reduction in income tax rates in Germany and adjustments for prior year income tax returns.

Full-year 2006 adjustments:

• Restructuring and restructuring related expenses of $27 million pre-tax, or 39-cents per diluted share;
• Aftermarket customer changeover costs of $6 million pre-tax, or 8-cents per diluted share;
• A reserve of $3 million pre tax, or 4-cents per diluted share, for receivables from a former affiliate;
• Benefit of $7 million pre-tax, or 10-cents per diluted share, from replacing the defined benefit pension plans in the U.S.;
• Tax benefits of $16 million, or 34-cents per diluted share, primarily for an investment tax credit in the Czech Republic, resolution of tax issues with former affiliates, and final adjustments to prior year income tax returns.

The company benefited in 2007 from its geographic and customer balance. Geographically, 53% of total 2007 revenue and 52% of EBIT was generated outside North America with a growing share in expanding markets like China and Eastern Europe.

“Tenneco performed exceptionally well in a year marked by industry challenges. We profitably launched more than $1 billion in new OE business globally, the majority of which featured advanced technology products and systems,” Sherrill said. “We executed on our global growth strategies by investing in growing markets like Russia and China, and making strategic investments in engineering and innovative technologies that are already generating new business. At the same time, we improved our financial flexibility and successfully managed our overhead costs.”

OUTLOOK
Tenneco anticipates ongoing industry volatility in 2008. The company expects that North America industry OE production volumes will be lower, Europe OE volumes will remain relatively stable, and strong sales growth in expanding markets like China, India and Brazil will continue.

In the first quarter, Tenneco expects higher year-over-year revenues in North America given its market position and the anticipated benefit of incremental sales from new OE emission control business it launched in 2007, which will be at higher production levels compared to first quarter last year. In Europe, the company also expects to benefit from its strong position in Eastern Europe and Russia, where industry growth is predicted.

In 2007, Tenneco generated $5.1 billion in global original equipment revenues. Adjusted for substrate sales, global original equipment value-added sales were $3.4 billion. Tenneco estimates that its global original equipment revenues will be approximately $5.5 billion in 2008 and $6.0 billion in 2009. Adjusted for substrate sales, original equipment value-added sales are estimated to be approximately $3.7 billion in 2008 and $4.1 billion in 2009.

The company expects the pricing environment for steel will increase gross steel costs year-over-year by up to $40 million in 2008, which it anticipates fully offsetting through cost reductions, manufacturing efficiencies, material substitutions, low-cost country sourcing and customer recovery.

As part of its five year strategic vision, Tenneco projects it will achieve an average compounded annual OE revenue growth rate of 11% to13% between 2008 and 2012, primarily driven by tightening emission control regulations globally. This projection reflects new business the company has been already awarded or expects to win with light vehicle and commercial vehicle original equipment manufacturers.

“Tenneco has a proven track-record of execution and implementing the right strategies to be successful, even in tough markets,” Sherrill said. “Given our leading technology and engineering capabilities, favorable geographic and customer balance, cost flexibility and a relentless focus on managing costs and improving operations, Tenneco is well-positioned to address the industry challenges in 2008 while capturing additional new business opportunities, which will fuel our growth globally over the next five to seven years.”

Attachment 1:

  • Statements of Income - 3 Months
  • Statements of Income - 12 Months
  • Balance Sheet
  • Statements of Cash Flow - 3 Months
  • Statements of Cash Flow - 12 Months

Attachment 2:
  • Reconciliation of GAAP Net Income to EBITDA - 3 Months
  • Reconciliation of GAAP to Non-GAAP Earnings Measures - 3 Months
  • Reconciliation of GAAP Net Income to EBITDA - 12 Months
  • Reconciliation of GAAP to Non-GAAP Earnings Measures - 12 Months
  • Reconciliation of GAAP Revenues to Non-GAAP Revenue Measures - 3 Months
  • Reconciliation of GAAP Revenues to Non-GAAP Revenue Measures - 12 Months
  • Reconciliation of Non-GAAP Measures - Ratio of Debt Net of Cash to Adjusted EBITDA - 12 Months
  • Reconciliation of adjusted EBIT as a percent of value-added sales – 3 Months and 12 Months

These files are provided in a PDF format.
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CONFERENCE CALL
The company will host a conference call on Thursday, January 24, 2008 at 10:30 a.m. EST. The dial-in number is 888-790-1408 (domestic) or 773-756-0157 (international). The passcode is TENNECO. The call and accompanying slides will be available on the financial section of the Tenneco web site at www.tenneco.com. A recording of the call will be available one hour following completion of the call on January 24, 2008. To access this recording, dial 866-365-2445 (domestic) or 203-369-0215 (international). The purpose of the call is to discuss the company’s operations for the quarter, as well as other matters that may impact the company’s outlook. A copy of the press release is available on the financial and news sections of the Tenneco web site.

2008 ANNUAL MEETING
The Tenneco Board of Directors has scheduled the corporation’s annual meeting of shareholders for Tuesday, May 6, 2008 at 10:00 a.m. CDT. The meeting will be held at the corporate headquarters, 500 North Field Drive, Lake Forest, Illinois. The record date for shareholders to vote at the meeting is March 11, 2008.

Tenneco is a $6.2 billion manufacturing company with headquarters in Lake Forest, Illinois and approximately 21,000 employees worldwide. Tenneco is one of the world’s largest designers, manufacturers and marketers of emission control and ride control products and systems for the automotive original equipment market and the aftermarket. Tenneco markets its products principally under the Monroe®, Walker®, Gillet™ and Clevite®Elastomer brand names.

Revenue estimates in this release are based on OE manufacturers’ programs that have been formally awarded to the company; programs where Tenneco is highly confident that it will be awarded business based on informal customer indications consistent with past practices; Tenneco’s status as supplier for the existing program and its relationship with the customer; and the actual original equipment revenues achieved by the company for each of the last several years compared to the amount of those revenues that the company estimated it would generate at the beginning of each year. These revenue estimates are also based on anticipated vehicle production levels and pricing, including precious metals pricing and certain actions to recover a portion of materials cost increases. The revenue estimates assume that foreign currency exchange rates will remain constant over the entire period.

This press release contains forward-looking statements. Words such as “hopes,” “may,” “expects,” “anticipate,” “will,” and “outlook” and similar expressions identify forward-looking statements. These forward-looking statements are based on the current expectations of the company (including its subsidiaries). Because these forward-looking statements involve risks and uncertainties, the company's plans, actions and actual results could differ materially. Among the factors that could cause these plans, actions and results to differ materially from current expectations are:
(i) changes in automotive manufacturers' production rates and their actual and forecasted requirements for the company's products;
(ii) the overall highly competitive nature of the automotive parts industry, including pricing pressure from the company’s OE customers and the loss of any awards of business, or the failure to obtain new awards of business, from our large customers, on which we are dependent for a substantial portion of our revenues; for example, Ford, from whom the company derived more than 10% of its 2006 net sales, announced in 2006 a plan to significantly reduce the number of its global suppliers. While the company currently believes that its relationship with Ford will not be impacted by this plan, any significant reduction in sales to Ford could have a material adverse effect on the company;
(iii) the company's resultant inability to realize the sales represented by its awarded book of business which is based on anticipated pricing for the applicable program over its life, and is subject to increases or decreases due to changes in customer requirements, customer and consumer preferences, and the number of vehicles actually produced by customers;
(iv) increases in the costs of raw materials, including the company’s ability to successfully reduce the impact of any such cost increases through materials substitutions, cost reduction initiatives, customer recovery and other methods;
(v) the cyclical nature of the global vehicular industry, including the performance of the global aftermarket sector, and changes in consumer demand and prices, including longer product lives of automobile parts and the cyclicality of automotive production and sales of automobiles which include the company's products, and the potential negative impact on the company's revenues and margins from such products;
(vi) the company's continued success in cost reduction and cash management programs and its ability to execute restructuring and other cost reduction plans and to realize anticipated benefits from these plans;
(vii) the general political, economic and competitive conditions in markets and countries where the company and its subsidiaries operate, including the strength of other currencies relative to the U.S. dollar and currency fluctuations and other risks associated with operating in foreign countries;
(viii) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals;
(ix) changes in capital availability or costs, including increases in the company's costs of borrowing (i.e., interest rate increases), the amount of the company's debt, the ability of the company to access capital markets and the credit ratings of the company's debt;
(x) the cost and outcome of existing and any future legal proceedings, and compliance with changes in regulations, including environmental regulations;
(xi) workforce factors such as strikes or labor interruptions;
(xii) the company's ability to develop and profitably commercialize new products and technologies, and the acceptance of such new products and technologies by the company's customers and the market;
(xiii) further changes in the distribution channels for the company's aftermarket products, further consolidations among automotive parts customers and suppliers, and product warranty costs;
(xiv) changes by the Financial Accounting Standards Board or other accounting regulatory bodies to authoritative generally accepted accounting principles or policies;
(xv) acts of war, riots or terrorism, including, but not limited to the events taking place in the Middle East, the current military action in Iraq and the continuing war on terrorism, as well as actions taken or to be taken by the United States or other governments as a result of further acts or threats of terrorism, and the impact of these acts on economic, financial and social conditions in the countries where the company operates; and
(xvi) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond the control of the company and its subsidiaries.
The company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company's SEC filings, including but not limited to its report on Form 10-K/A for the year ended December 31, 2006. Further information can be found on the company's web site at www.tenneco.com.

CONTACT:
Tenneco Media Relations
Jane Ostrander
(1) 847 482 5607
jostrander@tenneco.com

Tenneco Investor Relations
Leslie Hunziker
(1) 847 482 5042
lhunziker@tenneco.com