LAKE FOREST, Ill.--(BUSINESS WIRE)--July 27, 2000--Tenneco Automotive (NYSE: TEN) today announced revenues of $948 million for the second quarter ended June 30, 2000, a nine percent increase over second quarter 1999 revenues of $868 million. The company also reported income from continuing operations of $15 million, or 42 cents per diluted share, compared to $37 million, or $1.06 per diluted share in the second quarter of 1999. Cash flow before financing activities was $24 million versus a negative $113 million in cash flow for the second quarter of 1999, allowing the company to pay down another $32 million of debt during the quarter.

Included in the second quarter results are pre-tax stand-alone costs of $13 million, and the costs associated with the company's new capital structure following the November 4, 1999 spin-off of Pactiv Corporation. If the company had incurred the same level of stand-alone and interest costs in 1999 as it did in 2000, its net income and earnings per diluted share for the second quarter of 1999 would have been $22 million, or 66 cents per share.

"We are disappointed with our earnings this quarter despite solid revenue growth and, as a result, are accelerating our efforts to cut costs and improve our operating efficiency worldwide," said Mark P. Frissora, chairman and CEO, Tenneco Automotive. "On the positive side, we continue to generate strong cash flow. As a result, we've been able to reduce our debt by approximately $100 million since becoming an independent company eight months ago."

Including stand-alone costs, EBITDA for the quarter was $105 million, a decline of 21 percent compared to $133 million in the second quarter of 1999. Second quarter 1999 EBITDA would have been $122 million if the stand-alone costs were included in the results.

The company reported EBIT, including stand-alone costs, of $68 million, a decline of 30 percent compared to $97 million in the same quarter last year. EBIT in the second quarter of 1999 would have been $86 million if the stand-alone costs were included.

The company has also shown a year over year improvement in EVA(R) (Economic Value Added) performance of $7 million through the first two quarters of 2000.

NORTH AMERICA

Continued strong OE production levels helped fuel a 23 percent increase in the company's North American original equipment business, reporting revenues of $374 million compared to $304 million in second quarter 1999. A change in revenue recognition for catalytic converter sales accounted for $52 million of the increase. A greater percentage of higher content exhaust system contracts versus components as well as supply contracts for a large number of top-selling vehicles also contributed to the growth.

Second quarter revenues for the North American aftermarket were $165 million, compared to $166 million in the second quarter of 1999. Despite a softening aftermarket in North America, overall aftermarket revenues were stronger during the last month of the quarter due to the introduction of the new premium Reflex shock absorber for passenger vehicles, and the increase of Sensa-Trac sales in the retail channel. In addition, the company recorded strong sales of its high performance Rancho shock absorber and suspension systems.

Before stand-alone costs, the second quarter EBIT for North American operations was $49 million, a 29 percent decrease from $69 million in the previous year.

The decline in EBIT was primarily driven by higher costs in the North American original equipment operations. Contributing to the decline were higher costs associated with the delayed closing of the Culver, Indiana exhaust plant; increased R&D spending to support future platform launches including advanced suspension technologies; and lower than expected margins on some of the new OE exhaust platform launches.

The Culver, Indiana exhaust plant was closed on July 14, 2000, after remaining open beyond the first quarter at the request of the customer. The advanced suspension R&D expenses represent investments in new technologies, which should be recovered on future OE programs. In addition, margins should improve on the new OE exhaust platforms in the second half of the year as the company implements already identified manufacturing efficiency improvements.

EUROPE

The company reported second quarter 2000 revenues for the European original equipment business of $213 million, a five percent increase compared to second quarter 1999 revenues of $202 million. Revenue would have increased by 16 percent if exchange rates had been the same in the second quarter 2000 as in second quarter 1999. The increase was driven by new ride control business, and higher volume exhaust business.

Revenues for the European aftermarket business were $109 million, a 12 percent decrease from $124 million in the second quarter of 1999. Had exchange rates been the same in the second quarter of 1999 as in 2000, revenue would have declined three percent. The overall softness in the European aftermarket influenced the quarter results, as well as excess capacity in the European exhaust industry.

Despite the weakness of the euro, European EBIT, before stand-alone costs, was up four percent at $26 million.

Tenneco Automotive reported second quarter results in other geographical areas as follows:

Stronger sales in Brazil and Asia; and efficiency improvements and headcount reductions in South America continue to drive improvement in EBIT for South America, Australia, and Asia. Combined EBIT, before stand-alone costs, for these areas in the second quarter was $6 million, slightly higher than the $5 million recorded in second quarter 1999.

OUTLOOK

Despite softening in the global aftermarket and the North American OE market, Tenneco Automotive products were featured on 15 new product launches during the second quarter 2000, with revenue exceeding $80 million. In addition, Tenneco Automotive captured new platforms in this quarter, which should generate future global OE business of $150 million. In the aftermarket business, the company also recorded new incremental revenue of more than $16 million from new and existing North American customers in the second quarter. This new revenue, the result of aggressive product launches and product repositioning programs, helped offset the downturn in the aftermarket during the quarter.

"We are confident that we have the right growth strategies in place," said Mark Frissora. "However, it's critical that we continue to manage cost cutting initiatives worldwide with the goal of significantly reducing working capital, SG&A, and debt."

Attached are exhibits that provide additional information on Tenneco Automotive's 2000 and 1999 operating results.

Tenneco Automotive is a $3.3 billion manufacturing company headquartered in Lake Forest, Ill., with 24,000 employees worldwide. Tenneco Automotive is one of the world's largest producers and marketers of ride control and exhaust systems and products, which are sold under the Monroe(R) and Walker (R) global brand names. Among its products are Sensa-Trac(R) and Reflex (R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(TM) mufflers and DynoMax(TM) performance exhaust products, and Monroe(R) Clevite(TM) vibration control components.

Safe Harbor

The statements in this press release relating to expected revenue from new platform awards, and the company's expected margin improvement on new OE exhaust platforms, and expected recovery of the advanced systems R&D expenses on future OE programs are forward-looking. These forward-looking statements are based on the current expectations of the Company (including its subsidiaries). Because forward-looking statements involve risks and uncertainties, the Company's plans, actions and actual results could differ materially. Among the factors that could cause plans, actions and results to differ materially from current expectations are: (i) the general political, economic and competitive conditions in markets and countries where the Company and its subsidiaries operate, including currency fluctuations and other risks associated with operating in foreign countries; (ii) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals; (iii) changes in capital availability or costs; (iv) changes in automotive manufacturers' actual and forecasted requirements for the Company's products, including the Company's resultant inability to realize the sales represented by its awarded business; (v) changes in consumer demand and prices, including decreases in demand for automobiles which include the Company's products, and the potential negative impact on the Company's revenues and margins from such products; (vi) the cost of compliance with changes in regulations, including environmental regulations; (vii) workforce factors such as strikes or labor interruptions; (viii) material substitutions and increases in the costs of raw materials; (ix) the ability of the Company and its subsidiaries to transition to being an independent, stand-alone public company in a timely and cost-effective manner; (x) the introduction and acceptance of new technologies; (xi) further changes in the distribution channels for the Company's aftermarket products, and further consolidations among automotive parts customers and suppliers; (xii) changes by the Financing Accounting Standards Board or other accounting regulatory bodies of authoritative generally accepted accounting principles or policies; and (xiii) 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.

Tenneco Automotive
Statement of Income (Loss)
Six Months Ended June 30, 2000
(Millions Except Per Share Amounts)

CONTACT: Tenneco Automotive, Media relations
Jane Ostrander, 847/482-5607
jane.ostrander@tenneco-automotive.com

Tenneco Automotive, Investor relations
Leslie Cleveland Hague, 847/482-5042
lchague@tenneco-automotive.com