LAKE FOREST, Ill. — Tenneco has reported net income of $17 million, or 32-cents per diluted share, in the fourth quarter, compared with a net loss of $298 million, or $6.40 per diluted share in fourth quarter 2008.

Adjusted for the items below, net income was $7 million, or 13-cents per diluted share, versus a net loss of $24 million, or 51-cents per diluted share a year ago.

“Our strong profit improvement this quarter, both sequentially and year-over-year, reflects the benefits from our restructuring initiatives, closely managing costs and Tenneco’s strong position in growth markets,” said Gregg Sherrill, chairman and CEO, Tenneco. “Going forward, the cost structure changes and operational improvements we have institutionalized will help us leverage significant new business opportunities beginning later this year as well as a strengthening global production environment.”

Fourth quarter revenue was $1.322 billion, up 9 percent from $1.208 billion a year ago. Excluding substrate sales and the positive currency impact of $87 million, revenue was $955 million, up 5 percent versus $911 million in fourth quarter 2008. The revenue increase was primarily driven by stronger OE production volumes in China and South America and higher North America aftermarket sales.

Tenneco generated $133 million in cash flow from operations in the quarter, driven by earnings, and $55 million in cash from working capital improvements. Cash flow from operations in fourth quarter 2008 was $126 million.

The company’s worldwide factored receivables were $137 million as of Dec. 31, 2009, versus $179 million at the end of last year. Factored receivables in the quarter included $62 million in U.S. factored receivables, versus $101 million a year ago.

Tenneco can securitize up to $250 million in receivables under the terms of its debt agreements with the flexibility of using several sources globally to maintain the program. Tenneco expects to renew its $100 million U.S. receivable securitization program by the end of February 2010.

Capital expenditures incurred in the quarter were $47 million, up slightly from $45 million a year ago. Total capital expenditures in 2009 were $118 million, versus $221 million in 2008. By redeploying assets, using existing capacity and deferring discretionary projects, Tenneco reduced capital spending by 47 percent year-over-year while still making the necessary investments to support customer programs and new business opportunities.

As of Dec. 31, 2009, Tenneco’s leverage ratio under its senior credit facility was 3.43, below the maximum level of 6.60. The interest coverage ratio was 2.48, above the minimum of 1.60. At the end of the quarter, Tenneco had an EBITDA cushion of $113 million against its tightest covenant.
The company reduced net debt by $272 million during 2009. The debt reduction included positive cash flow generated during the year and $188 million in proceeds from the company’s common stock offering in the fourth quarter. Tenneco ended 2009 with no borrowings under its revolving credit facilities. The ratio of net debt to adjusted EBITDA including non-controlling interests was 3.1 compared with 3.5 at the end of 2008.

NORTH AMERICA
• North America OE revenue was $457 million, down from $498 million in fourth quarter 2008. Excluding substrate sales and the impact of currency, revenue decreased 9 percent to $293 million, compared with $322 million a year ago. A decrease in year-over-year steel recovery due to lower steel costs accounted for more than half of the revenue decline. The decrease was also driven by lower production volumes on certain platforms, partially offset by increases on other platforms, including the Ford F-150, Ford SuperDuty and the Taurus. Industry light vehicle production increased 1 percent in the quarter.

• Aftermarket revenue increased 7 percent to $120 million from $113 million a year ago. The increase was driven by higher ride control sales and pricing, which more than offset a decline in exhaust product sales.

EUROPE, SOUTH AMERICA AND INDIA
• Europe OE revenue was $389 million, up from $352 million a year ago. Excluding substrate sales and the impact of currency, revenue was $261 million, relatively even with $262 million in fourth quarter 2008. After considering the negative impact of lower year-over-year alloy surcharge recovery due to lower alloy surcharge costs and production declines in the two-wheeler market, revenue was in line with the year-over-year industry production increase of 7 percent.

• Europe aftermarket revenue increased to $78 million from $76 million a year ago. Excluding the impact of currency, revenue was $70 million, compared with $76 million, primarily driven by lower emission control sales.

• South America and India revenue was $113 million, a 56 percent increase from $72 million in fourth quarter 2008. Excluding the impact of substrate sales and currency, revenue increased 36 percent to $90 million from $65 million a year ago, driven by strong OE production volumes in South America.

ASIA PACIFIC
• Asia revenue was $123 million, up from $70 million a year ago. Excluding substrate sales and the impact of currency, revenue was $92 million, up 93 percent from $48 million in fourth quarter 2008. The increase was driven by higher OE production volumes in China including on GM, VW, Great Wall and Brilliance platforms.

• Australia revenue was $42 million, up from $27 million in fourth quarter 2008. Excluding substrate sales and currency, revenue was $30 million, versus $25 million the prior year. The increase was driven by a strengthening industry production environment toward the end of 2009.

FULL YEAR 2009 RESULTS
Tenneco reported annual revenue of $4.649 billion, down 21 percent from $5.916 billion in 2008. Excluding substrate sales and currency, revenue was $3.968 billion, down 10 percent compared with $4.424 billion the year before. Tenneco’s 2009 annual revenue was significantly impacted by the global downturn in the automotive industry with light vehicle production down year-over-year in North America by 32 percent and in Europe by 22 percent. These production declines in Tenneco’s two largest regions of operations were partially offset by production volume increases in China.

The company reported a net loss of $73 million, or $1.50 per diluted share, compared with a net loss of $415 million, or $8.95 per diluted share in 2008. Adjusted for the items below, the net loss was $29 million, or 59-cents per diluted share, versus net income of $20 million, or 42-cents per diluted share a year ago.
Full-year EBIT was $92 million, an increase from a loss of $3 million in 2008. Adjusted EBIT was $118 million, compared with $158 million a year ago. 2009 EBIT includes a negative currency impact of $7 million. EBITDA including non-controlling interests for full-year 2009 was $313 million, compared with $219 million in 2008. Adjusted EBITDA including non-controlling interests was $335 million, down from $380 million a year ago.

OUTLOOK
Global Insight forecasts that the 2010 OE light vehicle production environment will continue to strengthen in North America to about 10.6 million units during the year. Europe production will be up slightly at 17.6 million units but with an improving mix for Tenneco. Production is expected to increase on larger-sized vehicles, offset by declines in the smaller segment vehicles, which benefited from government incentive programs in 2009. Production in faster growing automotive markets such as China and South America will continue to expand. Light vehicle production in China is estimated to be 13.4 million units. In the Class 4-8 on-road commercial vehicle segment, 2010 production is expected to increase globally to about 255,000 units in North America, 359,000 units in Europe and 947,000 units in China.

“Although we are just in the early stages of a global industry recovery and 2010 production forecasts for North America and Europe remain low relative to historical levels, Tenneco is well-positioned to deliver revenue and earnings growth this year as we launch new business, take advantage of volume increases and continue to benefit from permanent cost reductions and operational improvements,” said Sherrill.

In 2009, Tenneco generated $3.6 billion in global original equipment revenues. Adjusted for substrate sales, global original equipment value-added revenues were $2.6 billion. Tenneco estimates that its global original equipment revenues will be approximately $4.4 billion in 2010 and $5.7 billion in 2011. Adjusted for substrate sales, original equipment value-added revenues are estimated to be approximately $3.2 billion in 2010 and $4.0 billion in 2011.

Between fourth quarter 2009 and fourth quarter 2011, Tenneco is launching multiple programs with 11 different commercial vehicle customers – truck and engine manufacturers – to help customers meet new emissions regulations for on- and off-road commercial vehicles. The company began launching some of these programs in China at the end of last year with China National Heavy Truck Company, Shanghai Diesel Engine Company and Weichai Power. Programs in North America, Europe and South America primarily begin launching in the back half of 2010. The company’s commercial vehicle emission control customers also include Caterpillar, Navistar and Deutz as well as five customers who will be announced as programs launch. Tenneco will also supply diesel aftertreatment systems, including selective catalytic reduction, for next generation heavy-duty pick-up trucks in North America.

Tenneco projects it will achieve a five-year average compounded annual OE revenue growth rate of 18 percent to 20 percent through 2014. The growth is primarily driven by increasingly stringent and broader emissions regulations that are being implemented globally, which will accelerate growth in the on-road and off-road commercial vehicle markets. The company’s estimates for its future OE revenue growth are also based on unit volume projections by Global Insight that global light vehicle production will grow at an annual compounded rate of 7 percent through 2014 and on-road commercial vehicle production will grow at an annual compounded rate of 12 percent.

Tenneco continues to execute on its growth strategies including capitalizing on regulatory-driven growth opportunities in the commercial vehicle segment. Based on current light and commercial vehicle production forecasts, the company projects that about 15 percent of its global OE revenues in 2011 will be generated by commercial vehicle business, up from 7 percent in 2009. In line with previous projections, the commercial vehicle business is expected to account for between 25 percent and 30 percent of Tenneco’s global OE revenues in 2012.

Tenneco is also providing the following guidance for 2010:

• Capital expenditures will be approximately $160 to $170 million;
• Depreciation & amortization will be about $225 million;
• Annual interest expense will be about $125 million; and
• Cash taxes will be approximately $50 to $60 million.