LAKE FOREST, Ill. — Tenneco reported a second quarter net loss of $33 million, or 72 cents per diluted share, compared with net income of $13 million, or 26 cents per diluted share, in second quarter 2008. Adjusted for the items below, the net loss was $10 million, or 22 cents per diluted share, versus net income of $34 million, or 71 cents per diluted share a year ago.

EBIT (earnings before interest, taxes and non-controlling interests) was $17 million, compared with $75 million a year ago. Adjusted EBIT was $25 million, versus $88 million in second quarter 2008. The company’s cost reduction efforts and the benefits from restructuring actions helped offset a portion of the $89 million negative impact on EBIT from lower OE production volumes worldwide and related manufacturing fixed cost absorption. Unfavorable currency exchange rates compared with a year ago also negatively impacted EBIT by $9 million.

EBITDA including non-controlling interests (EBIT before depreciation and amortization) was $72 million compared with $132 million a year ago. Adjusted EBITDA including non-controlling interests was $79 million, versus $145 million in second quarter 2008.

“Our cost reduction, restructuring and cash generation actions continue to take hold and are delivering the results we need to manage through this very challenging production environment,” said Gregg Sherrill, chairman and CEO, Tenneco. “Although our revenue and profitability continue to be negatively impacted by the global industry downturn, we are pleased with our strong cash flow performance this quarter as well as our gross margin improvement.”

Second quarter revenue was $1.106 billion compared with $1.651 billion a year ago, down 24 percent excluding the impact of $148 million in unfavorable currency in the quarter. Excluding the currency impact and substrate sales, revenue was $1.028 billion, down 17 percent from $1.245 billion in second quarter 2008. Lower production volumes on OE vehicle platforms globally drove the decline.

The company said it delivered its best gross margin performance since the third quarter of 2006. Gross margin was 17.5 percent, an improvement from 16.2 percent a year ago and up from 14.5 percent in first quarter 2009. The gross margin improved, despite lower year-over-year revenues, as the company executed on restructuring savings and cost reductions to successfully offset a portion of the negative impact from lower OE production volumes and related manufactured fixed cost absorption. Gross margin in second quarter 2009 includes $1 million in restructuring and related costs and second quarter 2008 includes $3 million in restructuring and related costs.

SGA&E (selling, general, administrative and engineering) expense decreased to $112 million from $136 million in second quarter 2008, primarily as a result of the company’s cost reduction initiatives. SGA&E as a percent of sales increased to 10.1 percent versus 8.2 percent due to lower year-over-year revenues. SGA&E in second quarter 2009 includes $1 million in restructuring and related costs and second quarter 2008 includes $3 million in restructuring and related costs and $7 million in aftermarket customer changeover costs.

Tenneco generated $112 million in cash from operations in the quarter, compared with cash from operations of $58 million in second quarter 2008, despite a $60 million year-over-year decline in EBITDA including non-controlling interests. The cash performance was driven by working capital improvements, particularly inventory and accounts receivable reductions. Cash flow from accounts receivable improved $58 million year-over-year even though the company’s sale of receivables generated $21 million less in cash compared with a year ago. An intense focus on reducing inventories generated $33 million in cash versus a cash use of $4 million in second quarter 2008.

Tenneco continues to hold down capital spending without sacrificing the spending needed for technology development and new program launches. Capital spending in the quarter was $24 million, a 58 percent decrease from $57 million in second quarter 2008. The company now estimates that its capital spending will be approximately $140 million in 2009, down from the previous guidance of $160 million.

At June 30, Tenneco’s leverage ratio under its senior credit facility was 5.77, below the maximum level of 7.35. The interest coverage ratio was 2.21, above the minimum of 1.85. At the end of the quarter, Tenneco had an EBITDA cushion of $40 million and a debt cushion of $392 million against its tightest covenant.

The company’s strong cash flow performance in the quarter improved liquidity and reduced debt net of cash balances by $65 million in the quarter.

 “We delivered our strongest second quarter operating cash flow performance since becoming a stand-alone company, which shows outstanding execution on our plans for generating and preserving cash and is to the credit of all our employees worldwide,” said Sherrill. “We remain intensely focused on cash flow, our liquidity position and supporting our customers’ requirements including new business launches and production ramp-ups as the industry begins to recover.”

Tenneco said it collected substantially all of its pre-petition receivables from General Motors and Chrysler. Other than the impact from production shut-downs, the company incurred no economic loss from the bankruptcies of these two customers.

Although numerous governments have enacted incentive programs, which are positively impacting vehicle sales in certain regions, and the uncertainty over the GM and Chrysler bankruptcies has been alleviated, overall global automotive industry conditions remain weak.

While Tenneco is not anticipating a significant industry sales recovery over the remainder of 2009, it is important to note that the majority of vehicle inventory corrections were achieved in the first half and Tenneco expects strengthening in OE production volumes in the second half of the year as production begins to track more closely with sales.

“This crisis has been a catalyst for driving our operations to new performance levels and resulted in significant efficiency improvements across our businesses globally. Capturing and institutionalizing these improvements will help us take full advantage of an eventual industry recovery,” said Sherrill. “I continue to be very confident in Tenneco’s long-term growth prospects. The fundamentals for that growth remain in place, and our people, at all levels, are dedicated and driven to fully realizing those opportunities.”