- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-Q

(mark one)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

COMMISSION FILE NUMBER 1-12387

---------------------------

TENNECO AUTOMOTIVE INC.
(Exact name of registrant as specified in its charter)

DELAWARE 76-0515284
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 NORTH FIELD DRIVE, LAKE FOREST,
ILLINOIS 60045
(Address of principal executive
offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 482-5000

------------------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.

Common Stock, par value $.01 per share: 33,674,559 shares as of November 5,
1999.

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2

TABLE OF CONTENTS

PAGE
----

PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Tenneco Automotive Inc. and Consolidated Subsidiaries--
Statements of Income (Loss)....................... 2
Statements of Cash Flows.......................... 3
Balance Sheets.................................... 4
Statements of Changes in Shareowners' Equity...... 5
Statements of Comprehensive Income (Loss)......... 6
Notes to Financial Statements..................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 22
Item 3. Quantitative and Qualitative Disclosures About
Market Risk........................................... 34
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.............................. *
Item 2. Changes in Securities.......................... 35
Item 3. Defaults Upon Senior Securities................ *
Item 4. Submission of Matters to a Vote of Security
Holders............................................... 35
Item 5. Other Information.............................. *
Item 6. Exhibits and Reports on Form 8-K............... 36

- ------------
* No response to this item is included herein for the reason that it is
inapplicable or the answer to such item is negative.

CAUTIONARY STATEMENT AND "SAFE HARBOR" OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q contains forward-looking statements
regarding among other things: (i) the restructuring and potential supplemental
restructuring plans; (ii) capital resources; (iii) the Year 2000 issue (relating
to potential equipment and computer failures by or at the change in the
century); and (iv) the implementation of the Euro. See "Restructuring and Other
Charges," "Liquidity and Capital Resources -- Capitalization," "Year 2000," and
"Euro Conversion" under "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The words "will," "may," "believes,"
"should," "plans," "expects," "intends," and "estimates," and similar
expressions, identify these forward-looking statements. These forward-looking
statements are based on the current expectations of Tenneco (as defined below).
Because forward-looking statements involve risks and uncertainties, the plans,
actions and actual results could differ materially. Among the factors that could
cause the plans, actions and results to differ materially from current
expectations are: (i) the general economic, political, and competitive
conditions in markets and countries where Tenneco operates, including currency
fluctuations and other risks associated with operating in foreign countries and
changes in distribution channels; (ii) governmental actions, including the
ability to receive regulatory approvals and the timing of such approvals; (iii)
changes in capital availability or costs, including changes in interest rates
and market perceptions of Tenneco; (iv) changes in consumer demand and prices,
including decreases in demand for Tenneco products and its customers' products
and the resulting negative impact on revenues and margins from such products;
(v) the cost of compliance with changes in regulations, including environmental
regulations; (vi) workforce factors such as strikes or labor interruptions;
(vii) material substitutions or increases in the costs of raw materials; (viii)
Tenneco's ability to integrate operations of acquired businesses quickly and in
a cost-effective manner; (ix) new technologies; (x) the ability of Tenneco and
those with whom it conducts business to timely resolve the Year 2000 issue,
unanticipated costs of, problems with or delays in resolving the Year 2000
issue, and the costs and impacts if the Year 2000 issue is not timely resolved;
(xi) changes by the Financial Accounting Standards Board or other accounting
regulatory bodies of authoritative generally accepted accounting principles or
policies; and (xii) the timing and occurrence (or non-occurrence) of
transactions and events which may be subject to circumstances beyond Tenneco's
control.

1
3

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF INCOME (LOSS)
(UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)

REVENUES
Net sales and operating revenues...................... $ 816 $ 804 $ 2,473 $ 2,468
Other income --
Gain (loss) on sale of businesses and assets,
net............................................ (2) (4) (5) (14)
Other income, net................................ 4 9 15 26
---------- ---------- ---------- ----------
818 809 2,483 2,480
---------- ---------- ---------- ----------
COSTS AND EXPENSES
Cost of sales (exclusive of depreciation shown
below).............................................. 600 570 1,812 1,731
Engineering, research, and development................ 12 5 39 18
Selling, general, and administrative.................. 100 115 303 333
Depreciation and amortization......................... 39 38 110 110
---------- ---------- ---------- ----------
751 728 2,264 2,192
---------- ---------- ---------- ----------
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY
INTEREST................................................ 67 81 219 288
Interest expense...................................... 16 19 58 49
Income tax expense (benefit).......................... 16 (7) 60 48
Minority interest..................................... 8 6 21 22
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS......................... 27 63 80 169
Income (loss) from discontinued operations, net of income
tax..................................................... 12 40 (99) 146
---------- ---------- ---------- ----------
Income (loss) before extraordinary loss................... 39 103 (19) 315
Extraordinary loss, net of income tax..................... -- -- (7) --
---------- ---------- ---------- ----------
Income (loss) before cumulative effect of change in
accounting principle.................................... 39 103 (26) 315
Cumulative effect of change in accounting principle, net
of income tax........................................... -- -- (134) --
---------- ---------- ---------- ----------
NET INCOME (LOSS)......................................... $ 39 $ 103 $ (160) $ 315
========== ========== ========== ==========
EARNINGS (LOSS) PER SHARE
Average shares of common stock outstanding --
Basic................................................. 33,491,897 33,597,131 33,423,014 33,785,955
Diluted............................................... 33,545,064 33,656,449 33,491,690 33,876,785
Basic earnings (loss) per share of common stock --
Continuing operations................................. $ .86 $ 1.85 $ 2.40 $ 4.99
Discontinued operations............................... .32 1.24 (2.98) 4.35
Extraordinary loss.................................... -- -- (.20) --
Cumulative effect of change in accounting principle... -- -- (4.00) --
---------- ---------- ---------- ----------
$ 1.18 $ 3.09 $ (4.78) $ 9.34
========== ========== ========== ==========
Diluted earnings (loss) per share of common stock --
Continuing operations................................. $ .86 $ 1.84 $ 2.40 $ 4.97
Discontinued operations............................... .32 1.24 (2.98) 4.34
Extraordinary loss.................................... -- -- (.20) --
Cumulative effect of change in accounting principle... -- -- (4.00) --
---------- ---------- ---------- ----------
$ 1.18 $ 3.08 $ (4.78) $ 9.31
========== ========== ========== ==========
Cash dividends per share of common stock.................. $ 1.50 $ 1.50 $ 4.50 $ 4.50
========== ========== ========== ==========

The accompanying notes to financial statements are an integral part of these
statements of income (loss).
2
4

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CASH FLOWS

(UNAUDITED)

NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1999 1998
-------- ------
(MILLIONS)

OPERATING ACTIVITIES
Income from continuing operations........................... $ 80 $ 169
Adjustments to reconcile income from continuing operations
to cash provided (used) by operating activities --
Depreciation and amortization.......................... 110 110
Deferred income taxes.................................. 44 27
(Gain) loss on sale of businesses and assets, net...... 5 14
Changes in components of working capital --
(Increase) decrease in receivables................ (244) (179)
(Increase) decrease in inventories................ (7) (16)
(Increase) decrease in prepayments and other
current assets................................... 15 (7)
Increase (decrease) in payables................... 44 7
Increase (decrease) in taxes accrued.............. (74) (18)
Increase (decrease) in interest accrued........... 39 30
Increase (decrease) in other current
liabilities...................................... (62) (43)
Other.................................................. (50) (61)
------- -----
Cash provided (used) by continuing operations............... (100) 33
Cash provided (used) by discontinued operations............. (66) 332
------- -----
Net cash provided (used) by operating activities............ (166) 365
------- -----
INVESTING ACTIVITIES
Net proceeds related to the sale of discontinued
operations................................................ 342 13
Net proceeds from sale of assets............................ 8 10
Expenditures for plant, property, and equipment............. (104) (121)
Acquisition of businesses................................... (36) --
Expenditures for plant, property, and equipment and business
acquisitions -- discontinued operations................... (1,249) (301)
Investments and other....................................... (29) (70)
------- -----
Net cash provided (used) by investing activities............ (1,068) (469)
------- -----
FINANCING ACTIVITIES
Issuance of common and treasury shares...................... 28 39
Purchase of common stock.................................... (4) (104)
Issuance of long-term debt.................................. 1,761 3
Retirement of long-term debt................................ (30) (18)
Net increase (decrease) in short-term debt excluding current
maturities on long-term debt.............................. (360) 328
Dividends (common).......................................... (151) (152)
------- -----
Net cash provided (used) by financing activities............ 1,244 96
------- -----
Effect of foreign exchange rate changes on cash and
temporary cash investments................................ 3 3
------- -----
Increase (decrease) in cash and temporary cash
investments............................................... 13 (5)
Cash and temporary cash investments, January 1.............. 29 29
------- -----
Cash and temporary cash investments, September 30 (Note).... $ 42 $ 24
======= =====
Cash paid during the period for interest.................... $ 150 $ 162
Cash paid during the period for income taxes (net of
refunds).................................................. $ 77 $ 25
NON-CASH INVESTING AND FINANCING ACTIVITIES
Common equity interest received related to the sale of
containerboard operations................................. $ 194 $ --
Principal amount of long-term debt assumed by buyers of
containerboard operations................................. $(1,760) $ --

- -------------------------
Note: Cash and temporary cash investments include highly liquid investments with
a maturity of three months or less at the date of purchase.

The accompanying notes to financial statements are an integral part of these
statements of cash flows.

3
5

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

BALANCE SHEETS

(UNAUDITED)

SEPTEMBER 30, DECEMBER 31,
------------- ------------
1999 1998
------------- ------------
(MILLIONS)

ASSETS
Current assets:
Cash and temporary cash investments..................... $ 42 $ 29
Receivables --
Customer notes and accounts, net................... 657 430
Income taxes....................................... -- 3
Other.............................................. 23 10
Inventories --
Finished goods..................................... 209 221
Work in process.................................... 84 79
Raw materials...................................... 72 73
Materials and supplies............................. 38 41
Deferred income taxes................................... 28 39
Prepayments and other................................... 63 139
------ ------
1,216 1,064
------ ------
Other assets:
Long-term notes receivable, net......................... 30 23
Goodwill and intangibles, net........................... 505 499
Deferred income taxes................................... -- 39
Pension assets.......................................... 99 101
Other................................................... 106 201
------ ------
740 863
------ ------
Plant, property, and equipment, at cost..................... 1,936 1,944
Less -- Reserves for depreciation and amortization...... 881 851
------ ------
1,055 1,093
------ ------
Net assets of discontinued operations....................... 1,483 1,739
------ ------
$4,494 $4,759
====== ======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt (including current maturities on
long-term debt)........................................ $ 237 $ 304
Trade payables.......................................... 365 337
Taxes accrued........................................... 46 31
Accrued liabilities..................................... 194 161
Other................................................... 46 76
------ ------
888 909
------ ------
Long-term debt.............................................. 796 671
------ ------
Deferred income taxes....................................... 104 98
------ ------
Postretirement benefits..................................... 136 139
------ ------
Deferred credits and other liabilities...................... 19 31
------ ------
Commitments and contingencies
Minority interest........................................... 411 407
------ ------
Shareowners' equity:
Common stock............................................ -- --
Premium on common stock and other capital surplus....... 2,723 2,712
Accumulated other comprehensive income (loss)........... (174) (91)
Retained earnings (accumulated deficit)................. (168) 142
------ ------
2,381 2,763
Less -- Shares held as treasury stock, at cost.......... 241 259
------ ------
2,140 2,504
------ ------
$4,494 $4,759
====== ======

The accompanying notes to financial statements are an integral part of these
balance sheets.
4
6

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY

(UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
1999 1998
------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------ ---------- ------
(MILLIONS EXCEPT SHARE AMOUNTS)

COMMON STOCK
Balance January 1.................................... 34,734,039 $ -- 34,513,978 $ --
Issued pursuant to benefit plans................ 109,004 -- 183,742 --
---------- ------ ---------- ------
Balance September 30................................. 34,843,043 -- 34,697,720 --
========== ------ ========== ------
PREMIUM ON COMMON STOCK AND OTHER CAPITAL SURPLUS
Balance January 1.................................... 2,712 2,681
Premium on common stock issued pursuant to
benefit plans................................. 11 25
------ ------
Balance September 30................................. 2,723 2,706
------ ------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance January 1.................................... (91) (122)
Other comprehensive income (loss)............... (83) 38
------ ------
Balance September 30................................. (174) (84)
------ ------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance January 1.................................... 142 89
Net income (loss)............................... (160) 315
Dividends on common stock....................... (150) (151)
------ ------
Balance September 30................................. (168) 253
------ ------
LESS -- COMMON STOCK HELD AS TREASURY STOCK, AT COST
Balance January 1.................................... 1,351,536 259 585,638 120
Shares acquired................................. 34,669 5 553,162 107
Shares issued pursuant to benefit and dividend
reinvestment plans............................ (118,166) (23) (80,584) (16)
---------- ------ ---------- ------
Balance September 30................................. 1,268,039 241 1,058,216 211
========== ------ ========== ------
Total........................................... $2,140 $2,664
====== ======

The accompanying notes to financial statements are an integral part of these
statements of changes in shareowners' equity.
5
7

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
ACCUMULATED ACCUMULATED
OTHER OTHER
COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE
INCOME INCOME INCOME INCOME
------------- ------------- ------------- -------------
(MILLIONS)

NET INCOME (LOSS)........................ $ 39 $103
----- ----
ACCUMULATED OTHER COMPREHENSIVE INCOME
(LOSS)
CUMULATIVE TRANSLATION ADJUSTMENT
Balance July 1......................... $(185) $(142)
Translation of foreign currency
statements........................ 20 20 58 58
----- -----
Balance September 30................... (165) (84)
----- -----
ADDITIONAL MINIMUM PENSION LIABILITY
ADJUSTMENT
Balance July 1......................... (9) --
Additional minimum pension liability
adjustment........................ -- -- -- --
----- -----
Balance September 30................... (9) --
----- -----
Balance September 30..................... $(174) $ (84)
===== =====
----- ----
Other comprehensive income (loss)........ 20 58
----- ----
COMPREHENSIVE INCOME (LOSS).............. $ 59 $161
===== ====

NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
ACCUMULATED ACCUMULATED
OTHER OTHER
COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE
INCOME INCOME INCOME INCOME
------------- ------------- ------------- -------------
(MILLIONS)

NET INCOME (LOSS)........................ $(160) $315
----- ----
ACCUMULATED OTHER COMPREHENSIVE INCOME
(LOSS)
CUMULATIVE TRANSLATION ADJUSTMENT
Balance January 1...................... $ (82) $(122)
Translation of foreign currency
statements........................ (83) (83) 38 38
----- -----
Balance September 30................... (165) (84)
----- -----
ADDITIONAL MINIMUM PENSION LIABILITY
ADJUSTMENT
Balance January 1...................... (9) --
Additional minimum pension liability
adjustment........................ -- -- -- --
----- -----
Balance September 30................... (9) --
----- -----
Balance September 30..................... $(174) $ (84)
===== =====
----- ----
Other comprehensive income (loss)........ (83) 38
----- ----
COMPREHENSIVE INCOME (LOSS).............. $(243) $353
===== ====

The accompanying notes to financial statements are an integral part
of these statements of comprehensive income (loss).
6
8

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

(1) Tenneco Automotive Inc. was known as Tenneco Inc. before the spin-off
on November 4, 1999 of Tenneco Inc.'s packaging business, as described in Note
2. In these notes, discussions of Tenneco refer to Tenneco Inc. and its
subsidiaries before the spin-off and to Tenneco Automotive Inc. and its
subsidiaries after the spin-off.

In the opinion of Tenneco, the accompanying unaudited financial statements
contain all adjustments (consisting of normal recurring adjustments) necessary
to present fairly the financial position, results of operations, cash flows,
changes in shareowners' equity, and comprehensive income for the periods
indicated. The unaudited interim consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles. The consolidated
financial statements of Tenneco include all majority-owned subsidiaries.
Investments in 20% to 50% owned companies where Tenneco has the ability to exert
significant influence over operating and financial policies are carried at cost
plus equity in undistributed earnings and cumulative translation adjustments
since date of acquisition. Tenneco has no investments in 20% to 50% owned
companies where it does not carry the investment at cost plus equity in
undistributed earnings.

Prior year's financial statements have been reclassified where appropriate
to conform to 1999 presentations.

(2) In July 1998, Tenneco's Board of Directors authorized management to
develop a broad range of strategic alternatives to separate the automotive,
paperboard packaging and specialty packaging businesses. Subsequently, Tenneco
completed the following actions:

- In January 1999, Tenneco announced an agreement to contribute its
containerboard business to a new joint venture with an affiliate of
Madison Dearborn Partners. The proceeds from the transaction, including
debt assumed by the new joint venture, were approximately $2 billion. The
transaction closed in April 1999. Tenneco retained a 43% percent interest
in the joint venture.

- In April 1999, Tenneco announced an agreement to sell its folding carton
operations to Caraustar Industries. This transaction closed in June 1999.
The folding carton operations and the containerboard business together
represented Tenneco's paperboard packaging operating segment.

- On November 4, 1999, Tenneco completed the spin-off of Tenneco Packaging
Inc., now known as Pactiv Corporation ("Packaging"). The morning
following the spin-off, Tenneco changed its name from "Tenneco Inc. " to
"Tenneco Automotive Inc." and effected a reverse stock split whereby
every five shares of Tenneco common stock were converted into one share
of Tenneco's new common stock.

The separation of the automotive and packaging businesses was accomplished
by the spin-off of the common stock of Packaging to Tenneco shareowners. At the
time of the spin-off, Packaging included Tenneco's specialty packaging business,
the remaining interest in the containerboard joint venture and Tenneco's
administrative services operations. In August 1999, Tenneco received a letter
ruling from the Internal Revenue Service that the spin-off would be tax-free for
U.S. federal income tax purposes to Tenneco and its shareowners.

Before the spin-off, Tenneco realigned substantially all of its existing
debt through a combination of tender offers, exchange offers, and other
refinancings. The company's debt realignment was financed by borrowings by
Tenneco under new credit facilities, the issuance by Tenneco of subordinated
debt, and borrowings by Packaging under new credit facilities, and the issuance
by Packaging of its new publicly-traded debt in exchange for certain series of
the publicly-traded debt of Tenneco that was outstanding before the spin-off and
debt realignment. The debt of Packaging was rated investment grade and the debt
of Tenneco was rated non-investment grade by both Standard & Poor's and Moodys
debt rating agencies.

7
9
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

As a result of these transactions, Tenneco's former specialty and
paperboard packaging operating segments are presented as discontinued operations
in the accompanying financial statements. Tenneco's sole continuing operation is
its automotive segment. Refer to Note 3 for further information related to
discontinued operations.

(3) Revenues and income for the paperboard packaging discontinued
operations are shown in the following table:

THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- --------------
1999 1998 1999 1998
----- ----- ----- ------
(MILLIONS)

Net sales and operating revenues....................... $-- $415 $ 445 $1,185
=== ==== ===== ======
Income before income taxes and interest allocation..... $ 8 $ 35 $ 30 $ 101
Income tax (expense) benefit........................... -- (12) (11) (38)
--- ---- ----- ------
Income before interest allocation...................... 8 23 19 63
Allocated interest expense, net of income tax.......... -- (8) (5) (20)
--- ---- ----- ------
Income from discontinued operations before
disposition.......................................... 8 15 14 43
Gain (loss) on disposition, net of income tax.......... -- 10 (169) 19
--- ---- ----- ------
Income (loss) from discontinued operations............. $ 8 $ 25 $(155) $ 62
=== ==== ===== ======

Revenues and income for the specialty packaging discontinued operations are
shown in the following table:

THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- ---------------
1999 1998 1999 1998
----- ----- ------ ------
(MILLIONS)

Net sales and operating revenues...................... $754 $696 $2,158 $2,067
==== ==== ====== ======
Income before income taxes and interest allocation.... $ 69 $ 74 $ 213 $ 247
Income tax (expense) benefit.......................... (39) (36) (87) (96)
---- ---- ------ ------
Income before interest allocation..................... 30 38 126 151
Allocated interest expense, net of income tax......... (26) (23) (70) (67)
---- ---- ------ ------
Income (loss) from discontinued operations............ $ 4 $ 15 $ 56 $ 84
==== ==== ====== ======

Net assets of discontinued operations includes $1,985 million and $2,456
million of debt allocated to discontinued operations as of September 30, 1999,
and December 31, 1998, respectively.

(4) In the fourth quarter of 1998, Tenneco's Board of Directors approved an
extensive restructuring plan designed to reduce administrative and operational
overhead costs. Tenneco recorded a pre-tax charge to income from continuing
operations of $53 million, $34 million after-tax, or $1.02 per diluted common
share. Of the pre-tax charge, for operational restructuring plans, $36 million
related to the consolidation of the manufacturing and distribution operations of
the North American automotive aftermarket business. A staff and related cost
reduction plan, which covers employees in both the operating units and corporate
operations, is expected to cost $17 million.

8
10
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

The automotive aftermarket restructuring involves closing two plant
locations and five distribution centers, resulting in the elimination of 302
positions. The staff and related cost reduction plan involves the elimination of
454 administrative positions.

The fixed assets at the locations to be closed were written down to their
fair value, less costs to sell, in the fourth quarter of 1998. As a result of
the single-purpose nature of the assets, fair value was estimated at scrap value
less cost to dispose. No significant net cash proceeds are expected to be
received from the ultimate disposal of these assets, which should be complete by
the fourth quarter of 2000. The effect of suspending depreciation for these
impaired assets is a reduction in depreciation and amortization of approximately
$2 million on an annual basis.

As of September 30, 1999, approximately 670 employees have been terminated.
To address customer service and production transfer issues, the closure of one
plant location and one aftermarket distribution center has been delayed until
the first and second quarters of 2000, respectively. All other restructuring
actions, with the exception of the final disposal of certain assets, are being
executed according to the initial plan and are expected to be complete by the
fourth quarter of 1999. During the nine months ended September 30, 1999, the
automotive aftermarket business closed one plant location and four distribution
centers.

Amounts related to the restructuring plan are shown in the following table:

CASH
PAYMENTS
NINE MONTHS
DECEMBER 31, 1998 ENDED BALANCE AT
RESTRUCTURING SEPTEMBER 30, SEPTEMBER 30,
CHARGE BALANCE 1999 1999
----------------- ------------- -------------
(MILLIONS)

Severance........................................... $15 $ 6 $ 9
Facility exit costs................................. 1 1 --
--- --- ---
$16 $ 7 $ 9
=== === ===

(5) Tenneco is a party to various legal proceedings arising from its
operations. Tenneco believes that the outcome of these proceedings, individually
and in the aggregate, will not have a material adverse effect on its financial
position or results of operations.

(6) Tenneco is subject to a variety of environmental and pollution control
laws and regulations in all jurisdictions in which it operates. Tenneco has
provided reserves for compliance with these laws and regulations where it is
probable that a liability exists and where Tenneco can make a reasonable
estimate of the liability. The estimated liabilities recorded are subject to
change as more information becomes available regarding the magnitude of possible
cleanup costs and the timing, varying costs, and effectiveness of alternative
cleanup technologies. However, Tenneco believes that any additional costs which
may arise as more information becomes available will not have a material adverse
effect on its financial position or results of operations.

(7) In the first quarter of 1999, Tenneco recorded an extraordinary loss
for extinguishment of debt of $7 million (net of a $3 million income tax
benefit), or $.20 per diluted common share. The loss related to early retirement
of debt in connection with the sale of the containerboard assets.

(8) In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("FAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes new
accounting and reporting standards requiring that all derivative instruments
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as

9
11
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

either an asset or liability measured at its fair value. The statement requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting treatment. This statement cannot be applied
retroactively and is effective for all fiscal years beginning after June 15,
2000. Tenneco is currently evaluating the new standard but has not yet
determined the impact it will have on its financial position or results of
operations.

In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of
Start-Up Activities," which requires costs of start-up activities to be expensed
as incurred. This statement is effective for fiscal years beginning after
December 15, 1998. The statement requires previously capitalized costs related
to start-up activities to be expensed as a cumulative effect of a change in
accounting principle when the statement is adopted. Prior to January 1, 1999,
Tenneco capitalized certain costs related to start-up activities, primarily
engineering costs for new automobile original equipment platforms. Tenneco
adopted SOP 98-5 on January 1, 1999, and recorded an after-tax charge for the
cumulative effect of this change in accounting principle of $102 million (net of
a $50 million tax benefit), or $3.05 per diluted common share. The change in
accounting principle decreased income from continuing operations by $11 million
(net of a $8 million tax benefit), or $.33 per diluted common share for the nine
months ended September 30, 1999. If the new accounting method had been applied
retroactively, income from continuing operations for the nine months ended
September 30, 1998, would have been lower by $10 million (net of a $7 million
tax benefit), or $.30 per diluted common share. For the three months ended
September 30, 1999, the change in accounting principle decreased income from
continuing operations by $6 million (net of a $4 million tax benefit), or $.18
per diluted common share. If the new accounting method had been applied
retroactively, income from continuing operations for the three months ended
September 30, 1998, would have been lower by $5 million (net of a $3 million tax
benefit), or $.15 per diluted common share.

In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which establishes new
accounting and reporting standards for the costs of computer software developed
or obtained for internal use. This statement requires prospective application
for fiscal years beginning after December 15, 1998. Tenneco adopted SOP 98-1 on
January 1, 1999. The impact of this new standard did not have a significant
effect on Tenneco's financial position or results of operations.

Effective January 1, 1999, Tenneco changed its method of accounting for
customer acquisition costs from a deferral method to an expense-as-incurred
method. In connection with Tenneco's decision to separate its automotive and
specialty packaging businesses into independent public companies, Tenneco
determined that a change to an expense-as-incurred method of accounting for
automotive aftermarket customer acquisition costs was preferable in order to
permit improved comparability of stand-alone financial results with its
aftermarket industry competitors. Tenneco recorded an after-tax charge for the
cumulative effect of this change in accounting principle of $32 million (net of
a $22 million tax benefit), or $.95 per diluted common share. The change in
accounting principle increased income from continuing operations by $8 million
(net of $5 million in income tax expense), or $.24 per diluted common share for
the nine months ended September 30, 1999. If the new accounting principle had
been applied retroactively, income from continuing operations for the nine
months ended September 30, 1998, would have been higher by $1 million (net of $1
million in income tax expense), or $.03 per diluted common share. For the three
months ended September 30, 1999, the change in accounting principle increased
income from continuing operations by $3 million (net of $1 million in income tax
expense), or $.09 per diluted common share. If the new accounting principle had
been applied

10
12
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

retroactively, income from continuing operations for the three months ended
September 30, 1998, would have been higher by $3 million (net of $2 million in
income tax expense), or $.09 per diluted common share.

(9) In October 1999, Tenneco's shareowners approved an amendment to the
Certificate of Incorporation providing for a one-for-five reverse stock split of
Tenneco's common stock. The reverse stock split is reflected for all periods
presented in the accompanying financial statements, other footnotes, and this
computation of earnings from continuing operations per share of common stock
outstanding.

Basic Earnings Per Share --
Income from continuing
operations..................... $ 27 $ 63 $ 80 $ 169
========== ========== ========== ==========
Average shares of common stock
outstanding.................... 33,491,897 33,597,131 33,423,014 33,785,955
========== ========== ========== ==========
Earnings from continuing
operations per average share of
common stock................... $ .86 $ 1.85 $ 2.40 $ 4.99
========== ========== ========== ==========
Diluted Earnings Per Share --
Income from continuing
operations..................... $ 27 $ 63 $ 80 $ 169
========== ========== ========== ==========
Average shares of common stock
outstanding.................... 33,491,897 33,597,131 33,423,014 33,785,955
Effect of dilutive securities:
Restricted stock............ 4,633 8,140 9,973 8,888
Stock options............... -- 6,090 -- 32,984
Performance shares.......... 48,534 45,088 58,703 48,958
---------- ---------- ---------- ----------
Average shares of common stock
outstanding including dilutive
securities..................... 33,545,064 33,656,449 33,491,690 33,876,785
========== ========== ========== ==========
Earnings from continuing
operations per average share of
common stock................... $ .86 $ 1.84 $ 2.40 $ 4.97
========== ========== ========== ==========

(10) Tenneco is a global manufacturer with a single operating segment:

Automotive -- Manufacture and sale of exhaust and ride control systems
for both the original equipment market and the aftermarket.

Tenneco evaluates business segment operating performance based primarily on
income before interest expense, income taxes, and minority interest, exclusive
of restructuring charges and other unusual items. Individual operating segments
have not been aggregated within this reportable segment.

11
13
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

The following table summarizes certain Tenneco segment information:

SEGMENT
------------------- RECLASS
AUTOMOTIVE OTHER & ELIMS CONSOLIDATED
---------- ------ ------- ------------
(MILLIONS)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
Revenues from external customers...................... $ 816 $ -- $ -- $ 816
Income (loss) before interest, income taxes, and
minority interest................................... 67 -- -- 67

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
Revenues from external customers...................... $ 804 $ -- $ -- $ 804
Income (loss) before interest, income taxes, and
minority interest................................... 86 (5) -- 81

AT SEPTEMBER 30, 1999, AND FOR THE NINE MONTHS THEN
ENDED
Revenues from external customers...................... $2,473 $ -- $ -- $2,473
Income (loss) before interest, income taxes, and
minority interest................................... 223 (4) -- 219
Extraordinary loss.................................... -- (7) -- (7)
Cumulative effect of change in accounting principle... (33) (101) -- (134)
Total assets (Note)................................... 2,977 1,548 (31) 4,494
Net assets of discontinued operations................. -- 1,483 -- 1,483

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Revenues from external customers...................... $2,468 $ -- $ -- $2,468
Income (loss) before interest, income taxes, and
minority interest................................... 305 (17) -- 288

- ---------------
Note: The Other segment's total assets include the net assets of discontinued
operations.

12
14
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

(11) Some of Tenneco's subsidiaries have guaranteed Tenneco debt.
Supplemental guarantor condensed consolidating financial statements are
presented below.

Basis of Presentation

On October 14, 1999, Tenneco issued $500,000,000 in aggregate principal
amount of Senior Subordinated Notes Due 2009 ("the Notes") as a component of a
plan to realign its debt prior to the spin-off. See Note 2 for further
discussion of the spin-off and debt realignment. Effective upon the spin-off,
all of Tenneco's then existing and future material domestic wholly owned
subsidiaries (the Guarantor Subsidiaries) fully and unconditionally guaranteed
the Notes on a joint and several basis. Additionally, the Guarantor Subsidiaries
fully and unconditionally guarantee Tenneco's senior secured credit facility.
Separate financial statements of the Guarantor Subsidiaries are not presented
because the Guarantor Subsidiaries are jointly, severally, and unconditionally
liable under the guarantees, and Tenneco believes the condensed consolidating
financial statements presented are more meaningful in understanding the
financial position of the Guarantor Subsidiaries.

These condensed consolidating financial statements are presented on the
equity method. Under this method, investments are recorded at cost and adjusted
for a company's ownership share of a subsidiary's cumulative results of
operations, capital contributions and distributions, and other equity changes.
The balance sheet caption "Investment in affiliated companies" includes
investments in continuing and discontinued subsidiaries. The condensed
consolidating financial statements of the Guarantor Subsidiaries should be read
in connection with the financial statements of Tenneco Automotive Inc. and
Consolidated Subsidiaries and notes thereto of which this note is an integral
part.

Distributions

There are no significant restrictions on the ability of the Guarantor
Subsidiaries to make distributions to Tenneco Automotive Inc.

13
15
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

STATEMENT OF INCOME

THREE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)

REVENUES
Net sales and operating revenues --
External.......................... $359 $456 $ 1 $ -- $816
Affiliated companies.............. 19 16 -- (35) --
Other income, net.................... 4 (1) -- (1) 2
---- ---- ---- ---- ----
382 471 1 (36) 818
---- ---- ---- ---- ----
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)......... 271 364 1 (36) 600
Engineering, research, and
development....................... 8 4 -- -- 12
Selling, general, and
administrative.................... 56 44 -- -- 100
Depreciation and amortization........ 19 20 -- -- 39
---- ---- ---- ---- ----
354 432 1 (36) 751
---- ---- ---- ---- ----
INCOME FROM CONTINUING OPERATIONS
BEFORE INTEREST EXPENSE, INCOME
TAXES, MINORITY INTEREST, AND EQUITY
IN NET INCOME FROM CONTINUING
OPERATIONS OF AFFILIATED COMPANIES... 28 39 -- -- 67
Interest expense --
External (net of interest
capitalized)................. 1 3 11 1 16
Affiliated companies (net of
interest income)............. 20 5 (25) -- --
Income tax expense (benefit)...... 18 -- 2 (4) 16
Minority interest................. -- 1 -- 7 8
---- ---- ---- ---- ----
(11) 30 12 (4) 27
Equity in net income from
continuing operations of
affiliated companies............ 12 -- 15 (27) --
---- ---- ---- ---- ----
INCOME FROM CONTINUING OPERATIONS...... 1 30 27 (31) 27
Income (loss) from discontinued
operations, net of income tax........ -- 39 12 (39) 12
---- ---- ---- ---- ----
Income (loss) before extraordinary
loss................................. 1 69 39 (70) 39
Extraordinary loss, net of income
tax.................................. -- -- -- -- --
---- ---- ---- ---- ----
Income (loss) before cumulative effect
of change in accounting principle.... 1 69 39 (70) 39
Cumulative effect of change in
accounting principle, net of income
tax.................................. -- -- -- -- --
---- ---- ---- ---- ----
NET INCOME (LOSS)...................... 1 69 39 (70) 39
Preferred stock dividends.............. 7 -- -- (7) --
---- ---- ---- ---- ----
NET INCOME (LOSS) TO COMMON STOCK...... $ (6) $ 69 $ 39 $(63) $ 39
==== ==== ==== ==== ====

14
16
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

STATEMENT OF INCOME

THREE MONTHS ENDED SEPTEMBER 30, 1998
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------

REVENUES
Net sales and operating revenues --
External.......................... $348 $456 $ -- $ -- $804
Affiliated companies.............. 23 16 -- (39) --
Other income, net.................... 5 -- -- -- 5
---- ---- ---- ----- ----
376 472 -- (39) 809
---- ---- ---- ----- ----
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)......... 258 351 -- (39) 570
Engineering, research, and
development....................... 4 1 -- -- 5
Selling, general, and
administrative.................... 72 43 -- -- 115
Depreciation and amortization........ 21 17 -- -- 38
---- ---- ---- ----- ----
355 412 -- (39) 728
---- ---- ---- ----- ----
INCOME FROM CONTINUING OPERATIONS
BEFORE INTEREST EXPENSE, INCOME
TAXES, MINORITY INTEREST, AND EQUITY
IN NET INCOME FROM CONTINUING
OPERATIONS OF AFFILIATED COMPANIES... 21 60 -- -- 81
Interest expense --
External (net of interest
capitalized)................. 1 5 13 -- 19
Affiliated companies (net of
interest income)............. 22 1 (23) -- --
Income tax expense (benefit)...... (16) 7 (53) 55 (7)
Minority interest................. -- -- -- 6 6
---- ---- ---- ----- ----
14 47 63 (61) 63
Equity in net income from
continuing operations of
affiliated companies............ 37 -- -- (37) --
---- ---- ---- ----- ----
INCOME FROM CONTINUING OPERATIONS...... 51 47 63 (98) 63
Income from discontinued operations,
net of income tax.................... 7 53 40 (60) 40
---- ---- ---- ----- ----
Income before extraordinary loss....... 58 100 103 (158) 103
Extraordinary loss, net of income
tax.................................. -- -- -- -- --
---- ---- ---- ----- ----
Income before cumulative effect of
change in accounting principle....... 58 100 103 (158) 103
Cumulative effect of change in
accounting principle, net of income
tax.................................. -- -- -- -- --
---- ---- ---- ----- ----
NET INCOME............................. 58 100 103 (158) 103
Preferred stock dividends.............. 6 -- -- (6) --
---- ---- ---- ----- ----
NET INCOME TO COMMON STOCK............. $ 52 $100 $103 $(152) $103
==== ==== ==== ===== ====

15
17
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

STATEMENT OF INCOME

NINE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)

REVENUES
Net sales and operating revenues --
External.......................... $1,089 $1,383 $ 1 $ -- $2,473
Affiliated companies.............. 61 52 -- (113) --
Other income, net.................... 9 2 -- (1) 10
------ ------ ----- ----- ------
1,159 1,437 1 (114) 2,483
------ ------ ----- ----- ------
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)......... 821 1,104 1 (114) 1,812
Engineering, research, and
development....................... 21 18 -- -- 39
Selling, general, and
administrative.................... 160 142 1 -- 303
Depreciation and amortization........ 54 56 -- -- 110
------ ------ ----- ----- ------
1,056 1,320 2 (114) 2,264
------ ------ ----- ----- ------
INCOME FROM CONTINUING OPERATIONS
BEFORE INTEREST EXPENSE, INCOME
TAXES, MINORITY INTEREST, AND EQUITY
IN NET INCOME FROM CONTINUING
OPERATIONS OF AFFILIATED COMPANIES... 103 117 (1) -- 219
Interest expense --
External (net of interest
capitalized)................. 2 13 42 1 58
Affiliated companies (net of
interest income)............. 56 6 (62) -- --
Income tax expense (benefit)...... 45 14 12 (11) 60
Minority interest................. -- 1 -- 20 21
------ ------ ----- ----- ------
-- 83 7 (10) 80
Equity in net income from
continuing operations of
affiliated companies............ 52 -- 73 (125) --
------ ------ ----- ----- ------
INCOME FROM CONTINUING OPERATIONS...... 52 83 80 (135) 80
Income (loss) from discontinued
operations, net of income tax........ 1 9 (99) (10) (99)
------ ------ ----- ----- ------
Income (loss) before extraordinary
loss................................. 53 92 (19) (145) (19)
Extraordinary loss, net of income
tax.................................. -- (7) (7) 7 (7)
------ ------ ----- ----- ------
Income (loss) before cumulative effect
of change in accounting principle.... 53 85 (26) (138) (26)
Cumulative effect of change in
accounting principle, net of income
tax.................................. (64) (70) (134) 134 (134)
------ ------ ----- ----- ------
NET INCOME (LOSS)...................... (11) 15 (160) (4) (160)
Preferred stock dividends.............. 20 -- -- (20) --
------ ------ ----- ----- ------
NET INCOME (LOSS) TO COMMON STOCK...... $ (31) $ 15 $(160) $ 16 $ (160)
====== ====== ===== ===== ======

16
18
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

STATEMENT OF INCOME

NINE MONTHS ENDED SEPTEMBER 30, 1998
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------

REVENUES
Net sales and operating revenues --
External.......................... $1,099 $1,366 $ 3 $ -- $2,468
Affiliated companies.............. 70 57 -- (127) --
Other income, net.................... 21 (9) -- -- 12
------ ------ ---- ----- ------

1,190 1,414 3 (127) 2,480
------ ------ ---- ----- ------
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)......... 812 1,044 2 (127) 1,731
Engineering, research, and
development....................... 11 7 -- -- 18
Selling, general, and
administrative.................... 198 134 1 -- 333
Depreciation and amortization........ 58 52 -- -- 110
------ ------ ---- ----- ------
1,079 1,237 3 (127) 2,192
------ ------ ---- ----- ------
INCOME FROM CONTINUING OPERATIONS
BEFORE INTEREST EXPENSE, INCOME
TAXES, MINORITY INTEREST, AND EQUITY
IN NET INCOME FROM CONTINUING
OPERATIONS OF AFFILIATED COMPANIES... 111 177 -- -- 288
Interest expense --
External (net of interest
capitalized)................. 2 11 36 -- 49
Affiliated companies (net of
interest income)............. 37 4 (41) -- --
Income tax expense (benefit)...... 5 46 14 (17) 48
Minority interest................. -- 1 -- 21 22
------ ------ ---- ----- ------
67 115 (9) (4) 169
Equity in net income from
continuing operations of
affiliated companies............ 84 -- 178 (262) --
------ ------ ---- ----- ------
INCOME FROM CONTINUING OPERATIONS...... 151 115 169 (266) 169
Income from discontinued operations,
net of income tax.................... 18 220 146 (238) 146
------ ------ ---- ----- ------
Income before extraordinary loss....... 169 335 315 (504) 315
Extraordinary loss, net of income
tax.................................. -- -- -- -- --
------ ------ ---- ----- ------
Income before cumulative effect of
change in accounting principle....... 169 335 315 (504) 315
Cumulative effect of change in
accounting principle, net of income
tax.................................. -- -- -- -- --
------ ------ ---- ----- ------
NET INCOME............................. 169 335 315 (504) 315
Preferred stock dividends.............. 21 -- -- (21) --
------ ------ ---- ----- ------
NET INCOME TO COMMON STOCK............. $ 148 $ 335 $315 $(483) $ 315
====== ====== ==== ===== ======

17
19
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

STATEMENT OF CASH FLOWS

OPERATING ACTIVITIES
Net cash provided (used) by operating
activities............................. $(148) $ 85 $ (83) $(20) $ (166)
----- ------- ----- ---- -------
INVESTING ACTIVITIES
Net proceeds related to the sale of
discontinued operations................ -- 342 -- -- 342
Net proceeds from sale of businesses and
assets................................. 6 2 -- -- 8
Expenditures for plant, property, and
equipment.............................. (39) (65) -- -- (104)
Acquisitions of businesses............... (2) (34) -- -- (36)
Expenditures for plant, property, and
equipment and business acquisitions --
discontinued operations................ -- (1,249) -- -- (1,249)
Investments and other.................... (8) (24) 3 -- (29)
----- ------- ----- ---- -------
Net cash provided (used) by investing
activities............................. (43) (1,028) 3 -- (1,068)
----- ------- ----- ---- -------
FINANCING ACTIVITIES
Issuance of common and treasury shares... -- -- 28 -- 28
Purchase of common stock................. -- -- (4) -- (4)
Issuance of long-term debt............... -- 1,761 -- -- 1,761
Retirement of long-term debt............. (1) (35) 6 -- (30)
Net increase (decrease) in short-term
debt excluding current maturities on
long-term debt......................... (25) (48) (287) -- (360)
Intercompany dividends and net increase
(decrease) in intercompany
obligations............................ 236 (742) 506 -- --
Dividends (common and preferred)......... (20) -- (151) 20 (151)
----- ------- ----- ---- -------
Net cash provided (used) by financing
activities............................. 190 936 98 20 1,244
----- ------- ----- ---- -------
Effect of foreign exchange rate changes
on cash and temporary cash
investments............................ -- 3 -- -- 3
----- ------- ----- ---- -------
Increase (decrease) in cash and temporary
cash investments....................... (1) (4) 18 -- 13
Cash and temporary cash investments,
January 1.............................. 3 26 -- -- 29
----- ------- ----- ---- -------
Cash and temporary cash investments,
September 30 (Note).................... $ 2 $ 22 $ 18 $ -- $ 42
===== ======= ===== ==== =======
NON-CASH INVESTING AND FINANCING
ACTIVITIES
Common equity interest received related
to the sale of containerboard
operations............................. $ -- $ 194 $ -- $ -- $ 194
Principal amount of long-term debt
assumed by buyers of containerboard
operations............................. $ -- $(1,760) $ -- $ -- $(1,760)

- ---------------

Note: Cash and temporary cash investments include highly liquid investments with
a maturity of three months or less at the date of purchase.

18
20
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

STATEMENT OF CASH FLOWS

OPERATING ACTIVITIES
Net cash provided (used) by operating
activities.......................... $ 54 $ 428 $ (97) $(20) $ 365
---- ----- ----- ---- -----
INVESTING ACTIVITIES
Net proceeds related to the sale of
discontinued operations............. -- 13 -- -- 13
Net proceeds from sale of businesses
and assets.......................... 6 4 -- -- 10
Expenditures for plant, property, and
equipment........................... (52) (69) -- -- (121)
Acquisitions of businesses............ -- -- -- -- --
Expenditures for plant, property, and
equipment and business
acquisitions -- discontinued
operations.......................... -- (301) -- -- (301)
Investments and other................. (33) (38) 1 -- (70)
---- ----- ----- ---- -----
Net cash provided (used) by investing
activities.......................... (79) (391) 1 -- (469)
---- ----- ----- ---- -----
FINANCING ACTIVITIES
Issuance of common and treasury
shares.............................. -- -- 39 -- 39
Purchase of common stock.............. -- -- (104) -- (104)
Issuance of long-term debt............ -- 3 -- -- 3
Retirement of long-term debt.......... (1) (17) -- -- (18)
Net increase (decrease) in short-term
debt excluding current maturities on
long-term debt...................... -- 57 271 -- 328
Intercompany dividends and net
increase (decrease) in intercompany
obligations......................... 44 (91) 47 -- --
Dividends (common and preferred)...... (20) -- (152) 20 (152)
---- ----- ----- ---- -----
Net cash provided (used) by financing
activities.......................... 23 (48) 101 20 96
---- ----- ----- ---- -----
Effect of foreign exchange rate
changes on cash and temporary cash
investments......................... -- 3 -- -- 3
---- ----- ----- ---- -----
Increase (decrease) in cash and
temporary cash investments.......... (2) (8) 5 -- (5)
Cash and temporary cash investments,
January 1........................... 3 26 -- -- 29
---- ----- ----- ---- -----
Cash and temporary cash investments,
September 30 (Note)................. $ 1 $ 18 $ 5 $ -- $ 24
==== ===== ===== ==== =====

- ---------------

Note: Cash and temporary cash investments include highly liquid investments with
a maturity of three months or less at the date of purchase.

19
21
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

BALANCE SHEET

SEPTEMBER 30, 1999
-----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- -------- ------------
(MILLIONS)

ASSETS
Current assets:
Cash and temporary cash investments..... $ 2 $ 22 $ 18 $ -- $ 42
Receivables............................. 363 374 28 (85) 680
Inventories............................. 151 252 -- -- 403
Deferred income taxes................... 39 (11) -- -- 28
Prepayments and other................... 27 36 -- -- 63
------ ------ ------- -------- ------
582 673 46 (85) 1,216
------ ------ ------- -------- ------
Other assets:
Investment in affiliated companies...... 351 -- 4,935 (5,286) --
Notes and advances receivable from
affiliates............................ 2,417 9 3,334 (5,760) --
Long-term notes receivable, net......... 13 17 -- -- 30
Goodwill and intangibles, net........... 334 171 -- -- 505
Pension assets.......................... 92 7 -- -- 99
Other................................... 43 54 9 -- 106
------ ------ ------- -------- ------
3,250 258 8,278 (11,046) 740
------ ------ ------- -------- ------
Plant, property, and equipment, at cost..... 888 1,047 1 -- 1,936
Less -- Reserves for depreciation and
amortization.......................... 433 448 -- -- 881
------ ------ ------- -------- ------
455 599 1 -- 1,055
------ ------ ------- -------- ------
Net assets of discontinued operations....... 27 2,812 (1,356) -- 1,483
------ ------ ------- -------- ------
$4,314 $4,342 $ 6,969 $(11,131) $4,494
====== ====== ======= ======== ======
LIABILITIES AND SHAREOWNERS'
EQUITY
Current liabilities:
Short-term debt (including current
maturities on long-term debt)......... $ 1 $ 537 $ 420 $ (721) $ 237
Trade payables.......................... 160 276 11 (82) 365
Taxes accrued........................... (1) 28 130 (111) 46
Other................................... 100 67 73 -- 240
------ ------ ------- -------- ------
260 908 634 (914) 888
Long-term debt.............................. 1,558 24 4,262 (5,048) 796
Deferred income taxes....................... (27) 18 (67) 180 104
Postretirement benefits and other
liabilities............................... 132 23 -- -- 155
Commitments and contingencies
Minority interest........................... -- 16 -- 395 411
Preferred stock with mandatory redemption
provisions................................ 395 -- -- (395) --
Shareowners' equity......................... 1,996 3,353 2,140 (5,349) 2,140
------ ------ ------- -------- ------
$4,314 $4,342 $ 6,969 $(11,131) $4,494
====== ====== ======= ======== ======

20
22
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

BALANCE SHEETS

DECEMBER 31, 1998
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)

ASSETS
Current assets:
Cash and temporary cash investments...... $ 1 $ 25 $ 3 $ -- $ 29
Receivables.............................. 277 307 32 (173) 443
Inventories.............................. 149 265 -- -- 414
Deferred income taxes.................... 48 (9) -- -- 39
Prepayments and other.................... 94 45 -- -- 139
------ ------ ------- ------- ------
569 633 35 (173) 1,064
------ ------ ------- ------- ------
Other assets:
Investment in affiliated companies....... 733 -- 5,387 (6,120) --
Notes and advances receivable from
affiliates............................. 635 -- 2,772 (3,407) --
Long-term notes receivable, net.......... 12 9 2 -- 23
Goodwill and intangibles, net............ 348 151 -- -- 499
Deferred income taxes.................... -- 39 -- -- 39
Pension assets........................... 83 18 -- -- 101
Other.................................... 89 106 6 -- 201
------ ------ ------- ------- ------
1,900 323 8,167 (9,527) 863
------ ------ ------- ------- ------
Plant, property, and equipment, at cost...... 875 1,069 -- -- 1,944
Less -- Reserves for depreciation and
amortization........................... 419 432 -- -- 851
------ ------ ------- ------- ------
456 637 -- -- 1,093
------ ------ ------- ------- ------
Net assets of discontinued operations........ 1,649 3,119 (3,029) -- 1,739
------ ------ ------- ------- ------
$4,574 $4,712 $ 5,173 $(9,700) $4,759
====== ====== ======= ======= ======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt (including current
maturities on long-term debt).......... $ 26 $ 124 $ 229 $ (75) $ 304
Trade payables........................... 148 258 10 (79) 337
Taxes accrued............................ (3) 34 -- -- 31
Other.................................... 130 71 36 -- 237
------ ------ ------- ------- ------
301 487 275 (154) 909
Long-term debt............................... 1,571 25 2,480 (3,405) 671
Deferred income taxes........................ 137 47 (86) -- 98
Postretirement benefits and other
liabilities................................ 126 44 -- -- 170
Commitments and contingencies
Minority interest............................ -- 13 -- 394 407
Preferred stock with mandatory redemption
provisions................................. 394 -- -- (394) --
Shareowners' equity.......................... 2,045 4,096 2,504 (6,141) 2,504
------ ------ ------- ------- ------
$4,574 $4,712 $ 5,173 $(9,700) $4,759
====== ====== ======= ======= ======

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

SPIN-OFF OF PACKAGING OPERATIONS

Tenneco Automotive Inc. was known as Tenneco Inc. before the spin-off on
November 4, 1999, of Tenneco Inc.'s packaging business, as described below. In
this Management's Discussion and Analysis, discussions of Tenneco refer to
Tenneco Inc. and its subsidiaries before the spin-off and to Tenneco Automotive
Inc. and its subsidiaries after the spin-off.

In July 1998, Tenneco's Board of Directors authorized management to develop
a broad range of strategic alternatives to separate the automotive, paperboard
packaging and specialty packaging businesses. Subsequently, Tenneco completed
the following actions:

- On November 4, 1999, Tenneco completed the spin-off of Tenneco Packaging
Inc., now known as Pactiv Corporation ("Packaging"). The morning
following the spin-off, Tenneco changed its name from "Tenneco Inc." to
"Tenneco Automotive Inc." and effected a reverse stock split whereby
every five shares of Tenneco common stock were converted into one share
of Tenneco's new common stock.

Before the spin-off, Tenneco realigned substantially all of its existing
debt through a combination of tender offers, exchange offers, and other
refinancings. The company's debt realignment was financed by borrowings by
Tenneco under new credit facilities, the issuance by Tenneco of subordinated
debt, and borrowings by Packaging under new credit facilities and the issuance
by Packaging of its new publicly-traded debt in exchange for certain series of
the publicly-traded debt of Tenneco that was outstanding before the spin-off and
debt realignment. The debt of Packaging was rated investment grade and the debt
of Tenneco was rated non-investment grade by both Standard & Poor's and Moodys
debt rating agencies.

As a result of these transactions, Tenneco's former specialty and
paperboard packaging operating segments are presented as discontinued operations
in the accompanying financial statements. Tenneco's sole continuing operation is
its automotive segment ("Automotive"). Refer to Notes 2 and 3 to the financial
statements for further information related to discontinued operations.

RESULTS OF CONTINUING OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER 30, 1999 AND
1998

NET SALES AND OPERATING REVENUES

THIRD QUARTER
------------------------
1999 1998 % CHANGE
---- ---- --------

North America...................................... $434 $408 6%
Europe............................................. 307 316 (3)
Rest Of World...................................... 75 80 (6)
---- ----
$816 $804 1%
==== ====

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24

Revenues for Automotive's North American operations were $434 million, a 6
percent increase over the same period in 1998. Aftermarket revenues decreased
$24 million in the third quarter of 1999 from the comparable period in 1998.
Weaker industry conditions in the North American aftermarket were more than
offset by the $50 million increase in sales to North American original equipment
manufacturers. This increase is primarily attributable to Automotive's strong
position in the North American light duty truck market where vehicle production
has increased by 500,000 units from the third quarter in 1998 to the comparable
period in 1999, and otherwise generally higher North American vehicle production
levels.

Automotive's European revenues were $307 million, a decrease of 3 percent
from the same period a year earlier. The reduction in sales was primarily
attributable to weak European aftermarket industry conditions. European
aftermarket revenues decreased $11 million in the third quarter of 1999 from the
comparable period in 1998. This reduction was partially offset by new program
launches to support European original equipment manufacturers in the third
quarter of 1999 compared to the same period in 1999.

Automotive's revenues from operations in the rest of the world decreased 6
percent to $75 million compared to $80 million in the third quarter of 1998.
Difficult economic conditions in South America and currency devaluation in
Brazil resulted in a $10 million decrease in revenues from the third quarter of
1998 to the comparable period in 1999. This was partially offset by solid
Australian and improving Asian results which increased $5 million in third
quarter of 1999 from the comparable period in 1998.

INCOME BEFORE INTEREST EXPENSE, INCOME TAXES AND MINORITY INTEREST
("OPERATING INCOME")

THIRD QUARTER
------------------------
1999 1998 % CHANGE
---- ---- --------

North America....................................... $41 $30 37%
Europe.............................................. 23 46 (50)
Rest of World....................................... 3 10 (70)
Other............................................... -- (5) --
--- ---
$67 $81 (17)%
=== ===

North American operating income was $41 million, a 37 percent improvement
over the prior year. A strong position in the solid selling light truck market
and otherwise generally higher North American vehicle production levels
increased operating income by $10 million. Additionally, improved operating
efficiencies, including results from earlier restructuring initiatives,
contributed $8 million to this improvement. Lower aftermarket sales volumes in
North America, combined with the change in accounting principles with respect to
the capitalization of start-up activities, partially offset these improvements.

Operating income in Europe fell 50 percent from $46 million to $23 million.
The change in accounting for platform start-up costs negatively impacted results
by $7 million from the third quarter of 1998 to the comparable period in 1999.
Lower aftermarket sales volumes in Europe contributed an additional $3 million
to the decrease. The remainder of the decrease was primarily due to a shift in
the mix of original equipment revenues from higher to lower margin business.

Operating income from operations in the rest of the world declined 70
percent to $3 million from $10 million. Difficult economic conditions in South
America and currency devaluation in Brazil resulted in $6 million of this
decline.

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25

OPERATING INCOME AS A PERCENTAGE OF REVENUE

THIRD QUARTER
------------------------
1999 1998 % CHANGE
---- ---- --------

North America..................................... 9.4% 7.4% 27%
Europe............................................ 7.5 14.6 (49)
Rest of World..................................... 4.0 12.5 (68)
Tenneco Automotive.............................. 8.2% 10.1% (19)%

Since revenue was essentially flat, operating income as a percentage of
revenue declined primarily as a result of the factors cited in the discussion of
operating income above.

INTEREST EXPENSE

For the quarter ended September 30, 1998, Tenneco allocated $42 million in
interest expense to the discontinued specialty packaging operations. For the
comparable period in 1999, $39 million in interest expense was allocated to
discontinued operations. Adjusting for this allocation, interest expense was $6
million lower in the third quarter of 1999 than the comparable period in 1998.
The lower interest expense is primarily attributable to debt reduction from the
proceeds of the sale of Tenneco's containerboard interest early in the second
quarter of 1999.

INCOME TAXES

Tenneco's effective tax rate for the third quarter of 1999 was 31% compared
to a negative 11% in the third quarter last year. The 1998 rate was lower as a
result of certain non-recurring foreign tax benefits in that quarter. The 1999
rate was unfavorably impacted by the tax effect of the recapitalization of
Automotive's foreign subsidiaries.

EARNINGS PER SHARE

Income from continuing operations was $.86 per diluted common share for the
third quarter of 1999, compared to $1.84 per diluted common share for last
year's quarter. Discontinued operations generated income of $.32 per diluted
common share during this year's quarter compared to income of $1.24 per diluted
common share for the prior year's quarter. Net income was $1.18 per diluted
common share for the third quarter of 1999, compared to $3.08 per diluted common
share in last year's quarter.

RESULTS OF CONTINUING OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
AND 1998

NET SALES AND OPERATING REVENUES

NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998 % CHANGE
------- ------- ---------

North America................................. $1,321 $1,287 3 %
Europe........................................ 945 949 --
Rest of World................................. 207 232 (11)
------ ------
$2,473 $2,468 --
====== ======

Revenues for Automotive's North American operations were $1.3 billion, a 3
percent increase over the same period in 1998. Aftermarket revenues decreased
$82 million in the nine months ended September 30, 1999 from the comparable
period in 1998. Weaker industry conditions in the North American aftermarket
were more than offset by the $116 million increase in sales to North American
original equipment manufacturers. This increase is primarily attributable to
Tenneco Automotive's strong presence in the light duty truck market, where North
American light duty truck production has increased by one million units from the
nine months ended September 30, 1998 to the comparable period in 1999, and
otherwise generally higher North American vehicle production levels.

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26

Automotive's European revenues were $945 million, essentially flat from the
same period a year earlier. European aftermarket revenues decreased $36 million
in the nine months ended September 30, 1999 from the comparable period in 1998.
This reduction was offset by increased sales to European original equipment
manufacturers of $32 million for the nine months ended September 30, 1999
compared to the same period in 1998 resulting primarily from new program
launches.

Automotive's revenues from operations in the rest of the world decreased 11
percent to $207 million compared to $232 million in the nine months ended
September 30, 1998. Difficult economic conditions in South America and currency
devaluation in Brazil led to a $38 million decrease in revenues. This was
partially offset by an increase of $13 million in revenues from solid Australian
and improving Asian results.

INCOME BEFORE INTEREST EXPENSE, INCOME TAXES AND MINORITY INTEREST ("OPERATING
INCOME")

NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1999 1998 % CHANGE
---- ---- --------

North America.................................... $143 $129 11 %
Europe........................................... 74 147 (50)
Rest Of World.................................... 6 29 (79)
Other............................................ (4) (17) NM
---- ----
$219 $288 (24)%
==== ====

North American operating income was $143 million for the nine months ended
September 30, an 11 percent improvement over the same period in the prior year.
Improved operating efficiencies in manufacturing and other cost reduction
actions including results from earlier period restructuring initiatives
contributed $26 million to these results. Additionally, Automotive's strong
position in the solid selling light truck market and otherwise generally higher
North American vehicle production levels increased operating income by $18
million. Lower North American aftermarket volumes and the change in accounting
principles with respect to the capitalization of start-up activities somewhat
offset this improvement in operating income for the nine months ended September
30, 1999 compared to the same period in 1998.

European operating income decreased 50 percent from $147 million to $74
million. The lower operating income in Europe is primarily attributable to the
change in accounting for platform start-up costs, lower aftermarket volumes and
a shift in the mix of original equipment revenues from higher to lower margin
business.

Operating income from operations in the rest of the world declined 79
percent to $6 million from $29 million, as difficult economic conditions in
South America and currency devaluation in Brazil reduced operating income by $16
million.

OPERATING INCOME AS A PERCENTAGE OF REVENUE

NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1999 1998 % CHANGE
---- ---- --------

North America..................................... 10.8% 10.0% 8 %
Europe............................................ 7.8 15.5 (50)
Rest of World..................................... 2.9 12.5 (77)
Tenneco Automotive................................ 8.9% 11.7% (24)%

Since revenue was essentially flat, operating income as a percentage of
revenue declined primarily as a result of the factors cited in the discussion of
operating income above.

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27

INTEREST EXPENSE

For the nine months ended September 30, 1998, Tenneco allocated $129
million in interest expense to discontinued specialty packaging operations. For
the comparable period in 1999, $115 million in interest expense was allocated to
discontinued operations. Adjusting for this allocation, interest expense was $5
million lower in the first three quarters of 1999 than the comparable period in
1998. The lower interest expense is primarily attributable to debt reduction
from the proceeds of the sale of Tenneco's containerboard interest early in the
second quarter of 1999.

INCOME TAXES

Tenneco's effective tax rate for the nine months ended September 30, 1999
was 37% compared to 20% in the third quarter last year. The 1998 rate was lower
as a result of certain non-recurring foreign tax benefits in that quarter. The
1999 rate was unfavorably impacted by the tax effect of the recapitalization of
Automotive's foreign subsidiaries.

EARNINGS PER SHARE

Income from continuing operations was $2.40 per diluted common share for
the nine months ended September 30, 1999, compared to $4.97 per diluted common
share in the comparable period of 1998. Discontinued operations generated a loss
of $2.98 per diluted common share during 1999 compared to income of $4.35 per
diluted common share for the prior year. The current year period also included a
$.20 per diluted common share extraordinary loss on early retirement of debt in
connection with the sale of the containerboard assets, and $4.00 per diluted
common share of charges related to the cumulative effect of changes in
accounting principles noted above. Net loss was $4.78 per diluted common share
for the nine months ended September 30, 1999, compared to $9.31 net income per
diluted common share in the comparable period of 1998.

RESTRUCTURING AND OTHER CHARGES

In the fourth quarter of 1998, Tenneco's Board of Directors approved an
extensive restructuring plan designed to reduce administrative and operational
overhead costs. Tenneco recorded a pre-tax charge to income from continuing
operations of $53 million, $34 million after-tax, or $1.02 per diluted common
share. Of the pre-tax charge, for operational restructuring plans, $36 million
related to the consolidation of the manufacturing and distribution operations of
Automotive's North American aftermarket business. A staff and related cost
reduction plan, which covers employees in Automotive's operating units and
corporate operations, is expected to cost $17 million.

The Automotive aftermarket restructuring involves closing two plant
locations and five distribution centers, resulting in the elimination of 302
positions. The staff and related cost reduction plan involves the elimination of
454 administrative positions in Automotive's business units and its corporate
operations.

As of September 30, 1999, approximately 670 employees have been terminated.
To address customer service and production transfer issues, the closure of one
plant location and one Automotive aftermarket distribution center has been
delayed until the first and second quarters of 2000, respectively. All other
restructuring actions, with the exception of the final disposal of certain
assets, are being executed according to the initial plan and are expected to be
complete by the fourth quarter of 1999. During the nine months ended September
30, 1999, the Automotive aftermarket business closed one plant location and four
distribution centers.

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28

Amounts related to the restructuring plan are shown in the following table:

CASH
PAYMENTS
NINE MONTHS
DECEMBER 31, 1998 ENDED BALANCE AT
RESTRUCTURING SEPTEMBER 30, SEPTEMBER 30,
CHARGE BALANCE 1999 1999
----------------- ------------- -------------
(MILLIONS)

Severance........................................... $15 $6 $ 9
Facility exit costs................................. 1 1 --
--- -- ---
$16 $7 $ 9
=== == ===

Automotive expects to realize annual savings of $27 million as a result of
these restructuring initiatives, primarily from a reduction in salary and
related employee expenses. Reduced depreciation charges comprise $2 million of
the balance. Tenneco expects these savings will be fully realized beginning in
the second quarter of 2000.

To further reduce its cost structure, Tenneco is also evaluating a
supplemental restructuring plan which could involve the closure of additional
manufacturing and distribution facilities in North America and Europe. If this
supplemental plan is approved by the Board of Directors and implemented, it
could result in an additional charge in the fourth quarter of 1999 of between
$45 million and $55 million before taxes, of which approximately 50 to 60
percent could be cash.

DISCONTINUED OPERATIONS AND EXTRAORDINARY LOSS

On November 5, 1999, Tenneco spun-off its specialty packaging businesses
into a separate, independent company. The specialty packaging company also owns
the remaining interest in the containerboard joint venture and the
administrative services operations. The specialty and paperboard packaging
businesses, and the administrative services operations, have been reflected as
discontinued operations in the accompanying financial statements.

Revenues and income for the paperboard packaging discontinued operations
are shown in the following table.

THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- --------------
1999 1998 1999 1998
----- ----- ----- ------

Net sales and operating revenues............................ $-- $415 $ 445 $1,185
=== ==== ===== ======
Income before income taxes and interest allocation.......... $ 8 $ 35 $ 30 $ 101
Income tax (expense) benefit................................ -- (12) (11) (38)
--- ---- ----- ------
Income before interest allocation........................... 8 23 19 63
Allocated interest expense, net of income tax............... -- (8) (5) (20)
--- ---- ----- ------
Income from discontinued operations before disposition...... 8 15 14 43
Gain (loss) on disposition, net of income tax............... -- 10 (169) 19
--- ---- ----- ------
Income (loss) from discontinued operations.................. $ 8 $ 25 $(155) $ 62
=== ==== ===== ======

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Revenues and income for the specialty packaging business and administrative
services operations are shown in the following table:

THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- ---------------
1999 1998 1999 1998
----- ----- ------ ------

Net sales and operating revenues............................ $754 $696 $2,158 $2,067
==== ==== ====== ======
Income before income taxes and interest allocation.......... 69 74 213 247
Income tax (expense) benefit................................ (39) (36) (87) (96)
---- ---- ------ ------
Income before interest allocation........................... 30 38 126 151
Allocated interest expense, net of income tax............... (26) (23) (70) (67)
---- ---- ------ ------
Income (loss) from discontinued operations.................. $ 4 $ 15 $ 56 $ 84
==== ==== ====== ======

The current year period also included a $7 million extraordinary loss on
early retirement of debt in connection with the sale of the containerboard
assets.

Nine months ended September 30, 1999 results from discontinued operations
for the specialty packaging segment includes a pre-tax charge of $29 million
relating to a plan to realign its headquarters functions. This plan involves the
severance of approximately 40 employees and the closing of the Greenwich,
Connecticut headquarters facility.

CHANGES IN ACCOUNTING PRINCIPLES

In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," which establishes
new accounting and reporting standards for the costs of computer software
developed or obtained for internal use. This statement requires prospective
application for fiscal years beginning after December 15, 1998. Tenneco adopted
SOP 98-1 on January 1, 1999. The impact of this new standard did not have a
significant effect on Tenneco's financial position or results of operations.

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes new
accounting and reporting standards requiring that all derivative instruments,
including derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be

28
30

recognized currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting treatment. This
statement cannot be applied retroactively and is effective for all fiscal years
beginning after June 15, 2000. Tenneco is currently evaluating the new standard
but has not yet determined the impact it will have on its financial position or
results of operations.

LIQUIDITY AND CAPITAL RESOURCES

CAPITALIZATION

SEPTEMBER 30, DECEMBER 31,
1999 1998 % CHANGE
------------- ------------ --------

Short term debt and current maturities.................... $ 237 $ 304 (22%)
Long-term debt............................................ 796 671 19
Debt allocated to discontinued operations................. 1,985 2,456 (19)
------ ------
Total debt................................................ 3,018 3,431 (12)
------ ------
Minority interest of continuing operations................ 411 407 1
Minority interest of discontinued operations.............. 21 14 50
------ ------
Total minority interest................................... 432 421 3
------ ------
Common shareowners' equity................................ 2,140 2,504 (15)
------ ------
Total capitalization...................................... $5,590 $6,356 (12%)
====== ======

Tenneco's ratio of debt to total capitalization was 54 percent at September
30, 1999 and at December 31, 1998. This ratio was calculated before giving
effect to the debt realignment and spin-off, described below, which were
completed after September 30, 1999. Tenneco expects its debt to total
capitalization ratio to increase significantly as a result of these
transactions.

Prior to the spin-off, Tenneco realigned substantially all of its existing
debt. To accomplish this, Tenneco initiated an offer to exchange Packaging debt
securities for Tenneco debt securities having a book value of $1,166 million.
Tenneco also initiated a cash tender offer to purchase debt securities having a
book value of $1,374 million and repaid substantially all of its short-term
borrowings. Finally, Tenneco retired approximately $400 million of subsidiary
preferred stock. These transactions were financed by borrowings by Tenneco under
a new credit facility, senior subordinated debt issued by Tenneco, and
borrowings by Packaging under new credit facilities. The debt of Packaging was
rated investment grade and the debt of Tenneco was rated non-investment grade by
debt rating agencies.

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31

As part of the debt realignment, on September 30, 1999 Tenneco entered into
a $1.55 billion committed senior secured financing arrangement with a syndicate
of banks and other financial institutions consisting of: (i) a $500 million,
six-year revolving credit facility; (ii) a $450 million six-year term loan;
(iii) a $300 million eight-year term loan and; (iv) a $300 million eight and
one-half year term loan. A portion of each term loan is payable in quarterly
installments beginning September 30, 2001. Borrowings under this facility bear
interest at an annual rate equal to, at the borrower's option, either (i) the
London Interbank Offering Rate plus a margin of 275 basis points for the
six-year revolving credit facility and the six-year term loan, 325 basis points
for the eight-year term loan and 350 basis points for the eight and one-half
year term loan; or (ii) a rate consisting of the greater of The Chase Manhattan
Bank's prime rate or the Federal Funds rate plus 50 basis points, plus a margin
of 175 basis points for the six-year revolving credit facility and the six-year
term loan, 225 basis points for the eight-year term loan and 250 basis points
for the eight and one-half year term loan. Under the provisions of the senior
credit facility agreement, the interest margins for borrowings under the
revolving credit facility and the six-year term loan may be adjusted based on
the consolidated leverage ratio (total debt divided by consolidated earnings
before interest, taxes, depreciation and amortization ("EBITDA") as defined in
the senior credit facility agreement) measured at the end of each quarter
starting with the fiscal quarter ending December 31, 2000.

The senior credit facility agreement requires that Tenneco initially
maintain: (i) a consolidated leverage ratio (consolidated indebtedness divided
by consolidated EBITDA) not greater than 4.75; (ii) a consolidated interest
coverage ratio (consolidated EBITDA divided by consolidated interest expense)
not less than 2.00; and (iii) a consolidated fixed charge coverage ratio
(consolidated EBITDA less consolidated capital expenditures, divided by
consolidated interest expense) not less than 1.00. Under the terms of the senior
credit facility agreement, the maximum permitted consolidated leverage ratio
will decrease beginning in the year 2001, the minimum permitted consolidated
interest coverage ratio will increase beginning in the year 2001 and the minimum
permitted consolidated fixed charge coverage ratio will increase beginning in
the year 2002. The senior credit facility agreement also contains restrictions
on Tenneco's operations that are customary for similar facilities, including
limitations on: (a) incurring additional liens; (b) sale and leaseback
transactions; (c) liquidations and dissolutions (d) incurring additional
indebtedness or guarantees; (e) capital expenditures; (f) dividends; (g) mergers
and consolidations; and (h) prepayments and modifications of subordinated and
other debt instruments. Compliance with these requirements and restrictions is a
condition for any incremental borrowings under the senior credit facility
agreement and failure to meet these requirements enables the lenders to require
repayment of any outstanding loans.

The senior subordinated debt indenture requires that Tenneco Automotive, as
a condition to incurring certain types of indebtedness not otherwise permitted,
initially maintain an interest coverage ratio of not less than 2.00. Under the
terms of the indenture, the minimum interest coverage ratio will increase
beginning in 2001. The indenture also contains restrictions on Tenneco's
operations, including limitations on: (1) incurring additional indebtedness or
liens; (2) dividends; (3) distributions and stock repurchases; (4) investments;
and (5) mergers and consolidations.

Upon completion of the debt realignment and spin-off, Tenneco's total
indebtedness was approximately $1.7 billion, including $22 million which was
borrowed under the revolving credit facility, leaving $478 million available
under that facility on the date of the spin-off. Tenneco believes that cash
flows from operations, combined with available borrowing capacity described
above, will generally be sufficient to meet its future capital requirements for
the following year.

CASH FLOWS

NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998 % CHANGE
------ ----- --------

Cash provided (used) by:
Operating activities -- continuing operations... $ (100) $ 33 (403)%
Investing activities -- continuing operations... $ (161) $(181) 11 %
Financing activities............................ $1,244 $ 96 1,195 %

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32

OPERATING ACTIVITIES

Cash provided by continuing operating activities declined by $133 million
for the nine months ended September 30, 1999 compared to the comparable 1998
period. Income from continuing operations was $89 million lower and investments
in working capital were $63 million more for the nine months ended September 30,
1999 compared to the 1998 period. The increase in working capital was primarily
attributable to the one-time impact of terminating Automotive's accounts
receivable factoring program in connection with the spin-off, which increased
receivables by $67 million.

Cash provided by Tenneco's discontinued operations declined by $398 million
in the first nine months ended 1999 compared to the 1998 period. The paperboard
operations were responsible for $213 million which is primarily attributable to
the purchase of containerboard business accounts receivable in contemplation of
the sale of the containerboard business in April. Additionally, containerboard
results are reflected for the first four months in 1999 and for the first nine
months in 1998 due to the sale of this business. Investment in working capital
within the specialty packaging business increased by $139 million in the nine
months ended 1999 compared to the 1998 period.

INVESTING ACTIVITIES

Cash used by investing activities from continuing operations was $20
million lower in the nine months ended September 30, 1999 compared to the same
period in 1998. Capital expenditures were $17 million lower in the nine months
ended September 30, 1999 compared to the same period in 1998 due to more
effective capital management. This was offset by the acquisition of Kinetic Ltd.
for $36 million. Kinetic, an Australian suspension engineering company with
advanced roll-control technology, provides enhanced on-road handling while
improving off-road performance.

Cash used by investments in discontinued operations increased by $619
million in the nine months ended September 30, 1999 compared to the 1998 period.
During the second quarter of 1999, Tenneco acquired for approximately $1.1
billion certain assets previously used by the containerboard business under
operating leases and timber cutting rights. This was required in order to
complete the April containerboard sale. The source of the funds for these
capital expenditures was borrowings by Packaging prior to the containerboard
sale. See "Financing Activities" below. Tenneco also received approximately $300
million in proceeds related to the containerboard and folding carton sale
transactions.

FINANCING ACTIVITIES

Excluding borrowings required to complete the containerboard sale
transaction, cash used by financing activities was $517 million for the nine
months ended September 30, 1999. This primarily reflected the use of the net
proceeds of the containerboard sale transaction to reduce Tenneco's short-term
debt.

Before the containerboard sale transaction, Packaging borrowed
approximately $1.8 billion. These borrowings were used to acquire the assets
used under operating leases and timber cutting rights described under "Investing
Activities" above, and to purchase the containerboard business accounts
receivable described under "Operating Activities" above. Packaging remitted the
balance of the borrowings to Tenneco to retire short-term debt. Packaging
contributed the containerboard business to the new joint venture subject to the
approximately $1.8 billion in new debt. The debt reduction, which resulted from
this contribution, is shown on the Statements of Cash Flows as a non-cash
financing activity.

31
33

YEAR 2000

Many computer software systems, as well as some hardware and equipment
utilizing date-sensitive data, were designed to use a two-digit date field.
Consequently, these systems will not be able to properly recognize dates beyond
the year 1999 ("the Year 2000 issue"). Tenneco's significant technology
transformation projects have addressed the Year 2000 issue in those areas where
replacement systems are being installed for other business reasons. Where
existing systems and equipment are expected to remain in place beyond 1999,
Tenneco has a detailed process in place to identify and assess Year 2000 issues
and to remediate, replace or establish alternative procedures addressing
non-Year 2000 compliant systems, hardware, and equipment.

Tenneco has substantially completed inventorying its systems and equipment,
including computer systems and business applications, as well as date-sensitive
technology embedded in its equipment and facilities. Tenneco continues to plan
for and undertake remediation, replacement, or establishment of alternative
procedures for non-compliant Year 2000 systems and equipment; and test
remediated, replaced or alternative procedures for systems and equipment.

Tenneco believes that approximately 99 percent of Automotive's major
business applications systems and approximately 99 percent of Automotive's
manufacturing equipment had achieved Year 2000 compliance as of September 30,
1999. Tenneco has confirmed that none of its Automotive products are
date-sensitive. Remediation, replacement, or establishment of alternative
procedures for systems and equipment have been and are being undertaken on a
business priority basis.

Tenneco has also contacted Automotive's major suppliers, financial
institutions, and others with whom Automotive conducts business to determine
whether they will be able to resolve in a timely manner Year 2000 problems
possibly affecting Automotive. A majority of these entities, including critical
suppliers, have responded by advising as to the status of their efforts and by
stating that they expect to become Year 2000 compliant in a timely manner. Based
on these responses, critical suppliers have been assigned a risk rating. This
process is ongoing. Tenneco intends to continue corresponding with critical high
risk third parties to obtain information and updates on their Year 2000 efforts,
and to assess new suppliers, financial institutions and others with whom
Automotive begins to conduct business.

Based upon current estimates, Tenneco believes that costs to address
Automotive's Year 2000 issues and implement necessary changes to its existing
systems and equipment including costs incurred to date, will range from $15 to
$17 million. As of September 30, 1999, approximately $13 million of the costs
had been incurred. These costs are being expensed as they are incurred, except
that in some instances Tenneco may determine that replacing existing computer
systems or equipment may be more effective and efficient, particularly where
additional functionality is available. These replacements would be capitalized
and would reduce the estimated expense associated with Year 2000 issues.

If Tenneco is unable to complete on a timely and cost-effective basis the
remediation or replacement of critical systems or equipment not yet in
compliance, or develop alternative procedures, or if those with whom Automotive
conducts business are unsuccessful in implementing timely solutions, Year 2000
issues could have a material adverse effect on Tenneco's financial condition or
results of operations. Possible worst case scenarios include interruptions in
Automotive's ability to manufacture its products, process and ship orders, and
bill and collect accounts receivable due to internal systems failures or the
systems failures of its suppliers or customers. Tenneco believes it will be able
to timely resolve Automotive's own Year 2000 issues.

As part of its planning and readiness activities, Tenneco is developing
Year 2000 contingency plans for critical business processes such as banking,
data center operations and just-in-time manufacturing operations. Contingency
plans are being developed on a business unit basis, where needed, to respond to
previously undetected Year 2000 problems and business interruption from
suppliers. Contingency plans will include alternative suppliers, as necessary,
and assuring the availability of key personnel at year end to address unforeseen
Year 2000 problems.

32
34

]EURO CONVERSION

The European Monetary Union resulted in the adoption of a common currency,
the "Euro," among eleven European nations. The Euro is being adopted over a
three-year transition period beginning January 1, 1999. In October 1997, Tenneco
established a cross-functional Euro Committee, comprised of representatives of
its operational divisions as well as its corporate offices. That Committee had
two principal objectives: (i) to determine the impact of the Euro on Tenneco's
business operations, and (ii) to recommend and facilitate implementation of
those steps necessary to ensure that Tenneco would be fully prepared for the
Euro's introduction. As of January 1, 1999, Tenneco implemented those Euro
conversion procedures that it had determined to be necessary and prudent to
adopt by that date, and is on track to becoming fully "Euro ready" on or before
the conclusion of the three-year Euro transition period. Tenneco believes that
the costs associated with transitioning to the Euro will not be material to its
consolidated financial position or the results of its operations.

33
35

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Subsequent to September 30, 1999, Tenneco realigned substantially all of
its debt in connection with the spin-off of Packaging. Substantially all of
Tenneco's existing fixed rate debt was retired through cash tender offers or
offers to exchange Packaging debt securities for Tenneco debt securities.
Tenneco financed this debt realignment by issuing new debt securities, a portion
of which carry interest rates that change with market rates of interest. See
Item 2., Management's Discussion and Analysis of Financial Condition and Results
of Operations for further information.

34
36

PART II

OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

On October 5, 1999, Tenneco commenced a cash tender offer and debt exchange
offer for all series of its then-outstanding publicly registered debt securities
(the "Public Debt Securities"). These securities were issued under an Indenture,
dated as of November 1, 1996, as amended (the "Indenture"), between Tenneco and
The Chase Manhattan Bank, as trustee. In connection with the tender and exchange
offers, Tenneco solicited consents from the holders of these securities to
amendments to the Indenture. The required consents were received and the
Indenture was amended to eliminate the restrictions on Tenneco's operations
previously included in the Indenture. The eliminated restrictions include prior
limitations on (1) the ability of Tenneco and specified subsidiaries to incur
secured debt and enter into sale-leaseback transactions and (2) the ability of
Tenneco to merge, consolidate or transfer all or substantially all of its
assets. The supplemental indenture pursuant to which the amendments were
effected is filed as an exhibit to this report and is incorporated herein by
reference.

In connection with the realignment of its debt as part of its spin-off of
Packaging, Tenneco (1) entered into a new senior secured credit facility on
September 30, 1999 and made initial borrowings of $1,072 under this facility on
November 4, 1999 and (2) issued $500 million of senior subordinated notes due
October 15, 2009 on October 14, 1999. The senior secured credit facility is
secured by substantially all of the tangible and intangible domestic assets of
Tenneco and its subsidiaries and is collateralized by a perfected security
interest in all of the capital stock of Tenneco's material domestic subsidiaries
and in up to 66% of the capital stock of Tenneco's first-tier foreign
subsidiaries. In addition, the senior secured credit facility is guaranteed on a
joint and several basis by all of Tenneco's material domestic subsidiaries and
the senior subordinated notes are guaranteed on a joint and several basis by all
of Tenneco's material domestic wholly owned subsidiaries. Because the senior
secured credit facility and senior subordinated notes are secured and/or
guaranteed, the Public Debt Securities that remain outstanding after the tender
and exchange offers described above have become structurally subordinated to the
rights of the lenders for these new borrowings. This is because the remaining
Public Debt Securities are not and will not be supported by similar security
and/or guarantees.

In addition, the senior secured credit facility and senior subordinated
notes contain provisions which limit the ability of Tenneco and its subsidiaries
to take a number of actions relating to their capital stock and debt securities.
These restrictions include, among other things, limitations on their ability to:
(1) pay dividends or make distributions to holders of capital stock; (2)
repurchase or redeem capital stock; and (3) prepay or modify other debt
securities.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Tenneco held a special stockholders' meeting on October 25, 1999 to
consider and vote on two separate proposals: (i) a proposal to amend Tenneco's
certificate of incorporation to phase-out Tenneco's existing three-class
staggered Board of Directors system, and provide instead for the annual election
of directors (the "Elimination of Staggered Board Proposal"), and (ii) a
proposal to amend Tenneco's certificate of incorporation whereby every five
shares of Tenneco's then-issued common stock would be converted automatically
into one share of Tenneco's new common stock (the "Reverse Stock Split
Proposal"). The meeting proceeded and both the Elimination of Staggered Board
Proposal and Reverse Stock Split Proposal were approved by holders of a majority
of the Tenneco's outstanding common stock. The following sets forth the number
of votes cast for, against and abstain with respect to these proposals at the
meeting:

ELIMINATION OF STAGGERED BOARD PROPOSAL

VOTES FOR VOTES AGAINST VOTES ABSTAIN
--------- ------------- -------------

127,396,690 2,378,548 1,051,113

35
37

REVERSE STOCK SPLIT PROPOSAL

VOTES FOR VOTES AGAINST VOTES ABSTAIN
--------- ------------- -------------

138,533,392 8,254,821 1,175,919

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits. The exhibits filed with this report are listed on the Exhibit
Index following the signature page of this report, which is incorporated herein
by reference.

(b) Reports on Form 8-K. Since the beginning of the third quarter of 1999,
Tenneco filed the following Current Reports on Form 8-K:

- Form 8-K dated July 14, 1999, including pursuant to item 5 financial and
other information that superseded comparable information included in
Tenneco's Annual Report on From 10-K for the year ended December 31, 1998
and Quarterly Report on Form 10-Q for the quarter ended March 31, 1999
(including the following financial statements: (1) Tenneco Inc. and
consolidated subsidiaries financial statements for the three months ended
March 31, 1999 and 1998; and (2) Tenneco Inc. and consolidated
subsidiaries financial statements for the three years in the period ended
December 31, 1998);

- Form 8-K dated August 20, 1999, including pursuant to item 5 financial
and other information that superseded comparable information included in
Tenneco's Annual Report on Form 10-K for the year ended December 31,
1998, Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and
Current Report on Form 8-K dated July 14, 1999 (including the following
financial statements: (1) Tenneco Inc. and consolidated subsidiaries
financial statements for the three months ended March 31, 1999 and 1998;
(2) Tenneco Inc. and consolidated subsidiaries financial statements for
the three months and six months ended June 30, 1999 and 1998; and (3)
Tenneco Inc. and consolidated subsidiaries financial statements for the
three years in the period ended December 31, 1998);

- Form 8-K dated September 27, 1999, including pursuant to item 5 certain
information regarding the offering of senior subordinated notes by
Tenneco;

- Form 8-K dated October 4, 1999, as amended, including pursuant to item 5
certain financial information;

- Form 8-K dated October 4, 1999, including pursuant to item 5 certain
information regarding Packaging;

- Form 8-K dated October 7, 1999, including pursuant to item 5 certain
financial information and certain information regarding the offering of
senior subordinated notes by Tenneco;

- Form 8-K dated October 12, 1999, including pursuant to item 5 certain
information regarding the spin-off of Packaging and certain information
regarding the offering of senior subordinated notes by Tenneco;

- Form 8-K dated October 25, 1999, including pursuant to item 5 certain
information regarding Tenneco's special stockholders' meeting held on
October 25, 1999, certain information regarding Packaging and certain
financial information; and

- Form 8-K dated November 4, 1999, including pursuant to items 2 and 7
financial and other information regarding the spin-off of Packaging
(including an Unaudited Pro Forma Consolidated Balance Sheet of Tenneco
at June 30, 1999 and Unaudited Pro Forma Consolidated Statements of
Income for Tenneco for the six months ended June 30, 1999 and the year
ended December 31, 1998).

36
38

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934,
Tenneco Automotive Inc. has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

TENNECO AUTOMOTIVE INC.

By: /s/ MARK A. MCCOLLUM
------------------------------------
Mark A. McCollum
Senior Vice President and
Chief Financial Officer

November 15, 1999

37
39

EXHIBIT INDEX
TO
QUARTERLY ON FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1999

EXHIBIT NO. DESCRIPTION
- ----------- -----------

2 Distribution Agreement by and between Tenneco Inc. and
Tenneco Packaging Inc. dated November 3, 1999 (incorporated
herein by reference to Exhibit 2 to the registrant's Current
Report on Form 8-K dated November 4, 1999, File No.
1-12387).
3.1(a) Restated Certificate of Incorporation of the registrant
dated December 11, 1996 (incorporated herein by reference
from Exhibit 3.1(a) of the registrant's Annual Report on
Form 10-K for the year ended December 31, 1997, File No.
1-12387).
3.1(b) Certificate of Amendment, dated December 11, 1996
(incorporated herein by reference from Exhibit 3.1(c) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, File No. 1-12387).
3.1(c) Certificate of Ownership and Merger, dated July 8, 1997
(incorporated herein by reference from Exhibit 3.1(d) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, File No. 1-12387).
3.1(d) Certificate of Designation of Series B Junior Participating
Preferred Stock dated September 9, 1998 (incorporated herein
by reference from Exhibit 3.1(d) of the registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, File No. 1-12387).
3.1(e) Certificate of Elimination of the Series A Participating
Junior Preferred Stock of the registrant dated September 11,
1998 (incorporated herein by reference from Exhibit 3.1(e)
of the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, File No. 1-12387).
3.1(f) Certificate of Amendment to Restated Certificate of
Incorporation of the registrant dated November 5, 1999.
3.1(g) Certificate of Amendment to Restated Certificate of
Incorporation of the registrant dated November 5, 1999.
3.1(h) Certificate of Ownership and Merger merging Tenneco
Automotive Merger Sub Inc. with and into the registrant,
dated November 5, 1999.
3.2(a) Amended By-Laws of the registrant (incorporated herein by
reference from Exhibit 3.2 of the registrant's Annual Report
on Form 10-K for the year ended December 31, 1998, File No.
1-12387).
3.2(b) Amendments to the By-Laws of the registrant effected October
12, 1999.
4.1 Qualified Offer Plan Rights Agreement dated as of September
8, 1998, by and between the registrant and First Chicago
Trust Company of New York, as Rights Agent (incorporated
herein by reference from Exhibit 4.1 of the registrant's
Current Report on Form 8-K dated September 24, 1998, File
No. 1-12387).
4.2(a) Indenture, dated as of November 1, 1996, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.1 of the
registrant's Form S-4, Registration No. 333-14003).
4.2(b) First Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(b) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).

EXHIBIT NO. DESCRIPTION
- ----------- -----------

4.2(c) Second Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(c) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
4.2(d) Third Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(d) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
4.2(e) Fourth Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(e) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
4.2(f) Fifth Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(f) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
4.2(g) Sixth Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(g) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
4.2(h) Seventh Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(h) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
4.2(i) Eighth Supplemental Indenture, dated as of April 28, 1997,
to Indenture, dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.1 of the
registrant's Current Report on Form 8-K dated April 23,
1997, File No. 1-12387).
4.2(j) Ninth Supplemental Indenture, dated as of April 28, 1997, to
Indenture, dated as of November 1, 1996, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.2 of the
registrant's Current Report on Form 8-K dated April 23,
1997, File No. 1-12387).
4.2(k) Tenth Supplemental Indenture, dated as of July 16, 1997, to
Indenture, dated as of November 1, 1996, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.1 of the
registrant's Current Report on Form 8-K dated June 11, 1997,
File No. 1-12387).
4.2(l) Eleventh Supplemental Indenture, dated October 21, 1999, to
Indenture dated November 1, 1996 between The Chase Manhattan
Bank, as Trustee, and the registrant.
4.3 Specimen stock certificate for Tenneco Automotive Inc.
common stock.
4.4(a) Indenture dated October 14, 1999 by and between the
registrant and The Bank of New York, as trustee.
4.4(b) Supplemental Indenture dated November 4, 1999 among Tenneco
Automotive Operating Subsidiary Inc. (formerly Tenneco
Automotive Inc.), Tenneco International Holding Corp.,
Tenneco Global Holdings Inc., The Pullman Company and
Clevite Industries Inc. in favor of The Bank of New York, as
trustee.
4.5(a) Credit Agreement, dated as of September 30, 1999, among the
registrant, the Lenders named therein, Commerzbank and Bank
of America, N.A., Citicorp USA, Inc. and The Chase Manhattan
Bank.

EXHIBIT NO. DESCRIPTION
- ----------- -----------

9 None
10.1 Distribution Agreement, dated November 1, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.) the
registrant, and Newport News Shipbuilding Inc. (incorporated
herein by reference from Exhibit 2 of the registrant's Form
10, File No. 1-12387).
10.2 Amendment No. 1 to Distribution Agreement, dated as of
December 11, 1996, by and among El Paso Tennessee Pipeline
Co. (formerly Tenneco Inc.), the registrant, and Newport
News Shipbuilding Inc. (incorporated herein by reference
from Exhibit 10.2 of the registrant's Annual Report on Form
10-K for the year ended December 31, 1996, File No.
1-12387).
10.3 Debt and Cash Allocation Agreement, dated December 11, 1996,
by and among El Paso Tennessee Pipeline Co. (formerly
Tenneco Inc.), the registrant, and Newport News Shipbuilding
Inc. (incorporated herein by reference from Exhibit 10.3 of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-123387).
10.4 Benefits Agreement, dated December 11, 1996, by and among El
Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), the
registrant, and Newport News Shipbuilding Inc. (incorporated
herein by reference from Exhibit 10.4 of the registrant's
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
10.5 Insurance Agreement, dated December 11, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), the
registrant, and Newport News Shipbuilding Inc. (incorporated
herein by reference from Exhibit 10.5 of the registrant's
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
10.6 Tax Sharing Agreement, dated December 11, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.),
Newport News Shipbuilding Inc., the registrant, and El Paso
Natural Gas Company (incorporated herein by reference from
Exhibit 10.6 of the registrant's Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
10.7 First Amendment to Tax Sharing Agreement, dated as of
December 11, 1996, among El Paso Tennessee Pipeline Co.
(formerly Tenneco Inc.), the registrant and Newport News
Shipbuilding Inc. (incorporated herein by reference from
Exhibit 10.7 of the registrant's Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
10.8 Tenneco Automotive Inc. Executive Incentive Compensation
Plan.
10.9 Agreement, dated September 9, 1992 between Theodore R.
Tetzlaff and the registrant (incorporated herein by
reference from Exhibit 10.21 of the registrant's Form 10,
File No. 1-12387).
10.10 Letter Agreement dated September 24, 1998 between Robert T.
Blakely and the registrant. (incorporated herein by
reference from Exhibit 10.23 of the registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1998, File No. 1-12387).

EXHIBIT NO. DESCRIPTION
- ----------- -----------

10.11 Letter Agreement dated September 24, 1998 between John J.
Castellani and the registrant (incorporated herein by
reference from Exhibit 10.28 of the registrant's Annual
Report on Form 10-K for the year ended December 31, 1998,
File No. 1-12387).
10.12 Agreement, dated as of April 12, 1999, among the registrant
Tenneco Management Company, Tenneco Packaging Inc., and Paul
T. Stecko. (incorporated herein by reference from Exhibit
10.30 of the registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999, File No. 1-12387).
10.13 Tenneco Automotive Inc. Change of Control Severance Benefits
Plan for Key Executives.
10.14 Tenneco Automotive Inc. Stock Ownership Plan.
10.15 Tenneco Automotive Inc. Key Executive Pension Plan.
10.16 Tenneco Automotive Inc. Deferred Compensation Plan.
10.17 Tenneco Automotive Inc. Supplemental Executive Retirement
Plan.
10.18 Release Agreement dated as of October 18, 1999 by and
between Dana G. Mead and Tenneco Management Company and
Modification of Release Agreement dated as of October 18,
1999 among Dana G. Mead, Tenneco Inc. and Tenneco Management
Company.
10.19 Human Resources Agreement by and between Tenneco Inc. and
Tenneco Packaging Inc. dated November 4, 1999 (incorporated
herein by reference to Exhibit 99.1 to the registrant's
Current Report on Form 8-K dated November 4, 1999, File No.
1-12387).
10.20 Tax Sharing Agreement by and between Tenneco Inc. and
Tenneco Packaging Inc. dated November 3, 1999 (incorporated
herein by reference to Exhibit 99.2 to the registrant's
Current Report on Form 8-K dated November 4, 1999, File No.
1-12387).
10.21 Amended and Restated Transition Services Agreement by and
between Tenneco Inc. and Tenneco Packaging Inc. dated as of
November 4, 1999.
11 None
12 Computation of Ratio of Earnings to Fixed Charges.
18 None
22 None
23 None
24 None
27.1 Financial Data Schedule - Period ended September 30, 1999.
27.2 Financial Data Schedule - Period ended September 30, 1998.
28 None
99 None