Tenneco Automotive Reports Record Third Quarter Revenue and Net Income

LAKE FOREST, Oct. 25 /PRNewswire-FirstCall/ -- Tenneco Automotive reported record third quarter revenue and net income since becoming a stand-alone company. The company reported third quarter net income of $10 million, or 23-cents per diluted share, up from net income of $6 million, or 14-cents per diluted share in third quarter 2004. Adjusted for the items below, net income rose to $12 million, or 27-cents per diluted share, compared with $7 million, or 16-cents per diluted share a year ago. The company reported third quarter revenue of $1.096 billion, up from $996 million a year ago.

EBIT (earnings before interest, taxes and minority interest) was $50 million compared with $44 million in third quarter 2004. EBITDA (EBIT before depreciation and amortization) was $94 million, up from $86 million the previous year. On an adjusted basis, EBIT was $52 million, up from $46 million a year ago and EBITDA was $96 million, 10% higher than $88 million the previous year. See the tables attached to the press release, which reconcile GAAP results to non-GAAP results.

Adjusted third quarter 2005 and 2004 results: Q3 2005 Q3 2004 Net Per Net Per EBITDA EBIT Income Share EBITDA EBIT Income Share Earnings Measures $94 $50 $10 $0.23 $86 $44 $6 $0.14 Adjustments (reflects non-GAAP measures): Restruct- uring and re- structuring related expenses 2 2 2 0.04 2 2 2 0.04 Tax adjust- ments - - - - - - (1) (0.02) Non-GAAP earnings measures $96 $52 $12 $0.27 $88 $46 $7 $0.16 Third quarter 2005 adjustments: -- Restructuring related expenses of $2 million pre-tax, or 4-cents per diluted share. Third quarter 2004 adjustments: -- Restructuring related expenses of $2 million pre-tax, or 4-cents per diluted share; -- Tax benefit of $1 million, or 2-cents per diluted share.

The quarterly revenue of $1.096 billion was the company's 14th consecutive quarter of year-over-year revenue growth. The increase over $996 million in third quarter 2004 was driven by higher global original equipment (OE) production volumes and $19 million in favorable currency.

Tenneco Automotive's performance in the third quarter was driven by its platform mix with products on strong selling vehicles globally; improved aftermarket ride control volumes in North America and Europe; benefits from the company's ongoing manufacturing efficiency programs; and reduced costs through tight controls on discretionary spending. These efforts helped offset the negative impact of higher material costs and higher transportation costs due to fuel surcharges.

"We delivered another solid quarter in spite of very challenging market conditions," said Mark P. Frissora, chairman, CEO and president, Tenneco Automotive. "Our ability to execute on consistent strategies for growing the top-line while managing costs is proving successful despite lower OE industry production volumes in North America and Europe, our two largest markets, and the impact of higher material and fuel costs globally."

Cash generated by operations in the quarter was $33 million, which on a year-over-year comparison basis includes a $9 million negative impact from the discontinuation of General Motor's advanced payment program and a $20 million cash outflow for incremental pension contributions. Cash generated by operations was $76 million for the same period one year ago. The remaining difference in the year-over-year comparison was due to working capital requirements -- primarily in accounts receivables -- to support approximately $100 million in higher revenue in the quarter.

At quarter-end, total debt was $1.429 billion, compared with $1.423 billion the previous year. Debt net of cash was $1.340 billion versus $1.220 billion a year ago, primarily due to the discontinuation of advance payment programs by General Motors, Ford and DaimlerChrysler, which increased debt by $103 million over the last 12 months. Debt net of cash at June 30, 2005 was $1.346 billion.

During the quarter, Tenneco resolved a commercial lawsuit that is recorded as other income and settled a customer issue, which is netted against revenue. The net of these transactions had no financial impact on the company's operating results.

The company's gross margin decreased 1.2 percentage points year-over-year to 18.9%. Gross margin was negatively impacted by higher steel costs, fuel surcharges on transportation costs and a shifting business mix between Europe and North America, and between OE and aftermarket businesses. Additionally, resolution of the OE customer issue mentioned above reduced gross margin. These factors offset savings and improved efficiencies from Lean manufacturing, Six Sigma and other cost reduction initiatives.

Total steel cost increases in the third quarter were $33 million, which were largely offset by the company's cost reduction efforts, including SGA&E restructuring savings, material cost savings, Six Sigma program savings and Lean manufacturing efficiencies as well as steel cost recovery from OE and aftermarket customers. Based on the company's efforts to offset increased steel costs and trends in the steel market, the company doesn't currently anticipate a significant year-over-year impact on operating results through the remainder of 2005.

Sales, General, Administrative and Engineering (SGA&E) expense in the quarter was 10.8% of sales versus 11.3% a year ago. SGA&E improvement was driven by higher revenues, cutbacks on discretionary spending and benefits from previously announced restructuring programs.

Tenneco Automotive continued to outperform its bank debt covenants in the quarter. At September 30, the leverage ratio was 3.39, lower than the maximum limit of 4.50; the fixed charge ratio was 2.05, exceeding the minimum ratio of 1.10; and the interest coverage ratio was 3.12, exceeding the minimum ratio of 2.00.

NORTH AMERICA -- North American OE revenue was up 9% to $369 million, versus $338 million a year ago. Excluding the impact of currency and catalytic converter pass-through sales, revenue was up 11%, outperforming a light vehicle market production decline of 2%. The increase was driven by the company's platform mix with products on strong selling vehicles. -- North American aftermarket revenue was $133 million, up 5% year-over- year. Stronger ride control volumes and price increases in both product lines helped offset lower emission control volumes. -- EBIT for North American operations was $37 million, versus $31 million in third quarter 2004. Stronger OE volumes and manufacturing efficiencies more than offset unrecovered steel costs, higher advertising costs to support the company's ride control aftermarket product lines and the launch costs for its new line of aftermarket brake products. EUROPE, SOUTH AMERICA, INDIA -- European OE revenue was $341 million, versus $305 million a year ago. Adjusted for favorable currency, catalytic converter pass-through sales and a change in reporting for a customer contract, revenue was up 14%. The year-over-year improvement -- despite a market production decline of 1% -- was driven by the continued ramp up of new launches and a favorable platform mix with product on many of the better selling vehicles. -- European aftermarket revenue was $97 million, versus $94 million the previous year. The 3% improvement was primarily due to stronger ride control volumes and price increases in both product lines. -- South America and India revenue was $62 million, including $8 million in favorable currency, compared with $45 million a year ago. Stronger OE volumes drove the increase. -- EBIT for Europe, South America and India was $9 million, versus $10 million in third quarter 2004. The EBIT decrease was the result of currency transactional losses with a $2 million negative impact, manufacturing inefficiencies due to inventory reductions in the quarter, costs for implementing a resource planning system for the company's European emission control business and a reserve increase related to a pending legal settlement. -- Third quarter 2004 and 2005 EBIT results include $2 million in restructuring related expenses. ASIA PACIFIC -- Asia operations generated $38 million in revenue, versus $37 million a year ago. -- Australian revenue increased to $56 million from $50 million the previous year, largely driven by $4 million in favorable currency. -- EBIT for Asia Pacific operations was $4 million, up from $3 million a year ago. EBIT was up despite OE revenue weakness in China and investments to increase Tenneco's aftermarket presence there. YEAR-TO-DATE RESULTS

Through the first nine months of the year, Tenneco Automotive reported net income of $50 million, or $1.11 per diluted share, versus net income of $34 million, or 78-cents per diluted share for the first nine months of 2004. On an adjusted basis, year-to-date 2005 net income was $56 million, or $1.24 per diluted share, versus adjusted net income of $44 million, or $1.01 per diluted share for the same period one year ago.

Year-to-date EBIT was $177 million, compared with EBIT of $153 million for the first nine months of 2004. Adjusted EBIT was $184 million versus $177 million a year ago. Year-to-date 2005 EBITDA was $311 million, compared with $284 million a year ago, and adjusted EBITDA was $318 million, versus adjusted EBITDA of $308 million for the same period a year ago.

OUTLOOK

"We do not expect an immediate turnaround in OE production rates in North America or Europe, and we are closely monitoring the aftermarket in those regions for a potential drop in consumer spending on vehicle maintenance due to higher fuel prices. This landscape, coupled with continuing increases in material costs and the impact of higher fuel costs on our transportation expenses, creates a tough operating environment going forward," Frissora said. "As a result, we will continue to focus on those areas within our control- namely executing with discipline on the fundamentals and maintaining a relentless focus on costs. We should also continue to benefit from our balance and diversification in terms of products, markets served and customers. Finally, we will capitalize on opportunities to win incremental OE and aftermarket business from our competitors."

Attachment 1: Statements of Income - 3 Months Statements of Income - 9 Months Balance Sheet Statements of Cash Flow Attachment 2: Reconciliation of GAAP Net Income to EBITDA - 3 Months Reconciliation of GAAP to Non-GAAP Earnings Measures - 3 Months Reconciliation of GAAP Revenues to Non-GAAP Revenue Measures - 3 Months Reconciliation of GAAP Net Income to EBITDA - 9 Months Reconciliation of GAAP to Non-GAAP Earnings Measures - 9 Months Reconciliation of GAAP Revenues to Non-GAAP Revenue Measures - 9 Months CONFERENCE CALL

The company will host a conference call on Tuesday, October 25, 2005 at 10:30 a.m. EDT. The dial in number is 888-790-1408 (domestic) or 1-773-756- 0157 (international). The pass code is Tenneco Auto. The call and accompanying slides will be available on the financial section of the Tenneco Automotive web site at http://www.tenneco-automotive.com/ . A recording of the call will be available one hour following completion of the call on October 25, 2005. To access this recording, dial 866-365-2447 domestic or 203-369- 0216 international. The purpose of the call is to discuss the company's operations for the third quarter, as well as other matters that may impact the company's outlook. A copy of the press release is available on the financial and news sections of the Tenneco Automotive web site.

Tenneco Automotive is a $4.2 billion manufacturing company with headquarters in Lake Forest, Illinois and approximately 18,400 employees worldwide. Tenneco Automotive is one of the world's largest designers, manufacturers and marketers of emission control and ride control products and systems for the automotive original equipment market and the aftermarket. Tenneco Automotive markets its products principally under the Monroe(R), Walker(R), Gillet(R) and Clevite(R)Elastomer brand names. Among its products are Sensa-Trac(R) and Monroe Reflex(R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(R) mufflers, Dynomax(R) performance exhaust products, and Clevite(R)Elastomer noise, vibration and harshness control components.

This press release contains forward-looking statements. Words such as "continue," "will," "expects," "believe," "plans," and similar expressions identify forward-looking statements. These forward-looking statements are based on the current expectations of the company (including its subsidiaries). Because these forward-looking statements involve risks and uncertainties, the company's plans, actions and actual results could differ materially. Among the factors that could cause these plans, actions and results to differ materially from current expectations are: (i) changes in automotive manufacturers' production rates and their actual and forecasted requirements for the company's products, including the overall highly competitive nature of the automotive parts industry, and the company's resultant inability to realize the sales represented by its awarded book of business which is based on anticipated pricing for the applicable program over its life, and is subject to increases or decreases due to changes in customer requirements, customer and consumer preferences, and the number of vehicles actually produced by customers; (ii) increases in the costs of raw materials, including the company's ability to successfully reduce the impact of any such cost increases through materials substitutions, cost reduction initiatives and other methods; (iii) the cyclical nature of the global vehicular industry, including the performance of the global aftermarket sector, and changes in consumer demand and prices, including longer product lives of automobile parts and the cyclicality of automotive production and sales of automobiles which include the company's products, and the potential negative impact on the company's revenues and margins from such products; (iv) the company's continued success in cost reduction and cash management programs and its ability to execute restructuring and other cost reduction plans and to realize anticipated benefits from these plans; (v) the general political, economic and competitive conditions in markets and countries where the company and its subsidiaries operate, including the strength of other currencies relative to the U.S. Dollar and currency fluctuations and other risks associated with operating in foreign countries; (vi) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals; (vii) changes in capital availability or costs, including increases in the company's costs of borrowing (i.e., interest rate increases), the amount of the company's debt, the ability of the company to access capital markets and the credit ratings of the company's debt; (viii) the cost and outcome of existing and any future legal proceedings, and compliance with changes in regulations, including environmental regulations; (ix) workforce factors such as strikes or labor interruptions; (x) the company's ability to develop and profitably commercialize new products and technologies, and the acceptance of such new products and technologies by the company's customers and the market; (xi) further changes in the distribution channels for the company's aftermarket products, further consolidations among automotive parts customers and suppliers, and product warranty costs; (xii) changes by the Financial Accounting Standards Board or other accounting regulatory bodies to authoritative generally accepted accounting principles or policies; (xiii) acts of war, riots or terrorism, including, but not limited to the events taking place in the Middle East, the current military action in Iraq and the continuing war on terrorism, as well as actions taken or to be taken by the United States or other governments as a result of further acts or threats of terrorism, and the impact of these acts on economic, financial and social conditions in the countries where the company operates and (xiv) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond the control of the company and its subsidiaries. The company undertakes no obligation to update any forward- looking statement to reflect events or circumstances after the date of this press release. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company's SEC filings, including but not limited to its report on Form 10-K for the year ended December 31, 2004. Further information can be found on the company's web site at http://www.tenneco-automotive.com/ .

ATTACHMENT 1 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF INCOME Unaudited THREE MONTHS ENDED SEPTEMBER 30, (Millions except share and per share amounts) 2005 2004 Net sales and operating revenues $1,096 $996 Costs and Expenses Cost of Sales (exclusive of depreciation shown below) 889 (a) 796 (b) Engineering, Research and Development 22 20 Selling, General and Administrative 96 93 Depreciation and Amortization of Other Intangibles 44 42 Total Costs and Expenses 1,051 951 Loss on sale of receivables (1) - Other Income (Expense) 6 (1) Total Other Income (Expense) 5 (1) Income before Interest Expense, Income Taxes, and Minority Interest North America 37 31 Europe & South America 9 (a) 10 (b) Asia Pacific 4 3 50 44 Less: Interest expense (net of interest capitalized) 33 35 Income tax expense 7 2 (c) Minority interest - 1 Net income $10 $6 Average common shares outstanding: Basic 43.3 41.7 Diluted 45.6 44.3 Earnings per share of common stock: Basic $0.25 $0.15 Diluted $0.23 $0.14 (a) Includes restructuring and restructuring related charges of $2 million pre-tax, $2 million after tax or $0.04 per share. The entire $2 million adjustment is recorded in cost of sales and geographically in Europe and South America. (b) Includes restructuring and restructuring related charges of $2 million pre-tax, $2 million after tax or $0.04 per share. The entire charge is recorded in cost of sales. Geographically, the entire amount is recored in Europe and South America. (c) Includes a $1 million or $0.02 per share tax benefit related to the resolution of outstanding tax issues. ATTACHMENT 1 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF INCOME Unaudited NINE MONTHS ENDED SEPTEMBER 30, (Millions except share and per share amounts) 2005 2004 Net sales and operating revenues $3,377 $3,142 (c) Costs and Expenses Cost of Sales (exclusive of depreciation shown below) 2,718 (a) 2,498 (d) Engineering, Research and Development 64 56 Selling, General and Administrative 287 (a) 302 (c) (d) (e) Depreciation and Amortization of Other Intangibles 134 131 Total Costs and Expenses 3,203 2,987 Loss on sale of receivables (2) (1) Other Income (Expense) 5 (1) Total Other Income (Expense) 3 (2) Income before Interest Expense, Income Taxes, and Minority Interest North America 126 (a) 111 (c) (d) (e) Europe & South America 41 (a) 26 (d) (e) Asia Pacific 10 16 (e) 177 153 Less: Interest expense (net of interest capitalized) 97 104 Income tax expense 29 (b) 11 (f) Minority interest 1 4 Net income $50 $34 Average common shares outstanding: Basic 43.0 41.3 Diluted 45.2 44.0 Earnings per share of common stock: Basic $1.17 $0.84 Diluted $1.11 $0.78 (a) Includes restructuring and restructuring related charges of $7 million pre-tax, $5 million after tax or $0.11 per share. Of the adjustment $6 million is recorded in cost of sales and $1 million is in SG&A. Geographically, $2 million is recorded in North America and $5 million in Europe and South America. (b) Includes a $1 million or $0.02 per share tax expense primarily related to adjusting state tax net operating loss carry forwards. (c) Includes changeover costs for a new aftermarket customer acquired in the first quarter of $8 million pre-tax, $5 million after-tax or $0.13 per share. Of the adjustment $6 million is recorded in Sales and $2 million is recorded in SG&A. Geographically all of the charge is recorded in North America. (d) Includes restructuring and restructuring related charges of $12 million pre-tax, $8 million after tax or $0.18 per share. Of the adjustment $2 million is recorded in SG&A and the remaining $10 million is in cost of sales. Geographically, $3 million is recorded in North America and $9 million in Europe and South America. (e) Includes consulting fees indexed to stock price of $4 million pre- tax, $3 million after-tax or $0.06 per share. The entire charge is recorded in SG&A. Geographically $2 million of the charge is recorded in North America, $1 million in Europe and South America and $1 million in Asia Pacific. (f) Includes a $6 million or $0.14 per share tax benefit related to the resolution of outstanding tax issues. ATTACHMENT 1 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES BALANCE SHEET (Unaudited) (Millions) September 30, 2005 December 31, 2004 Assets Cash and Cash Equivalents $89 $214 Receivables, Net 675 488 Inventories 395 396 Other Current Assets 179 194 Investments and Other Assets 661 693 Plant, Property, and Equipment, Net 1,051 1,134 Total Assets $3,050 $3,119 Liabilities and Shareholders' Equity Short-Term Debt $71 $19 Accounts Payable 716 696 Accrued Taxes 30 24 Accrued Interest 33 35 Other Current Liabilities 263 273 Long-Term Debt 1,358 1,401 Deferred Income Taxes 70 126 Deferred Credits and Other Liabilities 336 362 Minority Interest 23 24 Total Shareholders' Equity 150 159 Total Liabilities and Shareholders' Equity $3,050 $3,119 (a) Accounts Receivables net of: September 30, 2005 December 31, 2004 Accounts Receivable securitization programs $146 $124 Receivables collected under advance payment programs $- $132 (b) Long term debt composed of: September 30, 2005 December 31, 2004 Term loan B (Due 2010) $356 $392 10.25% senior notes (Due 2013) 489 490 8.625% subordinated notes (Due 2014) 500 500 Other long term debt 13 19 $1,358 $1,401 ATTACHMENT 1 Tenneco Automotive Inc. and Consolidated Subsidiaries Statements of Cash Flows (Unaudited) (Millions) Nine Months Ended September 30, 2005 2004 Operating activities: Net income $50 $34 Adjustments to reconcile net income to net cash provided (used) by operating activities - Depreciation and amortization of other intangibles 134 131 Deferred income taxes 3 (12) (Gain)/loss on sale of assets, net 2 1 Changes in components of working capital (net of acquisition)- (Inc.)/dec. in receivables (209) (66) (Inc.)/dec. in inventories (22) (22) (Inc.)/dec. in prepayments and other current assets (23) (21) Inc./(dec.) in payables 52 55 Inc./(dec.) in taxes accrued 11 5 Inc./(dec.) in interest accrued (2) - Inc./(dec.) in other current liabilities 5 21 Other (39) 9 Net cash provided (used) by operating activities (38) 135 Investing activities: Net proceeds from sale of assets 4 12 Expenditures for plant, property & equipment (100) (87) Acquisition of business (11) - Investments and other 1 - Net cash used by investing activities (106) (75) Financing activities: Issuance of common shares 6 6 Issuance of long-term debt 1 - Retirement of long-term debt (43) (6) Net inc./(dec.) in short-term debt excluding current maturities on long-term debt 56 1 Other 1 1 Net cash provided by financing activities 21 2 Effect of foreign exchange rate changes on cash and cash equivalents (2) (4) Inc./(dec.) in cash and cash equivalents (125) 58 Cash and cash equivalents, January 1 214 145 Cash and cash equivalents, September 30 $89 $203 Cash paid during the period for interest $94 $106 Cash paid during the period for income taxes $16 $15 TENNECO AUTOMOTIVE ATTACHMENT 2 RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA Unaudited Q3 2005 North Europe Asia America & SA Pacific Total Net income $10 Income tax expense 7 Interest expense (net of interest capitalized) 33 EBIT, Income before interest expense, income taxes and minority interest (GAAP measure) 37 9 4 50 Depreciation and amortization of other intangibles 22 19 3 44 Total EBITDA(2) $59 $28 $7 $94 Q3 2004 North Europe Asia America & SA Pacific Total Net income $6 Minority interest 1 Income tax expense 2 Interest expense (net of interest capitalized) 35 EBIT, Income before interest expense, income taxes and minority interest (GAAP measure) 31 10 3 44 Depreciation and amortization 23 17 2 42 Total EBITDA $54 $27 $5 $86 (1) Generally Accepted Accounting Principles (2) EBITDA represents income before interest expense, income taxes, minority interest and depreciation and amortization. EBITDA is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA should not be considered as an alternative to net income or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco Automotive has presented EBITDA because it regularly reviews EBITDA as a measure of the company's performance. In addition, Tenneco Automotive believes its debt holders utilize and analyze our EBITDA for similar purposes. Tenneco Automotive also believes EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. TENNECO AUTOMOTIVE ATTACHMENT 2 RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2) Unaudited Q3 2005 Q3 2004 EBITDA Net Per EBITDA Net Per (3) EBIT Income Share (3) EBIT Income Share Earnings Measures $94 $50 $10 $0.23 $86 $44 $6 $0.14 Adjustments (reflects non-GAAP measures): Restructuring and restructuring related expenses 2 2 2 0.04 2 2 2 0.04 Tax adjustments - - - - - - (1) (0.02) Non-GAAP earnings measures $96 $52 $12 $0.27 $88 $46 $7 $0.16 Q3 2005 North Europe Asia America & SA Pacific Total EBIT $37 $9 $4 $50 Restructuring and restructuring related expenses 2 - 2 Adjusted EBIT $37 $11 $4 $52 Q3 2004 North Europe Asia America & SA Pacific Total EBIT $31 $10 $3 $44 Restructuring and restructuring related expenses - 2 - 2 Adjusted EBIT $31 $12 $3 $46 (1) Generally Accepted Accounting Principles (2) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP earnings measures in order to reflect the results for the third quarters of 2005 and 2004 in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business. The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period. (3) EBITDA represents income before interest expense, income taxes, minority interest and depreciation and amortization. EBITDA is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA should not be considered as an alternative to net income or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco Automotive has presented EBITDA because it regularly reviews EBITDA as a measure of the company's performance. In addition, Tenneco Automotive believes its debt holders utilize and analyze our EBITDA for similar purposes. Tenneco Automotive also believes EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. TENNECO AUTOMOTIVE ATTACHMENT 2 RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA Unaudited YTD 2005 North Europe Asia America & SA Pacific Total Net income $50 Minority interest 1 Income tax expense 29 Interest expense (net of interest capitalized) 97 EBIT, Income before interest expense, income taxes and minority interest (GAAP measure) 126 41 10 177 Depreciation and amortization of other intangibles 68 57 9 134 Total EBITDA(2) $194 $98 $19 $311 YTD 2004 North Europe Asia America & SA Pacific Total Net income $34 Minority interest 4 Income tax expense 11 Interest expense (net of interest capitalized) 104 EBIT, Income before interest expense, income taxes and minority interest (GAAP measure) 111 26 16 153 Depreciation and amortization 71 52 8 131 Total EBITDA $182 $78 $24 $284 (1) Generally Accepted Accounting Principles (2) EBITDA represents income before interest expense, income taxes, minority interest and depreciation and amortization. EBITDA is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA should not be considered as an alternative to net income or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco Automotive has presented EBITDA because it regularly reviews EBITDA as a measure of the company's performance. In addition, Tenneco Automotive believes its debt holders utilize and analyze our EBITDA for similar purposes. Tenneco Automotive also believes EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. TENNECO AUTOMOTIVE ATTACHMENT 2 RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2) Unaudited YTD 2005 YTD 2004 EBITDA Net Per EBITDA Net Per (3) EBIT Income Share (3) EBIT Income Share Earnings Measures $311 $177 $50 $1.11 $284 $153 $34 $0.78 Adjustments (reflects non-GAAP measures): Restructuring and restructuring related expenses 7 7 5 0.11 12 12 8 0.18 New Aftermarket customer changeover costs - - - - 8 8 5 0.13 Consulting fees indexed to stock price - - - - 4 4 3 0.06 Tax adjustments - - 1 0.02 - - (6) (0.14) Non-GAAP earnings measures $318 $184 $56 $1.24 $308 $177 $44 $1.01 YTD 2005 North Europe Asia America & SA Pacific Total EBIT $126 $41 $10 $177 Restructuring and restructuring related expenses 2 5 - 7 Adjusted EBIT $128 $46 $10 $184 YTD 2004 North Europe Asia America & SA Pacific Total EBIT $111 $26 $16 $153 Restructuring and restructuring related expenses 3 9 - 12 New Aftermarket customer changeover costs 8 - - 8 Consulting fees indexed to stock price 2 1 1 4 Adjusted EBIT $124 $36 $17 $177 (1) Generally Accepted Accounting Principles (2) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP earnings measures in order to reflect the results for the six months of 2005 and 2004 in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business. The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period. (3) See Reconciliation of GAAP Net Income to EBITDA on previous page. EBITDA represents income before interest expense, income taxes, minority interest and depreciation and amortization. EBITDA is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA should not be considered as an alternative to net income or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco Automotive has presented EBITDA because it regularly reviews EBITDA as a measure of the company's performance. In addition, Tenneco Automotive believes its debt holders utilize and analyze our EBITDA for similar purposes. Tenneco Automotive also believes EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. TENNECO AUTOMOTIVE ATTACHMENT 2 RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES Unaudited Q3 2005 Pass- Revenues through Excluding Sales Currency Revenues Excluding and Pass Currency Excluding Currency -through Revenues Impact Currency Impact Sales North America Original Equipment Ride Control $120 $- $120 $- $120 Exhaust 249 3 246 69 177 Total North America Original Equipment 369 3 366 69 297 North America Aftermarket Ride Control 90 - 90 - 90 Exhaust 43 - 43 - 43 Total North America Aftermarket 133 - 133 - 133 Total North America 502 3 499 69 430 Europe Original Equipment Ride Control 84(a) 3 81 - 81(a) Exhaust 257 1 256 76 180 Total Europe Original Equipment 341 4 337 76 261 Europe Aftermarket Ride Control 46 - 46 - 46 Exhaust 51 - 51 - 51 Total Europe Aftermarket 97 - 97 - 97 South America & India 62 8 54 6 48 Total Europe & South America 500 12 488 82 406 Asia 38 - 38 10 28 Australia 56 4 52 4 48 Total Asia Pacific 94 4 90 14 76 Total Tenneco Automotive $1,096 $19 $1,077 $165 $912 Q3 2004 Pass- Revenues through Excluding Sales Currency Revenues Excluding and Pass Currency Excluding Currency -through Revenues Impact Currency Impact Sales North America Original Equipment Ride Control $108 $- $108 $- $108 Exhaust 230 - 230 71 159 Total North America Original Equipment 338 - 338 71 267 North America Aftermarket Ride Control 83 - 83 - 83 Exhaust 44 - 44 - 44 Total North America Aftermarket 127 - 127 - 127 Total North America 465 - 465 71 394 Europe Original Equipment Ride Control 81(a) - 81 - 81(a) Exhaust 224 - 224 74 150 Total Europe Original Equipment 305 - 305 74 231 Europe Aftermarket Ride Control 44 - 44 - 44 Exhaust 50 - 50 - 50 Total Europe Aftermarket 94 - 94 - 94 South America & India 45 - 45 4 41 Total Europe & South America 444 - 444 78 366 Asia 37 - 37 12 25 Australia 50 - 50 4 46 Total Asia Pacific 87 - 87 16 71 Total Tenneco Automotive $996 $- $996 $165 $831

Tenneco Automotive presents the above reconciliation of revenues in order to reflect the trend in the company's sales, in various product lines and geographical regions, separately from the effects of doing business in currencies other than the U.S. dollar. Additionally, pass-through catalytic converter sales include precious metals pricing, which may be volatile. While Tenneco Automotive's original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding pass-through catalytic converter sales removes this impact. Tenneco Automotive uses this information to analyze the trend in revenues before these factors. Tenneco Automotive believes investors find this information useful in understanding period to period comparisons in the company's revenues.

(a) Beginning in the second quarter of 2005, Tenneco Automotive changed its accounting for a customer contract in its European OE Ride Control unit. The cost of sales for this contract are now netted against the revenues, reducing reported revenues and cost of sales. In the third quarter of 2004, Tenneco Automotive recorded $15 million in revenues for this contract. TENNECO AUTOMOTIVE ATTACHMENT 2 RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES Unaudited Nine Months Ended September 30, 2005 Pass- Revenues through Excluding Sales Currency Revenues Excluding and Pass Currency Excluding Currency -through Revenues Impact Currency Impact Sales North America Original Equipment Ride Control $378 $- $378 $- $378 Exhaust 756 8 748 204 544 Total North America Original Equipment 1,134 8 1,126 204 922 North America Aftermarket Ride Control 284 - 284 - 284 Exhaust 125 - 125 - 125 Total North America Aftermarket 409 - 409 - 409 Total North America 1,543 8 1,535 204 1,331 Europe Original Equipment Ride Control 291(a) 19 272 - 272(a) Exhaust 813 27 786 236 550 Total Europe Original Equipment 1,104 46 1,058 236 822 Europe Aftermarket Ride Control 134 3 131 - 131 Exhaust 154 4 150 - 150 Total Europe Aftermarket 288 7 281 - 281 South America & India 172 18 154 13 141 Total Europe & South America 1,564 71 1,493 249 1,244 Asia 108 1 107 34 73 Australia 162 9 153 13 140 Total Asia Pacific 270 10 260 47 213 Total Tenneco Automotive $3,377 $89 $3,288 $500 $2,788 Nine Months Ended September 30, 2004 Pass- Revenues through Excluding Sales Currency Revenues Excluding and Pass Currency Excluding Currency -through Revenues Impact Currency Impact Sales North America Original Equipment Ride Control $346 $- $346 $- $346 Exhaust 752 - 752 243 509 Total North America Original Equipment 1,098 - 1,098 243 855 North America Aftermarket Ride Control 268 - 268 - 268 Exhaust 125 - 125 - 125 Total North America Aftermarket 393 - 393 - 393 Total North America 1,491 - 1,491 243 1,248 Europe Original Equipment Ride Control 257(a) - 257 - 257(a) Exhaust 719 - 719 232 487 Total Europe Original Equipment 976 - 976 232 744 Europe Aftermarket Ride Control 133 - 133 - 133 Exhaust 144 - 144 - 144 Total Europe Aftermarket 277 - 277 - 277 South America & India 121 - 121 11 110 Total Europe & South America 1,374 - 1,374 243 1,131 Asia 127 - 127 45 82 Australia 150 - 150 12 138 Total Asia Pacific 277 - 277 57 220 Total Tenneco Automotive $3,142 $- $3,142 $543 $2,599

Tenneco Automotive presents the above reconciliation of revenues in order to reflect the trend in the company's sales, in various product lines and geographical regions, separately from the effects of doing business in currencies other than the U.S. dollar. Additionally, pass-through catalytic converter sales include precious metals pricing, which may be volatile. While Tenneco Automotive's original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding pass-through catalytic converter sales removes this impact. Tenneco Automotive uses this information to analyze the trend in revenues before these factors. Tenneco Automotive believes investors find this information useful in understanding period to period comparisons in the company's revenues.

(a) Beginning in the second quarter of 2005, Tenneco Automotive changed its accounting for a customer contract in its European OE Ride Control unit. The cost of sales for this contract are now netted against the revenues, reducing reported revenues and cost of sales. In the second and third quarters of 2004, Tenneco Automotive recorded $30 million in revenues for this contract.