EXHIBIT 99.1
TENNECO AUTOMOTIVE GROWS REVENUE AND IMPROVES OPERATIONAL PROFIT
o Record quarterly revenue of $1.03 billion
o First quarter EBIT up 5 percent -- adjusted EBIT up 33 percent
o Adjusted EPS improves significantly
o Record low debt net of cash balances of $1.277 billion at quarter-end
Lake Forest, Illinois, April 20, 2004 - Tenneco Automotive (NYSE: TEN) announced
today that the company reported a first quarter 2004 net loss of $2 million, or
5-cents per share, compared with net income of $1 million, or 2-cents per
diluted share, in the first quarter of 2003. The company's reported EBIT
(earnings before interest, taxes, and minority interest) increased 5 percent to
$33 million versus $31 million in first quarter 2003. EBITDA (EBIT before
depreciation and amortization expense) increased to $78 million compared with
$70 million in first quarter 2003. (See the table that reconciles EBITDA in
attachment 2 to the press release.)
Adjusted for the items described below, first quarter 2004 net income was $6
million, or 15-cents per diluted share, versus 1-cent per diluted share in first
quarter 2003, and first quarter 2004 EBIT was $47 million compared to $36
million in first quarter 2003.
ADJUSTED FIRST QUARTER 2004 AND 2003 RESULTS:
<Table>
<Caption>
Q1-2004 Q1-2003
----------------------------------------- -----------------------------------------
EBIT NET INCOME PER SHARE EBIT NET INCOME PER SHARE
---------- ---------- ---------- ---------- ---------- ----------
GAAP earnings
measures $ 33 $ (2) $ (0.05) $ 31 $ 1 $ 0.02
Adjustments:
Restructuring/
restructuring
related expenses 5 3 0.07 5 2 0.07
Tax settlement
adjustment -- -- -- -- (3) (0.08)
New Aftermarket
customer
changeover costs 6 3 0.08 -- -- --
Consulting fees indexed
to stock price 3 2 0.05 -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Non-GAAP earnings
measures $ 47 $ 6 $ 0.15 $ 36 $ -- $ 0.01
========== ========== ========== ========== ========== ==========
</Table>
Additional information regarding Non GAAP financial results, including a
reconciliation to GAAP results is included in the tables which appear as
Attachment 2 to this press release.
1
FIRST QUARTER 2004 ADJUSTMENTS:
o Restructuring and restructuring related costs of $5 million pre-tax, $3
million after-tax, or 7-cents per diluted share;
o Expenses of $6 million pre-tax, $3 million after-tax, or 8-cents per
diluted share, associated with the changeover costs for a major new
aftermarket customer;
o Expenses of $3 million pre-tax, $2 million after-tax, or 5-cents per
diluted share, related to consulting fees indexed to the stock price
based on a 1999 agreement for implementing EVA(R), a shareholder value
improvement initiative.
FIRST QUARTER 2003 ADJUSTMENTS:
o Restructuring and restructuring related costs of $5 million pre-tax, $2
million after-tax, or 7-cents per diluted share;
o Tax benefit of $3 million, or 8-cents per diluted share.
"We continue to build momentum toward achieving our long-term objectives as
evidenced by our strong revenue generation of more than $1 billion in the
quarter and a 33 percent improvement in operating income on an adjusted basis,"
said Mark P. Frissora, chairman and CEO, Tenneco Automotive. "We are
aggressively pursuing growth opportunities globally while maintaining our
relentless focus on cost management and operational efficiency improvements."
Interest expense in the first quarter 2004 was $4 million higher than the same
period one year ago as a result of the debt refinancing initiatives the company
implemented in 2003. The 2003 debt refinancing initiatives improved the
company's financial flexibility by providing a committed long-term source of
liquidity and extending nearly all of its debt maturities to 2009 and beyond.
Cash flow before financing activities was a use of $2 million in the quarter
compared with cash inflow of $10 million in the first quarter of 2003. Cash used
for working capital was an outflow of $26 million in the quarter as a result of
higher receivables related to sales volumes and higher inventory levels due to
new customers and seasonal inventory builds in anticipation of the aftermarket
summer selling period. This outflow was partially offset by $11 million in
proceeds from the sale of the company's facility in Birmingham, U.K. Cash flow
performance resulted in end of quarter cash balances of $149 million and total
debt of $1.426 billion, or debt net of cash balances of $1.277 billion.
Tenneco Automotive outperformed the requirements of its bank debt covenants in
the quarter. At March 31, the leverage ratio was 3.97, below the maximum limit
of 5.00; the fixed charge coverage ratio was 1.76, exceeding the minimum
required ratio of 1.10; and the interest coverage ratio was 2.77, exceeding the
minimum coverage ratio of 2.00.
The company reported record high quarterly revenue of $1.03 billion, up 12
percent compared with $921 million in first quarter 2003. Favorable currency
exchange rates benefited revenue by $62 million in the quarter. Excluding the
impact of favorable currency, revenue was up 5 percent.
The company's operational improvement initiatives continued to generate savings.
Six Sigma programs generated $5 million in savings toward a 2004 goal of $20
million and the company realized $6 million in incremental savings from
restructuring activities including $2 million from Project Genesis
restructuring. The company's gross margin in the quarter was 19.7 percent, an
increase over first quarter 2003 gross margin of 19.3 percent.
"Our original equipment revenue in both North America and Europe outpaced market
production as we continue to benefit from our position on top-selling vehicle
platforms globally and our established presence with Japanese original equipment
manufacturers," said Frissora. "Our results continue to be negatively impacted
by the European aftermarket business. However, I am encouraged with the
strengthening in our North American aftermarket business, where we launched
significant new ride control business this quarter and where we have seen six
consecutive months of improvement in the exhaust segment."
NORTH AMERICA
o North American original equipment revenue was $381 million, up 2 percent
compared with $373 million in first quarter 2003 and versus a market
production decline of 1 percent. Excluding the impact of currency and
catalytic converter pass-through sales, revenue was up 1 percent. The
company's strong position on high volume OE models drove the increase.
2
o North American aftermarket revenue was $122 million, up 13 percent
compared with first quarter 2003 revenue of $108 million. The increase
was primarily the result of a 19 percent increase in ride control sales,
largely driven by new customers as well as sales of the company's new
car care appearance products.
o EBIT for North American operations was $30 million versus $28 million in
first quarter 2003. The EBIT increase was due to strong OE and
aftermarket volumes and improved manufacturing efficiencies.
o First quarter 2004 EBIT results include $2 million in restructuring and
restructuring related costs; $6 million related to changeover costs with
a new aftermarket customer (the company anticipates up to $3 million in
additional changeover costs through the end of 2004); and a $1 million
expense for consulting fees indexed to the stock price based on a 1999
agreement. First quarter 2003 EBIT results include $3 million in
restructuring and restructuring related expenses.
o Excluding the above items, first quarter 2004 North America adjusted
EBIT was $39 million, versus adjusted 2003 EBIT of $31 million.
EUROPE
o European original equipment revenue increased 22 percent to $328
million, versus $269 million in first quarter 2003, despite a 1 percent
market decline in light vehicle production. Excluding catalytic
converter pass-through sales and the impact of favorable currency
exchange rates, revenue increased 13 percent.
o The company's European aftermarket revenue was $80 million compared with
$76 million in first quarter 2003. Excluding the favorable currency
impact, revenue was down 8 percent. Continued lower demand for exhaust
products and softer ride control sales negatively impacted European
aftermarket results.
o European EBIT was a loss of $3 million compared with a first quarter
2003 loss of $1 million. Aftermarket volume declines and overcapacity in
the aftermarket exhaust segment more than offset the benefit of higher
OE ride control volumes, manufacturing efficiencies and tight spending
controls. Europe's operational improvement was also negatively impacted
by pull-forward pricing adjustments made for two OE customers; higher
aftermarket promotional costs; higher depreciation expenses related to
five new just-in-time (JIT) manufacturing facilities opened within the
past year; and higher stock-based compensation costs, which when
combined, totaled $6 million. First quarter 2004 EBIT benefited from $1
million of favorable currency translation.
o First quarter 2004 European EBIT results include $3 million in
restructuring and restructuring related costs; and a $1 million expense
for consulting fees indexed to the stock price based on a 1999
agreement. First quarter 2003 EBIT results include $2 million in
restructuring and restructuring related expenses.
o Excluding the above items and not adjusted for currency, European EBIT
was flat year-over-year at $1 million.
REST OF WORLD
o Revenue from Asian operations increased to $39 million from $36 million
in the first quarter of last year. The increase was driven by strong OE
exhaust volumes in China.
o In South America, revenue grew to $35 million compared with $26 million
in first quarter 2003. Improved OE sales and favorable currency drove
the increase. Excluding the impact of favorable currency, revenue
increased 18 percent.
o Australian operations reported an increase in revenue to $49 million
from $33 million in first quarter 2003, driven by strong OE volumes and
favorable currency. Excluding the impact of favorable currency, revenue
increased 14 percent.
o Reported combined EBIT for Asia, South America and Australia was $6
million versus $4 million in first quarter 2003. The increase was the
result of strong OE volumes in all regions and favorable currency in
South America and Australia.
o First quarter EBIT 2004 results include a $1 million expense for
consulting fees indexed to the stock price based on a 1999 agreement;
and $1 million in favorable currency.
3
o Excluding the above item and not adjusted for currency, adjusted EBIT
for Asia, South America and Australia was $7 million versus $4 million
in first quarter 2003.
Attachment 1 to this press release provides additional information on Tenneco
Automotive's first quarter results.
CONFERENCE CALL
The company will host a conference call on April 20, 2004 at 10:30 a.m. EDT. The
dial-in number is 888 730-9138 (domestic) or 630 395-0019 (international). The
passcode is Tenneco Auto. The call will be available on the financial section of
the Tenneco Automotive web site at www.tenneco-automotive.com. A copy of the
press release is available on the financial and news sections of the Tenneco
Automotive web site. A recording of this call will be available one hour
following the completion of the call on April 20, 2004 through April 27, 2004.
To access this recording, dial 888 568-0399 (domestic) or 420 530-7938
(international).
2004 ANNUAL MEETING
Tenneco Automotive's annual meeting of shareholders will be on Tuesday, May 11,
2004 at 10:00 a.m. CDT. The meeting will be held at the corporate headquarters,
500 North Field Drive, Lake Forest, Illinois.
Tenneco Automotive is a $3.8 billion manufacturing company with headquarters in
Lake Forest, Illinois and approximately 19,200 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 within the meaning of the
Private Securities Litigation Reform Act of 1995. Words such as "continue,"
"achieving," "pursuing" 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) 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; (ii) governmental actions, including the ability to receive
regulatory approvals and the timing of such approvals; (iii) 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; (iv) 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; (v) 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; (vi) the cost
and outcome of existing and any future legal proceedings, and compliance with
changes in regulations, including environmental regulations; (vii) workforce
factors such as strikes or labor interruptions; (viii) material substitutions
and increases in the costs of raw materials; (ix) the 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; (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 Financing Accounting Standards
Board or other accounting regulatory bodies of 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 we operate 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, 2003. Further
information can be found on the company's web site at
www.tenneco-automotive.com.
4
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
THREE MONTHS ENDED MARCH 31,
(Millions except share and per share amounts)
<Table>
<Caption>
2004 2003
---------- ----------
Net sales and operating revenues $ 1,034(a) $ 921
========== ==========
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 830(b) 743(d)
Engineering, Research and Development 17 19
Selling, General and Administrative 109(a)(b)(c) 88
Depreciation and Amortization of
Other Intangibles 45 39
Total Costs and Expenses 1,001 889
========== ==========
Other Income (Loss) -- (1)
---------- ----------
Income (Loss) before Interest Expense,
Income Taxes, and Minority Interest
North America 30(a)(b)(c) 28(d)
Europe (3)(b)(c) (1)(d)
Other 6(c) 4
---------- ----------
33 31
Less:
Interest expense (net of interest
capitalized) 35 31
Income tax expense (benefit) (1) (2)(e)
Minority interest 1 1
---------- ----------
Net income (loss) $ (2) $ 1
========== ==========
Average common shares outstanding:
Basic 40.9 40.1
========== ==========
Diluted 43.5 40.9
========== ==========
Earnings (loss) per share of common stock:
Basic $ (0.05) $ 0.02
========== ==========
Diluted $ (0.05) $ 0.02
========== ==========
</Table>
- ----------
(a) Includes changeover costs for a new aftermarket customer of $6 million
pre-tax, $3 million after-tax or $0.08 per share. Of the adjustment $4
million is recorded in Sales and $2 million is recorded in SG&A.
Geographically all of the charge is recorded in North America.
(b) Includes restructuring and restructuring related charges of $5 million
pre-tax, $3 million after tax or $0.07 per share. Of the adjustment $2
million is recorded in SG&A and the remaining $3 million is in cost of
sales. Geographically, $2 million is recorded in North America and $3
million in Europe.
(c) Consulting fees indexed to stock price of $3 million pre-tax, $2
million after-tax or $0.05 per share. The entire charge is recorded in
SG&A. Geographically $1 million of the charge is recorded in North
America, Europe and Other respectively.
(d) Includes restructuring related charges of $5 million pre-tax, $2
million after-tax or $0.07 per share. The entire charge is recorded in
cost of sales. Geographically, $3 million is recorded in North America
and $2 million in Europe.
(e) Includes a $3 million or $0.08 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
<Table>
<Caption>
MARCH 31, 2004 DECEMBER 31, 2003
------------------ ------------------
Assets
Cash and Cash Equivalents $ 149 $ 145
Receivables, Net 512 442
Inventories 367 343
Other Current Assets 203 175
Investments and Other Assets 602 579
Plant, Property, and Equipment, Net 1,079 1,111
------------------ ------------------
Total Assets $ 2,912 $ 2,795
================== ==================
Liabilities and Shareholders' Equity
Short-Term Debt $ 18 $ 20
Accounts Payable 692 621
Accrued Taxes 25 19
Accrued Interest 39 42
Other Current Liabilities 234 191
Long-Term Debt 1,408 1,410
Deferred Income Taxes 125 119
Deferred Credits and Other Liabilities 297 292
Minority Interest 21 23
Total Shareholders' Equity 53 58
------------------ ------------------
Total Liabilities and Shareholders'
Equity $ 2,912 $ 2,795
================== ==================
</Table>
ATTACHMENT 1
Tenneco Automotive Inc. and Consolidated Subsidiaries
Statement of Cash Flows
(Unaudited)
(Millions)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
--------------------------
2004 2003
---------- ----------
Operating activities:
Net income (loss) $ (2) $ 1
Adjustments to reconcile income (loss) to net cash provided
(used) by operating activities -
Depreciation and amortization 45 39
Deferred income taxes (9) (7)
Changes in components of working capital -
(Inc.)/dec. in receivables (70) (49)
(Inc.)/dec. in inventories (27) (12)
(Inc.)/dec. in prepayments and other current assets (26) (6)
Inc./(dec.) in payables 79 78
Inc./(dec.) in taxes accrued 5 (4)
Inc./(dec.) in interest accrued (2) 11
Inc./(dec.) in other current liabilities 15 (18)
Other 5 3
---------- ----------
Net cash provided (used) by operating activities 13 36
Investing activities:
Net proceeds from sale of assets 11 1
Expenditures for plant, property & equipment (25) (26)
Investments and other (1) (1)
---------- ----------
Net cash provided (used) by investing activities (15) (26)
---------- ----------
Net cash provided (used) before financing activities (2) 10
Financing activities:
Issuance of common and treasury shares 3 --
Retirement of long-term debt (2) (24)
Net inc./(dec.) in short-term debt excluding current
maturities on long-term debt (2) 21
Other 1 --
---------- ----------
Net cash provided (used) by financing activities -- (3)
---------- ----------
Effect of foreign exchange rate changes on cash and cash
equivalents 6 (3)
---------- ----------
Inc./(dec.) in cash and cash equivalents 4 4
Cash and cash equivalents, January 1 145 54
---------- ----------
Cash and cash equivalents, March 31 $ 149 $ 58
========== ==========
Cash paid during the period for interest $ 37 $ 20
Cash paid during the period for income taxes $ 3 $ 11
</Table>
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) NET INCOME (LOSS) TO EBITDA
Unaudited
<Table>
<Caption>
Q1 2004
------------------------------------------------
NORTH
AMERICA EUROPE OTHER TOTAL
-------- -------- -------- --------
Net income (loss) (GAAP measure) $ (2)
Minority interest 1
Income tax expense (benefit) (1)
Interest expense (net of interest
capitalized) 35
EBIT, Income (loss) before interest
expense, income taxes and minority
interest (GAAP measure) $ 30 $ (3) $ 6 33
Depreciation and amortization of other
intangibles 24 17 4 45
-------- -------- -------- --------
Total EBITDA(2) $ 54 $ 14 $ 10 $ 78
======== ======== ======== ========
</Table>
<Table>
<Caption>
Q1 2003
------------------------------------------------
NORTH
AMERICA EUROPE OTHER TOTAL
-------- -------- -------- --------
Net income (loss) (GAAP measure) $ 1
Minority interest 1
Income tax expense (benefit) (2)
Interest expense (net of interest
capitalized) 31
--------
EBIT, Income (loss) before interest
expense, income taxes and minority
interest (GAAP measure) $ 28 $ (1) $ 4 $ 31
Depreciation and amortization 22 14 3 39
-------- -------- -------- --------
Total EBITDA $ 50 $ 13 $ 7 $ 70
======== ======== ======== ========
</Table>
- ----------
(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.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
<Table>
<Caption>
Q1 2004 Q1 2003
-------------------------------------------------- --------------------------------------------------
EBITDA(3) EBIT NET INCOME PER SHARE EBITDA(3) EBIT NET INCOME PER SHARE
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings Measures $ 78 $ 33 $ (2) $ (0.05) $ 70 $ 31 $ 1 $ 0.02
Adjustments
(reflects
non-GAAP
measures):
Restructuring and
restructuring
related expenses 5 5 3 0.07 5 5 2 0.07
Tax settlement
adjustment -- -- -- -- -- -- (3) (0.08)
New Aftermarket
customer
changeover costs 6 6 3 0.08 -- -- -- --
Consulting fees
indexed to stock
price 3 3 2 0.05 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Non-GAAP earnings
measure $ 92 $ 47 $ 6 $ 0.15 $ 75 $ 36 $ -- $ 0.01
========== ========== ========== ========== ========== ========== ========== ==========
</Table>
<Table>
<Caption>
Q1 2004
--------------------------------------------------
NORTH
AMERICA EUROPE OTHER TOTAL
---------- ---------- ---------- ----------
EBIT $ 30 $ (3) $ 6 $ 33
Restructuring and
restructuring
related expenses 2 3 -- 5
New Aftermarket
customer changeover
costs 6 -- -- 6
Consulting fees
indexed to stock
price 1 1 1 3
---------- ---------- ---------- ----------
Adjusted EBIT $ 39 $ 1 $ 7 $ 47
========== ========== ========== ==========
</Table>
<Table>
<Caption>
Q1 2003
--------------------------------------------------
NORTH
AMERICA EUROPE OTHER TOTAL
---------- ---------- ---------- ----------
EBIT $ 28 $ (1) $ 4 $ 31
Restructuring and
restructuring
related expenses 3 2 -- 5
---------- ---------- ---------- ----------
Adjusted EBIT $ 31 $ 1 $ 4 $ 36
========== ========== ========== ==========
</Table>
- ----------
(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 first quarters of
2004 and 2003 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.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP REVENUES TO NON-GAAP REVENUE MEASURE
Unaudited
<Table>
<Caption>
Q1 2004
----------------------------------------------------------------------------------------------------
PASS-THROUGH REVENUES
SALES EXCLUDING
REVENUES EXCLUDING CURRENCY
CURRENCY EXCLUDING CURRENCY AND PASS-THROUGH
REVENUES IMPACT CURRENCY IMPACT SALES
---------------- ---------------- ---------------- ---------------- ----------------
NORTH AMERICA
AFTERMARKET
RIDE CONTROL $ 85 $ -- $ 85 $ -- $ 85
EXHAUST 37 -- 37 -- 37
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL NORTH AMERICA
AFTERMARKET 122 -- 122 -- 122
NORTH AMERICA
ORIGINAL EQUIPMENT
RIDE CONTROL 118 -- 118 -- 118
EXHAUST 263 5 258 88 170
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL NORTH AMERICA
ORIGINAL EQUIPMENT 381 5 376 88 288
TOTAL NORTH AMERICA 503 5 498 88 410
EUROPE AFTERMARKET
RIDE CONTROL 38 4 34 -- 34
EXHAUST 42 6 36 -- 36
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL EUROPE
AFTERMARKET 80 10 70 -- 70
EUROPE ORIGINAL
EQUIPMENT
RIDE CONTROL 85 10 75 -- 75
EXHAUST 243 21 222 77 145
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL EUROPE
ORIGINAL EQUIPMENT 328 31 297 77 220
TOTAL EUROPE 408 41 367 77 290
ASIA 39 -- 39 13 26
SOUTH AMERICA 35 4 31 4 27
AUSTRALIA 49 12 37 4 33
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL OTHER 123 16 107 21 86
TOTAL TENNECO
AUTOMOTIVE $ 1,034 $ 62 $ 972 $ 186 $ 786
================ ================ ================ ================ ================
</Table>
<Table>
<Caption>
Q1 2003
----------------------------------------------------------------------------------------------------
PASS-THROUGH REVENUES
SALES EXCLUDING
REVENUES EXCLUDING CURRENCY
CURRENCY EXCLUDING CURRENCY AND PASS-THROUGH
REVENUES IMPACT CURRENCY IMPACT SALES
---------------- ---------------- ---------------- ---------------- ----------------
NORTH AMERICA
AFTERMARKET
RIDE CONTROL $ 72 $ -- $ 72 $ -- $ 72
EXHAUST 36 -- 36 -- 36
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL NORTH AMERICA
AFTERMARKET 108 -- 108 -- 108
NORTH AMERICA
ORIGINAL EQUIPMENT
RIDE CONTROL 116 -- 116 -- 116
EXHAUST 257 -- 257 87 170
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL NORTH AMERICA
ORIGINAL EQUIPMENT 373 -- 373 87 286
TOTAL NORTH AMERICA 481 -- 481 87 394
EUROPE AFTERMARKET
RIDE CONTROL 35 -- 35 -- 35
EXHAUST 41 -- 41 -- 41
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL EUROPE
AFTERMARKET 76 -- 76 -- 76
EUROPE ORIGINAL
EQUIPMENT
RIDE CONTROL 57 -- 57 -- 57
EXHAUST 212 -- 212 74 138
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL EUROPE
ORIGINAL EQUIPMENT 269 -- 269 74 195
TOTAL EUROPE 345 -- 345 74 271
ASIA 36 -- 36 13 23
SOUTH AMERICA 26 -- 26 2 24
AUSTRALIA 33 -- 33 3 30
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL OTHER 95 -- 95 18 77
TOTAL TENNECO
AUTOMOTIVE $ 921 $ -- $ 921 $ 179 $ 742
================ ================ ================ ================ ================
</Table>
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.