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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM 10-Q

(Mark One)

<Table>

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

For the Quarterly Period Ended September 30, 2004

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

Commission file number 1-12387

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

<Table>

DELAWARE 76-0515284
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)

500 NORTH FIELD DRIVE, LAKE FOREST, ILLINOIS 60045
(Address of principal executive offices) (Zip Code)
</Table>

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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
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: 42,419,552 shares as of October 31,
2004.

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TABLE OF CONTENTS

<Table>
<Caption>
PAGE
----

PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).................. 4
Tenneco Automotive Inc. and Consolidated Subsidiaries--
Report of Independent Registered Public Accounting
Firm................................................ 4
Statements of Income................................. 5
Balance Sheets....................................... 6
Statements of Cash Flows............................. 7
Statements of Changes in Shareholders' Equity........ 8
Statements of Comprehensive Income................... 9
Notes to Consolidated Financial Statements........... 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 29
Item 3. Quantitative and Qualitative Disclosures About
Market Risk....................................... 54
Item 4. Controls and Procedures........................... 54
PART II--OTHER INFORMATION
Item 1. Legal Proceedings................................. *
Item 2. Changes in Securities and Use of Proceeds......... *
Item 3. Defaults Upon Senior Securities................... *
Item 4. Submission of Matters to a Vote of Security
Holders........................................... *
Item 5. Other Information................................. *
Item 6. Exhibits.......................................... 55
</Table>

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

* 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 FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q contains forward-looking statements
regarding, among other things, our prospects and business strategies. The words
"may," "will," "believes," "should," "could," "plans," "expects," "anticipate,"
"intends," "estimates," and similar expressions (and variations thereof),
identify these forward-looking statements. Although we believe that the
expectations reflected in these forward-looking statements are based on
reasonable assumptions, these expectations may not prove to be correct. Because
these forward-looking statements are also subject to risks and uncertainties,
actual results may differ materially from the expectations expressed in the
forward-looking statements. Important factors that could cause actual results to
differ materially from the expectations reflected in the forward-looking
statements include:

- changes in automotive manufacturers' production rates and their actual
and forecasted requirements for our products, including the overall
highly competitive nature of the automotive parts industry, and our
resultant inability to realize the sales represented by our 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;

- increases in the costs of raw materials, including our ability to
successfully reduce the impact of any such cost increases through
materials substitutions, cost reduction initiatives and other methods;

- 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 our products, and the potential negative impact on our revenues
and margins from such products;

- our continued success in cost reduction and cash management programs and
our ability to execute restructuring and other cost reduction plans and
to realize anticipated benefits from these plans;

- general economic, business and market conditions;

- the impact of consolidation among automotive parts suppliers and
customers on our ability to compete;

- operating hazards associated with our business;

- changes in distribution channels or competitive conditions in the markets
and countries where we operate, including the impact of changes in
distribution channels for aftermarket products on our ability to increase
or maintain aftermarket sales;

- the cost and outcome of existing and any future legal proceedings, and
compliance with changes in regulations, including environmental
regulations;

- labor disruptions at our facilities or at any of our significant
customers or suppliers;

- economic, exchange rate and political conditions in the foreign countries
where we operate or sell our products;

- customer acceptance of new products;

- new technologies that reduce the demand for certain of our products or
otherwise render them obsolete;

- our ability to realize our business strategy of improving operating
performance;

- capital availability or costs, including changes in interest rates,
market perceptions of the industries in which we operate or ratings of
securities;

- changes by the Financial Accounting Standards Board or the Securities and
Exchange Commission of authoritative generally accepted accounting
principles or policies;

- the impact of changes in and compliance with laws and regulations,
including environmental laws and regulations, and environmental
liabilities in excess of the amount reserved;

- terrorism, acts of war and similar events, and their resultant impact on
economic and political conditions; and

- the occurrence or non-occurrence of other circumstances beyond our
control.

PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
TENNECO AUTOMOTIVE INC.

We have reviewed the accompanying consolidated balance sheet of Tenneco
Automotive Inc. and consolidated subsidiaries as of September 30, 2004, and the
related consolidated statements of income and comprehensive income for the
three-month and nine-month periods ended September 30, 2004 and 2003, and of
cash flows and changes in shareholders' equity for the nine-month periods ended
September 30, 2004 and 2003. These interim financial statements are the
responsibility of Tenneco Automotive Inc.'s management.

We conducted our review in accordance with standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with standards
of the Public Company Accounting Oversight Board (United States), the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that
should be made to such consolidated interim financial statements for them to be
in conformity with accounting principles generally accepted in the United States
of America.

We previously audited, in accordance with standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
Tenneco Automotive Inc. and consolidated subsidiaries as of December 31, 2003,
and the related consolidated statements of income (loss), cash flows, changes in
shareholders' equity and comprehensive income (loss) for the year then ended
(not presented herein); and in our report dated March 9, 2004, we expressed an
unqualified opinion on those consolidated financial statements (such report
includes explanatory paragraphs relating to (i) a change in accounting for
goodwill and intangible assets upon the adoption of Statement of Financial
Accounting Standards No. 142, and (ii) the application of procedures relating to
certain disclosures and reclassifications of financial statement amounts related
to the 2001 financial statements that were audited by other auditors who have
ceased operations and for which we have expressed no opinion or other form of
assurance other than with respect to such disclosures and reclassifications). In
our opinion, the information set forth in the accompanying consolidated balance
sheet as of December 31, 2003 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.

DELOITTE & TOUCHE LLP

Chicago, Illinois
November 5, 2004

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF INCOME
(UNAUDITED)

<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
(MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)

REVENUES
Net sales and operating revenues........ $ 998 $ 914 $ 3,146 $ 2,833
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Cost of sales (exclusive of depreciation
shown below)......................... 798 727 2,502 2,249
Engineering, research, and
development.......................... 22 18 56 50
Selling, general, and administrative.... 91 91 302 276
Depreciation and amortization of other
intangibles.......................... 42 40 131 120
----------- ----------- ----------- -----------
953 876 2,991 2,695
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Loss on sale of receivables............. -- -- (1) (1)
Other income (loss)..................... (1) -- (1) (1)
----------- ----------- ----------- -----------
(1) -- (2) (2)
----------- ----------- ----------- -----------
INCOME BEFORE INTEREST EXPENSE, INCOME
TAXES, AND MINORITY INTEREST............ 44 38 153 136
Interest expense (net of interest
capitalized)......................... 35 34 104 103
Income tax expense (benefit)............ 2 (2) 11 (1)
Minority interest....................... 1 2 4 5
----------- ----------- ----------- -----------
NET INCOME................................ $ 6 $ 4 $ 34 $ 29
=========== =========== =========== ===========
EARNINGS PER SHARE
Average shares of common stock
outstanding--
Basic................................... 41,693,641 40,553,785 41,314,451 40,345,137
Diluted................................. 44,322,958 42,187,011 43,997,882 41,473,974
Basic earnings per share of common
stock................................... $ 0.15 $ 0.11 $ 0.84 $ 0.72
Diluted earnings per share of common
stock................................... $ 0.14 $ 0.10 $ 0.78 $ 0.70
</Table>

The accompanying notes to financial statements are an integral part of these
statements of income.
5

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

BALANCE SHEETS
(UNAUDITED)

<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
2004 2003
------------- ------------
(MILLIONS)

ASSETS
Current assets:
Cash and cash equivalents................................. $ 203 $ 145
Receivables--
Customer notes and accounts, net........................ 495 427
Other................................................... 16 15
Inventories--
Finished goods.......................................... 152 149
Work in process......................................... 88 73
Raw materials........................................... 85 83
Materials and supplies.................................. 38 38
Deferred income taxes..................................... 61 63
Prepayments and other..................................... 137 112
------- -------
1,275 1,105
------- -------
Other assets:
Long-term notes receivable, net........................... 21 21
Goodwill.................................................. 193 193
Intangibles, net.......................................... 25 25
Deferred income taxes..................................... 259 239
Pension assets............................................ 8 6
Other..................................................... 145 145
------- -------
651 629
------- -------
Plant, property, and equipment, at cost..................... 2,342 2,303
Less--Reserves for depreciation and amortization.......... 1,272 1,192
------- -------
1,070 1,111
------- -------
$ 2,996 $ 2,845
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt (including current maturities of long-term
debt)................................................... $ 20 $ 20
Trade payables............................................ 667 621
Accrued taxes............................................. 22 19
Accrued interest.......................................... 42 42
Accrued liabilities....................................... 210 162
Other..................................................... 27 29
------- -------
988 893
------- -------
Long-term debt.............................................. 1,403 1,410
------- -------
Deferred income taxes....................................... 129 123
------- -------
Postretirement benefits..................................... 274 266
------- -------
Deferred credits and other liabilities...................... 77 72
------- -------
Commitments and contingencies
Minority interest........................................... 24 23
------- -------
Shareholders' equity:
Common stock.............................................. -- --
Premium on common stock and other capital surplus......... 2,760 2,751
Accumulated other comprehensive loss...................... (241) (241)
Retained earnings (accumulated deficit)................... (2,178) (2,212)
------- -------
341 298
Less--Shares held as treasury stock, at cost.............. 240 240
------- -------
101 58
------- -------
$ 2,996 $ 2,845
======= =======
</Table>

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

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CASH FLOWS
(UNAUDITED)

<Table>
<Caption>
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------
2004 2003
---- -----
(MILLIONS)

OPERATING ACTIVITIES
Net income.................................................. $ 34 $ 29
Adjustments to reconcile net income to cash provided by
operating activities--
Depreciation and amortization of other intangibles........ 131 120
Deferred income taxes..................................... (12) (17)
Loss on sale of assets, net................................. 1 1
Changes in components of working capital--
(Increase) decrease in receivables..................... (66) (46)
(Increase) decrease in inventories..................... (22) 43
(Increase) decrease in prepayments and other current
assets................................................ (21) 3
Increase (decrease) in payables........................ 55 31
Increase (decrease) in accrued taxes................... 5 (25)
Increase (decrease) in accrued interest................ -- 19
Increase (decrease) in other current liabilities....... 21 (15)
Other..................................................... 9 19
---- -----
Net cash provided by operating activities................... 135 162
---- -----
INVESTING ACTIVITIES
Net proceeds from sale of assets............................ 12 4
Expenditures for plant, property, and equipment............. (87) (83)
Investments and other....................................... -- (5)
---- -----
Net cash used by investing activities....................... (75) (84)
---- -----
FINANCING ACTIVITIES
Issuance of common shares................................... 6 --
Proceeds from capital contributions......................... -- 1
Issuance of long-term debt.................................. -- 350
Debt issuance costs on long-term debt....................... -- (13)
Retirement of long-term debt................................ (6) (277)
Net increase (decrease) in short-term debt excluding current
maturities of long-term debt.............................. 1 (119)
Other....................................................... 1 (1)
---- -----
Net cash provided (used) by financing activities............ 2 (59)
---- -----
Effect of foreign exchange rate changes on cash and cash
equivalents............................................... (4) (10)
---- -----
Increase in cash and cash equivalents....................... 58 9
Cash and cash equivalents, January 1........................ 145 54
---- -----
Cash and cash equivalents, September 30 (Note).............. $203 $ 63
==== =====
Cash paid during the period for interest.................... $106 $ 79
Cash paid during the period for income taxes (net of
refunds).................................................. $ 15 $ 41
</Table>

NOTE: Cash and cash equivalents 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.
7

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)

<Table>
<Caption>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------
2004 2003
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------- ---------- -------
(MILLIONS EXCEPT SHARE AMOUNTS)

COMMON STOCK
Balance January 1.................................. 42,167,296 $ -- 41,347,340 $ --
Issued pursuant to benefit plans................. 452,976 -- 533,222 --
Stock options exercised.......................... 1,075,302 -- 229,730 --
---------- ------- ---------- -------
Balance September 30............................... 43,695,574 -- 42,110,292 --
========== ==========
PREMIUM ON COMMON STOCK AND OTHER CAPITAL SURPLUS
Balance January 1.................................. 2,751 2,749
Premium on common stock issued pursuant to
benefit plans................................. 9 3
------- -------
Balance September 30............................... 2,760 2,752
------- -------
ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance January 1.................................. (241) (357)
Other comprehensive income (loss)................ -- 79
------- -------
Balance September 30............................... (241) (278)
------- -------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance January 1.................................. (2,212) (2,246)
Net income....................................... 34 29
------- -------
Balance September 30............................... (2,178) (2,217)
------- -------
LESS--COMMON STOCK HELD AS TREASURY STOCK, AT COST
Balance January 1 and September 30................. 1,294,692 240 1,294,692 240
========== ------- ========== -------
Total....................................... $ 101 $ 17
======= =======
</Table>

The accompanying notes to financial statements are an integral part
of these statements of changes in shareholders' equity.
8

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

<Table>
<Caption>
THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
2004 2003
----------------------------- -----------------------------
ACCUMULATED ACCUMULATED
OTHER OTHER
COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE
INCOME INCOME INCOME INCOME
(LOSS) (LOSS) (LOSS) (LOSS)
------------- ------------- ------------- -------------
(MILLIONS)

NET INCOME................................... $ 6 $ 4
--- ---
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
CUMULATIVE TRANSLATION ADJUSTMENT
Balance July 1............................. $(162) $(204)
Translation of foreign currency
statements............................. 19 19 6 6
----- -----
Balance September 30....................... (143) (198)
----- -----
FAIR VALUE OF INTEREST RATE SWAPS
Balance July 1............................. $ -- $ --
Fair value adjustment.................... -- -- -- --
----- -----
Balance September 30....................... -- --
----- -----
ADDITIONAL MINIMUM PENSION LIABILITY
ADJUSTMENT
Balance July 1 and September 30............ (98) -- (80) --
----- -----
Balance September 30......................... $(241) $(278)
===== --- ===== ---
Other comprehensive income................... 19 6
--- ---
COMPREHENSIVE INCOME......................... $25 $10
=== ===
</Table>

<Table>
<Caption>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
2004 2003
----------------------------- -----------------------------
ACCUMULATED ACCUMULATED
OTHER OTHER
COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE
INCOME INCOME INCOME INCOME
(LOSS) (LOSS) (LOSS) (LOSS)
------------- ------------- ------------- -------------
(MILLIONS)

NET INCOME................................... $34 $ 29
--- ----
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
CUMULATIVE TRANSLATION ADJUSTMENT
Balance January 1.......................... $(143) $(273)
Translation of foreign currency
statements............................. -- -- 75 75
----- -----
Balance September 30....................... (143) (198)
----- -----
FAIR VALUE OF INTEREST RATE SWAPS
Balance January 1.......................... $ -- $ (4)
Fair value adjustment.................... -- -- 4 4
----- -----
Balance September 30....................... -- --
----- -----
ADDITIONAL MINIMUM PENSION LIABILITY
ADJUSTMENT
Balance January 1 and September 30......... (98) -- (80) --
----- -----
Balance September 30......................... $(241) -- $(278)
===== --- ===== ----
Other comprehensive income................... -- 79
--- ----
COMPREHENSIVE INCOME......................... $34 $108
=== ====
</Table>

The accompanying notes to financial statements are an integral part
of these statements of comprehensive income.
9

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) As you read the accompanying financial statements and Management's
Discussion and Analysis you should also read our Annual Report on Form 10-K for
the year ended December 31, 2003.

In our opinion, the accompanying unaudited financial statements contain all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly Tenneco Automotive Inc.'s financial position, results of operations, cash
flows, changes in shareholders' equity, and comprehensive income for the periods
indicated. We have prepared the unaudited interim consolidated financial
statements 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 accounting principles generally accepted in the United
States for annual financial statements.

Our consolidated financial statements include all majority-owned
subsidiaries. We carry investments in 20 percent to 50 percent owned companies
at cost plus equity in undistributed earnings and cumulative translation
adjustments from the date of acquisition since we have the ability to exert
significant influence over operating and financial policies.

We have reclassified prior year's financial statements where appropriate to
conform to 2004 presentations.

(2) In June 2003, we issued $350 million of 10 1/4 percent senior secured
notes in a private placement. The notes have a final maturity date of July 15,
2013. The notes accrued interest from June 19, 2003 with a first interest
payment date of January 15, 2004. In October 2003, we completed an offer to
exchange all of the notes issued in the June 2003 private placement for a like
amount of the 10 1/4 percent senior secured notes, with substantially identical
terms, which had been registered under the Securities Act of 1933.

We received net proceeds in the second quarter of 2003 from the offering of
the notes, after deducting underwriting discounts and commissions and our
expenses, of $338 million. We used the net proceeds of the offering to repay
outstanding amounts under our senior credit facility as follows: (i) first, to
prepay $199 million on the term loan A due November 4, 2005, (ii) second, to
prepay $52 million on the term loans B and C due November 4, 2007 and May 4,
2008, respectively, and (iii) third, to prepay outstanding borrowings of $87
million under the revolving credit portion of our senior credit facility.

In connection with issuing $350 million of 10 1/4 percent senior secured
notes due July 15, 2013, we amended the senior credit facility effective May 29,
2003. This amendment allowed us to incur debt secured by a second lien on our
U.S. assets and to have that debt guaranteed by our major U.S. subsidiaries. The
amendment also allowed us to use a portion of the proceeds from the new senior
secured notes to repay outstanding borrowings under the revolving credit
facility, without having to reduce the then-applicable $450 million size of the
revolving credit facility, and to prepay the term loans under the senior credit
facility on a non pro-rata basis with the remaining net proceeds from the notes.
In exchange for these amendments, we agreed to pay an aggregate sum of $1
million to consenting lenders. We also incurred legal, advisory and other costs
related to the amendment process of $1 million. These costs were included in the
capitalized debt issuance costs.

In December 2003, we amended and restated our senior credit facility and in
connection therewith, we issued an additional $125 million of 10 1/4 percent
senior secured notes in a private placement. We received $136 million of net
proceeds from the offering of the additional $125 million of 10 1/4 percent
senior secured notes, after deducting underwriting discounts and commissions and
other expenses and including a 13 percent price premium over par. We also
received $391 million in net proceeds from the new term loan B borrowings under
the amended and restated senior credit facility, after deducting fees and other
expenses. We used the combined net proceeds of $527 million to prepay the $514
million outstanding under term loans A, B and C under the senior credit facility
immediately prior to the completion of the transaction. The remaining $13
million of net proceeds were used for general corporate purposes. In addition,
we received $6 million of accrued interest on the new notes for the period from
June 19 through December 12, 2003 that investors paid

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

us and that we subsequently used to pay, on January 15, 2004, the accrued
interest on the notes from June 19, 2003. In June 2004, we completed an offer to
exchange all of the notes issued in the December 2003 private placement for a
like amount of the 10 1/4 percent senior secured notes, with substantially
identical terms, which have been registered under the Securities Act of 1933.

We incurred $27 million in fees associated with the issuance of the
aggregate $475 million of 10 1/4 percent senior secured notes and the amendment
and restatement of our senior credit facility which will be amortized over the
term of the senior secured notes and the amended and restated senior credit
facility.

After giving effect to the use of the net proceeds from both the June and
December transactions, we expect these transactions would have increased our
annual interest expense by approximately $9 million for 2003. This does not give
effect to the fixed-to-floating interest rate swaps we completed in April 2004,
described below. In addition, we expensed in the second and fourth quarters of
2003 a total of approximately $12 million of existing deferred debt issuance
costs as a result of retiring the term loans under the senior credit facility.

In April 2004, we amended our senior credit facility in connection with a
proposed transaction to refinance our outstanding senior subordinated notes.
While we abandoned the proposed transaction in late May 2004, the amendment
remains in effect. The amendment permitted certain aspects of the transaction
and made other minor technical changes.

In April 2004, we entered into three separate fixed-to-floating interest
rate swaps with two separate financial institutions. These agreements swapped an
aggregate of $150 million of fixed interest rate debt at a per annum rate of
10 1/4 percent to floating interest rate debt at a per annum rate of LIBOR plus
a spread of 5.68 percent. Each agreement requires semi-annual settlements
through July 15, 2013. Based on the current LIBOR as determined under these
agreements of 1.86 percent (which remains in effect until January 15, 2005),
these swaps would reduce our annual interest expense by approximately $4
million. The swaps qualify as fair value hedges in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," and as such are recorded on the balance
sheet at market value with an offset to the underlying hedged item, which is
long-term debt. As of September 30, 2004, the fair value of the interest rate
swaps was approximately a negative $1 million, which has been recorded as a
decrease to long-term debt and an increase to other long-term liabilities.

(3) Over the past several years we have adopted plans to restructure
portions of our operations. These plans were approved by the Board of Directors
and were designed to reduce operational and administrative overhead costs
throughout the business. Prior to the change in accounting required for exit or
disposal activities, we recorded charges to income related to these plans for
costs that do not benefit future activities in the period in which the plans
were finalized and approved, while actions necessary to affect these
restructuring plans occurred over future periods in accordance with established
plans.

In the fourth quarter of 2001, our Board of Directors approved a
restructuring plan, a project known as Project Genesis, designed to lower our
fixed costs, improve efficiency and utilization, and better optimize our global
footprint. Project Genesis involved closing eight facilities, improving the
process flow and efficiency through value mapping and plant arrangement at 20
facilities, relocating production among facilities, and centralizing some
functional areas. The total of all these restructuring and other costs recorded
in the fourth quarter of 2001 was $32 million before tax, $31 million after tax,
or $0.81 per diluted common share. As of December 31, 2003, we have eliminated
974 positions in connection with Project Genesis. Additionally, we executed this
plan more efficiently than originally anticipated and as a result in the fourth
quarter of 2002 reduced our reserves related to this restructuring activity by
$6 million, which was recorded in cost of sales. In the fourth quarter of 2003,
we reclassified $2 million of severance reserve to the asset impairment reserve.
This reclassification became necessary as actual asset impairments along with
the sale of our closed facilities were

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

different than the original estimates. We completed the remaining restructuring
activities related to Project Genesis in the second quarter of 2004.

In the first quarter of 2003, we incurred severance costs of $1 million
associated with eliminating 17 salaried positions through selective layoffs and
an early retirement program. Additionally, 93 hourly positions were eliminated
through selective layoffs in the quarter. These reductions were done to reduce
ongoing labor costs in North America. This charge was primarily recorded in cost
of sales.

In October of 2003, we announced the closing of an emission control
manufacturing facility in Birmingham, U.K. Approximately 130 employees were
eligible for severance benefits in accordance with union contracts and U.K.
legal requirements. We incurred approximately $3 million in costs related to
this action in the first nine months of 2004. Additional costs related to this
closing are not expected to exceed $1 million and will be recorded in 2005. This
action is in addition to the plant closings announced in Project Genesis in the
fourth quarter of 2001.

Including the above costs, we incurred $12 million in restructuring and
restructuring-related costs in the first nine months of 2004. These costs are
primarily related to the continuation of the optimization of our manufacturing
footprint that was started with Project Genesis in 2001.

Including the costs incurred in 2002 and 2003 of $18 million, we have
incurred a total of $30 million for activities related to our restructuring
actions initiated in prior periods that could not be accrued as part of the
restructuring charges for these actions.

Amounts related to the reserves we have established regarding activities
that are part of our restructuring plans are as follows:

<Table>
<Caption>
DECEMBER 31, SEPTEMBER 30,
2003 2004 CHARGED TO IMPACT OF 2004
RESTRUCTURING CASH ASSET EXCHANGE RESTRUCTURING
RESERVE PAYMENTS ACCOUNTS RATES RESERVE
------------- -------- ---------- --------- -------------
(MILLIONS)

Severance............................. $1 $1 $ -- $ -- $ --
Asset Impairment...................... -- -- -- -- --
Other................................. -- -- -- -- --
-- -- ----- ----- -----
$1 $1 $ -- $ -- $ --
== == ===== ===== =====
</Table>

Under the terms of our amended and restated senior credit agreement that
took effect on December 12, 2003, we are allowed to exclude up to $60 million of
cash charges and expenses, before taxes, related to potential future cost
reduction initiatives over the 2002 to 2006 time period from the calculation of
the financial covenant ratios we are required to maintain under our senior
credit agreement. As of September 30, 2004, we have excluded $31 million of the
$60 million available under the terms of the senior credit facility. In October
2004, we announced a plan to eliminate 250 salaried positions through selected
layoffs and an elective early retirement program. The majority of the layoffs
will be at the middle and senior management level. As a result, we expect to
incur charges of approximately $20 to $24 million related to these reductions
which will be recorded over the next several months. The reductions are expected
to be completed by the end of April 2005 and will impact our excluded amount. In
addition to the announced actions, we will continue to evaluate additional
opportunities to initiate actions that will reduce our costs through
implementing the most appropriate and efficient logistics, distribution and
manufacturing footprint for the future. There can be no assurances, however,
that we will undertake additional restructuring actions. Actions that we take,
if any, will require the approval of our Board of Directors, or its authorized
committee, and if the costs of the plans exceed the amount previously approved
by our senior lenders, could require approval by our senior lenders. We plan to

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

conduct any workforce reductions that result in compliance with all legal and
contractual requirements including obligations to consult with workers'
councils, union representatives and others.

(4) We are subject to a variety of environmental and pollution control laws
and regulations in all jurisdictions in which we operate. We expense or
capitalize, as appropriate, expenditures for ongoing compliance with
environmental regulations that relate to current operations. We expense
expenditures that relate to an existing condition caused by past operations and
that do not contribute to current or future revenue generation. We record
liabilities when environmental assessments indicate that remedial efforts are
probable and the costs can be reasonably estimated. Estimates of the liability
are based upon currently available facts, existing technology, and presently
enacted laws and regulations taking into consideration the likely effects of
inflation and other societal and economic factors. We consider all available
evidence including prior experience in remediation of contaminated sites, other
companies' cleanup experiences and data released by the United States
Environmental Protection Agency or other organizations. These estimated
liabilities are subject to revision in future periods based on actual costs or
new information. Where future cash flows are fixed or reliably determinable, we
have discounted the liabilities. All other environmental liabilities are
recorded at their undiscounted amounts. We evaluate recoveries separately from
the liability and, when they are assured, recoveries are recorded and reported
separately from the associated liability in our financial statements.

As of September 30, 2004, we are designated as a potentially responsible
party in one Superfund site. We have estimated our share of the remediation
costs for this site to be less than $1 million in the aggregate. In addition to
the Superfund site, we may have the obligation to remediate current or former
facilities, and we estimate our share of remediation costs at these facilities
to be approximately $11 million. For the Superfund site and the current and
former facilities, we have established reserves that we believe are adequate for
these costs. Although we believe our estimates of remediation costs are
reasonable and are based on the latest available information, the cleanup costs
are estimates and are subject to revision as more information becomes available
about the extent of remediation required. At some sites, we expect that other
parties will contribute to the remediation costs. In addition, at the Superfund
site, the Comprehensive Environmental Response, Compensation and Liability Act
provides that our liability could be joint and several, meaning that we could be
required to pay in excess of our share of remediation costs. Our understanding
of the financial strength of other potentially responsible parties at the
Superfund site, and of other liable parties at our current and former
facilities, has been considered, where appropriate, in our determination of our
estimated liability.

We believe that any potential costs associated with our current status as a
potentially responsible party in the Superfund site, or as a liable party at our
current or former facilities, will not be material to our results of operations
or consolidated financial position.

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

are subject to a number of lawsuits initiated by a significant number of
claimants alleging health problems as a result of exposure to asbestos. Many of
these cases involve significant numbers of individual claimants. However, only a
small percentage of these claimants allege that they were automobile mechanics
who were allegedly exposed to our former muffler products and a significant
number appear to involve workers in other industries or otherwise do not include
sufficient information to determine whether there is any basis for a claim
against us. We believe, based on scientific and other evidence, it is unlikely
that mechanics were exposed to asbestos by our former muffler products and that,
in any event, they would not be at increased risk of asbestos-related disease
based on their work with these products. Further, many of these cases involve
numerous defendants, with the number of each in some cases exceeding 200
defendants from a variety of industries. Additionally, the plaintiffs either do
not specify any, or specify the jurisdictional minimum, dollar amount for
damages. On the other hand, we are experiencing an increasing number of these
claims, likely due to bankruptcies of major asbestos manufacturers. We
vigorously defend ourselves against these claims as part of our ordinary course
of business. To date, with respect to claims that have proceeded sufficiently
through the judicial process, we have regularly achieved favorable resolution in
the form of a dismissal of the claim or a judgment in our favor. Accordingly, we
presently believe that these asbestos-related claims will not have a material
adverse impact on our future financial condition or results of operations.

We provide warranties on some of our products. The warranty terms vary but
range from one year up to limited lifetime warranties on some of our premium
aftermarket products. Provisions for estimated expenses related to product
warranty are made at the time products are sold or when specific warranty issues
are identified on OE products. These estimates are established using historical
information about the nature, frequency, and average cost of warranty claims. We
actively study trends of warranty claims and take action to improve product
quality and minimize warranty claims. We believe that the warranty reserve is
appropriate; however, actual claims incurred could differ from the original
estimates, requiring adjustments to the reserve. The reserve is included in both
long-term and short-term liabilities on the balance sheet.

Below is a table that shows the activity in the warranty accrual accounts:

<Table>
<Caption>
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------
2004 2003
---- ----
(MILLIONS)

Beginning Balance........................................... $18 $21
Accruals related to product warranties...................... 4 8
Reductions for payments made................................ (4) (7)
--- ---
Ending Balance.............................................. $18 $22
=== ===
</Table>

(5) In January 2003, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 46, "Consolidation of Variable Interest Entities"
("FIN 46"), which was revised in December 2003. FIN 46 requires that the assets,
liabilities and results of the activity of variable interest entities be
consolidated into the financial statements of the entity that has the
controlling financial interest. FIN 46 also provides the framework for
determining whether a variable interest entity should be consolidated based on
voting interest or significant financial support provided to it. This
interpretation as revised is effective January 1, 2004. The adoption of FIN 46
did not have a material impact on our consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amended and
clarified financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133. SFAS No. 149 is effective for contracts
entered into or modified

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact
on our financial position or results of operations.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 established standards for classification of certain financial
instruments that have characteristics of both liabilities and equity but have
been presented entirely as equity or between the liabilities and equity section
of the statement of financial position. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003. The adoption of SFAS
No. 150 did not have a material impact on our financial position.

In December 2003, the FASB revised SFAS No. 132, "Employer's Disclosures
About Pensions and Other Postretirement Benefits." The revised SFAS No. 132
changes employers' disclosures about pension plans and other postretirement
benefits and requires additional disclosures about assets, obligations, cash
flows and net periodic benefit cost. The revised statement is effective for
annual and interim periods ended after December 15, 2003. We adopted the revised
disclosures as of December 31, 2003, in our consolidated financial statements.

On December 8, 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Act) introduced a voluntary prescription drug
benefit under Medicare as well as a federal subsidy to sponsors of retiree
healthcare plans that provide prescription drug benefits that are at least
actuarially equivalent to Medicare Part D. As permitted by FASB Staff Position
("FSP") 106-1, we previously chose to defer recognizing the effects of the Act
on our postretirement healthcare insurance plans until authoritative guidance
was issued by the FASB. In May 2004, the FASB issued FSP No. 106-2, which
supercedes FSP No. 106-1 and requires accounting for the effects of the Act no
later than our quarter ending September 30, 2004. The adoption of FSP 106-2 did
not have a material impact on our consolidated financial statements.

(6) We entered into an agreement during the third quarter of 2000 to sell
an interest in some of our U.S. trade accounts receivable to a third party.
Receivables become eligible for the program on a daily basis, at which time the
receivables are sold to the third party, net of a purchase discount, through a
wholly-owned subsidiary. Under this agreement, as well as individual agreements
with third parties in Europe, we have sold accounts receivable of $148 million
and $136 million at September 30, 2004 and 2003, respectively. We recognized a
loss of approximately $1 million in each of the nine months ended September 30,
2004 and 2003, respectively, on these sales of trade accounts, representing the
discount from book values at which these receivables were sold to the third
party. The discount rate varies based on funding cost incurred by the third
party, and it averaged approximately four percent during the time period in 2004
when we sold receivables. We retained ownership of the remaining interest in the
pool of receivables not sold to the third party. The retained interest
represents a credit enhancement for the program. We value the retained interest
based upon the amount we expect to collect from our customers, which
approximates book value.

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

(7) We account for our stock-based employee compensation plans under the
recognition and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees." As permitted by SFAS No. 123, "Accounting for
Stock-Based Compensation," and amended by SFAS No. 148, "Accounting for
Stock-based Compensation--Transition and Disclosure, an amendment of FASB
Statement No. 123," we follow the disclosure requirements only of SFAS No. 123.
The following table illustrates the effect on net income and earnings per share
if we had applied the fair value recognition provisions of SFAS No. 123:

<Table>
<Caption>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- -----------------
2004 2003 2004 2003
------- ------- ------- -------
(MILLIONS EXCEPT PER SHARE AMOUNTS)

Net income.................................................. $ 6 $ 4 $ 34 $ 29
Add: Stock-based employee compensation expense included in
net income, net of income tax............................. 2 2 10 2
Deduct: Stock-based employee compensation expense determined
under fair value based method for all awards, net of
income tax................................................ (2) (2) (11) (3)
----- ----- ----- -----
Pro forma net income........................................ $ 6 $ 4 $ 33 $ 28
===== ===== ===== =====
Earnings per share:
Basic--as reported........................................ $0.15 $0.11 $0.84 $0.72
Basic--pro forma.......................................... $0.14 $0.10 $0.82 $0.69
Diluted--as reported...................................... $0.14 $0.10 $0.78 $0.70
Diluted--pro forma........................................ $0.13 $0.09 $0.77 $0.67
</Table>

The fair value of each option granted during the first nine months of 2004
and 2003 is estimated on the date of grant using the Black-Scholes option
pricing model using the following weighted-average assumptions for grants in the
first nine months of 2004 and 2003, respectively: (i) risk-free interest rates
of 4.07 percent and 4.01 percent; (ii) expected lives of 10 years and 10 years;
(iii) expected volatility of 43.56 percent and 40.43 percent; and (iv) dividend
yield of 0.00 percentage and 0.00 percentage.

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

(8) Earnings per share of common stock outstanding were computed as
follows:

<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
(MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)

Basic earnings per share--
Net income............................. $ 6 $ 4 $ 34 $ 29
=========== =========== =========== ===========
Average shares of common stock
outstanding......................... 41,693,641 40,553,785 41,314,451 40,345,137
=========== =========== =========== ===========
Basic earnings per average share of
common stock........................ $ 0.15 $ 0.11 $ 0.84 $ 0.72
=========== =========== =========== ===========
Diluted earnings per share--
Net income............................. $ 6 $ 4 $ 34 $ 29
=========== =========== =========== ===========
Average shares of common stock
outstanding......................... 41,693,641 40,553,785 41,314,451 40,345,137
Effect of dilutive securities:
Restricted stock.................... 257,920 75,351 266,296 58,764
Stock options....................... 2,371,397 1,557,875 2,417,135 1,070,073
----------- ----------- ----------- -----------
Average shares of common stock
outstanding including dilutive
shares.............................. 44,322,958 42,187,011 43,997,882 41,473,974
=========== =========== =========== ===========
Diluted earnings per average share of
common stock........................ $ 0.14 $ 0.10 $ 0.78 $ 0.70
=========== =========== =========== ===========
</Table>

Options to purchase 751,239 and 2,379,719 shares of common stock were
outstanding at September 30, 2004 and 2003, respectively, but were not included
in the computation of diluted EPS because the options' exercise prices were
greater than the average market price of the common shares on such dates.

(9) Net periodic pension costs (income) and postretirement benefit costs
(income) consist of the following components:

<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
PENSION POSTRETIREMENT PENSION POSTRETIREMENT
----------- -------------- ----------- --------------
2004 2003 2004 2003 2004 2003 2004 2003
---- ---- ------ ----- ---- ---- ----- -----
(MILLIONS) (MILLIONS)

Service cost............................ $ 5 $ 4 $ 1 $1 $ 15 $ 12 $ 2 $ 4
Interest cost........................... 7 7 2 3 22 21 6 8
Expected return on plan assets.......... (7) (7) -- -- (22) (21) -- --
Net amortization:
Actuarial loss........................ 1 1 1 1 4 2 4 3
Prior service cost.................... 1 1 (2) -- 3 3 (6) (1)
--- --- ----- -- ---- ---- ----- -----
Net pension and postretirement costs.... $ 7 $ 6 $ 2 $5 $ 22 $ 17 $ 6 $ 14
=== === ===== == ==== ==== ===== =====
</Table>

For the nine months ended September 30, 2004, we made pension contributions
of approximately $13 million. Based on current actuarial estimates, we believe
we will be required to make approximately $5 million to $10 million in
contributions for the remainder of 2004.

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

We made postretirement contributions of approximately $5 million during the
first nine months of 2004. Based on current actuarial estimates, we believe we
will be required to make approximately $1 million in contributions for the
remainder of 2004.

(10) We occasionally provide guarantees that could require us to make
future payments in the event that the third party primary obligor does not make
its required payments. We have not recorded a liability for any of these
guarantees. The only third party guarantee we have made is the performance of
lease obligations by a former affiliate. Our maximum liability under this
guarantee was approximately $4 million at both September 30, 2004 and 2003,
respectively. We have no recourse in the event of default by the former
affiliate. However, we have not been required to make any payments under this
guarantee.

Additionally, we have from time to time issued guarantees for the
performance of obligations by some of our subsidiaries, and some of our
subsidiaries have guaranteed our debt. All of our then existing and future
material domestic wholly-owned subsidiaries fully and unconditionally guarantee
the $800 million senior secured credit facility, the $475 million senior secured
notes and the $500 million senior subordinated notes on a joint and several
basis. The arrangement for the senior secured credit facility is also secured by
first-priority liens on substantially all our domestic assets and pledges of 66
percent of the stock of certain first-tier foreign subsidiaries. The arrangement
for the $475 million senior secured notes is also secured by second-priority
liens on substantially all our domestic assets, excluding some of the stock of
our domestic subsidiaries. This arrangement is not secured by any pledges of
stock or assets of our foreign subsidiaries. You should also read Note 12 where
we present the Supplemental Guarantor Condensed Consolidating Financial
Statements.

We have issued guarantees through letters of credit in connection with some
obligations of our affiliates. We have guaranteed through letters of credit
support for local credit facilities, travel and procurement card programs, and
cash management requirements for some of our subsidiaries totaling $24 million.
We have also issued $18 million in letters of credit to support some of our
subsidiaries' insurance arrangements. In addition, we have issued $3 million in
guarantees through letters of credit to guarantee other obligations of
subsidiaries primarily related to environmental remediation activities.

(11) We are a global manufacturer with two geographic reportable segments:
North America and Europe. Each segment manufactures and distributes ride control
and emission control products primarily for the automotive industry. We have not
aggregated individual operating segments within these reportable segments. We
evaluate segment performance based primarily on income before interest expense,
income taxes, and minority interest. Products are transferred between segments
and geographic areas on a basis intended to reflect as nearly as possible the
"market value" of the products.

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

The following table summarizes certain segment information:

<Table>
<Caption>
SEGMENT
-----------------------------------------------------------
RECLASS
NORTH AMERICA EUROPE OTHER & ELIMS CONSOLIDATED
------------- ------ ----- ------- ------------
(MILLIONS)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004
Revenues from external customers............. $ 465 $ 399 $134 $ -- $ 998
Intersegment revenues........................ 2 12 5 (19) --
Income before interest, income taxes, and
minority interest.......................... 31 6 7 -- 44
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003
Revenues from external customers............. $ 452 $ 344 $118 $ -- $ 914
Intersegment revenues........................ 1 9 5 (15) --
Income before interest, income taxes, and
minority interest.......................... 32 (3) 9 -- 38
AT SEPTEMBER 30, 2004, AND FOR THE NINE
MONTHS THEN ENDED
Revenues from external customers............. $1,491 $1,253 $402 $ -- $3,146
Intersegment revenues........................ 5 40 14 (59) --
Income before interest, income taxes, and
minority interest.......................... 111 17 25 -- 153
Total Assets................................. 841 1,195 841 119 2,996
AT SEPTEMBER 30, 2003, AND FOR THE NINE
MONTHS THEN ENDED
Revenues from external customers............. $1,434 $1,077 $322 $ -- $2,833
Intersegment revenues........................ 5 28 10 (43) --
Income before interest, income taxes, and
minority interest.......................... 109 7 20 -- 136
Total Assets................................. 784 1,085 725 146 2,740
</Table>

In October 2004, we announced a change in the structure of our organization
that will change our reportable segments. The European segment will now include
our South American operations. While this will have no impact on our
consolidated results, it will change our segment results. This change would have
increased European segment revenues by approximately $42 million for the third
quarter and $113 million for the nine months ended September 30, 2004. The
impact on European EBIT would have been an increase of approximately $4 million
for the third quarter and $10 million for the nine months ended September 30,
2004. Asia-Pacific will be our new reportable segment and will include our Asian
and Australian operations. The change in segment reporting will be reflected in
our Annual Report on Form 10-K for the year ended December 31, 2004.

(12) Supplemental guarantor condensed financial statements are presented
below:

Basis of Presentation

Subject to limited exceptions, all of our existing and future material
domestic wholly owned subsidiaries (which are referred to as the Guarantor
Subsidiaries) fully and unconditionally guarantee our senior subordinated notes
due 2009 and our senior secured notes due 2013 on a joint and several basis. We
have not presented separate financial statements and other disclosures
concerning each of the Guarantor Subsidiaries

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

because management has determined that such information is not material to the
holders of the notes. Therefore, the Guarantor Subsidiaries are combined in the
presentation below.

These condensed consolidating financial statements are presented on the
equity method. Under this method, our investments are recorded at cost and
adjusted for our ownership share of a subsidiary's cumulative results of
operations, capital contributions and distributions, and other equity changes.
You should read the condensed consolidating financial statements of the
Guarantor Subsidiaries in connection with our consolidated financial statements
and related notes 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 us.

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

STATEMENT OF INCOME (LOSS)

<Table>
<Caption>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004
----------------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS &
SUBSIDIARIES SUBSIDIARIES COMPANY) ELIMS CONSOLIDATED
------------ ------------ --------------- --------- ------------
(MILLIONS)

REVENUES
Net sales and operating
revenues--
External...................... $448 $550 $ -- $ -- $998
Affiliated companies.......... 14 87 -- (101) --
---- ---- ---- ----- ----
462 637 -- (101) 998
---- ---- ---- ----- ----
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)..... 364 535 -- (101) 798
Engineering, research, and
development................... 10 12 -- -- 22
Selling, general, and
administrative................ 42 49 -- -- 91
Depreciation and amortization of
other intangibles............. 17 25 -- -- 42
---- ---- ---- ----- ----
433 621 -- (101) 953
---- ---- ---- ----- ----
OTHER INCOME (EXPENSE)
Loss on sale of receivables...... -- -- -- -- --
Other income (loss).............. 1 (2) -- -- (1)
---- ---- ---- ----- ----
1 (2) -- -- (1)
---- ---- ---- ----- ----
INCOME (LOSS) BEFORE INTEREST
EXPENSE, INCOME TAXES, MINORITY
INTEREST, AND EQUITY IN NET
INCOME FROM AFFILIATED
COMPANIES........................ 30 14 -- -- 44
Interest expense--
External (net of interest
capitalized)................ -- 3 32 -- 35
Affiliated companies (net of
interest income)............ 22 (2) (20) -- --
Income tax expense (benefit)..... (25) 2 (16) 41 2
Minority interest................ -- 1 -- -- 1
---- ---- ---- ----- ----
33 10 4 (41) 6
Equity in net income (loss) from
affiliated companies.......... 18 -- 2 (20) --
---- ---- ---- ----- ----
NET INCOME (LOSS).................. $ 51 $ 10 $ 6 $ (61) $ 6
==== ==== ==== ===== ====
</Table>

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

STATEMENT OF INCOME (LOSS)

<Table>
<Caption>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003
----------------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS &
SUBSIDIARIES SUBSIDIARIES COMPANY) ELIMS CONSOLIDATED
------------ ------------ --------------- --------- ------------
(MILLIONS)

REVENUES
Net sales and operating
revenues--
External...................... $450 $464 $ -- $ -- $914
Affiliated companies.......... 14 84 -- (98) --
---- ---- ---- ---- ----
464 548 -- (98) 914
---- ---- ---- ---- ----
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)..... 357 468 -- (98) 727
Engineering, research, and
development................... 3 15 -- -- 18
Selling, general, and
administrative................ 48 43 -- -- 91
Depreciation and amortization of
other intangibles............. 17 23 -- -- 40
---- ---- ---- ---- ----
425 549 -- (98) 876
---- ---- ---- ---- ----
OTHER INCOME (EXPENSE)
Loss on sale of receivables...... -- -- -- -- --
Other income (loss).............. -- -- -- -- --
-- -- -- -- --
INCOME BEFORE INTEREST EXPENSE,
INCOME TAXES, MINORITY INTEREST,
AND EQUITY IN NET INCOME FROM
AFFILIATED COMPANIES............. 39 (1) -- -- 38
Interest expense--
External (net of interest
capitalized)................ 1 1 32 -- 34
Affiliated companies (net of
interest income)............ 20 (2) (18) -- --
Income tax expense (benefit)..... (1) -- (16) 15 (2)
Minority interest................ -- 2 -- -- 2
---- ---- ---- ---- ----
19 (2) 2 (15) 4
Equity in net income (loss) from
affiliated companies.......... 5 -- 2 (7) --
---- ---- ---- ---- ----
NET INCOME (LOSS).................. $ 24 $ (2) $ 4 $(22) $ 4
==== ==== ==== ==== ====
</Table>

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

STATEMENT OF INCOME (LOSS)

<Table>
<Caption>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
----------------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS &
SUBSIDIARIES SUBSIDIARIES COMPANY) ELIMS CONSOLIDATED
------------ ------------ --------------- --------- ------------
(MILLIONS)

REVENUES
Net sales and operating
revenues--
External...................... $1,338 $1,808 $ -- $ -- $3,146
Affiliated companies.......... 41 194 -- (235) --
------ ------ ---- ----- ------
1,379 2,002 -- (235) 3,146
------ ------ ---- ----- ------
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)..... 1,067 1,670 -- (235) 2,502
Engineering, research, and
development................... 26 30 -- -- 56
Selling, general, and
administrative................ 150 152 -- -- 302
Depreciation and amortization of
other intangibles............. 56 75 -- -- 131
------ ------ ---- ----- ------
1,299 1,927 -- (235) 2,991
------ ------ ---- ----- ------
OTHER INCOME (EXPENSE)
Loss on sale of receivables...... -- (1) -- -- (1)
Other income (loss).............. 19 (13) -- (7) (1)
------ ------ ---- ----- ------
19 (14) -- (7) (2)
------ ------ ---- ----- ------
INCOME (LOSS) BEFORE INTEREST
EXPENSE, INCOME TAXES, MINORITY
INTEREST, AND EQUITY IN NET
INCOME FROM AFFILIATED
COMPANIES........................ 99 61 -- (7) 153
Interest expense--
External (net of interest
capitalized)................ -- 6 98 -- 104
Affiliated companies (net of
interest income)............ 64 (7) (57) -- --
Income tax expense (benefit)..... (59) 16 (51) 105 11
Minority interest................ -- 4 -- -- 4
------ ------ ---- ----- ------
94 42 10 (112) 34
Equity in net income (loss) from
affiliated companies.......... 56 -- 24 (80) --
------ ------ ---- ----- ------
NET INCOME (LOSS).................. $ 150 $ 42 $ 34 $(192) $ 34
====== ====== ==== ===== ======
</Table>

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

STATEMENT OF INCOME (LOSS)

<Table>
<Caption>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
----------------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS &
SUBSIDIARIES SUBSIDIARIES COMPANY) ELIMS CONSOLIDATED
------------ ------------ --------------- --------- ------------
(MILLIONS)

REVENUES
Net sales and operating
revenues--
External...................... $1,315 $1,518 $ -- $ -- $2,833
Affiliated companies.......... 37 191 -- (228) --
------ ------ ---- ----- ------
1,352 1,709 -- (228) 2,833
------ ------ ---- ----- ------
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)..... 1,053 1,424 -- (228) 2,249
Engineering, research, and
development................... 19 31 -- -- 50
Selling, general, and
administrative................ 133 143 -- -- 276
Depreciation and amortization of
other intangibles............. 53 67 -- -- 120
------ ------ ---- ----- ------
1,258 1,665 -- (228) 2,695
------ ------ ---- ----- ------
OTHER INCOME (EXPENSE)
Loss on sale of receivables...... -- (1) -- -- (1)
Other income (loss).............. (1) 2 -- (2) (1)
------ ------ ---- ----- ------
(1) 1 -- (2) (2)
------ ------ ---- ----- ------
INCOME (LOSS) BEFORE INTEREST
EXPENSE, INCOME TAXES, MINORITY
INTEREST, AND EQUITY IN NET
INCOME FROM AFFILIATED
COMPANIES........................ 93 45 -- (2) 136
Interest expense--
External (net of interest
capitalized)................ -- 3 100 -- 103
Affiliated companies (net of
interest income)............ 62 (1) (61) -- --
Income tax expense (benefit)..... (6) (1) (51) 57 (1)
Minority interest................ -- 5 -- -- 5
------ ------ ---- ----- ------
37 39 12 (59) 29
Equity in net income (loss) from
affiliated companies.......... 50 (2) 17 (65) --
------ ------ ---- ----- ------
NET INCOME (LOSS).................. $ 87 $ 37 $ 29 $(124) $ 29
====== ====== ==== ===== ======
</Table>

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

BALANCE SHEET

<Table>
<Caption>
SEPTEMBER 30, 2004
------------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS &
SUBSIDIARIES SUBSIDIARIES COMPANY) ELIMS CONSOLIDATED
------------ ------------ --------------- --------- ------------
(MILLIONS)

ASSETS
Current assets:
Cash and cash equivalents.......... $ 118 $ 85 $ -- $ -- $ 203
Receivables, net................... 122 529 23 (163) 511
Inventories........................ 96 267 -- -- 363
Deferred income taxes.............. 87 9 1 (36) 61
Prepayments and other.............. 22 115 -- -- 137
------ ------ ------ ------- ------
445 1,005 24 (199) 1,275
------ ------ ------ ------- ------
Other assets:
Investment in affiliated
companies....................... 345 -- 2,143 (2,488) --
Notes and advances receivable from
affiliates...................... 2,852 31 3,307 (6,190) --
Long-term notes receivable, net.... 2 19 -- -- 21
Goodwill........................... 136 57 -- -- 193
Intangibles, net................... 14 11 -- -- 25
Deferred income taxes.............. 233 36 115 (125) 259
Pension assets..................... -- 8 -- -- 8
Other.............................. 45 66 34 -- 145
------ ------ ------ ------- ------
3,627 228 5,599 (8,803) 651
------ ------ ------ ------- ------
Plant, property, and equipment, at
cost............................... 888 1,454 -- -- 2,342
Less--Reserves for depreciation and
amortization.................... 543 729 -- -- 1,272
------ ------ ------ ------- ------
345 725 -- -- 1,070
------ ------ ------ ------- ------
$4,417 $1,958 $5,623 $(9,002) $2,996
====== ====== ====== ======= ======

LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt (including current
maturities of long-term debt)
Short-term
debt--non-affiliated.......... $ -- $ 16 $ 4 $ -- $ 20
Short-term debt--affiliated..... 1 81 10 (92) --
Trade payables..................... 220 515 -- (68) 667
Accrued taxes...................... -- 27 16 (21) 22
Other.............................. 110 130 41 (2) 279
------ ------ ------ ------- ------
331 769 71 (183) 988
Long-term debt--non-affiliated....... -- 15 1,388 -- 1,403
Long-term debt--affiliated........... 2,127 -- 4,063 (6,190) --
Deferred income taxes................ 122 79 -- (72) 129
Postretirement benefits and other
liabilities........................ 267 78 -- 6 351
Commitments and contingencies
Minority interest.................... -- 24 -- -- 24
Shareholders' equity................. 1,570 993 101 (2,563) 101
------ ------ ------ ------- ------
$4,417 $1,958 $5,623 $(9,002) $2,996
====== ====== ====== ======= ======
</Table>

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

BALANCE SHEET

<Table>
<Caption>
DECEMBER 31, 2003
------------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS &
SUBSIDIARIES SUBSIDIARIES COMPANY) ELIMS CONSOLIDATED
------------ ------------ --------------- --------- ------------
(MILLIONS)

ASSETS
Current assets:
Cash and cash equivalents.............. $ 70 $ 75 $ -- $ -- $ 145
Receivables, net....................... 136 449 19 (162) 442
Inventories............................ 89 254 -- -- 343
Deferred income taxes.................. 85 9 -- (31) 63
Prepayments and other.................. 40 72 -- -- 112
------ ------ ------ ------- ------
420 859 19 (193) 1,105
------ ------ ------ ------- ------
Other assets:
Investment in affiliated companies..... 330 -- 2,105 (2,435) --
Notes and advances receivable from
affiliates........................... 2,741 37 3,243 (6,021) --
Long-term notes receivable, net........ 2 19 -- -- 21
Goodwill............................... 136 57 -- -- 193
Intangibles, net....................... 14 11 -- -- 25
Deferred income taxes.................. 218 35 78 (92) 239
Pension assets......................... -- 6 -- -- 6
Other.................................. 39 70 36 -- 145
------ ------ ------ ------- ------
3,480 235 5,462 (8,548) 629
------ ------ ------ ------- ------
Plant, property, and equipment, at
cost................................... 877 1,426 -- -- 2,303
Less--Reserves for depreciation and
amortization......................... 511 681 -- -- 1,192
------ ------ ------ ------- ------
366 745 -- -- 1,111
------ ------ ------ ------- ------
$4,266 $1,839 $5,481 $(8,741) $2,845
====== ====== ====== ======= ======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt (including current
maturities of long-term debt)
Short-term debt--non-affiliated...... $ -- $ 16 $ 4 $ -- $ 20
Short-term debt--affiliated.......... -- 123 10 (133) --
Trade payables......................... 184 464 -- (27) 621
Accrued taxes.......................... -- 32 17 (30) 19
Other.................................. 100 94 40 (1) 233
------ ------ ------ ------- ------
284 729 71 (191) 893
Long-term debt--non-affiliated........... -- 17 1,393 -- 1,410
Long-term debt--affiliated............... 2,062 -- 3,959 (6,021) --
Deferred income taxes.................... 140 75 1 (93) 123
Postretirement benefits and other
liabilities............................ 256 77 (1) 6 338
Commitments and contingencies
Minority interest........................ -- 23 -- -- 23
Shareholders' equity..................... 1,524 918 58 (2,442) 58
------ ------ ------ ------- ------
$4,266 $1,839 $5,481 $(8,741) $2,845
====== ====== ====== ======= ======
</Table>

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

STATEMENT OF CASH FLOWS

<Table>
<Caption>
NINE MONTHS ENDED SEPTEMBER 30, 2004
------------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS &
SUBSIDIARIES SUBSIDIARIES COMPANY) ELIMS CONSOLIDATED
------------ ------------ --------------- --------- ------------
(MILLIONS)

OPERATING ACTIVITIES
Net cash provided (used) by
operating activities........... $156 $143 $(164) $ -- $135
---- ---- ----- ----- ----
INVESTING ACTIVITIES
Net proceeds from sale of
assets......................... -- 12 -- -- 12
Expenditures for plant, property,
and equipment.................. (28) (59) -- -- (87)
Investments and other............ -- -- -- -- --
---- ---- ----- ----- ----
Net cash used by investing
activities..................... (28) (47) -- -- (75)
---- ---- ----- ----- ----
FINANCING ACTIVITIES
Issuance of common shares........ -- -- 6 -- 6
Proceeds from capital
contributions.................. -- -- -- -- --
Issuance of long-term debt....... -- -- -- -- --
Debt issuance costs on long-term
debt........................... -- -- -- -- --
Retirement of long-term debt..... -- (2) (4) -- (6)
Net increase (decrease) in
short-term debt excluding
current maturities of long-term
debt........................... -- 1 -- -- 1
Intercompany dividends and net
increase (decrease) in
intercompany obligations....... (80) (82) 162 -- --
Other............................ -- 1 -- -- 1
---- ---- ----- ----- ----
Net cash provided (used) by
financing activities........... (80) (82) 164 -- 2
---- ---- ----- ----- ----
Effect of foreign exchange rate
changes on cash and cash
equivalents.................... -- (4) -- -- (4)
---- ---- ----- ----- ----
Increase in cash and cash
equivalents.................... 48 10 -- -- 58
Cash and cash equivalents,
January 1...................... 70 75 -- -- 145
---- ---- ----- ----- ----
Cash and cash equivalents,
September 30 (Note)............ $118 $ 85 $ -- $ -- $203
==== ==== ===== ===== ====
</Table>

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

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

STATEMENT OF CASH FLOWS

<Table>
<Caption>
NINE MONTHS ENDED SEPTEMBER 30, 2003
------------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS &
SUBSIDIARIES SUBSIDIARIES COMPANY) ELIMS CONSOLIDATED
------------ ------------ --------------- --------- ------------
(MILLIONS)

OPERATING ACTIVITIES
Net cash provided (used) by
operating activities........... $ 186 $105 $(129) $ -- $ 162
----- ---- ----- ----- -----
INVESTING ACTIVITIES
Net proceeds from the sale of
fixed assets................... 1 3 -- -- 4
Expenditures for plant, property,
and equipment.................. (29) (54) -- -- (83)
Investments and other............ -- (5) -- -- (5)
----- ---- ----- ----- -----
Net cash used by investing
activities..................... (28) (56) -- -- (84)
----- ---- ----- ----- -----
FINANCING ACTIVITIES
Proceeds from capital
contributions.................. -- -- 1 -- 1
Issuance of long-term debt....... -- -- 350 -- 350
Debt issuance cost on long-term
debt........................... -- -- (13) -- (13)
Retirement of long-term debt..... -- (2) (275) -- (277)
Net increase (decrease) in
short-term debt excluding
current maturities of long-term
debt........................... -- 1 (120) -- (119)
Intercompany dividends and net
increase (decrease) in
intercompany obligations....... (157) (29) 186 -- --
Other............................ -- (1) -- -- (1)
----- ---- ----- ----- -----
Net cash provided (used) by
financing activities........... (157) (31) 129 -- (59)
----- ---- ----- ----- -----
Effect of foreign exchange rate
changes on cash and cash
equivalents.................... -- (10) -- -- (10)
----- ---- ----- ----- -----
Increase in cash and cash
equivalents.................... 1 8 -- -- 9
Cash and cash equivalents,
January 1...................... -- 54 -- -- 54
----- ---- ----- ----- -----
Cash and cash equivalents,
September 30 (Note)............ $ 1 $ 62 $ -- $ -- $ 63
===== ==== ===== ===== =====
</Table>

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

(The preceding notes are an integral part of the foregoing financial
statements.)
28

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

EXECUTIVE SUMMARY

We are one of the world's leading manufacturers of automotive emission
control and ride control products and systems. We completed the separation of
our packaging business in a series of transactions during 1999, culminating in
the spin-off to our shareholders of the common stock of Pactiv Corporation
(formerly known as Tenneco Packaging Inc.) on November 4, 1999. We serve both
original equipment (OE) vehicle manufacturers and the repair and replacement
markets, or aftermarket, globally through leading brands, including Monroe(R),
Rancho(R), Clevite(R) Elastomers and Fric Rot(TM) ride control products and
Walker(R), Fonos(TM), and Gillet(TM) emission control products. Worldwide we
serve more than 30 different original equipment manufacturers, and our products
or systems are included on six of the top 10 passenger car models produced in
North American and Western Europe and all of the top 10 light truck models
produced in North America for 2003. During 2003, our aftermarket customers were
comprised of full-line and specialty warehouse distributors, retailers, jobbers,
installer chains and car dealers. We operate more than 70 manufacturing
facilities worldwide and employ approximately 19,100 people to service our
customer's demands.

Factors that are critical to our success include new business awards,
managing our overall global manufacturing footprint to ensure proper placement
and workforce levels in line with business needs, maintaining competitive wages
and benefits, maximizing efficiencies in manufacturing processes, fixing or
eliminating unprofitable businesses and reducing overall costs. In addition, our
ability to adapt to key industry trends, such as the consolidation of OE
customers, increasing technologically sophisticated content, changing
aftermarket distribution channels, increasing environmental standards and
extended product life of automotive parts, also plays a critical role in our
success. Other factors that are critical to our success include adjusting to
environmental and economic challenges such as increases in the cost of raw
materials and our ability to successfully reduce the impact of any such cost
increases through material substitutions, cost reduction initiatives and other
methods.

We have a substantial amount of indebtedness, with total debt, net of cash
balances, of $1.22 billion as of September 30, 2004. As such, our ability to
generate cash--both to fund operations and service our debt--is also a
significant area of focus for our company. See "Liquidity and Capital Resources"
below for further discussion of cash flows.

Total revenues for the third quarter of 2004 were $998 million, a nine
percent increase over the third quarter of 2003. Higher OE volumes and improved
North American aftermarket revenues and currency appreciation were the key
drivers of this increase. Gross margin for the third quarter of 2004 was 20
percent, down five-tenths of a percent from 20.5 percent in the third quarter of
2003. Strong growth in the global OE business outpaced the improvement in the
higher gross margin aftermarket. This shift in business mix coupled with
increasing material costs offset strong OE volumes, aftermarket price increases,
and the benefits from efficiency improvement and cost management activities. We
reported selling, general, administrative and engineering expenses for the third
quarter of 2004 of 11.3 percent of revenues, as compared to 11.9 percent of
revenues for the third quarter of 2003. The decrease was primarily attributable
to higher sales volumes. EBIT was $44 million for the third quarter of 2004, up
$6 million from the $38 million reported in the third quarter of 2003. Increased
profitability in Europe primarily drove this improvement.

Total revenues for the first nine months of 2004 were $3.1 billion, an 11
percent increase over the $2.8 billion reported for same period last year.
Strong OE volumes, improved North American aftermarket revenues and currency
appreciation primarily drove this increase. Gross margin for first nine months
of 2004 was 20.5 percent, a slight decline over the 20.6 percent reported for
the first nine months of 2003. Selling, general, administrative and engineering
expenses for the first nine months of 2004 were 11.4 percent of revenues
compared with 11.5 percent of revenues reported for the same period last year.
Higher revenues, partially offset by higher aftermarket new-customer changeover
costs, restructuring and certain consulting fees tied to the stock price,
primarily drove the reduction. EBIT was $153 million for the first nine months
of 2004, up $17 million from the $136 million reported for prior year. The
increase in EBIT was primarily driven by higher sales volumes and operating
efficiencies.
29

In October 2004, we announced a change in the structure of our organization
in a manner that will change our reportable segments. The European segment will
now include our South American operations. While this will have no impact on our
consolidated results, it will change our segment results. This change would have
increased European segment revenues by approximately $42 million for the third
quarter and $113 million for the nine months ended September 30, 2004. The
impact on European EBIT would have been an increase of approximately $4 million
for the third quarter and $10 million for the nine months ended September 30,
2004. Asia-Pacific will be our new reportable segment and will include our Asian
and Australian operations. The change in segment reporting will be reflected in
our Annual Report on Form 10-K for the year ended December 31, 2004.

RESULTS FROM OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

NET SALES AND OPERATING REVENUES

The following tables reflect our revenues for the third quarter of 2004 and
2003. We present these reconciliations of revenues in order to reflect the trend
in our sales in various product lines and geographic 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. These "pass-through" catalytic converter sales
occur when, at the direction of our OE customers, we purchase catalytic
converters or components from suppliers, use them in our manufacturing process,
and sell them as part of the completed system. While our OE customers assume the
risk of this volatility, it impacts our reported revenue. Excluding
"pass-through" catalytic converter sales removes this impact. We have not
reflected any currency impact in the 2003 table since this is the base period
for measuring the effects of currency during 2004 on our operations. We use this
information to analyze the trend in our revenues before these factors. We
believe investors find this information useful in understanding period-to-period
comparisons in our revenues.

<Table>
<Caption>
THREE MONTHS ENDED SEPTEMBER 30, 2004
-----------------------------------------------------------------
PASS-THROUGH REVENUES
SALES EXCLUDING
REVENUES EXCLUDING CURRENCY AND
CURRENCY EXCLUDING CURRENCY PASS-THROUGH
REVENUES IMPACT CURRENCY IMPACT SALES
-------- -------- --------- ------------ ------------
(MILLIONS)

North America Aftermarket
Ride Control............................ $ 83 $-- $ 83 $ -- $ 83
Emission Control........................ 44 -- 44 -- 44
---- --- ---- ---- ----
Total North America Aftermarket.... 127 -- 127 -- 127
North America Original Equipment
Ride Control............................ 108 -- 108 -- 108
Emission Control........................ 230 1 229 71 158
---- --- ---- ---- ----
Total North America Original
Equipment....................... 338 1 337 71 266
Total North America............. 465 1 464 71 393
Europe Aftermarket
Ride Control............................ 44 3 41 -- 41
Emission Control........................ 50 4 46 -- 46
---- --- ---- ---- ----
Total Europe Aftermarket........... 94 7 87 -- 87
Europe Original Equipment
Ride Control............................ 81 7 74 -- 74
Emission Control........................ 224 14 210 74 136
---- --- ---- ---- ----
Total Europe Original Equipment.... 305 21 284 74 210
Total Europe.................... 399 28 371 74 297
Asia...................................... 42 -- 42 12 30
South America............................. 42 -- 42 4 38
Australia................................. 50 4 46 4 42
---- --- ---- ---- ----
Total Other..................... 134 4 130 20 110
---- --- ---- ---- ----
Total Tenneco Automotive.................. $998 $33 $965 $165 $800
==== === ==== ==== ====
</Table>

<Table>
<Caption>
THREE MONTHS ENDED SEPTEMBER 30, 2003
-----------------------------------------------------------------
PASS-THROUGH REVENUES
SALES EXCLUDING
REVENUES EXCLUDING CURRENCY AND
CURRENCY EXCLUDING CURRENCY PASS-THROUGH
REVENUES IMPACT CURRENCY IMPACT SALES
-------- -------- --------- ------------ ------------
(MILLIONS)

North America Aftermarket
Ride Control............................ $ 78 $ -- $ 78 $ -- $ 78
Emission Control........................ 45 -- 45 -- 45
---- ----- ---- ---- ----
Total North America Aftermarket.... 123 -- 123 -- 123
North America Original Equipment
Ride Control............................ 102 -- 102 -- 102
Emission Control........................ 227 -- 227 67 160
---- ----- ---- ---- ----
Total North America Original
Equipment....................... 329 -- 329 67 262
Total North America............. 452 -- 452 67 385
Europe Aftermarket
Ride Control............................ 45 -- 45 -- 45
Emission Control........................ 47 -- 47 -- 47
---- ----- ---- ---- ----
Total Europe Aftermarket........... 92 -- 92 -- 92
Europe Original Equipment
Ride Control............................ 65 -- 65 -- 65
Emission Control........................ 187 -- 187 56 131
---- ----- ---- ---- ----
Total Europe Original Equipment.... 252 -- 252 56 196
Total Europe.................... 344 -- 344 56 288
Asia...................................... 42 -- 42 15 27
South America............................. 31 -- 31 4 27
Australia................................. 45 -- 45 4 41
---- ----- ---- ---- ----
Total Other..................... 118 -- 118 23 95
---- ----- ---- ---- ----
Total Tenneco Automotive.................. $914 $ -- $914 $146 $768
==== ===== ==== ==== ====
</Table>

Revenues from our North American operations increased $13 million in the
third quarter of 2004 compared to the same period last year reflecting higher
sales from both the OE and aftermarket businesses. Total North American OE
revenues were up $9 million to $338 million in the third quarter of 2004. OE
emission control revenues were up $3 million to $230 million in the third
quarter of 2004, from $227 million in the prior year. Adjusted for pass-through
sales, which increased six percent, and currency, OE emission control sales were
down $2 million compared to the prior year primarily due to lower volumes on
specific Ford platforms as well as last year's build-out of the Dodge Intrepid
and Durango. OE ride control revenues for the third quarter of 2004 increased
six percent from the prior year driven by higher heavy-duty volumes. Total OE
revenues, excluding pass-through sales and currency, increased two percent in
the third quarter of 2004, while North American light vehicle production rates
were down one percent from the third quarter of 2003. OE revenues benefited from
higher heavy-duty volumes, our position on many of North America's top-selling
platforms with GM, Ford, DaimlerChrysler, and increasing revenues from Honda,
Toyota and Nissan. Aftermarket revenues for North America were $127 million in
the third quarter of 2004, representing an increase of two percent compared to
the prior year. Aftermarket ride control revenues increased $5 million or six
percent in the third quarter of 2004, due in large part to orders from new
customers as well as higher sales of premium priced products. In line with
market softness, especially in the Northeast, aftermarket emission control
revenues were down four percent in the third quarter of 2004 compared to 2003.
It appears that the double-digit declines we previously experienced in the
exhaust aftermarket, driven by the OE introduction of stainless steel and its
negative impact on aftermarket replacement rates, are subsiding.

Our European segment's revenues increased $55 million or 16 percent in the
third quarter of 2004 compared to last year. Total OE revenues were $305 million
in the third quarter of 2004, up 21 percent from

last year. OE emission control revenues increased 20 percent to $224 million in
the third quarter of 2004, from $187 million in the prior year. Excluding an $18
million increase in pass-through sales and a $14 million increase due to
strengthening currency, OE emission control revenues increased four percent over
2003, while European light vehicle production levels were up one percent
compared to the third quarter of 2003. We experienced this increase as a result
of higher volumes on successful platforms with Volvo and Peugeot, along with
newly launched platforms with Ford, Volkswagen and BMW. OE ride control revenues
increased to $81 million in the third quarter of 2004, up 25 percent from $65
million a year ago. Excluding a $7 million benefit from currency appreciation,
OE ride control revenues increased 14 percent. We experienced this revenue
increase, despite the modest one percent increase in European light vehicle
build rates, with incremental new business from Volkswagen and Ford. European
aftermarket sales were $94 million in the third quarter of 2004 compared to $92
million last year. Excluding $7 million attributable to currency appreciation,
European aftermarket revenues declined five percent in the third quarter of 2004
compared to last year. Ride control aftermarket revenues, excluding the impact
of currency, were down nine percent compared to the prior year as a result of
customer consolidations, primarily in Germany and the U.K. In addition,
aftermarket emission control revenues excluding currency declined by two
percent, versus an estimated market decline of eight percent as the exhaust
business picked up some market share, partially offsetting the adverse impact of
the now-standard use of stainless steel, which increases the lifespan of OE
exhaust products.

Revenues from our Other operations, which include South America, Australia
and Asia, increased $16 million to $134 million in the third quarter of 2004 as
compared to $118 million in the prior year. Asian operations reported revenues
of $42 million during the third quarter, even with the prior year. The slow-down
in auto sales growth in China offset the volume contribution from our new joint
ventures. In Australia, stronger OE volumes and strengthening currency increased
revenues by 13 percent to $50 million. Excluding the impact of currency,
Australian revenues increased four percent. South American revenues were up $11
million primarily as a result of improving economies in both Brazil and
Argentina driving higher OE and aftermarket volumes.

EARNINGS BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY INTEREST ("EBIT")

<Table>
<Caption>
THREE MONTHS
ENDED
SEPTEMBER 30,
---------------
2004 2003 CHANGE
---- ---- ------
(MILLIONS)

North America............................................... $31 $32 $(1)
Europe...................................................... 6 (3) 9
Other....................................................... 7 9 (2)
--- --- ---
$44 $38 $ 6
=== === ===
</Table>

The EBIT results shown in the preceding table include the following item,
discussed below under "Restructuring and Other Charges" which have an effect on
the comparability of EBIT results between periods:

<Table>
<Caption>
THREE MONTHS
ENDED
SEPTEMBER 30,
---------------
2004 2003
---- ----

Europe
Restructuring related expenses............................ $2 $1
</Table>

EBIT for North American operations decreased $1 million to $31 million in
the third quarter of 2004 from $32 million one year ago. Higher OE volumes
increased EBIT by $5 million in the third quarter of 2004 compared to the prior
year. The higher North American ride control aftermarket volumes increased EBIT
by $5 million. Lower marketing and advertising expenses increased EBIT by $6
million. Offsetting these increases were higher material costs of $8 million and
higher group and administration costs of $4 million, as well as higher OE price
concessions and the impact of lower aftermarket emission control volumes.

Our European segment's EBIT was $6 million for the third quarter of 2004,
up $9 million from a loss of $3 million in 2003. Higher OE volumes contributed
$4 million to EBIT in the third quarter. Also contributing to EBIT were
manufacturing efficiencies and restructuring savings of $6 million, currency
appreciation of $1 million and aftermarket price increases of $2 million.
Partially offsetting these increases in the third quarter were lower aftermarket
volumes of $3 million and higher material costs of $2 million, as well as the
impact of OE price concessions. Included in 2004's third quarter EBIT were $2
million in restructuring related expenses. Included in 2003's third quarter EBIT
were restructuring related expenses of $1 million.

EBIT for our Other operations decreased $2 million to $7 million in the
third quarter of 2004 compared to $9 million one year ago. South America EBIT
improved by $1 million, mostly due to higher volumes and price increases. The
overall decline for our Other operations was primarily due to lower OE revenues
in China and manufacturing inefficiencies related to the start-up of a new
production line by a customer in Australia.

EBIT AS A PERCENTAGE OF REVENUE

<Table>
<Caption>
THREE MONTHS
ENDED
SEPTEMBER 30,
---------------
2004 2003
---- ----

North America............................................... 7% 7%
Europe...................................................... 2% (1)%
Other....................................................... 5% 8%
Total Tenneco Automotive.................................. 4% 4%
</Table>

In North America, EBIT as a percentage of revenue for the third quarter of
2004 remained flat compared to the prior year. Higher volumes in both the OE and
aftermarket segments were offset by higher price concessions and materials
costs. In Europe, EBIT margins for the third quarter of 2004 improved to two
percent from negative one percent in the prior year. Stronger OE volumes,
aftermarket price increases, manufacturing efficiencies and currency
appreciation were partially offset by weaker aftermarket volumes, OE price
concessions, and higher material and restructuring costs. EBIT as a percentage
of revenue for our Other operations decreased by three percent in the third
quarter of 2004 compared to the same period last year. The decrease was
primarily driven by lower OE volumes in China and manufacturing inefficiencies
in Australia.

INTEREST EXPENSE, NET OF INTEREST CAPITALIZED

We reported interest expense of $35 million in the third quarter of 2004
compared to $34 million in the prior year. Last year's interest expense included
a $2 million reduction resulting from an adjustment to the write off of debt
issuance costs that were deferred on the senior debt we paid down with the
proceeds of the June $350 million bond offering. Excluding that adjustment, the
latest quarter's decrease in interest expense resulted from lower average debt
balances and the benefits of the interest rate swaps we entered into in April of
this year. See more detailed explanations on our debt structure, including the
$350 million bond offering in June 2003, the $125 million bond offering in
December 2003, and the senior debt refinancing in December 2003, and the
anticipated impact of these transactions on our interest expense, in "Liquidity
and Capital Resources--Capitalization" later in this Management's Discussion and
Analysis.

INCOME TAXES

Income tax expense was $2 million for the third quarter of 2004, compared
to a $2 million tax benefit in the prior year. Included in the third quarter of
2004's results is a benefit of $1 million primarily related to

adjustments for outstanding tax issues. Included in the third quarter of 2003's
results was a benefit of $3 million that occurred when we adjusted our tax
accruals based on the tax returns filed in the quarter. The effective rate for
the third quarter of 2004, including the $1 million benefit, was 19 percent.
Excluding the $1 million benefit, our effective tax rate was 34 percent. The
effective tax rate for the third quarter of 2003 was negative 53 percent,
including the $3 million benefit. Excluding this $3 million benefit, the
effective tax rate was 40 percent.

EARNINGS PER SHARE

We reported earnings of $6 million or $0.14 per diluted common share for
the third quarter of 2004, compared to $4 million or $0.10 per diluted common
share for 2003. Included in the results for the third quarter of 2004 was the
negative impact of expenses related to our restructuring activities and the
benefit of adjustments related to outstanding tax issues. The net impact of
these items decreased 2004 third quarter earnings per diluted common share by
$0.02. Included in the results for the third quarter of 2003 was the impact of
expenses related to our restructuring activities, offset by an adjustment to the
write-off of debt issuance costs related to the bond transaction in June of
2003, and benefits from adjustments to tax accruals for prior year tax returns.
The net impact of these items increased earnings per diluted common share for
the third quarter of 2003 by $0.09. You should also read Note 8 to the
consolidated financial statements for more detailed information on earnings per
share.

RESTRUCTURING AND OTHER CHARGES

Over the past several years we have adopted plans to restructure portions
of our operations. These plans were approved by the Board of Directors and were
designed to reduce operational and administrative overhead costs throughout the
business. Prior to the change in accounting required for exit or disposal
activities, we recorded charges to income related to these plans for costs that
do not benefit future activities in the period in which the plans were finalized
and approved, while actions necessary to affect these restructuring plans
occurred over future periods in accordance with established plans.

To date we have generated about $31 million of annual savings from Project
Genesis. Approximately $7 million of savings was related to closing the eight
facilities, approximately $16 million of savings was related to value mapping
and plant arrangement and approximately $8 million of savings was related to
relocating production among facilities and centralizing some functional areas.
To date, there have been no significant deviations from planned savings. All
actions for Project Genesis have been completed including $1 million of
severance that was paid during the second quarter of 2004.

Amounts related to the reserves we have established regarding activities
that are part of our restructuring plans are as follows:

Severance............................... $ 1 $ 1 $ -- $ -- $ --
Asset Impairment........................ -- -- -- -- --
Other................................... -- -- -- -- --
--- --- ----- ----- -----
$ 1 $ 1 $ -- $ -- $ --
=== === ===== ===== =====
</Table>

Under the terms of our amended and restated senior credit agreement that
took effect on December 12, 2003, we are allowed to exclude up to $60 million of
cash charges and expenses, before taxes, related to potential future cost
reduction initiatives over the 2002 to 2006 time period from the calculation of
the financial covenant ratios we are required to maintain under our senior
credit agreement. As of September 30, 2004, we have excluded $31 million of the
$60 million available under the terms of the senior credit facility. In October
2004, we announced a plan to eliminate 250 salaried positions through selected
layoffs and an elective early retirement program. The majority of the layoffs
will be at the middle and senior management level. As a result, we expect to
incur charges of approximately $20 to $24 million related to these reductions
which will be recorded over the next several months. The reductions are expected
to be completed by the end of April 2005. As a result, as of October 31, 2004,
we would have excluded approximately $51 to $55 million of the $60 million
available under the terms of the senior credit facility. In addition to the
announced actions, we will continue to evaluate additional opportunities to
initiate actions that will reduce our costs through implementing the most
appropriate and efficient logistics, distribution and manufacturing footprint
for the future. There can be no assurances, however, that we will undertake
additional restructuring actions. Actions that we take, if any, will require the
approval of our Board of Directors, or its authorized committee, and if the
costs of the plans exceed the amount previously approved by our senior lenders,
could require approval by our senior lenders. We plan to conduct any workforce
reductions that result in compliance with all legal and contractual requirements
including obligations to consult with workers' councils, union representatives
and others.

CRITICAL ACCOUNTING POLICES

We prepare our financial statements in accordance with accounting
principles generally accepted in the United States of America. Preparing our
financial statements in accordance with generally accepted accounting principles
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The following paragraphs include a
discussion of some critical areas where estimates are required.

Revenue Recognition

We recognize revenue for sales to our original equipment and aftermarket
customers under the terms of our arrangements with those customers, generally at
the time of shipment from our plants or distribution centers. For our
aftermarket customers, we provide for promotional incentives and returns at the
time of sale. Estimates are based upon the terms of the incentives and
historical experience with returns. Where we have offered product warranty, we
also provide for warranty costs. Those estimates are based upon historical
experience and upon specific warranty issues as they arise. While we have not
experienced any material differences between these estimates and our actual
costs, it is reasonably possible that future warranty issues could arise that
could have a significant impact on our financial statements.

Long-Term Receivables

We expense pre-production design and development costs incurred for our
original equipment customers unless we have a contractual guarantee for
reimbursement of those costs from the customer. At September 30, 2004, we had
$15 million recorded as a long-term receivable from original equipment customers
for guaranteed pre-production design and development arrangements. While we
believe that the vehicle programs behind these arrangements will enter
production, these arrangements allow us to recover our pre-production design and
development costs in the event that the programs are cancelled or do not reach
expected production levels. We have not experienced any material losses on
arrangements where we have a contractual guarantee of reimbursement from our
customers.

Income Taxes

We have a U.S. Federal tax net operating loss ("NOL") carryforward at
September 30, 2004, of $537 million, which will expire in varying amounts from
2018 to 2024. The federal tax effect of that NOL is $188 million, and is
recorded as an asset on our balance sheet at September 30, 2004. We estimate,
based on available evidence, that it is more likely than not that we will
utilize the NOL within the prescribed carryforward period. That estimate is
based upon our expectations regarding future taxable income of our U.S.
operations and upon strategies available to accelerate usage of the NOL.
Circumstances that could change that estimate include future U.S. earnings at
lower than expected levels or a majority ownership change as defined in the
rules of the U.S. tax law. If that estimate changed, we would be required to
cease recognizing an income tax benefit for any new NOL and could be required to
record a reserve for some or all of the asset currently recorded on our balance
sheet. As of September 30, 2004, we believe that there has been a significant
change in our ownership, but not a majority change, in the last three years.

Stock-Based Compensation

We utilize the intrinsic value method to account for our stock-based
compensation plans in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees." If our compensation costs for
our stock-based compensation plans were determined using the fair value method
of accounting as provided in Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," we estimate that
our pro-forma net income and earnings per share would be lower by approximately
$1 million or $0.01 per diluted share for the nine months ended September 30,
2004 and by approximately $1 million or $0.03 per diluted share for the nine
months ended September 30, 2003.

Goodwill and Other Intangible Assets

We utilize an impairment-only approach to value our purchased goodwill in
accordance with SFAS No. 142, "Goodwill and Other Intangible Assets." Each year
in the fourth quarter, we perform an impairment analysis on the balance of
goodwill. Inherent in this calculation is the use of estimates as the fair value
of our designated reporting units is based upon the present value of our
expected future cash flows. In addition, our calculation includes our best
estimate of our weighted average cost of capital and growth rate. If the
calculation results in a fair value of goodwill which is less than the book
value of goodwill, an impairment charge would be recorded in the operating
results of the impaired reporting unit.

Pension and Other Postretirement Benefits

We have various defined benefit pension plans that cover substantially all
of our employees. We also have postretirement health care and life insurance
plans that cover a majority of our domestic employees. Our pension and
postretirement health care and life insurance expenses and valuations are
dependent on management's assumptions used by our actuaries in calculating such
amounts. These assumptions include discount rates, health care cost trend rates,
long-term return on plan assets, retirement rates, mortality rates and other
factors. Health care cost trend rate assumptions are developed based on
historical cost data and an assessment of likely long-term trends. Retirement
and mortality rates are based primarily on actual plan experience.

Our approach to establishing the discount rate assumption starts with the
Moody's AA Corporate Bond Index adjusted for an incremental yield based on
actual historical performance. This incremental yield adjustment is the result
of selecting securities whose yields are higher than the "normal" bonds that
comprise the index. Based on this approach, at September 30, 2003 the discount
rate for pension plans was 6.1 percent. The discount rate for postretirement
benefits was 6.5 percent at September 30, 2003.

Our approach to determining expected return on plan asset assumptions
evaluates both historical returns as well as estimates of future returns, and is
adjusted for any expected changes in the long-term outlook for the equity and
fixed income markets. As a result, our estimate of the long-term rate of return
on plan assets for our pension plans was 8.4 percent for 2003 and is 8.75
percent for 2004.

CHANGES IN ACCOUNTING PRINCIPLES

In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"),
which was revised in December 2003. FIN 46 requires that the assets, liabilities
and results of the activity of variable interest entities be consolidated into
the financial statements of the entity that has the controlling financial
interest. FIN 46 also provides the framework for determining whether a variable
interest entity should be consolidated based on voting interest or significant
financial support provided to it. This interpretation as revised is effective
January 1, 2004. The adoption of FIN 46 did not have a material impact on our
consolidated financial statements.

defer recognizing the effects of the Act on our postretirement healthcare
insurance plans until authoritative guidance was issued by the FASB. In May
2004, the FASB issued FSP No. 106-2, which supercedes FSP No. 106-1 and requires
accounting for the effects of the Act no later than our quarter ended September
30, 2004. The adoption of FSP 106-2 did not have a material impact on our
consolidated financial statements.

RESULTS FROM OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

NET SALES AND OPERATING REVENUES

The following tables reflect our revenues for the first nine months of 2004
and 2003, including the same reconciliations as are presented above for the
third quarters of 2004 and 2003. See "Results from Operations for the Three
Months Ended September 30, 2004 and 2003" for a description of why we present,
and how we use, these reconciliations.

<Table>
<Caption>
NINE MONTHS ENDED SEPTEMBER 30, 2004
-----------------------------------------------------------------
PASS-THROUGH REVENUES
SALES EXCLUDING
REVENUES EXCLUDING CURRENCY AND
CURRENCY EXCLUDING CURRENCY PASS-THROUGH
REVENUES IMPACT CURRENCY IMPACT SALES
-------- -------- --------- ------------ ------------
(MILLIONS)

North America Aftermarket
Ride Control............................ $ 268 $ -- $ 268 $ -- $ 268
Emission Control........................ 125 -- 125 -- 125
------ ---- ------ ---- ------
Total North America Aftermarket.... 393 -- 393 -- 393
North America Original Equipment
Ride Control............................ 346 -- 346 -- 346
Emission Control........................ 752 7 745 243 502
------ ---- ------ ---- ------
Total North America Original
Equipment....................... 1,098 7 1,091 243 848
Total North America............. 1,491 7 1,484 243 1,241
Europe Aftermarket
Ride Control............................ 133 9 124 -- 124
Emission Control........................ 144 12 132 -- 132
------ ---- ------ ---- ------
Total Europe Aftermarket........... 277 21 256 -- 256
Europe Original Equipment
Ride Control............................ 257 21 236 -- 236
Emission Control........................ 719 49 670 232 438
------ ---- ------ ---- ------
Total Europe Original Equipment.... 976 70 906 232 674
Total Europe.................... 1,253 91 1,162 232 930
Asia...................................... 139 1 138 45 93
South America............................. 113 3 110 11 99
Australia................................. 150 20 130 12 118
------ ---- ------ ---- ------
Total Other..................... 402 24 378 68 310
------ ---- ------ ---- ------
Total Tenneco Automotive.................. $3,146 $122 $3,024 $543 $2,481
====== ==== ====== ==== ======
</Table>

<Table>
<Caption>
NINE MONTHS ENDED SEPTEMBER 30, 2003
-----------------------------------------------------------------
PASS-THROUGH REVENUES
SALES EXCLUDING
REVENUES EXCLUDING CURRENCY AND
CURRENCY EXCLUDING CURRENCY PASS-THROUGH
REVENUES IMPACT CURRENCY IMPACT SALES
-------- -------- --------- ------------ ------------
(MILLIONS)

North America Aftermarket
Ride Control............................ $ 240 $ -- $ 240 $ -- $ 240
Emission Control........................ 127 -- 127 -- 127
------ ----- ------ ---- ------
Total North America Aftermarket.... 367 -- 367 -- 367
North America Original Equipment
Ride Control............................ 336 -- 336 -- 336
Emission Control........................ 731 -- 731 229 502
------ ----- ------ ---- ------
Total North America Original
Equipment....................... 1,067 -- 1,067 229 838
Total North America............. 1,434 -- 1,434 229 1,205
Europe Aftermarket
Ride Control............................ 133 -- 133 -- 133
Emission Control........................ 137 -- 137 -- 137
------ ----- ------ ---- ------
Total Europe Aftermarket........... 270 -- 270 -- 270
Europe Original Equipment
Ride Control............................ 186 -- 186 -- 186
Emission Control........................ 621 -- 621 203 418
------ ----- ------ ---- ------
Total Europe Original Equipment.... 807 -- 807 203 604
Total Europe.................... 1,077 -- 1,077 203 874
------ ----- ------ ---- ------
Asia...................................... 118 -- 118 42 76
South America............................. 86 -- 86 9 77
Australia................................. 118 -- 118 11 107
------ ----- ------ ---- ------
Total Other..................... 322 -- 322 62 260
------ ----- ------ ---- ------
Total Tenneco Automotive.................. $2,833 $ -- $2,833 $494 $2,339
====== ===== ====== ==== ======
</Table>

Revenues from our North American operations increased $57 million in the
first nine months of 2004 compared to last year's first nine months, reflecting
higher sales from both OE and aftermarket businesses. Total North American OE
revenues increased three percent to $1.1 billion in the first nine months of
this year. OE emission control revenues were up three percent in the first nine
months of 2004 as compared to the prior year. Pass-through emission control
sales increased six percent to $243 million in the first nine months of 2004.
Adjusted for pass-through sales, and currency, OE emission control sales levels
were even with last year. OE ride control revenues increased three percent from
the prior year driven primarily by higher heavy-duty volumes. Total OE revenues,
excluding pass-through sales, and currency, increased one percent in the first
nine months of 2004, while North American light vehicle production was unchanged
from the first nine months a year ago. Our revenue improvement was greater than
the flat production rate primarily due to our strong position on top-selling
platforms with General Motors, Ford, DaimlerChrysler, Toyota and Honda, as well
as higher heavy-duty volumes. Aftermarket revenues for North America were $393
million in the first nine months of 2004, representing an increase of seven
percent compared to the same period of the prior year. Aftermarket ride control
revenues increased $28 million or 12 percent in the first nine months of 2004,
primarily due to orders from new customers, higher sales of premium priced
products and, to a lesser degree, sales of DuPont car care appearance products
launched earlier this year. Aftermarket emission control revenues declined two
percent in the first nine months of 2004 compared to 2003, reflecting a
continued overall market decline in the emission control business and the longer
lives of exhaust components due to the OE use of stainless steel, which reduces
aftermarket replacement rates.

Our European segment's revenues increased $176 million, or 16 percent, in
the first nine months of 2004 compared to last year's first nine months. Total
OE revenues were $976 million, up 21 percent from the first

nine months of last year. OE emission control revenues in the first nine months
increased 16 percent to $719 million from $621 million in the prior year.
Excluding a $29 million increase in pass-through sales and a $49 million
increase due to strengthening currency, OE emission control revenues increased
five percent over the first nine months of 2003. This improvement was greater
than overall European production levels, which were one-half of one percent
higher during the first nine months compared to a year ago. Strong volumes on
PSA, Volkswagen, Ford and Porsche platforms more than offset the general
market's relatively flat production rates. OE ride control revenues in the first
nine months increased to $257 million, up 38 percent from $186 million a year
ago. Excluding a $21 million benefit from currency appreciation, OE ride control
revenues increased 27 percent. We experienced this revenue increase despite the
relatively flat market build rates due to stronger sales on new and existing
platforms with Volkswagen, Ford, Renault and Fiat. European aftermarket sales
were $277 million in the first nine months of this year compared to $270 million
in last year's first nine months. Excluding $21 million attributable to currency
appreciation, European aftermarket revenues declined five percent in the first
nine months of 2004 compared to the same period last year. Ride control
aftermarket revenues, excluding the impact of currency, were down seven percent
compared with the prior year, reflecting continued market pressure from customer
consolidations. Additionally, aftermarket emission control revenues were lower
as a result of the now standard use of longer lasting stainless steel by OE
manufacturers. Excluding the impact of currency, European aftermarket emission
control revenues declined four percent from the prior year.

Revenues from our Other operations, which include South America, Australia
and Asia, increased $80 million to $402 million in the first nine months of 2004
as compared to $322 million in the first nine months of the prior year. Higher
OE volumes and pass-through sales drove increased revenues of $21 million at our
Asian operations. In Australia, stronger volumes and strengthening currency
increased revenues by 28 percent to $150 million. Stronger volumes, pricing and
currency appreciation increased South American revenues by $27 million or 31
percent over the same period last year.

EARNINGS BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY INTEREST ("EBIT")

<Table>
<Caption>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
2004 2003 CHANGE
---- ---- ------
(MILLIONS)

North America............................................... $111 $109 $ 2
Europe...................................................... 17 7 10
Other....................................................... 25 20 5
---- ---- ---
$153 $136 $17
==== ==== ===
</Table>

The EBIT results shown in the preceding table include the following items,
discussed above under "Restructuring Charges", which have an effect on the
comparability of EBIT results between periods:

<Table>
<Caption>
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------
2004 2003
---- ----
(MILLIONS)

North America
Restructuring related expenses............................ $3 $3
Changeover costs for a major new aftermarket customer..... 8 --
Consulting fees indexed to stock price.................... 2 --
Europe
Restructuring related expenses............................ 9 4
Consulting fees indexed to stock price.................... 1 --
Other
Consulting fees indexed to stock price.................... 1 --
</Table>

EBIT for North American operations increased to $111 million in the first
nine months of 2004 from $109 million one year ago. Higher OE ride and emission
control volumes increased EBIT by $11 million and $6 million, respectively.
Offsetting these increases were price concessions, higher manufacturing costs
and higher selling, general and administrative costs. Higher North American
aftermarket ride control volumes increased EBIT by $18 million, with price and
mix improvements adding another $3 million to EBIT. These increases were
partially offset by higher manufacturing costs and higher selling, general and
administrative costs including changeover, promotion and advertising expenses.
Included in 2004's EBIT for the first nine months was $3 million in
restructuring and restructuring-related expenses, $8 million in changeover costs
and $2 million in consulting fees indexed to the stock price. The customer
changeover costs include the cost of acquiring and disposing of competitor
inventory when we supply aftermarket parts to a new customer. We expect an
additional $1 million of changeover costs during the last quarter of 2004. The
consulting fees relate to a 1999 agreement that provided that a portion of the
consultant's compensation would be in stock appreciation rights ("SAR's") that
were priced above the market price of our stock at the grant date. As of October
2004, all SAR's have been exercised. Included in 2003's EBIT for the first nine
months were $3 million in restructuring-related expenses.

Our European segment's EBIT was $17 million for the first nine months of
2004, up $10 million from $7 million in the first nine months of 2003. Higher OE
volumes in both product lines contributed $14 million to EBIT. OE manufacturing
efficiencies increased EBIT $7 million. Currency appreciation added $3 million
of EBIT compared to the same period last year. These increases were partially
offset by price concessions and higher selling, general and administrative
costs. Lower aftermarket volumes also reduced EBIT by $7 million, but were more
than offset by higher operating efficiencies and customer price increases.
Included in 2004's EBIT for the first nine months were $9 million in
restructuring-related expenses and $1 million in consulting fees indexed to the
stock price. For the same period last year, EBIT included $4 million in
restructuring-related expenses.

EBIT for our Other operations increased $5 million to $25 million in the
first nine months of 2004 compared to $20 million for the same period one year
ago. Higher revenues and strengthening Australian currency more than offset
increased manufacturing and selling, general and administrative costs. Included
in 2004's EBIT for the first nine months were $1 million in consulting fees
indexed to the stock price.

EBIT AS A PERCENTAGE OF REVENUE

<Table>
<Caption>
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------
2004 2003
---- ----

North America............................................... 7% 8%
Europe...................................................... 1% 1%
Other....................................................... 6% 6%
Total Tenneco Automotive.................................. 5% 5%
</Table>

In North America, EBIT as a percentage of revenue for the first nine months
of 2004 was down one percent compared to the prior year. Higher volumes in both
the OE and aftermarket segments were offset by higher price concessions,
manufacturing costs and selling, general and administrative costs, including
changeover costs. In Europe, EBIT margins for the first nine months of 2004 were
unchanged with the same period last year, remaining at one percent. OE volume
increases, manufacturing efficiencies and currency appreciation were offset by
OE price concessions, restructuring expenses and higher selling, general and
administrative costs. EBIT as a percentage of revenue for our Other operations
was also unchanged from last year, remaining at six percent for the first nine
months of 2004. Increased revenues were proportionally offset with increased
manufacturing costs and selling, general and administrative costs.

INTEREST EXPENSE, NET OF INTEREST CAPITALIZED

We reported interest expense of $104 million for the first nine months of
2004 compared to $103 million for the same period in 2003. Compared to 2004,
last year's interest expense for the first nine months included

the benefit of $2 million in higher capitalized interest. Last year's interest
expense also included $3 million for the write-off of senior debt issuance costs
that were deferred on the senior debt that we paid down with the proceeds of our
$350 million bond offering in June of 2003. For the first nine months of 2004,
higher interest expense on the 10 1/4 bonds that we issued in June and December
of 2003 was partially offset by benefits of lower average debt balances and
interest rate swaps we entered into in April of this year. See more detailed
explanations on our debt structure, including the $350 million bond offering in
June 2003, the $125 million bond offering in December 2003, and the senior debt
refinancing in December 2003, and the anticipated impact of these transactions
on our interest expense, in "Liquidity and Capital Resources--Capitalization"
later in this Management's Discussion and Analysis.

INCOME TAXES

Income tax expense was $11 million for the first nine months of 2004,
compared to a $1 million tax benefit for the first nine months of 2003. The
first nine months of 2004 included $6 million of tax benefits, reflecting the
adjustment and settlement of prior year tax issues on a more favorable basis
than originally anticipated. Including these benefits, the effective tax rate
for the first nine months of 2004 was 22 percent. Excluding these benefits, our
effective tax rate was 34 percent. The first nine months of 2003 included
benefits of $14 million, including book to return adjustments and settlement of
prior year tax issues on a more favorable basis than originally anticipated.
Including these benefits, the effective tax rate for the first nine months of
2003 was negative two percent. Excluding these benefits our effective tax rate
was 40 percent.

EARNINGS PER SHARE

We reported earnings per diluted common share of $0.78 for the first nine
months of 2004, compared to $0.70 per diluted common share for the first nine
months of 2003. Included in the results for the first nine months of 2004 were
the negative impacts from expenses related to our restructuring activities,
customer changeover costs for a major new aftermarket customer, consulting fees
indexed to the stock price and benefits for the resolution of outstanding tax
issues. In total, these items decreased earnings per diluted common share by
$0.23. Included in the results for the first nine months of 2003 were impacts
from expenses related to our restructuring activities, the write-off of debt
issuance costs relating to the bond transaction in June of 2003 and tax benefits
for the resolution of several audit issues. The net impact of these items
increased earnings per diluted common share by $0.20. You should also read Note
8 to the financial statements for more detailed information on earnings per
share.

LIQUIDITY AND CAPITAL RESOURCES

CAPITALIZATION

<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
2004 2003 % CHANGE
------------- ------------ --------
(MILLIONS)

Short-term debt and current maturities..................... $ 20 $ 20 --%
Long-term debt............................................. 1,403 1,410 (1)
------ ------
Total debt................................................. 1,423 1,430 (1)
------ ------
Total minority interest.................................... 24 23 4
Common shareholders' equity................................ 101 58 74
------ ------
Total capitalization....................................... $1,548 $1,511 2
====== ======
</Table>

General. The increase in shareholders' equity primarily results from the
net income of $34 million reported in the first nine months of 2004 and a $9
million increase in premium on common stock issued pursuant to benefit plans and
other transactions. Although our book equity balance was small at September 30,
2004, it should not affect our business operations. We have no debt covenants
that are based upon our book equity, and there are no other agreements that are
adversely impacted by our relatively low book equity.

Short-term debt, which includes the current portion of long-term
obligations and borrowings by foreign subsidiaries, as well as our revolving
credit facility, remained constant in the third quarter of 2004. There were no
borrowings outstanding under our revolving credit facility at both September 30,
2004 and 2003. The overall decrease in long-term debt resulted from payments
made on our outstanding long-term debt and capital leases in addition to our
position on interest rate swaps entered into in April 2004. See below for
further information on the interest rate swaps.

Senior Credit Facility. Our financing arrangements are primarily provided
by a committed senior secured financing arrangement with a syndicate of banks
and other financial institutions, which was $797 million at September 30, 2004.
The arrangement is secured by substantially all our domestic assets and pledges
of 66 percent of the stock of certain first-tier foreign subsidiaries, as well
as guarantees by our material domestic subsidiaries. We originally entered into
this facility in 1999 and since that time have periodically requested and
received amendments to the facility for various purposes. In 2003, we engaged in
a series of transactions that resulted in the full refinancing of the facility,
through an amendment and restatement, in December.

In June 2003, we issued $350 million of 10 1/4 percent senior secured notes
in a private placement. The notes have a final maturity date of July 15, 2013.
The notes accrue interest from June 19, 2003 with a first interest payment date
of January 15, 2004. In October 2003, we completed an offer to exchange all of
the notes issued in the June 2003 private placement for a like amount of the
10 1/4 percent senior secured notes, with substantially identical terms, which
had been registered under the Securities Act of 1933. These notes are described
in more detail below under "--Senior Secured and Subordinated Notes."

Our amended and restated senior credit facility consists of a seven-year,
$400 million term loan B facility maturing in December 2010; a five-year, $220
million revolving credit facility maturing in December 2008; and a seven-year,
$180 million tranche B letter of credit/revolving loan facility maturing in
December 2010. Although the term loan facility and the tranche B letter of
credit/revolving loan facility mature in 2010, the two facilities are subject to
mandatory prepayment in full, and any letters of credit issued under the term
loan B/revolving loan facility are subject to full cash collateralization, (a)
on April 15, 2009, if by that date our senior subordinated notes are not
refinanced or extended with a maturity not earlier than April 15, 2011, and (b)
on the date which is six months prior to the date to which the senior
subordinated notes have been refinanced or had their maturity extended, if our
senior subordinated notes have been refinanced or had their maturity extended to
a date prior to April 15, 2011. Quarterly principal repayment installments of $1
million on the term loan B facility began March 31, 2004 and continue until
December 31, 2009, then rise to $94 million each on March 31, June 30, and
September 30 of 2010, with the remaining $94 million final principal repayment
due on December 12, 2010. As of September 30, 2004, borrowings under the term
loan B facility and the tranche B letter of credit facility bear interest at an
annual rate equal to, at our option, either (i) the London Interbank Offering
Rate plus a margin of 300 basis points; or (ii) a rate consisting of the greater
of the JP Morgan Chase prime rate or the Federal Funds rate plus 50 basis
points, plus a margin of 200 basis points. Under the provisions of the senior
credit facility agreement, the interest margins for borrowings under the credit
facility and fees paid on letters of credit issued under our credit facility are
subject to adjustment based on the consolidated leverage ratio (consolidated
indebtedness divided by consolidated EBITDA as defined in the senior credit
facility agreement) measured at the end of each quarter. The interest margins
for borrowings under the term loan B facility will be further reduced by 25
basis points following the end of each fiscal quarter for which the consolidated
leverage ratio is less than 3.5. The interest margin on our revolving credit
facility is currently 25 basis points higher than those stated above, and is
subject to adjustment beginning with the fourth quarter of 2004. We also pay a
commitment fee of 50 basis points on the unused portion of the revolving credit
facility. Our senior secured credit facility does not contain any terms that
could accelerate the payment of the facility as a result of a credit rating
agency downgrade.

The $180 million tranche B letter of credit/revolving loan facility is
available for borrowings of revolving loans and to support letters of credit
issued from time to time under the senior credit facility. On December 12, 2003,
the tranche B letter of credit/revolving loan facility lenders deposited $180
million with the administrative agent, who will invest that amount in time
deposits. Revolving loans can be drawn, repaid and reborrowed thereunder. Such
revolving loans will be funded from such deposits and such repayments will

be redeposited with the administrative agent. If a letter of credit is paid
under this facility and not reimbursed in full by us, each participating
lender's ratable share of the deposit will be applied automatically in
satisfaction of the reimbursement obligation. We will not have an interest in
any such funds on deposit, and we will not account for such funds as our
indebtedness when deposited with the administrative agent until drawn by us as
described below. Revolving loans borrowed under such facility will be funded
with the funds on deposit in such accounts and accrue interest at a rate per
annum equal to LIBOR plus 300 basis points. Letters of credit issued thereunder
will accrue a letter of credit fee at a per annum rate of 300 basis points for
the pro rata account of the lenders under such facility and a fronting fee for
the ratable account of the issuers thereof at a per annum rate in an amount to
be agreed upon payable monthly in arrears. The administrative agent will pay on
a monthly basis to the lenders under the facility a return on their funds
actually on deposit in such accounts in an amount equal to a per annum rate of
monthly LIBOR (reset every business day during such monthly period) minus 10
basis points. We will be obligated to pay such lenders on a monthly basis a fee
equal to the excess of (x) a per annum rate equal to monthly LIBOR (reset at the
start of the applicable month) plus 300 basis points on the size of such
facility (i.e., $180 million initially) over (y) the sum of (1) the amount of
such return for such month, (2) the amount of interest accrued on such loans
under such facility for such month and (3) the letter of credit fees (but not
the fronting fees) accrued on such letters of credit under such facility for
such month; provided, that except in certain circumstances, the aggregate amount
of such interest and fees shall not exceed the amount determined pursuant to
clause (x) above minus such return. The interest margins paid on revolving loans
and the fees paid on letters of credit issued under the tranche B letter of
credit/revolving loan facility will reduce by 25 basis points following the end
of each fiscal quarter for which the consolidated leverage ratio is less than
4.0.

The tranche B letter of credit/revolving loan facility will be reflected as
debt on our balance sheet only if we have outstanding thereunder revolving loans
or payments by the facility in respect of letters of credit. We will not be
liable for any losses to or misappropriation of any (i) return due to the
administrative agent's failure to achieve the return described above or to pay
all or any portion of such return to any lender under such facility or (ii)
funds on deposit in such account by such lender (other than the obligation to
repay funds released from such accounts and provided to us as revolving loans
under such facility).

The amended and restated senior credit facility requires that we maintain
financial ratios equal to or better than the following consolidated leverage
ratios (consolidated indebtedness divided by consolidated EBITDA), consolidated
interest coverage ratios (consolidated EBITDA divided by consolidated cash
interest paid), and fixed charge coverage ratios (consolidated EBITDA less
consolidated capital expenditures, divided by consolidated cash interest paid)
at the end of each period indicated. The financial ratios required under the
amended senior credit facility and, in the case of the first, second, and third
quarters of 2004, the actual ratios we achieved are shown in the following
tables:

<Table>
<Caption>
QUARTER ENDED
-----------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
2004 2004 2004 2004
------------ ----------- ------------- ------------
REQ. ACT. REQ. ACT. REQ. ACT. REQUIRED
---- ---- ---- ---- ----- ----- ------------

Leverage Ratio (maximum)................... 5.00 3.97 5.00 3.78 4.75 3.69 4.75
Interest Coverage Ratio (minimum).......... 2.00 2.77 2.00 3.15 2.00 2.75 2.00
Fixed Charge Coverage Ratio (minimum)...... 1.10 1.76 1.10 2.04 1.10 1.78 1.10
</Table>

<Table>
<Caption>
QUARTERS ENDING
----------------------------------------------------------------------------------------------------
MARCH 31,
2005- SEPTEMBER 30- MARCH 31- MARCH 31- MARCH 31- MARCH 31- MARCH 31-
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2005 2005 2006 2007 2008 2009 2010
--------- ------------- ------------ ------------ ------------ ------------ ------------
REQ. REQ. REQ. REQ. REQ. REQ. REQ.
--------- ------------- ------------ ------------ ------------ ------------ ------------

Leverage Ratio (maximum)... 4.75 4.50 4.25 3.75 3.50 3.50 3.50
Interest Coverage Ratio
(minimum)................ 2.00 2.00 2.10 2.20 2.35 2.50 2.75
Fixed Charge Coverage Ratio
(minimum)................ 1.10 1.10 1.15 1.25 1.35 1.50 1.75
</Table>

As part of the amendment and restatement, the terms of our senior credit
facility were also revised to: (i) extend the period of time during which we can
exclude up to $60 million of cash charges and expenses, before taxes, related to
any cost reduction initiatives from the calculation of the financial covenant
ratios through 2006; (ii) permit the refinancing of our senior subordinated
notes and/or our 10 1/4 percent senior secured notes using the net cash proceeds
from the issuance of similarly structured debt; (iii) permit the repurchase of
our senior subordinated notes and/or our 10 1/4 percent senior secured notes
using the net cash proceeds from the issuance of shares of common stock of
Tenneco Automotive Inc.; and (iv) delete the mandatory prepayment of term loans
from excess cash flow in 2003 and reduce the percentage of excess cash flow that
must be used to prepay term loans in subsequent years from 75 percent to 50
percent.

The senior credit facility agreement also contains restrictions on our
operations that are customary for similar facilities, including limitations on:
(i) incurring additional liens; (ii) sale and leaseback transactions (except for
the permitted transactions as described in the amendment); (iii) liquidations
and dissolutions; (iv) incurring additional indebtedness or guarantees; (v)
capital expenditures; (vi) dividends; (vii) mergers and consolidations; and
(viii) 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. As of September 30, 2004, we were in compliance with both the
financial covenants (as indicated above) and operational restrictions of the
facility.

Senior Secured and Subordinated Notes. Our outstanding debt also includes
$500 million of 11 5/8 percent senior subordinated notes due October 15, 2009 in
addition to the $475 million of 10 1/4 percent senior secured notes due July 15,
2013 described above. We can redeem some or all of the notes at any time after
July 15, 2008, in the case of the senior secured notes, and October 15, 2004, in
the case of the senior subordinated notes. If we sell certain of our assets or
experience specified kinds of changes in control, we must offer to repurchase
the notes. We are permitted to redeem up to 35 percent of the senior secured
notes with the proceeds of certain equity offerings completed before July 15,
2006.

The indentures for our senior secured notes and existing senior
subordinated notes require that we, as a condition to incurring certain types of
indebtedness not otherwise permitted, maintain an interest coverage ratio of not
less than 2.25. We have not incurred any of the types of indebtedness not
otherwise permitted by the indentures. The indentures also contain restrictions
on our operations, including limitations on: (i) incurring additional
indebtedness or liens; (ii) dividends; (iii) distributions and stock
repurchases; (iv) investments; and (v) mergers and consolidations. Subject to
limited exceptions, all of our existing and future material domestic wholly
owned subsidiaries fully and unconditionally guarantee these notes on a joint
and several basis. In addition, the senior secured notes and related guarantees
are secured by second priority liens, subject to specified exceptions, on all of
our and our subsidiary guarantors' assets that secure obligations under our
senior credit facility, except that only a portion of the capital stock of our
and our subsidiary guarantor's domestic subsidiaries is provided as collateral
and no assets or capital stock of our direct or indirect foreign subsidiaries
secure the notes or guarantees. There are no significant restrictions on the
ability of the subsidiaries that have guaranteed these notes to make
distributions to us. As of September 30, 2004, we were in compliance with the
covenants and restrictions of these indentures.

We continue to evaluate opportunities to refinance our senior and
subordinated notes. For example, the 11 5/8 percent senior subordinated notes
became callable in October 2004. If we determined it is advantageous to do so,
we could refinance the senior subordinated notes with the cash proceeds of sales
of common stock or new debt, debt securities or preferred stock, any or all of
which could be convertible into common equity, or through any combination of
those securities. We previously disclosed our consideration of specific
transactions to refinance our subordinated notes earlier this year, but
determined not to proceed with those transactions because the pricing for the
new securities we would have issued to complete the refinancing was not
sufficiently attractive in light of our intended use of the proceeds. Any
decision to refinance our current debt will be based upon the then-current
economic conditions and the benefits to our company, and we could move quickly
to effect a refinancing in the event that attractive economic conditions and
transactional benefits are available to us.

Accounts Receivable Securitization. In addition to our senior credit
facility, senior secured notes and senior subordinated notes, we also sell some
of our accounts receivable. In North America, we have an accounts receivable
securitization program with a commercial bank. We sell original equipment and
aftermarket receivables on a daily basis under this program. We had sold
accounts receivable under this program of $69 million at both September 30, 2004
and 2003, respectively. This program is subject to cancellation prior to its
maturity date if we were to (i) fail to pay interest or principal payments on an
amount of indebtedness exceeding $50 million, (ii) default on the financial
covenant ratios under the senior credit facility, or (iii) fail to maintain
certain financial ratios in connection with the accounts receivable
securitization program. In January 2003, this program was amended to extend its
term to January 31, 2005 and reduce the size of the program to $50 million. The
program has since been amended to increase its size to $75 million with its
termination date unchanged at January 31, 2005. We also sell some receivables in
our European operations to regional banks in Europe. At September 30, 2004, we
had sold $79 million of accounts receivable in Europe up from $67 million at
September 30, 2003. The arrangements to sell receivables in Europe are not
committed and can be cancelled at any time. If we were not able to sell
receivables under either the North American or European securitization programs,
our borrowings under our revolving credit agreements would increase. These
accounts receivable securitization programs provide us with access to cash at
costs that are generally favorable to alternative sources of financing, and
allow us to reduce borrowings under our revolving credit agreements.

Capital Requirements. We believe that cash flows from operations, combined
with available borrowing capacity described above, assuming that we maintain
compliance with the financial covenants and other requirements of our loan
agreement, will be sufficient to meet our future capital requirements for the
following year, including scheduled debt principal amortization payments. Our
ability to meet the financial covenants depends upon a number of operational and
economic factors, many of which are beyond our control. Factors that could
impact our ability to comply with the financial covenants include the rate at
which consumers continue to buy new vehicles and the rate at which they continue
to repair vehicles already in service, as well as our ability to successfully
implement our restructuring plans. Lower North American vehicle production
levels, weakening in the global aftermarket, or a reduction in vehicle
production levels in Europe, beyond our expectations, could impact our ability
to meet our financial covenant ratios. In the event that we are unable to meet
these financial covenants, we would consider several options to meet our cash
flow needs. These options could include further renegotiations with our senior
credit lenders, additional cost reduction or restructuring initiatives, sales of
assets or common stock, or other alternatives to enhance our financial and
operating position. Should we be required to implement any of these actions to
meet our cash flow needs, we believe we can do so in a reasonable time frame.

CONTRACTUAL OBLIGATIONS

Our remaining required debt principal amortization and payment obligations
under lease and certain other financial commitments as of September 30, 2004,
are shown in the following table:

<Table>
<Caption>
PAYMENTS DUE IN:
--------------------------------------------------------
BEYOND
2004 2005 2006 2007 2008 2008 TOTAL
---- ---- ---- ---- ---- ------ ------
(MILLIONS)

Obligations:
Revolver borrowings........................ $-- $ -- $ -- $ -- $ -- $ -- $ --
Senior long-term debt...................... 1 4 4 4 4 380 397
Long-term notes............................ -- 1 -- 1 2 475 479
Capital leases............................. 1 3 3 3 3 5 18
Subordinated long-term debt................ -- -- -- -- -- 500 500
Other subsidiary debt...................... 1 -- -- -- -- 1 2
Short-term debt............................ 12 -- -- -- -- -- 12
--- ---- ---- ---- ---- ------ ------
Debt and capital lease obligations........... 15 8 7 8 9 1,361 1,408
Operating leases............................. 7 16 13 12 5 6 59
Interest payments............................ 34 122 122 122 122 285 807
Capital commitments.......................... 20 -- -- -- -- -- 20
Stock appreciation rights.................... 2 -- -- -- -- -- 2
--- ---- ---- ---- ---- ------ ------
Total Payments............................... $78 $146 $142 $142 $136 $1,652 $2,296
=== ==== ==== ==== ==== ====== ======
</Table>

We principally use our revolving credit facilities to finance our
short-term capital requirements. As a result, we classify the outstanding
balances of the revolving credit facilities within our short-term debt even
though the revolving credit facility has a termination date of December 13, 2008
and the tranche B letter of credit facility/revolving loan facility has a
termination date of December 13, 2010.

If we do not maintain compliance with the terms of our senior credit
facility or the indentures governing our senior secured notes or senior
subordinated notes described above, all amounts under those arrangements could,
automatically or at the option of the lenders or other debt holders, become due.
Additionally, each of those facilities contains provisions that certain events
of default under one facility will constitute a default under the other
facility, allowing the acceleration of all amounts due. We currently expect to
maintain compliance with terms of all of our various credit agreements for the
foreseeable future.

Included in our contractual obligations is the amount of interest to be
paid on our long-term debt. As our debt structure contains both fixed and
variable rate interest debt, we have made assumptions in calculating the amount
of the future interest payments. Interest on our senior secured notes is
calculated using the fixed rates of 10 1/4 percent. Interest on our senior
subordinated notes is calculated using the fixed rate of 11 5/8 percent.
Interest on our variable rate debt is calculated as 350 basis points plus LIBOR
of 1.5 percent which is the current rate at September 30, 2004. We have assumed
that LIBOR will remain unchanged for the outlying years. See
"--Capitalization--Senior Secured and Subordinated Notes." In addition we have
included the impact of our interest rate swaps entered into in April 2004. See
"Interest Rate Risk" below.

We have also included an estimate of expenditures required after September
30, 2004 to complete the facilities and projects authorized at December 31,
2003, in which we have made substantial commitments in connections with
facilities. In addition, we have included an estimate of our obligation to a
consulting firm who received stock appreciation rights ("SAR") as partial
payment for services rendered in the year 2000. As of October 2004, all SAR's
had been exercised.

We have not included purchase obligations as part of our contractual
obligations as we generally do not enter into long-term agreements with our
suppliers. In addition, the agreements we currently have do not specify the
volumes we are required to purchase. If any commitment is provided, in many
cases the agreements state only the minimum percentage of our purchase
requirements we must buy from the supplier.

As a result, these purchase obligations fluctuate from year to year and we are
not able to quantify the amount of our future obligation.

We have also not included material cash requirements for taxes and funding
requirements for pension and postretirement benefits. We have not included cash
requirements for taxes as we are a taxpayer in certain foreign jurisdictions but
not in domestic locations. Additionally, it is difficult to estimate taxes to be
paid as shifts in where we generate income can have a significant impact on
future tax payments. We have not included cash requirements for funding pension
and postretirement costs, as based upon current estimates we believe we will be
required to make contributions between $24 million to $29 million to those plans
in 2004 of which approximately $18 million has been contributed as of September
30, 2004. Pension and postretirement contributions beyond 2004 will be required
but those amounts will vary based upon many factors, including the performance
of our pension fund investments during 2004.

We occasionally provide guarantees that could require us to make future
payments in the event that the third party primary obligor does not make its
required payments. We have not recorded a liability for any of these guarantees.
The only third party guarantee we have made is the performance of lease
obligations by a former affiliate. Our maximum liability under this guarantee
was approximately $4 million at both September 30, 2004 and 2003, respectively.
We have no recourse in the event of default by the former affiliate. However, we
have not been required to make any payments under this guarantee.

Additionally, we have from time to time issued guarantees for the
performance of obligations by some of our subsidiaries, and some of our
subsidiaries have guaranteed our debt. All of our then existing and future
material domestic wholly-owned subsidiaries fully and unconditionally guarantee
the $800 million senior secured credit facility, the $475 million senior secured
notes and the $500 million senior subordinated notes on a joint and several
basis. The arrangement for the senior secured credit facility is also secured by
first-priority liens on substantially all our domestic assets and pledges of 66
percent of the stock of certain first-tier foreign subsidiaries. The arrangement
for the $475 million senior secured notes is also secured by second-priority
liens on substantially all of our domestic assets, excluding some of the stock
of our domestic subsidiaries. This arrangement is not secured by any pledges of
stock or assets of our foreign subsidiaries. You should also read Note 12 where
we present the Supplemental Guarantor Condensed Consolidating Financial
Statements.

CASH FLOWS

<Table>
<Caption>
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------
2004 2003
----- -----
(MILLIONS)

Cash provided (used) by:
Operating activities...................................... $135 $162
Investing activities...................................... (75) (84)
Financing activities...................................... 2 (59)
</Table>

Operating Activities

For the nine months ended, September 30, 2004, cash flows provided by
operating activities were $135 million as compared to $162 million during the
same period of the prior year. The decrease was primarily attributable to
improved earnings being more than offset by an increase in working capital
levels year over year. For the first nine months of 2004, working capital used
$28 million as compared to being a source of

$10 million for the first nine months of 2003. Higher sales levels in 2004 are
the primary driver for higher year over year receivable balances. In addition,
2003 benefited from actions to rationalize our aftermarket product offering,
which resulted in a substantial reduction in inventory levels last year. Cash
interest payments were also significantly lower last year as a result of the
June 2003 bond transaction. Lower cash paid during 2004 for taxes helped offset
other increases in working capital.

In June 2001, we entered into arrangements with two major OE customers in
North America under which, in exchange for a discount, payments for product
sales are made earlier than otherwise required under existing payment terms.
These arrangements reduced accounts receivable by $95 million and $64 million as
of September 30, 2004 and 2003, respectively. We have been informed that the
financing company that supports this program intends to discontinue advance
payments on behalf of the OE customers by the end of 2005 with a small portion
of the program ending in the first quarter of 2005. Although we cannot assure
you that another similar arrangement will be available for periods after
December 2005 on commercially reasonable terms, we intend to seek such an
arrangement.

In June 2003, we entered into a similar arrangement with a third major OE
customer in North America. This arrangement reduced accounts receivable by $8
million as of September 30, 2004. We have been informed that this program will
be discontinued after December 31, 2004. In March 2004, we entered into another
arrangement with a major OE customer in Europe. This arrangement reduced
accounts receivable by $19 million at September 30, 2004. This arrangement can
be cancelled at any time.

Investing Activities

Cash used for investing activities was $9 million lower in the first nine
months of 2004 compared to the same period a year ago. In the first nine months
of 2004, we received $11 million in cash from the sale of our Birmingham, U.K.
facility. Capital expenditures were $87 million in the first nine months of
2004, an increase of $4 million from the $83 million in the first nine months of
last year.

Financing Activities

Cash flow from financing activities was a $2 million inflow in the first
nine months of 2004 compared to an outflow of $59 million in the same period of
2003. The primary reason for the change is attributable to the net decrease in
short term borrowing during the first nine months of 2003 as compared to the
current year.

INTEREST RATE RISK

Our financial instruments that are sensitive to market risk for changes in
interest rates are our debt securities. We primarily use a revolving credit
facility to finance our short-term capital requirements. We pay a current market
rate of interest on these borrowings. We have financed our long-term capital
requirements with long-term debt with original maturity dates ranging from seven
to ten years.

On September 30, 2004, we had $993 million in long-term debt obligations
that have fixed interest rates. Of that amount, $500 million is fixed through
October 2009, and $475 million through July 2013, while the remainder was fixed
over periods of 2005 through 2025. There were also $410 million in long-term
debt obligations that have variable interest rates based on a current market
rate of interest. In April 2004, we entered into three separate
fixed-to-floating interest rate swaps with two separate financial institutions.
These agreements swapped an aggregate of $150 million of fixed interest rate
debt at a per annum rate of 10 1/4 percent to floating interest rate debt at a
per annum rate of LIBOR plus a spread of 5.68 percent. Each agreement requires
semi-annual settlements through July 15, 2013. Based on the current LIBOR as
determined under these agreements of 1.86 percent (which remains in effect until
January 15, 2005), these swaps would reduce our annual interest expense by
approximately $4 million. The swaps qualify as fair value hedges in accordance
with SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," and as such are recorded on the balance sheet at market value with
an offset to the underlying hedged item, which is long-term debt. As of
September 30, 2004, the fair value of the interest rate swaps was approximately
a negative $1 million, which has been recorded as a decrease to long-term debt
and an increase to other long-term liabilities.
51

We estimate that the fair value of our long-term debt at September 30, 2004
was about 107 percent of its book value and a one percentage point increase or
decrease in interest rates would increase or decrease the annual interest
expense we recognize in the income statement and the cash we pay for interest
expense by about $3 million after tax, excluding the effect of the interest rate
swaps we completed in April 2004. A one percentage point increase or decrease in
interest rates on the swaps we completed in April 2004 would increase or
decrease the annual interest expense we recognize in the income statement and
the cash we pay for interest expense by approximately $1 million after tax.

OUTLOOK

For the first nine months of 2004, North American OE light vehicle
production was flat compared to the previous year. We expect full year 2004
North American OE light vehicle production to be 15.8 million units, slightly
down from 2003. We remain cautious about the outlook for North American
production rates for the remainder of 2004 and into 2005 due to rising interest
rates, oil prices and current original equipment manufacturers' inventory
levels. We are also uncertain about the willingness of the original equipment
manufacturers to continue to support consumer vehicle sales through incentives.
We believe that new platforms we have launched and our position on top-selling
platforms should help us to offset pressures from North American production
rates. Europe new light vehicle production volumes grew about one-half of one
percent during the first nine months of the 2004. Expectations for 2004 indicate
a one percent overall increase in production rates as volume is anticipated to
increase during the last quarter of the year. This, combined with a significant
number of new ride and emission control platform launches, should benefit our
European operations. We saw a strong increase in heavy-duty truck production
rates during the first nine months of 2004. Compared to 2003, we expect that
heavy-duty truck production rates could increase between 37 and 39 percent for
2004. Although heavy-duty business represents a small percentage of our overall
revenues, this should benefit our North American operations. In the global
aftermarket, issues that have impacted revenues in the past will likely continue
to be a challenge throughout 2004. Customer consolidation and longer product
replacement cycles are expected to continue their impact on volumes. We saw
signs of improvement in the North America aftermarket during the first nine
months of 2004, and we are cautiously optimistic that these conditions will
continue for the remainder of 2004.

In addition to economic uncertainties, processed metal and raw carbon steel
price increases are a growing concern. Increased pressure on carbon steel prices
is expected to continue into the foreseeable future. We are working hard to
address this issue by evaluating alternative materials and processes, reviewing
material substitution opportunities, increasing component and assembly
outsourcing to low cost countries and aggressively pursuing recovery of higher
costs from our customers. In addition to these actions, we continue to pursue
productivity initiatives and review opportunities to reduce costs through
restructuring activities. The situation remains fluid as we continue to pursue
these actions but, at this point, we are hopeful that these actions and recent
increases in new business awards will be effective in containing margin
pressures.

ENVIRONMENTAL AND OTHER MATTERS

We are subject to a variety of environmental and pollution control laws and
regulations in all jurisdictions in which we operate. We expense or capitalize,
as appropriate, expenditures for ongoing compliance with environmental
regulations that relate to current operations. We expense expenditures that
relate to an existing condition caused by past operations and that do not
contribute to current or future revenue generation. We record liabilities when
environmental assessments indicate that remedial efforts are probable and the
costs can be reasonably estimated. Estimates of the liability are based upon
currently available facts, existing technology, and presently enacted laws and
regulations taking into consideration the likely effects of inflation and other
societal and economic factors. We consider all available evidence including
prior experience in remediation of contaminated sites, other companies' cleanup
experiences and data released by the United States Environmental Protection
Agency or other organizations. These estimated liabilities are subject to
revision in future periods based on actual costs or new information. Where
future cash flows are fixed or reliably determinable, we have discounted the
liabilities. All other environmental liabilities are recorded at

their undiscounted amounts. We evaluate recoveries separately from the liability
and, when they are assured, recoveries are recorded and reported separately from
the associated liability in our financial statements.

From time to time we are subject to product warranty claims whereby we are
required to bear costs of repair or replacement of certain of our products.
Warranty claims may range from individual customer claims to full recalls of all
products in the field. See Note 4 to our consolidated financial statements
included under Item 1 for information regarding our warranty reserves.

We also from time to time are involved in legal proceedings or claims that
are incidental to the conduct of our business. Some of these proceedings allege
damages against us relating to environmental liabilities (including toxic tort,
property damage and remediation), intellectual property matters (including
patent, trademark and copyright infringement, and licensing disputes), personal
injury claims (including injuries due to product failure, design or warnings
issues, and other product liability related matters), employment matters, and
commercial or contractual disputes, sometimes related to acquisitions or
divestitures. As an example, we are involved in litigation with the minority
owner of one of our Indian joint ventures over various operational issues which
involves a court-mandated bidding process. We vigorously defend ourselves
against all of these claims. In future periods, we could be subjected to cash
costs or non-cash charges to earnings if we are required to sell our interest in
the joint venture on unfavorable terms. However, although the ultimate outcome
of any legal matter cannot be predicted with certainty, based on present
information, including our assessment of the merits of the particular claim, we
do not expect that these legal proceedings or claims will have any material
adverse impact on our future consolidated financial position or results of
operations. In addition, we are subject to a number of lawsuits initiated by a
significant number of claimants alleging health problems as a result of exposure
to asbestos. Many of these cases involve significant numbers of individual
claimants. However, only a small percentage of these claimants allege that they
were automobile mechanics who were allegedly exposed to our former muffler
products and a significant number appear to involve workers in other industries
or otherwise do not include sufficient information to determine whether there is
any basis for a claim against us. We believe, based on scientific and other
evidence, it is unlikely that mechanics were exposed to asbestos by our former
muffler products and that, in any event, they would not be at increased risk of
asbestos-related disease based on their work with these products. Further, many
of these cases involve numerous defendants, with the number of each in some
cases exceeding 200 defendants from a variety of industries. Additionally, the
plaintiffs either do not specify any, or specify the jurisdictional minimum,
dollar amount for damages. On the other hand, we are experiencing an increasing
number of these claims, likely due to bankruptcies of major asbestos
manufacturers. We vigorously defend ourselves against these claims as part of
our ordinary course of business. To date, with respect to claims that have
proceeded sufficiently through the judicial process, we have regularly achieved
favorable resolution in the form of a dismissal of the claim or a judgment in
our favor. Accordingly, we presently believe that these asbestos-related claims
will not have a material adverse impact on our future financial condition or
results of operations.
53

EMPLOYEE DEFINED CONTRIBUTION PLAN

We have established Employee Defined Contribution Plans for the benefit of
our employees. Under the plans, participants may elect to defer up to 50 percent
of their salary through contributions to the plan, which are invested in
selected mutual funds or used to buy our common stock. We currently match in
cash 50 percent of each employee's contribution up to eight percent of the
employee's salary. We recorded expense for these matching contributions of
approximately $5 million for each of the nine months ended September 30, 2004
and 2003, respectively. All contributions vest immediately.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information regarding our exposure to interest rate risk, see the
caption entitled "Interest Rate Risk" in "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations," which is
incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation was carried out under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities
Exchange Act of 1934) as of the end of the quarter covered by this report. Based
on their evaluation, our Chief Executive Officer and Chief Financial Officer
have concluded that the company's disclosure controls and procedures are
effective to ensure that information required to be disclosed by our company in
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. There were no changes in the internal
control over financial reporting that occurred during the third quarter of 2004
that have materially affected, or are likely to materially affect, our internal
control over financial reporting.

PART II

ITEM 6. 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.

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/ KENNETH R. TRAMMELL
------------------------------------
Kenneth R. Trammell
Senior Vice President and
Chief Financial Officer

Dated: November 5, 2004

INDEX TO EXHIBITS
TO
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 2004

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

2 -- None.
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
(incorporated herein by reference from Exhibit 3.1(f) of the
registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-12387).
3.1(g) -- Certificate of Amendment to Restated Certificate of
Incorporation of the registrant dated November 5, 1999
(incorporated herein by reference from Exhibit 3.1(g) of the
registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-12387).
3.1(h) -- Certificate of Ownership and Merger merging Tenneco
Automotive Merger Sub Inc. with and into the registrant,
dated November 5, 1999 (incorporated herein by reference
from Exhibit 3.1(h) of the registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, File No.
1-12387).
3.1(i) -- Certificate of Amendment to Restated Certificate of
Incorporation of the registrant dated May 9, 2000
(incorporated herein by reference from Exhibit 3.1(i) of the
registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000, File No. 1-12387).
3.2 -- By-laws of the registrant, as amended July 13, 2004
(incorporated herein by reference from Exhibit 3.2 of the
registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004, File No. 1-12387).
3.3 -- Certificate of Incorporation of Tenneco Global Holdings Inc.
("Global"), as amended (incorporated herein by reference to
Exhibit 3.3 to the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).
3.4 -- By-laws of Global (incorporated herein by reference to
Exhibit 3.4 to the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

3.5 -- Certificate of Incorporation of TMC Texas Inc. ("TMC")
(incorporated herein by reference to Exhibit 3.5 to the
registrant's Registration Statement on Form S-4, Reg. No.
333-93757).
3.6 -- By-laws of TMC (incorporated herein by reference to Exhibit
3.6 to the registrant's Registration Statement on Form S-4,
Reg. No. 333-93757).
3.7 -- Amended and Restated Certificate of Incorporation of Tenneco
International Holding Corp. ("TIHC") (incorporated herein by
reference to Exhibit 3.7 to the registrant's Registration
Statement on Form S-4, Reg. No. 333-93757).
3.8 -- Amended and Restated By-laws of TIHC (incorporated herein by
reference to Exhibit 3.8 to the registrant's Registration
Statement on Form S-4, Reg. No. 333-93757).
3.9 -- Certificate of Incorporation of Clevite Industries Inc.
("Clevite"), as amended (incorporated herein by reference to
Exhibit 3.9 to the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).
3.10 -- By-laws of Clevite (incorporated herein by reference to
Exhibit 3.10 to the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).
3.11 -- Amended and Restated Certificate of Incorporation of the
Pullman Company ("Pullman") (incorporated herein by
reference to Exhibit 3.11 to the registrant's Registration
Statement on Form S-4, Reg. No. 333-93757).
3.12 -- By-laws of Pullman (incorporated herein by reference to
Exhibit 3.12 to the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).
3.13 -- Certificate of Incorporation of Tenneco Automotive Operating
Company Inc. ("Operating") (incorporated herein by reference
to Exhibit 3.13 to the registrant's Registration Statement
on Form S-4, Reg. No. 333-93757).
3.14 -- By-laws of Operating (incorporated herein by reference to
Exhibit 3.14 to the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).
4.1(a) -- 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).
4.1(b) -- Amendment No. 1 to Rights Agreement, dated March 14, 2000,
by and between the registrant and First Chicago Trust
Company of New York, as Rights Agent (incorporated herein by
reference from Exhibit 4.4(b) of the registrant's Annual
Report on Form 10-K for the year ended December 31, 1999,
File No. 1-12387).
4.1(c) -- Amendment No. 2 to Rights Agreement, dated February 5, 2001,
by and between the registrant and First Union National Bank,
as Rights Agent (incorporated herein by reference from
Exhibit 4.4(b) of the registrant's Post-Effective Amendment
No. 3, dated February 26, 2001, to its Registration
Statement on Form 8-A dated September 17, 1998).
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 Registration Statement on 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 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).
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).
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

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) -- Eleventh Supplemental Indenture, dated October 21, 1999, to
Indenture dated November 1, 1996 between The Chase Manhattan
Bank, as Trustee, and the registrant (incorporated herein by
reference from Exhibit 4.2(l) of the registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999, File No. 1-12387).
4.3 -- Specimen stock certificate for Tenneco Automotive Inc.
common stock (incorporated herein by reference from Exhibit
4.3 of the registrant's Annual Report on Form 10-K for the
year ended December 31, 2000, File No. 1-12387).
4.4(a) -- Indenture dated October 14, 1999 by and between the
registrant and The Bank of New York, as trustee
(incorporated herein by reference from Exhibit 4.4(a) of the
registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-12387).
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, Clevite
Industries Inc. and TMC Texas Inc. in favor of The Bank of
New York, as trustee (incorporated herein by reference from
Exhibit 4.4(b) of the registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999, File No.
1-12387).
4.4(c) -- Subsidiary Guarantee dated as of October 14, 1999 from
Tenneco Automotive Operating Subsidiary Inc. (formerly
Tenneco Automotive Inc.), Tenneco International Holding
Corp., Tenneco Global Holdings Inc., the Pullman Company,
Clevite Industries Inc. and TMC Texas Inc. in favor of The
Bank of New York, as trustee (incorporated herein by
reference to Exhibit 4.4(c) to the registrant's Registration
Statement on Form S-4, Reg. No. 333-93757).
4.5(a) -- Amended and Restated Credit Agreement, dated as of December
12, 2003, among Tenneco Automotive Inc., the several banks
and other financial institutions or entities from time to
time parties thereto, Bank of America, N.A. and Citicorp
North America, Inc., as co-documentation agents, Deutsche
Bank Securities Inc., as syndication agent, and JP Morgan
Chase Bank, as administrative agent (incorporated herein by
reference to Exhibit 4.5(a) to the registrant's Annual
Report on Form 10-K for the year ended December 31, 2003,
File No. 1-12387).
4.5(b) -- Amended and Restated Guarantee And Collateral Agreement,
dated as of November 4, 1999, by Tenneco Automotive Inc. and
the subsidiary guarantors named therein, in favor of
JPMorgan Chase Bank, as Administrative Agent (incorporated
herein by reference from Exhibit 4.5(f) to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2003, File No. 1-12387).
* 4.5(c) -- First Amendment, dated as of April 31, 2004, to the Amended
and Restated Credit Agreement ated as of December 12, 2003,
among Tenneco Automotive Inc., JP Morgan Chase Bank as
administrative agent and the various lenders party thereto.
4.6(a) -- Indenture, dated as of June 19, 2003, among Tenneco
Automotive Inc., the subsidiary guarantors named therein and
Wachovia Bank, National Association (incorporated herein by
reference from Exhibit 4.6(a) to the registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2003,
File No. 1-12387).
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

4.6(b) -- Collateral Agreement, dated as of June 19, 2003, by Tenneco
Automotive Inc. and the subsidiary guarantors named therein
in favor of Wachovia Bank, National Association
(incorporated herein by reference from Exhibit 4.6(b) to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003, File No. 1-12387).
4.6(c) -- Registration Rights Agreement, dated as of June 19, 2003,
among Tenneco Automotive Inc., the subsidiary guarantors
named therein, and the initial purchasers named therein, for
whom JPMorgan Securities Inc. acted as representative
(incorporated herein by reference from Exhibit 4.6(c) to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003, File No. 1-12387).
4.6(d) -- Supplemental Indenture, dated as of December 12, 2003, among
Tenneco Automotive Inc., the subsidiary guarantors named
therein and Wachovia Bank, National Association
(incorporated herein by reference to Exhibit 4.6(d) to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 2003, File No. 1-12387).
4.6(e) -- Registration Rights Agreement, dated as of December 12,
2003, among Tenneco Automotive Inc., the subsidiary
guarantors named therein, and the initial purchasers named
therein, for whom Banc of America Securities LLC acted as
representative agent (incorporated herein by reference to
Exhibit 4.5(a) to the registrant's Annual Report on Form
10-K for the year ended December 31, 2003, File No.
1-12387).
4.7 -- Intercreditor Agreement, dated as of June 19, 2003, among
JPMorgan Chase Bank, as Credit Agent, Wachovia Bank,
National Association, as Trustee and Collateral Agent, and
Tenneco Automotive Inc. (incorporated herein by reference
from Exhibit 4.7 to the registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2003, File No.
1-12387).
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. 1-12387).
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).
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

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, El Paso Natural Gas
Company 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. Value Added "TAVA" Incentive
Compensation Plan (incorporated herein by reference from
Exhibit 10.8 of the registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 2003, File No.
1-12387).
10.9 -- Tenneco Automotive Inc. Change of Control Severance Benefits
Plan for Key Executives (incorporated herein by reference
from Exhibit 10.13 of the registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, File No.
1-12387).
10.10 -- Tenneco Automotive Inc. Stock Ownership Plan (incorporated
herein by reference from Exhibit 10.10 of the registrant's
Registration Statement on Form S-4, Reg. No. 333-93757).
10.11 -- Tenneco Automotive Inc. Key Executive Pension Plan
(incorporated herein by reference from Exhibit 10.11 to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000, File No. 1-12387).
10.12 -- Tenneco Automotive Inc. Deferred Compensation Plan
(incorporated herein by reference from Exhibit 10.12 to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000, File No. 1-12387).
10.13 -- Tenneco Automotive Inc. Supplemental Executive Retirement
Plan (incorporated herein by reference from Exhibit 10.13 to
the registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000, File No. 1-12387).
10.14 -- Human Resources Agreement by and between Tenneco Automotive
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).
10.15 -- Tax Sharing Agreement by and between Tenneco Automotive 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).
10.16 -- Amended and Restated Transition Services Agreement by and
between Tenneco Automotive Inc. and Tenneco Packaging Inc.
dated as of November 4, 1999 (incorporated herein by
reference from Exhibit 10.21 of the registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999, File No. 1-12387).
10.17 -- Assumption Agreement among Tenneco Automotive Operating
Company Inc., Tenneco International Holding Corp., Tenneco
Global Holdings Inc., The Pullman Company, Clevite
Industries Inc., TMC Texas Inc., Salomon Smith Barney Inc.
and the other Initial Purchasers listed in the Purchase
Agreement dated as of November 4, 1999 (incorporated herein
by reference from Exhibit 10.24 of the registrant's
Registration Statement on Form S-4, Reg. No. 333-93757).
10.18 -- Amendment No. 1 to Change in Control Severance Benefits Plan
for Key Executives (incorporated herein by reference from
Exhibit 10.23 to the registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000, File No. 1-12387).
10.19 -- Letter Agreement dated July 27, 2000 between the registrant
and Mark P. Frissora (incorporated herein by reference from
Exhibit 10.24 to the registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000, File No. 1-12387).
10.20 -- Letter Agreement dated July 27, 2000 between the registrant
and Richard P. Schneider (incorporated herein by reference
from Exhibit 10.26 to the registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2000, File No.
1-12387).
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10.21 -- Letter Agreement dated July 27, 2000 between the registrant
and Timothy R. Donovan (incorporated herein by reference
from Exhibit 10.28 to the registrant's Annual Report on Form
10-K for the year ended December 31, 2000, File No.
1-12387).
10.22 -- Form of Indemnity Agreement entered into between the
registrant and the following directors of the registrant:
Paul Stecko, M. Kathryn Eickhoff and Dennis Severance
(incorporated herein by reference from Exhibit 10.29 to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000, File No. 1-12387).
10.23 -- Mark P. Frissora Special Appendix under Tenneco Automotive
Inc. Supplemental Executive Retirement Plan (incorporated
herein by reference from Exhibit 10.30 to the registrant's
Annual Report on Form 10-K for the year ended December 31,
2000, File No. 1-12387).
10.24 -- Letter Agreement dated as of June 1, 2001 between the
registrant and Hari Nair (incorporated herein by reference
from Exhibit 10.28 to the registrant's Annual Report on Form
10-K for the year ended December 31, 2001. File No.
1-12387).
10.25 -- Tenneco Automotive Inc. 2002 Long-Term Incentive Plan (As
Amended and Restated Effective March 11, 2003) (incorporated
herein by reference from Exhibit 10.26 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2003. File No. 1-12387).
10.26 -- Amendment to No. 1 Tenneco Automotive Inc. Deferred
Compensation Plan (incorporated herein by reference from
Exhibit 10.27 to the registrant's Annual Report on Form 10-K
for the year ended December 31, 2002, File No. 1-12387).
10.27 -- Tenneco Automotive Inc. Supplemental Stock Ownership Plan
(incorporated herein by reference from Exhibit 10.28 to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 2002, File No. 1-12387).
11 -- None.
*12 -- Computation of Ratio of Earnings to Fixed Charges.
*15 -- Letter of Deloitte and Touche LLP regarding interim
financial information.
18 -- None.
22 -- None.
23 -- None.
24 -- None.
*31.1 -- Certification of Mark P. Frissora under Section 302 of the
Sarbanes-Oxley Act of 2002.
*31.2 -- Certification of Kenneth R. Trammell under Section 302 of
the Sarbanes-Oxley Act of 2002.
*32.1 -- Certification of Mark P. Frissora and Kenneth R. Trammell
under Section 906 of the Sarbanes-Oxley Act of 2002.
99 -- None.
</Table>

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

* Filed herewith.