.
.
.
news release [TENNECO AUTOMOTIVE LOGO]
For immediate release
<Table>
<Caption>
Contacts: Jane Ostrander Leslie Hunziker
Media Relations Investor Relations
847 482-5607 847 482-5042
jane.ostrander@tenneco-automotive.com leslie.hunziker@tenneco-automotive.com
</Table>
TENNECO AUTOMOTIVE REPORTS STRONG SECOND QUARTER OPERATING RESULTS
o 13th consecutive quarter of year-over-year revenue growth
o Strong cash performance offsets loss of customer advance payment program
o EBIT and EPS improve year-over-year
o Europe and South America EBIT up 43% on 13% revenue gain
o 14th consecutive quarter of year-over-year adjusted EBITDA improvement
Lake Forest, Illinois, July 21, 2005 - Tenneco Automotive (NYSE: TEN) reported
second quarter net income of $33 million, or 71-cents per diluted share, up from
net income of $30 million, or 69-cents per diluted share a year ago. Adjusted
for the items below, second quarter net income rose to $35 million, or 77-cents
per diluted share, compared with $31 million, or 70-cents per diluted share in
second quarter 2004.
EBIT (earnings before interest, taxes and minority interest) was $83 million
compared with $76 million a year ago. EBITDA (EBIT before depreciation and
amortization) was $127 million, versus $120 million in second quarter 2004. On
an adjusted basis, EBIT was $85 million, up from $84 million a year ago, and the
company reported its 14th consecutive quarter of year-over-year improved
adjusted EBITDA at $129 million, up from $128 million in second quarter 2004.
See the tables attached to the press release, which reconcile GAAP results to
non-GAAP results.
Adjusted second quarter 2005 and 2004 results:
<Table>
<Caption>
Q2 2005 Q2 2004
-------------------------------- ---------------------------------
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
----- ----- ------ ----- ------ ---- ------ -----
Earnings Measures $127 $ 83 $ 33 $0.71 $120 $ 76 $ 30 $0.69
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related expenses 2 2 1 0.03 5 5 3 0.07
New Aftermarket customer changeover costs -- -- -- -- 2 2 1 0.02
Consulting fees indexed to stock price -- -- -- -- 1 1 1 0.01
Tax adjustments -- -- 1 0.03 -- -- (4) (0.09)
---- ---- ---- ----- ---- ---- ---- -----
Non-GAAP earnings measures $129 $ 85 $ 35 $0.77 $128 $ 84 $ 31 $0.70
==== ==== ==== ===== ==== ==== ==== =====
</Table>
-More-
-2-
Second quarter 2005 adjustments:
o Restructuring related expenses of $2 million pre-tax, or 3-cents per
diluted share;
o Tax expense of $1 million, or 3-cents per diluted share, primarily related
to adjusting state tax net operating loss carry forwards.
Second quarter 2004 adjustments:
o Restructuring related expenses of $5 million pre-tax, or 7-cents per
diluted share;
o Expenses of $2 million pre-tax, or 2-cents per diluted share, associated
with changeover costs for a new aftermarket customer;
o Expenses of $1 million pre-tax, or 1-cent per diluted share, for stock
price indexed consulting fees;
o Tax benefit of $4 million, or 9-cents per diluted share.
Despite a $65 million impact from the discontinuation of General Motor's advance
payment program, operating cash inflow in the quarter was $28 million, versus a
$46 million inflow in the second quarter of 2004. The strong cash performance
was driven by inventory reductions and improved accounts payable. At
quarter-end, total debt was $1.412 billion, down from $1.419 billion a year ago
and debt net of cash was $1.346 billion versus $1.253 billion a year ago. The
decrease was primarily the result of the discontinuation of advance payment
programs by General Motors, Ford and DaimlerChrysler, which had a $94 million
impact on debt.
Tenneco Automotive generated its 13th consecutive quarter of year-over-year
revenue growth with revenue of $1.180 billion, compared with $1.113 billion a
year ago. Favorable currency benefited revenue by $33 million. Total OE revenues
were up 7% year-over-year, outpacing a 2% increase in global industry
production. Revenue was driven by the company's strong position on top-selling
vehicles, continued gains from new OE business in Europe and stronger Japanese
OE business in North America.
"Our strategies for generating top-line growth and cash continue to be effective
despite difficult and volatile market conditions," said Mark P. Frissora,
chairman and CEO, Tenneco Automotive. "We are also benefiting from our intense
focus on managing costs and improving operational efficiency through Lean and
Six Sigma. In addition, our balance in terms of products, markets, customers and
vehicle platform mix gives us a competitive edge and continues to drive our
progress."
The company's gross margin in the quarter was 20.3%, down 1.3 percentage points
from a year ago. Higher steel costs, restructuring charges and business mix
offset savings and improved efficiencies from Lean manufacturing, Six Sigma
programs and other cost reduction initiatives.
Total steel cost increases in the second quarter were $35 million, which were
largely offset by the company's cost reduction efforts, including SGA&E
restructuring savings, material cost savings, Six Sigma program savings of $9
million and Lean manufacturing efficiencies as well as steel cost recovery from
OE and aftermarket customers. Based on the company's efforts to offset increased
steel costs and trends in the steel market, the company doesn't currently
anticipate a significant year-over-year impact on operating results through the
remainder of 2005.
Sales, General, Administrative and Engineering (SGA&E) expense in the quarter
was 9.4% of sales versus 10.7% one year ago. SGA&E improvement was driven by
restructuring and tight controls on discretionary spending.
-3-
The company outperformed its bank debt covenants in the quarter. At June 30, the
leverage ratio was 3.41, below the maximum limit of 4.75; the fixed charge ratio
was 2.03, exceeding the minimum ratio of 1.10; and the interest coverage ratio
was 3.06, exceeding the minimum coverage ratio of 2.0.
NORTH AMERICA
o North American original equipment revenue was up 3% to $390 million,
versus $379 million a year ago. Excluding the impact of currency and
catalytic converter pass-through sales, revenue was up 8%, outpacing a 2%
industry production decline (Tables to this press release reconcile GAAP
revenues to revenues adjusted for catalytic converter pass-through sales
and currency). The increase was driven by exhaust business on better
selling passenger vehicle and medium truck platforms, stronger commercial
vehicle volumes, volume growth on key Japanese OE platforms and specialty
market revenue from acquiring the Harley Davidson exhaust business.
o North American aftermarket revenue was $146 million, versus $144 million
in second quarter 2004. Ride control price increases, driven by higher
steel costs, offset lower ride control volumes and exhaust sales.
o EBIT for North American operations was $52 million, versus $50 million a
year ago. Adjusted second quarter 2005 EBIT was $52 million compared with
adjusted EBIT of $54 million in second quarter 2004. The impact of higher
steel costs in the quarter more than offset benefits from restructuring
and stronger value-added volumes.
o Second quarter 2004 EBIT results include $4 million in costs related to
the adjustments described above.
EUROPE AND SOUTH AMERICA
o European original equipment revenue was $382 million, up 12% versus $343
million a year ago. Adjusted for favorable currency, catalytic converter
pass-through sales and a change in reporting for a customer contract,
revenue was up 13%. Strong ride control volumes and the company's exhaust
business on top-selling platforms drove the increase.
o European aftermarket revenue was $109 million, up from $103 million in
second quarter 2004. Excluding currency, revenue was still up 3%, driven
by higher exhaust revenues due to market share gains and price increases.
A 10% year-over-year increase in exhaust sales helped offset a decrease in
ride control revenue due to lower sales in Southern Europe and the Middle
East.
o South America operations generated $50 million in revenue versus $35
million a year ago. Excluding the benefit of currency, revenue was up 25%,
driven by stronger OE ride and exhaust volumes.
o EBIT for European and South American operations was $27 million, up 43%
from $17 million in second quarter 2004. Adjusted EBIT in the quarter was
$29 million, up from adjusted EBIT of $21 million a year ago. The strong
EBIT performance was driven by higher OE and AM exhaust volumes,
restructuring savings and manufacturing efficiencies, which more than
offset the negative impact of higher steel costs.
o Second quarter 2005 EBIT results include $2 million in restructuring
related expenses and second quarter 2004 EBIT includes $4 million in
restructuring related expenses.
ASIA PACIFIC
o Revenue from Asia operations was $44 million, versus $58 million a year
ago. The decline was due to lower OE volumes in China as a result of
government actions to control consumer lending and soft consumer sales at
the company's largest customer in China.
o Australian revenue was $59 million, compared with $51 million in second
quarter 2004. Excluding the impact of currency and pass-through sales,
revenue was up 7%, driven by higher volumes on existing OE platforms.
-4-
o Lower OE volumes in China had a significant impact on Asia Pacific EBIT,
which was $4 million, down from $9 million a year ago.
YEAR-TO-DATE RESULTS
Through the first half of the year, Tenneco Automotive reported net income of
$40 million, or 88-cents per diluted share, versus net income of $28 million, or
65-cents per diluted share reported for the first six months of 2004. On an
adjusted basis, year-to-date net income was $44 million, or 97-cents per diluted
share, versus year-to-date adjusted net income of $37 million, or 85-cents per
diluted share.
Year-to-date EBIT was $127 million compared with EBIT of $109 million in the
first six months of 2004. EBITDA was $217 million versus $198 million a year
ago. Adjusted year-to-date 2005 EBIT was $132 million, compared with $131
million a year ago, and adjusted EBITDA was $222 million, versus adjusted EBITDA
of $220 million for the same period a year ago.
ATTACHMENT 1:
Statements of Income - 3 months
Statements of Income - 6 months
Balance Sheet
Statements of Cash Flow
ATTACHMENT 2:
Reconciliation of GAAP Net Income to EBITDA - 3 months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 3 months
Reconciliation of GAAP Revenues to Non-GAAP Revenue Measure - 3 months
Reconciliation of GAAP Net Income to EBITDA - 6 months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 6 months
Reconciliation of GAAP Revenue to NON-GAAP Revenue Measures - 6 months
CONFERENCE CALL
The company will host a conference call on Thursday, July 21, 2005 at 10:30 am
EDT. The dial-in number is 800 857-4151 domestic or 210 839-8501 international.
The passcode is Tenneco Auto. The call and accompanying slides will be available
on the financial section of the Tenneco Automotive web site at
www.tenneco-automotive.com. A recording of the call will be available one hour
following completion of the call on July 21, 2005. To access this recording,
dial 866 457-5512 domestic or 203 369-1285 international. The purpose of the
call is to discuss the company's operations for the second quarter, as well as
other matters that may impact the company's outlook. A copy of the press release
is available on the financial and news sections of the Tenneco Automotive web
site.
Tenneco Automotive is a $4.2 billion manufacturing company with headquarters in
Lake Forest, Illinois and approximately 18,400 employees worldwide. Tenneco
Automotive is one of the world's largest designers, manufacturers and marketers
of emission control and ride control products and systems for the automotive
original equipment market and the aftermarket. Tenneco Automotive markets its
products principally under the Monroe(R), Walker(R), Gillet(R) and
Clevite(R)Elastomer brand names. Among its products are Sensa-Trac(R) and Monroe
Reflex(R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(R)
mufflers, Dynomax(R) performance exhaust products, and Clevite(R)Elastomer
noise, vibration and harshness control components.
-5-
This press release contains forward-looking statements. Words such as
"continue," "will," "expects," "believe," "plans," and similar expressions
identify forward-looking statements. These forward-looking statements are based
on the current expectations of the company (including its subsidiaries). Because
these forward-looking statements involve risks and uncertainties, the company's
plans, actions and actual results could differ materially. Among the factors
that could cause these plans, actions and results to differ materially from
current expectations are: (i) changes in automotive manufacturers' production
rates and their actual and forecasted requirements for the company's products,
including the overall highly competitive nature of the automotive parts
industry, and the company's resultant inability to realize the sales represented
by its awarded book of business which is based on anticipated pricing for the
applicable program over its life, and is subject to increases or decreases due
to changes in customer requirements, customer and consumer preferences, and the
number of vehicles actually produced by customers; (ii) increases in the costs
of raw materials, including the company's ability to successfully reduce the
impact of any such cost increases through materials substitutions, cost
reduction initiatives and other methods; (iii) the cyclical nature of the global
vehicular industry, including the performance of the global aftermarket sector,
and changes in consumer demand and prices, including longer product lives of
automobile parts and the cyclicality of automotive production and sales of
automobiles which include the company's products, and the potential negative
impact on the company's revenues and margins from such products; (iv) the
company's continued success in cost reduction and cash management programs and
its ability to execute restructuring and other cost reduction plans and to
realize anticipated benefits from these plans; (v) the general political,
economic and competitive conditions in markets and countries where the company
and its subsidiaries operate, including the strength of other currencies
relative to the U.S. dollar and currency fluctuations and other risks associated
with operating in foreign countries; (vi) governmental actions, including the
ability to receive regulatory approvals and the timing of such approvals; (vii)
changes in capital availability or costs, including increases in the company's
costs of borrowing (i.e., interest rate increases), the amount of the company's
debt, the ability of the company to access capital markets and the credit
ratings of the company's debt; (viii) the cost and outcome of existing and any
future legal proceedings, and compliance with changes in regulations, including
environmental regulations; (ix) workforce factors such as strikes or labor
interruptions; (x) the company's ability to develop and profitably commercialize
new products and technologies, and the acceptance of such new products and
technologies by the company's customers and the market; (xi) further changes in
the distribution channels for the company's aftermarket products, further
consolidations among automotive parts customers and suppliers, and product
warranty costs; (xii) changes by the Financial Accounting Standards Board or
other accounting regulatory bodies to authoritative generally accepted
accounting principles or policies; (xiii) acts of war, riots or terrorism,
including, but not limited to the events taking place in the Middle East, the
current military action in Iraq and the continuing war on terrorism, as well as
actions taken or to be taken by the United States or other governments as a
result of further acts or threats of terrorism, and the impact of these acts on
economic, financial and social conditions in the countries where the company
operates and (xiv) the timing and occurrence (or non-occurrence) of transactions
and events which may be subject to circumstances beyond the control of the
company and its subsidiaries. The company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this press release. Additional information regarding these risk factors and
uncertainties is detailed from time to time in the company's SEC filings,
including but not limited to its report on Form 10-K for the year ended December
31, 2004. Further information can be found on the company's web site at
www.tenneco-automotive.com.
###
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
THREE MONTHS ENDED JUNE 30,
(Millions except share and per share amounts)
<Table>
<Caption>
2005 2004
--------- ---------
Net sales and operating revenues $ 1,180 $ 1,113(c)
========= =========
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 941(a) 873(d)
Engineering, Research and Development 18 19
Selling, General and Administrative 93 100(e)
Depreciation and Amortization of Other Intangibles 44 44
--------- ---------
Total Costs and Expenses 1,096 1,036
========= =========
Loss on sale of receivables (1) (1)
--------- ---------
Total Other Loss (1) (1)
--------- ---------
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 52 50(c)(d)(e)
Europe & South America 27(a) 17(d)
Asia Pacific 4 9
--------- ---------
83 76
Less:
Interest expense (net of
interest capitalized) 32 34
Income tax expense 18(b) 10(f)
Minority interest -- 2
--------- ---------
Net income $ 33 $ 30
========= =========
Average common shares outstanding:
Basic 43.0 41.5
========= =========
Diluted 45.1 44.2
========= =========
Earnings per share of common stock:
Basic $ 0.75 $ 0.73
========= =========
Diluted $ 0.71 $ 0.69
========= =========
</Table>
(a) Includes restructuring and restructuring related charges of $2 million
pre-tax, $1 million after tax or $0.03 per share. The entire $2 million
adjustment is recorded in cost of sales and geographically in Europe and South
America.
(b) Includes a $1 million or $0.03 per share tax expense primarily related to
adjusting state tax net operating loss carryforwards.
(c) Includes continuing changeover costs for a new aftermarket customer acquired
in the first quarter of $2 million pre-tax, $1 million after-tax or $0.02 per
share. The entire cost is recorded in Sales. Geographically all of the charge is
recorded in North America.
(d) Includes restructuring and restructuring related charges of $5 million
pre-tax, $3 million after tax or $0.07 per share. The entire charge is recorded
in cost of sales. Geographically, $1 million is recorded in North America and $4
million in Europe and South America.
(e) Includes consulting fees indexed to stock price of $1 million pre-tax, $1
million after-tax or $0.01 per share. The entire charge is recorded in SG&A.
Geographically the entire charge is recorded in North America.
(f) Includes a $4 million or $0.09 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
SIX MONTHS ENDED JUNE 30,
(Millions except share and per share amounts)
<Table>
<Caption>
2005 2004
--------- ---------
Net sales and operating revenues $ 2,281 $ 2,146(c)
========= =========
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 1,829(a) 1,702(d)
Engineering, Research and Development 42 36
Selling, General and Administrative 191(a) 209(c)(d)(e)
Depreciation and Amortization of Other Intangibles 90 89
--------- ---------
Total Costs and Expenses 2,152 2,036
========= =========
Loss on sale of receivables (1) (1)
Other Loss (1) --
--------- ---------
Total Other Loss (2) (1)
--------- ---------
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 89(a) 80(c)(d)(e)
Europe & South America 32(a) 17(d)(e)
Asia Pacific 6 12(e)
--------- ---------
127 109
Less:
Interest expense (net of
interest capitalized) 64 69
Income tax expense 22(b) 9(f)
Minority interest 1 3
--------- ---------
Net income $ 40 $ 28
========= =========
Average common shares outstanding:
Basic 42.8 41.1
========= =========
Diluted 45.0 43.8
========= =========
Earnings per share of common stock:
Basic $ 0.92 $ 0.69
========= =========
Diluted $ 0.88 $ 0.65
========= =========
</Table>
(a) Includes restructuring and restructuring related charges of $5 million
pre-tax, $3 million after tax or $0.07 per share. Of the adjustment $4 is
recorded in cost of sales and $1 million is in SG&A. Geographically, $2 million
is recorded in North America and $3 million in Europe and South America.
(b) Includes a $1 million or $0.02 per share tax expense primarily related to
adjusting state tax net operating loss carryforwards.
(c) Includes changeover costs for a new aftermarket customer acquired in the
first quarter of $8 million pre-tax, $5 million after-tax or $0.11 per share. Of
the adjustment $6 million is recorded in Sales and $2 million is recorded in
SG&A. Geographically all of the charge is recorded in North America.
(d) Includes restructuring and restructuring related charges of $10 million
pre-tax, $6 million after tax or $0.14 per share. Of the adjustment $2 million
is recorded in SG&A and the remaining $8 million is in cost of sales.
Geographically, $3 million is recorded in North America and $7 million in Europe
in South America.
(e) Includes consulting fees indexed to stock price of $4 million pre-tax, $3
million after-tax or $0.06 per share. The entire charge is recorded in SG&A.
Geographically $2 million of the charge is recorded in North America, $1 million
in Europe and South America and $1 million in Asia Pacific.
(f) Includes a $5 million or $0.11 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
<Table>
<Caption>
June 30, 2005 December 31, 2004
------------- -----------------
Assets
Cash and Cash Equivalents $ 66 $ 214
Receivables, Net 662 488
Inventories 404 396
Other Current Assets 203 194
Investments and Other Assets 682 693
Plant, Property, and Equipment, Net 1,050 1,134
---------- ----------
Total Assets $ 3,067 $ 3,119
========== ==========
Liabilities and Shareholders' Equity
Short-Term Debt $ 49 $ 19
Accounts Payable 726 696
Accrued Taxes 39 24
Accrued Interest 37 35
Other Current Liabilities 246 273
Long-Term Debt 1,363 1,401
Deferred Income Taxes 118 126
Deferred Credits and Other Liabilities 338 362
Minority Interest 22 24
Total Shareholders' Equity 129 159
---------- ----------
Total Liabilities and Shareholders' Equity $ 3,067 $ 3,119
========== ==========
(a) Accounts Receivables net of: June 30, 2005 December 31, 2004
------------- -----------------
Accounts Receivable securitization programs $ 148 $ 124
Receivables collected under advance payment programs $ 9 $ 132
(b) Long term debt composed of: June 30, 2005 December 31, 2004
------------- -----------------
Term loan B (Due 2010) $ 356 $ 392
10.25% senior notes (Due 2013) 489 490
8.625% subordinated notes (Due 2014) 500 500
Other long term debt 18 19
---------- ----------
$ 1,363 $ 1,401
========== ==========
</Table>
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Millions)
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
-----------------------
2005 2004
------- -------
Operating activities:
Net income $ 40 $ 28
Adjustments to reconcile net income
to net cash provided (used) by operating activities -
Depreciation and amortization of other intangibles 90 89
Deferred income taxes (5) (5)
(Gain)/loss on sale of assets, net 1 --
Changes in components of working capital (net of acquisition)-
(Inc.)/dec. in receivables (200) (113)
(Inc.)/dec. in inventories (33) (16)
(Inc.)/dec. in prepayments and other current assets (19) (27)
Inc./(dec.) in payables 64 60
Inc./(dec.) in taxes accrued 19 13
Inc./(dec.) in interest accrued 2 (2)
Inc./(dec.) in other current liabilities (10) 24
Other (20) 8
------- -------
Net cash provided (used) by operating activities (71) 59
Investing activities:
Net proceeds from sale of assets 3 11
Expenditures for plant, property & equipment (63) (54)
Acquisition of business (11) --
Investments and other 2 (2)
------- -------
Net cash used by investing activities (69) (45)
------- -------
Financing activities:
Issuance of common shares 4 4
Retirement of long-term debt (42) (4)
Net inc./(dec.) in short-term debt excluding current
maturities on long-term debt 34 1
Other -- 2
------- -------
Net cash provided (used) by financing activities (4) 3
------- -------
Effect of foreign exchange rate changes on cash and
cash equivalents (4) 4
------- -------
Inc./(dec.) in cash and cash equivalents (148) 21
Cash and cash equivalents, January 1 214 145
------- -------
Cash and cash equivalents, June 30 $ 66 $ 166
======= =======
Cash paid during the period for interest $ 61 $ 74
Cash paid during the period for income taxes $ 11 $ 7
</Table>
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
<Table>
<Caption>
Q2 2005
------------------------------------------------------------
North Europe Asia
America & SA Pacific Total
--------- --------- --------- ---------
Net income $ 33
Income tax expense 18
Interest expense (net of interest capitalized) 32
---------
EBIT, Income before interest expense, income taxes and minority
interest (GAAP measure) 52 27 4 83
Depreciation and amortization of other intangibles 23 18 3 44
--------- --------- --------- ---------
Total EBITDA(2) $ 75 $ 45 $ 7 $ 127
========= ========= ========= =========
</Table>
<Table>
<Caption>
Q2 2004
------------------------------------------------------------
North Europe Asia
America & SA Pacific Total
--------- --------- --------- ---------
Net income $ 30
Minority interest 2
Income tax expense 10
Interest expense (net of interest capitalized) 34
----------
EBIT, Income before interest expense, income taxes and minority
interest (GAAP measure) 50 17 9 76
Depreciation and amortization 24 18 2 44
--------- --------- --------- ---------
Total EBITDA $ 74 $ 35 $ 11 $ 120
========== ========= ========= =========
</Table>
(1) Generally Accepted Accounting Principles
(2) EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation based
upon generally accepted accounting principles. The amounts included in the
EBITDA calculation, however, are derived from amounts included in the historical
statements of income data. In addition, EBITDA should not be considered as an
alternative to net income or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows as a measure
of liquidity. Tenneco Automotive has presented EBITDA because it regularly
reviews EBITDA as a measure of the company's performance. In addition, Tenneco
Automotive believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco Automotive also believes EBITDA assists investors in comparing
a company's performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many factors. However,
the EBITDA measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the components of the
calculation.
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
<Table>
<Caption>
Q2 2005 Q2 2004
--------------------------------------------- -------------------------------------------
EBITDA(3) EBIT Net Income Per Share EBITDA(3) EBIT Net Income Per Share
--------- ------- ---------- --------- --------- ------- ---------- ---------
Earnings Measures $ 127 $ 83 $ 33 $ 0.71 $ 120 $ 76 $ 30 $ 0.69
Adjustments (reflects
non-GAAP measures):
Restructuring and restructuring
related expenses 2 2 1 0.03 5 5 3 0.07
New Aftermarket customer
changeover costs -- -- -- -- 2 2 1 0.02
Consulting fees indexed to
stock price -- -- -- -- 1 1 1 0.01
Tax adjustments -- -- 1 0.03 -- -- (4) (0.09)
------- ------- ------- ------- ------- ------- ------- -------
Non-GAAP earnings measures $ 129 $ 85 $ 35 $ 0.77 $ 128 $ 84 $ 31 $ 0.70
======= ======= ======= ======= ======= ======= ======= =======
</Table>
<Table>
<Caption>
Q2 2005
-----------------------------------------
North Europe Asia
America & SA Pacific Total
------- ------- ------- -------
EBIT $ 52 $ 27 $ 4 $ 83
Restructuring and restructuring
related expenses -- 2 -- 2
------- ------- ------- -------
Adjusted EBIT $ 52 $ 29 $ 4 $ 85
======= ======= ======= =======
</Table>
<Table>
<Caption>
Q2 2004
-----------------------------------------
North Europe Asia
America & SA Pacific Total
------- ------- ------- -------
EBIT $ 50 $ 17 $ 9 $ 76
Restructuring and restructuring
related expenses 1 4 -- 5
New Aftermarket customer
changeover costs 2 -- -- 2
Consulting fees indexed to
stock price 1 -- -- 1
------- ------- ------- -------
Adjusted EBIT $ 54 $ 21 $ 9 $ 84
======= ======= ======= =======
</Table>
(1) Generally Accepted Accounting Principles
(2) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP
earnings measures in order to reflect the results for the second quarters of
2005 and 2004 in a manner that allows a better understanding of the results of
operational activities separate from the financial impact of decisions made for
the long-term benefit of the company. Adjustments similar to the ones reflected
above have been recorded in earlier periods, and similar types of adjustments
can reasonably be expected to be recorded in future periods. Using only the
non-GAAP earnings measures to analyze earnings would have material limitations
because its calculation is based on the subjective determinations of management
regarding the nature and classification of events and circumstances that
investors may find material. Management compensates for these limitations by
utilizing both GAAP and non-GAAP earnings measures reflected above to understand
and analyze the results of the business. The company believes investors find the
non-GAAP information helpful in understanding the ongoing performance of
operations separate from items that may have a disproportionate positive or
negative impact on the company's financial results in any particular period.
(3) EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation based
upon generally accepted accounting principles. The amounts included in the
EBITDA calculation, however, are derived from amounts included in the historical
statements of income data. In addition, EBITDA should not be considered as an
alternative to net income or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows as a measure
of liquidity. Tenneco Automotive has presented EBITDA because it regularly
reviews EBITDA as a measure of the company's performance. In addition, Tenneco
Automotive believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco Automotive also believes EBITDA assists investors in comparing
a company's performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many factors. However,
the EBITDA measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the components of the
calculation.
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
<Table>
<Caption>
YTD 2005
--------------------------------------------------------
North Europe Asia
America & SA Pacific Total
-------- -------- -------- --------
Net income $ 40
Minority interest 1
Income tax expense 22
Interest expense (net of interest capitalized) 64
--------
EBIT, Income before interest expense, income taxes and minority
interest (GAAP measure) 89 32 6 127
Depreciation and amortization of other intangibles 46 38 6 90
-------- -------- -------- --------
Total EBITDA(2) $ 135 $ 70 $ 12 $ 217
======== ======== ======== ========
</Table>
<Table>
<Caption>
YTD 2004
--------------------------------------------------------
North Europe Asia
America & SA Pacific Total
-------- -------- -------- --------
Net income $ 28
Minority interest 3
Income tax expense 9
Interest expense (net of interest capitalized) 69
--------
EBIT, Income before interest expense, income taxes and minority
interest (GAAP measure) 80 17 12 109
Depreciation and amortization 48 35 6 89
-------- -------- -------- --------
Total EBITDA $ 128 $ 52 $ 18 $ 198
======== ======== ======== ========
</Table>
(1) Generally Accepted Accounting Principles
(2) EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation based
upon generally accepted accounting principles. The amounts included in the
EBITDA calculation, however, are derived from amounts included in the historical
statements of income data. In addition, EBITDA should not be considered as an
alternative to net income or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows as a measure
of liquidity. Tenneco Automotive has presented EBITDA because it regularly
reviews EBITDA as a measure of the company's performance. In addition, Tenneco
Automotive believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco Automotive also believes EBITDA assists investors in comparing
a company's performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many factors. However,
the EBITDA measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the components of the
calculation.
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
<Table>
<Caption>
YTD 2005 YTD 2004
--------------------------------------------- ---------------------------------------------
EBITDA(3) EBIT Net Income Per Share EBITDA(3) EBIT Net Income Per Share
--------- ------- ---------- --------- --------- ------- ---------- ---------
Earnings Measures $ 217 $ 127 $ 40 $ 0.88 $ 198 $ 109 $ 28 $ 0.65
Adjustments (reflects
non-GAAP measures):
Restructuring and restructuring
related expenses 5 5 3 0.07 10 10 6 0.14
New Aftermarket customer
changeover costs -- -- -- -- 8 8 5 0.11
Consulting fees indexed to
stock price -- -- -- -- 4 4 3 0.06
Tax adjustments -- -- 1 0.02 -- -- (5) (0.11)
------- ------- ------- ------- ------- ------- ------- -------
Non-GAAP earnings measures $ 222 $ 132 $ 44 $ 0.97 $ 220 $ 131 $ 37 $ 0.85
======= ======= ======= ======= ======= ======= ======= =======
</Table>
<Table>
<Caption>
YTD 2005
-------------------------------------------
North Europe Asia
America & SA Pacific Total
------- ------- ------- -------
EBIT $ 89 $ 32 $ 6 $ 127
Restructuring and restructuring
related expenses 2 3 -- 5
------- ------- ------- -------
Adjusted EBIT $ 91 $ 35 $ 6 $ 132
======= ======= ======= =======
</Table>
<Table>
<Caption>
YTD 2004
-------------------------------------------
North Europe Asia
America & SA Pacific Total
------- ------- ------- -------
EBIT $ 80 $ 17 $ 12 $ 109
Restructuring and restructuring
related expenses 3 7 -- 10
New Aftermarket customer
changeover costs 8 -- -- 8
Consulting fees indexed to
stock price 2 1 1 4
------- ------- ------- -------
Adjusted EBIT $ 93 $ 25 $ 13 $ 131
======= ======= ======= =======
</Table>
(1) Generally Accepted Accounting Principles
(2) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP
earnings measures in order to reflect the results for the six months of 2005 and
2004 in a manner that allows a better understanding of the results of
operational activities separate from the financial impact of decisions made for
the long-term benefit of the company. Adjustments similar to the ones reflected
above have been recorded in earlier periods, and similar types of adjustments
can reasonably be expected to be recorded in future periods. Using only the
non-GAAP earnings measures to analyze earnings would have material limitations
because its calculation is based on the subjective determinations of management
regarding the nature and classification of events and circumstances that
investors may find material. Management compensates for these limitations by
utilizing both GAAP and non-GAAP earnings measures reflected above to understand
and analyze the results of the business. The company believes investors find the
non-GAAP information helpful in understanding the ongoing performance of
operations separate from items that may have a disproportionate positive or
negative impact on the company's financial results in any particular period.
(3) See Reconciliation of GAAP Net Income to EBITDA on previous page. EBITDA
represents income before interest expense, income taxes, minority interest and
depreciation and amortization. EBITDA is not a calculation based upon generally
accepted accounting principles. The amounts included in the EBITDA calculation,
however, are derived from amounts included in the historical statements of
income data. In addition, EBITDA should not be considered as an alternative to
net income or operating income as an indicator of the company's operating
performance, or as an alternative to operating cash flows as a measure of
liquidity. Tenneco Automotive has presented EBITDA because it regularly reviews
EBITDA as a measure of the company's performance. In addition, Tenneco
Automotive believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco Automotive also believes EBITDA assists investors in comparing
a company's performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many factors. However,
the EBITDA measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the components of the
calculation.
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
<Table>
<Caption>
Q2 2005
---------------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
--------- --------- --------- ------------ ----------------
North America Aftermarket
Ride Control $ 103 $ -- $ 103 $ -- $ 103
Exhaust 43 -- 43 -- 43
---------- ---------- ---------- ---------- ----------
Total North America Aftermarket 146 -- 146 -- 146
North America Original Equipment
Ride Control 131 -- 131 -- 131
Exhaust 259 3 256 68 188
---------- ---------- ---------- ---------- ----------
Total North America Original Equipment 390 3 387 68 319
Total North America 536 3 533 68 465
Europe Aftermarket
Ride Control 51 1 50 -- 50
Exhaust 58 2 56 -- 56
---------- ---------- ---------- ---------- ----------
Total Europe Aftermarket 109 3 106 -- 106
Europe Original Equipment
Ride Control 98(a) 5 93 -- 93(a)
Exhaust 284 10 274 85 189
---------- ---------- ---------- ---------- ----------
Total Europe Original Equipment 382 15 367 85 282
South America 50 7 43 3 40
Total Europe & South America 541 25 516 88 428
Asia 44 1 43 11 32
Australia 59 4 55 5 50
---------- ---------- ---------- ---------- ----------
Total Asia Pacific 103 5 98 16 82
Total Tenneco Automotive $ 1,180 $ 33 $ 1,147 $ 172 $ 975
========== ========== ========== ========== ==========
</Table>
<Table>
<Caption>
Q2 2004
---------------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
---------- ---------- ---------- ----------- ----------------
North America Aftermarket
Ride Control $ 100 $ -- $ 100 $ -- $ 100
Exhaust 44 -- 44 -- 44
---------- ---------- ---------- ---------- ----------
Total North America Aftermarket 144 -- 144 -- 144
North America Original Equipment
Ride Control 120 -- 120 -- 120
Exhaust 259 -- 259 84 175
---------- ---------- ---------- ---------- ----------
Total North America Original Equipment 379 -- 379 84 295
Total North America 523 -- 523 84 439
Europe Aftermarket
Ride Control 51 -- 51 -- 51
Exhaust 52 -- 52 -- 52
---------- ---------- ---------- ---------- ----------
Total Europe Aftermarket 103 -- 103 -- 103
Europe Original Equipment
Ride Control 91 -- 91 -- 91
Exhaust 252 -- 252 81 171
---------- ---------- ---------- ---------- ----------
Total Europe Original Equipment 343 -- 343 81 262
South America 35 -- 35 3 32
Total Europe & South America 481 -- 481 84 397
Asia 58 -- 58 20 38
Australia 51 -- 51 4 47
---------- ---------- ---------- ---------- ----------
Total Asia Pacific 109 -- 109 24 85
Total Tenneco Automotive $ 1,113 $ -- $ 1,113 $ 191 $ 922
========== ========== ========== ========== ==========
</Table>
Tenneco Automotive presents the above reconciliation of revenues in order to
reflect the trend in the company's sales, in various product lines and
geographical regions, separately from the effects of doing business in
currencies other than the U.S. dollar. Additionally, pass-through catalytic
converter sales include precious metals pricing, which may be volatile. While
Tenneco Automotive's original equipment customers assume the risk of this
volatility, it impacts reported revenue. Excluding pass-through catalytic
converter sales removes this impact. Tenneco Automotive uses this information
to analyze the trend in revenues before these factors. Tenneco Automotive
believes investors find this information useful in understanding period to
period comparisons in the company's revenues.
(a) Beginning in the second quarter of 2005, Tenneco Automotive changed its
accounting for a customer contract in its European OE Ride Control unit. The
cost of sales for this contract are now netted against the revenues, reducing
reported revenues and cost of sales. In the second quarter of 2004, Tenneco
Automotive recorded $15 million in revenues for this contract.
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
<Table>
<Caption>
Six Months Ended June 30, 2005
---------------------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
------------ ------------ ------------ ------------ ----------------
North America Aftermarket
Ride Control $ 194 $ -- $ 194 $ -- $ 194
Exhaust 82 -- 82 -- 82
------------ ------------ ------------ ------------ ------------
Total North America Aftermarket 276 -- 276 -- 276
North America Original Equipment
Ride Control 258 -- 258 -- 258
Exhaust 507 5 502 135 367
------------ ------------ ------------ ------------ ------------
Total North America Original Equipment 765 5 760 135 625
Total North America 1,041 5 1,036 135 901
Europe Aftermarket
Ride Control 88 3 85 -- 85
Exhaust 103 4 99 -- 99
------------ ------------ ------------ ------------ ------------
Total Europe Aftermarket 191 7 184 -- 184
Europe Original Equipment
Ride Control 207(a) 16 191 -- 191(a)
Exhaust 556 26 530 160 370
------------ ------------ ------------ ------------ ------------
Total Europe Original Equipment 763 42 721 160 561
South America 94 10 84 7 77
Total Europe & South America 1,048 59 989 167 822
Asia 86 1 85 24 61
Australia 106 5 101 9 92
------------ ------------ ------------ ------------ ------------
Total Asia Pacific 192 6 186 33 153
Total Tenneco Automotive $ 2,281 $ 70 $ 2,211 $ 335 $ 1,876
============ ============ ============ ============ ============
</Table>
<Table>
<Caption>
Six Months Ended June 30, 2004
---------------------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
------------ ------------ ------------ ------------ ----------------
North America Aftermarket
Ride Control $ 185 $ -- $ 185 $ -- $ 185
Exhaust 81 -- 81 -- 81
---------- ---------- ---------- ---------- ----------
Total North America Aftermarket 266 -- 266 -- 266
North America Original Equipment
Ride Control 238 -- 238 -- 238
Exhaust 522 -- 522 172 350
---------- ---------- ---------- ---------- ----------
Total North America Original Equipment 760 -- 760 172 588
Total North America 1,026 -- 1,026 172 854
Europe Aftermarket
Ride Control 89 -- 89 -- 89
Exhaust 94 -- 94 -- 94
---------- ---------- ---------- ---------- ----------
Total Europe Aftermarket 183 -- 183 -- 183
Europe Original Equipment
Ride Control 176 -- 176 -- 176
Exhaust 495 -- 495 158 337
---------- ---------- ---------- ---------- ----------
Total Europe Original Equipment 671 -- 671 158 513
South America 69 -- 69 7 62
Total Europe & South America 923 -- 923 165 758
Asia 97 -- 97 33 64
Australia 100 -- 100 8 92
---------- ---------- ---------- ---------- ----------
Total Asia Pacific 197 -- 197 41 156
Total Tenneco Automotive $ 2,146 $ -- $ 2,146 $ 378 $ 1,768
========== ========== ========== ========== ==========
</Table>
Tenneco Automotive presents the above reconciliation of revenues in order to
reflect the trend in the company's sales, in various product lines and
geographical regions, separately from the effects of doing business in
currencies other than the U.S. dollar. Additionally, pass-through catalytic
converter sales include precious metals pricing, which may be volatile. While
Tenneco Automotive's original equipment customers assume the risk of this
volatility, it impacts reported revenue. Excluding pass-through catalytic
converter sales removes this impact. Tenneco Automotive uses this information
to analyze the trend in revenues before these factors. Tenneco Automotive
believes investors find this information useful in understanding period to
period comparisons in the company's revenues.
(a) Beginning in the second quarter of 2005, Tenneco Automotive changed its
accounting for a customer contract in its European OE Ride Control unit. The
cost of sales for this contract are now netted against the revenues, reducing
reported revenues and cost of sales. In the second quarter of 2004, Tenneco
Automotive recorded $15 million in revenues for this contract.