TENNECO INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

	Year Ended December 31,
	2008			2007			2006
	(Millions Except Share and Per Share Amounts)
Revenues
Net sales and operating revenues	$	5,916		$	6,184		$	4,682
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)		5,063			5,210			3,836
Goodwill impairment charge		114			—			—
Engineering, research, and development		127			114			88
Selling, general, and administrative		392			399			373
Depreciation and amortization of intangibles		222			205			184
		5,918			5,928			4,481
Other income (expense)
Loss on sale of receivables		(10	)		(10	)		(9	)
Other income		9			6			4
		(1	)		(4	)		(5	)
Income (loss) before interest expense, income taxes, and noncontrolling interests		(3	)		252			196
Interest expense (net of interest capitalized of $6 million, $6 million and $6 million, respectively)		113			164			136
Income tax expense		289			83			5
Net income (loss)		(405	)		5			55
Less: Net income attributable to noncontrolling interests		10			10			6
Net income (loss) attributable to Tenneco Inc.	$	(415	)	$	(5	)	$	49
Earnings (loss) per share
Weighted average shares of common stock outstanding —
Basic		46,406,095			45,809,730			44,625,220
Diluted		46,406,095			45,809,730			46,755,573
Basic earnings (loss) per share of common stock	$	(8.95	)	$	(0.11	)	$	1.11
Diluted earnings (loss) per share of common stock	$	(8.95	)	$	(0.11	)	$	1.05

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

1

TENNECO INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2008			2007
	(Millions)
ASSETS
Current assets:
Cash and cash equivalents	$	126		$	188
Receivables —
Customer notes and accounts, net		529			732
Other		45			25
Inventories		513			539
Deferred income taxes		18			36
Prepayments and other		107			121
Total current assets		1,338			1,641
Other assets:
Long-term receivables, net		11			19
Goodwill		95			208
Intangibles, net		26			26
Deferred income taxes		88			370
Other		125			141
		345			764
Plant, property, and equipment, at cost		2,960			2,978
Less — Accumulated depreciation and amortization		(1,815	)		(1,793	)
		1,145			1,185
Total assets	$	2,828		$	3,590
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt (including current maturities of long-term debt)	$	49		$	46
Trade payables		790			987
Accrued taxes		30			41
Accrued interest		22			22
Accrued liabilities		201			213
Other		65			49
Total current liabilities		1,157			1,358
Long-term debt		1,402			1,328
Deferred income taxes		51			114
Postretirement benefits		377			288
Deferred credits and other liabilities		61			71
Commitments and contingencies
Total liabilities		3,048			3,159
Redeemable noncontrolling interests		7			6
Tenneco Inc. shareholders’ equity:
Common stock		—			—
Premium on common stock and other capital surplus		2,809			2,800
Accumulated other comprehensive loss		(318	)		(73	)
Retained earnings (accumulated deficit)		(2,502	)		(2,087	)
		(11	)		640
Less — Shares held as treasury stock, at cost		240			240
Total Tenneco Inc. shareholders’ equity		(251	)		400
Noncontrolling interests		24			25
Total equity		(227	)		425
Total liabilities, redeemable noncontrolling interests and equity	$	2,828		$	3,590

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

2

TENNECO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2008			2007			2006
	(Millions)
Operating Activities
Net income (loss)	$	(405	)	$	5		$	55
Adjustments to reconcile net income (loss) to cash provided by operating activities —
Depreciation and amortization of other intangibles		222			205			184
Goodwill impairment charge		114			—			—
Deferred income taxes		204			25			(41	)
Stock-based compensation		10			9			7
Loss on sale of assets		10			8			3
Changes in components of working capital —
(Increase) decrease in receivables		126			(116	)		(24	)
(Increase) decrease in inventories		19			(66	)		(57	)
(Increase) decrease in prepayments and other current assets		1			15			(25	)
Increase (decrease) in payables		(181	)		100			91
Increase (decrease) in accrued taxes		4			(25	)		15
Increase (decrease) in accrued interest		—			(10	)		2
Increase (decrease) in other current liabilities		—			19			5
Change in long-term assets		16			6			3
Change in long-term liabilities		19			(13	)		(11	)
Other		1			(4	)		(4	)
Net cash provided by operating activities		160			158			203
Investing Activities
Proceeds from sale of assets		3			10			17
Cash payments for plant, property, and equipment		(233	)		(177	)		(177	)
Cash payments for software related intangible assets		(15	)		(19	)		(13	)
Cash payment for net assets purchased		—			(16	)		—
Acquisition of businesses (net of cash acquired)		(16	)		—			—
Investments and other		—			—			1
Net cash used by investing activities		(261	)		(202	)		(172	)
Financing Activities
Issuance of common shares		2			8			17
Issuance of long-term debt		1			400			—
Debt issuance costs on long-term debt		(2	)		(11	)		—
Increase (decrease) in bank overdrafts		(1	)		7			—
Retirement of long-term debt		(6	)		(591	)		(4	)
Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt		77			183			3
Distribution to noncontrolling interest partners		(13	)		(6	)		(4	)
Net cash provided (used) by financing activities		58			(10	)		12
Effect of foreign exchange rate changes on cash and cash equivalents		(19	)		40			18
Increase (decrease) in cash and cash equivalents		(62	)		(14	)		61
Cash and cash equivalents, January 1		188			202			141
Cash and cash equivalents, December 31 (Note)	$	126		$	188		$	202
Supplemental Cash Flow Information
Cash paid during the year for interest	$	117		$	177		$	137
Cash paid during the year for income taxes (net of refunds)		62			60			26
Non-cash Investing and Financing Activities
Period ended balance of payables for plant, property, and equipment	$	28		$	40		$	18
Assumption of debt from business acquisition		10			—			—

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 consolidated financial statements are an integral
part of these statements of cash flows.

3

TENNECO INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

	Year Ended December 31,
	2008					2007					2006
	Shares		Amount			Shares		Amount			Shares			Amount
	(Millions Except Share Amounts)
Common Stock
Balance January 1		47,892,532	$	—			47,085,274	$	—			45,544,668		$	—
Issued (Reacquired) pursuant to benefit plans		238,982		—			209,558		—			(104,240	)		—
Stock options exercised		182,976		—			597,700		—			1,644,846			—
Balance December 31		48,314,490		—			47,892,532		—			47,085,274			—
Premium on Common Stock and Other Capital Surplus
Balance January 1				2,800					2,790						2,776
Premium on common stock issued pursuant to benefit plans				9					10						14
Balance December 31				2,809					2,800						2,790
Accumulated Other Comprehensive Loss
Balance January 1				(73	)				(252	)					(281	)
Adoption of recognition provision of Statement of Financial Accounting Standard (SFAS) No. 158, net of tax of $31 million				—					—						(59	)
Measurement date implementation of SFAS No. 158, net of tax of $7 million				—					14						—
Other comprehensive income (loss)				(245	)				165						88
Balance December 31				(318	)				(73	)					(252	)
Retained Earnings (Accumulated Deficit)
Balance January 1				(2,087	)				(2,072	)					(2,118	)
Net income (loss) attributable to Tenneco Inc.				(415	)				(5	)					49
Measurement date implementation of SFAS No. 158, net of tax of $2 million				—					(8	)					—
Other				—					(2	)					(3	)
Balance December 31				(2,502	)				(2,087	)					(2,072	)
Less — Common Stock Held as Treasury Stock, at Cost
Balance January 1 and December 31		1,294,692		240			1,294,692		240			1,294,692			240
Total Tenneco Inc. shareholders’ equity			$	(251	)			$	400					$	226
Noncontrolling interests:
Balance January 1				25					24						21
Net income				6					7						4
Dividends declared				(7	)				(6	)					(1	)
Balance December 31			$	24				$	25					$	24
Total equity			$	(227	)			$	425					$	250

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

4

TENNECO INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Year Ended December 31, 2008
	Tenneco Inc.						Noncontrolling Interests				Total
	Accumulated						Accumulated				Accumulated
	Other						Other				Other
	Comprehensive			Comprehensive			Comprehensive		Comprehensive		Comprehensive			Comprehensive
	Income			Income			Income		Income		Income			Income
	(Loss)			(Loss)			(Loss)		(Loss)		(Loss)			(Loss)
	(Millions)
Net Income (Loss)				$	(415	)			$	6				$	(409	)
Accumulated Other Comprehensive Income (Loss)
Cumulative Translation Adjustment
Balance January 1	$	85					$	—			$	85
Translation of foreign currency statements		(127	)		(127	)		—				(127	)		(127	)
Balance December 31		(42	)					—				(42	)
Additional Liability for Pension Benefits
Balance January 1		(158	)					—				(158	)
Additional liability for pension and postretirement benefits, net of tax of $9 million		(118	)		(118	)		—				(118	)		(118	)
Balance December 31		(276	)					—				(276	)
Balance December 31	$	(318	)				$	—			$	(318	)
Other comprehensive income (loss)					(245	)				—					(245	)
Comprehensive Income (Loss)				$	(660	)			$	6				$	(654	)

	Year Ended December 31, 2007
	Tenneco Inc.						Noncontrolling Interests				Total
	Accumulated						Accumulated				Accumulated
	Other						Other				Other
	Comprehensive			Comprehensive			Comprehensive		Comprehensive		Comprehensive			Comprehensive
	Income			Income			Income		Income		Income			Income
	(Loss)			(Loss)			(Loss)		(Loss)		(Loss)			(Loss)
	(Millions)
Net Income (Loss)				$	(5	)			$	7				$	2
Accumulated Other Comprehensive Income (Loss)
Cumulative Translation Adjustment
Balance January 1	$	(53	)				$	—			$	(53	)
Translation of foreign currency statements		138			138			—				138			138
Balance December 31		85						—				85
Additional Liability for Pension Benefits
Balance January 1		(199	)					—				(199	)
Additional liability for pension and postretirement benefits, net of tax of $(15) million		27			27			—				27			27
Measurement date implementation of SFAS No. 158, net of tax of $7 million		14			—			—		—		14			—
Balance December 31		(158	)					—				(158	)
Balance December 31	$	(73	)				$	—			$	(73	)
Other comprehensive income (loss)					165					—					165
Comprehensive Income (Loss)				$	160				$	7				$	167

The accompanying notes to financial statements are an integral part

of these statements of comprehensive income (loss).

5

TENNECO INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — (Continued)

	Year Ended December 31, 2006
	Tenneco Inc.						Noncontrolling Interests				Total
	Accumulated						Accumulated				Accumulated
	Other						Other				Other
	Comprehensive			Comprehensive			Comprehensive		Comprehensive		Comprehensive			Comprehensive
	Income			Income			Income		Income		Income			Income
	(Loss)			(Loss)			(Loss)		(Loss)		(Loss)			(Loss)
	(Millions)
Net Income (Loss)				$	49				$	4				$	53
Accumulated Other Comprehensive Income (Loss)
Cumulative Translation Adjustment
Balance January 1	$	(149	)				$	—			$	(149	)
Translation of foreign currency statements		96			96			—				96			96
Balance December 31		(53	)					—				(53	)
Additional Liability for Pension Benefits
Balance January 1		(132	)					—				(132	)
Additional liability for pension and postretirement benefits, net of tax of $2 million		(5	)		(5	)		—				(5	)		(5	)
Deferred tax valuation allowance adjustment		(3	)		(3	)		—		—		(3	)		(3	)
Balance December 31		(140	)					—				(140	)
Adoption of recognition provision of SFAS No. 158, net of tax of $31 million		(59	)		—			—		—		(59	)		—
Balance December 31	$	(252	)					—			$	(252	)
Other comprehensive income (loss)					88					—					88
Comprehensive Income (Loss)				$	137				$	4				$	141

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

6

14.  Supplemental Guarantor Condensed Consolidating Financial Statements

Basis of Presentation

Subject to limited exceptions, all of our existing and future material domestic 100% owned subsidiaries (which are referred to as the Guarantor Subsidiaries) fully and unconditionally guarantee our senior subordinated notes due in 2014, our senior notes due in 2015 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 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 information 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 INC.

STATEMENT OF INCOME (LOSS)

	For the Year Ended December 31, 2008
							Tenneco Inc.
	Guarantor			Nonguarantor			(Parent			Reclass
	Subsidiaries			Subsidiaries			Company)			& Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	2,392		$	3,524		$	—		$	—		$	5,916
Affiliated companies		66			476			—			(542	)		—
		2,458			4,000			—			(542	)		5,916
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)		2,058			3,547			—			(542	)		5,063
Goodwill impairment charge		114			—			—			—			114
Engineering, research, and development		52			75			—			—			127
Selling, general, and administrative		124			264			4			—			392
Depreciation and amortization of intangibles		86			136			—			—			222
		2,434			4,022			4			(542	)		5,918
Other income (expense)
Loss on sale of receivables		—			(10	)		—			—			(10	)
Other income (expense)		63			(1	)		(1	)		(52	)		9
		63			(11	)		(1	)		(52	)		(1	)
Income (loss) before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies		87			(33	)		(5	)		(52	)		(3	)
Interest expense —
External (net of interest capitalized)		(3	)		3			113			—			113
Affiliated companies (net of interest income)		124			(10	)		(114	)		—			—
Income tax expense (benefit)		20			89			185			(5	)		289
Equity in net income (loss) from affiliated companies		(138	)		—			(226	)		364			—
Net income (loss)		(192	)		(115	)		(415	)		317			(405	)
Less: Net income attributable to noncontrolling interests		—			10			—			—			10
Net income (loss) attributable to Tenneco Inc.	$	(192	)	$	(125	)	$	(415	)	$	317		$	(415	)

7

TENNECO INC.

STATEMENT OF INCOME (LOSS)

	For the Year Ended December 31, 2007
							Tenneco Inc.
	Guarantor			Nonguarantor			(Parent			Reclass
	Subsidiaries			Subsidiaries			Company)			& Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	2,827		$	3,357		$	—		$	—		$	6,184
Affiliated companies		95			895			—			(990	)		—
		2,922			4,252			—			(990	)		6,184
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)		2,619			3,582			(1	)		(990	)		5,210
Engineering, research, and development		55			59			—			—			114
Selling, general, and administrative		145			249			4			1			399
Depreciation and amortization of intangibles		80			125			—			—			205
		2,899			4,015			3			(989	)		5,928
Other income (expense)
Loss on sale of receivables		—			(10	)		—			—			(10	)
Other income (expense)		13			3			—			(10	)		6
		13			(7	)		—			(10	)		(4	)
Income (loss) before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies		36			230			(3	)		(11	)		252
Interest expense —
External (net of interest capitalized)		(2	)		2			164			—			164
Affiliated companies (net of interest income)		185			(16	)		(169	)		—			—
Income tax expense (benefit)		(42	)		78			57			(10	)		83
Equity in net income (loss) from affiliated companies		135			—			50			(185	)		—
Net income (loss)		30			166			(5	)		(186	)		5
Less: Net income attributable to noncontrolling interests		—			10			—			—			10
Net income (loss) attributable to Tenneco Inc.	$	30		$	156		$	(5	)	$	(186	)	$	(5	)

8

TENNECO INC.

STATEMENT OF INCOME (LOSS)

	For the Year Ended December 31, 2006
							Tenneco Inc.
	Guarantor			Nonguarantor			(Parent			Reclass
	Subsidiaries			Subsidiaries			Company)			& Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	1,892		$	2,790		$	—		$	—		$	4,682
Affiliated companies		88			483			—			(571	)		—
		1,980			3,273			—			(571	)		4,682
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)		1,614			2,793			—			(571	)		3,836
Engineering, research, and development		45			43			—			—			88
Selling, general, and administrative		131			238			4			—			373
Depreciation and amortization of intangibles		71			113			—			—			184
		1,861			3,187			4			(571	)		4,481
Other income (expense)
Loss on sale of receivables		—			(9	)		—			—			(9	)
Other income (expense)		—			6			(3	)		1			4
		—			(3	)		(3	)		1			(5	)
Income (loss) before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies		119			83			(7	)		1			196
Interest expense —
External (net of interest capitalized)		(4	)		3			137			—			136
Affiliated companies (net of interest income)		165			(11	)		(154	)		—			—
Income tax expense (benefit)		(33	)		41			(4	)		1			5
Equity in net income (loss) from affiliated companies		24			3			35			(62	)		—
Net income (loss)		15			53			49			(62	)		55
Less: Net income attributable to noncontrolling interests		—			6			—			—			6
Net income (loss) attributable to Tenneco Inc.	$	15		$	47		$	49		$	(62	)	$	49

9

TENNECO INC.

BALANCE SHEET

	December 31, 2008
							Tenneco Inc.
	Guarantor			Nonguarantor			(Parent			Reclass
	Subsidiaries			Subsidiaries			Company)			& Elims			Consolidated
	(Millions)
ASSETS
Current assets:
Cash and cash equivalents	$	16		$	110		$	—		$	—		$	126
Receivables, net		461			792			33			(712	)		574
Inventories		193			320			—			—			513
Deferred income taxes		58			—			—			(40	)		18
Prepayments and other		24			83			—			—			107
		752			1,305			33			(752	)		1,338
Other assets:
Investment in affiliated companies		399			—			614			(1,013	)		—
Notes and advances receivable from affiliates		3,641			234			5,605			(9,480	)		—
Long-term receivables, net		1			10			—			—			11
Goodwill		22			73			—			—			95
Intangibles, net		17			9			—			—			26
Deferred income taxes		64			24			46			(46	)		88
Other		36			66			23			—			125
		4,180			416			6,288			(10,539	)		345
Plant, property, and equipment, at cost		1,039			1,921			—			—			2,960
Less — Accumulated depreciation and amortization		(687	)		(1,128	)		—			—			(1,815	)
		352			793			—			—			1,145
Total assets	$	5,284		$	2,514		$	6,321		$	(11,291	)	$	2,828
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt (including current maturities of long-term debt)
Short-term debt — non-affiliated	$	—		$	49		$	—		$	—		$	49
Short-term debt — affiliated		174			371			10			(555	)		—
Trade payables		332			594			—			(136	)		790
Accrued taxes		12			18			—			—			30
Other		132			169			48			(61	)		288
		650			1,201			58			(752	)		1,157
Long-term debt-non-affiliated		—			12			1,390			—			1,402
Long-term debt-affiliated		4,229			127			5,124			(9,480	)		—
Deferred income taxes		43			54			—			(46	)		51
Postretirement benefits and other liabilities		345			89			—			4			438
Commitments and contingencies
Total liabilities		5,267			1,483			6,572			(10,274	)		3,048
Redeemable noncontrolling interests		—			7			—			—			7
Tenneco Inc. Shareholders’ equity		17			1,000			(251	)		(1,017	)		(251	)
Noncontrolling interests		—			24			—			—			24
Total equity		17			1,024			(251	)		(1,017	)		(227	)
Total liabilities, redeemable noncontrolling interests and equity	$	5,284		$	2,514		$	6,321		$	(11,291	)	$	2,828

10

TENNECO INC.

BALANCE SHEET

	December 31, 2007
							Tenneco Inc.
	Guarantor			Nonguarantor			(Parent		Reclass
	Subsidiaries			Subsidiaries			Company)		& Elims			Consolidated
	(Millions)
ASSETS
Current assets:
Cash and cash equivalents	$	6		$	182		$	—	$	—		$	188
Receivables, net		385			1,090			148		(866	)		757
Inventories		198			341			—		—			539
Deferred income taxes		53			—			3		(20	)		36
Prepayments and other		18			103			—		—			121
		660			1,716			151		(886	)		1,641
Other assets:
Investment in affiliated companies		628			—			1,083		(1,711	)		—
Notes and advances receivable from affiliates		3,607			232			5,383		(9,222	)		—
Long-term receivables, net		—			19			—		—			19
Goodwill		136			72			—		—			208
Intangibles, net		17			9			—		—			26
Deferred income taxes		310			60			180		(180	)		370
Other		40			76			25		—			141
		4,738			468			6,671		(11,113	)		764
Plant, property, and equipment, at cost		994			1,984			—		—			2,978
Less — Accumulated depreciation and amortization		(658	)		(1,135	)		—		—			(1,793	)
		336			849			—		—			1,185
Total assets	$	5,734		$	3,033		$	6,822	$	(11,999	)	$	3,590
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt (including current maturities of long-term debt)
Short-term debt — non-affiliated	$	—		$	44		$	2	$	—		$	46
Short-term debt — affiliated		274			439			10		(723	)		—
Trade payables		350			774			—		(137	)		987
Accrued taxes		27			16			—		(2	)		41
Other		118			169			21		(24	)		284
		769			1,442			33		(886	)		1,358
Long-term debt-non-affiliated		—			7			1,321		—			1,328
Long-term debt-affiliated		4,100			54			5,068		(9,222	)		—
Deferred income taxes		213			81			—		(180	)		114
Postretirement benefits and other liabilities		264			89			—		6			359
Commitments and contingencies
Total liabilities		5,346			1,673			6,422		(10,282	)		3,159
Redeemable noncontrolling interests		—			6			—		—			6
Tenneco Inc. shareholders’ equity		388			1,329			400		(1,717	)		400
Noncontrolling interests		—			25			—		—			25
Total equity		388			1,354			400		(1,717	)		425
Total liabilities, redeemable noncontrolling interests and equity	$	5,734		$	3,033		$	6,822	$	(11,999	)	$	3,590

11

TENNECO INC.

STATEMENT OF CASH FLOWS

	Year Ended December 31, 2008
							Tenneco Inc.
	Guarantor			Nonguarantor			(Parent			Reclass
	Subsidiaries			Subsidiaries			Company)			& Elims		Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	167		$	130		$	(137	)	$	—	$	160
Investing Activities
Proceeds from sale of assets		—			3			—			—		3
Cash payments for plant, property, and equipment		(90	)		(143	)		—			—		(233	)
Acquisition of business (net of cash acquired)		(19	)		3			—			—		(16	)
Cash payments for software related intangible assets		(9	)		(6	)		—			—		(15	)
Investments and other		—			—			—			—		—
Net cash used by investing activities		(118	)		(143	)		—			—		(261	)
Financing Activities
Issuance of common shares		—			—			2			—		2
Issuance of long-term debt		—			1			—			—		1
Retirement of long-term debt		—			(4	)		(2	)		—		(6	)
Debit issuance cost on long-term debt		—			—			(2	)		—		(2	)
Increase (decrease) in bank overdrafts		—			(1	)		—			—		(1	)
Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt		—			7			70			—		77
Intercompany dividends and net increase (decrease) in intercompany obligations		(39	)		(30	)		69			—		—
Distribution to noncontrolling interest partners		—			(13	)		—			—		(13	)
Net cash provided (used) by financing activities		(39	)		(40	)		137			—		58
Effect of foreign exchange rate changes on cash and cash equivalents		—			(19	)		—			—		(19	)
Increase (decrease) in cash and cash equivalents		10			(72	)		—			—		(62	)
Cash and cash equivalents, January 1		6			182			—			—		188
Cash and cash equivalents, December 31 (Note)	$	16		$	110		$	—		$	—	$	126

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

12

TENNECO INC.

STATEMENT OF CASH FLOWS — (Continued)

	Year Ended December 31, 2007
							Tenneco Inc.
	Guarantor			Nonguarantor			(Parent			Reclass
	Subsidiaries			Subsidiaries			Company)			& Elims		Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	380		$	302		$	(524	)	$	—	$	158
Investing Activities
Proceeds from sale of assets		1			9			—			—		10
Cash payments for plant, property, and equipment		(59	)		(118	)		—			—		(177	)
Cash payment for net assets purchased		(16	)		—			—			—		(16	)
Cash payments for software related intangible assets		(13	)		(6	)		—			—		(19	)
Investments and other		—			(250	)		250			—		—
Net cash provided (used) by investing activities		(87	)		(365	)		250			—		(202	)
Financing Activities
Issuance of common shares		—			—			8			—		8
Issuance of subsidiary equity		41			(41	)		—			—		—
Issuance of long-term debt		—			—			400			—		400
Retirement of long-term debt		—			(3	)		(588	)		—		(591	)
Debt issuance cost on long-term debt		—			—			(11	)		—		(11	)
Increase (decrease) in bank overdrafts		—			7			—			—		7
Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt		—			16			167			—		183
Intercompany dividends and net increase (decrease) in intercompany obligations		(384	)		86			298			—		—
Distribution to noncontrolling interest partners		—			(6	)		—			—		(6	)
Net cash provided (used) by financing activities		(343	)		59			274			—		(10	)
Effect of foreign exchange rate changes on cash and cash equivalents		—			40			—			—		40
Increase (decrease) in cash and cash equivalents		(50	)		36			—			—		(14	)
Cash and cash equivalents, January 1		56			146			—			—		202
Cash and cash equivalents, December 31 (Note)	$	6		$	182		$	—		$	—	$	188

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

13

TENNECO INC.

STATEMENT OF CASH FLOWS — (Continued)

	Year Ended December 31, 2006
							Tenneco Inc.
	Guarantor			Nonguarantor			(Parent			Reclass
	Subsidiaries			Subsidiaries			Company)			& Elims		Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	242		$	249		$	(288	)	$	—	$	203
Investing Activities
Proceeds from sale of assets		10			7			—			—		17
Cash payment for plant, property, and equipment		(78	)		(99	)		—			—		(177	)
Cash payment for software related intangible assets		(6	)		(7	)		—			—		(13	)
Investments and other		—			1			—			—		1
Net cash used by investing activities		(74	)		(98	)		—			—		(172	)
Financing Activities
Issuance of common shares		—			—			17			—		17
Retirement of long-term debt		—			(3	)		(1	)		—		(4	)
Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt		—			3			—			—		3
Intercompany dividends and net increase (decrease) in intercompany obligations		(142	)		(129	)		271			—		—
Distribution to noncontrolling interest partners		—			(4	)		—			—		(4	)
Net cash provided (used) by financing activities		(142	)		(133	)		287			—		12
Effect of foreign exchange rate changes on cash and cash equivalents		—			18			—			—		18
Increase (decrease) in cash and cash equivalents		26			36			(1	)		—		61
Cash and cash equivalents, January 1		31			110			—			—		141
Cash and cash equivalents, December 31 (Note)	$	57		$	146		$	(1	)	$	—	$	202

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

14