Supplemental Guarantor Condensed Consolidating Financial Statements

Basis of Presentation

Substantially 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 notes due in 2018 and 2020 on a joint and several basis. However, a subsidiary’s guarantee may be released in certain customary circumstances such as a sale of the subsidiary or all or substantially all of its assets in accordance with the indenture applicable to the notes. The Guarantor Subsidiaries are combined in the presentation below.

These 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 condensed consolidated financial statements and related notes of which this note is an integral part.

We revised the supplemental guarantor statements of comprehensive income and cash flows as a result of a correction to comprehensive income and to the classification of intercompany dividends in the cash flow. These revisions had no impact on any of the company’s current or previously issued consolidated financial statements. The misclassification in the supplemental cash flow statements consisted of including $40 million of intercompany dividend payments by the nonguarantor subsidiaries in operating activities which should have instead been included in financing activities for both the three and six month periods ended on June 30, 2013. Other comprehensive loss of $18 million was excluded in the net comprehensive income of the parent company for the three month period ended on June 30, 2013 and $40 million of other comprehensive loss was excluded for the six month period ended June 30, 2013. The impact of these corrections to the applicable prior periods are reflected in the guarantor financial information herein and will be reflected in future filings.

Distributions

There are no significant restrictions on the ability of the Guarantor Subsidiaries to make distributions to us.

STATEMENT OF COMPREHENSIVE INCOME (LOSS)



	For the Three Months Ended June 30, 2014
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	1,007		$	1,234		$	—		$	—		$	2,241
Affiliated companies	103			157			—			(260		)	—
	1,110			1,391			—			(260		)	2,241
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)	975			1,136			—			(260		)	1,851
Engineering, research, and development	18			24			—			—			42
Selling, general, and administrative	55			82			2			—			139
Depreciation and amortization of other intangibles	21			31			—			—			52
	1,069			1,273			2			(260		)	2,084
Other income (expense)
Loss on sale of receivables	—			(1		)	—			—			(1		)
Other income (loss)	27			(1		)	—			(26		)	—
	27			(2		)	—			(26		)	(1		)
Earnings (loss) before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies	68			116			(2		)	(26		)	156
Interest expense —
External (net of interest capitalized)	(1		)	1			19			—			19
Affiliated companies (net of interest income)	21			(21		)	—			—			—
Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies	48			136			(21		)	(26		)	137
Income tax expense	6			40									46
Equity in net income (loss) from affiliated companies	83			—			102			(185		)	—
Net Income (loss)	125			96			81			(211		)	91
Less: Net income attributable to noncontrolling interests	—			10			—			—			10
Net income (loss) attributable to Tenneco Inc.	$	125		$	86		$	81		$	(211	)	$	81
Comprehensive income (loss) attributable to Tenneco Inc.	$	123		$	97		$	90		$	(220	)	$	90

STATEMENT OF COMPREHENSIVE INCOME (LOSS)



	For the Three Months Ended June 30, 2013
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	904		$	1,163		$	—		$	—		$	2,067
Affiliated companies	92			141			—			(233		)	—
	996			1,304			—			(233		)	2,067
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)	776			1,192			—			(232		)	1,736
Engineering, research, and development	14			19			—			—			33
Selling, general, and administrative	45			60			1			—			106
Depreciation and amortization of other intangibles	19			31			—			—			50
	854			1,302			1			(232		)	1,925
Other income (expense)
Loss on sale of receivables	—			(1		)	—			—			(1		)
Other income (expense)	34			5			—			(39		)	—
	34			4			—			(39		)	(1		)
Earnings before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies	176			6			(1		)	(40		)	141
Interest expense —
External (net of interest capitalized)	(1		)	1			20			—			20
Affiliated companies (net of interest income)	18			(18		)	—			—			—
Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies	159			23			(21		)	(40		)	121
Income tax expense	40			7			—			—			47
Equity in net income (loss) from affiliated companies	2			—			84			(86		)	—
Net income (loss)	121			16			63			(126		)	74
Less: Net income attributable to noncontrolling interests	—			11			—			—			11
Net income (loss) attributable to Tenneco Inc.	$	121		$	5		$	63		$	(126	)	$	63
Comprehensive income (loss) attributable to Tenneco Inc.	$	126		$	(18	)	$	45		$	(108	)	$	45

STATEMENT OF COMPREHENSIVE INCOME (LOSS)



	For the Six Months Ended June 30, 2014
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	1,927		$	2,408		$	—		$	—		$	4,335
Affiliated companies	206			305			—			(511		)	—
	2,133			2,713			—			(511		)	4,335
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)	1,777			2,339			—			(511		)	3,605
Engineering, research, and development	40			44			—			—			84
Selling, general, and administrative	106			161			4			—			271
Depreciation and amortization of other intangibles	42			61			—			—			103
	1,965			2,605			4			(511		)	4,063
Other income (expense)
Loss on sale of receivables	—			(2		)	—			—			(2		)
Other income (expense)	25			—			—			(26		)	(1		)
	25			(2		)	—			(26		)	(3		)
Earnings before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies	193			106			(4		)	(26		)	269
Interest expense —
External (net of interest capitalized)	(1		)	1			38						38
Affiliated companies (net of interest income)	37			(37		)	—			—			—
Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies	157			142			(42		)	(26		)	231
Income tax expense	36			50			—			—			86
Equity in net income (loss) from affiliated companies	68			—			169			(237		)	—
Net income (loss)	189			92			127			(263		)	145
Less: Net income attributable to noncontrolling interests	—			18			—			—			18
Net income (loss) attributable to Tenneco Inc.	$	189		$	74		$	127		$	(263	)	$	127
Comprehensive income (loss) attributable to Tenneco Inc.	$	188		$	81		$	133		$	(269	)	$	133

STATEMENT OF COMPREHENSIVE INCOME (LOSS)



	For the Six Months Ended June 30, 2013
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	1,756		$	2,214		$	—		$	—		$	3,970
Affiliated companies	171			291			—			(462		)	—
	1,927			2,505			—			(462		)	3,970
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)	1,518			2,283			—			(461		)	3,340
Engineering, research, and development	29			39			—			—			68
Selling, general, and administrative	98			124			3			—			225
Depreciation and amortization of other intangibles	38			62			—			—			100
	1,683			2,508			3			(461		)	3,733
Other income (expense)
Loss on sale of receivables	—			(2		)	—			—			(2		)
Other income (expense)	33			5			—			(39		)	(1		)
	33			3			—			(39		)	(3		)
Earnings before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies	277			—			(3		)	(40		)	234
Interest expense —
External (net of interest capitalized)	(1		)	2			39			—			40
Affiliated companies (net of interest income)	36			(37		)	1			—			—
Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies	242			35			(43		)	(40		)	194
Income (benefit) tax expense	46			13						—			59
Equity in net income (loss) from affiliated companies	(3		)	—			160			(157		)	—
Net income (loss)	193			22			117			(197		)	135
Less: Net income attributable to noncontrolling interests	—			18			—			—			18
Net income (loss) attributable to Tenneco Inc.	$	193		$	4		$	117		$	(197	)	$	117
Comprehensive income (loss) attributable to Tenneco Inc.	$	193		$	(36	)	$	77		$	(157	)	$	77

BALANCE SHEET



	June 30, 2014
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	260		$	—		$	—		$	260
Restricted cash	—			5			—			—			5
Receivables, net	569			1,505			—			(716		)	1,358
Inventories	321			440			—			—			761
Deferred income taxes	88			—			7			(23		)	72
Prepayments and other	48			225			—			—			273
Total current assets	1,026			2,435			7			(739		)	2,729
Other assets:
Investment in affiliated companies	998			—			907			(1,905		)	—
Notes and advances receivable from affiliates	983			9,010			4,951			(14,944		)	—
Long-term receivables, net	12			2			—			—			14
Goodwill	21			47			—			—			68
Intangibles, net	12			16			—			—			28
Deferred income taxes	60			9			52			—			121
Other	44			61			21			—			126
	2,130			9,145			5,931			(16,849		)	357
Plant, property, and equipment, at cost	1,202			2,415			—			—			3,617
Less — Accumulated depreciation and amortization	(826		)	(1,560		)	—			—			(2,386		)
	376			855			—			—			1,231
Total assets	$	3,532		$	12,435		$	5,938		$	(17,588	)	$	4,317
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt (including current maturities of long-term debt)
Short-term debt — non-affiliated	$	—		$	76		$	15		$	—		$	91
Short-term debt — affiliated	205			295			10			(510		)	—
Trade payables	541			1,109			—			(156		)	1,494
Accrued taxes	(12		)	25			28			—			41
Other	144			303			9			(73		)	383
Total current liabilities	878			1,808			62			(739		)	2,009
Long-term debt — non-affiliated	—			53			1,153			—			1,206
Long-term debt — affiliated	1,831			8,978			4,135			(14,944		)	—
Deferred income taxes	—			29			—			—			29
Postretirement benefits and other liabilities	342			81			(1		)	4			426
Commitments and contingencies
Total liabilities	3,051			10,949			5,349			(15,679		)	3,670
Redeemable noncontrolling interests	—			22			—			—			22
Tenneco Inc. shareholders’ equity	481			1,428			589			(1,909		)	589
Noncontrolling interests	—			36			—			—			36
Total equity	481			1,464			589			(1,909		)	625
Total liabilities, redeemable noncontrolling interests and equity	$	3,532		$	12,435		$	5,938		$	(17,588	)	$	4,317

BALANCE SHEET



	December 31, 2013
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)		Reclass & Elims			Consolidated
	(Millions)
ASSETS
Current assets:
Cash and cash equivalents	$	6		$	269		$	—	$	—		$	275
Restricted cash	—			5			—		—			5
Receivables, net	387			1,306			16		(649		)	1,060
Inventories	279			377			—		—			656
Deferred income taxes	87			—			7		(23		)	71
Prepayments and other	35			188			—		—			223
Total current assets	794			2,145			23		(672		)	2,290
Other assets:
Investment in affiliated companies	944			—			696		(1,640		)	—
Notes and advances receivable from affiliates	1,026			7,320			4,826		(13,172		)	—
Long-term receivables, net	12			2			—		—			14
Goodwill	22			47			—		—			69
Intangibles, net	13			17			—		—			30
Deferred income taxes	72			9			44		—			125
Other	44			60			23		—			127
	2,133			7,455			5,589		(14,812		)	365
Plant, property, and equipment, at cost	1,173			2,325			—		—			3,498
Less — Accumulated depreciation and amortization	(807		)	(1,516		)	—		—			(2,323		)
	366			809			—		—			1,175
Total assets	$	3,293		$	10,409		$	5,612	$	(15,484	)	$	3,830
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt (including current maturities of long-term debt)
Short-term debt — non-affiliated	$	—		$	68		$	15	$	—		$	83
Short-term debt — affiliated	247			176			10		(433		)	—
Trade payables	521			1,011			—		(173		)	1,359
Accrued taxes	9			31			—		—			40
Other	128			285			9		(66		)	356
Total current liabilities	905			1,571			34		(672		)	1,838
Long-term debt — non-affiliated	—			8			1,011		—			1,019
Long-term debt — affiliated	1,700			7,338			4,134		(13,172		)	—
Deferred income taxes	—			28			—		—			28
Postretirement benefits and other liabilities	357			92			—		4			453
Commitments and contingencies
Total liabilities	2,962			9,037			5,179		(13,840		)	3,338
Redeemable noncontrolling interests	—			20			—		—			20
Tenneco Inc. shareholders’ equity	331			1,313			433		(1,644		)	433
Noncontrolling interests	—			39			—		—			39
Total equity	331			1,352			433		(1,644		)	472
Total liabilities, redeemable noncontrolling interests and equity	$	3,293		$	10,409		$	5,612	$	(15,484	)	$	3,830

STATEMENT OF CASH FLOWS



	Three Months Ended June 30, 2014
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Operating Activities
Net cash provided by operating activities	$	52		$	80		$	8		$	(26	)	$	114
Investing Activities
Cash payments for plant, property, and equipment	(22		)	(62		)	—			—			(84		)
Cash payments for software related intangible assets	(2		)	—			—			—			(2		)
Changes in restricted cash	—			1			—			—			1
Net cash used by investing activities	(24		)	(61		)	—			—			(85		)
Financing Activities
Issuance of common shares	—			—			1			—			1
Tax benefit from stock-based compensation	—			—			5			—			5
Retirement of long-term debt	—			—			(7		)	—			(7		)
Issuance of long-term debt				45						—			45
Increase (decrease) in bank overdrafts	—			(5		)				—			(5		)
Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt and short-term borrowings secured by accounts receivables	—			(17		)	(13		)	—			(30		)
Net increase (decrease) in short-term borrowings secured by accounts receivables	—			—			(30		)	—			(30		)
Intercompany dividend payments and net increase (decrease) in intercompany obligations	(30		)	(32		)	36			26			—
Capital contribution from noncontrolling interest partners	—			4			—			—			4
Net cash used by financing activities	(30		)	(28		)	(8		)	26			(40		)
Effect of foreign exchange rate changes on cash and cash equivalents	—			4			—			—			4
Increase (decrease) in cash and cash equivalents	(2		)	(5		)	—			—			(7		)
Cash and cash equivalents, April 1	2			265			—			—			267
Cash and cash equivalents, June 30 (Note)	$	—		$	260		$	—		$	—		$	260



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

STATEMENT OF CASH FLOWS



	Three Months Ended June 30, 2013
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	87		$	113		$	(27	)	$	(40	)	$	133
Investing Activities
Proceeds from sale of assets	1			(1		)	—			—			—
Cash payments for plant, property, and equipment	(23		)	(31		)	—			—			(54		)
Cash payments for software related intangible assets	(6		)	—			—			—			(6		)
Changes in restricted cash	—			4									4
Net cash used by investing activities	(29		)	(28		)	—			—			(56		)
Financing Activities
Issuance of common shares	—			—			12			—			12
Retirement of long-term debt	—			(1		)	(2		)	—			(3		)
Purchase of common stock under the share repurchase program	—			—			(2		)	—			(2		)
Increase (decrease) in bank overdrafts	40			4			—			—			44
Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt	—			7			(91		)	—			(84		)
Intercompany dividend payments and net increase (decrease) in intercompany obligations	(102		)	(48		)	110			40			—
Distributions to noncontrolling interest partners	—			(23		)	—			—			(23		)
Net cash provided (used) by financing activities	(62		)	(61		)	27			40			(56		)
Effect of foreign exchange rate changes on cash and cash equivalents	—			(19		)	—			—			(19		)
Increase (decrease) in cash and cash equivalents	(3		)	5			—			—			2
Cash and cash equivalents, April 1	4			229			—			—			233
Cash and cash equivalents, June 30 (Note)	$	1		$	234		$	—		$	—		$	235



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

STATEMENT OF CASH FLOWS



	For the Six Months Ended June 30, 2014
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	(156	)	$	170		$	(14	)	$	(26	)	$	(26	)
Investing Activities
Proceeds from sale of assets	—			—			—			—			—
Cash payments for plant, property, and equipment	(47		)	(120		)	—			—			(167		)
Cash payments for software related intangible assets	(6		)	(3		)	—			—			(9		)
Changes in restricted cash	—			—			—			—			—
Net cash used by investing activities	(53		)	(123		)	—			—			(176		)
Financing Activities
Issuance (Repurchase) of common and treasury shares	—			—			(1		)	—			(1		)
Tax benefit from stock-based compensation	—			—			17			—			17
Retirement of long-term debt	—			—			(10		)				(10		)
Issuance of long-term debt	—			45			—			—			45
Increase (decrease) in bank overdrafts	—			(1		)	—			—			(1		)
Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt and short-term borrowings secured by accounts receivables	—			7			160			—			167
Net increase (decrease) in short-term borrowings secured by accounts receivables	—			—			(10		)	—			(10		)
Intercompany dividend payments and net increase (decrease) in intercompany obligations	203			(87		)	(142		)	26			—
Capital contribution from noncontrolling interest partners	—			5			—			—			5
Distributions to noncontrolling interest partners	—			(23		)				—			(23		)
Net cash provided (used) by financing activities	203			(54		)	14			26			189
Effect of foreign exchange rate changes on cash and cash equivalents	—			(2		)	—			—			(2		)
Increase (decrease) in cash and cash equivalents	(6		)	(9		)	—			—			(15		)
Cash and cash equivalents, January 1	6			269			—			—			275
Cash and cash equivalents, June 30 (Note)	$	—		$	260		$	—		$	—		$	260



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

STATEMENT OF CASH FLOWS



	Six Months Ended June 30, 2013
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	(15	)	$	128		$	(32	)	$	(40	)	$	41
Investing Activities
Proceeds from sale of assets	1			1			—			—			2
Cash payments for plant, property, and equipment	(55		)	(69		)	—			—			(124		)
Cash payments for software related intangible assets	(9		)	(3		)	—			—			(12		)
Changes in restricted cash	—			(5		)	—			—			(5		)
Net cash used by investing activities	(63		)	(76		)	—			—			(139		)
Financing Activities
Issuance of common and treasury shares	—			—			13			—			13
Retirement of long-term debt	—			(1		)	(7		)	—			(8		)
Purchase of common stock under the share repurchase program	—			—			(2		)	—			(2		)
Increase (decrease) in bank overdrafts	40			(5		)	—			—			35
Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt	—			10			97			—			107
Intercompany dividend payments and net increase (decrease) in intercompany obligations	35			(6		)	(69		)	40			—
Capital contribution from noncontrolling interest partners	—			—			—			—			—
Distributions to noncontrolling interest partners	—			(23		)	—			—			(23		)
Net cash provided (used) by financing activities	75			(25		)	32			40			122
Effect of foreign exchange rate changes on cash and cash equivalents	—			(12		)	—			—			(12		)
Increase (decrease) in cash and cash equivalents	(3		)	15			—			—			12
Cash and cash equivalents, January 1	4			219			—			—			223
Cash and cash equivalents, June 30 (Note)	$	1		$	234		$	—		$	—		$	235



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