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 2020, 2024 and 2026 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.

Distributions

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

STATEMENT OF COMPREHENSIVE INCOME (LOSS)



	Three Months Ended June 30, 2016
	Guarantor Subsidiaries			Nonguarantor Subsidiaries		Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	1,005		$	1,207	$	—		$	—		$	2,212
Affiliated companies	128			196		—			(324		)	—
	1,133			1,403		—			(324		)	2,212
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)	945			1,189		—			(324		)	1,810
Engineering, research, and development	19			18		—			—			37
Selling, general, and administrative	58			75		1			—			134
Depreciation and amortization of other intangibles	21			31		—			—			52
	1,043			1,313		1			(324		)	2,033
Other income (expense)
Loss on sale of receivables	(1		)	—		—			—			(1		)
Other income (expense)	7			7		—			(15		)	(1		)
	6			7		—			(15		)	(2		)
Earnings (loss) before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies	96			97		(1		)	(15		)	177
Interest expense —
External (net of interest capitalized)	—			2		32			—			34
Affiliated companies (net of interest income)	(3		)	2		1			—			—
Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies	99			93		(34		)	(15		)	143
Income tax expense	24			16		—			—			40
Equity in net income (loss) from affiliated companies	60			—		120			(180		)	—
Net income (loss)	135			77		86			(195		)	103
Less: Net income attributable to noncontrolling interests	—			17		—			—			17
Net income (loss) attributable to Tenneco Inc.	$	135		$	60	$	86		$	(195	)	$	86
Comprehensive income (loss) attributable to Tenneco Inc.	$	135		$	60	$	69		$	(195	)	$	69

STATEMENT OF COMPREHENSIVE INCOME (LOSS)



	Three Months Ended June 30, 2015
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	984		$	1,146		$	—		$	—		$	2,130
Affiliated companies	105			143			—			(248		)	—
	1,089			1,289			—			(248		)	2,130
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)	901			1,111			—			(248		)	1,764
Engineering, research, and development	20			18			—			—			38
Selling, general, and administrative	50			71			—			—			121
Depreciation and amortization of other intangibles	22			29			—			—			51
	993			1,229			—			(248		)	1,974
Other income (expense)
Loss on sale of receivables	(1		)	—			—			—			(1		)
Other income (expense)	31			(1		)	—			(30		)	—
	30			(1		)	—			(30		)	(1		)
Earnings (loss) before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies	126			59			—			(30		)	155
Interest expense —
External (net of interest capitalized)	(1		)	2			16			—			17
Affiliated companies (net of interest income)	20			(21		)	1			—			—
Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies	107			78			(17		)	(30		)	138
Income tax expense	43			4			—			—			47
Equity in net income (loss) from affiliated companies	59			—			95			(154		)	—
Net income (loss)	123			74			78			(184		)	91
Less: Net income attributable to noncontrolling interests	—			13			—			—			13
Net income (loss) attributable to Tenneco Inc.	$	123		$	61		$	78		$	(184	)	$	78
Comprehensive income (loss) attributable to Tenneco Inc.	$	123		$	61		$	102		$	(184	)	$	102

STATEMENT OF COMPREHENSIVE INCOME (LOSS)



	Six Months Ended June 30, 2016
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	2,001		$	2,347		$	—		$	—		$	4,348
Affiliated companies	255			386			—			(641		)	—
	2,256			2,733			—			(641		)	4,348
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)	1,894			2,327			—			(641		)	3,580
Engineering, research, and development	39			37			—			—			76
Selling, general, and administrative	126			154			1			—			281
Depreciation and amortization of other intangibles	42			64			—			—			106
	2,101			2,582			1			(641		)	4,043
Other income (expense)
Loss on sale of receivables	(1		)	(1		)	—			—			(2		)
Other income (expense)	1			12			—			(15		)	(2		)
	—			11			—			(15		)	(4		)
Earnings (loss) before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies	155			162			(1		)	(15		)	301
Interest expense —
External (net of interest capitalized)	—			2			50			—			52
Affiliated companies (net of interest income)	(6		)	4			2			—			—
Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies	161			156			(53		)	(15		)	249
Income tax expense	37			37			—			—			74
Equity in net income (loss) from affiliated companies	87			—			196			(283		)	—
Net income (loss)	211			119			143			(298		)	175
Less: Net income attributable to noncontrolling interests	—			32			—			—			32
Net income (loss) attributable to Tenneco Inc.	$	211		$	87		$	143		$	(298	)	$	143
Comprehensive income (loss) attributable to Tenneco Inc.	$	211		$	87		$	153		$	(298	)	$	153

STATEMENT OF COMPREHENSIVE INCOME (LOSS)



	Six Months Ended June 30, 2015
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	1,881		$	2,272		$	—		$	—		$	4,153
Affiliated companies	211			288			—			(499		)	—
	2,092			2,560			—			(499		)	4,153
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)	1,743			2,206			—			(499		)	3,450
Engineering, research, and development	41			38			—			—			79
Selling, general, and administrative	96			148			2			—			246
Depreciation and amortization of other intangibles	44			57			—			—			101
	1,924			2,449			2			(499		)	3,876
Other income (expense)
Loss on sale of receivables	(1		)	(1		)	—			—			(2		)
Other income (expense)	27			3			—			(30		)	—
	26			2			—			(30		)	(2		)
Earnings (loss) before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies	194			113			(2		)	(30		)	275
Interest expense —
External (net of interest capitalized)	(1		)	2			32			—			33
Affiliated companies (net of interest income)	37			(38		)	1			—			—
Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies	158			149			(35		)	(30		)	242
Income tax expense	61			27			—			—			88
Equity in net income (loss) from affiliated companies	89			—			162			(251		)	—
Net income (loss)	186			122			127			(281		)	154
Less: Net income attributable to noncontrolling interests	—			27			—			—			27
Net income (loss) attributable to Tenneco Inc.	$	186		$	95		$	127		$	(281	)	$	127
Comprehensive income (loss) attributable to Tenneco Inc.	$	186		$	95		$	82		$	(281	)	$	82

BALANCE SHEET



	June 30, 2016
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)		Reclass & Elims			Consolidated
	(Millions)
ASSETS
Current assets:
Cash and cash equivalents	$	2		$	309		$	—	$	—		$	311
Restricted cash	—			3			—		—			3
Receivables, net	504			1,432			—		(649		)	1,287
Inventories	355			383			—		—			738
Prepayments and other	82			183			—		—			265
Total current assets	943			2,310			—		(649		)	2,604
Other assets:
Investment in affiliated companies	1,233			—			1,120		(2,353		)	—
Notes and advances receivable from affiliates	946			14,959			4,862		(20,767		)	—
Long-term receivables, net	10			1			—		—			11
Goodwill	21			37			—		—			58
Intangibles, net	8			13			—		—			21
Deferred income taxes	120			22			62		—			204
Other	41			49			9		—			99
	2,379			15,081			6,053		(23,120		)	393
Plant, property, and equipment, at cost	1,299			2,199			—		—			3,498
Less — Accumulated depreciation and amortization	(867		)	(1,352		)	—		—			(2,219		)
	432			847			—		—			1,279
Total assets	$	3,754		$	18,238		$	6,053	$	(23,769	)	$	4,276
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt (including current maturities of long-term debt)
Short-term debt — non-affiliated	$	—		$	63		$	15	$	—		$	78
Short-term debt — affiliated	177			273			—		(450		)	—
Accounts payable	540			1,032			—		(134		)	1,438
Accrued taxes	7			39			—		—			46
Other	118			245			3		(65		)	301
Total current liabilities	842			1,652			18		(649		)	1,863
Long-term debt — non-affiliated	—			13			1,269		—			1,282
Long-term debt — affiliated	1,636			14,906			4,225		(20,767		)	—
Deferred income taxes	—			9			—		—			9
Postretirement benefits and other liabilities	419			79			—		—			498
Commitments and contingencies
Total liabilities	2,897			16,659			5,512		(21,416		)	3,652
Redeemable noncontrolling interests	—			28			—		—			28
Tenneco Inc. shareholders’ equity	857			1,496			541		(2,353		)	541
Noncontrolling interests	—			55			—		—			55
Total equity	857			1,551			541		(2,353		)	596
Total liabilities, redeemable noncontrolling interests and equity	$	3,754		$	18,238		$	6,053	$	(23,769	)	$	4,276

BALANCE SHEET



	December 31, 2015
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)		Reclass & Elims			Consolidated
	(Millions)
ASSETS
Current assets:
Cash and cash equivalents	$	2		$	285		$	—	$	—		$	287
Restricted cash	—			1			—		—			1
Receivables, net	299			1,241			—		(428		)	1,112
Inventories	333			349			—		—			682
Prepayments and other	67			162			—		—			229
Total current assets	701			2,038			—		(428		)	2,311
Other assets:
Investment in affiliated companies	1,146			—			893		(2,039		)	—
Notes and advances receivable from affiliates	938			13,291			4,788		(19,017		)	—
Long-term receivables, net	11			2			—		—			13
Goodwill	22			38			—		—			60
Intangibles, net	9			13			—		—			22
Deferred income taxes	122			28			68		—			218
Other	42			47			11		—			100
	2,290			13,419			5,760		(21,056		)	413
Plant, property, and equipment, at cost	1,281			2,137			—		—			3,418
Less — Accumulated depreciation and amortization	(851		)	(1,324		)	—		—			(2,175		)
	430			813			—		—			1,243
Total assets	$	3,421		$	16,270		$	5,760	$	(21,484	)	$	3,967
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt (including current maturities of long-term debt)
Short-term debt — non-affiliated	$	—		$	73		$	13	$	—		$	86
Short-term debt — affiliated	164			147			—		(311		)	—
Accounts payable	484			955			—		(63		)	1,376
Accrued taxes	6			31			—		—			37
Other	125			221			3		(54		)	295
Total current liabilities	779			1,427			16		(428		)	1,794
Long-term debt — non-affiliated	—			21			1,103		—			1,124
Long-term debt — affiliated	1,583			13,226			4,208		(19,017		)	—
Deferred income taxes	—			7			—		—			7
Postretirement benefits and other liabilities	424			100			—		—			524
Commitments and contingencies
Total liabilities	2,786			14,781			5,327		(19,445		)	3,449
Redeemable noncontrolling interests	—			43			—		—			43
Tenneco Inc. shareholders’ equity	635			1,404			433		(2,039		)	433
Noncontrolling interests	—			42			—		—			42
Total equity	635			1,446			433		(2,039		)	475
Total liabilities, redeemable noncontrolling interests and equity	$	3,421		$	16,270		$	5,760	$	(21,484	)	$	3,967

STATEMENT OF CASH FLOWS



	Three Months Ended June 30, 2016
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	155		$	24		$	(39	)	$	(11	)	$	129
Investing Activities
Proceeds from sale of assets	—			2			—			—			2
Cash payments for plant, property, and equipment	(30		)	(41		)	—			—			(71		)
Cash payments for software related intangible assets	(2		)	(1		)	—			—			(3		)
Changes in restricted cash	—			(1		)	—			—			(1		)
Net cash used by investing activities	(32		)	(41		)	—			—			(73		)
Financing Activities
Issuance of common shares	—			—			6			—			6
Tax impact from stock-based compensation	—			—			1			—			1
Retirement of long-term debt	—			(16		)	(328		)	—			(344		)
Issuance of long-term debt	—			1			500			—			501
Debt issuance cost of long-term debt	—			—			(8		)	—			(8		)
Purchase of common stock under the share repurchase program	—			—			(41		)	—			(41		)
Net decrease in bank overdrafts	—			(2		)	—			—			(2		)
Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt	—			(18		)	(150		)	—			(168		)
Net decrease in short-term borrowings secured by accounts receivables	—			—			(30		)	—			(30		)
Intercompany dividend payments and net increase (decrease) in intercompany obligations	(126		)	25			90			11			—
Distributions to noncontrolling interest partners	—			(27		)	—			—			(27		)
Net cash provided (used) by financing activities	(126		)	(37		)	40			11			(112		)
Effect of foreign exchange rate changes on cash and cash equivalents	1			(7		)	(1		)	—			(7		)
Decrease in cash and cash equivalents	(2		)	(61		)	—			—			(63		)
Cash and cash equivalents, April 1	4			370			—			—			374
Cash and cash equivalents, June 30 (Note)	$	2		$	309		$	—		$	—		$	311



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, 2015
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	118		$	63		$	(30	)	$	(19	)	$	132
Investing Activities
Proceeds from sale of assets	1			—			—			—			1
Cash payments for plant, property, and equipment	(30		)	(43		)	—			—			(73		)
Cash payments for software related intangible assets	(3		)	—			—			—			(3		)
Changes in restricted cash	—			(2		)							(2		)
Net cash used by investing activities	(32		)	(45		)	—			—			(77		)
Financing Activities
Issuance of common shares	—			—			5			—			5
Tax benefit from stock-based compensation	—			—			3			—			3
Retirement of long-term debt	—			(13		)	(4		)	—			(17		)
Debt issuance cost of long-term debt	—			—			(1		)	—			(1		)
Purchase of common stock under the share repurchase program	—			—			(33		)	—			(33		)
Net decrease in bank overdrafts	—			(3		)	—			—			(3		)
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	—			(5		)	(21		)	—			(26		)
Intercompany dividend payments and net increase (decrease) in intercompany obligations	(82		)	(18		)	81			19			—
Distributions to noncontrolling interest partners	—			(22		)	—			—			(22		)
Net cash provided (used) by financing activities	(82		)	(61		)	30			19			(94		)
Effect of foreign exchange rate changes on cash and cash equivalents	—			1			—			—			1
Increase (decrease) in cash and cash equivalents	4			(42		)	—			—			(38		)
Cash and cash equivalents, April 1	—			288			—			—			288
Cash and cash equivalents, June 30 (Note)	$	4		$	246		$	—		$	—		$	250



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, 2016
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	(57	)	$	204		$	(36	)	$	(11	)	$	100
Investing Activities
Proceeds from sale of assets	—			3			—			—			3
Cash payments for plant, property, and equipment	(43		)	(96		)	—			—			(139		)
Cash payments for software related intangible assets	(4		)	(5		)	—			—			(9		)
Changes in restricted cash	—			(2		)	—			—			(2		)
Net cash used by investing activities	(47		)	(100		)	—			—			(147		)
Financing Activities
Issuance of common shares	—			—			4			—			4
Tax impact from stock-based compensation	—			—			1			—			1
Retirement of long-term debt	—			(16		)	(332		)	—			(348		)
Issuance of long-term debt	—			6			500			—			506
Debt issuance cost of long-term debt	—			—			(8		)	—			(8		)
Purchase of common stock under the share repurchase program	—			—			(57		)	—			(57		)
Net decrease in bank overdrafts	—			5			—			—			5
Net increase in revolver borrowings and short-term debt excluding current maturities of long-term debt and short-term borrowings secured by accounts receivables	—			(10		)	35			—			25
Net increase in short-term borrowings secured by accounts receivables	—			—			(30		)	—			(30		)
Intercompany dividend payments and net increase (decrease) in intercompany obligations	103			(38		)	(76		)	11			—
Distributions to noncontrolling interest partners	—			(27		)	—			—			(27		)
Net cash provided (used) by financing activities	103			(80		)	37			11			71
Effect of foreign exchange rate changes on cash and cash equivalents	1			—			(1		)	—			—
Increase in cash and cash equivalents	—			24			—			—			24
Cash and cash equivalents, January 1	2			285			—			—			287
Cash and cash equivalents, June 30 (Note)	$	2		$	309		$	—		$	—		$	311




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, 2015
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	44		$	89		$	(32	)	$	(19	)	$	82
Investing Activities
Proceeds from sale of assets	1			1			—			—			2
Cash payments for plant, property, and equipment	(57		)	(93		)	—			—			(150		)
Cash payments for software related intangible assets	(5		)	(3		)	—			—			(8		)
Changes in restricted cash	—			1			—			—			1
Cash payments for net assets purchased	—			—			—			—			—
Net cash used by investing activities	(61		)	(94		)	—			—			(155		)
Financing Activities
Repurchase of common shares	—			—			5			—			5
Tax benefit from stock-based compensation	—			—			6			—			6
Retirement of long-term debt	—			(13		)	(8		)	—			(21		)
Debt issuance cost of long-term debt	—			—			(1		)	—			(1		)
Purchase of common stock under the share repurchase program	—			—			(44		)	—			(44		)
Net decrease in bank overdrafts	—			(11		)	—			—			(11		)
Net increase in revolver borrowings and short-term debt excluding current maturities of long-term debt	—			59			26			—			85
Net increase in short-term borrowings secured by accounts receivables	—			—			50			—			50
Intercompany dividend payments and net increase (decrease) in intercompany obligations	11			(28		)	(2		)	19			—
Distributions to noncontrolling interest partners	—			(22		)	—			—			(22		)
Net cash provided (used) by financing activities	11			(15		)	32			19			47
Effect of foreign exchange rate changes on cash and cash equivalents	—			(6		)	—			—			(6		)
Increase (decrease) in cash and cash equivalents	(6		)	(26		)	—			—			(32		)
Cash and cash equivalents, January 1	10			272			—			—			282
Cash and cash equivalents, June 30 (Note)	$	4		$	246		$	—		$	—		$	250




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