Supplemental Guarantor Condensed Consolidating Financial Statements

9 Months Ended

Sep. 30, 2012

Supplemental Guarantor Condensed Consolidating Financial Statements

(13) 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.

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 September 30, 2012
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	792		$	986		$	—		$	—		$	1,778
Affiliated companies		43			123			—			(166	)		—
		835			1,109			—			(166	)		1,778
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)		771			889			—			(166	)		1,494
Engineering, research, and development		14			14			—			—			28
Selling, general, and administrative		26			67			1			—			94
Depreciation and amortization of other intangibles		18			31			—			—			49
		829			1,001			1			(166	)		1,665
Other income (expense)
Loss on sale of receivables		—			(1	)		—			—			(1	)
Other income (loss)		13			(11	)		—			(3	)		(1	)
		13			(12	)		—			(3	)		(2	)
Earnings (loss) before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies		19			96			(1	)		(3	)		111
Interest expense —
External (net of interest capitalized)		—			1			20			—			21
Affiliated companies (net of interest income)		57			(21	)		(36	)		—			—
Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies		(38	)		116			15			(3	)		90
Income tax expense		(77	)		35			—			—			(42	)
Equity in net income (loss) from affiliated companies		73			—			110			(183	)		—
Net Income		112			81			125			(186	)		132
Less: Net income attributable to noncontrolling interests		—			7			—			—			7
Net income (loss) attributable to Tenneco Inc.	$	112		$	74		$	125		$	(186	)	$	125
Comprehensive income (loss) attributable to Tenneco Inc.	$	117		$	86		$	125		$	(186	)	$	142

STATEMENT OF COMPREHENSIVE INCOME (LOSS)

	For the Three Months Ended September 30, 2011
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	761		$	1,012		$	—		$	—		$	1,773
Affiliated companies		40			126			—			(166	)		—
		801			1,138			—			(166	)		1,773
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)		568			1,090			—			(166	)		1,492
Goodwill impairment charge		—			11			—			—			11
Engineering, research, and development		14			18			—			—			32
Selling, general, and administrative		34			65			2			—			101
Depreciation and amortization of other intangibles		18			33			—			—			51
		634			1,217			2			(166	)		1,687
Other income (expense)
Loss on sale of receivables		—			(1	)		—			—			(1	)
Other income (expense)		(3	)		2			—			—			(1	)
		(3	)		1			—			—			(2	)
Earnings before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies		164			(78	)		(2	)		—			84
Interest expense —
External (net of interest capitalized)		—			2			25			—			27
Affiliated companies (net of interest income)		54			(18	)		(36	)		—			—
Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies		110			(62	)		9			—			57
Income tax expense		3			18			—			—			21
Equity in net income (loss) from affiliated companies		(89	)		—			21			68			—
Net income (loss)		18			(80	)		30			68			36
Less: Net income attributable to noncontrolling interests		—			6			—			—			6
Net income (loss) attributable to Tenneco Inc.	$	18		$	(86	)	$	30		$	68		$	30
Comprehensive income (loss) attributable to Tenneco Inc.	$	1		$	(147	)	$	30		$	68		$	(48	)

STATEMENT OF COMPREHENSIVE INCOME (LOSS)

	For the Nine Months Ended September 30, 2012
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	2,579		$	3,031		$	—		$	—		$	5,610
Affiliated companies		139			420			—			(559	)		—
		2,718			3,451			—			(559	)		5,610
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)		2,389			2,866			—			(559	)		4,696
Engineering, research, and development		42			52			—			—			94
Selling, general, and administrative		103			214			4			—			321
Depreciation and amortization of other intangibles		54			94			—			—			148
		2,588			3,226			4			(559	)		5,259
Other income (expense)
Loss on sale of receivables		—			(3	)		—			—			(3	)
Other income (loss)		59			(21	)		—			(42	)		(4	)
		59			(24	)		—			(42	)		(7	)
Earnings (loss) before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies		189			201			(4	)		(42	)		344
Interest expense —
External (net of interest capitalized)		—			3			81			—			84
Affiliated companies (net of interest income)		169			(63	)		(106	)		—			—
Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies		20			261			21			(42	)		260
Income tax expense		(70	)		67			—			—			(3	)
Equity in net income (loss) from affiliated companies		170			—			221			(391	)		—
Net Income		260			194			242			(433	)		263
Less: Net income attributable to noncontrolling interests		—			21			—			—			21
Net income (loss) attributable to Tenneco Inc.	$	260		$	173		$	242		$	(433	)	$	242
Comprehensive income (loss) attributable to Tenneco Inc.	$	262		$	179		$	242		$	(433	)	$	250

STATEMENT OF COMPREHENSIVE INCOME (LOSS)

	For the Nine Months Ended September 30, 2011
	Guarantor Subsidiaries		Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
	(Millions)
Revenues
Net sales and operating revenues —
External	$	2,331	$	3,090		$	—		$	—		$	5,421
Affiliated companies		121		383			—			(504	)		—
		2,452		3,473			—			(504	)		5,421
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below)		2,013		3,014			—			(504	)		4,523
Goodwill impairment charge		—		11			—			—			11
Engineering, research, and development		42		60			—			—			102
Selling, general, and administrative		106		219			3			—			328
Depreciation and amortization of other intangibles		55		101			—			—			156
		2,216		3,405			3			(504	)		5,120
Other income (expense)
Loss on sale of receivables		—		(4	)		—			—			(4	)
Other income (expense)		29		—			—			(35	)		(6	)
		29		(4	)		—			(35	)		(10	)
Earnings before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies		265		64			(3	)		(35	)		291
Interest expense —
External (net of interest capitalized)		—		4			77			—			81
Affiliated companies (net of interest income)		156		(52	)		(104	)		—			—
Earnings before income taxes, noncontrolling interests, and equity in net income from affiliated companies		109		112			24			(35	)		210
Income tax expense		8		57			—			—			65
Equity in net income (loss) from affiliated companies		29		—			103			(132	)		—
Net income (loss)		130		55			127			(167	)		145
Less: Net income attributable to noncontrolling interests		—		18			—			—			18
Net income (loss) attributable to Tenneco Inc.	$	130	$	37		$	127		$	(167	)	$	127
Comprehensive income (loss) attributable to Tenneco Inc.	$	131	$	13		$	127		$	(167	)	$	104

BALANCE SHEET

	September 30, 2012
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)		Reclass & Elims			Consolidated
	(Millions)
ASSETS
Current assets:
Cash and cash equivalents	$	4		$	203		$	—	$	—		$	207
Receivables, net		362			1,290			29		(550	)		1,131
Inventories		280			392			—		—			672
Deferred income taxes		70			—			5		(5	)		70
Prepayments and other		22			171			—		—			193
Total current assets		738			2,056			34		(555	)		2,273
Other assets:
Investment in affiliated companies		537			—			758		(1,295	)		—
Notes and advances receivable from affiliates		4,227			3,773			6,130		(14,130	)		—
Long-term receivables, net		2			2			—		—			4
Goodwill		22			51			—		—			73
Intangibles, net		18			19			—		—			37
Deferred income taxes		7			24			91		—			122
Other		31			44			30		—			105
		4,844			3,913			7,009		(15,425	)		341
Plant, property, and equipment, at cost		1,076			2,206			—		—			3,282
Less — Accumulated depreciation and amortization		(756	)		(1,438	)		—		—			(2,194	)
		320			768			—		—			1,088
Total assets	$	5,902		$	6,737		$	7,043	$	(15,980	)	$	3,702
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt (including current maturities of long-term debt)
Short-term debt — non-affiliated	$	—		$	132		$	2	$	—		$	134
Short-term debt — affiliated		131			266			10		(407	)		—
Trade payables		460			842			—		(114	)		1,188
Accrued taxes		(91	)		148			—		—			57
Other		132			190			14		(34	)		302
Total current liabilities		632			1,578			26		(555	)		1,681
Long-term debt — non-affiliated		—			8			1,203		—			1,211
Long-term debt — affiliated		4,833			3,767			5,530		(14,130	)		—
Deferred income taxes		—			41			—		—			41
Postretirement benefits and other liabilities		390			78			—		4			472
Commitments and contingencies
Total liabilities		5,855			5,472			6,759		(14,681	)		3,405
Redeemable noncontrolling interests		—			13			—		—			13
Tenneco Inc. shareholders’ equity		47			1,210			284		(1,299	)		242
Noncontrolling interests		—			42			—		—			42
Total equity		47			1,252			284		(1,299	)		284
Total liabilities, redeemable noncontrolling interests and equity	$	5,902		$	6,737		$	7,043	$	(15,980	)	$	3,702

BALANCE SHEET

	December 31, 2011
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)		Reclass & Elims			Consolidated
	(Millions)
ASSETS
Current assets:
Cash and cash equivalents	$	1		$	213		$	—	$	—		$	214
Receivables, net		455			1,214			27		(716	)		980
Inventories		248			344			—		—			592
Deferred income taxes		35			31			—		(26	)		40
Prepayments and other		21			132			—		—			153
Total current assets		760			1,934			27		(742	)		1,979
Other assets:
Investment in affiliated companies		444			—			681		(1,125	)		—
Notes and advances receivable from affiliates		4,252			1,507			6,059		(11,818	)		—
Long-term receivables, net		2			8			—		—			10
Goodwill		22			52			—		—			74
Intangibles, net		13			19			—		—			32
Deferred income taxes		64			25			3		—			92
Other		31			45			27		—			103
		4,828			1,656			6,770		(12,943	)		311
Plant, property, and equipment, at cost		1,041			2,112			—		—			3,153
Less — Accumulated depreciation and amortization		(749	)		(1,357	)		—		—			(2,106	)
		292			755			—		—			1,047
Total assets	$	5,880		$	4,345		$	6,797	$	(13,685	)	$	3,337
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt (including current maturities of long-term debt)
Short-term debt — non-affiliated	$	—		$	64		$	2	$	—		$	66
Short-term debt — affiliated		203			374			10		(587	)		—
Trade payables		455			825			—		(109	)		1,171
Accrued taxes		11			33			—		—			44
Other		118			178			39		(46	)		289
Total current liabilities		787			1,474			51		(742	)		1,570
Long-term debt — non-affiliated		—			9			1,149		—			1,158
Long-term debt — affiliated		4,718			1,546			5,554		(11,818	)		—
Deferred income taxes		—			51			—		—			51
Postretirement benefits and other liabilities		407			92			—		4			503
Commitments and contingencies
Total liabilities		5,912			3,172			6,754		(12,556	)		3,282
Redeemable noncontrolling interests		—			12			—		—			12
Tenneco Inc. shareholders’ equity		(32	)		1,118			43		(1,129	)		—
Noncontrolling interests		—			43			—		—			43
Total equity		(32	)		1,161			43		(1,129	)		43
Total liabilities, redeemable noncontrolling interests and equity	$	5,880		$	4,345		$	6,797	$	(13,685	)	$	3,337

STATEMENT OF CASH FLOWS

	Three Months Ended September 30, 2012
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims		Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	107		$	69		$	(51	)	$	—	$	125
Investing Activities
Proceeds from sale of assets		—			1			—			—		1
Cash payments for plant, property, and equipment		(32	)		(38	)		—			—		(70	)
Cash payments for software related intangible assets		(3	)		—			—			—		(3	)
Cash payments for net assets purchased		(7	)		—			—			—		(7	)
Net cash used by investing activities		(42	)		(37	)		—			—		(79	)
Financing Activities
Retirement of long-term debt		—			—			(3	)		—		(3	)
Issuance of long-term debt		—			—			—			—		—
Debt issuance cost of long-term debt		—			—			—			—		—
Purchase of common stock under the share repurchase program		—			—			—			—		—
Increase (decrease) in bank overdrafts		—			2			—			—		2
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		—			(1	)		(18	)		—		(19	)
Net increase (decrease) in short-term borrowings secured by accounts receivables		—			—			—			—		—
Intercompany dividends and net increase (decrease) in intercompany obligations		(61	)		(11	)		72			—		—
Capital contribution from noncontrolling interest partners		—			4			—			—		4
Distributions to noncontrolling interest partners		—			(9	)		—			—		(9	)
Net cash provided (used) by financing activities		(61	)		(15	)		51			—		(25	)
Effect of foreign exchange rate changes on cash and cash equivalents		—			5			—			—		5
Increase (decrease) in cash and cash equivalents		4			22			—			—		26
Cash and cash equivalents, July 1		—			181			—			—		181
Cash and cash equivalents, September 30 (Note)	$	4		$	203		$	—		$	—	$	207

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 September 30, 2011
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims		Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	74		$	57		$	(51	)	$	—	$	80
Investing Activities
Cash payments for plant, property, and equipment		(14	)		(36	)		—			—		(50	)
Cash payments for software related intangible assets		(1	)		(3	)		—			—		(4	)
Net cash used by investing activities		(15	)		(39	)		—			—		(54	)
Financing Activities
Issuance of long-term debt		—			1			—			—		1
Increase (decrease) in bank overdrafts		—			(5	)		—			—		(5	)
Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt		—			8			12			—		20
Intercompany dividends and net increase (decrease) in intercompany obligations		(57	)		13			44			—		—
Purchase of additional noncontrolling equity interest		—			(4	)		—			—		(4	)
Distributions to noncontrolling interest partners		—			(10	)		—			—		(10	)
Purchase of common stock under the share repurchase program		—			—			(5	)		—		(5	)
Net cash provided (used) by financing activities		(57	)		3			51			—		(3	)
Effect of foreign exchange rate changes on cash and cash equivalents		—			(21	)		—			—		(21	)
Increase (decrease) in cash and cash equivalents		2			—			—			—		2
Cash and cash equivalents, July 1		—			161			—			—		161
Cash and cash equivalents, September 30 (Note)	$	2		$	161		$	—		$	—	$	163

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

	Nine Months Ended September 30, 2012
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims		Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	231		$	72		$	(177	)	$	—	$	126
Investing Activities
Proceeds from sale of assets		—			2			—			—		2
Cash payments for plant, property, and equipment		(79	)		(116	)		—			—		(195	)
Cash payments for software related intangible assets		(5	)		(5	)		—			—		(10	)
Cash payments for net assets purchased		(7	)		—			—			—		(7	)
Net cash used by investing activities		(91	)		(119	)		—			—		(210	)
Financing Activities
Retirement of long-term debt		—			(1	)		(405	)		—		(406	)
Issuance of long-term debt		—			—			250			—		250
Debt issuance cost of long-term debt		—			—			(13	)		—		(13	)
Purchase of common stock under the share repurchase program		—			—			(18	)		—		(18	)
Increase (decrease) in bank overdrafts		—			2			—			—		2
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		—			67			150			—		217
Net increase (decrease) in short-term borrowings secured by accounts receivables		—			—			60			—		60
Intercompany dividends and net increase (decrease) in intercompany obligations		(137	)		(16	)		153			—		—
Capital contribution from noncontrolling interest partners		—			5			—			—		5
Distributions to noncontrolling interest partners		—			(27	)		—			—		(27	)
Net cash provided (used) by financing activities		(137	)		30			177			—		70
Effect of foreign exchange rate changes on cash and cash equivalents		—			7			—			—		7
Increase (decrease) in cash and cash equivalents		3			(10	)		—			—		(7	)
Cash and cash equivalents, January 1		1			213			—			—		214
Cash and cash equivalents, September 30 (Note)	$	4		$	203		$	—		$	—	$	207

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

	Nine Months Ended September 30, 2011
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims		Consolidated
	(Millions)
Operating Activities
Net cash provided (used) by operating activities	$	226		$	(13	)	$	(169	)	$	—	$	44
Investing Activities
Proceeds from sale of assets		3			1			—			—		4
Cash payments for plant, property, and equipment		(44	)		(101	)		—			—		(145	)
Cash payments for software related intangible assets		(3	)		(7	)		—			—		(10	)
Net cash used by investing activities		(44	)		(107	)		—			—		(151	)
Financing Activities
Issuance of long-term debt		—			5			—			—		5
Debt issuance cost of long-term debt		—			—			(1	)		—		(1	)
Retirement of long-term debt		—			(1	)		(22	)		—		(23	)
Increase (decrease) in bank overdrafts		—			3			—			—		3
Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt		—			11			97			—		108
Intercompany dividends and net increase (decrease) in intercompany obligations		(180	)		69			111			—		—
Capital contribution from noncontrolling interest partner		—			1			—			—		1
Purchase of additional noncontrolling equity interest		—			(4	)		—			—		(4	)
Distribution to noncontrolling interest partners		—			(20	)		—			—		(20	)
Purchase of common stock under the share repurchase program		—			—			(16	)		—		(16	)
Net cash provided (used) by financing activities		(180	)		64			169			—		53
Effect of foreign exchange rate changes on cash and cash equivalents		—			(16	)		—			—		(16	)
Increase (decrease) in cash and cash equivalents		2			(72	)		—			—		(70	)
Cash and cash equivalents, January 1		—			233			—			—		233
Cash and cash equivalents, September 30 (Note)	$	2		$	161		$	—		$	—	$	163

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