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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

2013

OR

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OF THE SECURITIES EXCHANGE ACT OF 1934


Commission file number 1-12387

TENNECO INC.

(Exact name of registrant as specified in its charter)

Delaware 76-0515284

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

500 North Field Drive

Lake Forest, IL

(Address of principal executive offices)

 

60045

(Zip Code)

Registrant’s telephone number, including area code:      (847) 482-5000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Name of each Exchange

on which registered

Common Stock, par value $.01 per share New York and Chicago Stock Exchanges

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  þ      No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  ¨      No  þ
Note

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ      No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  þ      No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    

þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  þ
Accelerated filer  ¨
Non-accelerated filer  ¨
Smaller reporting company  ¨
 (Do not check if a smaller reporting company)


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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨      No  þ

State the

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2013, computed by reference to the price at which the registrant's common equitystock was last sold oron the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

Class of Common Equity and Number of Shares

held by Non-affiliates at June 30, 2011

Market Value held by Non-affiliates*

Common Stock, 58,288,962 shares

$2,568,794,555

*Based upon the closing sale price on the New York Stock Exchange Composite Tape for the Common Stock on June 30, 2011.

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT’S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE. New York Stock Exchange on June 28, 2013, was approximately $2.7 billion.

Common Stock, par value $.01 per share, 60,452,457 shares outstanding as of February 21, 2012.

2014 was 60,922,497.

Documents Incorporated by Reference:

Document 
Part of the Form 10-K
into which incorporated
Portions of Tenneco Inc.’s Definitive Proxy Statement for the Annual Meeting of Stockholders to be held May 16, 201214, 2014 Part III


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CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning, among other things, our prospects and business strategies. These forward-looking statements are included in various sections of this report, including the section entitled “Outlook” appearing in Item 7 of this report. The words “may,” “will,” “believe,” “should,” “could,” “plan,” “expect,” “anticipate,” “estimate,” and similar expressions (and variations thereof), identify these forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, these expectations may not prove to be correct. Because these forward-looking statements are also subject to risks and uncertainties, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include:

general economic, business and market conditions;

our ability to source and procure needed materials, components and other products and services in accordance with customer demand and at competitive prices;

changes in capital availability or costs, including increases in our cost of borrowing (i.e., interest rate increases), the amount of our debt, our ability to access capital markets at favorable rates, and the credit ratings of our debt;

changes in consumer demand, prices and our ability to have our products included on top selling vehicles, including any shifts in consumer preferences away from light trucks, which tend to be higher margin products for our customers and us, to other lower margin vehicles, for which we may or may not have supply contracts;

arrangements;

changes in consumer demand for our automotive, commercial or aftermarket products, or changes in automotive and commercial vehicle manufacturers’ production rates and their actual and forecasted requirements for our products, due to difficult economic conditions, such as the significant production cuts during 2008 and 2009 by automotive manufacturersprolonged recession in response to difficult economic conditions;

Europe;

the overall highly competitive nature of the automobile and commercial vehicle parts industries, and any resultant inability to realize the sales represented by our awarded book of business (which is based on anticipated pricing and volumes forover the life of the applicable program over its life)program);

the loss of any of our large original equipment manufacturer (“OEM”) customers (on whom we depend for a substantial portion of our revenues), or the loss of market shares by these customers if we are unable to achieve increased sales to other OEMs;

OEMs or any change in customer demand due to delays in the adoption or enforcement of worldwide emissions regulations;

our ability to successfully execute cash management and other cost reduction plans, including our current European cost reduction initiatives, and to realize anticipated benefits from these plans;

industrywide strikes, labor disruptions at our facilities or any labor or other economic disruptions at any of our significant customers or suppliers or any of our customers’ other suppliers (such as the 2008 strike at American Axle, which disrupted our supply of products for significant General Motors (GM) platforms);

suppliers;

increases in the costs of raw materials, including our ability to successfully reduce the impact of any such cost increases through materials substitutions, cost reduction initiatives, low cost country sourcing,customer recovery and price recovery efforts with aftermarket and OE customers;

other methods;

the negative impact of higher fuel prices on transportation and logistics costs, raw material costs and discretionary purchases of vehicles or aftermarket products;

the cyclical nature of the global vehicle industry, including the performance of the global aftermarket sector and the impact of vehicle parts’ longer product lives of vehicle parts;

lives;

our ability to successfully execute cash management, restructuring and other cost reduction plans and to realize anticipated benefits from these plans;

costs related to product warranties and other customer satisfaction actions;

the cost and outcome of existing and any future claims, legal proceedings or investigations, including, but not limited to, claims or proceedings against us or our customers relating to product performance, product safety or intellectual property rights;

the failure or breach of our information technology systems, including the consequences of any misappropriation, exposure or corruption of sensitive information stored on such systems and the interruption to our business that such failure or breach may cause;
the impact of consolidation among vehicle parts suppliers and customers on our ability to compete;

changes in distribution channels or competitive conditions in the markets and countries where we operate, including the impact of changes in distribution channels for aftermarket products on our ability to increase or maintain aftermarket sales;

the cost and outcome of existing and any future legal proceedings, including, but not limited to, proceedings against us or our customers relating to intellectual property rights;

economic, exchange rate and political conditions in the countries where we operate or sell our products;

customer acceptance of new products;

new technologies that reduce the demand for certain of our products or otherwise render them obsolete;

our ability to introduce new products and technologies that satisfy customers' needs in a timely fashion;


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our ability to realize our business strategy of improving operating performance;

our ability to successfully integrate any acquisitions that we complete and effectively manage our joint ventures and other third-party relationships;

changes by the Financial Accounting Standards Board or the Securities and Exchange Commission of authoritative generally accepted accounting principles or policies;

changes in accounting estimates and assumptions, including changes based on additional information;

any changes by the International Standards Organization for Standardization (ISO), Technical Specifications (TS) and or other such committees in their certification processesprotocols for processes and products, which may have the effect of delaying or hindering our ability to bring new products to market;

the impact of changes inthe extensive, increasing and compliance withchanging laws and regulations to which we are subject, including environmental laws and regulations, which may result in our incurrence of environmental liabilities in excess of the amount reserved, the implementation of mandated timelines for local, regional and national emission regulations, which could impact the demand for certain of our products, and any changes to the timing of the funding requirements for our pension and other postretirement benefit liabilities;

reserved;

the potential impairment in the carrying value of our long-lived assets and goodwill or our deferred tax assets;

potential volatility in our effective tax rate;

natural disasters, such as the 2011 earthquake in Japan and flooding in Thailand, and any resultant disruptions in the supply or production of goods or services to us or by us or in demand by our customers;

acts of war and/or terrorism, as well as actions taken or to be taken by the United States and 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 we operate; and

the timing and occurrence (or non-occurrence) of other transactions, events and circumstances which may be beyond our control.

The risks included here are not exhaustive. Refer to “Part I, Item 1A — Risk Factors” of this report for further discussion regarding our exposure to risks. Additionally, new risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor to assess the impact such risk factors might have on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.


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TABLE OF CONTENTS

PART I

Item 1.

Business
6
 

Business

5

Tenneco Inc

6
 5

Contributions of Major Businesses

8
 8

Description of Our Business

9
10

Item 1A.

Risk Factors

26
24

Item 1B.

Unresolved Staff Comments

34
31

Item 2.

Properties

34
31

Item 3.

Legal Proceedings

34
31

Item 4.

Mine Safety DisclosureDisclosures

36
32

Item 4.1.

Executive Officers of the Registrant

33
36
 
PART II
PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
38
34

Item 6.

Selected Financial Data

41
37

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

44
40

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

78
65

Item 8.

Financial Statements and Supplementary Data

79
66

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

144
121

Item 9A.

Controls and Procedures

121
Item 9B.
Other Information
144
121
 

Item 9B.

Other Information

144PART III
PART III

Item 10.

Directors, Executive Officers and Corporate Governance

145
122

Item 11.

Executive Compensation

145
122

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
145
122

Item 13.

Certain Relationships and Related Transactions, and Director Independence

146
123

Item 14.

Principal Accountant Fees and Services

123
146
 
PART IV
PART IV

Item 15.

Exhibits, and Financial Statement Schedules

147
124



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PART I

ITEM 1.BUSINESS.

TENNECO INC.

General

Our company, Tenneco Inc., is one of the world’s largest producers of emission controlclean air and ride controlperformance products and systems for light vehicle, commercial truck, off-highway and specialtyother vehicle applications. Our company serves both original equipment vehicle manufacturers (“OEMs”) and the repair and replacement markets, or aftermarket, worldwide. As used herein, the term “Tenneco,” “we,” “us,” “our,” or the “Company” refers to Tenneco Inc. and its consolidated subsidiaries.

We were incorporated in Delaware in 1996. In 2005, we changed our name from Tenneco Automotive Inc. to Tenneco Inc. The name Tenneco better represents the expanding number of markets we serve through our commercial truck and specialty vehicleoff-highway businesses. Building a stronger presence in these markets complements our core businesses of supplying ride controlperformance and emission controlclean air products and systems for light and commercial vehicles to original equipment and aftermarket customers worldwide. Our common stock is traded on the New York Stock Exchange (“NYSE”) and the Chicago Stock Exchange under the symbol “TEN.”

Corporate Governance and Available Information

We have established a comprehensive approach to corporate governance for the purpose of defining responsibilities, setting high standards of professional and personal conduct and assuring compliance with such responsibilities and standards. As part of its annual review process, the Board of Directors monitors developments in the area of corporate governance. Listed below are some of the key elements of our corporate governance policies.

For more information about these matters, see our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 16, 2012.

14, 2014.

Independence of Directors

Six of our eight directors are independent under the New York Stock Exchange (“NYSE”)NYSE listing standards.

Independent directors are scheduled to meet separately in executive session after every regularly scheduled Board of Directors meeting.

We have a lead independent director, Mr. Paul T. Stecko.

Audit Committee

All members meet the independence standards for audit committee membership under the NYSE listing standards and applicable Securities and Exchange Commission (“SEC”) rules.

One memberTwo members of the Audit Committee, Mr. Dennis J. Letham hasand Mr. Thomas C. Freyman, have been designated by the Board as an “audit committee financial expert,experts,” as defined in the SEC rules, and the remainingall members of the Audit Committee satisfy the NYSE’s financial literacy requirements.

The Audit Committee operates under a written charter which governs its duties and responsibilities, including its sole authority to appoint, review, evaluate and replace our independent auditors.

The Audit Committee has adopted policies and procedures governing the pre-approval of all audit, audit-related, tax and other services provided by our independent auditors.


Compensation/Nominating/Governance Committee

All members meet the independence standards for compensation and nominating committee membership under the NYSE listing standards.

The Compensation/Nominating/Governance Committee operates under a written charter that governs its duties and responsibilities, including the responsibility for executive compensation.

We have an Executive Compensation Subcommittee which has the responsibility to consider and approve equity based compensation for our executive officers which is intended to qualify as “performance based compensation” under Section 162(m) of the Internal Revenue Code.

Corporate Governance Principles

We have adopted Corporate Governance Principles, including qualification and independence standards for directors.

Stock Ownership Guidelines


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We have adopted Stock Ownership Guidelines to align the interests of our executives with the interests of stockholders and promote our commitment to sound corporate governance.

The Stock Ownership Guidelines apply to the independent directors, the Chairman and Chief Executive Officer, and all other officers with a rank of Vice President or higher.

Communication with Directors

The Audit Committee has established a process for confidential and anonymous submission by our employees, as well as submissions by other interested parties, regarding questionable accounting or auditing matters.

Additionally, the Board of Directors has established a process for stockholders to communicate with the Board of Directors, as a whole, or any independent director.

Codes of Business Conduct and Ethics

We have adopted a Code of Ethical Conduct for Financial Managers, which applies to our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Controller and other key financial managers. This code is filed as Exhibit 14 to this report.

We also operate under a StatementCode of Business PrinciplesConduct that applies to all directors, officers and employees and includes provisions ranging from restrictions on gifts to conflicts of interests. All salaried employees are required to affirm annually their acceptance of, and compliance with, these principles.

the Code of Conduct.

Related Party Transactions Policy

We have adopted a Policy and Procedure for Transactions With Related Persons, under which our Board of Directors must generally pre-approve transactions involving more than $120,000 with our directors, executive officers, five percent or greater stockholders and their immediate family members.

Equity Award Policy

We have adopted a written policy for all issuances by our company of compensatory awards in the form of our common stock or any derivative of the common stock.

Personal Loans to Executive Officers and Directors

We comply with and operate in a manner consistent with the legislation outlawing extensions of credit in the form of a personal loan to or for our directors or executive officers.


Our Internet address ishttp://www.tenneco.com. We make our proxy statements, annual report to stockholders, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as filed with or furnished to the SEC, available free of charge on our Internet

website as soon as reasonably practicable after submission to the SEC. Securities ownership reports on Forms 3, 4 and 5 are also available free of charge on our website as soon as reasonably practicable after submission to the SEC. The contents of our website are not, however, a part of this report. All such statements and reports can also be found at the internet site maintained by the SEC athttp://www.sec.gov.

Our Audit Committee, Compensation/Nominating/Governance Committee and Executive Compensation Subcommittee Charters, Corporate Governance Principles, Stock Ownership Guidelines, Audit Committee policy regarding accounting complaints, Code of Ethical Conduct for Financial Managers, StatementCode of Business Principles,Conduct, Policy and Procedures for Transactions with Related Persons, Equity Award Policy, policy for communicating with the Board of Directors and Audit Committee policy regarding the pre-approval of audit, non-audit, tax and other services are available free of charge on our website atwww.tenneco.com.In addition, we will make a copy of any of these documents available to any person, without charge, upon written request to Tenneco Inc., 500 North Field Drive, Lake Forest, Illinois 60045, Attn: General Counsel. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K and applicable NYSE rules regarding amendments to, or waivers of, our Code of Ethical Conduct for Financial Managers and StatementCode of Business PrinciplesConduct by posting this information on our website atwww.tenneco.com.


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CONTRIBUTIONS OF MAJOR BUSINESSES

For information concerning our operating segments, geographic areas and major products or groups of products, see Note 11 to the consolidated financial statements of Tenneco Inc. included in Item 8. The following tables summarize for each of our reportable segments for the periods indicated: (i) net sales and operating revenues; (ii) earnings before interest expense, income taxes and noncontrolling interests (“EBIT”); and (iii) expenditures for plant, property and equipment. You shouldSee also read “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 for information about certain costs and charges included in our results.

results; and management’s announced organizational changes on February 14, 2013 that aligned our business along product lines, effective with the first quarter of 2013, such that our three prior geographic reportable segments have each been split into two product segments (clean air and ride performance) and three geographic areas (North America; Europe, South America and India; and Asia Pacific), resulting in six operating segments (North America Clean Air, North America Ride Performance, Europe, South America and India Clean Air, Europe, South America and India Ride Performance, Asia Pacific Clean Air and Asia Pacific Ride Performance). The Clean Air division includes the company's emissions control businesses and the Ride Performance division is comprised of its ride control businesses. Costs related to other business activities, primarily corporate headquarter functions, are disclosed separately from the six operating segments as "Other". Prior period segment information has been revised to reflect our new reporting segments.

Net Sales and Operating Revenues:

   2011  2010  2009 
   (Dollar Amounts in Millions) 

North America

  $3,426    48%  $2,832    48%  $2,099    45% 

Europe, South America and India

   3,169    44    2,594    44    2,209    48  

Asia Pacific

   804    11    698    12    525    11  

Intergroup sales

   (194)   (3)   (187)   (4)   (184)   (4) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $7,205    100%  $5,937    100%  $4,649    100% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 


 2013 2012 2011
 (Dollar Amounts in Millions)
Clean Air Division           
North America$2,666
 33 % $2,512
 34 % $2,291
 32 %
Europe, South America & India2,045
 26 % 1,827
 25 % 1,952
 27 %
Asia Pacific853
 11 % 695
 9 % 625
 9 %
Intergroup sales(120) (2)% (108) (1)% (107) (2)%
Total Clean Air Division5,444
 68 % 4,926
 67 % 4,761
 66 %
Ride Performance Division           
North America1,265
 16 % 1,223
 16 % 1,135
 16 %
Europe, South America & India1,087
 14 % 1,094
 15 % 1,217
 17 %
Asia Pacific251
 3 % 213
 3 % 179
 2 %
Intergroup sales(83) (1)% (93) (1)% (87) (1)%
Total Ride Performance Division2,520
 32 % 2,437
 33 % 2,444
 34 %
Total Tenneco Inc.$7,964
 100 % $7,363
 100 % $7,205
 100 %

EBIT:

   2011  2010  2009 
   (Dollar Amounts in Millions) 

North America

  $216     57%  $155     55%  $42     45% 

Europe, South America and India

   125     33    76     27    20     22  

Asia Pacific

   38     10    50     18    30     33  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $379     100%  $281     100%  $92     100% 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

 2013 2012 2011
 (Dollar Amounts in Millions)
Clean Air Division           
North America$229
 54 % $202
 47 % $172
 45 %
Europe, South America & India57
 13 % 54
 13 % 79
 21 %
Asia Pacific84
 20 % 71
 17 % 47
 12 %
Total Clean Air Division370
 87 % 327
 76 % 298
 79 %
Ride Performance Division           
North America124
 29 % 122
 29 % 76
 20 %
Europe, South America & India(7) (2)% 41
 10 % 69
 18 %
Asia Pacific22
 5 % 5
 1 % (6) (2)%
Total Ride Performance Division139
 33 % 168
 39 % 139
 37 %
Other(85) (20)% (67) (16)% (58) (15)%
Total Tenneco Inc.$424
 100 % $428
 100 % $379
 100 %



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Expenditures for plant, propertyPlant, Property and equipment:

   2011  2010  2009 
   (Dollar Amounts in Millions) 

North America

  $88     40%  $59     38%  $45     38% 

Europe, South America and India

   95     44    66     43    58     49  

Asia Pacific

   35     16    29     19    15     13  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $218     100%  $154     100%  $118     100% 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Equipment:

 2013 2012 2011
 (Dollar Amounts in Millions)
Clean Air Division           
North America$77
 30% $76
 29% $49
 22%
Europe, South America & India61
 24% 56
 21% 55
 25%
Asia Pacific44
 17% 40
 15% 24
 11%
Total Clean Air Division182
 72% 172
 65% 128
 59%
Ride Performance Division           
North America32
 13% 46
 17% 39
 18%
Europe, South America & India34
 13% 32
 12% 40
 18%
Asia Pacific6
 2% 13
 5% 11
 5%
Total Ride Performance Division72
 28% 91
 35% 90
 41%
Total Tenneco Inc.$254
 100% $263
 100% $218
 100%

Interest expense, income taxes, and noncontrolling interests that were not allocated to our operating segments are:

   2011   2010   2009 
   (Millions) 

Interest expense (net of interest capitalized)

  $108    $149    $133  

Income tax expense

   88     69     13  

Noncontrolling interests

   26     24     19  

 2013 2012 2011
 (Millions)
Interest expense (net of interest capitalized)$80
 $105
 $108
Income tax expense122
 19
 88
Noncontrolling interests39
 29
 26

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DESCRIPTION OF OUR BUSINESS

We design, manufacture and sell emission controlclean air and ride controlperformance systems and products for light vehicle, commercial truck, off-highway and specialty vehicleother applications, and generated revenues of $7.2$8.0 billion in 2011.2013. We serve both original equipment manufacturers (OEMs) and replacement markets worldwide through leading brands, including Monroe®, Rancho®, Clevite® Elastomers, Marzocchi®, AxiosTM™, KineticTM™, and Fric-RotTM™ ride controlperformance products and Walker®, XNOx™, FonosTM™, DynoMax®, ThrushTM™, and LukeyTM™ emission controlclean air products.

As a parts supplier, we produce individual component parts for vehicles as well as groups of components that are combined as modules or systems within vehicles. These parts, modules and systems are sold globally to most leading OEMs, commercial vehicletruck and off-highway engine manufactures,manufacturers, and aftermarket distribution channels.

Overview of Vehicle Parts Industry and Adjacent Markets

The vehicle parts industry is generally separated into two categories: (1) “original equipment” or “OE” in which parts are sold in large quantities directly for use by OEMs and commercial vehicletruck and off-highway engine manufactures;manufacturers; and (2) “aftermarket” in which replacement parts are sold in varying quantities to wholesalers, retailers and installers. In the OE market,category, parts suppliers are generally divided into tiers — “Tier 1” suppliers that provide their products directly to OEMs, and “Tier 2” or “Tier 3” suppliers that sell their products principally to other suppliers for combination into the other supplier’ssuppliers’ own product offerings.

The market for “light

“Light vehicles” isare comprised of: (1) passenger cars and (2) light trucks which include sport-utility vehicles (SUV)(SUVs), crossover vehicles (CUV)(CUVs), pick-up trucks, vans and multi-purpose passenger vehicles. Demand for automotive parts in the OE light vehicle marketautomotive parts is generally a function of the number of new vehicles produced, which in turn is a function ofdepends on prevailing economic conditions and consumer preferences. In 2011,2013, the number of light vehicles produced by region was 13.116.2 million in North America, 30.227.5 million in Europe, South America and India and 33.321.0 million in Asia Pacific. Worldwide light vehicle production is forecasted to increase to 79.687.4 million units in 20122014 from approximately 76.684.5 million units in 2011,2013, according to IHS Automotive. Although OE demand is tied to planned vehicle production, parts suppliers also have the opportunity to grow revenues by increasing their product content per vehicle, by further expanding business with existing customers and by serving new customers in existing or new markets. Companies with a global presence and advanced technology, engineering, manufacturing and support capabilities, such as our Company, are better positioned to take advantage of these opportunities.

The increase and expansion in mandated diesel emission control and noise regulations or standards through 2014 in North America, Europe, China, Japan, Brazil, Russia and India have enabled suppliers such as us to serve customers beyond the light vehicle market.vehicles. Certain automotive parts suppliers are now developingthat have traditionally supplied the automotive industry also develop and producingproduce components and integrated systems for the commercial market oftruck, off-highway and other applications, such as medium- and heavy-duty trucks, buses, off-roadoff-highway equipment, and locomotive/marine applications as well as the recreational segment for two-wheelers and all-terrain vehicles. Tenneco foresees this market diversification of segments served as a source of future growth.

Demand for aftermarket products is driven by general economic conditions, the number of vehicles in operation, the age and distance driven of the vehicle fleet, and the average useful life and quality of vehicle parts. Although more vehicles are on the road than ever before, the aftermarket has experienced longer replacement cycles due to the improved quality of OE parts and increases in theincreased average useful life of automotivevehicle parts that has come to pass as a result of technological innovation. SuppliersParts suppliers are increasingly being required to deliver innovative aftermarket products to drive increased aftermarket demand. Global economic downturns generally impact aftermarket sales less adversely than OE sales, as customers forego new vehicle purchases and keep their vehicles longer, thereby increasing demand for repair and maintenance parts and services.


Industry Trends

As the dynamics of the marketscustomers we serve change, so do the roles, responsibilities and relationships of the participants. Key trends that we believe are affecting parts suppliers include:

General Economic Factors and Production Levels

The economic crisis in 2008 and 2009 materially and negatively impacted the automotive industry and our customers’ businesses in the U.S. and elsewhere. Automakers around the world experienced financial difficulties from a weakened economy, tightening credit markets, low consumer confidence, and reduced demand for their products. General Motors and Chrysler reorganized under bankruptcy protection in 2009, and other OE manufacturers took actions to improve profitability and remain solvent. The automotive supply base in turn also faced severe cash flow problems as a result of the significantly lower production levels of light vehicles, increased costs of certain raw materials, commodity and energy costs, and restricted access to additional liquidity through the capital markets. Consumers facing a weak job market and inadequate financing options were reluctant to purchase durable goods such as automobiles.

As a result of the lack of consumer confidence caused by the global economic downturn and credit market crisis, the industry experienced a rapid decline in light vehicle purchases in 2008 and the first half of 2009. The industry began to recover during the second half of 2009 when OE light vehicle production began to stabilize and then strengthen, as inventory levels began to be replenished, tracking more closely to vehicle sales. In 2010, annual light vehicle production continued to strengthen, evidenced bygrew 39 percent in North America, 30 percent in Asia Pacific and Europe light vehicle production volumes increasing 39 percent, 30 percent and 16 percent respectively in 2010 as compared to 2009.Europe. Production volumes continued to strengthen in 2011 in most geographic regions in which we operate. For example, production volumes in North America, Europe and EuropeChina increased 10 percent, five percent and five percent, respectively, in 2011,2011. In 2012, light vehicle production improved further in some regions, but declined markedly in Europe. Light vehicle production was up 17 percent in North America, though still not to the levels seen in recent history. The Asia Pacific region experienced a decline of twohistory, and six percent in China. European light vehicle production volumes as a resultwas down five percent from 2011 levels. In 2013, light vehicle production improved further in some regions, but declined in India and Australia. Light vehicle production was up five

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Table of a continued declineContents

percent in industryNorth America, six percent in South America, and 14 percent in China. European light vehicle production was about even with 2012 levels. Light vehicle production was down six percent when compared to 2012 in Australia,both India and lower OE volumes in Thailand and Japan as a result of the flooding and earthquakes experienced in those regions in 2011.

Australia.

Increasing Environmental Standards

OE manufacturers and their parts suppliers are designing and developing products to respond to increasingly stringent environmental requirements, growth in theengines using diesel marketsand alternative fuels and increased demandsdemand for better fuel economy. Government regulations adopted over the past decade require substantial reductions in vehicle tailpipe criteria pollutant emissions, longer warranties on parts ofwarranty periods for a vehicle’s pollution control equipment and additional equipment to control fuel vapor emissions. In addition, new regulations have been adopted to regulate greenhouse gas emissions of carbon dioxide and improved combustion efficiency and reduction of vehicle mass have become priorities. Manufacturers are responding with new technologies for gasoline- and diesel-fueled vehicles that minimize pollution and improve fuel economy.

As a leading supplier of emission controlclean air systems with strong technical capabilities, we believe we are well positioned to benefit from the more rigorous environmental standards being adopted around the world. We continue to expand our investment in regions such as China, India, Thailand and ThailandJapan to capitalize on the growing demand for environmentally friendly solutions for light vehicle, commercial truck and commercial vehiclesoff-highway applications driven by environmental regulations in these regions.

To meet stricter air quality regulations, we have developed and sold diesel particulate filters (DPFs) in Europe, for example, for the Mercedes Benz Sprinter andAudi A4, BMW 1 and 3 series passenger cars and Scania trucks and in Europe andNorth America for GM Duramax engine applications, the Ford Super Duty, the Chrysler Ram, Navistar medium-duty trucks in North America, and off-roadoff-highway applications for Caterpillar and John Deere in North America and Europe, and North America.Kubota in Japan. These particulate filters, coupled with converters, reduce emissions of particulate matter by up to 90 percent and of nitrogen oxide by up to 85 percent. In addition, we have development and production contracts for our selective catalytic reduction (SCR) systems with light, medium and medium-dutyheavy-duty truck manufacturers in North America,manufacturers. These SCR systems reduce emissions of nitrogen oxides by up to 95 percent. In China, South America, Europe, and Asia. In China,Japan, we have development and production contracts for complete turnkey SCR systems includingthat include the ELIM-NOx urea dosing technology acquired in 2007 and now sold globally under the name XNOxTM™. Customers have also purchased prototypes of our hydrocarbon injector, a product acquired in 2007 alongside our XNOxTM technology, which is used to inject hydrocarbon directly into the exhaust system to regenerate diesel particulate filters and

Lean NOx Traps. New regulations in the U.S. and European markets, which require reductions in carbon dioxide emissions and improvements in fuel economy, are creating increased demand for our fabricated manifolds, maniverters, integrated turbocharger/manifold modules, electronic exhaust valves, and lighter weightlightweight components. Lastly, for various off-roadoff-highway customers, we have developedoffer emission aftertreatment systems designed to meet Tier 4A4 interim and Tier 4 final environmental regulations. Both on-roadcommercial truck and off-roadoff-highway customers are embracing the concept of turnkey aftertreatment systems where we have developed and sold both electronicwhich require aftertreatment electronic control units (ECUs) as well as the related control software.

software which we have developed and sold to several customers.


Increasing Technologically Sophisticated Content

As end users and consumers continue to demand vehicles with improved performance, safety and functionality at competitive prices, the components and systems in these vehicles are becoming technologically more advanced and sophisticated. Mechanical functions are being replaced with electronics; and mechanical and electronic devices are being integrated into single systems. More stringent emission and other regulatory standards are increasing the complexity of the systems as well.

To remain competitive as a parts and systems supplier, we invest in engineering, research and development, spending $144 million in 2013, $126 million in 2012, and $133 million in 2011, $117 million in 2010, and $97 million in 2009, net of customer reimbursements. In addition, we build prototypes and incur other costs on behalf of our customers to further our technological capabilities. Such expenses reimbursed by our customers totaled $169 million in 2013, $159 million in 2012, and $119 million in 2011, $110 million in 2010,including building prototypes and $104 million in 2009.incurring other costs on behalf of our customers. We also fund and sponsor university and other independent research to advance our emission controlclean air and ride controlperformance development.

By investing in technology, we canhave been able to expand our product offerings and penetrate new markets. For example, we developed DPFs which were first sold in Europe and then offered in North America. Since these original innovations, we have developed T.R.U.E-Clean®with our partners, a product used to regenerate DPFs. We have also built prototypes of urea SCR systems for locomotive and marine engines. We expanded our suite of NOx-reduction technologies, developing prototypes of SCR systems using gaseous ammonia, absorbed on a solid forms of ammoniasalt, as the reductant andor a hydrocarbon lean NOx catalyst (HC-LNC for NOx reduction) that relies on hydrocarbons, ethanol, or other reductants instead of urea. For example, we are in aduring our period of exclusive development with General Electric utilizing their proprietary(GE), we developed a commercially viable hydrocarbon lean NOx catalyst (HC-LNC for NOx reduction),system which utilizes GE’s proprietary silver based catalyst formulation and haveattracted multiple customers in Brazil that are testing this system in Brazil.using ethanol as the reductant. We successfully developed and sold fabricated manifolds, previously used only on gasoline engines, into the passenger car diesel segment. Recently, we developed and sold our first prototype aftertreatment system for large engines, up to 4500 horsepower, used as line haul locomotives. Tenneco, through an exclusive partnership with Jiangsu Lvyuan in China, has become the first company to obtain China Classification Society (CCS) approval to sell marine selective catalytic reduction systems for China flagged vessels, as required by the International Maritime Organization. On the ride controlperformance side of our business, we co-developed with Öhlins Racing AB a continuously controlled electronic suspension system (CES) now offered by OEMs such as Volvo, Audi, Ford, VW, and Mercedes Benz in their vehicles.and BMW.

Enhanced Vehicle Safety and Handling

In 2009, with the adoption


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Table of Regulation No. 661/2009, Europe made electronic stability control (ESC) systems mandatory for all passenger cars and commercial vehicles being newly introduced to the market beginning in 2011. This regulation was further expanded to include all passenger cars and commercial vehicles (regardless of when the relevant car model was first approved for introduction into the market) beginning in November 2014. In addition, the U.S. made ESC systems mandatory by 2012 with the adoption of the Federal Motor Vehicle Safety Standard 126 (FMVSS-126). OEMs, toContents

To serve the needs of their customers and meet government mandates, OEMs are seeking parts suppliers that invest in new technologies, capabilities and products that advance vehicle safety, such as roll-over protection systems, computerized electronic suspension, and safer, more durable materials. Those suppliers able to offer such innovative products and technologies have a distinct competitive advantage.

Tenneco offers semi-active suspension systems named CES which was co-developed with Öhlins Racing AB, CES, and offers Kinetic® ride control technology to improvethat improves vehicle stability and handling. We also develop other advanced suspension systems like Actively Controlled Car (ACOCAR)TM™ that are being designed to provide improved vehicle safety and control. Further, we introducedsupply premium Monroe® branded brakes to the aftermarket to further complement our product offerings

in the aftermarket space. In addition to these efforts, we continue to promote the Safety TriangleTM™ of Steering-Stopping-Stability to educate consumers about the detrimental effect of worn shock absorbers on vehicle steering and stopping distances.

Outsourcing and Demand for Systems and Modules

OEMs have steadily outsourced more of the design and manufacturing of vehicle parts and systems to simplify the assembly process, lower costs and reduce development times. Furthermore, they have demanded fully integrated, functional systems made possible with the development of advanced electronics in addition to innovative, individual vehicle components and parts that may not readily interface together. As a result, successful parts suppliers offer a variety of component products individually as well as integrated modules and systems:

“Modules” are groups of component parts arranged in close physical proximity to each other within a vehicle. Modules are often assembled by the supplier and shipped to the OEM for installation in a vehicle as a unit. Integrated shock and spring units, seats, instrument panels, axles and door panels are examples.

“Systems” are groups of component parts located throughout a vehicle which operate together to provide a specific vehicle functionality. Emission control systems, anti-lock braking systems, safety restraint systems, roll control systems and powertrain systems are examples.

This shift towards fully integrated systems created the role of the Tier 1 systems integrator, a supplier responsible for executing a broad array of activities, including design, development, engineering, and testing of component parts, systems and modules. With more than a decade of experience asAs an established Tier 1 supplier, we have produced modules and systems for various vehicle platforms produced worldwide, supplying ride controlperformance modules for the Chevrolet Silverado, GMC Sierra, Chevrolet Malibu, Chevrolet Impala and Chevrolet Cruze and emission control systems for the Ford Super Duty, Ford Focus, Chevrolet Silverado, GMC Sierra, Chevrolet Malibu, Opel Astra, and VW Golf. In addition, we continue to design other modules and systems for platforms yet to be introduced to the global marketplace.

Global Reach of OE Customers

Changing market dynamics are driving OE manufacturers and their parts suppliers to expand their global reach:

•

Growing Importance of Developing Markets:    Because the North American and Western European automotive markets are mature, OEMs are increasingly focusing on developing markets for growth opportunities, particularly Brazil, Russia, India and China, collectively known as the BRIC economies, as well as Thailand. As OEMs have penetrated new regions, growth opportunities for suppliers have emerged.

•

Governmental Tariffs and Local Parts Requirements:    Many governments around the world require vehicles sold within their country to contain specified percentages of locally produced parts. Additionally, some governments place high tariffs on imported parts.

•

Location of Production Closer to End Markets:    As OE manufacturers and parts suppliers have shifted production globally to be closer to their end markets, suppliers have expanded their reach, capturing sales in developing markets and taking advantage of relatively lower labor costs.

Growing Importance of Growth Markets:    Because the North American and Western European automotive regions are mature, OEMs are increasingly focusing on other markets for growth opportunities, particularly Brazil, Russia, India and China, collectively known as the BRIC economies, as well as Thailand. As OEMs have penetrated new regions, growth opportunities for suppliers have emerged.
Governmental Tariffs and Local Parts Requirements:    Many governments around the world require vehicles sold within their country to contain specified percentages of locally produced parts. Additionally, some governments place high tariffs on imported parts.
Location of Production Closer to End Markets:    As OE manufacturers and parts suppliers have shifted production globally to be closer to their end markets, suppliers have expanded their reach, capturing sales in other markets and taking advantage where possible of relatively low labor costs.
Because of these trends, OE manufacturers are increasingly seeking suppliers capable of supporting vehicle platforms on a global basis. They want suppliers like Tenneco with design, production, engineering and logistics capabilities that can be accessed not just in North America and Europe but also inmany regions around the developing markets.

world.

Global Rationalization of OE Vehicle Platforms

OE manufacturers continue to standardize on “global platforms,” designing basic mechanical structures that are each suitedsuitable for a number of similar vehicle models and able to accommodate different features for more than one region. Light vehicle platforms of over one million units are expected to grow from 4248 percent to 5155 percent of global OE production from 20112013 to 2016.

2018.

With such global platforms, OE manufacturers realize significant economies of scale by limiting variations in items such as steering columns, brake systems, transmissions, axles, exhaust systems, support structures and power window and door lock mechanisms. The shift towards standardization can also benefit automotive parts suppliers. They can experience greater economies of scale, lower material costs, and reduced development costs.


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Extended Product Life of Automotive Parts

The average useful life of automotive parts, both OE and replacement, has been steadily increasingincreased in recent years due to technological innovations including longer-lasting materials. As a result, although there are more vehicles on the road than ever before, the global aftermarket has not kept pace with that growth. Accordingly, aftermarket suppliers have focused on reducing costs and providing product differentiation through advanced technology and recognized brand names. With our long history of technological innovation, strong brands and operational effectiveness, we believe we are well positioned to leverage our products and technology.

Changing Aftermarket Distribution Channels

From 20012003 to 2011,2013, the number of retail outlets supplying aftermarket parts increased significantly while the number of jobber stores declined 10nearly seven percent in the U.S. Major aftermarket retailers, such as AutoZone and Advance Auto Parts, attempted to expand their commercial sales by selling directly to parts installers, which had historically purchased from their local warehouse distributors and jobbers, as they continued to market to individual retail consumers. Retailers now have the option to offer premium brands which are often preferred by their commercial customers in addition to standard products which are often selected by their individual store buyers. We believe we are well positioned to respond to this trend because we continue to produce high-quality, premium brands and products. As distribution channels continue to consolidate, both wholesalers and retailers can realize the benefits of sourcing products from a supplier like Tenneco with our breadth of suspension and emissions control products.

Analysis of Revenues

The table below provides, for each of the years 20092011 through 2011,2013, information relating to our net sales and operating revenues, by primary product lines and customer categories.

   Net Sales
Year Ended December 31,		 
   2011   2010   2009 
   (Millions) 

Emission Control Products & Systems

      

Aftermarket

  $351    $318    $315  

Original Equipment

      

OE Value-add

   2,732     2,223     1,638  

OE Substrate(1)

   1,678     1,284     966  
  

 

 

   

 

 

   

 

 

 
   4,410     3,507     2,604  
  

 

 

   

 

 

   

 

 

 
   4,761     3,825     2,919  
  

 

 

   

 

 

   

 

 

 

Ride Control Products & Systems

      

Aftermarket

   944     851     721  

Original Equipment

   1,500     1,261     1,009  
  

 

 

   

 

 

   

 

 

 
   2,444     2,112     1,730  
  

 

 

   

 

 

   

 

 

 

Total Revenues

  $7,205    $5,937    $4,649  
  

 

 

   

 

 

   

 

 

 

 
Net Sales
Year Ended December 31,
 2013 2012 2011
 (Millions)
Clean Air Products & Systems     
Aftermarket$327
 $318
 $351
Original Equipment     
OE Value-add3,282
 2,948
 2,732
OE Substrate(1)1,835
 1,660
 1,678
 5,117
 4,608
 4,410
 5,444
 4,926
 4,761
Ride Performance Products & Systems     
Aftermarket953
 944
 944
Original Equipment1,567
 1,493
 1,500
 2,520
 2,437
 2,444
Total Revenues$7,964
 $7,363
 $7,205
(1)See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 for a discussion of substrate sales.

Brands

In each of our operating segments, we manufacture and market products with leading brand names. Monroe® ride control products and Walker® exhaust products are two of the most recognized brands in the industry. We emphasize product value differentiation with brands such as Monroe®, AxiosTM (suspension products), KineticTM™ and Fric-RotTM™ (ride control(ride performance products), DynoMaxWalker®, XNOx™ (clean air products), DynoMax®, ThrushTM™ and LukeyTM™ (performance exhaustclean air products), Rancho® (ride controlperformance products for the high performance light truck market)trucks), Clevite® Elastomers and Axios™ (noise, vibration and harshness control components), and Marzocchi® (forks and suspensions for the two-wheeler market)two-wheelers).

Customers

We have developedstrive to develop long-standing business relationships with our customers around the world. In each of our operating segments, we work collaboratively with our customers in all stages of production, including design, development, component sourcing, quality assurance, manufacturing and delivery. With a diverse mix of OE and aftermarket products and facilities in major markets worldwide, we believe we are well positioned to meet customer needs. We believe we have a strong, established

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reputation with customers for providing high-quality products at competitive prices, as well as for timely delivery and customer service.

Worldwide

In 2013, we serveserved more than 6465 different OEMs and Commercial Vehiclecommercial truck and off-highway engine manufacturers worldwide, and our products arewere included on nine of the top 10 passenger car models produced for sale in Europe and nineeight of the top 10 light truck models produced for sale in North America for 2011.

2013.

During 2011,2013, our OEM and Commercial Vehiclecommercial truck and off-highway engine manufacturer customers included:

North America Europe Asia
AM General AvtoVAZ Beijing Automotive
Caterpillar BMW BMW
Club Car Caterpillar Brilliance Automobile
CNH IndustrialCNH Industrial (Iveco)Changan Automotive
Daimler AG Daimler AG Changan AutomotiveChina National Heavy-Duty Truck Group
E-Z Go Deutz AG Daimler AG
Fiat-ChryslerFiat Chrysler Automobile Ducati Motor Dongfeng Motor
Fiat Industrial (CNH)Ford Motor Fiat-ChryslerFiat Chrysler Automobile Ducati Motor
General MotorsFord MotorFirst Auto Works
Harley-DavidsonGas-Gas MotorsFord Motor
Honda MotorsGeely AutomobileGeely Automobile
Hyundai MotorGeneral MotorsGeneral Motors
John DeereHarley-DavidsonGreat Wall Motor
Navistar InternationalJohn DeereHyundai Motor
Nissan MotorMazda MotorIsuzu Motors
Oshkosh TruckMcLaren AutomotiveJiangling Motors
PaccarNissan MotorKubota
Toyota MotorPaccarNissan Motor
Volkswagen GroupPSA Peugeot CitroenSAIC Motor
Volvo Global TruckRenaultSuzuki Motor
ScaniaToyota Motor
Suzuki MotorVolkswagen Group
Tata MotorsWeichai Power
Toyota MotorYuchai Group
Volkswagen Group
Volvo Global Truck

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AustraliaSouth AmericaIndia
Club CarCNH Industrial (Iveco)Club Car
CNH Industrial (Iveco)Daimler AGDaimler AG
Ford Motor Fiat Industrial (Iveco)Chrysler Automobile First Auto WorksE-Z Go
General Motors Ford Motor Ford Motor
Harley-DavidsonGeely AutomobileGeely Automobile
Honda MotorsGeneral MotorsGeneral Motors
Hyundai MotorHarley-DavidsonGreat Wall Motor
John DeereJohn DeereHyundai Motor
Navistar InternationalMazda MotorIsuzu Motors
Nissan MotorMcLaren AutomotiveJiangling Motors
Oshkosh TruckNissan MotorNissan Motor
PaccarPaccarSAIC Motor
Toyota MotorPorscheSuzuki Motor
Volkswagen GroupPSA Peugeot CitroenVolkswagen Group
Volvo Global TruckRenaultWeichai Power
Suzuki Motor
Tata Motors
Toyota Motor
Volkswagen Group
Volvo Global Truck

AustraliaSouth AmericaIndia
Club CarDaimler AGClub Car
Fiat Industrial (Iveco)Fiat-ChryslerE-Z Go
Ford MotorFiat Industrial (Iveco)Fiat-Chrysler
General MotorsFord MotorFord Motor
Mazda Motor General Motors General Motors
Toyota Motor MAN SE Isuzu Motor
 Navistar International Mahindra & Mahindra
 Nissan Motor Nissan Motor
 PSA Peugeot Citroen Suzuki Motor
 Renault Tata Motors
ScaniaToyota Motor
 Toyota Motor Toyota MotorVolkswagen Group
 Volkswagen Group Volkswagen Group
 Volvo Global Truck 

The following customers accounted for 10 percent or more of our net sales in any of the last three years.

Customer

  2011  2010  2009 

General Motors

   19%   19%   16% 

Ford

   15%   13%   14% 

Customer2013 2012 2011
General Motors15% 17% 19%
Ford Motor14% 15% 15%
During 2011,2013, our aftermarket customers were comprised of full-line and specialty warehouse distributors, retailers, jobbers, installer chains and car dealers. These customers included National Auto Parts Association (NAPA), Advance Auto Parts, Uni-Select, and O’Reilly Automotive, Aftermarket Auto Parts Alliance, and AutoZone in North America, Temot Autoteile GmbH, Autodistribution International, Group Auto Union, Auto Teile Ring and AP United in Europe and Rede Presidente in South America. We believe our revenue mix is balanced, with our top 10 aftermarket customers accounting for 4055 percent of our net aftermarket sales and our aftermarket sales representing 1816 percent of our total net sales in 2011.

2013.

Competition

We operate in highly competitive markets. Customer loyalty is a key element of competition in these markets and is developed through long-standing relationships, customer service, high quality value-added products and timely delivery. Product pricing and services provided are other important competitive factors.

In both the

As a supplier of OE light vehicle market and aftermarket parts, we compete with the vehicle manufacturers, some of which are also customers of ours, and numerous independent suppliers. In theFor OE market,sales, we believe that we rank among the top two suppliers infor certain key marketsapplications we serveservice throughout most regions in the world for both emission controlclean air and ride controlperformance products and systems for light vehicles.systems. In the aftermarket, we believe that we are the market sharea leader in supplying emission controlclean air and ride controlperformance products for light vehicles in certainfor the key marketsapplications we serve throughout the world.

Seasonality

Our OE and aftermarket businesses are somewhat seasonal. OE production is historically higher in the first half of the year compared to the second half. It decreases in the third quarter due to OE plant shutdowns for model changeovers and European holidays, and softens further in the fourth quarter due to reduced consumer demand for new vehiclesproduction during the holiday season and the winter months in North America and Europe generally. Our aftermarket operations, also affected by seasonality, experience relatively higher demand during the springSpring as vehicle owners prepare for the summerSummer driving season.

While seasonality does impact our business, actual results may vary from the above trends due to global and local economic dynamics as well as industry-specific platform launches and other production-related events. During periods of economic recession, OE sales traditionally decline due to reduced consumer demand for

automobiles and other capital goods. Aftermarket sales tend not to be as adversely affected during periods of economic downturn, as consumers forego new vehicle purchases and keep their vehicles longer, thereby increasing demand for repair and maintenance services. By participating in both the OE and aftermarket segments, we generally see a smaller revenue decline during economic downturns than the overall change in OE production.

During the recent global recession that began in 2008, seasonal OE plant closures were longer and more pronounced and aftermarket inventory levels remained leaner than normal. As the industry began to recover, the effects

Clean Air Systems

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Table of seasonality were somewhat masked during the later half of 2009 through 2010, as OE sales and inventories improved from their depressed levels as consumers began spending again on the maintenance and repair of their vehicles. In 2011, our production of parts returned to our normal seasonal trend of higher OE volumes in the first half of the year and higher AM volumes in the spring and summer months.

Emission Control Systems

Contents


Vehicle emission control products and systems play a critical role in safely conveying noxious exhaust gases away from the passenger compartment and reducing the level of pollutants and engine exhaust noise emitted to acceptable levels. Precise engineering of the exhaust system — extendingwhich extends from the manifold that connects an engine’s exhaust ports to an exhaust pipe, to the catalytic converter that eliminates pollutants from the exhaust, and to the muffler that modulates noise and emissions — leads to a pleasant, tuned engine sound, reduced pollutants and optimized engine performance.

We design, manufacture and distribute a variety of products and systems designed to reduce pollution and optimize engine performance, acoustic tuning and weight, including the following:

Catalytic converters and diesel oxidation catalysts — Devices consisting of a substrate coated with precious metals enclosed in a steel casing used to reduce harmful gaseous emissions such as carbon monoxide;

Diesel Particulate Filters (DPFs) — Devices to capture and regenerate particulate matter emitted from diesel engines;

Burner systems — Devices which actively combust fuel and air inside the exhaust system to create extra heat for DPF regeneration, or for improvedto improve the efficiency of SCR systems;

Lean NOx traps — Devices which reduce Nitrogen Oxidenitrogen oxide (NOx) emissions from diesel powertrains using capture and store technology;

Hydrocarbon vaporizers and injectors — Devices to add fuel to a diesel exhaust system in order to regenerate diesel particulate filters or Lean NOx traps;

•

Selective Catalytic Reduction (SCR) systems — Devices which reduce NOx emissions from diesel powertrains using injected reductants such as Verband der Automobil Industrie e.V. (AdBLue)(AdBlueTM™) or Diesel Exhaust Fluid (DEF);

Alternative NOx reduction technologies — Devices which reduce NOx emissions from diesel powertrains, by using alternative reductants such as diesel fuel, E85 (85% ethanol, 15% gasoline), or solid forms of ammonia;

Mufflers and resonators — Devices to provide noise elimination and acoustic tuning;

Fabricated Exhaust manifolds — Components that collect gases from individual cylinders of a vehicle’s engine and direct them into a single exhaust pipe; fabricated manifolds can form the core of an emissions module includingthat includes an integrated catalytic converter (maniverter) and/or turbocharger;

Pipes — Utilized to connect various parts of both the hot and cold ends of an exhaust system;

Hydroformed assemblies — Forms in various geometric shapes, such as Y-pipes or T-pipes, which provide optimization in both design and installation as compared to conventional pipes;

Hangers and isolators — Used for system installation and elimination of noise and vibration, and for the improvement of useful life; and

Aftertreatment control units — Computerized electronic devices that utilize embedded software to regulate the performance of active aftertreatment systems, including the control of sensors, injectors, vaporizers, pumps, heaters, valves, actuators, wiring harnesses, relays and other mechatronic components.


For the catalytic converters we sell, we either buy completed catalytic convertersconverter systems or procure substrates coated with precious metals which we incorporate into full systems. We obtain these components and systems from third parties or directly from OE manufacturers, often at the OEM’s direction. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on our sales of these products.

We supply our emission controlclean air offerings to 28 light vehicle manufacturers for use on over 215225 light vehicle models, including sixseven of the top 10 passenger car models produced in Europe and sixseven of the top 10 light truck models produced in North America for 2011.2013. We also supply emission controlclean air products to 1825 manufacturers of commercial vehiclestruck, off-highway and engines, and specialtyother vehicles including Harley-Davidson, BMW Motorcycle, Scania, Daimler Trucks, Navistar, Caterpillar, John Deere, Deutz, Kubota, CNHTC, FAW Truck, and Weichai Power.

We entered the emission controlclean air market in 1967 with the acquisition of Walker Manufacturing Company, which was founded in 1888, and became one of Europe’s leading OE emission controlclean air systems suppliers with the acquisition of Heinrich Gillet GmbH & Co. in 1994. Throughout this document, the term “Walker” refers to our subsidiaries and affiliates that produce emission controlclean air products and systems.

In the aftermarket, we manufacture, market and distribute replacement mufflers for virtually all North American, European, and Asian light vehicle models under brand names including Quiet-Flow®, and Tru-Fit® and Aluminox ProTM, in addition to offering a variety of other related products such as pipes and catalytic converters (Walker® Perfection). We also serve the specialty exhaust aftermarket with offerings that include Mega-Flow® exhaust products for heavy-duty vehicle applications and DynoMax® high performance exhaust products. We continue to emphasize product-value differentiation with other aftermarket brands such as ThrushWalker®, Thrush® and FonosTM™.

Ride ControlPerformance Systems


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Superior ride control is governed by a vehicle’s suspension system, including shock absorbers and struts. Shock absorbers and struts maintain the vertical loads placed on vehicle tires, helping keep the tires in contact with the road. Vehicle steering, braking, acceleration and safety dependsdepend on maintaining contact between the tires and the road. Worn shocks and struts can allow excess transfer of the vehicle’s weight — either from side to side which is called “roll;” from front to rear which is called “pitch;” or up and down, which is called “bounce.” Shock absorbers and struts are designed to control the vertical loads placed on tires and thereby provide resistance to vehicle roll, pitch and bounce. They function as safety components and provide a comfortable ride.

We design, manufacture and distribute a variety of ride controlperformance products and systems including:

Shock absorbers — A broad range of mechanical shock absorbers and related components for light- and heavy-duty vehicles, including twin-tube and monotube shock absorbers;

Struts — A complete line of struts and strut assemblies for light vehicles;

•

Vibration control components (Clevite® Elastomers, Axios™) — Generally, rubber-to-metal bushings and mountings to reduce vibration between metal parts of a vehicle. Offerings include a broad range of suspension arms, rods and links for light- and heavy-duty vehicles;

•

Kinetic® suspension technology — A suite of roll-control and nearly equal wheel-loading systems ranging from simple mechanical systems to complex hydraulic systems featuring proprietary and patented technology. The Kinetic® suspension technology was incorporated on the Citroën World Rally Car that was featured in the World Rally Championship of 2003, 2004 and 2005. Additionally, the Kinetic® suspension technology was offered on the Lexus GX 470 sport utility vehicle which resulted in our winningWe have won the PACE Award;Award for our Kinetic

® suspension technology;

Advanced suspension systems — Shock absorbers and suspension systems that electronically adjust a vehicle’s performance based on inputs such as steering and braking;

Kinetic H2/CES Semi-Active Suspension system — In 2011 we won the Supplier of the Year award from Vehicle Dynamics International Magazine, which recognizes outstanding achievement in global automotive suspension and

chassis engineering, for the Kinetic H2/CES Semi-Active Suspension system installed on the McLaren MP4-12C; and

Other — We also offer other ride controlperformance products such as load assist products, springs, steering stabilizers, adjustable suspension systems, suspension kits and modular assemblies.


We supply our ride controlperformance offerings to 2221 light vehicle manufacturers for use on over 150 light vehicle models, including fiveseven of the top 10 passenger car models produced in Europe and nineeight of the top 10 light truck models produced in North America for 2011.2013. We also supply ride controlperformance products and systems to over 40 commercial and specialty vehicletruck manufacturers including Volvo Truck, Scania, Navistar, Daimler Trucks and PACCAR.

In the ride controlperformance aftermarket, we manufacture, market and distribute replacement shock absorbers for virtually all North American, European and Asian light vehicle models under several brand names including Gas-Matic®, Sensa-Trac®, Monroe Reflex® Reflex® and Monroe® AdventureTM™, Quick-Strut®, as well as Clevite® Elastomers for elastomeric vibration control components. We also sell ride controlperformance offerings for the heavy-duty, off-roadcommercial truck and specialtyother aftermarket segments, such as our Gas-Magnum® shock absorbers for the North American heavy-dutycommercial category and Marzocchi® front forks for two-wheelers.

We entered the ride controlperformance product line in 1977 with the acquisition of Monroe Auto Equipment Company, which was founded in 1916, and introduced the world’s first modern tubular shock absorber in 1930. When the term “Monroe” is used in this document it refers to our subsidiaries and affiliates that produce ride controlperformance products and systems.

Financial Information About Geographic Areas

Refer to Note 11 of the consolidated financial statements of Tenneco Inc. included in Item 8 of this report for financial information about geographic areas.

Sales, Marketing and Distribution

We have separate and distinct sales and marketing efforts for our OE and aftermarket businesses.

For OE sales, our sales and marketing team is an integrated group of professionals, including skilled engineers and program managers, who are organized by customer and product type (e.g., ride controlperformance and emission control)clean air). Our sales and marketing team provides the appropriate mix of operational and technical expertise needed to interface successfully with the OEMs. Our new business “capture process” involves working closely with the OEM platform engineering and purchasing teams. Bidding on OE automotive platforms typically encompasses many months of engineering and business development activity. Throughout the process, our sales team, program managers and product engineers assist the OE customer in defining the project’s technical and business requirements. A normal part of the process includes our engineering and sales personnel working on customers’ integrated product teams, and assisting with developing component/system specifications and test procedures. Given that the OE business involves long-term production contracts awarded on a platform-by-platform basis, our strategy is to leverage our engineering expertise and strong customer relationships to target and win new business and increase operating margins.


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For aftermarket sales and marketing, our sales force is generally organized by customer and region and covers multiple product lines. We sell aftermarket products through four primary channels of distribution: (1) the traditional three-step distribution system of full-line warehouse distributors, jobbers and installers; (2) the specialty two-step distribution system of specialty warehouse distributors that carry only specified automotive product groups and installers; (3) direct sales to retailers; and (4) direct sales to installer chains. Our aftermarket sales and marketing representatives cover all levels of the distribution channel, stimulating interest in our products and helping our products move through the distribution system. Also, to generate demand for our products from end-users, we run print, online and televisionoutdoor advertisements and offer pricing promotions. We offer business-to-business services to customers with TA-Direct, an on-line order entry and customer service tool. In addition, we maintain detailed web sites for each of Walker®, Monroe®, Rancho®, DynoMax®, Monroe® brake brands and our heavy-duty products.

Manufacturing and Engineering

We focus on achieving superior product quality at the lowest operating costs possible using productive, reliable and safe manufacturing processes to achieve that goal. Our manufacturing strategy centers on a lean production system called the Tenneco Manufacturing System (TMS), that is designed to eliminate waste, develop skills, share best practices and lead our manufacturing enterprise to reduce overall costs, while maintaining quality standards and reducing manufacturing cycle time. As part of TMS, we use Six Sigma techniques both in manufacturing and design to minimize product defects and improve operational efficiencies. We deploy new technology to differentiate our products from our competitorscompetitors’ and to achieve higher quality and productivity. We continue to adapt our capacity to customer demand, both expanding capabilities in growth areas as well as reallocating capacity away from segments in decline.

Emission Control

Clean Air
Our consolidated businesses operate 62 clean air manufacturing facilities worldwide, of which 14 facilities are located in North America, 24 in Europe, South America and India, and 24 in Asia Pacific. We operate 11 emission controlof the manufacturing facilities in the U.S. and 46 emission control manufacturing facilities outside of the U.S. We operate 16 of these international manufacturing facilitiesAsia Pacific through joint ventures in which we hold a controlling interest. We operate five emission controlfour clean air engineering and technical facilities worldwide and share twothree other such facilities with our ride controlperformance operations. Of the four clean air engineering and technical facilities, one is located in North America, two in Europe, and one in Asia Pacific. In addition, two joint ventures in which we hold a noncontrolling interest operate a total of two manufacturing facilities outside the U.S.

in Europe.

Within each of our emission controlclean air manufacturing facilities, operations are organized by component (e.g., muffler, catalytic converter, pipe, resonator and manifold). Our manufacturing systems incorporate cell-based designs, allowing work-in-process to move through the operation with greater speed and flexibility. We continue to invest in plant and equipment to stay competitive in the industry. For instance, in our Smithville, Tennessee, OE manufacturing facility, we have developed a muffler assembly cell that utilizes laser welding. This allows for quicker change-over times in the process as well as less material used and less weight for the product. There is also a reduced cycle time compared to traditional joining and increased manufacturing precision for superior durability and performance. In 2007, we introduced the Measured and Matched Converter technique in North America. This allows us to maintain the optimum GBD (Gap Bulk Density) in our converter manufacturing operations with Tenneco proprietary processing. This process, coupled with cold spinning of the converter body, versus traditional cone to can welding, allows for more effective use of material through reduced welding, lower cost, and better performance of the product. In 2009, we introduced low-cost fabricated diesel manifolds in Europe which utilize advanced manufacturing processes such as deep drawing, laser welding, and furnace brazing.

To strengthen our position as a Tier 1 OE systems supplier, we have developed some of our emission controlclean air manufacturing operations into “just-in-time” or “JIT” systems. In this system, a JIT facility located close to our OE customer’s manufacturing plant receives product components from both our manufacturing operations and independent suppliers, and then assembles and ships products to the OEMs on an as-needed basis. To manage the JIT functions and material flow, we have advanced computerized material requirements planning systems linked with our customers’ and supplier partners’ resource management systems. We have three emission control26 clean air JIT assembly facilities worldwide, of which three facilities are located in the United StatesNorth America, ten in Europe and 23 throughout the rest of the world.

13 in Asia Pacific.

Our engineering capabilities include advanced predictive design tools, advanced prototyping processes and state-of-the-art testing equipment. These technological capabilities make us a “full system” integrator to the OEMs, supplying complete emission control systems from the manifold to the tailpipe, to provide full emission and noise control. We expanded our engineering capabilities with the 2007 acquisition of Combustion Component Associates’ ELIM-NOx, mobile emission technology, now sold globally under the XNOxTM™ name, thatwhich includes urea and hydrocarbon injection, and electronic controls and software for selective catalytic reduction. We also offer a complete suite of alternative full system NOx aftertreatment technologies, including the Hydrocarbon Lean NOx Catalyst (HC-LNC) technology under joint development with General Electric, and SOLID SCRTM™ technology licensed from FEV, a powertrain developmentAmminex, an engineering and engineeringmanufacturing company basedlocated in Germany.Denmark. We also developed advanced predictive engineering tools, including KBM&E (Knowledge Based

Manufacturing & Engineering). The innovation of our KBM&E (which we call TEN-KBM&E) is a modular toolbox set of CAD embedded applications for manufacturing and engineering compliant design. The encapsulated TEN-KBM&E content is driven by an analytical method which continuously


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captures and updates the knowledge of our main manufacturing and engineering processes. Our global engineering capabilities are standardized through the use of the ATLAS Global PDM (Product Data Management) system, enabling a more efficient transfer of knowledge around the world.


Ride Control

Performance

Our consolidated businesses operate seven27 ride controlperformance manufacturing facilities worldwide, of which nine facilities are located in the U.S.North America, 13 in Europe, South America and 23 ride control manufacturing facilities outside the U.S.India, and five in Asia Pacific. We operate two of these internationalthe facilities through joint ventures in which we hold a controlling interest.interest, one in Europe and another one in Asia. We operate seven engineering and technical facilities worldwide and share twothree other such facilities with our emission controlclean air operations.

Of the seven ride performance engineering and technical facilities, two are located in North America, four in Europe, South America and India, and one in Asia Pacific.

Within each of our ride controlperformance manufacturing facilities, operations are organized by product (e.g., shocks, struts and vibration control products) and include computer numerically controlled and conventional machine centers; tube milling and drawn-over-mandrel manufacturing equipment; metal inert gas and resistance welding; powdered metal pressing and sintering; chrome plating; stamping; and assembly/test capabilities. Our manufacturing systems incorporate cell-based designs, allowing work-in-process to move through the operation with greater speed and flexibility.

To strengthen our position as a Tier 1 OE module supplier, we have developed someone of our ride performance manufacturing operations into a JIT systems. We have two JIT ride control facilities outside the U.S.

assembly operation in Europe.

In designing our shock absorbers and struts, we use advanced engineering and test capabilities to provide product reliability, endurance and performance. Our engineering capabilities feature advanced computer-aided design equipment and testing facilities. Our dedication to innovative solutions has led to such technological advances as:

Adaptive damping systems — adapt to the vehicle’s motion to better control undesirable vehicle motions;

Electronically adjustable suspensions — change suspension performance based on a variety of inputs such as steering, braking, vehicle height, and velocity; and

Air leveling systems — manually or automatically adjust the height of the vehicle.

Conventional shock absorbers and struts generally develop an appropriate compromise eitherbetween ride comfort or vehicle control.and handling. Our innovative grooved-tube, gas-charged shock absorbers and struts provide both ride comfort and vehicle control, resulting in improved handling, reduced vibration and a wider range of vehicle control. This technology can be found in our premium quality Sensa-Trac® shock absorbers. We further enhanced this technology by adding the SafeTechTM™ fluon banded piston, which improves shock absorber performance and durability. We introduced the Monroe Reflex® Reflex® shock absorber, which incorporates our Impact SensorTM™ device. This technology permits the shock absorber to automatically switch in a matter of milliseconds between firm and soft compression damping when the vehicle encounters rough road conditions, and thus maintaining better tire-to-road contact and improving handling and safety. We developed the Quick-Strut® which simplifies and shortens the installation of aftermarket struts. This technology combines the spring and upper mount into a single, complete module, eliminating the need for special tools and skills required previously. We have also developed an innovative computerized electronic suspension system, which features dampers developed by Tenneco and electronic valves designed by Öhlins Racing AB. The continuously controlled electronic suspension (“CES”) ride controlperformance system is featured on Audi, Volvo, Ford, VW,Volkswagen, BMW, and Mercedes Benz vehicles.

Quality Control

Quality control is an important part of our production process. Our quality engineers establish performance and reliability standards in the product’s design stage, and use prototypes to confirm that the component/system can be manufactured to specifications. Quality control is also integrated into the manufacturing process, with shop operators responsible for quality control of their specific work product. In addition, our inspectors test work-in-progress at various stages to ensure components are being fabricated to meet customers’ requirements.

We believe our commitment to quality control and sound management practices and policies is demonstrated by our successful participation in the International Standards Organization/Technical Specifications certification process (“ISO/TS”). ISO/TS certifications are semi-annual or annual audits that certify that a company’s facilities meet stringent quality and business systems requirements. Without ISO or TS certification, we would not be able to supply our products for the aftermarket or theto our OE market, respectively,customers, either locally or globally. All of our manufacturing facilities where we have determined that TS certification is required to serve our customers or would provide us with an advantage in securing additional business, have achieved ISO/TS 16949 certification.

Global Procurement Management


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Our direct and indirect material costs represent a significant component of our cost structure. To ensure that our material acquisition process provides both a local and global competitive advantage, in addition to meeting regional legislative requirements, we have designed globally integrated standard processes which are managed by global teams of commodity specialists. Each global commodity strategy is tailored to regional requirements while leveraging our global scale to deliver the most cost effective solutions at a local level.

Business Strategy

We strive to strengthen our global market position by designing, manufacturing, delivering and marketing technologically innovative emission controlclean air and ride controlperformance products and systems for OEMs and the aftermarket. We work toward achieving a balanced mix of products, markets and customers by capitalizing on emerging trends, specific regional preferences and changing customer requirements. We target both mature and developing markets for both light vehicle, commercial truck, off-highway and commercial and specialtyother vehicle business. We further enhance our operations by focusing on operational excellence in all functional areas.

The key components of our business strategy are described below:

Develop and Commercialize Advanced Technologies

We develop and commercialize technologies that allow us to expand into new, fast-growing markets and serve our existing customers. By anticipating customer needs and preferences, we design advanced technologies that meet global market needs. For example, to meet the increasingly stringent emissions regulations being introduced around the world, we offer several technologies designed to reduce NOx emissions onfrom passenger, commercial truck and commercialoff-highway vehicles. This includesThese technologies include an integrated Selective Catalytic Reduction (SCR) system that incorporates our ELIM-NOx technology, now sold globally under the name XNOxTM™. technology, electrical valves for diesel-powered vehicles with low-pressure exhaust gas recirculation systems, and diesel and gasoline particulate filters. We also offer a NOx absorber and are developing a hydrocarbon lean NOx catalyst system and a solid form of ammonia SCR system to address NOx emissions.system. Additionally, we offer thermal management solutions, includingsuch as our T.R.U.E.-Clean® active diesel particulate filter system.system and through a consortium thermoelectric generators that convert waste exhaust heat into electrical energy.

We expect available content per vehicle to continue to rise over the next several years. Advanced aftertreatment exhaust systems are required to comply with emissions regulations that affect light, commercial truck and commercialoff-highway vehicles as well as off-road, locomotive, marine and stationary engines. In addition, vehicle manufacturers, we believe, will offer greater comfort, handling and safety features by offering products such as electronic suspension and adjustable dampers. Our Continuously Controlled Electronic Suspension (CES) shock absorbers, which we co-developed with Öhlins Racing AB, are now sold to Volvo, Audi, Mercedes, VW, BMW, and Ford, among others, and our engineered elastomers to manufacturers with unique requirements. Our newest electronic suspension product DRiVTM™, based onusing digital-valve technology licensed fromdeveloped by Sturman Industries, is the first industry example of using digital valves for ride controlperformance products thereby offering faster response, lighter weight, and reduced power consumption compared to existing analog products.

We continue to focus on developingintroducing highly engineered systems and complex assemblies and modules designed to provide value-added solutions to customers and increase vehicle content generally. Having many of our engineering and manufacturing facilities integrated electronically, we believe, has helped our products continue to be selected for inclusion in top-selling vehicles. In addition, our just-in-time and in-line sequencing manufacturing processes and distribution capabilities have enabled us to be more responsive to our customers’ needs.

Penetrate Adjacent Markets

We seek to penetrate a variety of adjacent marketssales opportunities and achieve growth in higher-margin businesses by applying our existing design, engineering and manufacturing capabilities. For example, we are aggressively leveragingleverage our technology and engineering leadership in emissionclean air and ride controlperformance into adjacent marketssales opportunities for two-wheelers, heavy-duty trucks, buses, agricultural equipment, construction machinery and other commercial and specialty vehicles. Commercial vehicle emission control launches are currently underway and will ramp up inIn line with regulatory enforcement, for on-regulations set and off-road equipmentenforced in North America, Europe, China, Japan, South America and South America. TheseIndia, we launch clean air products for commercial truck and off-highway customers. Such customers include Caterpillar, for whom we are their global diesel emission controlclean air system integrator, as well as John Deere, Navistar, Deutz, Daimler Trucks, MAN SE, Scania, China National Heavy Duty Truck Company, Shanghai Diesel Engine Company, Weichai Power, FAW Group, and YuChai.Yuchai. In addition, we continue to expand into new markets with new customers, including our most recently announced new emission control business with a commercial vehicle customerclean air products for customers, such as Kubota in Japan.Japan, and Mahindra in India. Our 20102013 and 20112012 revenue generated by our commercial truck, off-highway and specialty vehicleother business was nine14 percent and 1113 percent, of our total OE revenue, respectively. In 2008, we added the ride control products and technologies of Gruppo Marzocchi to our existing exhaust systems business for two-wheelers. In addition, we are evaluating and selectively pursuing retrofit opportunities which will allow us to penetrate new markets or expand our products in existing markets.

Expand in Developing Markets

Geographically

We continue to expand our global footprint into growth regions around the world. In 2010, we opened wholly-owned emission controlclean air manufacturing facilities in Chennai, India and Guangzhou, China, and a ride controlperformance facility in Chonburi, Thailand. In addition, we opened new emission controlclean air facilities in Changchun, China and in Beijing, China as a result of our joint venture agreements with FAW Sihuan and Beijing Hainachuan Automotive Part Company Limited, respectively. In 2011 we relocated and expanded two plants in China and during the third quarter, increased our investment in Thailand during the third quarter of 2011, by acquiring the remaining interest in our emission control

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clean air joint venture. We continue to develop our Thailand footprint with the goal of using it as a base for our future operations in that region. In 2012, we opened our first manufacturing plant in Japan, a clean air facility located in Osaka, which will support further growth in the region. In 2013, we opened our new clean air manufacturing facility in Chakan, India which is located close to key customers in the Pune region. As OEMs have expanded in the fast-growing marketsregions of Brazil, Russia, India, China, and Thailand, we have followed, building our capabilities to engineer and produce locally cost-competitive and cutting-edge products, which has enabledenabling us to capture new business.

Maintain Our Aftermarket Leadership

We manufacture and market leading, brand-name products to a diversified and global aftermarket customer base. Two of the most recognized brand-name products in the automotive parts industry are our Monroe® ride controlperformance products and Walker® emission control clean air products, which have been offered to consumers since the 1930s. We believe our brand equity in the aftermarket is a key asset especially as customers consolidate and distribution channels converge.

We provide value differentiation by creating product extensions bearing our various brands. For example, we offer Monroe Reflex® and Monroe Reflex® Sensa-Trac and Monroe® Sensa-Trac® shock absorbers, Walker® Quiet-Flow® mufflers, Rancho® ride controlperformance products, DynoMax® exhaust products and Walker Ultra® catalytic converters, and in European markets,Europe, Walker and Aluminox ProTM™ mufflers. Further, we introduced Monroe® Springs and Monro-Magnum® (bus and truck shock line) in Europe and Monroe Dynamics® and Monroe Ceramics Dynamics® and Monroe® Ceramics® brake pads in the United States. We continue to explore other opportunities for developing new product lines that will be marketed under our existing, well-known brands.

We strive to gain market share in the aftermarket business by adding new product offerings and increasing our market coverage of existing brands and products. To this end, we offer an innovative, ride controlperformance product, the Quick-Strut®, that combines the spring and the upper mount into a single, complete module and simplifies and shortens the installation process, eliminating the need for the special tools and skills required previously. We plan on adaptingadapt our products further for use in foreign nameplate vehicles, withfor example, by introducing the introductionOESpectrum® line of OESpectrumride performance products. Additionally, we find ways to our ride control line. We benefitedbenefit from the consolidation of, and regional expansion by, our customers and gained business lost by competitors that encountered financial difficulties.

Our success in the aftermarket business strengthens our competitive position with OEMs. We gain timely market and product knowledge that can be used to modify and enhance our offerings for greater customer acceptance. OnFor our exhaustclean air product line, we continue to enhance our converter coverage, including additionaladding for example to our suite of manifold converter part numbers. In addition, we also offer aftermarket diesel particulate filters.


Execute Focused Transactions

We have successfully identified and capitalized on strategic acquisitions and alliances to achieve growth. Through these acquisitions and alliances, we have (1) expanded our product portfolio with complementary technologies; (2) realized incremental business from existing customers; (3) gained access to new customers; and (4) achieved leadership positions in geographic marketsregions outside North America.

We developed a strategic alliance with Futaba, a leading exhaust manufacturer in Japan. This alliance helps us grow our business with Japan-based OEMs by leveraging the geographical reach of our partner to serve global vehicle platforms of these OEMs.

We positioned ourselves as a leading exhaust supplier in the rapidly growing Asian marketregion through our operations in China, India and Thailand. In June 2009, we formed a joint venture with Beijing Hainachuan Automotive Parts Company Limited in Beijing that produces emission controlclean air exhaust systems for Hyundai. In addition, we continue to serve North American and European OEMs located in China; we supply parts and systems for luxury cars produced by BMW and Audi through our joint venture with Eberspächer International GmbH, and we supply parts and systems for various Ford platforms through our joint venture with Chengdu Lingchuan Mechanical Plant. We established a local engineering center in Shanghai to develop automotive exhaustclean air products when our joint venture with Shanghai Tractor and Engine Company, a subsidiary of Shanghai Automotive Industry Corp., was expanded. Also, we increased our investment from 6080 percent to 80100 percent in Tenneco Tongtai Exhaust Company Limited (TTEC) located in Dalian in January 2010the fourth quarter of 2013 and from 75 percent to 100 percent in our Thailand emission controlclean air company, Walker Exhaust Co. Limited in August 2011. Further, we formed a new joint venture in March 2010 with FAW Sihuan to supply emission controlclean air components and systems for passenger and commercial vehicles.

In February 2009, we signed a joint development agreement with GE Transportation, a unit of General Electric Company, to develop a proprietary diesel aftertreatment technology for various transportation and other applications. We are collaborating with GE Transportation on the development and production of GE’s Hydrocarbon Lean NOx catalyst technology, a diesel aftertreatment innovation aimed at reducing harmful nitrogen oxide (NOx) emissions as effectively as urea-based SCR systems. We are working
In late 2012, we signed an exclusive joint development agreement with others on alternative ureaCormetech Inc., a joint equity company of Corning Inc. and Mitsubishi Heavy Industries Ltd, to design ultra-large diameter SCR technologies, such as solid formscatalysts for marine, locomotive and certain stationary applications. Also in late 2012, we signed a nonexclusive Joint Development and Licensing Agreement with Amminex for the design and development of ammonia.

SOLID-SCR™ systems.


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We signedhave exclusive licensing agreements for T.R.U.E. CleanT.R.U.E.-Clean®, an exhaust aftertreatment technology used for automatic and active regeneration of Diesel Particulate Filters (DPFs), with Woodward Governor Company and for vaporizer technologies with another company. These technologies,Company. This is an example of a technology, which complementcomplements our array of existing emissions controlclean air products, allowallowing us to provide integrated exhaust aftertreatment systems to commercial truck, off-highway and other vehicle manufacturers and others.manufacturers.

We intend to continue to pursue strategic alliances, joint ventures, acquisitions and other transactions that complement or enhance our existing products, technology, systems development efforts, customer base and/or global presence. We will align with companies that have proven products, proprietary technology, advanced research capabilities, broad geographic reach, and/or strong market positions to further strengthen our product leadership, technology position, global reach and customer relationships.

Adapt Cost Structure to Economic Realities

We aggressively respond to difficult economic environments, aligning our operations to any resulting reductions in production levels and replacement demand and executing comprehensive restructuring and cost-reduction initiatives. In the fourth quarter of 2008, we launched a global restructuring program which included actions to permanently reduce our fixed cost base and flex our costs, such as:

Permanently eliminating 1,100 jobs worldwide, which is in addition to 1,150 jobs previously eliminated in 2008;

Closing three North American manufacturing plants and an engineering facility in Australia;

Suspending matching contributions to employee 401(k) programs (which we reinstituted in 2010); and

Cutting spending on information technology, sales and marketing programs.

DuringOn September 22, 2009, we further flexed our operations to address the market conditions, implementing temporary layoffs of hourly workers at our plants worldwideannounced that we were impacted by customers’ plant shutdowns and announced the closing of our original equipment ride controlperformance plant in Cozad, Nebraska. In North America, where customerThe closure of the Cozad plant eliminated approximately 500 positions. We hired at other facilities as we moved production cuts werefrom Cozad to those facilities, which resulted in a net decrease of approximately 60 positions. Much of the greatest, we also initiated salaried employee furloughs. In Europe, we eliminated all temporary positions and negotiated with various works councilsproduction was shifted from Cozad to pursue similarour plant in Hartwell, Georgia. The closure of the Cozad plant was completed in August 2012 at a total cost of $23 million. Annualized cost savings as a result of these actions total $8 million.

We have continued to implement cost reduction efforts including reduced work hours. We instituted salary reductions of at least 10 percent for salaried employees effective April 1, 2009,initiatives where appropriate and implemented other actions to control employee costs. As economic and industry-wide conditions improved, we restored salaries to their prior levels effective October 1, 2009, and reinstated the employer matching contributions to the employee 401(k) plans for the year 2010.

In addition, during 2009, we strategically reduced capital expenditures and engineering investments where possible without compromising our long-term growth prospects. We eliminated or postponed regional expansion projects, deferred spending tied to delayed customer launches, redeployed assets where feasible, and eliminated all discretionary capital spending. We focused on developing technologies and capabilities tied to business launching within the next two to three years, making exceptions in instances where the customer agreed to pay upfront for engineering and advance technology developments for programs launching in 2012 and beyond. In this way, we were able to continue all programs critical to our growth while limiting any near-term cash impact.

In the third quarter of 2011, we completed a restructuring action that permanently eliminated 53 positions, or seven percent of our total workforce in Australia, which put our cost structure more in line with the industry environment.Australia. This restructuring is part of a continuing broader plan for the Asia Pacific region where we are positioning Tenneco for growth by re-deploying assets to maximize utilization while at the same time addressing the industry environment in the region.

On January 31, 2013, we announced our intent to reduce structural costs in Europe by approximately $60 million annually, and anticipate related costs of approximately $120 million, which includes the closing of the Vittaryd facility in Sweden that we announced in September 2012 and a $7 million charge recorded in the fourth quarter of 2012 related to the impairment of certain assets in the European ride performance business. We incurred $78 million in restructuring and related costs in 2013, of which $69 million was related to this initiative including $3 million for non-cash asset write downs. We expect that most of the remaining expense will be recorded in 2014, and that the company will reach a full savings run rate in 2016. Any plans affecting our European hourly and salaried workforce would be subject to consultation with the relevant employee representatives.
Strengthen Operational Excellence

We will continue to focus on operational excellence by optimizing our manufacturing footprint, enhancing our Six Sigma processes and Lean productivity tools, developing further our engineering capabilities, managing the complexities of our global supply chain to realize purchasing economies of scale while satisfying diverse and global requirements, and supporting our businesses with robust information technology systems. We will make investments in our operations and infrastructure as required to achieve our strategic goals. We will be mindful of the changing market conditions that might necessitate adjustments to our resources and manufacturing capacity around the world. We will remain committed to protecting the environment as well as the health and safety of our employees.

Environmental Matters

We estimate that we and our subsidiaries will make expenditures for plant, property and equipment for environmental matters of approximately $8 million in 20122014 and $3$5 million in 2013.

2015.

For additional information regarding environmental matters, see Item 3, “Legal Proceedings,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Environmental and Other Matters,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and Note 12 to the consolidated financial statements of Tenneco Inc. included in Item 8.

Employees

As of December 31, 2011,2013, we had approximately 24,00026,000 employees of whom approximately 4843 percent were covered by collective bargaining agreements. European works councils cover 1918 percent of our total employees, a majority of whom are also included under collective bargaining agreements. Several of our existing

labor agreements in Mexico and the U.S. are scheduled for renegotiation in 2012.2014. In addition, agreements are expiring in 2012 in Europe and South America covering plants in France, Germany, Poland, and Argentina.Argentina are expiring in 2014. We regard our employee relations as satisfactory.


Other

The principal raw material that we use is steel. We obtain steel from a number of sources pursuant to various contractual and other arrangements. We believe that an adequate supply of steel can presently be obtained from a number of different domestic and foreign suppliers. In general, steel prices have been increasing since 2004 with the exception of a temporary but

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significant decline in prices as a result of the economic turmoil in 2008 and 2009. We addressed theseaddress such price increases by evaluating alternative materials and processes, reviewing material substitution opportunities, increasing component and assembly to best cost countries, as well as strategically pursuing regional and global purchasing strategies for specific commodities, and aggressively negotiating with our customers to allow us to recover these higher costs from them. As global economies continue to recover, we expect increasing price pressure on key commodities, including rubber, oil and steel.

We hold a number of domestic and foreign patents and trademarks relating to our products and businesses. We manufacture and distribute our aftermarket products primarily under the Walker® and Monroe® brand names, which are well-recognized in the marketplace and are registered trademarks. We also sellmarket certain of our emission controlclean air products to OE manufacturers under the names SOLID SCRTM™ and XNOxTM™. The patents, trademarks and other intellectual property owned by or licensed to us are important in the manufacturing, marketing and distribution of our products.

ITEM 1A.RISK FACTORS.


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ITEM 1A.RISK FACTORS.
Future deterioration or prolonged difficulty in economic conditions could have a material adverse impact on our business, financial position and liquidity.

The economic crisis in 2008 and 2009 and the related worldwide financial industry turmoil resulted in a severe and global tightening of credit and liquidity. These conditions led to low consumer confidence, which resulted in delayed and reduced purchases of durable consumer goods such as automobiles. As a result, our OEM customers significantly reduced their production schedules. LightIn general, light vehicle production has been increasingincreased since the second half of 2009, and is forecasted to increase in most regions in 2012 as compared to 2011, however, production is still at low levels and is expected to declinealthough there was weakness in Europe and Australia.South America in 2012 and in Europe and India in 2013. Additionally, production of commercial truck and off-highway vehicles with our content on them has been weaker than historical production levels in certain product applications, such as construction equipment in North America. We cannot assure you that production levels will continue to increase or that they may not decline. Future deterioration or prolonged difficulty in economic conditions could have a material adverse effect on our business, financial position and liquidity.

For example, as we saw in 2008 and 2009, disruptions in the financial markets may adversely impact the availability and cost of credit which could materially and negatively affect our Company. Future disruptions in the capital and credit markets could adversely affect our customers’ and our ability to access the liquidity that is necessary to fund operations on terms that are acceptable to us or at all.

In addition, financial or other difficulties at any of our major customers could have a material adverse impact on us, including as a result of lost revenues, significant write offsdowns of accounts receivable, significant impairment charges or additional restructurings beyond our current global plans. Severe financial or other difficulties at any of our major suppliers could have a material adverse effect on us if we are unable to obtain on a timely basis on similar economic terms the quantity and quality of components we require to produce our products.

Moreover, severe financial or operating difficulties at any automotive, commercial truck and off-highway vehicle manufacturer or other supplier could have a significant disruptive effect on the entire automotive industry, leading to supply chain disruptions and labor unrest, among other things. These disruptions could force automotiveoriginal equipment manufacturers and, in turn, other suppliers, including us, to shut down production at plants. While the difficulties facing our customers and suppliers over the last several years have been primarily financial in nature, other difficulties, such as an inability to meet increased demand as the economy recovers, could also result in supply chain and other disruptions.

Factors that reduce demand for our products or reduce prices could materially and adversely impact our financial condition and results of operations.

Demand for and pricing of our products are subject to economic conditions and other factors present in the various domestic and international markets where the products are sold. Demand for our OE products is subject to the level of consumer demand for new vehicles that are equipped with our parts. The level of new light vehicle, commercial truck and commercialoff-highway vehicle purchases is cyclical, affected by such factors as general economic conditions, interest rates and availability of credit, consumer confidence, patterns of consumer spending, industrial construction levels, fuel costcosts, government incentives and the automobilevehicle replacement cycle.cycles. Consumer preferences also impact the demand for new light vehicle purchases. For example, if consumers increasingly prefer electric vehicles, demand for the vehicles equipped with our emission controlclean air products would decrease.

Demand for our aftermarket, or replacement, products varies based upon such factors as general economic conditions; the level of new vehicle purchases, which initially displaces demand for aftermarket products; the severity of winter weather, which increases the demand for certain aftermarket products; and other factors, including the average useful life of parts and number of miles driven.

The highly cyclical nature of the automotive and commercial vehicle industry presents a risk that is outside our control and that cannot be accurately predicted. Decreases in demand for automobiles and commercial vehicles and vehicle parts generally, or in the demand for our products in particular, could materially and adversely impact our financial condition and results of operations.


In addition, we believe that increasingly stringent environmental standards for emissions have presented and will continue to present an important opportunity for us to grow our emissions controlclean air business. We cannot assure you, however, that environmental standards for emissions will continue to become more stringent or that the adoption of any new standards will not be delayed beyond our expectations.

We are dependent on large customers for future revenue. The loss of all or a substantial portion of our sales to any of these customers or the loss of market share by these customers could have a material adverse impact on us.

We depend on major vehicle manufacturers for a substantial portion of our net sales. For example, during fiscal year ended December 31, 2011,2013, GM and Ford accounted for 1915 percent and 1514 percent of our net sales, respectively. The loss of all

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or a substantial portion of our sales to any of our large-volume customers could have a material adverse effect on our financial condition and results of operations by reducing cash flows and our ability to spread costs over a larger revenue base. We may make fewer sales to these customers for a variety of reasons, including but not limited to: (1) loss of awarded business; (2) reduced or delayed customer requirements; (3) strikes or other work stoppages affecting production by the customers; or (4) reduced demand for our customers’ products.

In addition, our OE customers compete intensively against each other and other OE manufacturers. The loss of market share by any of our significant OE customers could have a material adverse effect on our business unless we are able to achieve increased sales to other OE manufacturers.

We may be unable to realize sales represented by our awarded business, which could materially and adversely impact our financial condition and results of operations.

The realization of future sales from awarded business is inherently subject to a number of important risks and uncertainties, including the number of vehicles that our OE customers will actually produce, the timing of that production and the mix of options that our OE customers and consumers may choose. For several years prior to 2008, substantially all of our North American vehicle manufacturing customers had slowed or maintained at relatively flat levels new vehicle production. In 2009, new vehicle production decreased dramatically in many geographic regions as a result of the global economic crisis. During the second half of 2009 and in 2010, new vehicle production stabilized and began to strengthen from these low production levels. For 2011 through 2013, light vehicle production continued to improve in most geographic regions in which we operate, though still not to the levels seen in recent history.history in many of those regions. However, European production declined in 2012 and was weak in 2013, production in South America declined in 2012 and production in India declined in 2013. Additionally, production of commercial truck and off-highway vehicles with our content on them has been weaker than historical production levels in certain product applications, such as construction equipment in North America. In addition to the risks inherent in the cyclicality of vehicle production, our customers generally have the right to replace us with another supplier at any time for a variety of reasons and have demanded price decreases over the life of awarded business. Accordingly, we cannot assure you that we will in fact realize any or all of the future sales represented by our awarded business. Any failure to realize these sales could have a material adverse effect on our financial condition, results of operations, and liquidity.

In many cases, we must commit substantial resources in preparation for production under awarded OE business well in advance of the customer’s production start date. In certain instances, the terms of our OE customer arrangements permit us to recover these pre-production costs if the customer cancels the business through no fault of our company. Although we have been successful in recovering these costs under appropriate circumstances in the past, we can give no assurance that our results of operations will not be materially impacted in the future if we are unable to recover these types of pre-production costs in the event of an OE customer’s cancellation of awarded business.

Our level of debt makes us more sensitive to the effects of economic downturns; our level of debt and provisions in our debt agreements could limit our ability to react to changes in the economy or our industry.

Our level of debt makes us more vulnerable to changes in our results of operations because a substantialsignificant portion of our cash flow from operations is dedicated to servicing our debt and is not available for other purposes. Ourpurposes and our level of debt could have other negative consequences to us, including the following:

limitingimpair our ability to borrow money or sell stock for our workingraise additional capital capital expenditures, debt service requirements or other general corporate purposes;

if necessary.

limiting our flexibility in planning for, or reacting to, changes in our operations, our business or the industry in which we compete; and

our leverage may place us at a competitive disadvantage by limiting our ability to invest in the business or in further research and development.

Our ability to make payments on our indebtedness depends on our ability to generate cash in the future. If we do not generate sufficient cash flow to meet our debt service and working capital requirements, we may need to seek additional financing or sell assets. This may make it more difficult for us to obtain financing on terms that are acceptable to us, or at all. Without any such financing, we could be forced to sell assets to make up for any shortfall in our payment obligations under unfavorable circumstances. If necessary,circumstances and we may not be able to sell assets quickly enough or for sufficient amounts to enable us to meet our obligations.

In addition, our senior credit facility and our other debt agreements contain covenants that limit our flexibility in planning for or reacting to changes in our business and our industry, including limitations on incurring additional indebtedness, making investments, granting liens and merging or consolidating with other companies. Complying with these covenants may impair our ability to finance our future operations orand capital needs or to engage in other favorable business activities.

Our failure to comply with the covenants contained in our senior credit facility or the indentures for our other debt instruments, including as a result of events beyond our control, could result in an event of default, which could materially and adversely affect our operating results and our financial condition.

Our senior credit facility and receivables securitization program in the U.S. require us to maintain certain financial ratios. Our senior credit facility and our other debt instruments require us to comply with various operational and other covenants. If there were an event of default under any of our debt instruments that was not cured or waived, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately.immediately (which, in turn, could also result in an event of default under one or more of our other financing arrangements). If such event occurs, the lenders under our

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senior credit facility could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets and we could lose access to our securitization program. We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments, either upon maturity or if accelerated, upon an event of default, or that we would be able to refinance or restructure the payments on those debt instruments.

For example, in February 2009, we sought an amendment to our senior credit facility to revise the financial ratios we are required to maintain thereunder. If, in the future, we are required to obtain similar amendments as a result of our inability to meet the required financial ratios, there can be no assurance that those amendments will be available on commercially reasonable terms or at all. If, as or when required, we are unable to repay, refinance or restructure our indebtedness under our senior credit facility, or amend the covenants contained therein, the lenders under our senior credit facility could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets. In addition, any event of default or declaration of acceleration under one of our debt instruments could also result in an event of default under one or more of our other financing agreements, including our other debt instruments and/or the agreements under which we sell certain of our accounts receivable. This would have a material adverse impact on our liquidity, financial position and results of operations.

For example, as a result of the economic downturn in 2008 and 2009, we needed to amend our senior credit agreement to revise the financial ratios we are required to maintain. Even though we were able to obtain that amendment, we cannot assure you that we would be able to obtain an amendment on commercially reasonable terms, or at all, if required in the future.

Our working capital requirements may negatively affect our liquidity and capital resources.

Our working capital requirements can vary significantly, depending in part on the level, variability and timing of our customers’ worldwide vehicle production and the payment terms with our customers and suppliers. If our working capital needs exceed our cash flows from operations, we would look to our cash balances and availability for borrowings under our borrowing arrangements to satisfy those needs, as well as potential sources of additional capital, which may not be available on satisfactory terms and in adequate amounts, if at all.

We may be unable to realize our business strategy of improving operating performance and generating savings and improvements.
We regularly implement strategic and other initiatives designed to improve our operating performance. For example, in 2013 we announced a cost reduction initiative in Europe to significantly reduce our annual structural costs in the region. Our inability to implement these initiatives in accordance with our plans or our failure to achieve the goals of these initiatives could have a material adverse effect on our business, particularly since we rely on these initiatives to offset pricing pressures from our suppliers and our customers, as described above, as well as to manage the impacts of production cuts, such as the significant production decreases we experienced during 2008 and 2009 as a result of the global economic crisis, and the lingering effects this crisis had in Europe in particular, where light vehicle production declined in 2012 and remained at weak production levels in 2013. Our implementation of announced initiatives is from time to time subject to legal challenge in certain non-U.S. jurisdictions (where applicable employment laws differ from those in the United States). Furthermore, the terms of our senior credit facility and the indentures governing our notes may restrict the types of initiatives we undertake. In the past we have been successful in obtaining the consent of our senior lenders where appropriate in connection with our initiatives. We cannot assure you, however, that we will be able to pursue, successfully implement or realize the expected benefits of any initiative or that we will be able to sustain improvements made to date.
The hourly workforce in the automotive industryindustries in which we participate is highly unionized and our business could be adversely affected by labor disruptions.

A portion of our hourly workforce in North America and the majority of our hourly workforce in Europe isother regions are unionized. Although we consider our current relations with our employees to be satisfactory, if major work

disruptions were to occur, our business could be adversely affected by, for instance, a loss of revenues, increased costs or reduced profitability. We have not experienced a material labor disruption in our recent history, but there can be no assurance that we will not experience a material labor disruption at one of our facilities in the future in the course of renegotiation of our labor arrangements or otherwise.

In addition, substantially all of the hourly employees of General Motors, Ford and Chrysler in North America and many of their other suppliers are represented by the United Automobile, Aerospace and Agricultural Implement Workers of America under collective bargaining agreements. Vehicle manufacturers, their suppliers and their respective employees in other countries are also subject to labor agreements. A work stoppage or strike at one of our production facilities, at those of a customer, or impacting a supplier of ours or any of our customers, such as the 2008 strike at American Axle which resulted in 30 GM facilities in North America being idled for several months, could have an adverse impact on us by disrupting demand for our products and/or our ability to manufacture our products.

In the past, we have experienced significant increases and fluctuations in raw materials pricing; and future changes in the prices of raw materials or utilitiesutility services could have a material adverse impact on us without proportionate recovery from our customers.

Significant increases in the cost of certain raw materials used in our products or the cost of utilitiesutility services required to produce our products, to the extent they are not timely reflected in the price we charge our customers or are otherwise mitigated, could materially and adversely impact our results. In general, commodity prices including steel, oil and rubber, have been increasing since 2004 with the exception of a temporary but significant decline in prices as a result of the economic turmoil in 2008 and 2009. Notwithstanding this temporary decline, the trend of increasing commodity prices has continued. We mitigated these challenges by evaluating alternative materials and processes, reviewing material substitution opportunities, increasing component sourcing and parts assembly toin best cost countries as well as strategically pursuing regional and global

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purchasing strategies for specific commodities, and aggressively negotiating to recover these higher costs from our customers. We also continue to pursue productivity initiatives and other opportunities to reduce costs through restructuring activities. During periods of economic recovery, the cost of raw materials and utilitiesutility services generally rise. Accordingly, we cannot ensure that we will not face increased prices in the future or, if we do, whether these actions will be effective in containing them.

We

With Tenneco entering into new products and new technologies, capacity may be unable to realize our business strategy of improving operating performance, growing our business and generating savings and improvements.

We regularly implement strategic and other initiatives designed to improve our operating performance. The failure to achieve the goals of these initiatives could have a material adverse effect on our business, particularly since we rely on these initiatives to offset pricing pressures from our suppliers and our customers, as described above, as well as to manage the impacts of production cuts such as the significant production decreases we experienced during 2008 and 2009 as a result of the recent global economic crisis. Furthermore, the terms of our senior credit facility and the indentures governing our notes may restrict the types of initiatives we undertake, as these agreements restrict our uses of cash andfor certain of these agreements require usproducts be constrained in terms of investment and/or lead time. Therefore accurate and long term planning is becoming important to maintain financial ratios and otherwise prohibit us from undertaking certain activities. In the past we have been successful in obtaining the consentavoid supply interruptions because of our senior lenders where appropriate in connection with our initiatives. We cannot assure you, however, that we will be able to pursue, successfully implement or realize the expected benefits of any initiative or that we will be able to sustain improvements made to date.

these constraints.

We may incur material costs related to product warranties, environmental and regulatory matters, legal proceedings and other claims, which could have a material adverse impact on our financial condition and results of operations.

From time to time, we receive product warranty claims from our customers, pursuant to which we may be required to bear costs of repair or replacement of certain of our products. Vehicle manufacturers require their outside suppliers to guarantee or warrant their products and to be responsible for the operation of these

component products in new vehicles sold to consumers. Warranty claims may range from individual customer claims to full recalls of all products in the field. We cannot assure you that costs associated with providing product warranties will not be material, or that those costs will not exceed any amounts reserved in our consolidated financial statements. For a description of our accounting policies regarding warranty reserves, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” included in Item 7.

We are subject to extensive government regulations worldwide. Foreign, federal, state and local laws and regulations may change from time to time and our compliance with new or amended laws and regulations in the future may materially increase our costs and could adversely affect our results of operations and competitive position. For example, we are subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which we operate. Soil and groundwater remediation activities are being conducted at certain of our current and former real properties. We record liabilities for these activities when environmental assessments indicate that the remedial efforts are probable and the costs can be reasonably estimated. On this basis, we have established reserves that we believe are adequate for the remediation activities at our current and former real properties for which we could be held responsible. Although we believe our estimates of remediation costs are reasonable and are based on the latest available information, the cleanup costs are estimates and are subject to revision as more information becomes available about the extent of remediation required. In future periods, we could be subject toincur cash costs or charges to earnings if we are required to undertake material additional remediation efforts based onas the resultsresult of our ongoing analysis of the environmental status of our properties,properties. In addition, violations of the laws and regulations we are subject to could result in civil and criminal fines, penalties and sanctions against us, our officers or our employees, as more information becomes available to us.

well as prohibitions on the conduct of our business, and could also materially affect our reputation, business and results of operations.

We also from time to time are involved in a variety of legal proceedings, claims or investigations thatinvestigations. These matters typically are incidental to the conduct of our business. Some of these proceedings allegematters involve allegations of damages against us relating to environmental liabilities, intellectual property matters, personal injury claims, taxes, employment matters or commercial or contractual disputes.disputes or allegations relating to legal compliance by us or our employees. For example, we are subject to a number of lawsuits initiated by a significant number of claimants alleging health problems as a result of exposure to asbestos. Many of these cases involve significant numbers of individual claimants. Many of these cases also involve numerous defendants, with the number of defendants in some cases exceeding 100 defendants from a variety of industries. As major asbestos manufacturers or other companies that used asbestos in their manufacturing processes continue to go out of business, we may experience an increased number of these claims.

We vigorously defend ourselves in connection with all of the matters described above. We cannot, however, assure you that the costs, charges and liabilities associated with these matters will not be material, or that those costs, charges and liabilities will not exceed any amounts reserved for them in our consolidated financial statements. In future periods, we could be subject to cash costs or charges to earnings if any of these matters are resolved unfavorably to us. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Environmental and Other Matters”Legal Contingencies” included in Item 7.

Developments relating to our intellectual property could materially impact our business.
We and others in our industry hold a number of patents and other intellectual property rights, including licenses, that are critical to our respective businesses and competitive positions. Notwithstanding our intellectual property portfolio, our competitors may develop similar or superior proprietary technologies. Further, as we expand into regions where the protection of intellectual property rights is less robust, the risk of others replicating our proprietary technologies increases, which could result in a deterioration of our competitive position. On occasion, we may assert claims against third parties who are taking actions that we believe are infringing on our intellectual property rights. Similarly, third parties may assert claims against us and our customers and distributors alleging our products infringe upon third party intellectual property rights. These claims,

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regardless of their merit or resolution, are frequently costly to prosecute, defend or settle and divert the efforts and attention of our management and employees. Claims of this sort also could harm our relationships with our customers and might deter future customers from doing business with us. If any such claim were to result in an adverse outcome, we could be required to take actions which may include: expending significant resources to develop or license non-infringing products; paying substantial damages to third parties, including to customers to compensate them for their discontinued use or replacing infringing technology with non-infringing technology; or cessation of the manufacture, use or sale of the infringing products. Any of the foregoing results could have a material adverse effect on our business, financial condition, results of operations or our competitive position.
We are increasingly dependent on information technology, and if we are unable to protect against service interruptions or security breaches, our business could be adversely affected.
Our operations rely on a number of information technologies to manage, store, and support business activities. We have put in place a number of systems, processes, and practices designed to protect against the failure of our systems, as well as the misappropriation, exposure or corruption of the information stored thereon. Unintentional service disruptions or intentional actions such as intellectual property theft, cyber-attacks, unauthorized access or malicious software, may lead to such misappropriation, exposure or corruption if our protective measures prove to be inadequate. Further, these events may cause operational impediments or otherwise adversely affect our product sales, financial condition and/or results of operations. We could also encounter violations of applicable law or reputational damage from the disclosure of confidential information belonging to us or our employees, customers or suppliers. In addition, the disclosure of non-public information could lead to the loss of our intellectual property and/or diminished competitive advantages. Should any of the foregoing events occur, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.
We may have difficulty competing favorably in the highly competitive automotive parts industry.

The automotive parts industry is highly competitive. Although the overall number of competitors has decreased due to ongoing industry consolidation, we face significant competition within each of our major product areas, including from new competitors entering the markets which we serve. The principal competitive factors include price, quality, service, product performance, design and engineering capabilities, new product innovation, global presence and timely delivery. As a result, many suppliers have established or are establishing themselves in emerging, low-cost markets to reduce their costs of production and be more conveniently located for customers. Although we are also pursuing a low-costbest-cost country production strategy and otherwise continue to seek process improvements to reduce costs, we cannot assure you that we will be able to continue to compete favorably in this competitive market or that increased competition will not have a material adverse effect on our business by reducing our ability to increase or maintain sales or profit margins.

Furthermore, due to the cost focus of our major customers, we have been, and expect to continue to be, requested to reduce prices as part of our initial business quotations and over the life of vehicle platforms we have

been awarded. We cannot be certain that we will be able to generate cost savings and operational improvements in the future that are sufficient to offset price reductions requested by existing customers and necessary to win additional business.

The decreasing number of automotive parts customers and suppliers could make it more difficult for us to compete favorably.

Our financial condition and results of operations could be adversely affected because the customer base for automotive parts is decreasing in both the original equipment market and aftermarket. As a result, we are competing for business from fewer customers. Furthermore, the trend toward consolidation and bankruptcies among automotive parts suppliers isare resulting in fewer, larger suppliers who benefit from purchasing and distribution economies of scale. If we cannot achieve cost savings and operational improvements sufficient to allow us to compete favorably in the future with these larger companies, our financial condition and results of operations could be adversely affected due to a reduction of, or inability to increase sales.

We may not be able to successfully respond to the changing distribution channels for aftermarket products.

Major automotive aftermarket retailers, such as AutoZone and Advance Auto Parts, are attempting to increase their commercial sales by selling directly to automotive parts installers in addition to individual consumers. These installers have historically purchased from their local warehouse distributors and jobbers, who are our more traditional customers. We cannot assure you that we will be able to maintain or increase aftermarket sales through increasing our sales to retailers. Furthermore, because of the cost focus of major retailers, we have occasionally been requested to offer price concessions to them. Our failure to maintain or increase aftermarket sales, or to offset the impact of any reduced sales or pricing through cost improvements, could have an adverse impact on our business and operating results.

Longer product lives of automotive parts are adversely affecting aftermarket demand for some of our products.


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The average useful life of automotive parts has steadily increased in recent years due to innovations in products and technologies. The longer product lives allow vehicle owners to replace parts of their vehicles less often. As a result, a portion of sales in the aftermarket has been displaced. This has adversely impacted, and could continue to adversely impact, our aftermarket sales. Also, any additional increases in the average useful lives of automotive parts would further adversely affect the demand for our aftermarket products. Aftermarket sales represented approximately 1816 percent and 2017 percent of our net sales in the fiscal years ended December 31, 20112013 and 2010,2012, respectively.

Assertions against us or our customers relating to intellectual property rights could materially impact our business.

We and others in our industry hold a number of patents and other intellectual property rights that are critical to our respective businesses. On occasion, third parties may assert claims against us and our customers and distributors alleging our products or technology infringe upon third-party intellectual property rights. Similarly, we may assert claims against third-parties who are taking actions that we believe are infringing on our intellectual property rights. These claims, regardless of their merit or resolution, are frequently costly to prosecute, defend or settle and divert the efforts and attention of our management and employees. Claims of this sort also could harm our relationships with our customers and might deter future customers from doing business with us. If any such claim were to result in an adverse outcome, we could be required to take actions which may include: cease the manufacture, use or sale of the infringing products; pay substantial damages to third parties, including to customers to compensate them for their discontinued use or replace infringing technology with non-infringing technology; or expend significant resources to develop or license non-infringing products. Any of the foregoing results could have a material adverse effect on our business, financial condition and results of operations.

Any acquisitions we make could disrupt our business and seriously harm our financial condition.

We may, from time to time, consider acquisitions of complementary companies, products or technologies. Acquisitions involve numerous risks, including difficulties in the assimilation of the acquired businesses, the diversion of our management’s attention from other business concerns and potential adverse effects on existing business relationships with current customers and suppliers. In addition, any acquisitions could involve the incurrence of substantial additional indebtedness. We cannot assure you that we will be able to successfully integrate any acquisitions that we pursue or that such acquisitions will perform as planned or prove to be beneficial to our operations and cash flow. Any such failure could seriously harm our business, financial condition and results of operations.

We are subject to risks related to our international operations.

We have manufacturing and distribution facilities in many regions and countries, including Australia, Asia, North America, Europe, South Africa and South America, and sell our products worldwide. For the fiscal year ended December 31, 2011,2013, approximately 5351 percent of our net sales were derived from operations outside North America. International operations are subject to various risks which could have a material adverse effect on those operations or our business as a whole, including:

exposure to local economic conditions;

conditions and labor issues;

exposure to local political conditions, including the risk of seizure of assets by a foreign government;

exposure to local social unrest, including any resultant acts of war, terrorism or similar events;

exposure to local public health issues and the resultant impact on economic and political conditions;

currency exchange rate fluctuations;

hyperinflation in certain foreign countries;

controls on the repatriation of cash, including imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries; and

export and import restrictions.

restrictions; and

requirements for manufacturers to use locally produced goods.

New regulations related to conflict-free minerals may force us to incur additional expenses and otherwise adversely impact our business.
In August 2012, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC adopted final rules regarding disclosure of the use of certain minerals, known as conflict minerals, originating from the Democratic Republic of Congo (DRC) or adjoining countries. These new requirements will require ongoing due diligence efforts, with initial disclosure requirements beginning in May 2014. Our supply chain is complex and we may incur significant costs to determine the source of any such minerals used in our products. We may also incur costs with respect to potential changes to products, processes or sources of supply as a consequence of our diligence activities. Further, the implementation of these rules and their effect on customer, supplier and/or consumer behavior could adversely affect the sourcing, supply and pricing of materials used in our products. As there may be only a limited number of suppliers offering conflict-free minerals, we cannot be sure that we will be able to obtain necessary minerals from such suppliers in sufficient quantities or at competitive prices. We may face reputational challenges if we determine that certain of our products contain minerals not determined to be conflict-free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products through the procedures we implement. Accordingly, the implementation of these rules could have a material adverse effect on our business, results of operations and/or financial condition.
Exchange rate fluctuations could cause a decline in our financial condition and results of operations.

As a result of our international operations, we are subject to increased risk because we generate a significant portion of our net sales and incur a significant portion of our expenses in currencies other than the U.S. dollar. For example, where we have a greater portion of costs than revenues generated in a foreign currency, we are subject to risk if the foreign currency in which our costs are paid appreciates against the currency in which we generate revenue because the appreciation effectively increases our cost in that country.


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The financial condition and results of operations of some of our operating entities are reported in foreign currencies and then translated into U.S. dollars at the applicable exchange rate for inclusion in our consolidated financial statements. As a result, appreciation of the U.S. dollar against these foreign currencies generally will have a negative impact on our reported revenues and operating profit while depreciation of the U.S. dollar against these foreign currencies will generally have a positive effect on reported revenues and operating profit. For example, our consolidated results of operations were negatively impacted in 2013 primarily due to the weakening of the Canadian dollar, Argentine Peso and Indian Rupee against the U.S. dollar and in 2012 due to the weakening of the Euro against the U.S. dollar. Our consolidated results of operations were positively impacted in 2011 due to the strengthening of the Euro against the U.S. dollar. However, in 2008 through 2010, the dollar strengthened against the Euro which had negative effects on our results of operations. Our South American operations were negatively impacted by the devaluation in 2000 of the Brazilian currency as well as by the devaluation of the Argentine currency in 2002. We do not generally seek to mitigate this translation effect through the use of derivative financial instruments. To the extent we are unable to match revenues received in foreign currencies with costs paid in the same currency, exchange rate fluctuations in that currency could have a material adverse effect on our business.

Entering new markets poses new competitive threats and commercial risks.

As we have expanded into markets beyond light vehicles, we expect to diversify our product sales by leveraging technologies being developed for the light vehicle segment. Such diversification requires investments and resources which may not be available as needed. We cannot guarantee that we will be successful in leveraging our capabilities into new markets and thus, in meeting the needs of these new customers and competing favorably in these new markets. Further, a significant portion of our growth potential is dependent on our ability to increase sales to commercial truck and off-highway vehicle customers. While we believe that we can achieve our growth targets with the production contracts that have been or will be awarded to us, our future prospects will be negatively affected if those customers underlying these contracts experience reduced demand for their productionproducts, or financial difficulties.


Impairment in the carrying value of long-lived assets and goodwill could negatively affect our operating results.

We have a significant amount of long-lived assets and goodwill on our consolidated balance sheet. Under generally accepted accounting principles, long-lived assets are required to be reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment. If business conditions or other factors cause profitability and cash flows to decline, we may be required to record non-cash impairment charges. Goodwill must be evaluated for impairment annually or more frequently if events indicate it is warranted. If the carrying value of our reporting units exceeds their current fair value as determined based on the discounted future cash flows of the related business, the goodwill is considered impaired and is reduced to fair value by a non-cash charge to earnings. Events and conditions that could result in impairment in the value of our long-lived assets and goodwill include changes in the industries in which we operate, particularly the impact of a downturn in the global economy, as well as competition and advances in technology, adverse changes in the regulatory environment, or other factors leading to reduction in expected long-term sales or profitability. For example, during the fiscal year ended December 31, 2008, we recorded a $114 million asset impairment charge to write-off the remaining goodwill related to our 1996 acquisition of Clevite Industries and during the fiscal year ended December 31, 2011, we recorded a $11 million goodwill impairment charge relating to our Australian reporting unit.

unit and during the fiscal year ended December 31, 2012, we recorded non-cash asset impairment charges of $4 million related to the announced closing of our aftermarket clean air plant in Vittaryd, Sweden, and a $7 million asset impairment charge related to certain assets of our European ride performance business.

The value of our deferred tax assets could become impaired, which could materially and adversely affect our operating results.

As of December 31, 2011,2013, we had approximately $76$165 million in net deferred tax assets. These deferred tax assets include net operating loss carryovers and tax credits that can be used to offset taxable income in future periods and reduce income taxes payable in those future periods. Each quarter, we determine the probability of the realization of deferred tax assets, using significant judgments and estimates with respect to, among other things, historical operating results and expectations of future earnings and tax planning strategies. If we determine in the future that there is not sufficient positive evidence to support the valuation of these assets, due to the risk factors described herein or other factors, we may be required to further adjust the valuation allowance to reduce our deferred tax assets. Such a reduction could result in material non-cash expenses in the period in which the valuation allowance is adjusted and could have a material adverse effect on our results of operations.

Our expected annual effective tax rate could be volatile and materially change as a result of changes in mix of earnings and other factors.

Our overall effective tax rate is equal to our total tax expense as a percentage of our total profit or loss before tax. However, tax expenses and benefits are determined separately for each tax paying entity or group of entities that is consolidated for tax purposes in each jurisdiction. Losses in certain jurisdictions may provide no current financial statement tax benefit. As a result, changes in the mix of profits and losses between jurisdictions, among other factors, could have a significant impact on our overall effective tax rate.

ITEM 1B.UNRESOLVED STAFF COMMENTS.


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ITEM 1B.UNRESOLVED STAFF COMMENTS.
None.

ITEM 2.PROPERTIES.

ITEM 2.PROPERTIES.
We lease our principal executive offices, which are located at 500 North Field Drive, Lake Forest, Illinois, 60045.

Our emission controlClean Air business operates 1162 manufacturing facilities worldwide, of which 14 facilities are located in the U.S.North America, 24 in Europe, South America and 46 manufacturing facilities outside of the U.S. Our emission controlIndia, and 24 in Asia Pacific. Clean Air business also operates fivefour engineering and technical facilities worldwide and share twoshares three other such facilities with our ride controlRide Performance business. Twenty-six of these manufacturing plants are JIT facilities. In addition, two joint ventures in which we hold a noncontrolling interest operate a total of two manufacturing facilities outside the U.S.,in Europe, all of which are JIT facilities.

Our ride controlRide Performance business operates seven27 manufacturing facilities worldwide, of which nine facilities are located in the U.S.North America, 13 in Europe, South America and 23 manufacturing facilities outside the U.S.India, and five in Asia Pacific. Our ride controlRide Performance business also operates seven engineering and technical facilities worldwide and share twoshares three other such facilities with our emission controlClean Air business. TwoOne of these manufacturing plants areis a JIT facilities.

facility and is located in Europe.

The above-described manufacturing locations outside of the U.S. are located in Argentina, Australia, Belgium, Brazil, Canada, China, Czech Republic, France, Germany, Hungary, India, Italy, Japan, Korea, Mexico, Poland, Portugal, Russia, Spain, South Africa, Sweden, Thailand, the United Kingdom and the United Kingdom.States. We also have sales offices located in Japan, Singapore, Taiwan and Taiwan.

United Arab Emirates.

We own 5245 and lease 57 of the properties described above and lease 64.above. We hold 1713 of the above-described international manufacturing facilities through sevensix joint ventures in which we own a controlling interest. In addition, two joint ventures in which we hold a noncontrolling interest operate a total of two manufacturing facilities outside the U.S.in Europe. We also have distribution facilities at our manufacturing sites and at a few offsiteoff-site locations, substantially all of which we lease.

We believe that substantially all of our plants and equipment are, in general, well maintained and in good operating condition. They are considered adequate for present needs and, as supplemented by planned construction, are expected to remain adequate for the near future.

We also believe that we have generally satisfactory title to the properties owned and used in our respective businesses.

ITEM 3.LEGAL PROCEEDINGS.

ITEM 3.LEGAL PROCEEDINGS.
We are involved in environmental remediation matters, legal proceedings, claims, investigations and warranty obligations thatobligations. These matters are typically incidental to the conduct of our business and create the potential for contingent losses. We accrue for potential contingent losses when our review of available facts indicates that it is probable a loss has been incurred and the amount of the loss is reasonably estimable. Each quarter we assess our loss contingencies based upon currently available facts, existing technology, and presently enacted laws and regulations taking into consideration the likely effects of inflation and other societal and economic factors and record adjustments to these reserves as required. As an example, we consider all available evidence including prior experience in remediation of contaminated sites, other companies’ cleanup experiences and data released by the United States Environmental Protection Agency or other organizations when we evaluate our environmental remediation contingencies. Further, all of our loss contingency estimates are subject to revision in future periods based on actual costs or new information. With respect to our environmental liabilities, where future cash flows are fixed or reliably determinable, we have discounted those liabilities. All other environmental liabilities are recorded at their undiscounted amounts. We evaluate recoveries separately from the liability and, when they are assured, recoveries are recorded and reported separately from the associated liability in our consolidated financial statements.

We are subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which we operate. We expense or capitalize, as appropriate, expenditures for ongoing compliance with

environmental regulations that relate to current operations. We expense costs related to an existing condition caused by past operations that do not contribute to current or future revenue generation. As of December 31, 2011,2013, we have the obligation to remediate or contribute towards the remediation of certain sites, including one Federal Superfund site. At December 31, 2011,2013, our aggregated estimated share of environmental remediation costs for all these sites on a discounted basis was approximately $17$15 million, of which $5$3 million is recorded in other current liabilities and $12 million is recorded in deferred credits and other liabilities in our consolidated balance sheet. For those locations in whichwhere the liability was discounted, the weighted average discount rate used was 1.92.8 percent. The undiscounted value of the estimated remediation costs was $20$19 million. Our expected payments of environmental remediation costs are estimated to be approximately $4$3 million in 2012, $2 million in 2013,2014, $1 million each year beginning 20142015 through 20162018 and $11$12 million in aggregate thereafter. Based on information known to us, we have established reserves that we believe are adequate for these costs. Although we believe these estimates of remediation costs are reasonable and are based on the latest available information, the costs are estimates and are subject to revision as more information becomes available about the extent of remediation required. At some sites, we expect that other parties will contribute towards the remediation costs. In


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addition, certain environmental statutes provide that our liability could be joint and several, meaning that we could be required to pay in excess of our share of remediation costs. Our understanding of the financial strength of other potentially responsible parties at these sites has been considered, where appropriate, in our determination of our estimated liability. We do not believe that any potential costs associated with our current status as a potentially responsible party in the Federal Superfund site, or as a liable party at the other locations referenced herein, will be material to our consolidated results of operations, financial position or cash flows.

We also from time to time are involved in legal proceedings, claims or investigations. Some of these proceedings allegematters involve allegations of damages against us relating to environmental liabilities (including, toxic tort, property damage and remediation), intellectual property matters (including patent, trademark and copyright infringement, and licensing disputes), personal injury claims (including injuries due to product failure, design or warning issues, and other product liability related matters), taxes, employment matters, and commercial or contractual disputes, sometimes related to acquisitions or divestitures. Some of these matters involve allegations relating to legal compliance. For example, one of our Argentine subsidiaries is currently defending against a criminal complaint alleging the failure to comply with laws requiring the proceeds of export transactions to be collected, reported and/or converted to local currency within specified time periods. As another example, in the U.S. we are subject to an audit in 11 states with respect to the payment of unclaimed property to those states, spanning a period as far back as over 30 years. We now have practices in place whichWhile we believe ensure that we pay unclaimed property as required. We vigorously defend ourselves against all of these claims. Inclaims in future periods we could be subject to cash costs or charges to earnings if any of these matters are resolved on unfavorable terms. However, althoughAlthough the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, including our assessment of the merits of the particular claim, we do not expect that thesethe legal proceedings or claims currently pending against us will have any material adverse impact on our future consolidated financial position, results of operations or cash flows.

In addition, we are subject to a number of lawsuits initiated by a significant number of claimants alleging health problems as a result of exposure to asbestos. In the early 2000’s we were named in nearly 20,000 complaints, most of which were filed in Mississippi state court and the vast majority of which made no allegations of exposure to asbestos from our product categories. Most of these claims have been dismissed and our current docket of active and inactive cases is less than 500 cases nationwide. A small number of claims have been asserted by railroad workers alleging exposure to asbestos products in railroad cars manufactured by The Pullman Company, one of our subsidiaries. The balancesubstantial majority of the remaining claims isare related to alleged exposure to asbestos in our automotive products. Only a small percentage of the claimants allege that they were automobile mechanics and a significant number appear to involve workers in other industries or otherwise do not include sufficient information to determine whether there is any basis for a claim against us. We believe, based on scientific and other evidence, it is unlikely that mechanics were exposed to asbestos by our former products and that, in any event, they would not be at increased risk of asbestos-related disease based on their work with these products. Further, many of these cases involve numerous defendants, with the number of each in some cases exceeding 100 defendants from a variety of industries. Additionally, the plaintiffs either do not specify any, or specify the jurisdictional minimum, dollar amount for damages. As major asbestos manufacturers and/or users continue to go

out of business or file for bankruptcy, we may experience an increased number of these claims. We vigorously defend ourselves against these claims as part of our ordinary course of business. In future periods, we could be subject to cash costs or charges to earnings if any of these matters are resolved unfavorably to us. To date, with respect to claims that have proceeded sufficiently through the judicial process, we have regularly achieved favorable resolutions. Accordingly, we presently believe that these asbestos-related claims will not have a material adverse impact on our future consolidated financial condition, results of operations or cash flows.

ITEM 4.MINE SAFETY DISCLOSURES.

ITEM 4.MINE SAFETY DISCLOSURES.
Not applicable.

ITEM 4.1.EXECUTIVE OFFICERS OF THE REGISTRANT.



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ITEM 4.1.EXECUTIVE OFFICERS OF THE REGISTRANT.
The following provides information concerning the persons who serve as our executive officers as of February 24, 2012.

28, 2014.

Name and Age

 

Offices Held

Gregg M. Sherrill (59)

(61)		 Chairman and Chief Executive Officer

Hari N. Nair (52)

(54)		 Chief Operating Officer

Josep Fornos (61)

Executive Vice President, Ride Performance Division
Timothy E. Jackson (57)Executive Vice President Technology, Strategy and Business Development
Kenneth R. Trammell (51)

(53)		 Executive Vice President and Chief Financial Officer

Neal A. Yanos (50)

(52)		 Executive Vice President, North AmericaClean Air Division

Brent J. Bauer (56)

(58)		 Senior Vice President and General Manager — North America Original Equipment Emission ControlClean Air

Michael J. Charlton (53)

Gregg Bolt (54)		 Senior Vice President, Global Supply Chain ManagementHuman Resources and ManufacturingAdministration

Josep Fornos (59)

Michael J. Charlton (55)		 Senior Vice President, General Manager Europe, South AmericaGlobal Manufacturing Development and IndiaEuropean Cost Reduction Initiatives

James D. Harrington (51)

(53)		 Senior Vice President, General Counsel and Corporate Secretary

Timothy E. Jackson (55)

Senior Vice President and Chief Technology Officer

Barbara A. Kluth (55)

Senior Vice President — Global Human Resources

Paul D. Novas (53)

(55)		 Vice President and Controller

Gregg M. Sherrill — Mr. Sherrill was named the Chairman and Chief Executive Officer of Tenneco in January 2007. Mr. Sherrill joined us from Johnson Controls Inc., where he served since 1998, most recently as President, Power Solutions. From 2002 to 2003, Mr. Sherrill served as the Vice President and Managing Director of Europe, South Africa and South America for Johnson Controls’ Automotive Systems Group. Prior to joining Johnson Controls, Mr. Sherrill held various engineering and manufacturing assignments over a 22-year span at Ford Motor Company, including Plant Manager of Ford’s Dearborn, Michigan engine plant, Chief Engineer, Steering Systems and Director of Supplier Technical Assistance. Mr. Sherrill became a director of our company in January 2007.

Hari N. Nair — Mr. Nair was named Chief Operating Officer in July 2010. Prior to that, he served as our Executive Vice President and President — International since March 2007. Previously, Mr. Nair served as Executive Vice President and Managing Director of our business in Europe, South America and India. Before that, he was Senior Vice President and Managing Director — International. Prior to December 2000, Mr. Nair was the Vice President and Managing Director — Emerging Markets. Previously, Mr. Nair was the Managing Director for Tenneco Automotive Asia, based in Singapore and responsible for all operations and development projects in Asia. He began his career with the former Tenneco Inc. in 1987, holding various positions in strategic planning, marketing, business development, quality systems and finance. Prior to joining Tenneco, Mr. Nair was a senior financial analyst at General Motors Corporation focusing on European operations. Mr. Nair became a director of our company in March 2009.

Kenneth R. TrammellJosep Fornos — Mr. Trammell has served as our Executive Vice President and Chief Financial Officer since January 2006. Mr. Trammell was named our Senior Vice President and Chief Financial Officer in September 2003, having served as our Vice President and Controller since September 1999. From April 1997 to

November 1999, he served as Corporate Controller of Tenneco Inc. He joined Tenneco Inc. in May 1996 as Assistant Controller. Before joining Tenneco Inc., Mr. Trammell spent 12 years with the international public accounting firm of Arthur Andersen LLP, last serving as a senior manager.

Neal A. Yanos — Mr. YanosFornos was named Executive Vice President, North AmericaRide Performance Division in July 2008. Prior to that, heFebruary 2013. He served as our SeniorExecutive Vice President and General Manager, — North American Original Equipment Ride ControlEurope, South America and North American Aftermarket since May 2003. He joined our Monroe ride control division as a process engineer in 1988 and since that time has served in a broad range of assignments including product engineering, strategic planning, business development, finance, program management and marketing, including Director of our North American Original Equipment GM/VW business unit and most recently as our Vice President and General Manager — North American Original Equipment Ride Control from December 2000. Before joining our company, Mr. Yanos was employed in various engineering positions by Sheller Globe Inc. from 1985 to 1988.

Brent J. Bauer — Mr. Bauer has served as our Senior Vice President and General Manager — North American Original Equipment Emission Control since May 2002. Prior to this appointment, Mr. Bauer was named Vice President and General Manager — European and North American Original Equipment Emission Control in July 2001. Mr. Bauer joined Tenneco Automotive in August 1996 as a Plant Manager and was named Vice President and General Manager — European Original Equipment Emission Control in September 1999. Prior to joining Tenneco, he was employed at AeroquipVickers Corporation for 20 years in positions of increasing responsibility serving most recently as Director of Operations.

Michael J. Charlton — Mr. Charlton has served as our Senior Vice President, Global Supply Chain Management and Manufacturing since January 2010. Mr. Charlton served as our Vice President, Global Supply Chain Management and Manufacturing from November 2008 through December 2009. Mr. Charlton served as Tenneco’s Managing Director for India from January 2008 until November 2008. PriorMarch 2012 to that, he servedFebruary 2013 and as the operations director for the Company’s emission control business in Europe since 2005. Prior to joining Tenneco in 2005, Mr. Charlton held a variety of positions of increasing responsibility at TRW Automotive, the most recent being Lead Director, European Purchasing and Operations for the United Kingdom.

Josep Fornos — Josep Fornos was named Senior Vice President and General Manager, Europe, South America and India infrom July 2010.2010 to March 2012. Prior to this appointment,that, he had served as Vice President and General Manager, Europe Original Equipment Emission Control since March 2007. Mr. Fornos joined Tenneco in July 2000 as Vice President and General Manager, Europe Original Equipment Ride Control. Prior to joining Tenneco, Fornos spent a year at Lear Corporation as General Manager of the company’s seating and wire and harness business in France, following Lear’s acquisition of United Technologies Automotive. Mr. Fornos spent 16 years with United Technologies Automotive, holding several management positions in production, engineering and quality control in Spain and later having Europe-wide responsibility for engineering and quality control.


James D. HarringtonTimothy E. Jackson — Mr. HarringtonJackson has served as Executive Vice President, Technology, Strategy and Business Development since March 2012. He served as our Senior Vice President General Counsel and Corporate Secretary since June 2009 and is responsible for managing our worldwide legal affairs including corporate governance and compliance. Mr. Harrington joined us in January 2005 as Corporate Counsel and was named Vice President — Law in July 2007. Prior to joining Tenneco, he worked at Mayer Brown LLP in the firm’s corporate and securities practice.

Timothy E. Jackson — Mr. Jackson has served as our Chief Technology Officer sincefrom March 2007.2007 to March 2012. Prior to this role,that, Mr. Jackson served as our Senior Vice President — Global Technology and General Manager, Asia Pacific since July 2005. From 2002 to 2005, Mr. Jackson served as Senior Vice President — Manufacturing, Engineering, and Global Technology. In August 2000, he was named Senior Vice President — Global Technology, a role he served in after joining us as Senior Vice President and General Manager — North American Original Equipment and Worldwide Program Management in June 1999. Mr. Jackson came to Tenneco from ITT Industries where he was President of that company’s Fluid Handling Systems Division. With over 30 years of management experience, 14 within the automotive industry, he had also served as Chief Executive Officer for HiSAN,HiSan, a joint venture between ITT Industries and Sanoh Industrial Company. Mr. Jackson has also held senior management positions at BF Goodrich Aerospace and General Motors Corporation.


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Barbara A. KluthKenneth R. Trammell — Ms. KluthMr. Trammell has served as our Executive Vice President and Chief Financial Officer since January 2006. Mr. Trammell was named our Senior Vice President and Chief Financial Officer in September 2003, having served as our Vice President and Controller since September 1999. From April 1997 to November 1999, he served as Corporate Controller of Tenneco Inc. He joined Tenneco Inc. in May 1996 as Assistant Controller. Before joining Tenneco Inc., Mr. Trammell spent 12 years with the international public accounting firm of Arthur Andersen LLP, last serving as a senior manager.
Neal A. Yanos — Mr. Yanos was named Executive Vice President, Clean Air Division in February 2013. He served as Executive Vice President, North America from July 2008 to February 2013. Prior to that, he served as our Senior Vice President and General Manager — North American Original Equipment Ride Control and North American Aftermarket since May 2003. He joined our Monroe® ride control division as a process engineer in 1988 and since that time has served in a broad range of assignments including product engineering, strategic planning, business development, finance, program management and marketing, including Director of our North American Original Equipment GM/VW business unit and most recently as our Vice President and General Manager — North American Original Equipment Ride Control from December 2000. Before joining our company, Mr. Yanos was employed in various engineering positions by Sheller Globe Inc. from 1985 to 1988.
Brent J. Bauer — Mr. Bauer has served as our Senior Vice President and General Manager — North American Original Equipment Clean Air (f/k/a Emission Control) since May 2002. Prior to this appointment, Mr. Bauer was named Vice President and General Manager — European and North American Original Equipment Emission Control in July 2001. Mr. Bauer joined Tenneco Automotive in August 1996 as a Plant Manager and was named Vice President and General Manager — European Original Equipment Emission Control in September 1999. Prior to joining Tenneco, he was employed at AeroquipVickers Corporation for 20 years in positions of increasing responsibility serving most recently as Director of Operations.
Gregg Bolt — Mr. Bolt was named our Senior Vice President, Global Human Resources and Administration in February 2013. Prior to joining Tenneco, Mr. Bolt worked for Quad/Graphics, Inc. as Executive Vice President, Human Resources and Administration from March 2009 to January 2013. Previously, he was with Johnson Controls Inc. for more than 10 years, serving most recently as Vice President, Human Resources for JCI’s Building Efficiency division.
Michael J. Charlton — Mr. Charlton was named Senior Vice President, Global Manufacturing Development and European Cost Reduction Initiatives in February 2013. He served as our Senior Vice President, Global Supply Chain Management and Manufacturing from January 2010 to February 2013. Mr. Charlton served as our Vice President, Global Supply Chain Management and Manufacturing from November 2008 through December 2009. Mr. Charlton served as Tenneco’s Managing Director for India from January 2008 until November 2008. Prior to that, he served as the operations director for the Company’s emission control business in Europe since March 2011. She2005. Prior to joining Tenneco in 2005, Mr. Charlton held a variety of positions of increasing responsibility at TRW Automotive, the most recent being Lead Director, European Purchasing and Operations for the United Kingdom.
James D. Harrington — Mr. Harrington has served as our Senior Vice President, General Counsel and Corporate Secretary since June 2009 and is responsible for managing our worldwide legal affairs including corporate governance and compliance. Mr. Harrington joined us in January 2005 as Corporate Counsel and was named Vice President Global Human Resources— Law in April 2010. In December 2001, she was named Executive Director, HR, North America after beginning her careerJuly 2007. Prior to joining Tenneco, he worked at Mayer Brown LLP in human resources in 1988 as HR manager for our Marshall, Michigan facility. She joined Tenneco in 1985 as an internal auditor.the firm’s corporate and securities practice.

Paul D. Novas — Mr. Novas was namedhas served as our Vice President and Controller insince July 2006. Mr. Novas served as Vice President, Finance and Administration for Tenneco Europe from January 2004 until July 2006 and as Vice President and Treasurer of Tenneco from November 1999 until January 2004. Mr. Novas joined Tenneco in 1996 as assistant treasurer responsible for corporate finance and North American treasury operations. Prior to joining Tenneco, Mr. Novas worked in the treasurer’s office of General Motors Corporation for ten years.

PART II


ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our outstanding shares of common stock, par value $.01 per share, are listed on the New York and Chicago Stock Exchanges. The following table sets forth, for the periods indicated, the high and low sales prices of our common stock on the New York Stock Exchange Composite Transactions Tape.

   Sales Prices 

Quarter

  High   Low 

2011

    

1st

  $46.81    $36.23  

2nd

   46.80     36.52  

3rd

   46.49     24.33  

4th

   36.96     22.47  

2010

    

1st

  $25.00    $17.17  

2nd

   27.50     19.06  

3rd

   31.46     19.29  

4th

   43.71     28.47  


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 Sales Prices
QuarterHigh Low
2013
 
1st$39.50
 $34.55
2nd47.83
 34.26
3rd52.01
 45.30
4th57.85
 48.60
2012
 
1st$40.69
 $29.45
2nd39.28
 24.35
3rd32.81
 24.43
4th35.25
 26.72
As of February 21, 2012,2014, there were approximately 18,37817,016 holders of record of our common stock, including brokers and other nominees.

The declaration of dividends on our common stock is at the discretion of our Board of Directors. The Board has not adopted a dividend policy as such; subject to legal and contractual restrictions, its decisions regarding dividends are based on all considerations that in its business judgment are relevant at the time. These considerations may include past and projected earnings, cash flows, economic, business and securities market conditions and anticipated developments concerning our business and operations.

We are highly leveraged and restricted with respect to the payment of dividends under the terms of our financing arrangements. On January 10, 2001, we announced that our Board of Directors eliminated the regular quarterly dividend on the Company’s common stock. The Board took this action in response to then-then current industry conditions, primarily greater than anticipated production volume reductions by OEMs in North America and continued softness in the global aftermarket. We have not paid dividends on our common stock since the fourth quarter of 2000. There are no current plans to reinstate a dividend on our common stock. For additional information concerning our payment of dividends, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7.


See “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” included in Item 12 for information regarding securities authorized for issuance under our equity compensation plans.

Purchase of equity securities by the issuer and affiliated purchasers

The following table provides information relating to our purchase of shares of our common stock in the fourth quarter of 2011. All these2013. These purchases reflectinclude shares withheld upon vesting of restricted stock for minimum tax withholding obligations. We intend to continue to satisfy statutory minimum tax withholding obligations in connection with the vesting of outstanding restricted stock through the withholding of shares.

Period

  Total Number of
Shares  Purchased		  Average  Price
Paid

October 2011

    2,888     $33.98 

November 2011

    9     31.10 

December 2011

    2,820     29.73 
   

 

 

    

Total

    5,717     $31.88 

PeriodTotal Number of
Shares Purchased		 Average Price
Paid		 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet be Purchased Under These Plans or Programs
October 2013116,732
 $52.02
 114,646
 15,454
November 201315,463
 $53.68
 15,454
 —
December 2013—
 $—
 —
 —
Total132,195
 $52.21
 130,100
 —
In January 2012,2014, our Board of Directors approved a share repurchase program, authorizing our company to repurchase up to 600,000400,000 shares of the Company’s outstanding common stock over a 12 month period. OurThis share repurchase program is intended to offset dilution from shares of restricted stock and stock options issued in 20122014 to employees.

Recent Sales of Unregistered Securities

None.


Share Performance


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The following graph shows a five year comparison of the cumulative total stockholder return on Tenneco’s common stock as compared to the cumulative total return of two other indexes: a custom composite index (“Peer Group”) and the Standard & Poor’s 500 Composite Stock Price Index. The companies included in the Peer Group are: ArvinMeritorMeritor, Inc., American Axle & Manufacturing Co., Borg Warner Inc., Cummins Inc., Johnson Controls Inc., Lear Corp., Magna International Inc. and TRW Automotive Holdings Corp. These comparisons assume an initial investment of $100 and the reinvestment of dividends.

   12/31/06  12/31/07  12/31/08  12/31/09  12/31/10  12/31/11 

Tenneco Inc.

  100.00    105.46    11.93    71.72    166.50    120.47  

S&P 500

  100.00    105.49    66.46    84.05    96.71    98.75  

Peer Group

  100.00    133.21    58.42    101.00    186.97    142.42  

 
 12/31/200812/31/200912/31/201012/31/201112/31/201212/31/2013
Tenneco Inc.100.00
601.02
1,395.25
1,009.49
1,190.17
1,917.63
S&P 500100.00
126.46
145.51
148.59
172.37
228.19
Peer Group100.00
172.90
324.17
249.91
300.97
469.40
The graph and other information furnished in the section titled “Share Performance” under this Part II, Item 5 of this Form 10-K shall not be deemed to be “soliciting” material or to be “filed” with the Securities and Exchange Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.

ITEM 6.SELECTED FINANCIAL DATA.



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ITEM 6.SELECTED FINANCIAL DATA.
The following data should be read in conjunction with Item 7 — “Management’s Discussion and Analysis of Financial Condition and Operations” and our consolidated financial statements in Item 8 — “Financial Statements and Supplementary Data.” These items include discussions of factors affecting comparability of the information shown below.

In connection with the organizational changes announced on February 14, 2013 that aligned our businesses along product lines, effective with 2013, our three prior geographic reportable segments have each been split into two product segments. Beginning with 2013, we are managed and organized along our two major product lines (clean air and ride performance) and three geographic areas (North America; Europe, South America and India; and Asia Pacific), resulting in six operating segments (North America Clean Air, North America Ride Performance, Europe, South America and India Clean Air, Europe, South America and India Ride Performance, Asia Pacific Clean Air and Asia Pacific Ride Performance). Within each geographical area, each operating segment manufactures and distributes either clean air or ride performance products primarily for the original equipment and aftermarket industries. Each of the six operating segments constitutes a reportable segment. Costs related to other business activities, primarily corporate headquarter functions, are disclosed separately from the six operating segments as "Other." Prior period segment information has been revised to reflect our new reporting segments.


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TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL DATA

  Year Ended December 31, 
  2011(a)  2010  2009(b)  2008(c)  2007 
  (Millions Except Share and Per Share Amounts) 

Statements of Income (Loss) Data:

     

Net sales and operating revenues —

     

North America

 $3,426   $2,832   $2,099   $2,641   $2,910  

Europe, South America and India

  3,169    2,594    2,209    2,983    3,135  

Asia Pacific

  804    698    525    543    560  

Intergroup sales

  (194)   (187)   (184)   (251)   (421) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 $7,205   $5,937   $4,649   $5,916   $6,184  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings (loss) before interest expense, income taxes, and noncontrolling interests North America

 $216   $155   $42   $(107)  $120  

Europe, South America and India

  125    76    20    85    99  

Asia Pacific

  38    50    30    19    33  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  379    281    92    (3)   252  

Interest expense (net of interest capitalized)

  108    149    133    113    164  

Income tax expense

  88    69    13    289    83  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

  183    63    (54)   (405)   5  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Less: Net income attributable to noncontrolling interests

  26    24    19    10    10  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to Tenneco Inc.

 $157   $39   $(73)  $(415)  $(5) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average shares of common stock outstanding —

     

Basic

  59,884,139    59,208,103    48,572,463    46,406,095    45,809,730  

Diluted

  61,520,160    60,998,694    48,572,463    46,406,095    45,809,730  

Basic earnings (loss) per share of common stock

 $2.62   $0.65   $(1.50)  $(8.95)  $(0.11) 

Diluted earnings (loss) per share of common stock

 $2.55   $0.63   $(1.50)  $(8.95)  $(0.11) 

   Years Ended December 31, 
   2011  2010  2009  2008  2007 
   (Millions Except Ratio and Percent Amounts) 

Balance Sheet Data (at year end):

      

Total assets

  $3,337   $3,167   $2,841   $2,828   $3,590  

Short-term debt

   66    63    75    49    46  

Long-term debt

   1,158    1,160    1,145    1,402    1,328  

Redeemable noncontrolling interests

   12    12    7    7    6  

Total Tenneco Inc. shareholders’ equity

   —    (4)   (21)   (251)   400  

Noncontrolling interests

   43    39    32    24    25  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total equity

   43    35    11    (227)   425  

Statement of Cash Flows Data:

      

Net cash provided by operating activities

  $245   $244   $241   $160   $158  

Net cash used by investing activities

   (224)   (157)   (119)   (261)   (202) 

Net cash used by financing activities

   (26)   (30)   (87)   58    (10) 

Cash payments for plant, property and equipment

   (213)   (151)   (120)   (233)   (177) 

Other Data:

      

EBITDA including noncontrolling interests(d)

  $586   $497   $313   $219   $457  

Ratio of EBITDA including noncontrolling interests to interest expense

   5.43    3.34    2.35    1.94    2.79  

Ratio of net debt (total debt less cash and cash equivalents) to EBITDA including noncontrolling interests(e)

   1.72    1.99    3.36    6.05    2.60  

Ratio of earnings to fixed charges(f)

   3.10    1.79    —    —    1.46  

 Year Ended December 31,
 2013(a) 2012(b) 2011(c) 2010 2009(d)
 (Millions Except Share and Per Share Amounts)
Statements of Income (Loss) Data:         
Net sales and operating revenues —         
Clean Air Division         
North America$2,666
 $2,512
 $2,291
 $1,813
 $1,305
Europe, South America & India2,045
 1,827
 1,952
 $1,562
 $1,330
Asia Pacific853
 695
 625
 $543
 $405
Intergroup sales(120) (108) (107) $(93) $(121)
Total Clean Air Division5,444
 4,926
 4,761
 $3,825
 $2,919
Ride Performance Division         
North America1,265
 1,223
 1,135
 $1,019
 $799
Europe, South America & India1,087
 1,094
 1,217
 $1,032
 $880
Asia Pacific251
 213
 179
 $155
 $121
Intergroup sales(83) (93) (87) $(94) $(70)
Total Ride Performance Division2,520
 2,437
 2,444
 $2,112
 $1,730
Total Tenneco Inc.$7,964
 $7,363
 $7,205
 $5,937
 $4,649
Earnings (loss) before interest expense, income taxes, and noncontrolling interests —         
Clean Air Division         
North America$229
 $202
 $172
 $114
 $52
Europe, South America & India57
 54
 79
 $50
 $7
Asia Pacific84
 71
 47
 $53
 $25
Total Clean Air Division370
 327
 298
 $217
 $84
Ride Performance Division         
North America124
 122
 76
 $87
 $26
Europe, South America & India(7) 41
 69
 $55
 $27
Asia Pacific22
 5
 (6) $3
 $4
Total Ride Performance Division139
 168
 139
 $145
 $57
Other(85) (67) (58) (81) (49)
Total Tenneco Inc.$424
 $428
 $379
 281
 92
Interest expense (net of interest capitalized)80
 105
 108
 149
 133
Income tax expense122
 19
 88
 69
 13
Net income (loss)222
 304
 183
 63
 (54)
Less: Net income attributable to noncontrolling interests39
 29
 26
 24
 19
Net income (loss) attributable to Tenneco Inc.$183
 $275
 $157
 $39
 $(73)
Weighted average shares of common stock outstanding —         
Basic60,474,492
 59,985,677
 59,884,139
 59,208,103
 48,572,463
Diluted61,594,062
 61,083,510
 61,520,160
 60,998,694
 48,572,463
Basic earnings (loss) per share of common stock$3.03
 $4.58
 $2.62
 $0.65
 $(1.50)
Diluted earnings (loss) per share of common stock$2.97
 $4.50
 $2.55
 $0.63
 $(1.50)

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 Years Ended December 31,
 2013 2012 2011 2010 2009
 (Millions Except Ratio and Percent Amounts)
Balance Sheet Data (at year end):         
Total assets$3,830
 $3,608
 $3,337
 $3,167
 $2,841
Short-term debt83
 113
 66
 63
 75
Long-term debt1,019
 1,067
 1,158
 1,160
 1,145
Redeemable noncontrolling interests20
 15
 12
 12
 7
Total Tenneco Inc. shareholders’ equity433
 246
 —
 (4) (21)
Noncontrolling interests39
 45
 43
 39
 32
Total equity472
 291
 43
 35
 11
Statement of Cash Flows Data:         
Net cash provided by operating activities$503
 $365
 $245
 $244
 $241
Net cash used by investing activities(266) (273) (224) (157) (119)
Net cash used by financing activities(175) (89) (26) (30) (87)
Cash payments for plant, property and equipment(244) (256) (213) (151) (120)
Other Data:         
EBITDA including noncontrolling interests(e)$629
 $633
 $586
 $497
 $313
Ratio of EBITDA including noncontrolling interests to interest expense7.86
 6.03
 5.43
 3.34
 2.35
Ratio of net debt (total debt less cash and cash equivalents) to EBITDA including noncontrolling interests(f)1.31
 1.51
 1.72
 1.99
 3.36
Ratio of earnings to fixed charges(g)4.34
 3.55
 3.10
 1.79
 —
NOTE: Our consolidated financial statements for the three years ended December 31, 2011,2013, which are discussed in the following notes, are included in this Form 10-K under Item 8.


(a)2013 includes $78 million of restructuring and related costs primarily related to European cost reduction efforts including the closing of the ride performance plant in Gijon, Spain and intended reductions to the workforce at our ride performance plant in Sint-Truiden, our exit from the distribution of aftermarket exhaust products and ending production of leaf springs in Australia, headcount reductions in various regions, and the net impact of freezing our defined benefit plans in the United Kingdom. Of the total $78 million we incurred in restructuring and related costs, $3 million was related to non-cash asset write downs.
(b)2012 includes a $7 million asset impairment charge related to certain assets of our European Ride Performance business and a benefit of $5 million from property recoveries related to transactions originated by The Pullman Company before being acquired by Tenneco in 1996.
(c)During the third quarter of 2011, we recorded a goodwill impairment charge of $11 million related to our Australian reporting unit within the Asia Pacific segment.

(b)
(d)We incurred no direct economic loss from the bankruptcy filing of Chrysler and General Motors plants in North America during the second and third quarters of 2009. In this regard, we collected substantially all of our pre-petition receivables from Chrysler Group LLC and Chrysler Group LLC has assumed substantially all of the contracts which we had with Chrysler LLC. We collected substantially all of our pre-petition receivables from General Motors Company and General Motors Company has assumed substantially all of the contracts which we had with General Motors Corporation. However, the vehicle production shutdowns at Chrysler and significant reductions in vehicle production volumes at General Motors plants in North America during the second quarter of 2009 that coincided with their bankruptcies did cause Tenneco’s revenue from those two customers in North America to decline to $123 million in the second quarter of 2009, down from $242 million in the second quarter of 2008. We believe that General Motors and Chrysler were able to meet any unmet demand for their vehicles resulting from their production volume reductions in the second quarter of 2009 during the second half of 2009 after they exited their respective bankruptcy proceedings. Accordingly, for the entire 2009 calendar year, we consider the vehicle production volume reductions at Chrysler and General Motors to have been primarily driven by the same severe deterioration in overall economic conditions that caused substantially all of our original equipment customers in North America to significantly reduce production volumes in response to lower purchases of new vehicles.


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conditions that caused substantially all of our original equipment customers in North America to significantly reduce production volumes in response to lower purchases of new vehicles.
(c)During the fourth quarter of 2008, we recorded a goodwill impairment charge of $114 million related to our North American Original Equipment Ride Control reporting unit whose carrying value exceeded the estimated fair value. In addition, during the second half of 2008, we recorded tax expense of $190 million related to establishing a valuation allowance against our net deferred tax assets in the U.S.

(d)(e)

EBITDA including noncontrolling interests is a non-GAAP measure defined as net income before extraordinary items, cumulative effect of changes in accounting principle, interest expense, income taxes, depreciation and amortization and noncontrolling interests. We use EBITDA including noncontrolling interests, together with GAAP measures, to evaluate and compare our operating performance on a consistent basis between time periods and with other companies that

compete in our markets but which may have different capital structures and tax positions, which can have an impact on the comparability of interest expense, noncontrolling interests and tax expense. We also believe that using this measure allows us to understand and compare operating performance both with and without depreciation expense, which can vary based on several factors. We believe EBITDA including noncontrolling interests is useful to our investors and other parties for these same reasons.

EBITDA including noncontrolling interests should not be used as a substitute for net income or for net cash provided by operating activities prepared in accordance with GAAP. It should also be noted that EBITDA including noncontrolling interests may not be comparable to similarly titled measures used by other companies and, furthermore, that it excludes expenditures for debt financing, taxes and future capital requirements that are essential to our ongoing business operations. For these reasons, EBITDA including noncontrolling interests is of value to management and investors only as a supplement to, and not in lieu of, GAAP results. EBITDA including noncontrolling interests are derived from the statements of income (loss) as follows:

   Year Ended December 31, 
   2011   2010   2009  2008  2007 
   (Millions) 

Net income (loss)

  $157    $39    $(73)  $(415)  $(5) 

Noncontrolling interests

   26     24     19    10    10  

Income tax expense

   88     69     13    289    83  

Interest expense, net of interest capitalized

   108     149     133    113    164  

Depreciation and amortization of other intangibles

   207     216     221    222    205  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total EBITDA including noncontrolling interests

  $586    $497    $313   $219   $457  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

 Year Ended December 31,
 2013 2012 2011 2010 2009
 (Millions)
Net income (loss)$183
 $275
 $157
 $39
 $(73)
Noncontrolling interests39
 29
 26
 24
 19
Income tax expense122
 19
 88
 69
 13
Interest expense, net of interest capitalized80
 105
 108
 149
 133
Depreciation and amortization of other intangibles205
 205
 207
 216
 221
Total EBITDA including noncontrolling interests$629
 $633
 $586
 $497
 $313
(e)
(f)We present the ratio of net debt (total debt less cash and cash equivalents) to EBITDA including noncontrolling interests because management believes it is a useful measure of Tenneco’s credit position and progress toward reducing leverage. The calculation is limited in that we may not always be able to use cash to repay debt on a dollar-for-dollar basis.

(f)
(g)For purposes of computing this ratio, earnings generally consist of income before income taxes and fixed charges excluding capitalized interest. Fixed charges consist of interest expense, the portion of rental expense considered representative of the interest factor and capitalized interest. Earnings were insufficient to cover fixed charges by $39 million and $121 million for the yearsyear ended December 31, 2009 and 2008, respectively.2009. See Exhibit 12 to this Form 10-K for the calculation of this ratio.


ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

As you read the following review of our financial condition and results of operations, you should also read our consolidated financial statements and related notes beginning on page 67.

in Item 8.

Executive Summary

We are one of the world’s leading manufacturers of emission controlclean air and ride controlperformance products and systems for light vehicle, commercial truck and specialty vehicleoff-highway applications. We serve both original equipment (OE) vehicle designers and manufacturers and the repair and replacement markets, or aftermarket, globally through leading brands, including Monroe®, Rancho®, Clevite® Elastomers, Marzocchi®, AxiosTM™, KineticTM™ and Fric-RotTM™ ride controlperformance products and Walker®, XNOx™, FonosTM™, DynoMax®, ThrushTM™ and LukeyTM™ emission controlclean air products. We serve more than 6465 different original equipment manufacturers and commercial vehicletruck and off-highway engine manufacturers, and our products are included on nine of the top 10 car models produced for sale in Europe and nineeight of the top 10 light truck models produced for sale in North America for 2011.2013. Our aftermarket customers are comprised of full-line and specialty warehouse distributors, retailers, jobbers, installer chains and car dealers. As of December 31, 2011,2013, we operated 8789 manufacturing facilities worldwide and employed approximately 24,00026,000 people to service our customers’ demands.

Factors that continue to be critical to our success include winning new business awards, managing our overall global manufacturing footprint to ensure proper placement and workforce levels in line with business needs, maintaining competitive

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wages and benefits, maximizing efficiencies in manufacturing processes and reducing overall costs. In addition, our ability to adapt to key industry trends, such as a shift in consumer preferences to other vehicles in response to higher fuel costs and other economic and social factors, increasing technologically sophisticated content, changing aftermarket distribution channels, increasing environmental standards and extended product life of automotive parts, also play a critical role in our success. Other factors that are critical to our success include adjusting to economic challenges such as increases in the cost of raw materials and our ability to successfully reduce the impact of any such cost increases through material substitutions, cost reduction initiatives and other methods.

For 2011,2013, light vehicle production continued to improve from recent years in mostsome of the geographic regions in which we operate. Light vehicle production was up 10five percent in North America, and up five14 percent in bothChina and six percent in South America. India light vehicle production was down four percent and Australia was down 6 percent from 2012 levels. Europe light vehicle production was even compared to 2012.
In connection with the organizational changes announced on February 14, 2013 that aligned our businesses along product lines, effective with 2013, our three prior geographic reportable segments have each been split into two product segments. Beginning with 2013, we are managed and China, though not toorganized along our two major product lines (clean air and ride performance) and three geographic areas (North America; Europe, South America and India; and Asia Pacific), resulting in six operating segments (North America Clean Air, North America Ride Performance, Europe, South America and India Clean Air, Europe, South America and India Ride Performance, Asia Pacific Clean Air and Asia Pacific Ride Performance). Within each geographical area, each operating segment manufactures and distributes either clean air or ride performance products primarily for the levels seen in recent history.

We have a substantial amount of indebtedness. As such, our ability to generate cash — both to fund operations and service our debt — is also a significant area of focus for our company. See “Liquidity and Capital Resources” below for further discussion of cash flows and Item 1A, “Risk Factors” included in this Annual Report on Form 10-K.

Total revenues for 2011 were $7,205 million ($1,295 million in aftermarket revenues and $5,910 million in original equipment revenues),and aftermarket industries. Each of the six operating segments constitutes a 21reportable segment. Costs related to other business activities, primarily corporate headquarter functions, are disclosed separately from the six operating segments as "Other." Prior period segment information has been revised to reflect our new reporting segments.

Total revenue for 2013 was $7,964 million, an eight percent increase from $5,937 million ($1,169$7,363 million in aftermarket revenues and $4,768 million in original equipment revenues) in 2010.2012. Excluding the impact of currency and substrate sales, revenue was up $711$481 million, or 15 percent,from $5,703 million to $6,184 million, driven primarily by higher OE productionstronger global light vehicle volumes, higherlaunching new light vehicle platforms and growing commercial truck and off-highway and aftermarket sales globally and new launches of light and commercial vehicle emission control programs.

businesses.

Cost of sales: Cost of sales for 20112013 was $6,037$6,734 million, or 84.6 percent of sales, compared to $6,170 million, or 83.8 percent of sales compared to $4,900 million, or 82.5 percent of sales in 2010.2012. The following table lists the primary drivers behind the change in cost of sales ($ millions).

Year ended December 31, 2010

  $4,900  

Volume and mix

   871  

Material

   70  

Currency exchange rates

   179  

Restructuring

   (16) 

Other Costs

   33  
  

 

 

 

Year ended December 31, 2011

  $6,037  
  

 

 

 

Year ended December 31, 2012$6,170
Volume and mix571
Material(59)
Currency exchange rates(37)
Restructuring57
Other Costs32
Year ended December 31, 2013$6,734

The increase in cost of sales was due primarily to the year-over-year increase in production volumes, higher restructuring and other costs, mainly manufacturing, partially offset by lower net material costs and the impact of foreign currency exchange rates and higher material and other costs, mainly manufacturing.

rates.

Gross margin: Revenue less cost of sales for 20112013 was $1,168$1,230 million, or 15.4 percent of sales, versus $1,193 million, or 16.2 percent versus $1,037 million, or 17.5 percentof sales in 2010. The decline in gross margin percentage was primarily driven by a higher mix of OE revenues, higher substrate sales and higher material costs net of recoveries, which together had a 0.9 percentage point impact on gross margin.2012. The effects on gross margin resulting from higher volumes and lower restructuring and related expenses, were more than offset by unfavorable pricing, primarily related to contractual price reductions, higher manufacturing costs particularly in our North America OE ride control business, and inflationary wage costs in South Americanegative currency were partially offset by higher volumes and accounted for the remaining decline in gross margin.

better material cost management.

Engineering, research and development: Engineering, research and development expense was $133$144 million and $117$126 million in 20112013 and 2010,2012, respectively. Increased spending to support customer programs, technology applications, and growth in emerging markets and higher foreign exchange ratesdecreased engineering cost recoveries drove the increase in expense year-over-year.

year-over-year increase.

Selling, general and administrative: Selling, general and administrative expense was up $11$26 million in 2011,2013, at $428$453 million, compared to $417$427 million in 2010. Wage inflation2012. The year-over-year increase is due to higher compensation related accruals, growth in South America,emerging markets, higher restructuring and related expenses, to support new customer programs and new manufacturing facilitiesa benefit of $5 million in China, and higher aftermarket changeover costs primarily drove the increase in expense year-over-year. Lower deferred and long-term compensation expense indexed to the Company’s stock price partially offset these increases. 2010 included $6 million of charges2012 from property recoveries related to an actuarial loss for lump-sum pension payments.

transactions originated by The Pullman Company before being acquired by Tenneco in 1996.

Depreciation and amortization: Depreciation and amortization expense was $205 million for 2013 and 2012, respectively. The expense in 2011 was $2072012 included a $7 million compared to $216 million in 2010. Included in 2010 was $5 million of restructuring and related expenses.

Goodwill impairment: During the third quarter of 2011, we performed an impairment evaluation of our Australian reporting unit’s goodwill balance as a result of continued deterioration of that reporting unit’s financial performance driven by significant declines in industry production volumes in that region. As a result of our impairment evaluation, we concluded that the remaining amount of goodwill was impaired and accordingly, we recorded a goodwillasset impairment charge of $11 million.

related to the European ride performance business.

Earnings before interest expense, taxes and noncontrolling interests (“EBIT”) was $379$424 million for 2011, an improvement2013, a decrease of $98$4 million, when compared to $281$428 million in the prior year. Higher OE revenues, stronger margins on new light and commercial vehicle launches, lower depreciation and amortization expense, decreased restructuring and related costs,expenses, higher aftermarket sales, lower deferred and long-term compensationengineering expense, indexed to the Company’s stock price and $14 million of positivenegative currency drove the year-over-year increaseand a benefit of $5 million in 2012 from property recoveries related to EBIT. Partially offsetting the increasetransactions originated by The Pullman Company before being acquired by Tenneco in 1996 were partially offset by operational cost

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improvements, higher selling, general, administrativelight vehicle volumes globally, commercial truck and engineering spending to support new customer programs, which includedoff-highway revenue growth and higher aftermarket changeover costs and investments in new facilities in China, unfavorable pricing, primarily related to contractual price reductions, increased material costs net of recoveries, a goodwill impairment charge of $11 million in Australia and higher manufacturing and freight expenses.

sales.

Results from Operations

Net Sales and Operating Revenues for Years 20112013 and 2010

2012

The following tables below reflect our revenues for 20112013 and 2010.2012. We present these reconciliations of revenues in order to reflect the trend in our sales in various product lines and geographic regions separately from the effects of doing business in currencies other than the U.S. dollar. We have not reflected any currency impact in the 2010 table since this is the base period for measuring the effects of currency during 2011 on our operations. We believe investors find this information useful in understanding period-to-period comparisons in our revenues.

Additionally, we show the component of our OE revenue represented by substrate sales in the following tables.sales. While we generally have primary design, engineering and manufacturing responsibility for OE emission control systems, we do not manufacture substrates. Substrates are porous ceramic filters coated with a catalyst —- typically, precious metals such as platinum, palladium and rhodium. These are supplied to us by Tier 2 suppliers generally as directed by our OE customers. We generally earn a small margin on these components of the system. As the need for more sophisticated emission control solutions increases to meet more stringent environmental regulations, and as we capture more diesel aftertreatment business, these substrate components have been increasing as a percentage of our revenue. While these substrates dilute our gross margin percentage, they are a necessary component of an emission control system. We view the growth of substrates as a key indicator that our value-add content in an emission control system is moving toward the higher technology hot-end gas and diesel business.

Our value-add content in an emission control system includes designing the system to meet environmental regulations through integration of the substrates into the system, maximizing use of thermal energy to heat up the catalyst quickly, efficiently managing airflow to reduce back pressure as the exhaust stream moves past the catalyst, managing the expansion and contraction of the emission control system components due to temperature extremes experienced by an emission control system, using advanced acoustic engineering tools to design the desired exhaust sound, minimizing the opportunity for the fragile components of the substrate to be damaged when we integrate it into the emission control system and reducing unwanted noise, vibration and harshness transmitted through the emission control system.

We present these substrate sales separately in the following table because we believe investors utilize this information to understand the impact of this portion of our revenues on our overall business and because it removes the impact of potentially volatile precious metals pricing from our revenues. While our original equipment customers generally assume the risk of precious metals pricing volatility, it impacts our reported revenues. Excluding “substrate”Presenting revenues that exclude “substrates” used in catalytic converterconverters and diesel particulate filter salesfilters removes this impact.

   Year Ended December 31, 2011 
   Revenues   Currency
Impact		   Revenues
Excluding
Currency		   Substrate
Sales
Excluding
Currency		   Revenues
Excluding
Currency and
Substrate
Sales		 
   (Millions) 

North America Original Equipment

          

Ride Control

  $608    $4    $604    $—    $604  

Emission Control

   2,085     —     2,085     971     1,114  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total North America Original Equipment

   2,693     4     2,689     971     1,718  

North America Aftermarket

          

Ride Control

   518     5     513     —     513  

Emission Control

   203     3     200     —     200  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total North America Aftermarket

   721     8     713     —     713  

Total North America

   3,414     12     3,402     971     2,431  

Europe Original Equipment

          

Ride Control

   567     31     536     —     536  

Emission Control

   1,455     81     1,374     464     910  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Europe Original Equipment

   2,022     112     1,910     464     1,446  

Europe Aftermarket

          

Ride Control

   219     12     207     —     207  

Emission Control

   140     8     132     —     132  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Europe Aftermarket

   359     20     339     —     339  

South America & India

   632     8     624     102     522  

Total Europe, South America & India

   3,013     140     2,873     566     2,307  

Asia

   618     29     589     93     496  

Australia

   160     20     140     10     130  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Asia Pacific

   778     49     729     103     626  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Tenneco

  $7,205    $201    $7,004    $1,640    $5,364  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

   Year Ended December 31, 2010 
   Revenues   Currency
Impact		   Revenues
Excluding
Currency		   Substrate
Sales
Excluding
Currency		   Revenues
Excluding
Currency and
Substrate
Sales		 
   (Millions) 

North America Original Equipment

          

Ride Control

  $527    $—    $527    $—    $527  

Emission Control

   1,642     —     1,642     739     903  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total North America Original Equipment

   2,169     —     2,169     739     1,430  

North America Aftermarket

          

Ride Control

   484     —     484     —     484  

Emission Control

   168     —     168     —     168  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total North America Aftermarket

   652     —     652     —     652  

Total North America

   2,821     —     2,821     739     2,082  

Europe Original Equipment

          

Ride Control

   462     —     462     —     462  

Emission Control

   1,121     —     1,121     351     770  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Europe Original Equipment

   1,583     —     1,583     351     1,232  

Europe Aftermarket

          

Ride Control

   190     —     190     —     190  

Emission Control

   141     —     141     —     141  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Europe Aftermarket

   331     —     331     —     331  

South America & India

   532     —     532     76     456  

Total Europe, South America & India

   2,446     —     2,446     427     2,019  

Asia

   517     —     517     107     410  

Australia

   153     —     153     11     142  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Asia Pacific

   670     —     670     118     552  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Tenneco

  $5,937    $—    $5,937    $1,284    $4,653  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

   Year Ended December 31, 2011
Versus Year Ended December 31, 2010
Dollar and Percent Increase (Decrease)		 
   Revenues  Percent  Revenues
Excluding
Currency and
Substrate
Sales		  Percent 
   (Millions Except Percent Amounts) 

North America Original Equipment

     

Ride Control

  $81    15%  $77    15% 

Emission Control

   443    27%   211    23% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total North America Original Equipment

   524    24%   288    20% 

North America Aftermarket

     

Ride Control

   34    7%   29    6% 

Emission Control

   35    21%   32    19% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total North America Aftermarket

   69    11%   61    9% 

Total North America

   593    21%   349    17% 

Europe Original Equipment

     

Ride Control

   105    23%   74    16% 

Emission Control

   334    30%   140    18% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Europe Original Equipment

   439    28%   214    17% 

Europe Aftermarket

     

Ride Control

   29    15%   17    9% 

Emission Control

   (1)   (1)%   (9)   (7)% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Europe Aftermarket

   28    8%   8    2% 

South America & India

   100    19%   66    15% 

Total Europe, South America & India

   567    23%   288    14% 

Asia

   101    20%   86    21% 

Australia

   7    5%   (12)   (9)% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Asia Pacific

   108    16%   74    13% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Tenneco

  $1,268    21%  $711    15% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Additionally, we present these reconciliations of revenues in order to reflect value-add revenues without the effect of changes in foreign currency rates. We have not reflected any currency impact in the 2012 table since this is the base period for measuring the effects of currency during 2013 on our operations. We believe investors find this information useful in understanding period-to-period comparisons in our revenues.
 Year Ended December 31, 2013
 Revenues Substrate Sales Value-add Revenues Currency Impact on Value-add Revenues Value-add Revenues excluding Currency
 (Millions)
Clean Air Division         
North America$2,658
 $1,030
 $1,628
 $(1) $1,629
Europe, South America & India1,934
 663
 1,271
 (18) 1,289
Asia Pacific852
 142
 710
 9
 701
Total Clean Air Division5,444
 1,835
 3,609
 (10) 3,619
Ride Performance Division         
North America1,255
 —
 1,255
 (6) 1,261
Europe, South America & India1,046
 —
 1,046
 (36) 1,082
Asia Pacific219
 —
 219
 (3) 222
Total Ride Performance Division2,520
 —
 2,520
 (45) 2,565
Total Tenneco Inc.$7,964
 $1,835
 $6,129
 $(55) $6,184

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Table of Contents

 Year Ended December 31, 2012
 Revenues Substrate Sales Value-add Revenues Currency Impact on Value-add Revenues Value-add Revenues excluding Currency
 (Millions)
Clean Air Division         
North America$2,506
 $997
 $1,509
 $—
 $1,509
Europe, South America & India1,726
 570
 1,156
 —
 1,156
Asia Pacific694
 93
 601
 —
 601
Total Clean Air Division4,926
 1,660
 3,266
 —
 3,266
Ride Performance Division         
North America1,213
 —
 1,213
 —
 1,213
Europe, South America & India1,041
 —
 1,041
 —
 1,041
Asia Pacific183
 —
 183
 —
 183
Total Ride Performance Division2,437
 —
 2,437
 —
 2,437
Total Tenneco Inc.$7,363
 $1,660
 $5,703
 $—
 $5,703

 Year Ended December 31, 2013
Versus Year Ended December 31, 2012
Dollar and Percent Increase (Decrease)
 Revenues Percent Value-add Revenues excluding Currency Percent
 (Millions Except Percent Amounts)
Clean Air Division       
North America$152
 6% $120
 8%
Europe, South America & India208
 12% 133
 12%
Asia Pacific158
 23% 100
 17%
Total Clean Air Division518
 11% 353
 11%
Ride Performance Division       
North America42
 3% 48
 4%
Europe, South America & India5
 —% 41
 4%
Asia Pacific36
 20% 39
 21%
Total Ride Performance Division83
 3% 128
 5%
Total Tenneco Inc.$601
 8% $481
 8%

Light Vehicle Industry Production by Region for Years Ended December 31, 20112013 and 2010(According2012 (According to IHS Automotive, January 2012)2014)

   Year Ended
December 31,		   Increase
(Decrease)		  % Increase 
      
   2011   2010    
   (Number of Vehicles in Thousands) 

North America

   13,126     11,941     1,185    10% 

Europe

   20,089     19,208     881    5% 

South America

   4,318     4,173     145    3% 

India

   3,573     3,247     326    10% 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total Europe, South America & India

   27,980     26,628     1,352    5% 

China

   17,210     16,398     812    5% 

Australia

   221     242     (21)   (9)% 

North American light vehicle production increased 10 percent, while industry Class 8 commercial vehicle production

 Year Ended December 31,
 2013 2012 Increase
(Decrease)		 % Increase
(Decrease)
 (Number of Vehicles in Thousands)
North America16,184
 15,434
 750
 5 %
Europe19,331
 19,298
 33
 — %
South America4,536
 4,291
 245
 6 %
India3,648
 3,802
 (154) (4)%
Total Europe, South America & India27,515
 27,391
 124
 — %
China20,818
 18,235
 2,583
 14 %
Australia208
 221
 (13) (6)%

43
Table of Contents

Clean Air revenue was up 61 percent and industry Class 4-7 commercial vehicle production was up 49%$518 million in 2011 when2013 compared to 2010. Revenues from our North American operations increased2012, driven by higher sales in 2011 compared to last year due to higher OE and aftermarket sales of both product lines.all the regions. The increase in North American OE revenues was primarily driven by improved productionhigher volumes, which accounted for $503$156 million of the year-over-year change in revenues, on Tenneco-supplied vehicles such as the Ford Super-Duty and F-150 pick-ups, Ford Focus, Chevy Malibu, VW Jetta, Chevrolet Equinox, GM’s crossover models and the Toyota Tundra. Also contributing to the increase wasrevenues. Currency had a 63 percent increase in commercial vehicle OE revenues and a favorable $4$1 million currencyunfavorable impact on OE revenue year-over-year.North American revenues. The increase in aftermarket revenue for North America was primarily due to higher volumes in both product lines which resulted in a combined increase in revenue of $57 million. Favorable currency impacted aftermarket revenue by $8 million year-over-year.

Our European, South American and Indian segment’s revenues increased in 2011 compared to last year, due to increased sales in both Europe OE business units and European Aftermarket ride control as well as in South America and India. The full year total European light vehicle industry production was up five percent, while industry Class 8 commercial vehicle production was up 37 percent and industry Class 4-7 commercial vehicle production was up eight percent in 2011 when compared to 2010. Improvedmostly driven by higher volumes of $231 million, mainly due to higher year-over-year OE productionlight vehicle and commercial truck and off-highway revenues. Currency had a $15 million unfavorable impact on platforms such as the VW GolfEuropean, South American and Polo, the Mercedes E-class and CLS, Diamler Sprinter, the Ford Focus, the BMW 1 and 3 Series, Audi A4, A6 and A1, Renault/Dacia Logan and Opel Astra and Zafira were the primary drivers of our increased Europe OE revenues and contributed to anIndian revenues. The increase in Asia Pacific revenues was primarily driven by higher volumes of $166 million, mostly due to higher light vehicle and commercial truck volumes in China. Currency had an $11 million favorable impact on Asia Pacific revenues.

Ride Performance revenue of $315 million. Higher commercial and specialty revenue also contributed to this increase. European OE revenue also benefitedwas up $83 million in 2013 compared to last year from improved pricing, mainly material cost recovery and favorable foreign currency which2012, primarily driven by higher sales in all the regions. The increase in North American revenues was primarily driven by higher volumes of $43 million. Currency had a combined$6 million unfavorable impact of $127 million. Excluding currency,on North American revenues. The increase in European, ride control aftermarket revenues improved compared to last year on higher sales volumes which had a $17 million impact, tied in part to heavy duty sales. Excluding currency, European emission control aftermarket sales were down mainly due to volumes which accounted for $8 million of the decline. Light vehicle production increased three percent in South America and 10 percent in India for 2011 when compared to 2010. South American and Indian revenues werewas primarily driven by higher in 2011 when compared to the prior year primarily due to stronger OE and aftermarket volumes in both regions, which increased revenue by $76of $25 million. Currency also added $8had a $36 million tounfavorable impact on European, South American and Indian revenue.

Industryrevenues. The increase in Asia Pacific revenues was driven by higher volumes of $42 million, mostly due to higher light vehicle production increased five percent year-over-yearvolumes in China but decreased nine percent year-over-year in Australia. Revenues from ourChina. Currency had a $3 million unfavorable impact on Asia Pacific segment increased mainly due to higher sales in China. Asian revenues for 2011 improved from last year, primarily due to $77 million from stronger production volumes, particularly in China on key Tenneco-supplied GM, Ford, Audi, Volkswagon, FAW and Nissan platforms. Foreign currency also benefited Asian revenue by $29 million. Excluding $20 million in favorable foreign currency, lower OE production volumes in Australia drove a $10 million negative impact on revenue for 2011 over 2010.

revenues.


Net Sales and Operating Revenues for Years 20102012 and 2009

2011

The following tables reflect our revenues for the years of 20102012 and 2009.2011. See “Net Sales and Operating Revenues for Years 20112013 and 2010”2012” for a description of why we present these reconciliations of revenue.

   Year Ended December 31, 2010 
   Revenues   Currency
Impact		  Revenues
Excluding
Currency		   Substrate
Sales
Excluding
Currency		   Revenues
Excluding
Currency and
Substrate
Sales		 
   (Millions) 

North America Original Equipment

         

Ride Control

  $527    $11   $516    $—    $516  

Emission Control

   1,642     7    1,635     739     896  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total North America Original Equipment

   2,169     18    2,151     739     1,412  

North America Aftermarket

         

Ride Control

   484     4    480     —     480  

Emission Control

   168     2    166     —     166  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total North America Aftermarket

   652     6    646     —     646  

Total North America

   2,821     24    2,797     739     2,058  

Europe Original Equipment

         

Ride Control

   462     (26)   488     —     488  

Emission Control

   1,121     (40)   1,161     369     792  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total Europe Original Equipment

   1,583     (66)   1,649     369     1,280  

Europe Aftermarket

         

Ride Control

   190     (8)   198     —     198  

Emission Control

   141     (7)   148     —     148  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total Europe Aftermarket

   331     (15)   346     —     346  

South America & India

   532     33    499     74     425  

Total Europe, South America & India

   2,446     (48)   2,494     443     2,051  

Asia

   517     8    509     106     403  

Australia

   153     18    135     9     126  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total Asia Pacific

   670     26    644     115     529  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total Tenneco

  $5,937    $2   $5,935    $1,297    $4,638  
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

   Year Ended December 31, 2009 
   Revenues   Currency
Impact		   Revenues
Excluding
Currency		   Substrate
Sales
Excluding
Currency		   Revenues
Excluding
Currency and
Substrate
Sales		 
   (Millions) 

North America Original Equipment

          

Ride Control

  $382    $—    $382    $—    $382  

Emission Control

   1,154     —     1,154     530     624  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total North America Original Equipment

   1,536     —     1,536     530     1,006  

North America Aftermarket

          

Ride Control

   406     —     406     —     406  

Emission Control

   150     —     150     —     150  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total North America Aftermarket

   556     —     556     —     556  

Total North America

   2,092     —     2,092     530     1,562  

Europe Original Equipment

          

Ride Control

   421     —     421     —     421  

Emission Control

   917     —     917     296     621  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Europe Original Equipment

   1,338     —     1,338     296     1,042  

Europe Aftermarket

          

Ride Control

   181     —     181     —     181  

Emission Control

   154     —     154     —     154  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Europe Aftermarket

   335     —     335     —     335  

South America & India

   374     —     374     45     329  

Total Europe, South America & India

   2,047     —     2,047     341     1,706  

Asia

   380     —     380     85     295  

Australia

   130     —     130     10     120  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Asia Pacific

   510     —     510     95     415  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Tenneco

  $4,649    $—    $4,649    $966    $3,683  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

   Year Ended December 31, 2010
Versus Year Ended December 31, 2009
Dollar and Percent Increase (Decrease)		 
   Revenues  Percent  Revenues
Excluding
Currency and
Substrate
Sales		  Percent 
   (Millions Except Percent Amounts) 

North America Original Equipment

     

Ride Control

  $145    38%  $  134    35% 

Emission Control

   488    42%   272    44% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total North America Original Equipment

   633    41%   406    40% 

North America Aftermarket

     

Ride Control

   78    19%   74    18% 

Emission Control

   18    12%   16    10% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total North America Aftermarket

   96    17%   90    16% 

Total North America

   729    35%   496    32% 

Europe Original Equipment

     

Ride Control

   41    10%   67    16% 

Emission Control

   204    22%   171    28% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Europe Original Equipment

   245    18%   238    23% 

Europe Aftermarket

     

Ride Control

   9    6%   17    10% 

Emission Control

   (13)   (9)%   (6)   (4)% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Europe Aftermarket

   (4)   (1)%   11    3% 

South America & India

   158    42%   96    29% 

Total Europe, South America & India

   399    20%   345    20% 

Asia

   137    36%   108    37% 

Australia

   23    18%   6    4% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Asia Pacific

   160    31%   114    27% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Tenneco

  $1,288    28%  $955    26% 
  

 

 

  

 

 

  

 

 

  

 

 

 

 Year Ended December 31, 2012
 Revenues Substrate Sales Value-add Revenues Currency Impact on Value-add Revenues Value-add Revenues excluding Currency
 (Millions)
Clean Air Division         
North America$2,506
 $997
 $1,509
 $—
 $1,509
Europe, South America & India1,726
 570
 1,156
 (113) 1,269
Asia Pacific694
 93
 601
 —
 601
Total Clean Air Division4,926
 1,660
 3,266
 (113) 3,379
Ride Performance Division         
North America1,213
 —
 1,213
 —
 1,213
Europe, South America & India1,041
 —
 1,041
 (120) 1,161
Asia Pacific183
 —
 183
 (2) 185
Total Ride Performance Division2,437
 —
 2,437
 (122) 2,559
Total Tenneco Inc.$7,363
 $1,660
 $5,703
 $(235) $5,938

44
Table of Contents

 Year Ended December 31, 2011
 Revenues Substrate Sales Value-add Revenues Currency Impact on Value-add Revenues Value-add Revenues excluding Currency
 (Millions)
Clean Air Division         
North America$2,288
 $971
 $1,317
 $—
 $1,317
Europe, South America & India1,849
 597
 1,252
 —
 1,252
Asia Pacific624
 110
 514
 —
 514
Total Clean Air Division4,761
 1,678
 3,083
 —
 3,083
Ride Performance Division         
North America1,126
 —
 1,126
 —
 1,126
Europe, South America & India1,164
 —
 1,164
 —
 1,164
Asia Pacific154
 —
 154
 —
 154
Total Ride Performance Division2,444
 —
 2,444
 —
 2,444
Total Tenneco Inc.$7,205
 $1,678
 $5,527
 $—
 $5,527
 Year Ended December 31, 2012
Versus Year Ended December 31, 2011
Dollar and Percent Increase (Decrease)
 Revenues Percent Value-add Revenues excluding Currency Percent
 (Millions Except Percent Amounts)
Clean Air Division       
North America218
 10 % 192
 15 %
Europe, South America & India(123) (7)% 17
 1 %
Asia Pacific70
 11 % 87
 17 %
Total Clean Air Division165
 3 % 296
 10 %
Ride Performance Division       
North America87
 8 % 87
 8 %
Europe, South America & India(123) (11)% (3) — %
Asia Pacific29
 19 % 31
 20 %
Total Ride Performance Division(7) — % 115
 5 %
Total Tenneco Inc.158
 2 % 411
 7 %
Light Vehicle Industry Production by Region for Years Ended December 31, 20102012 and 2009(Updated2011 (Updated according to IHS Automotive, January 2012)2014)

   Year Ended
December 31,		   Increase
(Decrease)		   % Increase 
   2010   2009     
   (Number of Vehicles in Thousands) 

North America

   11,941     8,583     3,358     39% 

Europe

   19,208     16,517     2,691     16% 

South America

   4,173     3,693     480     13% 

India

   3,247     2,464     783     32% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Europe, South America & India

   26,628     22,674     3,954     17% 

China

   16,398     12,601     3,797     30% 

Australia

   242     213     29     14% 

North American light vehicle production increased 39 percent, while industry Class 8 commercial vehicle production

 Year Ended December 31,
 2012 2011 Increase
(Decrease)		 % Increase
(Decrease)
 (Number of Vehicles in Thousands)
North America15,434
 13,126
 2,308
 18 %
Europe19,298
 20,159
 (861) (4)%
South America4,291
 4,312
 (21) — %
India3,802
 3,600
 202
 6 %
Total Europe, South America & India27,391
 28,071
 (680) (2)%
China18,235
 17,276
 959
 6 %
Australia221
 222
 (1) — %

45
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Clean Air revenue was up 25 percent and industry Class 4-7 commercial vehicle production was flat$165 million in 2010 when2012 compared to 2009. Revenues from our2011, primarily driven by higher volumes in North American operations increasedAmerica and Asia Pacific, partially offset by lower volumes in 2010 compared to 2009 due to higher OEEurope, South America and aftermarket sales of both product lines.India. The increase in North American OErevenues was driven by higher volumes, which accounted for $214 million of the year-over-year change in revenues. The decrease in European, South American and Indian revenues was mostly driven by unfavorable currency impact of $166 million, partially offset by higher volumes of $36 million. The increase in Asia Pacific revenues was driven by higher volumes of $83 million, mostly due to higher light vehicle production volumes in China. Currency had $2 million favorable impact on Asia Pacific revenues.
Ride Performance revenue was down $7 million in 2012 compared to 2011, primarily driven by lower volumes in Europe, South America and India, partially offset by higher volumes in the North American and Asia Pacific regions. The increase in North America was driven by higher volumes which accounted for $72 million of the year-over-year change in revenues. The decrease in European, South American and Indian revenues was primarily driven by improved productionan unfavorable currency impact of $120 million and lower volumes of Tenneco-supplied vehicles such as the Ford F-150 and Super-Duty pick-ups, GM’s crossover models and the GMT900 platform which accounted for $655 million in revenues. Partially offsetting the increase was unfavorable platform mix which impacted revenue by $31 million when comparing 2010 to 2009.$26 million. The increase in aftermarketAsia Pacific revenues for North America was primarily due todriven by higher customer demand for both product lines which resulted in a combined increase in revenue of $101 million.

Our European, South American and Indian segment’s revenues increased in 2010 compared to 2009, due to increased sales in both Europe OE business units as well as in South America and India. The full year total European light vehicle industry production was up 16 percent, while industry Class 8 commercial vehicle production was up 55 percent and industry Class 4-7 commercial vehicle production was up 38 percent in 2010 when compared to 2009. Improved volumes due to our content on better-selling vehicles such as the Ford Focus, VW Polo, Opel Astra, Ford Mondeo and the Daimler Sprinter was the primary driver of our increased Europe OE revenues and resulted in an increase in revenue of $292 million, partially offset by a decrease of $66 million due to foreign currency. Excluding currency, European aftermarket revenues improved on higher ride control sales volumes of $16 million, tied in part to heavy duty sales, partially offset by lower emission control sales volumes of $6 million. Light vehicle production increased 13 percent in South America and 32 percent in India for 2010 when compared to 2009. South American and Indian revenues were higher in 2010 when compared to 2009 primarily due to higher aftermarket sales in South America and stronger OE production volumes in both regions, which increased revenue by $112 million. Currency also added $33 million, to South American and Indian revenue.

Industry light vehicle production increased when comparing 2010 versus 2009 by 30 percent and 14 percent in China and Australia, respectively. Revenues from our Asia Pacific segment, which includes Australia and Asia, increased due to higher sales in both regions. Asian revenues for 2010 improved from 2009, primarily due to $133 million from stronger production volumes, particularly in China on key Tenneco-supplied GM, VW and Audi platforms. A $9Currency had $2 million unfavorable impact on revenue due to stronger OE production volumes drove the 2010 revenue increase for Australia over 2009. Currency added $8 million to Asia revenue and $18 million to Australia revenue.

Pacific revenues.

Earnings before Interest Expense, Income Taxes and Noncontrolling Interests (“EBIT”) for Years 20112013 and 2010

   Year Ended
December 31,		   Change 
   2011   2010   
   (Millions) 

North America

  $216    $155    $61  

Europe, South America and India

   125     76     49  

Asia Pacific

   38     50     (12) 
  

 

 

   

 

 

   

 

 

 
  $379    $281    $98  
  

 

 

   

 

 

   

 

 

 

2012

 Year Ended December 31, Change
 2013 2012 
 (Millions)
Clean Air Division     
North America$229
 $202
 $27
Europe, South America & India57
 54
 3
Asia Pacific84
 71
 13
Total Clean Air Division370
 327
 43
Ride Performance Division     
North America124
 122
 2
Europe, South America & India(7) 41
 (48)
Asia Pacific22
 5
 17
Total Ride Performance Division139
 168
 (29)
Other(85) $(67) $(18)
Total Tenneco Inc.$424
 $428
 $(4)
The EBIT results shown in the preceding table include the following items, certain of which are discussed below under “Restructuring and Other Charges,” which have an effect on the comparability of EBIT results between periods:

   Year Ended
December 31,		 
   2011   2010 
   (Millions) 

North America

    

Restructuring and related expenses

  $2    $  14  

Pension Charges(1)

   —     6  

Europe, South America and India

    

Restructuring and related expenses

   3     3  

Asia Pacific

    

Restructuring and related expenses

   3     2  

Goodwill impairment charge(2)

   11     —  


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 Year Ended December 31,
 2013 2012
 (Millions)
Clean Air Division   
Europe, South America & India   
Restructuring and related expenses$8
 $7
Asia Pacific   
Restructuring and related expenses3
 —
Total Clean Air Division$11
 $7
Ride Performance Division   
North America   
Restructuring and related expenses$1
 $1
Pullman property recoveries (1)—
 (5)
Europe, South America & India   
Restructuring and related expenses62
 5
Asset impairment charge (2)—
 7
Asia Pacific   
Restructuring and related expenses2
 —
Total Ride Performance Division$65
 $8
Other   
Restructuring and related expenses$2
 $—
(1)Represents chargesBenefit from property recoveries related to an actuarial loss for lump-sum pension paymentstransactions originated by The Pullman Company before being acquired by Tenneco in a non-qualified pension plan in which one current and three former employees were participants. Lump-sum pension payments are required when participants retire or when they turn 55. Two former employees turned 55 in 2010.1996.

(2)Non-cash asset impairment charge related to goodwill for Tenneco’s Australian reporting unit.certain assets of our European ride performance business.

EBIT from North American operations increased to $216for the Clean Air division was $370 million in 2011, from $1552013 compared to $327 million one year ago.in 2012. EBIT for North America increased $27 million to $229 million in 2013 versus 2012. The benefits to EBIT from significantly higher OE production volumes, the related manufacturing efficiencies, decreased depreciationramp-up on new platforms and amortization expense, lower deferred and long-term compensation expense indexed to the Company’s stock price and improved aftermarket revenuesoperational cost improvements were partially offset by higher engineering investments for customer programs and negative currency. Europe, South America and India's EBIT increased material spending, increased manufacturing and distribution costs, and higher selling, general, administrative and engineering costs, which included a year-over-year increase to aftermarket changeover costs related to new aftermarket business. Restructuring and related expenses of $2 million were included in 2011 compared to $14 million of restructuring and related expenses and charges of $6 million for an actuarial loss from lump-sum pension payments in 2010. The increased manufacturing costs included higher year-over-year costs, particularly in the third and fourth quarters, related to our North American OE ride control business as we incur some temporarily higher costs while consolidating two North American manufacturing locations. Additionally, in the fourth quarter, we encountered an issue involving struts supplied on one particular OE platform. As a result, we directly incurred approximately $2$3 million in premium freight and overtime costs, some of which we expect2013 to continue into$57 million from $54 million in 2012. We are also continuing to work through details with the customer to determine responsibility for any other costs associated with this issue. We cannot estimate the amount of these costs at this time, but do not believe they will be material to our annual operating results.

Our European, South American and Indian segment’s EBIT was $125 million for 2011 compared to $76 million during the same period last year. The increase was driven by higher OE revenues partially offset by higher restructuring and related expenses and negative currency. EBIT for Asia Pacific increased $13 million to $84 million in 2013 from $71 million in 2012. The benefits to EBIT from launches of new platforms and higher production volumes, materialoperational cost management activities and lower deferred and long-term compensation expense indexed to the Company’s stock price. Unfavorable pricing, mainly contractual price reductions and increased manufacturing and selling, general, administrative and engineering costs, in particular inflationary wage costs in South America,positive currency were partially offset by increased restructuring and related expenses. For the increase. RestructuringClean Air division, EBIT included restructuring and related expenses of $3$11 million was included in EBIT for both 20112013 and 2010.$7 million in 2012. Currency had an $11 million favorableno impact on EBIT of the Clean Air division for 20112013 when compared to last year.

EBIT for our Asia Pacific segmentthe Ride Performance division was $139 million in 2011 was $38 million2013 compared to $50$168 million in 2010. Higher2012. EBIT for North America increased $2 million in 2013 to $124 million from $122 million in 2012. The increase was driven by higher OE light vehicle volumes and the related manufacturing efficiencies in Chinaramp-up on new OE platforms, which was partially offset by lower OE commercial truck and lower deferredoff-highway revenues and long-term compensation expense indexedaftermarket sales, negative currency and costs related to the Company’s stock price droveresolution of an issue related to struts supplied to one particular OE platform. We also recorded a benefit of $5 million in 2012 from property recoveries related to transactions originated by The Pullman Company before being acquired by Tenneco in 1996. Europe, South America and India's EBIT improvement, but was more than$(7) million in 2013, compared to $41 million a year ago. The decrease was driven by higher restructuring costs, lower OE light vehicle volumes and negative currency, which was partially offset by a goodwillnew OE platform launches and higher aftermarket volumes. EBIT from Asia Pacific increased $17 million in 2013 to $22 million from 2012. EBIT benefited from higher light vehicle production volumes and operational cost improvements, offset partially by higher restructuring costs. For the Ride Performance division, EBIT included restructuring and related expenses of $65 million in 2013 and $6 million in 2012. We also recorded an asset impairment charge and volume declinesof $7 million in Australia, unfavorable pricing and increased selling, general, administrative, and engineering costs2012 related to support new plants in China. In addition, lower OE production volumes in Thailand due to the flooding negatively impacted EBIT. Currency had a $3 million favorable impact on EBIT for 2011 when compared to last year.

certain assets of our European ride performance business. Currency had a $14 million favorableunfavorable impact on EBIT of the Ride Performance division for 2013 when compared to last year.

Currency had a $14 million unfavorable impact on overall company EBIT for 2011in 2013 as compared to the prior year.





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EBIT for Years 20102012 and 2009

   Year Ended
December 31,		   Change 
   2010   2009   
   (Millions) 

North America

  $155    $42    $113  

Europe, South America and India

   76     20     56  

Asia Pacific

   50     30     20  
  

 

 

   

 

 

   

 

 

 
  $281    $92    $189  
  

 

 

   

 

 

   

 

 

 

2011

 Year Ended December 31, Change
 2012 2011 
 (Millions)
Clean Air Division     
North America$202
 $172
 $30
Europe, South America & India54
 79
 (25)
Asia Pacific71
 47
 24
Total Clean Air Division327
 298
 29
Ride Performance Division     
North America122
 76
 46
Europe, South America & India41
 69
 (28)
Asia Pacific5
 (6) 11
Total Ride Performance Division168
 139
 29
Other(67) $(58) $(9)
Total Tenneco Inc.$428
 $379
 $49
The EBIT results shown in the preceding table include the following items, certain of which are discussed below under “Restructuring and Other Charges”,Charges,” which have an effect on the comparability of EBIT results between periods:

   Year Ended
December 31,		 
   2010   2009 
   (Millions) 

North America

    

Restructuring and related expenses

  $14    $17  

Pension Charges(1)

   6     —  

Environmental reserve(2)

   —     5  

Europe, South America and India

    

Restructuring and related expenses

   3     4  

Asia Pacific

    

Restructuring and related expenses

   2     —  

 Year Ended December 31,
 2012 2011
 (Millions)
Clean Air Division   
Europe, South America & India   
Restructuring and related expenses$7
 $3
Asia Pacific   
Restructuring and related expenses—
 2
Goodwill impairment charge (3)—
 1
Total Clean Air Division$7
 $6
Ride Performance Division   
North America   
Restructuring and related expenses$1
 $2
Pullman property recoveries (1)(5) —
Europe, South America & India   
Restructuring and related expenses5
 —
Asset impairment charge (2)7
 —
Asia Pacific   
Restructuring and related expenses—
 1
Goodwill impairment charge (3)—
 10
Total Ride Performance Division$8
 $13
(1)Represents chargesBenefit from property recoveries related to an actuarial loss for lump-sum pension paymentstransactions originated by The Pullman Company before being acquired by Tenneco in a non-qualified pension plan in which one current and three former employees were participants. Lump-sum pension payments are required when participants retire or when they turn 55. Two former employees turned 55 in 2010.1996.

(2)Represents a reserveNon-cash asset impairment charge related to environmental liabilitiescertain assets of a company Tenneco acquired in 1996, at locations never operated by Tenneco, andour European ride performance business.
(3)Non-cash asset impairment charge related to goodwill for which that acquired company had been indemnified by Mark IV Industries, which declared bankruptcy in the second quarter of 2009.Tenneco’s Australian reporting unit.


EBIT for the Clean Air division was $327 million in 2012 compared to $298 million in 2011. EBIT for North American operations was $155 million in 2010, an increase of $113 million from $42 million in 2009. The benefits to EBIT from significantly higher OE production volumes, the related manufacturing efficiencies and improved aftermarket revenues were partially offset by higher selling, general, administrative and engineering costs, which included higher performance-based compensation costs, the temporary cost reduction efforts from 2009, which included employee furloughs and salary and benefit cuts, that were subsequently restored by the beginning of 2010, charges of $6 million related to an actuarial loss for lump-sum pension payments andAmerica increased aftermarket changeover costs related to new aftermarket business. Currency had a $13 million favorable impact on North American EBIT for 2010 when compared to 2009. Restructuring and related expenses of $14 million were included in 2010 compared to $17 million of restructuring and related expenses and an environmental reserve charge of $5 million in 2009.

Our European, South American and Indian segment’s EBIT was $76 million for 2010, up $56 million from $20 million in 2009. The increase was driven by higher OE production volumes and the related manufacturing efficiencies, new platform launches, favorable platform mix in Europe and material cost management activities.

Increased selling, general, administrative and engineering costs partially offset the increase. Restructuring and related expenses of $3 million were included in EBIT for 2010, versus $4 million from the same period 2009. Currency had a $13 million unfavorable impact on EBIT for 2010.

EBIT for our Asia Pacific segment, which includes Asia and Australia, increased $20 million to $50 million in 2010 from $30 million in 2009. Higher volumes and the related manufacturing efficiencies drove the EBIT improvement. This increase was partially offset by increased selling, general, administrative and engineering costs. Currency had a $12012 to $202 million favorable impact on 2010 EBIT for our Asia Pacific segment.

Currency had a $1 million favorable impact on overall company EBIT for 2010 as comparedverses 2011. The benefits to 2009.

EBIT as a Percentage of Revenue for Years 2011, 2010 and 2009

   Year Ended
December 31,		 
   2011  2010  2009 

North America

   6%   6%   2% 

Europe, South America and India

   4%   3%   1% 

Asia Pacific

   5%   7%   6% 

Total Tenneco

   5%   5%   2% 

In North America, EBIT as a percentage of revenue for 2011 was even when compared to last year. The increase in EBIT from higher OE production volumes and the related manufacturing efficiencies higher aftermarket sales,were partially offset by increased operational costs. European, South American and Indian segment’s EBIT decreased $25 million to $54 million in 2012 from $79 million in 2011, driven by unfavorable currency, lower depreciationvolumes, increased operational costs and amortization expense, lower deferred and long-term compensation expense indexed to the Company’s stock price and decreasedhigher restructuring and related chargesexpenses. EBIT for Asia Pacific increased $24 million to $71 million in 2012 from $47 million in 2011. Higher volumes, the related manufacturing efficiencies, lower restructuring


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and related expenses and operational cost management drove the improvement. For the Clean Air division, EBIT included restructuring and related expenses of $7 million in 2012 and $5 million in 2011. We also recorded a goodwill impairment charge of $1 million in 2011. Currency had a $9 million unfavorable impact on EBIT of the Clean Air division for 2012 when compared to 2011.
EBIT for Ride Performance division was offset as$168 million in 2012 compared to $139 million in 2011. EBIT for North America increased $46 million in 2012 to $122 million verses 2011, primarily driven by higher OE production volumes, increased aftermarket revenues, the related manufacturing efficiencies, operational cost management, lower restructuring and related expenses and a percentagebenefit of revenue$5 million from property recoveries related to transactions originated by increased material spending and manufacturing and distribution costs and higher selling, general, administrative and engineering expenses, including higher aftermarket changeover costs. InThe Pullman Company before being acquired by Tenneco in 1996. Europe, South America and India segment’s EBIT margin for 2011decreased $28 million to $41 million in 2012 from 2011. The decrease in EBIT was up one percentage point from the prior year. Improveddriven by unfavorable currency, higher restructuring and related costs, lower volumes lower deferred and long-term compensation expense indexed toin Europe, the Company’s stock price, currency benefits and material cost management actions, were almost offset asdecision to relinquish a percentage of revenue by unfavorableplatform due to pricing and increased manufacturing and selling, general, administrative and engineering expenses, in particular inflationary wage costsprofitability in South America.America, and increased operational costs. EBIT as a percentage of revenue for our Asia Pacific segment decreased two percentage points in 2011 versus the prior year as higher2012 was $5 million compared to a loss of $6 million in 2011. Higher volumes and thelower restructuring and related manufacturing efficiencies in China and lower deferred and long-term compensation expense indexed to the Company’s stock price, were more thancosts drove EBIT improvement, but was partially offset by unfavorable pricing, a goodwill impairment charge, production declines in Australia and increased selling, general, administrative, and engineering expensescosts to support new plants and new customers in China. Asia. For Ride Performance division, EBIT included restructuring and related expenses of $6 million in 2012 and $3 million in 2011. We also recorded an asset impairment charge of $7 million in 2012 related to certain asset of our European Ride Performance business. The expense in 2011 included a goodwill impairment charge of $10 million. Currency had a $14 million unfavorable impact on EBIT of the Ride Performance division for 2012 when compared to 2011.
Currency had a $23 million unfavorable impact on overall company EBIT for 2012 as compared to 2011.
EBIT as a Percentage of Revenue for Years 2013, 2012 and 2011
 Year Ended December 31,
 2013 2012 2011
Clean Air Division     
North America9% 8% 8%
Europe, South America & India3% 3% 4%
Asia Pacific10% 10% 8%
Total Clean Air Division7% 7% 6%
Ride Performance Division     
North America10% 10% 7%
Europe, South America & India(1)% 4% 6%
Asia Pacific10% 3% (4)%
Total Ride Performance Division6% 7% 6%
Total Tenneco Inc.5% 6% 5%

In addition, lower OE production volumes in Thailand due to the flooding negatively impactedClean Air division, EBIT as a percentage of revenue.

revenues in 2013 was even compared to last year. In North America, EBIT as a percentage of revenue for 2010revenues in 2013 was up fourone percentage pointspoint from last year. The benefits from higher volumes, the ramp-up on new platforms and operational cost improvements were partially offset by higher engineering investments for customer programs and negative currency. Europe, South America and India's EBIT as a percentage of revenues in 2013 was even compared to prior year. The benefit from higher OE revenues was offset by higher restructuring and related expenses and negative currency. EBIT as a percentage of revenues for Asia Pacific was even in 2013 when compared to 2009.2012. The increasebenefits from launches of new platforms and higher production volumes, operational cost management and positive currency were offset by increased restructuring and related expenses.

In the Ride Performance division, EBIT as a percentage of revenues in 2013 was down one percentage points compared to the prior year. In 2013, EBIT as a percentage of revenues for North America was even compared to 2012. The benefits from higher OE light vehicle volumes and the ramp-up on new OE platforms were offset by lower OE commercial truck and off-highway revenues and aftermarket sales, negative currency and costs related to the resolution of an issue related to struts supplied to one particular OE platform. We also recorded a benefit of $5 million in 2012 from property recoveries related to transactions originated by The Pullman Company before being acquired by Tenneco in 1996. EBIT as a percentage of revenues in Europe, South America and India was down five percentage points in 2013 when compared to the prior year. The decrease was driven by higher restructuring costs, lower OE light vehicle volumes and negative currency, which was partially offset by new OE platform launches and higher aftermarket volumes. In Asia Pacific, EBIT as a percentage of revenues in 2013 was up seven percentage points from last year, driven by higher light vehicle production volumes and operational cost improvements, which were offset partially by higher restructuring costs.

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In the Clean Air division, EBIT as a percentage of revenues in 2012 was up one percentage point compared to 2011. In North America, EBIT as a percentage of revenues in 2012 was even compared to 2011. The benefits from higher OE production volumes and the related manufacturing efficiencies decreased restructuringwere offset by increased operational costs. Europe, South America and related charges, higher aftermarket sales and favorable currency was partially offsetIndia's EBIT as a percentage of revenuerevenues in 2012 decreased by higher selling, general, administrative and engineering expenses, including higher aftermarket changeover costs, higher performance-based compensationone percentage point compared to 2011, driven by unfavorable currency, lower volumes, increased operational costs and chargeshigher restructuring and related expenses. EBIT as a percentage of revenues for an actuarial loss for lump-sum pension payments. In Europe, South America and India, EBIT margin for 2010 wasAsia Pacific increased by two percentage points higher than 2009 duewhen compared to improved2011. Higher volumes, mostly in China, the related manufacturing efficiencies, lower restructuring and related expenses, favorable platform mix and materialoperational cost management actions, partially offset by unfavorable currency and increased selling, general, administrative and engineering expenses.drove the improvement.
In the Ride Performance division, EBIT as a percentage of revenue for our Asia Pacific segment increasedrevenues was up one percentage point in 2010 versus the 20092012 compared to 2011. EBIT as a percentage of revenues for North America increased three percentage points in 2012 when compared to 2011, primarily driven by higher OE production volumes, andincreased aftermarket revenues, the related manufacturing efficiencies, wereoperational cost management, lower restructuring and related expenses and a benefit of $5 million from property recoveries related to transactions originated by The Pullman Company before being acquired by Tenneco in 1996. EBIT as a percentage of revenues in Europe, South America and India was down two percentage points in 2012 when compared to 2011. The decrease was driven by unfavorable currency, higher restructuring and related costs, lower volumes in Europe, the Company’s decision to relinquish a platform due to pricing and profitability in South America, and increased operational costs. In Asia Pacific, EBIT as a percentage of revenues in 2012 was up seven percentage points from 2011. Higher volumes, mostly in China on current and new platforms, and lower restructuring and related costs drove the improvement, but was partially offset by increased selling, general, administrative, and engineering expenses.

costs to support new plants and new customers in Asia.

Interest Expense, Net of Interest Capitalized

We reported interest expense in 20112013 of $108$80 million ($77 million in our U.S. operations and $3 million in our foreign operations) net of interest capitalized of $4 million, down from $105 million ($102 million in our U.S. operations and $3 million in our foreign operations) net of interest capitalized of $4 million in 2012. Included in 2012 was $18 million of expense related to our refinancing activities. Excluding the refinancing expenses, interest expense decreased in 2013 compared to the prior year as a result of lower rates due to last year's debt refinancing transactions.
We reported interest expense in 2012 of $105 million ($102 million in our U.S. operations and $3 million in our foreign operations) net of interest capitalized of $4 million, down from $108 million ($105 million in our U.S. operations and $3 million in our foreign operations), down from $149 million net of interest capitalized of $4 million ($146in 2011. Included in 2012 was $18 million inof expense related to our U.S. operations and $3 million in our foreign operations) in 2010.refinancing activities. Included in 2011 was $1 million of expense related to our refinancing activities. Included in 2010 was $27 million of expense related to our refinancing activities and $4 million of expense related to an accounting change impacting our factored receivables. See “Liquidity and Capital Resources” below for further discussion on the accounting change. Excluding the refinancing expenses, interest expense decreased in 20112012 compared to the prior year2011 as a result of lower rates due to last year’sthe debt refinancing transactions.

We reported interest expense in 2010transactions from the first quarter of $149 million net of interest capitalized of $4 million ($146 million in our U.S. operations and $3 million in our foreign operations), up from $133 million net of interest capitalized of $4 million ($130 million in our U.S. operations and $3 million in our foreign operations) in 2009. Included in 2010 was $27 million of expense related to our refinancing activities and $4 million of expense related to an accounting change impacting our factored receivables. See “Liquidity and Capital Resources” below for further discussion of the accounting change. Excluding the refinancing expenses, interest expense decreased in 2010 compared to 2009 as a result of our lower average borrowings due to our operating cash performance and the 2009 equity offering.

2012.

On December 31, 2011,2013, we had $987$733 million in long-term debt obligations that have fixed interest rates. Of that amount, $250$500 million is fixed through November 2015,December 2020, $225 million is fixed through August 2018 $500 million is fixed through December 2020 and the remainder is fixed from 20122014 through 2025. We also have $175$288 million in long-term debt obligations that are subject to variable interest rates. For more detailed explanations on our debt structure and senior credit facility refer to “Liquidity and Capital Resources — Capitalization” later in this Management’s Discussion and Analysis.

Income Taxes

We reported an income tax expense of $122 million for 2013. The tax expense recorded in 2013 includes a net tax benefit of $25 million primarily for tax adjustments primarily related to recognizing a U.S. tax benefit for foreign taxes and changes to prior year estimates. The U.S. tax benefit for foreign taxes is driven by our ability to claim a U.S. foreign tax credit beginning in 2013. The U.S. foreign tax credit regime provides for a credit against U.S. taxes otherwise payable for foreign taxes paid with regard to dividends, interest and royalties paid to us in the U.S. We reported an income tax expense of $19 million for 2012. The tax expense recorded in 2012 included the impact of the U.S. 2012 valuation allowance release and income generated in lower tax rate jurisdictions, partially offset by the impact of recording a valuation allowance against the tax benefit for tax credits and losses in certain foreign jurisdictions. Income tax expense was $88 million for 2011. The tax expense recorded for 2011 differs from a statutory rate of 35 percent due toincluded a net tax benefit of $7 million primarily related to U.S. taxable income with no associated tax expense due to our net operating loss carryforward and income generated in lower tax rate jurisdictions, partially offset by the impact of recording a valuation allowance against the tax benefit for losses in certain foreign jurisdictions and taxes on repatriation of foreign earnings. Income
In 2012, we reversed the tax expense was $69 million for 2010. The tax expense recorded for 2010 differs from a statutory rate of 35 percent due to tax charges of $23 million primarily related to the impact of recording a valuation allowance that we recorded in 2008 against our net deferred tax assets in the tax benefitU.S. based on operating improvements we had made, the outlook for losseslight and commercial truck, off-highway and other vehicle production in the U.S. and the positive impact this should have on our U.S. operations. The net income impact of the tax valuation allowance release in the U.S. was a tax benefit of approximately $81 million. Our federal net operating loss ("NOL") at December 31, 2013 totaled $37 million and expires in 2030. The state NOLs expire in various tax years through 2032.

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Valuation allowances have been established in certain foreign jurisdictions for deferred tax assets based on a “more likely than not” threshold. The ability to realize deferred tax assets depends on our ability to generate sufficient taxable income within the carryforward periods provided for in the tax law for each tax jurisdiction. We have considered the following possible sources of taxable income when assessing the realization of our deferred tax assets:
Future reversals of existing taxable temporary differences;
Taxable income or loss, based on recent results, exclusive of reversing temporary differences and charges related to adjustments tocarryforwards;
Tax-planning strategies; and
Taxable income in prior year income taxes andcarryback years if carryback is permitted under the relevant tax contingencies, partially offset by income generated in lower tax rate jurisdictions. In 2009, we recorded income tax expense of $13 million. Computed using the U.S. Federal statutory income tax rate of 35 percent, income tax would be a benefit of $14 million. law.
The difference is due primarily to valuation allowances recorded against deferred tax assets generated by 2009taxable losses in the U.S. and in certain foreign countries which we cannot benefit, partially offset by adjustments to pastjurisdictions will impact our provision for income taxes until the valuation allowances are released. Our provision for deferredincome taxes will include no tax assets including a reversal of $20 million of U.S.benefit for losses incurred and no tax expense with respect to income generated in these jurisdictions until the respective valuation allowance based on the change in the fair value of a tax planning strategy.

is eliminated.

Restructuring and Other Charges

Over the past several years, we have adopted plans to restructure portions of our operations. These plans were approved by our Board of Directors and were designed to reduce operational and administrative overhead costs throughout the business. For 2009, we incurred $21 million in restructuring and related costs, of which $16 million was recorded in cost of sales, $1 million was recorded in selling, general, administrative and engineering expense and $4 million was recorded in depreciation and amortization expense. In 2010, we incurred $19 million in restructuring and related costs, of which $14 million was recorded in cost of sales and $5 million was recorded in depreciation and amortization expense. During 2011, we incurred $8 million in restructuring and related costs, primarily related to headcount reductions in Europe and Australia and the closure of our ride controlperformance plant in Cozad, Nebraska, all of which was recorded in cost of sales.

In 2012, we incurred $13 million in restructuring and related costs, primarily related to headcount reductions in South America and non-cash asset write downs of $4 million in Europe, of which $10 million was recorded in cost of sales and $3 million was recorded in SG&A. In 2013, we have incurred $78 million in restructuring and related costs, primarily related to European cost reduction efforts including non-cash asset write downs of $3 million, our exit from the distribution of aftermarket exhaust products and ending production of leaf springs in Australia, headcount reductions in various regions, and the net impact of freezing our defined benefit plans in the United Kingdom, of which $70 million was recorded in cost of sales, $6 million in SG&A, $1 million in engineering expense and $1 million in other expense.

Amounts related to activities that are part of our restructuring plans are as follows:

   December 31,
2010
Restructuring
Reserve		   2011
Expenses		   2011
Cash
Payments		  Reserve
Adjustments		  December 31,
2011
Restructuring
Reserve		 
           (millions)       

Severance

  $7     8     (13)   (1)  $1  

 
December 31,
2012
Restructuring
Reserve
 
2013
Expenses
 
2013
Cash
Payments
 Impact of Exchange Rates 
December 31,
2013
Restructuring
Reserve
 (Millions)
Employee Severance, Termination Benefits and Other Related Costs$—
 75
 (32) 1
 $44

Under the terms of our amended and extended senior credit agreement, that took effect on June 3, 2010, we are allowed to exclude $60$80 million of cash charges and expenses, before taxes, related to cost reduction initiatives incurred after June 3, 2010March 22, 2012 from the calculation of the financial covenant ratios required under our senior credit facility. As of December 31, 2011,2013, we have excluded $17 million in cumulativeall allowable charges relating to restructuring initiatives against the $60$80 million available under the terms of the senior credit facility.

On September 22, 2009,January 31, 2013, we announced our intent to reduce structural costs in Europe by approximately $60 million annually, and anticipate related costs of approximately $120 million, which includes the closing of the Vittaryd facility in Sweden that we were closing our originalannounced in September 2012 and a $7 million charge recorded in the fourth quarter of 2012 related to the impairment of certain assets in the European ride performance business. The $120 million of anticipated costs includes approximately $20 million of non-cash asset write downs, the cost of relocating tooling, equipment ride control plant in Cozad, Nebraska. The closure of the Cozad plant eliminates approximately 500 positions. We are hiring atand production to other facilities, as we move production from Cozadseverance and retention payments to those facilities, which will result in a net decrease of approximately 60 positions. Much ofemployees and other costs related to these actions. Any plans affecting our European hourly and salaried workforce would be subject to consultation with the production is being shifted from Cozad to our plant in Hartwell, Georgia.

During the transition of production from our Cozad facility to our Hartwell facility, several customer programs, which were planned to phase out, were reinstated and volumes increased beyond the amount in our original restructuring plan. To meet the higher volume requirements, we have taken a number of actions over the past few months to stabilize the production environment in Hartwell including reinforcing several core processes, realigning assembly lines, upgrading equipment to increase output and accelerating our Lean manufacturing activities. Based on the higher volumes, we are adjusting our consolidation plan. Our revised consolidation plan includes temporarily continuing some basic production operations in Cozad, and redirecting some programs from our Hartwell facility to our other North American facilities to better balance production. These actions are anticipated to conclude during the third quarter of 2012. As of December 31, 2011, more than 95 percent of the positions at our Cozad facility have been eliminated.relevant employee representatives. We still estimate that we will generate $8incurred $78 million in annualized cost savings once these actions are completed.

During 2009 and 2010, we recorded $11 million and $10 million, respectively, of restructuring and related expensescosts in 2013, of which $69 million was related to this initiative including $3 million for non-cash asset write downs. We expect that most of whichthe remaining expense will be recorded in 2014, and that the Company will reach a full savings run rate in 2016. On September 5, 2013, we announced our intent to close our ride performance plant in Gijon, Spain and reduce the workforce at our ride performance plant in Sint-Truiden, Belgium. The actions are subject to consultation with the relevant employee representatives and in total would eliminate approximately $16 million represents cash expenditures. For 2011,480 jobs in Western Europe while allowing the most efficient use of our capital assets and production capacity across the region. The actions in Sint-Truiden would transfer higher labor assemblies to other ride performance operations while focusing the Sint-Truiden plant on more highly automated, advanced component production and final assembly. We concluded the consultation period with employee representatives at Gijon without having reached agreement and on December 17, 2013 notified the Gijon workers' council that the Company is proceeding with the plant closure. Employee terminations at Gijon were completed by the end of 2013. The workers' council filed suit challenging the decision to close the Gijon plant and the


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local High Court of Justice of Asturias ruled in favor of the workers' council. On February 25, 2014, we have recorded an additional cash chargeannounced the intention of $2the Company to appeal that decision to the Supreme Court of Spain in Madrid. Negotiations with employee representatives at Sint-Truiden are continuing. Our estimate of total charges related to the actions at the Gijon and Sint-Truiden plants remains unchanged from what was announced previously. We expect to record charges of $63 million related to this initiative.

During 2011, wethese actions, of which $60 million was recorded $3in 2013. The charges comprise $57 million of restructuringcash expenditures (which consist of severance and related payments to employees, the cost of relocating tooling, equipment and production to other facilities and other costs related to these actions) and $6 million of non-cash asset write downs.

Earnings (Loss) Per Share
We reported net income attributable to Tenneco Inc. of $183 million or $2.97 per diluted common share for 2013. Included in the results for 2013 were negative impacts from expenses allrelated to our restructuring activities, which were partially offset by net tax benefits. The net impact of these items decreased earnings per diluted share by $0.81. We reported net income attributable to Tenneco Inc. of $275 million or $4.50 per diluted common share for 2012. Included in the results for 2012 were negative impacts from expenses related to our restructuring activities, an asset impairment charge and costs related to our refinancing activities, which represented cash expenditures,were more than offset by the benefit from The Pullman Company property recoveries and net tax benefits which included the net impact of approximately $81 million or $1.33 per diluted common share related to the permanent elimination of 53 positions in our Australian operations as a resultreversal of the continued declinetax valuation allowance on the Company’s U.S. net operating loss position in industry production volumes in that region.

Earnings (Loss) Per Share

the third quarter. The net impact of these items increased earnings per diluted common share by $1.18. We reported a net income attributable to Tenneco Inc. of $157 million or $2.55 per diluted common share for 2011. Included in the results for 2011 were negative impacts from expenses related to our restructuring activities, a goodwill impairment charge, costs related to our refinancing activities and tax adjustments. The net impact of these items decreased earnings per diluted share by $0.11. We reported net income of $39 million or $0.63 per diluted common share for 2010. Included in the results for 2010 were negative impacts from expenses related to our restructuring activities, pension charges, costs related to our refinancing activities and tax adjustments. The net impact of these items decreased earnings per diluted share by $0.94. We reported a net loss of $73 million or $1.50 per diluted common share for 2009. Included in the results for 2009 were negative impacts from expenses related to our restructuring activities, an environmental reserve and tax adjustments. The net impact of these items decreased earnings per diluted share by $0.91.

Dividends on Common Stock

On January 10, 2001, our Board of Directors eliminated the quarterly dividend on our common stock. There are no current plans to reinstate a dividend on our common stock.


Cash Flows for 20112013 and 2010

   Year Ended
December 31,		 
   2011  2010 
   (Millions) 

Cash provided (used) by:

   

Operating activities

  $245   $244  

Investing activities

   (224)   (157) 

Financing activities

   (26)   (30) 

2012

 
Year Ended
December 31,
 2013 2012
 (Millions)
Cash provided (used) by:   
Operating activities$503
 $365
Investing activities(266) (273)
Financing activities(175) (89)
Operating Activities

For 2011,2013, operating activities provided $245$503 million in cash compared to $244$365 million in cash provided during last year. The increase was mainly from working capital improvement. For 2011,2013, cash used forprovided from working capital was $130$77 million versus $71$76 million of cash used for working capital in 2010. The demand for working capital to support higher revenue primarily drove the increase in 2011 versus 2010.2012. Receivables were a use of cash of $183$88 million in 20112013 compared to a cash use of $231$9 million in the prior year. Inventory represented a cash outflowinflow of $64$3 million during 2011,2013, compared to a cash outflow of $122$72 million for the prior year. Accounts payable provided cash of $144$161 million for the year ended December 31, 2011,2013, compared to cash provided of $238$12 million for the year ended December 31, 2010.2012. Cash taxes were $85$109 million for 20112013 compared to $53$80 million in the prior year.

One of our European subsidiaries receives payment from one of its OE customers whereby the accounts receivable are satisfied through the delivery of negotiable financial instruments. We may collect these financial instruments before their maturity date by either selling them at a discount or using them to satisfy accounts receivable that have previously been sold to a European bank. Any of these financial instruments which are not sold are classified as other current assets. The amount of these financial instruments that was collected before their maturity date and sold at a discount totaled $10 million and $6 million at December 31, 2011 and 2010, respectively. No negotiable financial instruments were held by our European subsidiary as of December 31, 2011 and 2010, respectively.

In certain instances, several of our Chinese subsidiaries receive payment from OE customers and satisfy vendor payments through the receipt and delivery of negotiable financial instruments. Financial instruments used to satisfy vendor payables and not redeemed totaled $14 million and $8 million at December 31, 2011 and 2010, respectively, and were classified as notes payable. Financial instruments received from OE customers and not redeemed totaled $9 million and $11 million at December 31, 2011 and 2010, respectively. We classify financial instruments received from our OE customers as other current assets if issued by a financial institution of our customers or as customer notes and accounts, net if issued by our customer. We classified $9 million and $11 million in other current assets at December 31, 2011 and 2010, respectively. Some of our Chinese subsidiaries that issue their own negotiable financial instruments to pay vendors are required to maintain a cash balance if they exceed certain credit limits with the financial institution that guarantees those financial instruments. A restricted cash balance was not required at those Chinese subsidiaries at December 31, 2011 and 2010, respectively.

The negotiable financial instruments received by one of our European subsidiaries and some of our Chinese subsidiaries are checks drawn by our OE customers and guaranteed by their banks that are payable at a future date. The use of these instruments for payment follows local commercial practice. Because negotiable financial instruments are financial obligations of our customers and are guaranteed by our customers’ banks, we believe they represent a lower financial risk than the outstanding accounts receivable that they satisfy which are not guaranteed by a bank.

Investing Activities

Cash used for investing activities was $67$7 million higherlower in 20112013 compared to the same period a year ago. Cash payments for plant, property and equipment were $213$244 million in 20112013 versus payments of $151$256 million in

2010, an increase 2012, a decrease of $62$12 million. This increaseThe majority of spending was due to investmentssupport continued growth in the Clean Air business. In 2012, cash of $7 million was used to acquire certain rights from Combustion Components Associates, Inc. primarily pertaining to clean air technology for new business launches, technology development and future growth opportunities.stationary reciprocating engine applications. Cash payments for software-related intangible assets were $15$25 million in 20112013 compared to $12$13 million in 2010.

2012. Changes in restricted cash were a use of cash of $5 million in 2013.

Financing Activities

Cash flow from financing activities was an outflow of $175 million for the year ending December 31, 2013 compared to an outflow of $89 million for the year ending December 31, 2012. During 2013, we completed a previously announced stock buyback plan, repurchasing 550,000 shares of our outstanding common stock for $27 million, at an average price of $49.33 per

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share. During 2012, we completed a previously announced stock buyback plan, repurchasing 600,000 shares of our outstanding common stock for $18 million, at an average price of $29.22 per share. In 2013, we paid $69 million to acquire the remaining 20 percent equity interest in Tenneco Tongtai (Dalian) Exhaust System Co. Ltd. ("TTEC"), our joint venture in Dalian, China, and an additional $9 million to the partner in lieu of receiving its pro-rata share of dividends owed from the joint venture. As a result of this purchase, TTEC is now a wholly owned indirectly subsidiary of Tenneco. Borrowings under our revolving credit facility were $58 million at December 31, 2013 versus $92 million at December 31, 2012. In 2012, refinancing activities included retiring certain of our 8 1/8 percent senior notes due in 2015 and the $148 million Tranche B Term Facility, adding a new $250 million Tranche A Term Facility and increasing the amount and extending the maturity date of our revolving credit facility. At December 31, 2013, there was $10 million borrowed under the North American accounts receivable securitization programs, whereas at December 31, 2012, there was $50 million outstanding.
Cash Flows for 2012 and 2011
 
Year Ended
December 31,
 2012 2011
 (Millions)
Cash provided (used) by:   
Operating activities$365
 $245
Investing activities(273) (224)
Financing activities(89) (26)
Operating Activities
For 2012, operating activities provided $365 million in cash compared to $245 million in cash provided during 2011. For 2012, cash used for working capital was $76 million versus $130 million of cash used for working capital in 2011. Receivables were a use of cash of $9 million in 2012 compared to a cash use of $183 million in 2011. Inventory represented a cash outflow of $72 million during 2012, compared to a cash outflow of $64 million for 2011. Accounts payable provided cash of $12 million for the year ended December 31, 2012, compared to cash provided of $144 million for the year ended December 31, 2011. Cash taxes were $80 million for 2012 compared to $85 million in 2011.
Investing Activities
Cash used for investing activities was $49 million higher in 2012 compared to 2011. Cash payments for plant, property and equipment were $256 million in 2012 versus payments of $213 million in 2011, an increase of $43 million. The majority of the spending went to our Europe and North America OE businesses to support new light vehicle, commercial truck, and off-highway program launches, and in China to accommodate new programs and new customers. In 2012, cash of $7 million was used to acquire certain rights from Combustion Components Associates, Inc. primarily pertaining to clean air technology for stationary reciprocating engine applications. Cash payments for software-related intangible assets were $13 million in 2012 compared to $15 million in 2011.
Financing Activities
Cash flow from financing activities was an outflow of $89 million for the year ending December 31, 2012 compared to an outflow of $26 million for the year ending December 31, 2011 compared to an outflow of $30 million for the year ending December 31, 2010. In the second quarter of 2011,2011. During 2012, we completed a previously announced astock buyback plan, to repurchase up to 400,000repurchasing 600,000 shares of our outstanding common stock. Duringstock for $18 million, at an average price of $29.22 per share. In 2011, we purchased allcompleted a previously announced stock buyback plan, repurchasing 400,000 shares of our outstanding common stock for $16 million.million, at an average price of $39.84 per share. In 2012, refinancing activities included retiring certain of our 8 1/8 percent senior notes due in 2015 and the $148 million Tranche B Term Facility, adding a new $250 million Tranche A Term Facility and increasing the amount and extending the maturity date of our revolving credit facility. We also paid $4 million to secure the remaining 25 percent interest in our emission controlclean air joint venture in Thailand, now wholly-owned, during 2011. We ended 2012 and 2011 with $92 million and $24 million, respectively, in borrowings under our revolving credit facility. At December 31, 2011, there were no borrowings outstanding under the North American accounts receivable securitization programs.

Cash Flowsprograms, whereas at December 31, 2012, there was $50 million outstanding.

Outlook
First Quarter 2014
In the first quarter of 2014, IHS Automotive projects that industry light vehicle production in the regions where we operate will increase six percent year-over-year. North America is expected to be up six percent, Europe up four percent and China up 12 percent. Light vehicle production in India and South America is expected to be down nine percent and one percent, respectively.

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We expect revenue from commercial truck and off-highway customers in the first quarter to increase about 20 percent year-over-year as we launch additional content for 2010off-highway equipment to meet the next round of regulatory changes in North America and 2009

   Year Ended
December 31,		 
   2010  2009 
   (Millions) 

Cash provided (used) by:

   

Operating activities

  $244   $241  

Investing activities

   (157)   (119) 

Financing activities

   (30)   (87) 

Operating Activities

For 2010, operating activities provided $244 millionEurope, and as the pace of commercial truck customer orders in cash comparedChina continues to $241 milliongradually increase.

We expect our global aftermarket revenue in cash for 2009. For 2010, cash used for working capital was $71 million versus $65 million of cash provided from working capital in 2009. Receivables were a use of cash of $231 million comparedthe first quarter to a cash use of $8 million in 2009. The change in cash flow from receivables was partially due to higher year-over-year sales and a change in accountingremain at the strong levels achieved in the first quarter of 2010.2013.
Full Year 2014
In 2014, we expect our total OE revenue will increase between seven percent and 11 percent including both light vehicle, and commercial truck and off-highway revenue growth.
Our 2014 OE light vehicle revenue is expected to grow at a slightly higher rate than overall global industry production, which according to IHS Automotive is forecasted to increase 5% in the regions where we operate. This accounting change requires thatincludes IHS estimates of year-over-year increases in North America accounts receivable securitization(four percent), Europe (one percent), China (10 percent), South America (two percent) and India (six percent). Our light vehicle OE revenue growth will be driven by leveraging higher industry production volumes with a strong position on top-selling platforms and with customers globally; light vehicle program launches including new technology content; and the ramp-up of volumes on platforms launched in 2013.
We anticipate our 2014 commercial truck and off-highway revenue will increase in the range of 20 percent to 30 percent despite the expectation that overall, our commercial truck and off-highway markets will see relatively flat volumes in 2014. Our revenue growth will be driven primarily by programs with new incremental content to meet U.S. Tier 4 final and Europe Stage 4 off-highway regulations that begin phasing in during 2014. Also driving revenue growth will be accounted forthe launch of new programs globally, and gradually increasing revenues in China as secured borrowings rather than asmore cities enforce already enacted emissions regulations and low sulfur diesel fuel becomes more widely available.
We expect our global aftermarket business to continue to be a sale of accounts receivables. As a result, funding from the North America accounts receivable securitization program is included in net cash provided by financing activities on the statement of cash flows and was previously reflected in net cash used by operating activities. See “Liquidity and Capital Resources” below for further discussion of the accounting change. Inventory represented a cash outflow of $122 million during 2010, compared to a cash inflow of $101 million in 2009. The year-over-year change to cash flow from inventory was primarily a result of higher OE production levels. The higher production environment also led to accounts payable providing cash of $238 million in 2010, compared to a use of cash of $2 million in 2009. Cash taxes were $53 million for 2010 compared to $38 million in 2009.

Investing Activities

Cash used for investing activities was $38 million higher in 2010 compared to 2009. Cash payments for plant, property, and equipment were $151 million in 2010 versus payments of $120 million in 2009, an increase of $31 million. This increase was due to deferring discretionary projects in 2009, the investments for new business launches, technology development and future growth opportunities. Cash payments for software-related intangible assets were $12 million in 2010 compared to $6 million in 2009.

Financing Activities

Cash flow from financing activities was an outflow of $30 million in 2010 compared to an outflow of $87 million in 2009. The 2010 outflow was primarily due to debt issuance costs relatedstable contributor to our refinancing activities. We used $188 millionrevenue performance in net proceeds from our common stock offering in 2009 to pay down debt, primarily borrowings against our revolving credit facility. We ended 2010 with no borrowings under our revolving credit facility. As mentioned above in the “Operating Activities” section of this cash flow discussion, cash flow from financing activities was impacted by the accounting change for the way2014.

Looking forward, we account for our North American accounts receivable securitization programs. At December 31, 2010, there were no borrowings outstanding under the North American accounts receivable securitization programs.

Outlook

We are well positioned to deliverexpect significant revenue growth in 2012over the next five years, largely driven by increasingly stringent global emissions regulations for light vehicles and commercial markets. Our OE light vehicle revenue is expected to outpace global industry light vehicle production as we launch new business, ramp up programs that have already launched and help our customers meet stricter emissions standards for both on-road and off-road vehicles. We will continue to benefit fromleverage our strong position on manyplatforms, across geographic regions and with leading customers worldwide. In addition, we anticipate our strong book of the top-selling light vehicle modelsbusiness with commercial truck and our global presence in the world’s largestoff-highway manufacturers will support further revenue growth, driven by new business, incremental content and fastest growing markets. We estimate that our global original equipment revenues will be approximately $6.6 billion in 2012 and $7.8 billion in 2013 with substrate sales making up 29 percent of totalstronger volumes as various commercial markets recover. Over this timeframe, we expect a compounded annual OE revenue in 2012 and 30 percentgrowth rate of total OE revenue in 2013. We expect our global original equipment revenue to increase to between $10.0 billion and $11.5 billion by 2016, with substrate sales comprising 32 percent of total OE revenue.

We will continue to drive OE growth with the technology-driven expansion of commercial vehicle emission control programs, both truck and engine manufacturers, to help customers meet new emissions regulations for on-road and off-road commercial vehicles. We project that our OE commercial and specialty vehicle revenue to be $1.2 billion in 2012 and $1.9 billion in 2013 and account for about 30 percent to 35 percent of our global original equipment revenue by 2016.

10 percent.

The revenue estimates presented in this “Outlook” are based on volume projections summarized in the following chartprojected customer production schedules, IHS Automotive and onPower Systems Research forecasts as of January 2014; original equipment manufacturers’ programs that have been formally awarded to the company;us; programs where the company iswe are highly confident that itwe will be awarded business based on informal customer indications consistent with past practices; our status as supplier for the existing programs and our relationships and experience with the customer;our customers; and the actual original equipment revenues achieved by the companyus for each of the last several years compared to the amount of those revenues that the companywe estimated itwe would generate at the beginning of each year. OurThe revenue estimates are subject to increase or decrease due to changes in customer requirements, customeralso based on anticipated vehicle production levels and consumer preferences,pricing, including precious metals pricing and the numberimpact of vehicles actually produced by our customers. We update these estimates annually. In the interim we do not intend to otherwise update the estimates to reflect future changes in these assumptions. In addition, our revenue estimate is based on our anticipated pricing for each applicable program over its life. However, we are under continuing pricing pressures from our OE customers. We do not intend to update the amounts shown above for any pricematerial cost changes. Finally, for our foreign operations, our revenue estimate assumes fixed foreign currency values relative to the U.S. dollar. These values are used to translate foreign revenues to the U.S. dollar. Although such currency values are subject to fluctuations based on the economic conditions in each of our foreign operations, we do not intend to update the annual revenue estimates shown above due to these fluctuations. CurrencyFor example, currency is assumed to be constant at $1.27$1.33 per Euro throughout our projection. We plan to update our revenue guidance during the first quarter of 2013.2015. See “Cautionary Statement for Purposes of the ‘Safe Harbor’ Provisions of the Private Securities Litigation Reform Act of 1995” and Item 1A, “Risk Factors”.

Light Vehicle Production(According to IHS Automotive, January 2012)

   2011(actual)   2012   2013   2016 
   (Number of Vehicles in Millions) 

North America

   13.1     13.9     14.7     16.8  

Europe

   20.1     18.5     19.6     22.5  

China

   17.2     18.4     20.4     25.8  

South America

   4.3     4.6     5.0     5.9  

On-Road Commercial Vehicle Production (Class 4-8)(According to Power Systems Research, January 2012)

   2011(actual)   2012   2013   2016 
   (Number of Vehicles in Thousands) 

North America

   416     467     512     477  

Europe

   558     655     753     790  

China

   1,095     1,154     1,214     1,300  

Brazil

   204     184     196     223  

Off-Road Commercial Vehicle Production (Agriculture, Construction, Mining & Forestry) (According to Power Systems Research, January 2012)

   2011(actual)   2012   2013   2016 
   (Number of Vehicles in Thousands) 

U.S. (³25hp)

   218     217     229     247  

Europe (³50hp)

   426     440     458     459  

We anticipate that the global aftermarket for 2012 will continue to be a solid contributor to our business based on our market-leading global brands. We will continue to support our strong brands and aggressively pursue new customers, actions that we hope will help expand our market share globally.

We expect our capital expenditures for 20122014 to be approximately $230between $275 million to $250 million. We expectand $300 million, our 20122014 interest expense to be about $105$80 million, and our 20122014 cash taxes to be approximately $100 million.

between $190 million and $210 million and our 2014 tax rate to be between 36 percent and 38 percent.


Liquidity and Capital Resources
Capitalization

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Year Ended
December 31,
 % Change
 2013 2012 
 (Millions)
Short-term debt and maturities classified as current$83
 $113
 (27)%
Long-term debt1,019
 1,067
 (4)
Total debt1,102
 1,180
 (7)
Total redeemable noncontrolling interests20
 15
 33
Total noncontrolling interests39
 45
 (13)
Tenneco Inc. shareholders’ equity433
 246
 76
Total equity472
 291
 62
Total capitalization$1,594
 $1,486
 7 %

General.

Capitalization

   Year Ended
December 31,		  % Change 
   2011   2010  
   (Millions) 

Short-term debt and maturities classified as current

  $66    $63    5% 

Long-term debt

   1,158     1,160    —  
  

 

 

   

 

 

  

Total debt

   1,224     1,223    —  
  

 

 

   

 

 

  

Total redeemable noncontrolling interests

   12     12    —  
  

 

 

   

 

 

  

Total noncontrolling interests

   43     39    10  
  

 

 

   

 

 

  

Tenneco Inc. shareholders’ equity

   —     (4)   NM  
  

 

 

   

 

 

  

Total equity

   43     35    23  
  

 

 

   

 

 

  

Total capitalization

  $1,279    $1,270    1  
  

 

 

   

 

 

  

General.    Short-term debt, which includes maturities classified as current, borrowings by parent company and foreign subsidiaries, and borrowings by foreign subsidiaries, was $66under our North American accounts receivable securitization program, were $83 million and $63$113 million as of December 31, 20112013 and 2010,December 31, 2012, respectively. Borrowings under our revolving credit facilities, which are classified as long-term debt, were $24$58 million and zero$92 million at December 31, 20112013 and 2010,December 31, 2012, respectively.

The 20112013 year-to-date increase in totalTenneco Inc. shareholders' equity primarily resulted from net income attributable to Tenneco Inc. of $157$183 million, a $10$85 million increase related to pension and postretirement benefits, a $51 million increase in premium on common stock and other capital surplus relating to common stock issued pursuant to benefit plans, partially offset by a $102 $27 million increase in accumulatedtreasury stock as a result of purchases of common stock under our share purchase program, a $68 million decrease in premium on common stock and other comprehensive loss duecapital surplus relating to higher unrecognized pensionpurchase of noncontrolling equity interest in the Tenneco Tongtai (Dalian) Exhaust System Co., Ltd. (TTEC) joint venture investment in China and postretirement benefit costs, a $43 million $37 million decrease caused by the impact of changes in foreign exchange rates on the translation of financial statements of our foreign subsidiaries into U.S. dollars, a $16 million increase in treasury stock as a result of open market purchases of common stock under our share repurchase program, and a $2 million decrease in premium on common stock and other capital surplus due to the purchase of the remaining 25 percent equity interest in our Thailand emission control joint venture, Walker Exhaust Co. Limited, now wholly owned by Tenneco Automotive (Thailand) Limited.

We have in the past and will continue to review our outstanding indebtedness and opportunities to optimize our debt structure. We will continue to undertake transactions to amend, extend or otherwise refinance our indebtedness as and when market conditions permit and we determine it would be in our interests to do so. We may incur costs and charges relating to these refinancing transactions when they are undertaken.

dollars.

Overview.    Our financing arrangements are primarily provided by a committed senior secured financing arrangement with a syndicate of banks and other financial institutions. The arrangement is secured by substantially all our domestic assets and pledges of up to 66 percent of the stock of certain first-tier foreign subsidiaries, as well as guarantees by our material domestic subsidiaries.

On June 3, 2010,March 22, 2012, we completed an amendment and extensionrestatement of our senior secured credit facility by increasing the amount and extending the termmaturity date of our revolving credit facility and replacingadding a new Tranche A Term Facility. The amended and restated facility replaces our $128former $556 million termrevolving credit facility, $148 million Tranche B Term Facility and $130 million Tranche B-1 letter of credit/revolving loan A with a largerfacility. The proceeds from this refinancing transaction were used to repay our $148 million Tranche B Term Facility and longer maturity term loan B facility.to fund the purchase and redemption of our $250 million 8 1/8 percent senior notes due in 2015. As a result of the amendment and extension, as of December 31, 2011,2013, the senior credit facility provides us with a total revolving credit facility size of $622$850 million until March 16, 2012, when commitmentsand a $228 million Tranche A Term Facility, both of $66 million will expire. After March 16, 2012, the extended revolving credit facility will provide $556 million of revolving credit andwhich will mature on May 31, 2014. The extended facility will mature earlier on December 15, 2013, if our $130 million tranche B-1 letter of credit/revolving loan facility is not refinanced by that date. Prior to maturity, fundsMarch 22, 2017. Funds may be borrowed, repaid and re-borrowed under the two revolving credit facilitiesfacility without premium or penalty.

As of December 31, 2011, the senior The revolving credit facility also provides a six-year, $148 million term loan B maturing in June 2016, and a seven-year $130 million tranche B-1 letter of credit/revolving loan facility maturing in March 2014. We are required to make quarterly principal payments of $375 thousand on the term loan B, through March 31, 2016 with a final payment of $141 million due June 3, 2016. The tranche B-1 letter of credit/revolving loan facility requires repayment by March 2014. We can enter into revolving loans and issue letters of credit under the $130 million tranche B-1 letter of credit/revolving loan facility. The tranche B-1 letter of credit/revolving loan facility is reflected as debt on our balance sheet only if we borrow money under this facility or if we use the facility to make payments for letters of credit. There is no additional cost to us for issuing letters of credit under the tranche B-1 letter of credit/revolving loan facility. However, outstandingOutstanding letters of credit reduce our availability to enter into revolving loans under the facility. We payare required to make quarterly principal payments under the tranche B-1 lendersTranche A Term Facility of $3.1 million from June 30, 2012 through March 31, 2014, $6.3 million beginning June 30, 2014 through March 31, 2015, $9.4 million beginning June 30, 2015 through March 31, 2016, $12.5 million beginning June 30, 2016 through December 31, 2016 and a marginfinal payment of $125 million is due on March 22, 2017. We have excluded the $130required payments, within the next twelve months, under the Tranche A Term Facility totaling $22 million deposited withfrom current liabilities as of December 31, 2013, because we have the administrative agent. In addition,intent and ability to refinance the obligations on a long-term basis by using our revolving credit facility.

On March 8, 2012, we pay lenders interest equalannounced a cash tender offer to purchase our outstanding $250 million 8 1/8 percent senior notes due in 2015 and a solicitation of consents to certain proposed amendments to the London Interbank Offered Rate (“LIBOR”)indenture governing these notes. We received tenders and consents representing $232 million aggregate principal amount of the notes and, on March 22, 2012, we purchased the tendered notes at a price of 104.44 percent of the principal amount (which includes a consent payment of three percent of the principal amount), plus accrued and unpaid interest, and amended the related indenture. On April 6, 2012, we redeemed the remaining outstanding $18 million aggregate principal amount of senior notes that were not purchased pursuant to the tender offer at a price of 104.06 percent of the principal amount, plus accrued and unpaid interest. The additional liquidity provided by the new $850 million revolving credit facility and the new $250 million Tranche A Term Facility was used to fund the total cost of the tender offer and redemption, including all borrowingsrelated fees and expenses.

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We recorded $17 million of pre-tax charges in March 2012 related to the refinancing of our senior credit facility, the repurchase and redemption of $232 million aggregate principal amount of our 8 1/8 percent senior notes due in 2015 and the write-off of deferred debt issuance costs relating to these senior notes. We recorded an additional $1 million of pre-tax charges during the second quarter of 2012 relating to the redemption of the remaining $18 million aggregate principal amount of our 8  1/8 percent senior notes which occurred in April 2012.
At December 31, 2013, of the $850 million available under the facility. Funds depositedrevolving credit facility, we had unused borrowing capacity of $755 million with the administrative agent by the lenders$58 million in outstanding borrowings and not borrowed by the Company earn interest at an annual rate approximately equal$37 million in outstanding letters of credit. As of December 31, 2013, our outstanding debt also included $228 million related to LIBOR less 25 basis points.

our Tranche A Term Facility due March 22, 2017, $225 million of 7 3/4 percent senior notes due August 15, 2018, $500 million of 6 7/8 percent senior notes due December 15, 2020, and $91 million of other debt.

Senior Credit Facility — Interest Rates and Fees.Beginning June 3, 2010,March 22, 2012, our term loan BTranche A Term Facility and revolving credit facility bear interest at an annual rate equal to, at our option, either (i) LIBORLondon Interbank Offered Rate (“LIBOR”) plus a margin of 475 and 450 basis points, respectively, or (ii) a rate consisting of the greater of (a) the JPMorgan Chase prime rate plus a margin of 375 and 350 basis points, respectively, (b) the Federal Funds rate plus 50 basis points plus a margin of 375 and 350 basis points, respectively, and (c) the Eurodollar Rate plus 100 basis points plus a margin of 375 and 350 basis points, respectively. The margin we pay on these borrowings will be reduced by 25 basis points following each fiscal quarter for which our consolidated net leverage ratio is less than 2.25 for extending lenders and for the term loan B and will be further reduced by an additional 25 basis points following each fiscal quarter for which the consolidated net leverage ratio is less than 2.00 for extending lenders. Our consolidated net leverage ratio was 1.88 and 2.24 as of December 31, 2011 and 2010, respectively. Accordingly, in February of 2012 the margin we pay on these borrowings will be reduced by 25 basis points for extending lenders and will remain at such level for so long as our consolidated net leverage ratio remains below 2.00.

The borrowings under our tranche B-1 letter of credit/revolving loan facility incur interest at an annual rate equal to, at our option, either (i) LIBOR plus a margin of 500250 basis points, or (ii) a rate consisting of the greater of (a) the JPMorgan Chase prime rate plus a margin of 400150 basis points, (b) the Federal Funds rate plus 50 basis points plus a margin of 400150 basis points, and (c) the Eurodollar Rate plus 100 basis points plus a margin of 400150 basis points.

At December 31, 2011, of the $752 million available under the two revolving credit facilities within our senior secured credit facility, The margin we had unused borrowing capacity of $670 million with $24 million in outstandingpay on these borrowings and $58 million in letters of credit outstanding. As of December 31, 2011, our outstanding debt also included $250 million of 8 1/8 percent senior notes due November 15, 2015, $148 million term loan B due June 3, 2016, $225 million of 7 3/4 percent senior notes due August 15, 2018, $500 million of 6 7/8 percent senior notes due December 15, 2020, and $78 million of other debt.

On December 9, 2010, we commencedwill be reduced by a cash tender offer of our outstanding $500 million 8 5/8 percent senior subordinated notes due in 2014 and a consent solicitation to amend the indenture governing these notes. On December 23, 2010, we issued $500 million of 6 7/8 percent senior notes due December 15, 2020 in a private offering. The net proceeds of this transaction, together with cash and available liquidity, were used to finance the purchase of our 8 5/8 percent senior subordinated notes pursuant to the tender offer at a price of 103.25 percent of the principal amount, plus accrued and unpaid interest for holders who tendered prior to the expiration of the consent solicitation, and 100.25 percent of the principal amount, plus accrued and unpaid interest, for other participants. A total of $480 million of the senior subordinated notes were tendered prior to the expiration of the consent solicitation. On January 7, 2011, we redeemed all remaining outstanding $20 million of senior subordinated notes that were not previously tendered, at a price of 102.875 percent of the principal amount, plus accrued and unpaid interest. To facilitate these transactions, we amended our senior credit agreement to permit us to refinance our senior subordinated notes with new senior unsecured notes. We did not incur any fee in connection with this amendment. The new notes are general senior obligations of Tenneco Inc. and are not

secured by assets of Tenneco Inc. or any of our subsidiaries that guarantee the new notes. We recorded $20 million of pre-tax charges in December 2010 and an additional $1 million of pre-tax charges in the first quarter of 2011 related to our repurchase and redemption of our 8 5/8 percent senior subordinated notes. On March 14, 2011, we completed an offer to exchange the $500 million of 6 7/8 percent senior notes due in 2020 which have been registered under the Securities Act of 1933, for and in replacement of all outstanding unregistered 6 7/8 percent senior notes due in 2020. We received tenders from holders of all $500 million of the aggregate outstanding amount of25 basis points below the original notes. The termsmargin following each fiscal quarter for which our consolidated net leverage ratio is less than 1.50 or will be increased by a total of the new notes are substantially identical to the terms of25 basis points above the original notes for which they were exchanged, except that the transfer restrictions and the registration rights applicable to the original notes generally do not apply to the new notes.

On August 3, 2010, we issued $225 million of 7 3/4 percent senior notes due August 15, 2018 in a private offering. Themargin if our consolidated net proceeds of this transaction, together with cash and available liquidity, were used to finance the redemption of our 10 1/4 percent senior secured notes due in 2013. We called the senior secured notes for redemption on August 3, 2010, and completed the redemption on September 2, 2010 at a price of 101.708 percent of the principal amount, plus accrued and unpaid interest. We recorded $5 million of expense related to our redemption of our 10 1/4 percent senior secured notes in the third quarter of 2010. The new notes are general senior obligations of Tenneco Inc. and are not secured by assets of Tenneco Inc.leverage ratio is greater than or any of our subsidiaries that guarantee the new notes. On February 14, 2011, we completed an offer to exchange the $225 million of 7 3/4 percent senior notes due in 2018 which have been registered under the Securities Act of 1933, for and in replacement of all outstanding unregistered 7 3/4 percent senior notes due in 2018. We received tenders from holders of all $225 million of the aggregate outstanding amount of the original notes. The terms of the new notes are substantially identical to the terms of the original notes for which they were exchanged, except that the transfer restrictions and the registration rights applicable to the original notes generally do not apply to the new notes.

Senior Credit Facility — Interest Rates and Fees.    Borrowings and letters of credit issued under the senior credit facility bear interest at an annual rate equal to at our option, either (i) LIBOR plus2.50. We also pay a margin as set forth in the table below; or (ii) a rate consisting of the greater of the JPMorgan Chase prime rate, the Federal Funds rate plus 50commitment fee equal to 40 basis points or the Eurodollar Rate plus 100 basis points, plus a margin as set forth in the table below:

   8/14/2009
thru
2/28/2010		  3/1/2010
thru
6/2/2010		  6/3/2010
thru
2/27/2011		  2/28/2011
thru
5/15/2011		  5/16/2011
thru
8/7/2011		  Beginning
8/8/2011		 

Applicable Margin over:

       

LIBOR for Revolving Loans

   5.50%   4.50%   4.50%   4.25%   4.50%   4.25%* 

LIBOR for Term Loan B Loans

   —    —    4.75%   4.50%   4.75%   4.50%* 

LIBOR for Term Loan A Loans

   5.50%   4.50%   —    —    —    —  

LIBOR for Tranche B-1 Loans

   5.50%   5.00%   5.00%   5.00%   5.00%   5.00% 

Prime-based Term Loan A Loans

   4.50%   3.50%   —    —    —    —  

Prime for Revolving Loans

   —    —    3.50%   3.25%   3.50%   3.25%* 

Prime for Term Loan B Loans

   —    —    3.75%   3.50%   3.75%   3.50%* 

Prime for Tranche B-1 Loans

   —    —    4.00%   4.00%   4.00%   4.00% 

Federal Funds for Revolving Loans

   —    —    3.50%   3.25%   3.50%   3.25%* 

Federal Funds for Term Loan B Loans

   —    —    3.75%   3.50%   3.75%   3.50%* 

Federal Funds for Tranche B-1 Loans

   5.00%   4.00%   4.00%   4.00%   4.00%   4.00% 

Commitment Fee

   0.75%   0.50%   0.75%   0.50%   0.75%   0.50%* 

*points. In February 2012,2014, the margin we pay on borrowings will decreasedecreased by 25 basis points below the original margin, as a result of a decrease in our consolidated net leverage ratio from 2.071.86 at September 30, 20112013 to 1.881.39 at December 31, 2011.

2013.

Senior Credit Facility — Other Terms and Conditions.    Our senior credit facility requires that we maintain financial ratios equal to or better than the following consolidated net leverage ratio (consolidated indebtedness net of cash divided by consolidated EBITDA, as defined in the senior credit facility agreement), and consolidated interest coverage ratio (consolidated EBITDA divided by consolidated interest expense, as defined under the senior credit facility agreement) at the end of each period indicated. Failure to maintain these ratios will result in a default under our senior credit facility. The financial ratios required under the amended and restated senior credit facility and the actual ratios we achieved for the four quarters of 2011,2013, are as follows:

   Quarter Ended 
   March  31,
2011		   June  30,
2011		   September  30,
2011		   December  31,
2011		 
   Req.   Act.   Req.   Act.   Req.   Act.   Req.   Act. 

Leverage Ratio (maximum)

   4.00     2.32     3.75     2.17     3.50     2.07     3.50     1.88  

Interest Coverage Ratio (minimum)

   2.55     4.37     2.55     4.76     2.55     5.17     2.55     5.69  

 Quarter Ended
 
March 31,
2013
 
June 30,
2013
 
September 30,
2013
 
December 31,
2013
 Req. Act. Req. Act. Req. Act. Req. Act.
Leverage Ratio (maximum)3.50
 1.98
 3.50
 1.79
 3.50
 1.86
 3.50
 1.39
Interest Coverage Ratio (minimum)2.55
 8.39
 2.55
 8.74
 2.55
 9.09
 2.55
 9.89
The financial ratios required under the senior credit facility for each quarter beyond December 31, 2011 includeincludes a maximum leverage ratio covenant of 3.50 through March 22, 2017 and a minimum interest coverage ratio of 2.75.

2.55 through December 31, 2013 and 2.75 thereafter, through March 22, 2017.

The covenants in our senior credit facility agreement generally prohibit us from repaying or refinancing our senior notes. So long as no default existed, we would, however, under our senior credit facility agreement, be permitted to repay or refinance our senior notes:notes (i) with the net cash proceeds of incremental facilities and permitted refinancing indebtedness (as defined in the senior credit facility agreement)agreement or with the net cash proceeds of our common stock); (ii) with the net cash proceeds fromof the saleincremental facilities (as defined in the senior credit facility agreement); (iii) with the net cash proceeds of sharesthe revolving loans (as defined in the senior credit facility agreement); (iv) with the cash generated by our operations; (v) in an amount equal to the net cash proceeds of our common stock; (iii)qualified capital stock (as defined in the senior credit facility agreement) issued by us after March 22, 2012; and (vi) in exchange for permitted refinancing indebtedness or in exchange for shares of our common stock; (iv) with the net cash proceeds of any new senior or subordinated unsecured indebtedness; (v) with the proceeds of revolving credit loans (as defined in the senior credit facility agreement); (vi) with the cash generated by the operations of the Company; and (vii) in an amount equal to the sum of (a) the net cash proceeds of qualified stock issued by the Company after March 16, 2007, plus (b) the portion of annual excess cash flow (beginning with excess cash flow for fiscal year 2010) not required to be applied to payment of the credit facilities and which is not used for other purposes, provided that the aggregate principal amount of senior notes purchased and cancelled or redeemed pursuant to clauses (v), (vi) and (vii), issuch purchases are capped as follows based(with respect to clauses (iii), (iv) and (v) on thea pro forma consolidated leverage ratio after giving effect to such purchase, cancellation or redemption:

Pro forma Consolidated Leverage Ratio

  Aggregate Senior
Note Maximum
Amount		 
   (Millions) 

Greater than or equal to 3.0x

  $20  

Greater than or equal to 2.5x

  $100  

Less than 2.5x

  $125  

redemption):

Pro forma Consolidated Leverage Ratio
Aggregate Senior
Note Maximum
Amount
 (Millions)
Greater than or equal to 3.0x$20
Greater than or equal to 2.5x$100
Greater than or equal to 2.0x$200
Less than 2.0xno limit

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Although the senior credit facility agreement would permit us to repay or refinance our senior notes under the conditions described above, any repayment or refinancing of our outstanding notes would be subject to market conditions and either the voluntary participation of note holders or our ability to redeem the notes under the terms of the applicable note indenture. For example, while the senior credit agreement would allow us to repay our outstanding notes via a direct exchange of the notes for either permitted refinancing indebtedness or for shares of our common stock, we do not, under the terms of the agreements governing our outstanding notes, have the right to refinance the notes via any type of direct exchange.

The senior credit facility agreement also contains other restrictions on our operations that are customary for similar facilities, including limitations on: (i) incurring additional liens; (ii) sale and leaseback transactions (except for the permitted transactions as described in the senior credit facility agreement); (iii) liquidations and dissolutions; (iv) incurring additional indebtedness or guarantees; (v) investments and acquisitions; (vi) dividends and share repurchases; (vii) mergers and consolidations; and (viii) refinancing of the senior notes. Compliance with these requirements and restrictions is a condition for any incremental borrowings under the senior credit facility agreement and failure to meet these requirements enables the lenders to require repayment of any outstanding loans.

As of December 31, 2011,2013, we were in compliance with all the financial covenants and operational restrictions of the senior credit facility. Our senior credit facility does not contain any terms that could accelerate payment of the facility or affect pricing under the facility as a result of a credit rating agency downgrade.

Senior Notes.    As of December 31, 2011,2013, our outstanding debt also includes $250 million of 8 1/8 percent senior notes due November 15, 2015,included $225 million of 7  3/4 percent senior notes due August 15, 2018 and $500 million of 6 7/8 percent senior notes due December 15, 2020. Under the indentures governing the notes, we are permitted to redeem some or all of the remaining senior notes at specified prices that decline to par over a specified period at any time on and after NovemberAugust 15, 2011 in the case of the senior notes due 2015, August 14, 2014 in the case of the senior notes due 2018, and December 15, 2015 in the case of the senior notes due 2020. In addition, prior to such dates the notes may also be redeemed at a price generally equal to 100 percent of the principal amount thereof plus a premium based on the present values of the remaining payments due to the note holders. If we sell certain of our assets or experience specified kinds of changes in control, we must offer to repurchase the notes. Under the indentures governing the notes we are permitted to redeem up to 35due 2018 and 2020 at 101 percent of the senior notes due 2018, with the proceeds of certain equity offerings completed before August 13, 2013principal amount thereof plus accrued and up to 35 percent of the senior notes due 2020, with the proceeds of certain equity offerings completed before December 15, 2013.unpaid interest.

Our senior notes require that, as a condition precedent to incurring certain types of indebtedness not otherwise permitted, our consolidated fixed charge coverage ratio, as calculated on a pro forma basis, be greater than 2.00. The indentures also contain restrictions on our operations, including limitations on: (i) incurring additional indebtedness or liens; (ii) dividends; (iii) distributions and stock repurchases; (iv) investments; (v) asset sales and (vi) mergers and consolidations. Subject to limited exceptions, all of our existing and future material domestic wholly owned subsidiaries fully and unconditionally guarantee these notes on a joint and several basis. There are no significant restrictions on the ability of the subsidiaries that have guaranteed these notes to make distributions to us. As of December 31, 2011,2013, we were in compliance with the covenants and restrictions of these indentures.

Accounts Receivable Securitization.    We securitize some of our accounts receivable on a limited recourse basis in North America and Europe. As servicer under these accounts receivable securitization programs, we are responsible for performing all accounts receivable administration functions for these securitized financial assets including collections and processing of customer invoice adjustments. In North America, we have an accounts receivable securitization program with three commercial banks comprised of a first priority facility and a second priority facility. We securitize original equipment and aftermarket receivables on a daily basis under the bank program. In March 2011,2013, the North American program was amended and extended to March 23, 2012.21, 2014. The first priority facility continues to provide financing of up to $110 million and the second priority facility, which is subordinated to the first priority facility, continues to provide up to an additional $40 million of financing. Both facilities monetize accounts receivable generated in the U.S. and Canada that meet certain eligibility requirements, and therequirements. The second priority facility also monetizes certain accounts receivable generated in the U.S. or Canada that would otherwise be ineligible under the first priority securitization facility. The amendments to the North American program expand the trade receivables that are eligible for purchase under the program and decrease the margin we pay to our banks. We had noamount of outstanding third partythird-party investments in our securitized accounts receivable under the North American program was $10 million at December 31, 20112013 and 2010, respectively.$50 million at December 31, 2012.

Each facility contains customary covenants for financings of this type, including restrictions related to liens, payments, mergers or consolidationconsolidations and amendments to the agreements underlying the receivables pool. Further, each facility may be terminated upon the occurrence of customary events (with customary grace periods, if applicable), including breaches of covenants, failure to maintain certain financial ratios, inaccuracies of representations and warranties, bankruptcy and insolvency events, certain changes in the rate of default or delinquency of the receivables, a change of control and the entry or other enforcement of material judgments. In addition, each facility contains cross-default provisions, where the facility could be terminated in the event of non-payment of other material indebtedness when due and any other event which permits the acceleration of the maturity of material indebtedness.

We also securitize receivables in our European operations with regional banks in Europe. The arrangements to securitize receivables in Europe are provided under sevensix separate facilities provided by various financial institutions in each of the foreign

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jurisdictions. The commitments for these arrangements are generally for one

year, but some may be cancelled with notice 90 days prior to renewal. In some instances, the arrangement provides for cancellation by the applicable financial institution at any time upon 15 days, or less, notification. The amount of outstanding third partythird-party investments in our securitized accounts receivable in Europe was $121$134 million and $91$94 million at December 31, 20112013 and December 31, 2010,2012, respectively.

If we were not able to securitize receivables under either the North American or European securitization programs, our borrowings under our revolving credit agreementsagreement might increase. These accounts receivable securitization programs provide us with access to cash at costs that are generally favorable to alternative sources of financing, and allow us to reduce borrowings under our revolving credit agreements.

We adopted the amended accounting guidance under Accounting Standards Codification (“ASC”) Topic 860, Accounting for Transfers of Financial Assets effective January 1, 2010. Prior to the adoption of this new guidance, we accounted for activities under our North American and European accounts receivable securitization programs as sales of financial assets to our banks. The new accounting guidance changed the condition that must be met for the transfer of financial assets to be accounted for as a sale. The new guidance adds additional conditions that must be satisfied for transfers of financial assets to be accounted for as sales when the transferor has not transferred the entire original financial asset, including the requirement that no partial interest holder have rights in the transferred asset that are subordinate to the rights of other partial interest holders.

agreement.

In our North American accounts receivable securitization programs, we transfer a partial interest in a pool of receivables and the interest that we retain is subordinate to the transferred interest. Accordingly, beginning January 1, 2010, we account for our North American securitization program as a secured borrowing. In our European programs, we transfer accounts receivables in their entirety to the acquiring entities and satisfy all of the conditions established under ASC Topic 860, “Transfers and Servicing,” to report the transfer of financial assets in their entirety as a sale. The fair value of assets received as proceeds in exchange for the transfer of accounts receivable under our European securitization programs approximates the fair value of such receivables. We recognized $3 million and $4$2 million in interest expense for the year ended 2013 and $3 million for each of the years ended 20112012 and 2010, respectively,2011, relating to our North American securitization program, which effective January 1, 2010, is accounted for as a secured borrowing under the amended accounting guidance for transfers of financial assets.program. In addition, we recognized a loss of $4 million, $4 million and $5 million $3 million and $9 million for each of the years ended 2011, 20102013, 2012 and 2009, respectively,2011, on the sale of trade accounts receivable in our European and North American accounts receivable securitization programs, representing the discount from book values at which these receivables were sold to our banks. The discount rate varies based on funding costs incurred by our banks, which averaged approximately three percent four percent and five percent for the years ended 2013, 2012 and 2011, 2010respectively.
Negotiable Financial Instruments.    One of our European subsidiaries receives payment from one of its customers whereby the accounts receivable are satisfied through the delivery of negotiable financial instruments. We may collect these financial instruments before their maturity date by either selling them at a discount or using them to satisfy accounts receivable that have previously been sold to a European bank. Any of these financial instruments which are not sold are classified as other current assets. The amount of these financial instruments that was collected before their maturity date and 2009,sold at a discount totaled $5 million and $6 million at December 31, 2013 and December 31, 2012, respectively.

No negotiable financial instruments were held by our European subsidiary as of December 31, 2013 and December 31, 2012, respectively.

In certain instances, several of our Chinese subsidiaries receive payment from customers and satisfy vendor payments through the receipt and delivery of negotiable financial instruments. Financial instruments issued to satisfy vendor payables and not redeemed totaled $13 million and $12 million at December 31, 2013 and December 31, 2012, respectively, and were classified as notes payable. Financial instruments received from OE customers and not redeemed totaled $12 million and $8 million at December 31, 2013 and December 31, 2012, respectively. We classify financial instruments received from our customers as other current assets if issued by a financial institution of our customers or as customer notes and accounts if issued by our customer. We classified $12 million and $8 million in other current assets at December 31, 2013 and December 31, 2012, respectively. Some of our Chinese subsidiaries that issue their own negotiable financial instruments to pay vendors are required to maintain a cash balance if they exceed certain credit limits with the financial institution that guarantees those financial instruments. A restricted cash balance was not required at those Chinese subsidiaries at December 31, 2013 and December 31, 2012.
The negotiable financial instruments received by one of our European subsidiaries and some of our Chinese subsidiaries are checks drawn by our customers and guaranteed by their banks that are payable at a future date. The use of these instruments for payment follows local commercial practice. Because negotiable financial instruments are financial obligations of our customers and are guaranteed by our customers’ banks, we believe they represent a lower financial risk than the outstanding accounts receivable that they satisfy which are not guaranteed by a bank.
Supply Chain Financing. Near the end of the second quarter of 2013 certain of our suppliers in the U.S. extended their payment terms to Tenneco. The liquidity benefit to Tenneco from the extended payment terms totaled $10 million at December 31, 2013. These suppliers also began participating in a supply chain financing program under which they securitize their accounts receivables from Tenneco with two financial institutions. The financial institutions participate in the supply chain financing program on an uncommitted basis and can cease purchasing receivables from Tenneco's suppliers at any time. If the financial institutions did not continue to purchase receivables from Tenneco's suppliers under this program, the participating vendors could reduce their payment terms to Tenneco which in turn would cause our borrowings under our revolving credit facility to increase.
Capital Requirements.    We believe that cash flows from operations, combined with our cash on hand, subject to any applicable withholding taxes upon repatriation of cash balances from our foreign operations, and available borrowing capacity described above, assuming that we maintain compliance with the financial covenants and other requirements of our loan agreement, will be sufficient to meet our future capital requirements, including debt amortization, capital expenditures, pension contributions, and other operational requirements, for the following year. Our ability to meet the financial covenants depends

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upon a number of operational and economic factors, many of which are beyond our control. In the event that we are unable to meet these financial covenants, we would consider several options to meet our cash flow needs. Such actions include additional restructuring initiatives and other cost reductions, sales of assets, reductions to working capital and capital spending, issuance of equity and other alternatives to enhance our financial and operating position. Should we be required to implement any of these actions to meet our cash flow needs, we believe we can do so in a reasonable time frame.

Contractual Obligations.

Our remaining required debt principal amortization and payment obligations under lease and certain other financial commitments as of December 31, 20112013 are shown in the following table:

   Payments due in: 
   2012   2013   2014   2015   2016   Beyond
2016		   Total 
   (Millions) 

Obligations:

              

Revolver borrowings

  $—    $—    $24    $—    $—    $—    $24  

Senior term loans

   1     2     2     2     141     —     148  

Senior notes

   —     —     —     250     —     725     975  

Notes payable to customers

   1     2     —     —     —     —     3  

Debentures

   1     —     —     —     —     —     1  

Other subsidiary debt

   1     1     1     1     1     6     11  

Short-term debt

   62     —     —     —     —     —     62  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Debt and capital lease obligations

   66     5     27     253     142     731     1,224  

Operating leases

   33     24     17     10     8     8     100  

Interest payments

   91     90     82     77     55     172     567  

Capital commitments

   80     —     —     —     —     —     80  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total payments

  $270    $119    $126    $340    $205    $911    $1,971  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Payments due in:
 2014 2015 2016 2017 2018 
Beyond
2018
 Total
 (Millions)
Obligations:             
Revolver borrowings$—
 $—
 $—
 $58
 $—
 $—
 $58
Senior term loans22
 34
 47
 125
 —
 —
 228
Senior notes—
 —
 —
 —
 225
 500
 725
Debentures—
 —
 —
 —
 —
 1
 1
Other subsidiary debt and capital lease obligations1
 1
 1
 1
 1
 4
 9
Short-term debt81
 —
 —
 —
 —
 —
 81
Debt and capital lease obligations104
 35
 48
 184
 226
 505
 1,102
Operating leases40
 30
 21
 15
 11
 25
 142
Interest payments85
 81
 63
 52
 52
 68
 401
Capital commitments100
 —
 —
 —
 —
 —
 100
Total payments$329
 $146
 $132
 $251
 $63
 $598
 $1,745
If we do not maintain compliance with the terms of our senior credit facility or senior notes indentures described above, all amounts under those arrangements could, automatically or at the option of the lenders or other debt holders, become due. Additionally, each of those facilities contains provisions that certain events of default under one facility will constitute a default under the other facility, allowing the acceleration of all amounts due. We currently expect to maintain compliance with the terms of all of our various credit agreements for the foreseeable future.

Included in our contractual obligations is the amount of interest to be paid on our long-term debt. As our debt structure contains both fixed and variable rate obligations, we have made assumptions in calculating the amount of future interest payments. Interest on our senior notes is calculated using the fixed rates of 73/4 percent, 6 7/8 percent and 86 17/8 percent, respectively. Interest on our variable rate debt is calculated as LIBOR plus the applicable margin in effect at December 31, 20112013 for the Eurodollar, term loan B and trancheTranche B-1 loans and prime plus the applicable margin in effect on December 31, 20112013 on the prime-based loans. We have assumed that both LIBOR and the prime rate will remain unchanged for the outlying years. See “— Capitalization.”

We have also included an estimate of expenditures required after December 31, 20112013 to complete the projects authorized at December 31, 2011,2013, in which we have made substantial commitments in connection with purchasing plant, property and equipment for our operations. For 2012,2014, we expect our capital expenditures to be about $230between $275 million to $250and $300 million.

We have not included purchase obligations as part of our contractual obligations as we generally do not enter into long-term agreements with our suppliers. In addition, the agreements we currently have do not specify the volumes we are required to purchase. If any commitment is provided, in many cases the agreements state only the minimum percentage of our purchase requirements we must buy from the supplier. As a result, these purchase obligations fluctuate from year-to-year and we are not able to quantify the amount of our future obligations.

We have not included material cash requirements for unrecognized tax benefits or taxes as we are a taxpayer in certain foreign jurisdictions, but generally not in the U.S. Additionally, it is difficult to estimate taxes to be paid as changes in where we generate income can have a significant impact on future tax payments. We have also

not included cash requirements for funding pension and postretirement benefit costs. Based upon current estimates, we believe we will be required to make contributions of approximately $57$47 million to those plans in 2012.2014. Pension and postretirement contributions beyond 20122014 will be required but those amounts will vary based upon many factors, including the performance of our pension fund investments during 2012.2014 and future discount rate changes. For additional information relating to the funding of our pension and other


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postretirement plans, refer to Note 10 of our consolidated financial statements. In addition, we have not included cash requirements for environmental remediation. Based upon current estimates we believe we will be required to spend approximately $20$19 million over the next 30 years. However, due to possible modifications in remediation processes and other factors, it is difficult to determine the actual timing of the payments. See “— Environmental and Other Matters.”

We occasionally provide guarantees that could require us to make future payments in the event that the third party primary obligor does not make its required payments. We are not required to record a liability for any of these guarantees.

Additionally, we have from time to time issued guarantees for the performance of obligations by some of our subsidiaries, and some of our subsidiaries have guaranteed our debt. All of our existing and future material domestic wholly-owned subsidiaries fully and unconditionally guarantee our senior credit facility and our senior notes on a joint and several basis. The arrangement for the senior credit facility is also secured by first-priority liens on substantially all our domestic assets and pledges of up to 66 percent of the stock of certain first-tier foreign subsidiaries. No assets or capital stock secure our senior notes. You should also read Note 13 of the consolidated financial statements of Tenneco Inc., where we present the Supplemental Guarantor Condensed Consolidating Financial Statements.

In March 2011, we entered into

We have two performance guarantee agreements in the U.K. between Tenneco Management (Europe)Europe Limited (“TMEL”) and the two Walker Group Retirement Plans, the Walker Group Employee Benefit Plan and the Walker Group Executive Retirement Benefit Plan (the “Walker Plans”), whereby TMEL will guarantee the payment of all current and future pension contributions in event of a payment default by the sponsoring or participating employers of the Walker Plans. As a result of our decision to enter into these performance guarantee agreements, the levy due to the U.K. Pension Protection Fund was reduced. The Walker Plans are comprised of employees from Tenneco Walker (U.K.) Limited and our Futaba TennecoFutaba-Tenneco U.K. joint venture. Employer contributions are funded by both Tenneco Walker (U.K.) Limited, as the sponsoring employer, and Futaba TennecoFutaba-Tenneco U.K., as a participating employer. The performance guarantee agreements are expected to remain in effect until all pension obligations for the Walker Plans’ sponsoring and participating employers have been satisfied. The maximum amount payable for these pension performance guarantees, relating to other participating employers, is approximately $3$27 million as of December 31, 20112013 which is determined by taking 105 percent of the liability of the Walker Plans calculated under section 179 of the U.K. Pension Act of 2004 offset by plan assets. We did not record an additional liability in March 2011 for this performance guarantee since Tenneco Walker (U.K.) Limited, as the sponsoring employer of the Walker Plans, already recognizes 100 percent of the pension obligation calculated based on U.S. GAAP, for all of the Walker Plans’ participating employers on its balance sheet, which was $13$10 million and $9$7 million at December 31, 20112013 and December 31, 2010,2012, respectively. At December 31, 2011,2013, all pension contributions under the Walker Plans were current for all of the Walker Plans’ sponsoring and participating employers.

In June 2011, we entered into an indemnity agreement between TMEL and Futaba Industrial Co. Ltd. (“Futaba”) which requires Futaba to indemnify TMEL for any cost, loss or liability which TMEL may incur under the performance guarantee agreements.agreements relating to the Futaba-Tenneco U.K. joint venture. The maximum amount reimbursable by Futaba to TMEL under this indemnity agreement is equal to the amount incurred by TMEL under the performance guarantee agreements multiplied by Futaba’s shareholder ownership percentage of the Futaba TennecoFutaba-Tenneco U.K. joint venture. At December 31, 20112013 the maximum amount reimbursable by Futaba to TMEL is approximately $3 million.

$5 million.

We have issued guarantees through letters of credit in connection with some obligations of our affiliates. As of December 31, 2011,2013, we have $58$38 million in letters of credit to support some of our subsidiaries’ insurance arrangements, foreign employee benefit programs, environmental remediation activities and cash management and capital requirements.


Critical Accounting Policies

and Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. Preparing our consolidated financial statements in accordance with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The following paragraphs include a discussion of some critical areas where estimates are required.

Revenue Recognition

We recognize revenue for sales to our original equipment and aftermarket customers when title and risk of loss passes to the customers under the terms of our arrangements with those customers, which is usually at the time of shipment from our plants or distribution centers. Generally, in connection with the sale of exhaust systems to certain original equipment manufacturers, we purchase catalytic converters and diesel particulate filters or components thereof including precious metals (“substrates”) on behalf of our customers which are used in the assembled system. These substrates are included in our inventory and “passed through” to the customer at our cost, plus a small margin, since we take title to the inventory and are responsible for both the delivery and quality of the finished product. Revenues recognized for substrate sales were $1,640

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$1,835 million, $1,297$1,660 million and $966$1,678 million in 2011, 20102013, 2012 and 2009,2011, respectively. For our aftermarket customers, we provide for promotional incentives and returns at the time of sale. Estimates are based upon the terms of the incentives and historical experience with returns. Certain taxes assessed by governmental authorities on revenue producing transactions, such as value added taxes, are excluded from revenue and recorded on a net basis. Shipping and handling costs billed to customers are included in revenues and the related costs are included in cost of sales in our Statements of Income (Loss).

Income.


Warranty Reserves

Where we have offered product warranty, we also provide for warranty costs. Provisions for estimated expenses related to product warranty are made at the time products are sold or when specific warranty issues are identified on OE products. These estimates are established using historical information about the nature, frequency, and average cost of warranty claims and upon specific warranty issues as they arise. The warranty terms vary but range from one year up to limited lifetime warranties on some of our premium aftermarket products. We actively study trends of our warranty claims and take action to improve product quality and minimize warranty claims. While we have not experienced any material differences between these estimates and our actual costs, it is reasonably possible that future warranty issues could arise that could have a significant impact on our consolidated financial statements.

Engineering, Research and Development

We expense engineering, research, and development costs as they are incurred. Engineering, research, and development expenses were $144 million for 2013, $126 million for 2012 and $133 million for 2011, $117 million for 2010 and $97 million for 2009, net of reimbursements from our customers. Of these amounts, $19 million in 2013, $13 million in 2012 and $16 million in 2011 $13 million in 2010 and $10 million in 2009 relate to research and development, which includes the research, design, and development of a new unproven product or process. Additionally, $101 million, $92 million $80 million and $61$92 million of engineering, research, and development expense for 2011, 20102013, 2012 and 2009,2011, respectively, relates to engineering costs we incurred for application of existing products and processes to vehicle platforms. The remainder of the expenses in each year relate to improvements and enhancements to existing products and processes. Further, our customers reimburse us for engineering, research, and development costs on some platforms when we prepare prototypes and incur costs before platform awards. Our engineering, research, and development expense for 2011, 20102013, 2012 and 20092011 has been reduced by $119$169 million, $110$159 million and $104$119 million, respectively, for these reimbursements.

Pre-production Design and Development and Tooling Assets

We expense pre-production design and development costs as incurred unless we have a contractual guarantee for reimbursement from the original equipment customer. Unbilled pre-production design and development costs recorded in prepayments and other and long-term receivables was $19were $30 million and $15$25 million on December 31, 20112013 and 2010,2012, respectively. In addition, plant, property and equipment included $38$59 million and $50 million at both December 31, 20112013 and 2010,2012, respectively, for original equipment tools and dies that we own, and prepayments and other included $49$86 million and $46$66 million at December 31, 20112013 and 2010,2012, respectively, for in-process tools and dies that we are building for our original equipment customers.

Income Taxes

We reported incomerecognize deferred tax expenseassets and liabilities on the basis of $88 million, $69 millionthe future tax consequences attributable to temporary differences that exist between the financial statement carrying value of assets and $13 millionliabilities and their respective tax values, and net operating losses (“NOL”) and tax credit carryforwards on a taxing jurisdiction basis. We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years ending 2011, 2010 and 2009, respectively. The tax expense recorded in 2011 differs fromwhich we expect the expense that wouldtemporary differences to be recorded using a U.S. Federal statutory rate of 35 percent due to a net tax benefit of $7 million primarily related to U.S. taxable income with no associated tax expense due to our net operating loss (“NOL”) carryforward and income generated in lower tax rate jurisdictions, partially offset by the impact of recording a valuation allowance against the tax benefit for losses in certain foreign jurisdictions and taxes on repatriation of foreign earnings.

recovered or paid.

We evaluate our deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted. U.S. GAAP requires that companies assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. This assessment considers, among other matters, the nature, frequency and amount of recent losses, the duration of statutory carryforward periods, and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.

Valuation allowances have beenare established for deferred tax assets based on a “more likely than not” threshold. The ability to realize deferred tax assets depends on our ability to generate sufficient taxable income within the carryforward periods provided for in the tax law for each tax jurisdiction. We have consideredconsider the following possible sources of taxable income when assessing the realization of our deferred tax assets:

assets and the need for a valuation allowance:

Future reversals of existing taxable temporary differences;

Taxable income or loss, based on recent results, exclusive of reversing temporary differences and carryforwards;

Tax-planning strategies; and


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Taxable income in prior carryback years if carryback is permitted under the relevant tax law.

In 2008, given our historical losses in the U.S., we concluded that our ability to fully utilize our NOLsfederal and state NOL was limited, as we were required to project the continuation of the negative economic environment at that time and the impact of the negative operating environment on our tax planning strategies.limited. As a result, we recorded a valuation allowance against all of our U.S. deferred tax assets except for our tax planning strategies which havehad not yet been implemented and which dodid not depend upon generating future taxable income. We carryPrior to the reversal of the valuation allowance in the third quarter of 2012, we carried a deferred tax asset in the U.S. of $90 million relating to the expected utilization of the federal and state NOL.
In 2012, we reversed the tax valuation allowance against our net deferred tax assets in the U.S. based on operating improvements we had made, the outlook for light vehicle, commercial truck and off-highway vehicle production in the U.S. and the positive impact this should have on our U.S. operations. The net income impact of $90 million, as of December 31, 2011, relating to the expected utilization of those NOLs. The recording of atax valuation allowance does not impact the amount of the NOL that would be available for federal and state income tax purposes in future periods. The federal NOLs expire beginning in tax years ending in 2021 through 2029. The state NOLs expire in various tax years through 2029.

If our operating performance continues to improve on a sustained basis, our conclusion regarding the need for a valuation allowance could change, resultingrelease in the reversalU.S. was a tax benefit of some orapproximately $81 million.

In 2012, after considering all available evidence and all possible sources of thetaxable income, we recorded a $19 million tax valuation allowance in the future. Spain for tax credits that may not be utilized due to tax losses in Spain.
The charge to establish the U.S. valuation allowance also includes items related to the losses allocable to certain state jurisdictions where it was determined that tax attributes related to those jurisdictions were potentially not realizable. In addition, the charge to establish the U.S. valuation allowance eliminated the need for certain tax reserves which would need to beallowances recorded if the valuation allowance was reversed. If we were to reverse our U.S. valuation allowance, as of December 31, 2011, the impact on earnings would approximate $147 million.

In prior years, we recorded a valuation allowance against deferred tax assets generated by taxable losses in the U.S. as well asSpain and certain other foreign jurisdictions.jurisdictions will impact our provision for income taxes until the valuation allowances are released. Our provision for income taxes will include no tax benefit with respect tofor losses incurred and no tax expense with respect to income generated in these jurisdictions until the respective valuation allowance is eliminated. In certain foreign jurisdictions, we have recorded a tax benefit on NOLs and tax credits with unlimited lives that are supported by tax actions and forecasted profitability. If the tax actions are not successful or losses are incurred, we may need to record a valuation allowance in a future period. We have recorded net deferred tax assets of approximately $23 million in these jurisdictions as of December 31, 2011. These actions will cause variability in our effective tax rate.

Goodwill, net

We evaluate goodwill for impairment in the fourth quarter of each year, or more frequently if events indicate it is warranted. The goodwill impairment test consists of a two-step process. In step one, we compare the estimated fair value of our reporting units with goodwill to the carrying value of the unit’s assets and liabilities to determine if impairment exists within the recorded balance of goodwill. We estimate the fair value of each reporting unit using the income approach which is based on the present value of estimated future cash flows. The income approach is dependent on a number of factors, including estimates of market trends, forecasted revenues and expenses, capital expenditures, weighted average cost of capital and other variables. A separate discount rate derived by a combination of published sources, internal estimates and weighted based on our debt andto equity structure,ratio, was used to calculate the discounted cash flows for each of our reporting units. These estimates are based on assumptions that we believe to be reasonable, but which are inherently uncertain and outside of the control of management. If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist which requires step two to be performed to measure the amount of the impairment loss. The amount of impairment is determined by comparing the implied fair value of a reporting unit’s goodwill to its carrying value.

In the fourth quarter of 2010, the estimated fair value of all of our reporting units, except for our Australian reporting unit, significantly exceeded the carrying value of its assets and liabilities. Our Australian reporting unit had a goodwill balance of $11 million with an estimated fair value in excess of its net carrying value of one percent as of the testing date.

During the third quarter of 2011, we performed an impairment evaluation of our Australian reporting unit’s goodwill balance as a result of the continued deterioration of that reporting unit’s financial performance driven primarily by significant declines in industry production volumes in that region. We identified in our step one test that the carrying value of our Australian reporting unit was higher than its fair value which is an indication that impairment may exist which required us to perform step two of the goodwill impairment test to measure the amount of the impairment loss. Step two of the goodwill impairment evaluation required us to calculate the implied fair value of goodwill of our Australian reporting unit by allocating the estimated fair value to the assets and liabilities of this reporting unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the acquisition price. As a result of performing steps one and two of the goodwill impairment test, we concluded that the remaining amount of goodwill related to our Australian reporting unit was impaired and accordingly, we recorded a goodwill impairment charge of $11 million during the third quarter of 2011.

In the fourth quarter of 2011,2013 and 2012, as a result of our annual goodwill impairment testing, the estimated fair value of each of our reporting units exceeded the carrying value of their assets and liabilities as of the testing date.

Pension and Other Postretirement Benefits

We have various defined benefit pension plans that cover some of our employees. We also have postretirement health care and life insurance plans that cover some of our domestic employees. Our pension and postretirement health care and life insurance expenses and valuations are dependent on assumptions used by our actuaries in calculating those amounts. These assumptions include discount rates, health care cost trend rates, long-term return on plan assets, retirement rates, mortality rates and other factors. Health care cost trend rate

assumptions are developed based on historical cost data and an assessment of likely long-term trends. Retirement rates are based primarily on actual plan experience while mortality rates are based upon the general population experience which is not expected to differ materially from our experience.

Our approach to establishing the discount rate assumption for both our domestic and foreign plans is generally based on the yield on high-quality corporate fixed-income investments. At the end of each year, the discount rate is determined using the results of bond yield curve models based on a portfolio of high quality bonds matching the notional cash inflows with the expected benefit payments for each significant benefit plan. Based on this approach, for 2011 we loweredraised the weighted average discount rate for all our pension plans to 4.94.6 percent in 20112013 from 5.54.1 percent in 2010.2012. The discount rate for postretirement benefits was loweredraised to 4.8 percent in 20112013 from 5.64.1 percent in 2010.

2012.

Our approach to determining expected return on plan asset assumptions evaluates both historical returns as well as estimates of future returns, and is adjusted for any expected changes in the long-term outlook for the equity and fixed income

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markets. Based on this approach,As a result, our estimate of the weighted average long-term rate of return on plan assets for all of our pension plans was 7.2remained unchanged at 6.9 percent for both 20112013 and 2010.

Except in the U.K., our2012.

Our pension plans generally do not require employee contributions. Our policy is to fund our pension plans in accordance with applicable U.S. and foreign government regulations and to make additional payments as funds are available to achieve full funding of the accumulated benefit obligation. At December 31, 2011,2013, all legal funding requirements had been met. In 2010, we recognized a charge of $6 million related to an actuarial loss for lump sum pension payments to two former employees. Other postretirement benefit obligations, such as retire medical, and certain foreign pension plans are funded as the obligations become due.

Refer to Note 10 of our consolidated financial statements for more information regarding our pension and other postretirement employee benefit costs and assumptions.

New Accounting Pronouncements

Note 1 to the consolidated financial statements of Tenneco Inc. located in Item 8 — Financial Statements and Supplemental Data areis incorporated herein by reference.


Derivative Financial Instruments

Foreign Currency Exchange Rate Risk

We use derivative financial instruments, principally foreign currency forward purchase and sale contracts with terms of less than one year, to hedge our exposure to changes in foreign currency exchange rates. Our primary exposure to changes in foreign currency rates results from intercompany loans made between affiliates to minimize the need for borrowings from third parties. Additionally, we enter into foreign currency forward purchase and sale contracts to mitigate our exposure to changes in exchange rates on certain intercompany and third-party trade receivables and payables. We manage counter-party credit risk by entering into derivative financial instruments with major financial institutions that can be expected to fully perform under the terms of such agreements. We do not enter into derivative financial instruments for speculative purposes.

In managing our foreign currency exposures, we identify and aggregate existing offsetting positions and then hedge residual exposures through third-party derivative contracts. The fair value of our foreign currency forward contracts was a net assetliability position of less than $1 million at December 31, 20112013 and is based on an internally developed model which incorporates observable inputs including quoted spot rates, forward exchange rates and discounted future expected cash flows utilizing market interest rates with similar quality and maturity characteristics. The following table summarizes by major currency the notional amounts for our foreign currency forward purchase and sale contracts as of December 31, 2011.2013. All contracts in the following table mature in 2012.

2014.
  
Notional Amount
in Foreign Currency
  (Millions)

Australian dollars

—Purchase32

British pounds

—Purchase4

European euro

—Sell(16)
Japanese yen—Purchase135
 —Sell(56842)

Japanese yen

Polish zloty—Purchase33431

South African rand

—Purchase14492

U.S. dollars

—Purchase152
 —Sell(4715)

Other

—Purchase1
—Sell(12)

Interest Rate Risk

Our financial instruments that are sensitive to market risk for changes in interest rates are primarily our debt securities. We use our revolving credit facilities to finance our short-term and long-term capital requirements. We pay a current market rate of interest on these borrowings. Our long-term capital requirements have been financed with long-term debt with original maturity dates ranging from four to ten years. On December 31, 2011,2013, we had $987$733 million in long-term debt obligations that have fixed interest rates. Of that amount, $500 million is fixed through December 2020, $250 million is fixed through November 2015, $225 million is fixed through August 2018 and the remainder is fixed from 20122013 through 2025. We also have $175$288 million in long-term debt obligations that are subject to variable interest rates. For more detailed explanations on our debt structure and senior credit facility refer to “Liquidity and Capital Resources — Capitalization” earlier in this Management’s Discussion and Analysis.


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We estimate that the fair value of our long-term debt at December 31, 20112013 was about 103107 percent of its book value. A one percentage point increase or decrease in interest rates would increase or decrease the annual interest expense we recognize in the income statement and the cash we pay for interest expense by about $2$4 million.

Environmental Matters, Litigation and Legal Contingencies

Product Warranties

We are involved in environmental remediation matters, legal proceedings, claims, investigations and warranty obligations thatobligations. These matters are typically incidental to the conduct of our business and create the potential for contingent losses. We accrue for potential contingent losses when our review of available facts indicates that it is probable a loss has been incurred and the amount of the loss is reasonably estimable. Each quarter we assess our loss contingencies based upon currently available facts, existing technology, and presently enacted laws and regulations taking into consideration the likely effects of inflation and other societal and economic factors and record adjustments to these reserves as required. As an example, we consider all available evidence including prior experience in remediation of contaminated sites, other companies’ cleanup experiences and data released by the United States Environmental Protection Agency or other organizations when we evaluate our environmental remediation contingencies. Further, all of our loss contingency estimates are subject to revision in future periods

based on actual costs or new information. With respect to our environmental liabilities, where future cash flows are fixed or reliably determinable, we have discounted those liabilities. All other environmental liabilities are recorded at their undiscounted amounts. We evaluate recoveries separately from the liability and, when they are assured, recoveries are recorded and reported separately from the associated liability in our consolidated financial statements.

We are subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which we operate. We expense or capitalize, as appropriate, expenditures for ongoing compliance with environmental regulations that relate to current operations. We expense costs related to an existing condition caused by past operations that do not contribute to current or future revenue generation. As of December 31, 2011,2013, we have the obligation to remediate or contribute towards the remediation of certain sites, including one Federal Superfund site. At December 31, 2011,2013, our aggregated estimated share of environmental remediation costs for all these sites on a discounted basis was approximately $17$15 million, of which $5$3 million is recorded in other current liabilities and $12 million is recorded in deferred credits and other liabilities in our consolidated balance sheet. For those locations in whichwhere the liability was discounted, the weighted average discount rate used was 1.92.8 percent. The undiscounted value of the estimated remediation costs was $20$19 million. Our expected payments of environmental remediation costs are estimated to be approximately $4$3 million in 2012, $2 million in 2013,2014, $1 million each year beginning 20142015 through 20162018 and $11$12 million in aggregate thereafter. Based on information known to us, we have established reserves that we believe are adequate for these costs. Although we believe these estimates of remediation costs are reasonable and are based on the latest available information, the costs are estimates and are subject to revision as more information becomes available about the extent of remediation required. At some sites, we expect that other parties will contribute towards the remediation costs. In addition, certain environmental statutes provide that our liability could be joint and several, meaning that we could be required to pay in excess of our share of remediation costs. Our understanding of the financial strength of other potentially responsible parties at these sites has been considered, where appropriate, in our determination of our estimated liability. We do not believe that any potential costs associated with our current status as a potentially responsible party in the Federal Superfund site, or as a liable party at the other locations referenced herein, will be material to our consolidated results of operations, financial position or cash flows.

We also from time to time are involved in legal proceedings, claims or investigations. Some of these proceedings allegematters involve allegations of damages against us relating to environmental liabilities (including toxic tort, property damage and remediation), intellectual property matters (including patent, trademark and copyright infringement, and licensing disputes), personal injury claims (including injuries due to product failure, design or warning issues, and other product liability related matters), taxes, employment matters, and commercial or contractual disputes, sometimes related to acquisitions or divestitures. Some of these matters involve allegations relating to legal compliance. For example, one of our Argentine subsidiaries is currently defending against a criminal complaint alleging the failure to comply with laws requiring the proceeds of export transactions to be collected, reported and/or converted to local currency within specified time periods. As another example, in the U.S. we are subject to an audit in 11 states with respect to the payment of unclaimed property to those states, spanning a period as far back as over 30 years. We now have practices in place whichWhile we believe ensure that we pay unclaimed property as required. We vigorously defend ourselves against all of these claims. Inclaims, in future periods we could be subject to cash costs or charges to earnings if any of these matters are resolved on unfavorable terms. However, althoughAlthough the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, including our assessment of the merits of the particular claim, we do not expect that thesethe legal proceedings or claims currently pending against us will have any material adverse impact on our future consolidated financial position, results of operations or cash flows.

In addition, we are subject to a number of lawsuits initiated by a significant number of claimants alleging health problems as a result of exposure to asbestos. In the early 2000’s we were named in nearly 20,000 complaints, most of which were filed in Mississippi state court and the vast majority of which made no allegations of exposure to asbestos from our product categories. Most of these claims have been dismissed and our current docket of active and inactive cases is less than 500 cases nationwide. A small number of claims have been asserted by railroad workers alleging exposure to asbestos products in railroad cars

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manufactured by The Pullman Company, one of our subsidiaries. The balancesubstantial majority of the remaining claims isare related to alleged exposure to asbestos in

our automotive products. Only a small percentage of the claimants allege that they were automobile mechanics and a significant number appear to involve workers in other industries or otherwise do not include sufficient information to determine whether there is any basis for a claim against us. We believe, based on scientific and other evidence, it is unlikely that mechanics were exposed to asbestos by our former products and that, in any event, they would not be at increased risk of asbestos-related disease based on their work with these products. Further, many of these cases involve numerous defendants, with the number of each in some cases exceeding 100 defendants from a variety of industries. Additionally, the plaintiffs either do not specify any, or specify the jurisdictional minimum, dollar amount for damages. As major asbestos manufacturers and/or users continue to go out of business or file for bankruptcy, we may experience an increased number of these claims. We vigorously defend ourselves against these claims as part of our ordinary course of business. In future periods, we could be subject to cash costs or charges to earnings if any of these matters are resolved unfavorably to us. To date, with respect to claims that have proceeded sufficiently through the judicial process, we have regularly achieved favorable resolutions. Accordingly, we presently believe that these asbestos-related claims will not have a material adverse impact on our future consolidated financial condition, results of operations or cash flows.

We provide warranties on some of our products. The warranty terms vary but range from one year up to limited lifetime warranties on some of our premium aftermarket products. Provisions for estimated expenses related to product warranty are made at the time products are sold or when specific warranty issues are identified on OE products. These estimates are established using historical information about the nature, frequency, and average cost of warranty claims. We actively study trends of our warranty claims and take action to improve product quality and minimize warranty claims. We believe that the warranty reserve is appropriate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the reserve. The reserve is included in both current and long-term liabilities on the balance sheet.
Below is a table that shows the activity in the warranty accrual accounts:
 Year Ended
December 31,
 2013 2012 2011
 (Millions)
Beginning Balance$23
 $26
 $33
Accruals related to product warranties20
 15
 11
Reductions for payments made(19) (18) (18)
Ending Balance$24
 $23
 $26
EmployeeIn the fourth quarter of 2011, we encountered an issue in our North America OE ride performance business involving struts supplied on one particular OE platform. As a result, we directly incurred approximately $2 million in premium freight and overtime costs in the fourth quarter of 2011 and $3 million in 2012. In the first quarter of 2013 we incurred a charge of $2 million in connection with the resolution of all existing claims pertaining to this matter. We paid the customer the $2 million in the second quarter of 2013.
Tenneco 401(k) Retirement Savings Plans

We have established

Effective January 1, 2012, the Tenneco Employee Stock Ownership PlansPlan for Hourly Employees and the benefit of U.S. employees.Tenneco Employee Stock Ownership Plan for Salaried Employees were merged into one plan called the Tenneco 401(k) Retirement Savings Plan (the “Retirement Savings Plan”). Under the plans,plan, subject to limitations in the Internal Revenue Code, participants may elect to defer up to 75 percent of their salary through contributions to the plan, which are invested in selected mutual funds or used to buy our common stock. We match in cash 100 percent on the first three percent and 50 percent of each employee’s contribution up to eighton the next two percent of the employee’s salary. In 2009, we temporarily discontinued these matching contributions as a result of the global economic downturn that began in 2008. We restored the matching contributions to salaried and non-union hourly U.S. employees beginning on January 1, 2010.employee contributions. In connection with freezing the defined benefit pension plans for nearly all U.S. based salaried and non-union hourly employees effective December 31, 2006, and the related replacement of those defined benefit plans with defined contribution plans, we are making additional contributions to the Employee Stock Ownership Plans. We recorded expense for these contributions of approximately $23 million, $21 million and $18 million $17 million,in 2013, 2012, and $10 million in 2011, 2010 and 2009, respectively. Matching contributions vest immediately. Defined benefit replacement contributions fully vest on the employee’s third anniversary of employment.

Effective January 1, 2012, the Tenneco Employee Stock Ownership Plan for Hourly Employees and the Tenneco Employee Stock Ownership Plan for Salaried Employees were merged into one plan called the Tenneco 401(k) Retirement Savings Plan (the “Retirement Savings Plan”). The Retirement Savings Plan has been designed to adopt a Safe-Harbor approach approved by the Internal Revenue Service and which will provide for increased company matching contributions at lower percentages of employee deferrals. The company matching contribution will increase from 50 percent on the first eight percent of employee contributions to 100 percent on the first three percent and 50 percent on the next two percent of employee contributions.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The section entitled “Derivative Financial Instruments” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is incorporated herein by reference.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS OF TENNECO INC.

AND CONSOLIDATED SUBSIDIARIES

 Page

Management’s Report on Internal Control Over Financial Reporting

80
67

ReportsReport of Independent Registered Public Accounting FirmsFirm

81
68

Statements of income (loss) for each of the three years in the period ended December 31, 20112013

83
69

Statements of comprehensive income for each of the three years in the period ended December 31,  2013
70
Balance sheets — December 31, 20112013 and 20102012

84
73

Statements of cash flows for each of the three years in the period ended December 31, 20112013

85
74

Statements of changes in shareholders’ equity for each of the three years in the period ended December 31, 20112013

86
76

Statements of comprehensive income (loss) for each of the three years in the period ended December  31, 2011

87

Notes to consolidated financial statements

90
77

Schedule II — Valuation and Qualifying Accounts

143
120


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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Tenneco Inc. is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). Management’s internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error or circumvention or overriding of controls. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements in financial reporting. Further, due to changing conditions and adherence to established policies and controls, internal control effectiveness may vary over time.

Management assessed the company’s effectiveness of internal controls over financial reporting. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) inInternal Control-Integrated Framework.Framework (1992).

Based on our assessment we have concluded that the company’s internal control over financial reporting was effective as of December 31, 2011.

2013.

Our internal control over financial reporting as of December 31, 20112013 has been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm, as stated in their report, which is included herein.

February 24, 2012

28, 2014


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Tenneco Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, (loss),comprehensive income, cash flows, and changes in shareholders’ equity and comprehensive income present fairly, in all material respects, the financial position of Tenneco Inc. and its subsidiaries at December 31, 20112013, and 20102012 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 and 20102013 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule forlisted in the years ended December 31, 2011 and 2010 in Item 8accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011,2013, based on criteria established inInternal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/S/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

Chicago, Illinois

Milwaukee, Wisconsin
February 24, 2012

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board27, 2014


68
Table of Directors and Shareholders of Tenneco Inc.:

We have audited the consolidated statement of income (loss), cash flow, changes in shareholders’ equity, and comprehensive income (loss) of Tenneco Inc. and subsidiaries (the “Company”) for the year ended December 31, 2009. Our audit also included the financial statement schedule listed in the Index at Item 8 for the year ended December 31, 2009. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/S/ DELOITTE & TOUCHE LLP

Chicago, Illinois

February 26, 2010

Contents


TENNECO INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

   Year Ended December 31, 
   2011  2010  2009 
   (Millions Except Share and Per Share Amounts) 

Revenues

    

Net sales and operating revenues

  $7,205   $5,937   $4,649  
  

 

 

  

 

 

  

 

 

 

Costs and expenses

    

Cost of sales (exclusive of depreciation and amortization shown below)

   6,037    4,900    3,875  

Goodwill impairment charge

   11    —    —  

Engineering, research, and development

   133    117    97  

Selling, general, and administrative

   428    417    344  

Depreciation and amortization of other intangibles

   207    216    221  
  

 

 

  

 

 

  

 

 

 
   6,816    5,650    4,537  
  

 

 

  

 

 

  

 

 

 

Other income (expense)

    

Loss on sale of receivables

   (5)   (3)   (9) 

Other income (expense)

   (5)   (3)   (11) 
  

 

 

  

 

 

  

 

 

 
   (10)   (6)   (20) 
  

 

 

  

 

 

  

 

 

 

Earnings before interest expense, income taxes, and noncontrolling interests

   379    281    92  

Interest expense (net of interest capitalized of $4 million in each of 2011, 2010 and 2009, respectively)

   108    149    133  
  

 

 

  

 

 

  

 

 

 

Earnings before income taxes and noncontrolling interests

   271    132    (41) 

Income tax expense

   88    69    13  
  

 

 

  

 

 

  

 

 

 

Net income (loss)

   183    63    (54) 
  

 

 

  

 

 

  

 

 

 

Less: Net income attributable to noncontrolling interests

   26    24    19  
  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to Tenneco Inc.

  $157   $39   $(73) 
  

 

 

  

 

 

  

 

 

 

Earnings (loss) per share

    

Weighted average shares of common stock outstanding —

    

Basic

   59,884,139    59,208,103    48,572,463  

Diluted

   61,520,160    60,998,694    48,572,463  

Basic earnings (loss) per share of common stock

  $2.62   $0.65   $(1.50) 

Diluted earnings (loss) per share of common stock

  $2.55   $0.63   $(1.50) 

 Year Ended December 31,
 2013 2012 2011
 (Millions Except Share and Per Share Amounts)
Revenues     
Net sales and operating revenues$7,964
 $7,363
 $7,205
Costs and expenses     
Cost of sales (exclusive of depreciation and amortization shown below)6,734
 6,170
 6,037
Goodwill impairment charge—
 —
 11
Engineering, research, and development144
 126
 133
Selling, general, and administrative453
 427
 428
Depreciation and amortization of other intangibles205
 205
 207
 7,536
 6,928
 6,816
Other income (expense)     
Loss on sale of receivables(4) (4) (5)
Other expense—
 (3) (5)
 (4) (7) (10)
Earnings before interest expense, income taxes, and noncontrolling interests424
 428
 379
Interest expense (net of interest capitalized of $4 million each for 2013, 2012 and 2011, respectively)80
 105
 108
Earnings before income taxes and noncontrolling interests344
 323
 271
Income tax expense122
 19
 88
Net income222
 304
 183
Less: Net income attributable to noncontrolling interests39
 29
 26
Net income attributable to Tenneco Inc.$183
 $275
 $157
Earnings per share     
Weighted average shares of common stock outstanding —     
Basic60,474,492
 59,985,677
 59,884,139
Diluted61,594,062
 61,083,510
 61,520,160
Basic earnings per share of common stock$3.03
 $4.58
 $2.62
Diluted earnings per share of common stock$2.97
 $4.50
 $2.55
The accompanying notes to consolidated financial statements are an integral

part of these statements of income (loss).

income.


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TENNECO INC.

CONSOLIDATED BALANCE SHEETS

   December 31, 
   2011  2010 
   (Millions) 
ASSETS  

Current assets:

   

Cash and cash equivalents

  $214   $233  

Receivables —

   

Customer notes and accounts, net

   936    796  

Other

   44    30  

Inventories

   592    547  

Deferred income taxes

   40    38  

Prepayments and other

   153    146  
  

 

 

  

 

 

 

Total current assets

   1,979    1,790  
  

 

 

  

 

 

 

Other assets:

   

Long-term receivables, net

   10    9  

Goodwill

   74    89  

Intangibles, net

   32    32  

Deferred income taxes

   92    92  

Other

   103    105  
  

 

 

  

 

 

 
   311    327  
  

 

 

  

 

 

 

Plant, property, and equipment, at cost

   3,153    3,109  

Less — Accumulated depreciation and amortization

   (2,106)   (2,059) 
  

 

 

  

 

 

 
   1,047    1,050  
  

 

 

  

 

 

 

Total Assets

  $3,337   $3,167  
  

 

 

  

 

 

 
LIABILITIES AND SHAREHOLDERS’ EQUITY  

Current liabilities:

   

Short-term debt (including current maturities of long-term debt)

  $66   $63  

Trade payables

   1,171    1,048  

Accrued taxes

   44    51  

Accrued interest

   13    13  

Accrued liabilities

   226    227  

Other

   50    66  
  

 

 

  

 

 

 

Total current liabilities

   1,570    1,468  
  

 

 

  

 

 

 

Long-term debt

   1,158    1,160  

Deferred income taxes

   51    56  

Postretirement benefits

   385    311  

Deferred credits and other liabilities

   118    125  

Commitments and contingencies

   
  

 

 

  

 

 

 

Total liabilities

   3,282    3,120  
  

 

 

  

 

 

 

Redeemable noncontrolling interests

   12    12  
  

 

 

  

 

 

 

Tenneco Inc. Shareholders’ equity:

   

Common stock

   1    1  

Premium on common stock and other capital surplus

   3,016    3,008  

Accumulated other comprehensive loss

   (382)   (237) 

Retained earnings (accumulated deficit)

   (2,379)   (2,536) 
  

 

 

  

 

 

 
   256    236  

Less — Shares held as treasury stock, at cost

   256    240  
  

 

 

  

 

 

 

Total Tenneco Inc. shareholders’ equity

   —    (4) 
  

 

 

  

 

 

 

Noncontrolling interests

   43    39  
  

 

 

  

 

 

 

Total equity

   43    35  
  

 

 

  

 

 

 

Total liabilities, redeemable noncontrolling interests and equity

  $3,337   $3,167  
  

 

 

  

 

 

 

STATEMENTS OF COMPREHENSIVE INCOME

 Year Ended December 31, 2013
 Tenneco Inc. Noncontrolling interests Total
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Comprehensive
Income
(Loss)
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Comprehensive
Income
(Loss)
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Comprehensive
Income
(Loss)
 (Millions)
Net Income  $183
   $39
   $222
Accumulated Other Comprehensive Income (Loss)           
Cumulative Translation Adjustment           
Balance January 1$(24)   $5
   $(19)  
Translation of foreign currency statements(37) (37) —
 —
 (37) (37)
Balance December 31(61)   5
   (56)  
Adjustment to the Liability for Pension and Postretirement Benefits           
Balance January 1(384)   —
   (384)  
Adjustment to the Liability for Pension and Postretirement benefits, net of tax85
 85
     85
 85
Balance December 31(299)       (299)  
Balance December 31$(360)   $5
   $(355)  
Other comprehensive income  48
   —
   48
Comprehensive Income  $231
   $39
   $270
The accompanying notes to consolidated financial statements are an integral

part of these statements of comprehensive income.

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TENNECO INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Year Ended December 31, 2012
 Tenneco Inc. Noncontrolling interests Total
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Comprehensive
Income
(Loss)
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Comprehensive
Income
(Loss)
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Comprehensive
Income
(Loss)
 (Millions)
Net Income  $275
   $29
   $304
Accumulated Other Comprehensive Income (Loss)           
Cumulative Translation Adjustment           
Balance January 1$(30)   $4
   $(26)  
Translation of foreign currency statements6
 6
 1
 1
 7
 7
Balance December 31(24)   5
   (19)  
Adjustment to the Liability for Pension and Postretirement Benefits           
Balance January 1(352)   —
   (352)  
Adjustment to the Liability for Pension and Postretirement benefits, net of tax(32) (32)     (32) (32)
Balance December 31(384)       (384)  
Balance December 31$(408)   $5
   $(403)  
Other comprehensive income (loss)  (26)   1
   (25)
Comprehensive Income  $249
   $30
   $279
The accompanying notes to consolidated financial statements are an integral
part of these statements of comprehensive income.

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TENNECO INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Year Ended December 31, 2011
 Tenneco Inc. Noncontrolling interests Total
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Comprehensive
Income
(Loss)
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Comprehensive
Income
(Loss)
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Comprehensive
Income
(Loss)
 (Millions)
Net Income  $157
   $26
   $183
Accumulated Other Comprehensive Income (Loss)           
Cumulative Translation Adjustment           
Balance January 1$8
   $5
   $13
  
Translation of foreign currency statements(38) (38) (1) (1) (39) (39)
Balance December 31(30)   4
   (26)  
Adjustment to the Liability for Pension and Postretirement Benefits           
Balance January 1(250)   —
   (250)  
Adjustment to the Liability for Pension and Postretirement benefits, net of tax(102) (102)     (102) (102)
Balance December 31(352)       (352)  
Balance December 31$(382)   $4
   $(378)  
Other comprehensive loss  (140)   (1)   (141)
Comprehensive Income  $17
   $25
   $42
The accompanying notes to consolidated financial statements are an integral
part of these statements of comprehensive income.

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TENNECO INC.
CONSOLIDATED BALANCE SHEETS
 December 31,
 2013 2012
 (Millions)
ASSETS
Current assets:   
Cash and cash equivalents$275
 $223
Restricted cash5
 —
Receivables —   
Customer notes and accounts, net1,041
 966
Other19
 20
Inventories656
 667
Deferred income taxes71
 72
Prepayments and other223
 176
Total current assets2,290
 2,124
Other assets:   
Long-term receivables, net14
 4
Goodwill69
 72
Intangibles, net30
 35
Deferred income taxes125
 116
Other127
 135
 365
 362
Plant, property, and equipment, at cost3,498
 3,365
Less — Accumulated depreciation and amortization(2,323) (2,243)
 1,175
 1,122
Total Assets$3,830
 $3,608
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:   
Short-term debt (including current maturities of long-term debt)$83
 $113
Accounts payable1,359
 1,186
Accrued taxes40
 50
Accrued interest10
 10
Accrued liabilities252
 239
Other94
 51
Total current liabilities1,838
 1,649
Long-term debt1,019
 1,067
Deferred income taxes28
 27
Postretirement benefits249
 407
Deferred credits and other liabilities204
 152
Commitments and contingencies
 
Total liabilities3,338
 3,302
Redeemable noncontrolling interests20
 15
Tenneco Inc. Shareholders’ equity:   
Common stock1
 1
Premium on common stock and other capital surplus3,014
 3,031
Accumulated other comprehensive loss(360) (408)
Retained earnings (accumulated deficit)(1,921) (2,104)
 734
 520
Less — Shares held as treasury stock, at cost301
 274
Total Tenneco Inc. shareholders’ equity433
 246
Noncontrolling interests39
 45
Total equity472
 291
Total liabilities, redeemable noncontrolling interests and equity$3,830
 $3,608
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.


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TENNECO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

   Year Ended December 31, 
     2011    2010  2009 
   (Millions) 

Operating Activities

    

Net income (loss)

  $183   $63   $(54) 

Adjustments to reconcile net income (loss) to cash provided by operating activities —

    

Goodwill impairment charge

   11    —    —  

Depreciation and amortization of other intangibles

   207    216    221  

Deferred income taxes

   (5)   4    (24) 

Stock-based compensation

   8    9    7  

Loss on sale of assets

   4    3    9  

Changes in components of working capital —

    

(Increase) decrease in receivables

   (183)   (231)   (8) 

(Increase) decrease in inventories

   (64)   (122)   101  

(Increase) decrease in prepayments and other current assets

   (13)   20    (55) 

Increase (decrease) in payables

   144    238    (2) 

Increase (decrease) in accrued taxes

   (7)   12    10  

Increase (decrease) in accrued interest

   —    (8)   (1) 

Increase (decrease) in other current liabilities

   (7)   20    20  

Change in long-term assets

   1    12    10  

Change in long-term liabilities

   (41)   6    2  

Other

   7    2    5  
  

 

 

  

 

 

  

 

 

 

Net cash provided by operating activities

   245    244    241  
  

 

 

  

 

 

  

 

 

 

Investing Activities

    

Proceeds from sale of assets

   4    3    5  

Cash payments for plant, property, and equipment

   (213)   (151)   (120) 

Cash payments for software related intangible assets

   (15)   (12)   (6) 

Acquisition of businesses, net of cash acquired

   —    —    1  

Other

   —    3    1  
  

 

 

  

 

 

  

 

 

 

Net cash used by investing activities

   (224)   (157)   (119) 
  

 

 

  

 

 

  

 

 

 

Financing Activities

    

Purchase of common stock under the share repurchase program

   (16)   —    —  

Issuance of common shares

   —    —    188  

Issuance of long-term debt

   5    880    6  

Debt issuance costs of long-term debt

   (1)   (24)   (8) 

Retirement of long-term debt

   (24)   (864)   (22) 

Increase (decrease) in bank overdrafts

   3    2    (23) 

Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt

   30    (10)   (218) 

Capital contribution from noncontrolling interest partner

   1    —    —  

Purchase of additional noncontrolling equity interest

   (4)   —    —  

Distribution to noncontrolling interests partners

   (20)   (14)   (10) 
  

 

 

  

 

 

  

 

 

 

Net cash used by financing activities

   (26)   (30)   (87) 
  

 

 

  

 

 

  

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

   (14)   9    6  
  

 

 

  

 

 

  

 

 

 

Increase (decrease) in cash and cash equivalents

   (19)   66    41  

Cash and cash equivalents, January 1

   233    167    126  
  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents, December 31 (Note)

  $214   $233   $167  
  

 

 

  

 

 

  

 

 

 

Supplemental Cash Flow Information

    

Cash paid during the year for interest

  $106   $149   $131  

Cash paid during the year for income taxes (net of refunds)

   85    53    38  

Non-cash Investing and Financing Activities

    

Period end balance of trade payables for plant, property, and equipment

  $35   $29   $26  

 Year Ended December 31,
 2013 2012 2011
 (Millions)
Operating Activities     
Net income$222
 $304
 $183
Adjustments to reconcile net income to cash provided by operating activities —     
Goodwill impairment charge—
 —
 11
Depreciation and amortization of other intangibles205
 205
 207
Deferred income taxes5
 (65) (5)
Stock-based compensation13
 11
 8
Loss on sale of assets1
 4
 4
Changes in components of working capital —     
(Increase) decrease in receivables(88) (9) (183)
(Increase) decrease in inventories3
 (72) (64)
(Increase) decrease in prepayments and other current assets(53) (21) (13)
Increase (decrease) in payables161
 12
 144
Increase (decrease) in accrued taxes(10) 7
 (7)
Increase (decrease) in accrued interest—
 (3) —
Increase (decrease) in other current liabilities64
 10
 (7)
Change in long-term assets7
 14
 1
Change in long-term liabilities(32) (37) (41)
Other5
 5
 7
Net cash provided by operating activities503
 365
 245
Investing Activities     
Proceeds from sale of assets8
 3
 4
Cash payments for plant, property, and equipment(244) (256) (213)
Cash payments for software related intangible assets(25) (13) (15)
Cash payments for net assets purchased—
 (7) —
Change in restricted cash(5) —
 —
Net cash used by investing activities(266) (273) (224)
Financing Activities     
Retirement of long-term debt(16) (411) (24)
Issuance of long-term debt—
 250
 5
Debt issuance costs of long-term debt—
 (13) (1)
Purchase of common stock under the share repurchase program(27) (18) (16)
Issuance of common stock20
 5
 —
Tax benefit from stock-based compensation24
 —
 —
Increase (decrease) in bank overdrafts(6) 5
 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 receivable(22) 67
 30
Net increase (decrease) in short-term borrowings secured by accounts receivable(40) 50
 —
Capital contribution from noncontrolling interest partner—
 5
 1
Purchase of noncontrolling equity interest(69) —
 (4)
Distribution to noncontrolling interest partners(39) (29) (20)
Net cash used by financing activities(175) (89) (26)
Effect of foreign exchange rate changes on cash and cash equivalents(10) 6
 (14)
Increase (decrease) in cash and cash equivalents52
 9
 (19)
Cash and cash equivalents, January 1223
 214
 233
Cash and cash equivalents, December 31 (Note)$275
 $223
 $214

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Supplemental Cash Flow Information     
Cash paid during the year for interest$79
 $100
 $106
Cash paid during the year for income taxes (net of refunds)109
 80
 85
Non-cash Investing and Financing Activities     
Period end balance of trade payables for plant, property, and equipment$52
 $42
 $35
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.


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Table of Contents

TENNECO INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

  Year Ended December 31, 
  2011  2010  2009 
  Shares  Amount  Shares  Amount  Shares  Amount 
  (Millions Except Share Amounts) 

Common Stock

      

Balance January 1

  61,541,760   $1    60,789,739   $1    48,314,490   $—  

Issued

  —    —    —    —    12,000,000    1  

Issued pursuant to benefit plans

  49,871    —    142,643    —    283,195    —  

Stock options exercised

  509,704    —    609,378    —    192,054    —  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance December 31

  62,101,335    1    61,541,760    1    60,789,739    1  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Premium on Common Stock and Other Capital Surplus

      

Balance January 1

   3,008     3,005     2,809  

Purchase of additional noncontrolling equity interest

   (2)    (11)    —  

Premium on common stock issued

   —     —     188  

Premium on common stock issued pursuant to benefit plans

   10     14     8  
  

 

 

   

 

 

   

 

 

 

Balance December 31

   3,016     3,008     3,005  
  

 

 

   

 

 

   

 

 

 

Accumulated Other Comprehensive Loss

      

Balance January 1

   (237)    (212)    (318) 

Other comprehensive income (loss)

   (145)    (25)    106  
  

 

 

   

 

 

   

 

 

 

Balance December 31

   (382)    (237)    (212) 
  

 

 

   

 

 

   

 

 

 

Retained Earnings (Accumulated Deficit)

      

Balance January 1

   (2,536)    (2,575)    (2,502) 

Net income (loss) attributable to Tenneco Inc.

   157     39     (73) 
  

 

 

   

 

 

   

 

 

 

Balance December 31

   (2,379)    (2,536)    (2,575) 
  

 

 

   

 

 

   

 

 

 

Less — Common Stock Held as Treasury Stock, at Cost

      

Balance January 1

  1,294,692    240    1,294,692    240    1,294,692    240  

Purchase of common stock through stock repurchase program

  400,000    16    —    —    —    —  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance December 31

  1,694,692    256    1,294,692    240    1,294,692    240  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Tenneco Inc. shareholders’ equity

  $—    $(4)   $(21) 
  

 

 

   

 

 

   

 

 

 

Noncontrolling interests:

      

Balance January 1

   39     32     24  

Net income

   19     16     13  

Sale of twenty percent equity interest to Tenneco Inc.

   —     (4)    —  

Other comprehensive income (loss)

   (1)    3     —  

Dividends declared

   (14)    (8)    (5) 
  

 

 

   

 

 

   

 

 

 

Balance December 31

  $43    $39    $32  
  

 

 

   

 

 

   

 

 

 

Total equity

  $43    $35    $11  
  

 

 

   

 

 

   

 

 

 

 Year Ended December 31,
 2013 2012 2011
 Shares Amount Shares Amount Shares Amount
 (Millions Except Share Amounts)
Common Stock           
Balance January 162,789,382
 $1
 62,101,335
 $1
 61,541,760
 $1
Issued—
 —
 —
 —
 —
 —
Issued pursuant to benefit plans156,213
 —
 149,398
 —
 49,871
 —
Stock options exercised769,133
 —
 538,649
 —
 509,704
 —
Balance December 3163,714,728
 1
 62,789,382
 1
 62,101,335
 1
Premium on Common Stock and Other Capital Surplus           
Balance January 1  3,031
   3,016
   3,008
Purchase of noncontrolling equity interest  (68)   —
   (2)
Premium on common stock issued pursuant to benefit plans  51
   15
   10
Balance December 31  3,014
   3,031
   3,016
Accumulated Other Comprehensive Loss           
Balance January 1  (408)   (382)   (237)
Other comprehensive loss  48
   (26)   (145)
Balance December 31  (360)   (408)   (382)
Retained Earnings (Accumulated Deficit)           
Balance January 1  (2,104)   (2,379)   (2,536)
Net income attributable to Tenneco Inc.  183
   275
   157
Balance December 31  (1,921)   (2,104)   (2,379)
Less — Common Stock Held as Treasury Stock, at Cost           
Balance January 12,294,692
 274
 1,694,692
 256
 1,294,692
 240
Purchase of common stock through stock repurchase program550,000
 27
 600,000
 18
 400,000
 16
Balance December 312,844,692
 301
 2,294,692
 274
 1,694,692
 256
Total Tenneco Inc. shareholders’ equity  $433
   $246
   $—
Noncontrolling interests:           
Balance January 1  45
   43
   39
Net income  24
   20
   19
Capital contribution  —
   3
   —
Sale of noncontrolling equity interest  (1)   —
   —
Other comprehensive income (loss)  —
   1
   (1)
Dividends declared  (29)   (22)   (14)
Balance December 31  $39
   $45
   $43
Total equity  $472
   $291
   $43
The accompanying notes to consolidated financial statements are an integral

part of these statements of changes in shareholders’ equity.


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TENNECO INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

  Year Ended December 31, 2011 
  Tenneco Inc.  Noncontrolling interests  Total 
  Accumulated
Other
Comprehensive
Income
(Loss)		  Comprehensive
Income
(Loss)		  Accumulated
Other
Comprehensive
Income
(Loss)		  Comprehensive
Income
(Loss)		  Accumulated
Other
Comprehensive
Income
(Loss)		  Comprehensive
Income
(Loss)		 
  (Millions) 

Net Income

  $157    $  26    $183  
  

 

 

   

 

 

   

 

 

 

Accumulated Other Comprehensive Income (Loss)

      

Cumulative Translation Adjustment

      

Balance January 1

 $8    $5    $13   

Translation of foreign currency statements

  (38)   (38)   (1)   (1)   (39)   (39) 
 

 

 

   

 

 

   

 

 

  

Balance December 31

  (30)    4     (26)  
 

 

 

   

 

 

   

 

 

  

Additional Liability for Pension and Postretirement Benefits

      

Balance January 1

  (250)    —     (250)  

Additional Liability for Pension and Postretirement benefits, net of tax

  (102)   (102)     (102)   (102) 
 

 

 

     

 

 

  

Balance December 31

  (352)      (352)  
 

 

 

   

 

 

   

 

 

  

Balance December 31

 $(382)   $4    $(378)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income (loss)

   (140)    (1)    (141) 
  

 

 

   

 

 

   

 

 

 

Comprehensive Income

  $17    $25    $42  
  

 

 

   

 

 

   

 

 

 

The accompanying notes to consolidated financial statements are an integral

part of these statements of comprehensive income.

TENNECO INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

  Year Ended December 31, 2010
  Tenneco Inc. Noncontrolling interests Total
  Accumulated
Other
Comprehensive
Income
(Loss)		 Comprehensive
Income
(Loss)		 Accumulated
Other
Comprehensive
Income
(Loss)		 Comprehensive
Income
(Loss)		 Accumulated
Other
Comprehensive
Income
(Loss)		 Comprehensive
Income
(Loss)
  (Millions)

Net Income

    $39     $  24     $63 
    

 

 

     

 

 

     

 

 

 

Accumulated Other Comprehensive Income (Loss)

            

Cumulative Translation Adjustment

            

Balance January 1

  $37     $—     $37   

Translation of foreign currency statements

   (29)   (29)   5    5    (24)   (24)
  

 

 

     

 

 

     

 

 

   

Balance December 31

   8      5      13   
  

 

 

     

 

 

     

 

 

   

Additional Liability for Pension and Postretirement Benefits

            

Balance January 1

   (249)     —      (249)  

Additional liability for pension and postretirement benefits, net of tax

   (1)   (1)       (1)   (1)
  

 

 

         

 

 

   

Balance December 31

   (250)         (250)  
  

 

 

     

 

 

     

 

 

   

Balance December 31

  $(242)    $5     $(237)  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     (30)     5      (25)
    

 

 

     

 

 

     

 

 

 

Comprehensive Income

    $9     $  29     $38 
    

 

 

     

 

 

     

 

 

 

The accompanying notes to consolidated financial statements are an integral

part of these statements of comprehensive income.

TENNECO INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

  Year Ended December 31, 2009
  Tenneco Inc. Noncontrolling interests Total
  Accumulated
Other
Comprehensive
Income
(Loss)		 Comprehensive
Income
(Loss)		 Accumulated
Other
Comprehensive
Income
(Loss)		 Comprehensive
Income
(Loss)		 Accumulated
Other
Comprehensive
Income
(Loss)		 Comprehensive
Income
(Loss)
  (Millions)

Net Income (Loss)

     $  (73)       $  19       $  (54)  
    

 

 

     

 

 

     

 

 

 

Accumulated Other Comprehensive Income (Loss)

            

Cumulative Translation Adjustment

            

Balance January 1

   $  (42)       $—       $  (42)    

Translation of foreign currency statements

   79     79      —     —     79     79  
  

 

 

     

 

 

     

 

 

   

Balance December 31

   37       —       37    
  

 

 

     

 

 

     

 

 

   

Additional Liability for Pension and Postretirement Benefits

            

Balance January 1

   (276)       —       (276)    

Additional liability for pension and postretirement benefits, net of tax of $1 million

   27     27          27     27  
  

 

 

         

 

 

   

Balance December 31

   (249)           (249)    
  

 

 

     

 

 

     

 

 

   

Balance December 31

   $(212)       $—       $(212)    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     106       —       106  
    

 

 

     

 

 

     

 

 

 

Comprehensive Income

     $   33      $  19     $ 52 
    

 

 

     

 

 

     

 

 

 

The accompanying notes to consolidated financial statements are an integral

part of these statements of comprehensive income.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.

1.Summary of Accounting Policies

Summary of Accounting Policies

Consolidation and Presentation

Our consolidated financial statements include all majority-owned subsidiaries. We carry investments in 20 percent to 50 percent owned companies in which the Company does not have a controlling interest, as equity method investments, at cost plus equity in undistributed earnings since the date of acquisition and cumulative translation adjustments. We have eliminated intercompany transactions. We have evaluated all subsequent events through the date our financial statements were issued.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates include, among others allowances for doubtful receivables, promotional and product returns, pension and post-retirementpostretirement benefit plans, income taxes, and contingencies. These items are covered in more detail elsewhere in Note 1, Note 7, Note 10, and Note 12 of the consolidated financial statements of Tenneco Inc. Actual results could differ from those estimates.

Redeemable Noncontrolling Interests

We have noncontrolling interests in threefour joint ventures with redemption features that could require us to purchase the noncontrolling interests at fair value in the event of a change in control of Tenneco Inc. or certain of our subsidiaries. We do not believe that it is probable that the redemption features in any of these joint venture agreements will be triggered. However, the redemption of these shares is not solely within our control. Accordingly, the related noncontrolling interests are presented as “Redeemable noncontrolling interests” in the temporary equity section of our consolidated balance sheets.

In August 2011, we purchased the remaining 25 percent equity interest in our emission controlclean air joint venture in Thailand for $4$4 million in cash. As a result of this purchase, our equity ownership of this joint venture investment changed to 100 percent from 75 percent.percent. Refer to Note 3 of the consolidated financial statements of Tenneco Inc. for additional details.

The following is a rollforward of activity in our redeemable noncontrolling interests for the years ending December 31, 2013, 2012 and 2011, 2010 and 2009, respectively:

   2011  2010  2009 
   (Millions) 

Balance January 1

  $  12   $7   $7  

Net income attributable to redeemable noncontrolling interests

   7    8    5  

Sale of 25 percent equity interest to Tenneco Inc

   (2)   —    —  

Capital Contributions

   1    —    —  

Other comprehensive income (loss)

   —    2    —  

Dividends declared

   (6)   (5)   (5) 
  

 

 

  

 

 

  

 

 

 

Balance December 31

  $12   $  12   $7  
  

 

 

  

 

 

  

 

 

 

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


2013
2012
2011
 (Millions)
Balance January 1$15
 $12
 $12
Net income attributable to redeemable noncontrolling interests14
 9
 7
Sale of 25 percent equity interest to Tenneco Inc—
 —
 (2)
Capital Contributions—
 2
 1
Dividends declared(9) (8) (6)
Balance December 31$20
 $15
 $12
Inventories

At December 31, 20112013 and 2010,2012, inventory by major classification was as follows:

   2011   2010 
   (Millions) 

Finished goods

  $  244    $  222  

Work in process

   181     164  

Raw materials

   121     118  

Materials and supplies

   46     43  
  

 

 

   

 

 

 
  $592    $547  
  

 

 

   

 

 

 

 2013 2012
 (Millions)
Finished goods$267
 $273
Work in process202
 207
Raw materials130
 133
Materials and supplies57
 54
 $656
 $667
Our inventories are stated at the lower of cost or market value using the first-in, first-out (“FIFO”) or average cost methods.

Goodwill and Intangibles, net


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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We evaluate goodwill for impairment in the fourth quarter of each year, or more frequently if events indicate it is warranted. The goodwill impairment test consists of a two-step process. In step one, we compare the estimated fair value of our reporting units with goodwill to the carrying value of the unit’s assets and liabilities to determine if impairment exists within the recorded balance of goodwill. We estimate the fair value of each reporting unit using the income approach which is based on the present value of estimated future cash flows. The income approach is dependent on a number of factors, including estimates of market trends, forecasted revenues and expenses, capital expenditures, weighted average cost of capital and other variables. A separate discount rate derived by a combination of published sources, internal estimates and weighted based on our debt andto equity structure,ratio, was used to calculate the discounted cash flows for each of our reporting units. These estimates are based on assumptions that we believe to be reasonable, but which are inherently uncertain and outside of the control of management. If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist which requires step two to be performed to measure the amount of the impairment loss. The amount of impairment is determined by comparing the implied fair value of a reporting unit’s goodwill to its carrying value.

In the fourth quarter of 2010, the estimated fair value of all of our reporting units, except for our Australian reporting unit, significantly exceeded the carrying value of its assets and liabilities. Our Australian reporting unit had a goodwill balance of $11 million with an estimated fair value in excess of its net carrying value of one percent as of the testing date.

During the third quarter of 2011, we performed an impairment evaluation of our Australian reporting unit’s goodwill balance as a result of continued deterioration of that reporting unit’s financial performance driven primarily by significant declines in industry production volumes in that region. We identified in our step one test that the carrying value of our Australian reporting unit was higher than its fair value which is an indication that impairment may exist which required us to perform step two of the goodwill impairment test to measure the amount of the impairment loss. Step two of the goodwill impairment evaluation required us to calculate the implied fair value of goodwill of our Australian reporting unit by allocating the estimated fair value to the assets and liabilities of this reporting unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the acquisition price. As a result of performing steps one and two of the goodwill impairment test, we concluded that the remaining amount of goodwill related to our Australian reporting unit was impaired and accordingly, we recorded a goodwill impairment charge of $11$11 million during the third quarter of 2011.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In the fourth quarter of 2011,2013 and 2012, as a result of our annual goodwill impairment testing, the estimated fair value of each of our reporting units exceeded the carrying value of their assets and liabilities as of the testing date.

The changes in the net carrying amount of goodwill for the years ended December 31, 20112013 and 20102012 were as follows:

   Year Ended December 31, 2011 
   North
America		  Europe,
South
America
and India		  Asia
Pacific		  Total 
   (Millions) 

Balance as January 1

     

Goodwill

  $330   $85   $12   $427  

Accumulated impairment losses

   (306)   (31)   (1)   (338) 
  

 

 

  

 

 

  

 

 

  

 

 

 
   24    54    11    89  

Translation adjustments

   1    (5)   —    (4) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Goodwill impairment charge

   —    —    11    11  
  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31

     

Goodwill

   331    80    12    423  

Accumulated impairment losses

   (306)   (31)   (12)   (349) 
  

 

 

  

 

 

  

 

 

  

 

 

 
  $25   $49   $—   $74  
  

 

 

  

 

 

  

 

 

  

 

 

 

   Year Ended December 31, 2010 
   North
America		  Europe,
South
America
and India		  Asia
Pacific		  Total 
   (Millions) 

Balance as January 1

     

Goodwill

  $330   $87   $  10   $427  

Accumulated impairment losses

   (306)   (32)   —    (338) 
  

 

 

  

 

 

  

 

 

  

 

 

 
   24    55    10    89  

Translation adjustments

   —    (1)   1    —  
  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31

     

Goodwill

   330    85    12    427  

Accumulated impairment losses

   (306)   (31)   (1)   (338) 
  

 

 

  

 

 

  

 

 

  

 

 

 
  $24   $54   $  11   $89  
  

 

 

  

 

 

  

 

 

  

 

 

 

  
 Clean Air Division Ride Performance Division  
 North
America		 Europe, South America & India Asia
Pacific		 North
America		 Europe, South America & India Asia
Pacific		 Total
(Millions)
Balance at December 31, 2011$15
 $13
 $—
 $10
 $36
 $—
 $74
  Translation Adjustment(1) —
 —
 —
 (1) —
 (2)
Balance at December 31, 201214
 14
 —
 10
 34
 —
 72
  Translation Adjustment—
 —
 —
 —
 (3) —
 (3)
Balance at December 31, 201314
 14
 —
 10
 31
 —
 69

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We have capitalized certain intangible assets, primarily technology rights, trademarks and patents, based on their estimated fair value at the date we acquired them. We amortize our finite useful life intangible assets on a straight-line basis over periods ranging from five5 to 50 years. Amortization of intangibles amounted to $2$5 million in each of 2013 and 2012, and $2 million in 2011, 2010 and 2009, and isare included in the statements of income caption “Depreciation and amortization of intangibles.” The carrying amount and accumulated amortization of our finite useful life intangible assets were as follows:

   December 31, 2011  December 31, 2010
   Gross  Carrying
Value		  Accumulated
Amortization		  Gross  Carrying
Value		  Accumulated
Amortization
   (Millions)  (Millions)

Customer contract

    $  8     $  (3)      $  8      $  (2)  

Patents

    5     (4)      5      (4)  

Technology rights

    20     (6)      21      (5)  

Other

    9     —      6      (1)  
   

 

 

    

 

 

    

 

 

    

 

 

 

Total

    $  42     $  (13)      $  40      $  (12)  
   

 

 

    

 

 

    

 

 

    

 

 

 

 December 31, 2013 December 31, 2012
 Gross Carrying
Value		 Accumulated
Amortization		 Gross Carrying
Value		 Accumulated
Amortization
 (Millions) (Millions)
Customer contract$8
 $(4) $8
 $(3)
Patents3
 (2) 3
 (1)
Technology rights26
 (12) 26
 (7)
Other11
 (1) 11
 (1)
Total$48
 $(19) $48
 $(12)
Estimated amortization of intangible assets over the next five years is expected to be $3$3 million in 2012,2014, $5 million in 2015, $4 million in both 20132016, $3 million in 2017 and 2014, $3$2 million in 2015 and $2 million in 2016.2018. We have capitalized indefinite life intangibles of $3$1 million relating to purchased trademarks from our Marzocchi® acquisition in 2007.

2008.

Plant, Property, and Equipment, at Cost


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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At December 31, 20112013 and 2010,2012, plant, property, and equipment, at cost, by major category were as follows:

   2011   2010 
   (Millions) 

Land, buildings, and improvements

  $530    $524  

Machinery and equipment

   2,406     2,406  

Other, including construction in progress

   217     179  
  

 

 

   

 

 

 
  $3,153    $3,109  
  

 

 

   

 

 

 

 2013 2012
 (Millions)
Land, buildings, and improvements$579
 $563
Machinery and equipment2,673
 2,574
Other, including construction in progress246
 228

$3,498
 $3,365
We depreciate these properties excluding land on a straight-line basis over the estimated useful lives of the assets. Useful lives range from 10 to 50 years for buildings and improvements and from three3 to 25 years for machinery and equipment.

Notes and Accounts Receivable and Allowance for Doubtful Accounts

Receivables consist of amounts billed and currently due from customers and unbilled pre-production design and development costs. Short and long-term accounts receivable outstanding were $959$1,065 million and $823$980 million at December 31, 20112013 and 2010,2012, respectively. The allowance for doubtful accounts on short-term and long-term accounts receivable was $17$14 million and $20 million at both December 31, 20112013 and 2010,2012, respectively. Short and long-term notes receivable outstanding were $4$5 million and $2$3 million at December 31, 20112013 and 2010,2012, respectively. The allowance for doubtful accounts on short-term and long-term notes receivable was zero at both December 31, 20112013 and 2010.

2012.

Pre-production Design and Development and Tooling Assets

We expense pre-production design and development costs as incurred unless we have a contractual guarantee for reimbursement from the original equipment customer. Unbilled pre-production design and development costs recorded in prepayments and other and long-term receivables was $19were $30 million and $15$25 million

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

at December 31, 20112013 and 2010,2012, respectively. In addition, plant, property and equipment included $38$59 million and $50 million at both December 31, 20112013 and 2010,2012, respectively, for original equipment tools and dies that we own, and prepayments and other included $49$86 million and $46$66 million at December 31, 20112013 and 2010,2012, respectively, for in-process tools and dies that we are building for our original equipment customers.

Internal Use Software Assets

We capitalize certain costs related to the purchase and development of software that we use in our business operations. We amortize the costs attributable to these software systems over their estimated useful lives, ranging from 3 to 12 years, based on various factors such as the effects of obsolescence, technology, and other economic factors. Capitalized software development costs, net of amortization, were $58$55 million and $53$58 million at December 31, 20112013 and 2010,2012, respectively, and are recorded in other long-term assets. Amortization of software development costs was approximately $15$15 million $18, $15 million and $22$18 million for the years ended December 31, 2011, 20102013, 2012 and 2009,2011, respectively, and is included in the statements of income (loss) caption “Depreciation and amortization of intangibles.” Additions to capitalized software development costs, including payroll and payroll-related costs for those employees directly associated with developing and obtaining the internal use software, are classified as investing activities in the statements of cash flows.

Income Taxes

We reported income tax expenseexpenses of $88$122 million $69, $19 million and $13$88 million in the years endingended 2013, 2012 and 2011, 2010 and 2009, respectively. The tax expense recorded in 2011 differs from the expense that would be recorded using a U.S. Federal statutory rate of 35 percent due to2013 includes a net tax benefit of $7$25 million primarily for tax adjustments related to U.S. taxable income with no associated tax expense due to our net operating loss (“NOL”) carryforward and income generated in lower tax rate jurisdictions, partially offset by the impact of recordingrecognizing a valuation allowance against theU.S. tax benefit for losses in certain foreign jurisdictionstaxes and taxes on repatriation of foreign earnings.

changes to prior year estimates.

We evaluate our deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted. U.S. GAAP requires that companies assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. This assessment considers, among other matters, the nature, frequency and amount of recent losses, the duration of statutory carryforward periods, and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.

In 2012, we reversed the tax valuation allowance that we recorded in 2008 against our net deferred tax assets in the U.S. based on operating improvements we had made, the outlook for light and commercial vehicle production in the U.S. and the positive impact this should have on our U.S. operations. The net income impact of the tax valuation allowance release in the U.S. was a tax benefit of approximately $81 million.
Valuation allowances have been established in certain foreign jurisdictions for deferred tax assets based on a “more likely than not” threshold. The ability to realize deferred tax assets depends on our ability to generate sufficient taxable income within

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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the carryforward periods provided for in the tax law for each tax jurisdiction. We have considered the following possible sources of taxable income when assessing the realization of our deferred tax assets:

Future reversals of existing taxable temporary differences;

Taxable income or loss, based on recent results, exclusive of reversing temporary differences and carryforwards;

Tax-planning strategies; and

Taxable income in prior carryback years if carryback is permitted under the relevant tax law.

In 2008, given our historical losses in the U.S., we concluded that our ability to fully utilize our NOLs was limited, as we were required to project the continuation of the negative economic environment at that time and the impact of the negative operating environment on our tax planning strategies. As a result, we recorded a

The valuation allowance against all of our U.S. deferred tax assets except for our tax planning strategies which have not yet been implemented and which do not depend upon generating future taxable income. We carry deferred

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

tax assets in the U.S. of $90 million, as of December 31, 2011, relating to the expected utilization of those NOLs. The recording of a valuation allowance does not impact the amount of the NOL that would be available for federal and state income tax purposes in future periods. The federal NOLs expire beginning in tax years ending in 2021 through 2029. The state NOLs expire in various tax years through 2029.

If our operating performance continues to improve on a sustained basis, our conclusion regarding the need for a valuation allowance could change, resulting in the reversal of some or all of the valuation allowance in the future. The charge to establish the U.S. valuation allowance also includes items related to the losses allocable to certain state jurisdictions where it was determined that tax attributes related to those jurisdictions were potentially not realizable. In addition, the charge to establish the U.S. valuation allowance eliminated the need for certain tax reserves which would need to beallowances recorded if the valuation allowance was reversed. If we were to reverse our U.S. valuation allowance, as of December 31, 2011, the impact on earnings would approximate $147 million.

In prior years, we recorded a valuation allowance against deferred tax assets generated by taxable losses in the U.S. as well asSpain and certain other foreign jurisdictions.jurisdictions will impact our provision for income taxes until the valuation allowances are released. Our provision for income taxes will include no tax benefit with respect tofor losses incurred and no tax expense with respect to income generated in these jurisdictions until the respective valuation allowance is eliminated. In certain foreign jurisdictions, we have recorded a tax benefit on NOLs and tax credits with unlimited lives that are supported by tax actions and forecasted profitability. If the tax actions are not successful or losses are incurred, we may need to record a valuation allowance in a future period. We have recorded net deferred tax assets of approximately $23 million in these jurisdictions as of December 31, 2011. These actions will cause variability in our effective tax rate.

Revenue Recognition

We recognize revenue for sales to our original equipment and aftermarket customers when title and risk of loss passes to the customers under the terms of our arrangements with those customers, which is usually at the time of shipment from our plants or distribution centers. Generally, in connection with the sale of exhaust systems to certain original equipment manufacturers, we purchase catalytic converters and diesel particulate filters or components thereof including precious metals (“substrates”) on behalf of our customers which are used in the assembled system. These substrates are included in our inventory and “passed through” to the customer at our cost, plus a small margin, since we take title to the inventory and are responsible for both the delivery and quality of the finished product. Revenues recognized for substrate sales were $1,640$1,835 million $1,297, $1,660 million and $966$1,678 million in 2011, 20102013, 2012 and 2009,2011, respectively. For our aftermarket customers, we provide for promotional incentives and returns at the time of sale. Estimates are based upon the terms of the incentives and historical experience with returns. Certain taxes assessed by governmental authorities on revenue producing transactions, such as value added taxes, are excluded from revenue and recorded on a net basis. Shipping and handling costs billed to customers are included in revenues and the related costs are included in cost of sales in our consolidated statements of income (loss).

Warranty Reserves

Where we have offered product warranty, we also provide for warranty costs. Provisions for estimated expenses related to product warranty are made at the time products are sold or when specific warranty issues are identified on OE products. These estimates are established using historical information about the nature, frequency, and average cost of warranty claims and upon specific warranty issues as they arise. The warranty terms vary but range from one year up to limited lifetime warranties on some of our premium aftermarket products. We actively study trends of our warranty claims and take action to improve product quality and minimize warranty claims. While we have not experienced any material differences between these estimates and our actual costs, it is reasonably possible that future warranty issues could arise that could have a significant impact on our consolidated financial statements.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Earnings Per Share

We compute basic earnings per share by dividing income available to common shareholders by the weighted-average number of common shares outstanding. The computation of diluted earnings per share is similar to the computation of basic earnings per share, except that we adjust the weighted-average number of shares outstanding to include estimates of additional shares that would be issued if potentially dilutive common shares had been issued. In addition, we adjust income available to common shareholders to include any changes in income or loss that would result from the assumed issuance of the dilutive common shares. Due to the net loss for the year ended December 31, 2009, the calculation of diluted earnings per share did not include the dilutive effect from shares of restricted stock and stock options. See Note 2 to the consolidated financial statements of Tenneco Inc.

Engineering, Research and Development

We expense engineering, research, and development costs as they are incurred. Engineering, research, and development expenses were $133$144 million for 2013, $126 million for 2012, and $133 million for 2011, $117 million for 2010 and $97 million for 2009, net of reimbursements from our customers. Our customers reimburse us for engineering, research, and development costs on some platforms when we prepare prototypes and incur costs before platform awards. Our engineering, research, and development expense for 2011, 2010,2013, 2012 and 20092011 has been reduced by $119$169 million $110, $159 million and $104$119 million, respectively, for these reimbursements.

Advertising and Promotion Expenses

We expense advertising and promotion expenses as they are incurred. Advertising and promotion expenses were $61$53 million $59, $54 million, and $50$61 million for the years ended December 31, 2013, 2012, and 2011, 2010, and 2009, respectively.

Foreign Currency Translation


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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We translate the consolidated financial statements of foreign subsidiaries into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted-average exchange rate for revenues and expenses in each period. We record translation adjustments for those subsidiaries whose local currency is their functional currency as a component of accumulated other comprehensive lossincome (loss) in shareholders’ equity. We recognize transaction gains and losses arising from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency in earnings as incurred, except for those transactions which hedge purchase commitments and for those intercompany balances which are designated as long-term investments. Our results include foreign currency transaction losses of $13 million in 2013, of $8 million in 2012 and $3 million in 2011, less than $1 million2011. The amounts are recorded in 2010, and $4 million in 2009, respectively.

cost of sales.

Risk Management Activities

We use derivative financial instruments, principally foreign currency forward purchase and sales contracts with terms of less than one year, to hedge our exposure to changes in foreign currency exchange rates. Our primary exposure to changes in foreign currency rates results from intercompany loans made between affiliates to minimize the need for borrowings from third parties. Additionally, we enter into foreign currency forward purchase and sale contracts to mitigate our exposure to changes in exchange rates on certain intercompany and third-party trade receivables and payables. We manage counter-party credit risk by entering into derivative financial instruments with major financial institutions that can be expected to fully perform under the terms of such agreements. We do not enter into derivative financial instruments for speculative purposes. In managing our foreign currency exposures, we identify and aggregate existing offsetting positions and then hedge residual exposures through third-party derivative contracts. The fair value of our foreign currency forward contracts was a net assetliability position of $1less than $1 million at December 31, 20112013 and is based on an internally developed model which

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

incorporates observable inputs including quoted spot rates, forward exchange rates and discounted future expected cash flows utilizing market interest rates with similar quality and maturity characteristics. We record the change in fair value of these foreign exchange forward contracts as part of currency gains (losses) within cost of sales in the consolidated statements of income (loss). The fair value of foreign exchange forward contracts are recorded in prepayments and other current assets or other current liabilities in the consolidated balance sheet.

New Accounting Pronouncements

In April 2011,July 2013, the Financial Accounting Standards Board (“FASB”) issued an amendment to provide explicit guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. The objective of the accounting guidance for transfers of financial assets which changesamendment is to eliminate the criteria that must be met to achieve sales accounting. This amendment removes from the assessment of effective control the criterion relating to the transferor’s ability to repurchase or redeem financial assets on substantially the agreed terms, evendiversity in practice in the eventpresentation of default by the transferee. In addition, this amendment eliminates the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets.unrecognized tax benefits in those instances. This amendment is effective for a reporting entity’s first interim or annual periodperiods beginning on or after December 15, 2011.2013. We do not believe the adoption ofadopted this amendment to the accounting guidance for transfers of financial assets on January 1, 2012 will2014. Adoption of the amendment is not expected to have a material impact on our consolidated financial statements.

In May 2011,April 2013, the FASB issued an amendment to achieve common fair value measurement and disclosure requirements in United States Generally Accepted Accounting Principles (“U.S. GAAP”) and International Financial Reporting Standards (“IFRS”). The amendment includes (1) that the concepts of highest and best use and valuation premise in a fair value measurement are relevant onlyclarify when measuring the fair value of nonfinancial assets, (2) provides specific requirements for measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, (3) requires disclosure of quantitative information about unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy, (4) allows the use of a price, that would be received to sell a net asset position for a particular risk or to transfer a net liability position for a particular risk, in measuring the fair value of financial instruments that are managed within a portfolio, (5) in the absence of a Level 1 input a reporting entity should apply premiums or discounts when market participants would do so when pricing an asset or liabilitythe liquidation basis of accounting and (6) additional disclosure about fair value measurements.to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendment applies to all entities that issue financial statements that are presented in conformity with U.S. GAAP except investment companies that are regulated under the Investment Company Act of 1940. This amendment is effective for a reporting entity’s interim and annual periods beginning after December 15, 2011. We do2013. Adoption of the amendment will not believe the adoption of this amendment for fair value measurements on January 1, 2012 will have a materialany impact on our consolidated financial statements.
In February 2013, the measurementFASB issued an amendment to resolve the diversity in practice about whether Subtopic 810-10, Consolidation-Overall, or Subtopic 830-30, Foreign Currency Matters-Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part of all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real state or conveyance of oil and gas mineral rights) within a foreign entity. In addition, the amendments resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. This amendment is effective for reporting periods beginning after December 15, 2013. Adoption of the amendment will not have any impact on our consolidated financial assets and liabilities. We will add additional fair value disclosures, as required by this amendment, beginning with our first interim reporting period ending March 31, 2012.

statements.

In June 2011,February 2013, the FASB issued an amendment to the accounting guidance for the presentation on comprehensive incomerecognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which must be applied retrospectively for all periods presented. This amendment removes onethe total amount of the three presentation optionsobligation is fixed at the reporting date, except for presentingobligations addressed within existing guidance in U.S. GAAP. The guidance requires an entity to measure those obligations as the components of other comprehensive income as partsum of the statementamount the reporting entity agreed to pay on the basis of changesits arrangement amount its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in stockholders’ equitythis amendment also requires an entity to disclose the nature and requires either a single continuous statementamount of comprehensive income or a two statement approach andthe obligation as well as other information about those obligations. This amendment is effective for fiscal years, and interimreporting periods within those fiscal years, beginning after December 15, 2011. If a reporting entity elects the two statement approach, this amendment requires consecutive presentation2013. Adoption of the statement of net income followed by the statement of other comprehensive income. In addition, this amendment requires an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income. The FASB issued in December 2011, an amendment to defer the presentation of reclassification adjustments to allow additional time to redeliberate these new presentation requirements. We dowill not believe the adoption of this amendment to the accounting guidance for the presentation of comprehensive income on January 1, 2012 will have a materialany impact on our consolidated financial statements.


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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In September 2011,February 2013, the FASB issued an amendment to the accounting guidance to improve the transparency of reporting amounts reclassified out of other comprehensive income. Other comprehensive income (loss) includes gains and losses that are initially excluded from net income for testing goodwill for impairment.an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. This amendment provides adoes not change the current requirements for reporting entitynet income or other comprehensive income in the option to first assess qualitative factors to determine whether the existence of events and circumstances leads to a determination that it is more likely than not that the

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

fair value of a reporting unit is less than its carrying amount. If the reporting entity’s assessment after considering all events and circumstances is that it is not more likely than not that its fair value is less than its carrying amount, then performing the two-step impairment test is not required. If the reporting entity concludes that it is more likely than not that its fair value is less than its carrying amount then the first stepfinancial statements. All of the two-step impairment test is required. If the carrying amount of the reporting unit exceeds its fair value, then the reporting unitinformation that this amendment requires already is required to performbe disclosed elsewhere in the second stepfinancial statements under U.S. GAAP. This new amendment requires presentation either on the face of the goodwill impairment teststatement where net income is presented or in the notes, the effects of significant amounts reclassified out of accumulated other comprehensive income, and that the reclassified amounts be cross-referenced to measure the amount of the impairment loss.other disclosures required under U.S. GAAP. This amendment iswas effective for annual and interim goodwill impairment tests performed for fiscal yearsreporting periods beginning after December 15, 2011. We do2012. This amendment has not believe the adoption of this amendment on January 1, 2012 for testing goodwill for impairment will havehad a material impact on our condensed consolidated financial statements.

In December 2011, the FASB issued an amendment relating to the disclosure about offsetting assets and liabilities. This amendment requires disclosure to provide information to help reconcile differences in the offsetting requirements under U.S. GAAP and IFRS.International Financial Reporting Standards ("IFRS"). A reporting entity will be required to disclose 1)(1) the gross amount of recognized assets and liabilities, 2)(2) the amounts offset to determine the net amounts presented in the statement of financial position, 3)(3) the net amounts presented in the statement of financial position, 4)(4) the amounts subject to an enforceable master netting arrangement or similar agreement not otherwise included in (2), and 5)(5) the net amount after deducting the amounts in (4) and (3). This amendment iswas effective for a reporting entity’s interim and annual periods beginning on or after January 1, 2013. We do not believe the adoptionFollowing issuance of this amendment, relatingconsiderable concerns were raised regarding the broad scope of this amendment. In response to the concerns, in January, 2013, the FASB issued a new amendment revising the scope of the disclosure requirements to apply only to derivatives, repurchase agreements and reverse repurchase agreements, and security borrowing and lending transactions subject to a master netting arrangement or similar agreement. As a result of this new amendment the disclosure about offsetting assets and liabilities on January 1, 2013 willdid not have a materialany impact onto our consolidated financial statements.

Restricted Net Assets

In certain countries where we operate, transfers of funds out of such countries by way of dividends, loans or advances are subject to certain central bank restrictions which require approval from the central bank authorities prior to transferring funds out of these countries. The countries in which we operate that have such restrictions include Argentina, China, Russia, South Africa, India, Thailand and Argentina. At December 31, 2011, theThailand. The net asset balance of our subsidiaries in the countries in which we operate that have such restrictions was $137 million.$177 million and $183 million as of December 31, 2013 and 2012, respectively. These central banking restrictions do not have a significant effect on our ability to manage liquidity on a global basis.

TENNECO INC.2.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2.Earnings (Loss) Per Share

Earnings (loss)Per Share

Earnings per share of common stock outstanding were computed as follows:

   Year Ended December 31, 
   2011   2010   2009 
   (Millions Except Share and Per Share Amounts) 

Basic earnings (loss) per share —

      

Net income (loss) attributable to Tenneco Inc.

  $157    $39    $(73) 
  

 

 

   

 

 

   

 

 

 

Average shares of common stock outstanding

   59,884,139     59,208,103     48,572,463  
  

 

 

   

 

 

   

 

 

 

Earnings (loss) per average share of common stock

  $2.62    $0.65    $(1.50) 

Diluted earnings (loss) per share —

      

Net income attributable to Tenneco Inc.

  $157    $39    $(73) 

Average shares of common stock outstanding

   59,884,139     59,208,103     48,572,463  

Effect of dilutive securities:

      

Restricted stock

   168,539     441,561     —  

Stock options

   1,467,482     1,349,030     —  
  

 

 

   

 

 

   

 

 

 

Average shares of common stock outstanding including dilutive securities

   61,520,160     60,998,694     48,572,463  
  

 

 

   

 

 

   

 

 

 

Earnings (loss) per average share of common stock

  $2.55    $0.63    $(1.50) 
  

 

 

   

 

 

   

 

 

 

 Year Ended December 31,
 2013 2012 2011
 (Millions Except Share and Per Share Amounts)
Basic earnings per share —     
Net income attributable to Tenneco Inc.$183
 $275
 $157
Average shares of common stock outstanding60,474,492
 59,985,677
 59,884,139
Earnings per average share of common stock$3.03
 $4.58
 $2.62
Diluted earnings per share —
 
 
Net income attributable to Tenneco Inc.$183
 $275
 $157
Average shares of common stock outstanding60,474,492
 59,985,677
 59,884,139
Effect of dilutive securities:
 
 
Restricted stock205,020
 140,609
 168,539
Stock options914,550
 957,224
 1,467,482
Average shares of common stock outstanding including dilutive securities61,594,062
 61,083,510
 61,520,160
Earnings per average share of common stock$2.97
 $4.50
 $2.55
Options to purchase 202,009205,104, 521,249 and 612,832202,009 shares of common stock were outstanding as of December 31, 20112013, 2012 and 2010,2011, respectively, but not included in the computation of diluted earnings per share, because the options were anti-dilutive. As a result

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Table of the net loss in 2009, the calculation of diluted loss per share excludes the dilutive effect of options and restricted stock.

Contents
3.Acquisitions
3.
Acquisitions

In August 2011, we purchased the remaining 25 percent equity interest in our emission controlclean air joint venture in Thailand for $4$4 million in cash. As a result of this purchase, our equity ownership of this joint venture investment changed to 100 percent from 75 percent.

In January 2010,September 2012, we purchased certain rights from Combustion Components Associates, Inc. primarily pertaining to emission control technology for stationary reciprocating engine applications for $7 million in cash.
In the fourth quarter of 2013, we purchased an additional 20 percent equity interest in our Tenneco Tongtai (Dalian) Exhaust System Co., Ltd. (TTEC) joint venture investment in China for $15$69 million in cash.cash through two transactions. The joint venture partner also received an additional amount of $9 million in lieu of receiving its pro-rata share of dividends owed from the joint venture. As a result of thisthe purchase, our equity ownership percentageTTEC became a wholly owned indirect subsidiary of this joint venture investment increasedTenneco.
The table below summaries the net income attributable to 80 percent from 60 percent.

Tenneco Inc. and transfers to the noncontrolling interest:
 Year Ended December 31,
 2013 2012 2011
 (Millions)
Net income attributable to Tenneco Inc.$183
 $275
 $157
  Decrease in equity for purchase of noncontrolling equity interest(68) —
 (2)
Net income attributable to Tenneco Inc. shareholders less purchase of noncontrolling equity interest115
 275
 155


4.Restructuring and Other Charges
4.
Restructuring and Other Charges

Over the past several years, we have adopted plans to restructure portions of our operations. These plans were approved by our Board of Directors and were designed to reduce operational and administrative overhead costs throughout the business. For 2009, we incurred $21 million in restructuring and related costs, of which $16 million was recorded in cost of sales, $1 million was recorded in selling, general, administrative and engineering expense and $4 million was recorded in depreciation and amortization expense. In 2010, we incurred $19 million in restructuring and related costs, of which $14 million was recorded in cost of sales and $5 million was recorded in depreciation and amortization expense. During 2011, we incurred $8$8 million in restructuring and related costs, primarily related to headcount reductions in Europe and Australia and the closure of our ride controlperformance plant in Cozad, Nebraska, all of which was recorded in cost of sales.

In 2012, we incurred TENNECO INC.$13 million

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) in restructuring and related costs, primarily related to headcount reductions in South America and non-cash asset write downs of

$4 million in Europe, of which $10 million was recorded in cost of sales and $3 million was recorded in SG&A. In 2013, we incurred $78 million in restructuring and related costs, primarily related to European cost reduction efforts including non-cash asset write downs of $3 million, our exit from the distribution of aftermarket exhaust products and ending production of leaf springs in Australia, headcount reductions in various regions, and the net impact of freezing our defined benefit plans in the United Kingdom, of which $70 million was recorded in cost of sales, $6 million in SG&A, $1 million in engineering expense and $1 million in other expense.


Amounts related to activities that are part of our restructuring plans are as follows:

   December 31,
2010
Restructuring
Reserve		  2011
Expenses		  2011
Cash
Payments		 Reserve
Adjustments		 December 31,
2011
Restructuring
Reserve
   (Millions)

Severance

    $7     8     (13)   (1)   $1 

 December 31,
2012
Restructuring
Reserve		 2013
Expenses		 2013
Cash
Payments		 Impact of Exchange Rates December 31,
2013
Restructuring
Reserve
 (Millions)
Employee Severance, Termination Benefits and Other Related Costs$—

75

(32)
1
 $44
Under the terms of our amended and extendedrestated senior credit agreement that took effect on June 3, 2010,March 22, 2012, we are allowed to exclude $60$80 million of cash charges and expenses, before taxes, related to cost reduction initiatives incurred after June 3, 2010March 22, 2012 from the calculation of the financial covenant ratios required under our senior credit facility. As of December 31, 2011,2013, we have excluded $17 million in cumulativeall allowable charges relating to restructuring initiatives against the $60$80 million available under the terms of the senior credit facility.

On September 22, 2009,January 31, 2013, we announced thatour intent to reduce structural costs in Europe. This initiative includes the non-cash charges of $4 million we wereincurred in 2012 in connection with the announced closing our original equipmentof the Vittaryd facility in Sweden and a $7 million charge recorded in the fourth quarter of 2012 related to the impairment of certain assets in the European ride control plant in Cozad, Nebraska. The

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performance business. In August 2013, we completed the closure of the CozadVittaryd facility. On September 5, 2013, we announced our intent to close our ride performance plant will eliminate approximately 500 positions. We are hiringin Gijon, Spain and reduce the workforce at other facilities as we move production from Cozadour ride performance plant in Sint-Truiden, Belgium. The workers' council filed suit challenging the decision to those facilities, which will resultclose the Gijon plant and the local High Court of Justice of Asturias ruled in a net decrease of approximately 60 positions. Muchfavor of the production is being shifted from Cozad to our plant in Hartwell, Georgia.

Duringworkers' council. On February 25, 2014, we announced the transition of production from our Cozad facility to our Hartwell facility, several customer programs, which were planned to phase out, were reinstated and volumes increased beyond the amount in our original restructuring plan. To meet the higher volume requirements, we have taken a number of actions over the past few months to stabilize the production environment in Hartwell including reinforcing several core processes, realigning assembly lines, upgrading equipment to increase output and accelerating our Lean manufacturing activities. Based on the higher volumes, we are adjusting our consolidation plan. Our revised consolidation plan includes temporarily continuing some basic production operations in Cozad, and redirecting some programs from our Hartwell facility to our other North American facilities to better balance production. These actions are anticipated to conclude during the third quarter of 2012. As of December 31, 2011, more than 95 percentintention of the positions at our Cozad facility have been eliminated.

During 2009 and 2010, weCompany to appeal that decision to the Supreme Court of Spain in Madrid. We recorded $11$60 million and $10in charges related to these actions in 2013. We incurred $78 million respectively, ofin restructuring and related expensescosts in 2013, of which $69 million was related to this initiative including $3 million for non-cash asset write downs. These charges included non-cash asset impairments, the cost of which approximately $16 million represents cash expenditures. In 2011, we have recorded an additional cash charge of $2 millionrelocating tooling, equipment and production to other facilities, severance and retention payments to employees and other costs related to this initiative.

In 2011, we recorded $3 million of restructuringthese actions.


5.Long-Term Debt, Short-Term Debt, and related expenses, all of which represented cash expenditures, related to the permanent elimination of 53 positions in our Australian operations as a result of the continued decline in industry production volumes in that region.

TENNECO INC.Financing Arrangements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.Long-Term Debt, Short-Term Debt, and Financing Arrangements

Long-Term Debt

A summary of our long-term debt obligations at December 31, 20112013 and 2010,2012, is set forth in the following table:

   2011   2010 
   (Millions) 

Tenneco Inc. —

    

Revolver borrowings due 2014, average effective interest rate 5.3% in 2011 and 5.4% in 2010

  $24    $—  

Senior Term Loan due 2012 through 2016, average effective interest rate 4.9% in 2011 and 5.1% in 2010

   148     149  

7 3/4% Senior Notes due 2018

   225     225  

6 7/8% Senior Notes due 2020

   500     500  

8 5/8% Senior Subordinated Notes due 2014(a)

   —     20  

8 1/8% Senior Notes due 2015

   250     250  

Debentures due 2012 through 2025, average effective interest rate 8.4% in 2011 and 2010

   1     1  

Customer Notes due 2013, average effective interest rate 8.0% in 2011 and 2010

   3     4  

Other subsidiaries —

    

Notes due 2012 through 2025, average effective interest rate 1.3% in 2011 and 3.0% in 2010

   11     13  
  

 

 

   

 

 

 
   1,162     1,162  

Less — maturities classified as current

   4     2  
  

 

 

   

 

 

 

Total long-term debt

  $1,158    $1,160  
  

 

 

   

 

 

 

(a)

 2013 2012
 (Millions)
Tenneco Inc. —   
Revolver borrowings due 2017, average effective interest rate 2.7% in 2013 and 1.2% in 2012$58
 $92
Senior Term Loan due 2014 through 2017, average effective interest rate 2.7% in 2013 and 3.0% in 2012228
 241
7 3/4% Senior Notes due 2018225
 225
6 7/8% Senior Notes due 2020500
 500
Debentures due 2014 through 2026, average effective interest rate 7.5 in 2013 and 8.4% in 20121
 1
Customer Notes due 2013, average effective interest rate 8.0% in 2013 and 2012—
 1
Other subsidiaries —
 
Notes due 2014 through 2026, average effective interest rate 1.3% in both 2013 and 20129
 10

1,021
 1,070
Less — maturities classified as current2
 3
Total long-term debt$1,019
 $1,067
On January 7, 2011, we redeemed the remaining $20 million 8 5/8 percent senior subordinated notes by increasing our revolver borrowings which are classified as long-term debt.

The aggregate maturities and sinking fund requirements applicable to the long-term debt outstanding at December 31, 2011,2013, are $4$23 million $5, $35 million $27, $48 million $253, $184 million and $142$226 million for 2012, 2013, 2014, 2015, 2016, 2017 and 2016,2018, respectively.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We have excluded the required payments, within the next twelve months, under the Tranche A Term Facility totaling $22 million from current liabilities as of December 31, 2013, because we have the intent and ability to refinance the obligations on a long-term basis by using our revolving credit facility.
Short-Term Debt

Our short-term debt includes the current portion of long-term obligations and borrowings by parent company and foreign subsidiaries. Information regarding our short-term debt as of and for the years ended December 31, 20112013 and 20102012 is as follows:

   2011   2010 
   (Millions) 

Maturities classified as current

  $4    $2  

Notes payable

   62     61  
  

 

 

   

 

 

 

Total short-term debt

  $66    $63  
  

 

 

   

 

 

 

   Notes Payable(a) 
   2011  2010 
       (Dollars in Millions)     

Outstanding borrowings at end of year

  $62   $61  

Weighted average interest rate on outstanding borrowings at end of year(b)

   6.0%   7.8% 

Approximate maximum month-end outstanding borrowings during year

  $178   $201  

Approximate average month-end outstanding borrowings during year

  $118   $109  

Weighted average interest rate on approximate average month-end outstanding borrowings during year(b)

   5.6%   5.5% 

 2013 2012
 (Millions)
Maturities classified as current$2
 $3
Short-term borrowings81
 110
Total short-term debt$83
 $113


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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 Notes Payable(a)
 2013 2012
 (Dollars in Millions)    
Outstanding borrowings at end of year$81
 $110
Weighted average interest rate on outstanding borrowings at end of year(b)4.4% 5.3%
Approximate maximum month-end outstanding borrowings during year$177
 $156
Approximate average month-end outstanding borrowings during year$116
 $123
Weighted average interest rate on approximate average month-end outstanding borrowings during year(b)4.7% 5.5%
(a)Includes borrowings under both committed credit facilities and uncommitted lines of credit and similar arrangements.

(b)This calculation does not include the commitment fees to be paid on the unused revolving credit facility balances which are recorded as interest expense for accounting purposes.

Financing Arrangements

   Committed Credit Facilities(a) as of December 31, 2011 
   Term   Commitments   Borrowings   Letters  of
Credit(b)		   Available 
   (Millions) 

Tenneco Inc. revolving credit agreement

   2014     622     —     58     564  

Tenneco Inc. tranche B-1 letter of credit/revolving loan agreement

   2014     130     24     —     106  

Tenneco Inc. Senior Term Loans

   2016     148     148     —     —  

Subsidiaries’ credit agreements

   2012-2025     88     73     —     15  
    

 

 

   

 

 

   

 

 

   

 

 

 
    $988    $245    $58    $685  
    

 

 

   

 

 

   

 

 

   

 

 

 

 Committed Credit Facilities(a) as of December 31, 2013
 Term Commitments Borrowings 
Letters of
Credit(b)
 Available
 (Millions)
Tenneco Inc. revolving credit agreement2017 850
 58
 37
 755
Tenneco Inc. tranche A term facility2017 228
 228
 —
 —
Subsidiaries’ credit agreements2014-2026 110
 90
 —
 20
   $1,188
 $376
 $37
 $775
(a)We generally are required to pay commitment fees on the unused portion of the total commitment.

(b)Letters of credit reduce the available borrowings under the revolving credit agreement.

Overview.    Our financing arrangements are primarily provided by a committed senior secured financing arrangement with a syndicate of banks and other financial institutions. The arrangement is secured by

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

substantially all our domestic assets and pledges of up to 66 percent of the stock of certain first-tier foreign subsidiaries, as well as guarantees by our material domestic subsidiaries.

On June 3, 2010,March 22, 2012, we completed an amendment and extensionrestatement of our senior secured credit facility by increasing the amount and extending the termmaturity date of our revolving credit facility and replacingadding a new Tranche A Term Facility. The amended and restated facility replaces our $128former $556 million term revolving credit facility, $148 million Tranche B Term Facility and $130 million Tranche B-1 letter of credit/revolving loan A with a largerfacility. The proceeds from this refinancing transaction were used to repay our $148 million Tranche B Term Facility and longer maturity term loan B facility.to fund the purchase and redemption of our $250 million 8 1/8 percent senior notes due in 2015. As a result of the amendment and extension, as of December 31, 2011,2013, the senior credit facility provides us with a total revolving credit facility size of $622$850 million until March 16, 2012, when commitments and a $228 million Tranche A Term Facility, both of $66 million will expire. After March 16, 2012, the extended revolving credit facility will provide $556 million of revolving credit andwhich will mature on May 31, 2014. The extended facility will mature earlier on December 15, 2013, if our $130 million tranche B-1 letter of credit/revolving loan facility is not refinanced by that date. Prior to maturity, fundsMarch 22, 2017. Funds may be borrowed, repaid and re-borrowed under the two revolving credit facilitiesfacility without premium or penalty.

As of December 31, 2011, the senior The revolving credit facility also provides a six-year, $148 million term loan B maturing in June 2016, and a seven-year $130 million tranche B-1 letter of credit/revolving loan facility maturing in March 2014. We are required to make quarterly principal payments of $375 thousand on the term loan B, through March 31, 2016 with a final payment of $141 million due June 3, 2016. The tranche B-1 letter of credit/revolving loan facility requires repayment by March 2014. We can enter into revolving loans and issue letters of credit under the $130 million tranche B-1 letter of credit/revolving loan facility. The tranche B-1 letter of credit/revolving loan facility is reflected as debt on our balance sheet only if we borrow money under this facility or if we use the facility to make payments for letters of credit. There is no additional cost to us for issuing letters of credit under the tranche B-1 letter of credit/revolving loan facility. However, outstandingOutstanding letters of credit reduce our availability to enter into revolving loans under the facility. We payare required to make quarterly principal payments under the tranche B-1 lendersTranche A Term Facility of $3.1 million from June 30, 2012 through March 31, 2014, $6.3 million beginning June 30, 2014 through March 31, 2015, $9.4 million beginning June 30, 2015 through March 31, 2016, $12.5 million beginning June 30, 2016 through December 31, 2016 and a marginfinal payment of $125 million is due on March 22, 2017. We have excluded the $130required payments, within the next twelve months, under the Tranche A Term Facility totaling $22 million deposited withfrom current liabilities as of December 31, 2013, because we have the administrative agent. In addition,intent and ability to refinance the obligations on a long-term basis by using our revolving credit facility.

On March 8, 2012, we pay lenders interest equalannounced a cash tender offer to purchase our outstanding $250 million 8 1/8 percent senior notes due in 2015 and a solicitation of consents to certain proposed amendments to the London Interbank Offered Rate (“LIBOR”)indenture governing these notes. We received tenders and consents representing $232 million aggregate principal amount of the notes and, on March 22, 2012, we purchased the tendered notes at a price of 104.44 percent of the principal amount (which includes a consent payment of three percent of the principal amount), plus accrued and unpaid interest, and amended the related indenture. On April 6, 2012, we redeemed the remaining outstanding $18 million aggregate principal amount of senior notes that were not purchased pursuant to the tender offer at a price of 104.06 percent of the principal amount, plus accrued and unpaid interest. The additional liquidity provided by the new $850 million revolving credit facility and the new $250 million Tranche A Term Facility was used to fund the total cost of the tender offer and redemption, including all borrowingsrelated fees and expenses.

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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We recorded $17 million of pre-tax charges in March 2012 related to the refinancing of our senior credit facility, the repurchase and redemption of $232 million aggregate principal amount of our 8  1/8 percent senior notes due in 2015 and the write-off of deferred debt issuance costs relating to these senior notes. We recorded an additional $1 million of pre-tax charges during the second quarter of 2012 relating to the redemption of the remaining $18 million aggregate principal amount of our 8  1/8 percent senior notes which occurred in April 2012.
At December 31, 2013, of the $850 million available under the facility. Funds depositedrevolving credit facility, we had unused borrowing capacity of $755 million with the administrative agent by the lenders$58 million in outstanding borrowings and not borrowed by the Company earn interest at an annual rate approximately equal$37 million in outstanding letters of credit. As of December 31, 2013, our outstanding debt also included $228 million related to LIBOR less 25 basis points.

our Tranche A Term Facility due March 22, 2017, $225 million of 7 3/4 percent senior notes due August 15, 2018, $500 million of 6 7/8 percent senior notes due December 15, 2020, and $91 million of other debt.

Senior Credit Facility — Interest Rates and Fees.Beginning June 3, 2010,March 22, 2012, our term loan BTranche A Term Facility and revolving credit facility bear interest at an annual rate equal to, at our option, either (i) LIBORLondon Interbank Offered Rate (“LIBOR”) plus a margin of 475 and 450 basis points, respectively, or (ii) a rate consisting of the greater of (a) the JPMorgan Chase prime rate plus a margin of 375 and 350 basis points, respectively, (b) the Federal Funds rate plus 50 basis points plus a margin of 375 and 350 basis points, respectively, and (c) the Eurodollar Rate plus 100 basis points plus a margin of 375 and 350 basis points, respectively. The margin we pay on these borrowings will be reduced by 25 basis points following each fiscal quarter for which our consolidated net leverage ratio is less than 2.25 for extending lenders and for the term loan B and will be further reduced by an additional 25 basis points following each fiscal quarter for which the consolidated net leverage ratio is less than 2.00 for extending lenders. Our consolidated net leverage ratio was 1.88 and 2.24 as of December 31, 2011 and 2010, respectively. Accordingly, in February of 2012 the margin we pay on these borrowings will be reduced by 25 basis points for extending lenders and will remain at such level for so long as our consolidated net leverage ratio remains below 2.00.

The borrowings under our tranche B-1 letter of credit/revolving loan facility incur interest at an annual rate equal to, at our option, either (i) LIBOR plus a margin of 500250 basis points, or (ii) a rate consisting of the greater of (a) the JPMorgan Chase prime rate plus a margin of 400150 basis points, (b) the Federal Funds rate plus 50 basis points plus a margin of 400150 basis points, and (c) the Eurodollar Rate plus 100 basis points plus a margin of 400150 basis points.

At The margin we pay on these borrowings will be reduced by a total of 25 basis points below the original margin following each fiscal quarter for which our consolidated net leverage ratio is less than 1.50 or will be increased by a total of 25 basis points above the original margin if our consolidated net leverage ratio is greater than or equal to 2.50. We also pay a commitment fee equal to 40 basis points. In February 2014, the margin we pay on borrowings decreased by 25 basis points below the original margin, as a result of a decrease in our consolidated net leverage ratio from 1.86 at September 30, 2013 to 1.39 at December 31, 2011, of the $752 million available under the two revolving credit facilities within our senior secured credit facility, we had unused borrowing capacity of $670 million with $24 million in outstanding borrowings and $58 million in letters of credit outstanding. As of December 31, 2011, our outstanding debt also included $250 million of 82013.

 1/8 percent senior notes due November 15, 2015, $148 million term loan B due

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 3, 2016, $225 million of 7 3/4 percent senior notes due August 15, 2018, $500 million of 6 7/8 percent senior notes due December 15, 2020, and $78 million of other debt.

On December 9, 2010, we commenced a cash tender offer of our outstanding $500 million 8 5/8 percent senior subordinated notes due in 2014 and a consent solicitation to amend the indenture governing these notes. On December 23, 2010, we issued $500 million of 6 7/8 percent senior notes due December 15, 2020 in a private offering. The net proceeds of this transaction, together with cash and available liquidity, were used to finance the purchase of our 8 5/8 percent senior subordinated notes pursuant to the tender offer at a price of 103.25 percent of the principal amount, plus accrued and unpaid interest for holders who tendered prior to the expiration of the consent solicitation, and 100.25 percent of the principal amount, plus accrued and unpaid interest, for other participants. A total of $480 million of the senior subordinated notes were tendered prior to the expiration of the consent solicitation. On January 7, 2011, we redeemed all remaining outstanding $20 million of senior subordinated notes that were not previously tendered, at a price of 102.875 percent of the principal amount, plus accrued and unpaid interest. To facilitate these transactions, we amended our senior credit agreement to permit us to refinance our senior subordinated notes with new senior unsecured notes. We did not incur any fee in connection with this amendment. The new notes are general senior obligations of Tenneco Inc. and are not secured by assets of Tenneco Inc. or any of our subsidiaries that guarantee the new notes. We recorded $20 million of pre-tax charges in December 2010 and an additional $1 million of pre-tax charges in the first quarter of 2011 related to our repurchase and redemption of our 8 5/8 percent senior subordinated notes. On March 14, 2011, we completed an offer to exchange the $500 million of 6 7/8 percent senior notes due in 2020 which have been registered under the Securities Act of 1933, for and in replacement of all outstanding unregistered 6 7/8 percent senior notes due in 2020. We received tenders from holders of all $500 million of the aggregate outstanding amount of the original notes. The terms of the new notes are substantially identical to the terms of the original notes for which they were exchanged, except that the transfer restrictions and the registration rights applicable to the original notes generally do not apply to the new notes.

On August 3, 2010, we issued $225 million of 7 3/4 percent senior notes due August 15, 2018 in a private offering. The net proceeds of this transaction, together with cash and available liquidity, were used to finance the redemption of our 10 1/4 percent senior secured notes due in 2013. We called the senior secured notes for redemption on August 3, 2010, and completed the redemption on September 2, 2010 at a price of 101.708 percent of the principal amount, plus accrued and unpaid interest. We recorded $5 million of expense related to our redemption of our 10 1/4 percent senior secured notes in the third quarter of 2010. The new notes are general senior obligations of Tenneco Inc. and are not secured by assets of Tenneco Inc. or any of our subsidiaries that guarantee the new notes. On February 14, 2011, we completed an offer to exchange the $225 million of 7 3/4 percent senior notes due in 2018 which have been registered under the Securities Act of 1933, for and in replacement of all outstanding unregistered 7 3/4 percent senior notes due in 2018. We received tenders from holders of all $225 million of the aggregate outstanding amount of the original notes. The terms of the new notes are substantially identical to the terms of the original notes for which they were exchanged, except that the transfer restrictions and the registration rights applicable to the original notes generally do not apply to the new notes.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Senior Credit Facility — Interest Rates and Fees.    Borrowings and letters of credit issued under the senior credit facility bear interest at an annual rate equal to, at our option, either (i) LIBOR plus a margin as set forth in the table below; or (ii) a rate consisting of the greater of the JPMorgan Chase prime rate, the Federal Funds rate plus 50 basis points or the Eurodollar Rate plus 100 basis points, plus a margin as set forth in the table below:

   8/14/2009
thru
2/28/2010		  3/1/2010
thru
6/2/2010		  6/3/2010
thru
2/27/2011		  2/28/2011
thru
5/15/2011		  5/16/2011
thru
8/7/2011		  Beginning
8/8/2011		 

Applicable Margin over:

       

LIBOR for Revolving Loans

   5.50%   4.50%   4.50%   4.25%   4.50%   4.25%* 

LIBOR for Term Loan B Loans

   —    —    4.75%   4.50%   4.75%   4.50%* 

LIBOR for Term Loan A Loans

   5.50%   4.50%   —    —    —    —  

LIBOR for Tranche B-1 Loans

   5.50%   5.00%   5.00%   5.00%   5.00%   5.00% 

Prime-based Term Loan A Loans

   4.50%   3.50%   —    —    —    —  

Prime for Revolving Loans

   —    —    3.50%   3.25%   3.50%   3.25%* 

Prime for Term Loan B Loans

   —    —    3.75%   3.50%   3.75%   3.50%* 

Prime for Tranche B-1 Loans

   —    —    4.00%   4.00%   4.00%   4.00% 

Federal Funds for Revolving Loans

   —    —    3.50%   3.25%   3.50%   3.25%* 

Federal Funds for Term Loan B Loans

   —    —    3.75%   3.50%   3.75%   3.50%* 

Federal Funds for Tranche B-1 Loans

   5.00%   4.00%   4.00%   4.00%   4.00%   4.00% 

Commitment Fee

   0.75%   0.50%   0.75%   0.50%   0.75%   0.50%* 

*In February 2012, the margin we pay on borrowings will decrease by 25 basis points, as a result of a decrease in our consolidated net leverage ratio from 2.07 at September 30, 2011 to 1.88 at December 31, 2011.

Senior Credit Facility — Other Terms and Conditions.    Our senior credit facility requires that we maintain financial ratios equal to or better than the following consolidated net leverage ratio (consolidated indebtedness net of cash divided by consolidated EBITDA, as defined in the senior credit facility agreement), and consolidated interest coverage ratio (consolidated EBITDA divided by consolidated interest expense, as defined under the senior credit facility agreement) at the end of each period indicated. Failure to maintain these ratios will result in a default under our senior credit facility. The financial ratios required under the amended and restated senior credit facility and, the actual ratios we achieved for the four quarters of 2011,2013, are as follows:

   Quarter Ended 
   March 31,
2011		   June 30,
2011		   September 30,
2011		   December 31,
2011		 
   Req.   Act.   Req.   Act.   Req.   Act.   Req.   Act. 

Leverage Ratio (maximum)

   4.00     2.32     3.75     2.17     3.50     2.07     3.50     1.88  

Interest Coverage Ratio (minimum)

   2.55     4.37     2.55     4.76     2.55     5.17     2.55     5.69  

 Quarter Ended
 
March 31,
2013

June 30,
2013

September 30,
2013

December 31,
2013
 Req. Act. Req. Act. Req. Act. Req. Act.
Leverage Ratio (maximum)3.50

1.98

3.50

1.79

3.50

1.86

3.50

1.39
Interest Coverage Ratio (minimum)2.55

8.39

2.55

8.74

2.55

9.09

2.55

9.89
The financial ratios required under the senior credit facility for each quarter beyond December 31, 2011 includeincludes a maximum leverage ratio covenant of 3.50 through March 22, 2017 and a minimum interest coverage ratio of 2.75.

2.55 through December 31, 2013 and 2.75 thereafter, through March 22, 2017.

The covenants in our senior credit facility agreement generally prohibit us from repaying or refinancing our senior notes. So long as no default existed, we would, however, under our senior credit facility agreement, be permitted to repay or refinance our senior notes:notes (i) with the net cash proceeds of incremental facilities and permitted refinancing indebtedness (as defined in the senior credit facility agreement)agreement or with the net cash proceeds of our common stock); (ii) with the net cash proceeds fromof the saleincremental facilities (as defined in the senior credit facility agreement); (iii) with the net cash proceeds of sharesthe revolving loans (as defined in the senior credit facility agreement); (iv) with the cash generated by our operations; (v) in an amount equal to the net cash proceeds of our common stock; (iii)qualified capital stock (as defined in the senior credit facility agreement) issued by us after March 22, 2012; and (vi) in exchange for permitted refinancing indebtedness or in exchange for shares of our common stock; (iv) with the net cash proceeds of any new senior or subordinated unsecured indebtedness; (v) with the proceeds of revolving credit loans (as defined in the senior credit facility

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

agreement); (vi) with the cash generated by the operations of the Company; and (vii) in an amount equal to the sum of (a) the net cash proceeds of qualified stock issued by the Company after March 16, 2007, plus (b) the portion of annual excess cash flow (beginning with excess cash flow for fiscal year 2010) not required to be applied to payment of the credit facilities and which is not used for other purposes, provided that the aggregate principal amount of senior notes purchased and cancelled or redeemed pursuant to clauses (v), (vi) and (vii), issuch purchases are capped as follows based(with respect to clauses (iii), (iv) and (v) on thea pro forma consolidated leverage ratio after giving effect to such purchase, cancellation or redemption:

Pro forma Consolidated

Leverage Ratio

Aggregate Senior Note
Maximum Amount
(Millions)

Greater than or equal to 3.0x

$  20

Greater than or equal to 2.5x

$100

Less than 2.5x

$125

redemption):

Pro forma Consolidated
Leverage Ratio		Aggregate Senior
Note Maximum Amount
 (Millions)
Greater than or equal to 3.0x$20
Greater than or equal to 2.5x$100
Greater than or equal to 2.0x$200
Less than 2.0xno limit

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Although the senior credit facility agreement would permit us to repay or refinance our senior notes under the conditions described above, any repayment or refinancing of our outstanding notes would be subject to market conditions and either the voluntary participation of note holders or our ability to redeem the notes under the terms of the applicable note indenture. For example, while the senior credit agreement would allow us to repay our outstanding notes via a direct exchange of the notes for either permitted refinancing indebtedness or for shares of our common stock, we do not, under the terms of the agreements governing our outstanding notes, have the right to refinance the notes via any type of direct exchange.

The senior credit facility agreement also contains other restrictions on our operations that are customary for similar facilities, including limitations on: (i) incurring additional liens; (ii) sale and leaseback transactions (except for the permitted transactions as described in the senior credit facility agreement); (iii) liquidations and dissolutions; (iv) incurring additional indebtedness or guarantees; (v) investments and acquisitions; (vi) dividends and share repurchases; (vii) mergers and consolidations; and (viii) refinancing of the senior notes. Compliance with these requirements and restrictions is a condition for any incremental borrowings under the senior credit facility agreement and failure to meet these requirements enables the lenders to require repayment of any outstanding loans.

As of December 31, 2011,2013, we were in compliance with all the financial covenants and operational restrictions of the senior credit facility. Our senior credit facility does not contain any terms that could accelerate payment of the facility or affect pricing under the facility as a result of a credit rating agency downgrade.

Senior Notes.    As of December 31, 2011,2013, our outstanding debt also includes $250 million of 8 1/8 percent senior notes due November 15, 2015, $225included $225 million of 7 3/4 percent senior notes due August 15, 2018 and $500$500 million of 6 7/8 percent senior notes due December 15, 2020. Under the indentures governing the notes, we are permitted to redeem some or all of the remaining senior notes at specified prices that decline to par over a specified period at any time on and after NovemberAugust 15, 2011 in the case of the senior notes due 2015, August 14, 2014 in the case of the senior notes due 2018, and December 15, 2015 in the case of the senior notes due 2020. In addition, prior to such dates the notes may also be redeemed at a price generally equal to 100 percent of the principal amount thereof plus a premium based on the present values of the remaining payments due to the noteholders. If we sell certain of our assets or experience specified kinds of changes in control, we must offer to repurchase the notes. Under the indentures governing the notes, we are permitted to redeem up to 35 percent of the senior notes due 2018 with the proceeds of certain equity offerings completed before August 13, 2013 and up to 352020 at 101 percent of the senior notes due 2020, with the proceeds of certain equity offerings completed before December 15, 2013.principal amount thereof plus accrued and unpaid interest.

Our senior notes require that, as a condition precedent to incurring certain types of indebtedness not otherwise permitted, our consolidated fixed charge coverage ratio, as calculated on a pro forma basis, be greater than 2.00.2.00. The indentures also contain restrictions on our operations, including limitations on: (i) incurring additional indebtedness or liens; (ii) dividends; (iii) distributions and stock repurchases; (iv) investments;

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(v) asset sales and (vi) mergers and consolidations. Subject to limited exceptions, all of our existing and future material domestic wholly owned subsidiaries fully and unconditionally guarantee these notes on a joint and several basis. There are no significant restrictions on the ability of the subsidiaries that have guaranteed these notes to make distributions to us. As of December 31, 2011,2013, we were in compliance with the covenants and restrictions of these indentures.

Accounts Receivable Securitization.    We securitize some of our accounts receivable on a limited recourse basis in North America and Europe. As servicer under these accounts receivable securitization programs, we are responsible for performing all accounts receivable administration functions for these securitized financial assets including collections and processing of customer invoice adjustments. In North America, we have an accounts receivable securitization program with three commercial banks comprised of a first priority facility and a second priority facility. We securitize original equipment and aftermarket receivables on a daily basis under the bank program. In March 2011,2013, the North American program was amended and extended to March 23, 2012.21, 2014. The first priority facility continues to provide financing of up to $110$110 million and the second priority facility, which is subordinated to the first priority facility, continues to provide up to an additional $40$40 million of financing. Both facilities monetize accounts receivable generated in the U.S. and Canada that meet certain eligibility requirements, and therequirements. The second priority facility also monetizes certain accounts receivable generated in the U.S. or Canada that would otherwise be ineligible under the first priority securitization facility. The amendments to the North American program expand the trade receivables that are eligible for purchase under the program and decrease the margin we pay to our banks. We had noamount of outstanding third partythird-party investments in our securitized accounts receivable under the North American program was $10 millionat December 31, 20112013 and 2010, respectively.

$50 million at December 31, 2012.

Each facility contains customary covenants for financings of this type, including restrictions related to liens, payments, mergers or consolidationconsolidations and amendments to the agreements underlying the receivables pool. Further, each facility may be terminated upon the occurrence of customary events (with customary grace periods, if applicable), including breaches of covenants, failure to maintain certain financial ratios, inaccuracies of representations and warranties, bankruptcy and insolvency events, certain changes in the rate of default or delinquency of the receivables, a change of control and the entry or other enforcement of material judgments. In addition, each facility contains cross-default provisions, where the facility could be terminated in the event of non-payment of other material indebtedness when due and any other event which permits the acceleration of the maturity of material indebtedness.

We also securitize receivables in our European operations with regional banks in Europe. The arrangements to securitize receivables in Europe are provided under sevensix separate facilities provided by various financial institutions in each of the foreign

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jurisdictions. The commitments for these arrangements are generally for one year, but some may be cancelled with notice 90 days prior to renewal. In some instances, the arrangement provides for cancellation by the applicable financial institution at any time upon 15 days, or less, notification. The amount of outstanding third partythird-party investments in our securitized accounts receivable in Europe was $121$134 million and $91$94 million at December 31, 20112013 and 2010,December 31, 2012, respectively.


If we were not able to securitize receivables under either the North American or European securitization programs, our borrowings under our revolving credit agreementsagreement might increase. These accounts receivable securitization programs provide us with access to cash at costs that are generally favorable to alternative sources of financing, and allow us to reduce borrowings under our revolving credit agreements.

We adopted the amended accounting guidance under ASC Topic 860, Accounting for Transfers of Financial Assets effective January 1, 2010. Prior to the adoption of this new guidance, we accounted for activities under our North American and European accounts receivable securitization programs as sales of financial assets to our banks. The new accounting guidance changed the condition that must be met for the transfer of financial assets to be accounted for as a sale. The new guidance adds additional conditions that must be satisfied for transfers of financial assets to be accounted for as sales when the transferor has not transferred the entire original financial

agreement.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

asset, including the requirement that no partial interest holder have rights in the transferred asset that are subordinate to the rights of other partial interest holders.

In our North American accounts receivable securitization programs, we transfer a partial interest in a pool of receivables and the interest that we retain is subordinate to the transferred interest. Accordingly, beginning January 1, 2010, we account for our North American securitization program as a secured borrowing. In our European programs, we transfer accounts receivables in their entirety to the acquiring entities and satisfy all of the conditions established under ASC Topic 860, “Transfers and Servicing,” to report the transfer of financial assets in their entirety as a sale. The fair value of assets received as proceeds in exchange for the transfer of accounts receivable under our European securitization programs approximates the fair value of such receivables. We recognized $3$2 million in interest expense for the year ended 2013 and $4$3 million in interest expense for each of the years ended 20112012 and 2010,2011, respectively, relating to our North American securitization program, which effective January 1, 2010, is accounted for as a secured borrowing under the amended accounting guidance for transfers of financial assets.program. In addition, we recognized a loss of $5$4 million $3, $4 million and $9$5 million for each of the years ended 2011, 20102013, 2012 and 2009, respectively,2011, on the sale of trade accounts receivable in our European and North American accounts receivable securitization programs, representing the discount from book values at which these receivables were sold to our banks. The discount rate varies based on funding costs incurred by our banks, which averaged approximately three percent four percent and five percent for each of the years ended 2013, 2012 and 2011, 2010 and 2009, respectively.

6.Financial Instruments

6.Financial Instruments
The carrying and estimated fair values of our financial instruments by class at December 31, 20112013 and 20102012 were as follows:

   December 31, 2011   December 31, 2010 
   Carrying
Amount		   Fair
Value		   Carrying
Amount		   Fair
Value		 
   (Millions) 

Long-term debt (including current maturities)

  $1,162    $1,200    $1,162    $1,201  

Instruments with off-balance sheet risk:

        

Foreign exchange forward contracts:

        

Asset derivative contracts

   1     1     2     2  

 December 31, 2013 December 31, 2012
 Carrying
Amount		 Fair
Value		 Carrying
Amount		 Fair
Value
 (Millions)
Long-term debt (including current maturities)$1,021
 $1,089
 $1,070
 $1,136
Instruments with off-balance sheet risk:
 
 
 
Foreign exchange forward contracts:
 
 
 
Asset derivative contracts—
 —
 1
 1
Asset and Liability Instruments — The fair value of cash and cash equivalents, short and long-term receivables, accounts payable, and short-term debt was considered to be the same as or was not determined to be materially different from the carrying amount.

Long-term Debt — The fair value of our public fixed rate senior notes is based on quoted market prices. The fair value of our private borrowings under our senior credit facility and other long-term debt instruments is based on the market value of debt with similar maturities, interest rates and risk characteristics. The fair value of our level 1 debt, as classified in the fair value hierarchy, was

$792 million and $790 million at December 31, 2013 and December 31, 2012, respectively. We have classified the $287 million and $334 million as level 2 in the fair value hierarchy at December 31, 2013 and December 31, 2012, respectively, since we utilize valuation inputs that are observable both directly and indirectly. We classified the remaining $10 million and $12 million, consisting of foreign subsidiary debt, as level 3 in the fair value hierarchy at December 31, 2013 , and December 31, 2012 , respectively.

Foreign exchange forward contracts — We use derivative financial instruments, principally foreign currency forward purchase and sales contracts with terms of less than one year, to hedge our exposure to changes in foreign currency exchange rates. Our primary exposure to changes in foreign currency rates results from intercompany loans made between affiliates to minimize the need for borrowings from third parties. Additionally, we enter into foreign currency forward purchase and sale contracts to mitigate our exposure to changes in exchange rates on certain intercompany and third-party trade receivables and payables. We manage counter-party credit risk by entering into derivative financial instruments with major financial institutions that can be expected to fully perform under the terms of such agreements. We do not enter into derivative financial instruments for speculative purposes. The fair value of our foreign currency forward contracts is based on an internally developed model which incorporates observable inputs including quoted spot rates, forward exchange

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

rates and discounted future expected cash flows utilizing market interest rates with similar quality and maturity characteristics. We record the change in fair value of these foreign exchange forward contracts as part of currency gains (losses) within cost of sales in the consolidated statements of


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income. The fair value of foreign exchange forward contracts are recorded in prepayments and other current assets or other current liabilities in the consolidated balance sheet. The fair value of our foreign exchange forward contracts, presented on a gross basis by derivative contract at December 31, 20112013 and 2010,2012, respectively, was as follows:

   Fair Value of Derivative Instruments
   December 31, 2011  December 31, 2010
   Asset
Derivatives		  Liability
Derivatives		  Total  Asset
Derivatives		  Liability
Derivatives		  Total
   (Millions)

Foreign exchange forward contracts

    $1     $—     $1     $2     $—     $2 

 Fair Value of Derivative Instruments
 December 31, 2013 December 31, 2012
 Asset
Derivatives		 Liability
Derivatives		 Total Asset
Derivatives		 Liability
Derivatives		 Total
 (Millions)
Foreign exchange forward contracts$—
 $—
 $—
 $1
 $—
 $1
The fair value of our recurring financial assets and liabilities at December 31, 20112013 and 2010,2012, respectively, are as follows:

   December 31, 2011  December 31, 2010
   Level 1  Level 2  Level 3  Level 1  Level 2  Level 3
   (Millions)

Financial Assets:

                  

Foreign exchange contracts

    n/a     $1     n/a     n/a     $2     n/a 

 December 31, 2013 December 31, 2012
 Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
 (Millions)
Financial Assets:
 
 
 
 
 
Foreign exchange contracts$—
 $—
 $—
 n/a $1
 n/a
The fair value hierarchy definition prioritizes the inputs used in measuring fair value into the following levels:

Level 1

—Quoted prices in active markets for identical assets or liabilities.

Level 2

—Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

Level 3

—Unobservable inputs based on our own assumptions.

The following table summarizes by major currency the notional amounts for foreign currency forward purchase and sale contracts as of December 31, 20112013 (all of which mature in 2012)2014):

  Notional Amount
in Foreign Currency
  (Millions)

Australian dollars

—Purchase32

British pounds

—Purchase4

European euro

—Sell(5616)

Japanese Yen

yen—Purchase135431

South African rand

—Purchase92

U.S. dollars

—Purchase2

—Sell(47842)

Other

Polish zloty—Purchase331
South African rand—Purchase144
U.S. dollars—Purchase15

—Sell(15)
Other—Sell(12)


Guarantees — We have from time to time issued guarantees for the performance of obligations by some of our subsidiaries, and some of our subsidiaries have guaranteed our debt. All of our existing and future material domestic wholly-owned subsidiaries fully and unconditionally guarantee our senior credit facility and our senior notes on a joint and several basis. The arrangement for the senior credit facility is also secured by first-priority

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

liens on substantially all our domestic assets and pledges of up to 66 percent of the stock of certain first-tier foreign subsidiaries. No assets or capital stock of our direct or indirect foreign subsidiaries secure our senior notes. For additional information, refer to Note 13 of the consolidated financial statements of Tenneco Inc., where we present the Supplemental Guarantor Condensed Consolidating Financial Statements.

In March 2011, we entered into two performance guarantee agreements in the U.K. between Tenneco Management (Europe) Limited (“TMEL”) and the two Walker Group Retirement Plans, the Walker Group Employee Benefit Plan and the Walker Group Executive Retirement Benefit Plan (the “Walker Plans”), whereby TMEL will guarantee the payment of all current and future pension contributions in event of a payment default by the sponsoring or participating employers of the Walker Plans. As a result of our decision to enter into these performance guarantee agreements, the levy due to the U.K. Pension Protection Fund was reduced. The Walker Plans are comprised of employees from Tenneco Walker (U.K.) Limited and our Futaba TennecoFutaba-Tenneco U.K. joint venture. Employer contributions are funded by both Tenneco Walker (U.K.) Limited, as the sponsoring employer and Futaba TennecoFutaba-Tenneco U.K., as a participating employer. The performance guarantee agreements are expected to remain in effect until all pension obligations for the Walker Plans’ sponsoring and participating employers have

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been satisfied. The maximum amount payable for these pension performance guarantees, relatingrelated to other participating employers, is approximately $3$27 million as of December 31, 20112013 which is determined by taking 105 percent of the liability of the Walker Plans calculated under section 179 of the U.K. Pension Act of 2004 offset by plan assets. We did not record an additional liability in March 2011 for this performance guarantee since Tenneco Walker (U.K.) Limited, as the sponsoring employer of the Walker Plans, already recognizes 100 percent of the pension obligation calculated based on U.S. GAAP, for all of the Walker Plans’ participating employers on its balance sheet, which was $13$10 million and $9$7 million at December 31, 20112013 and 2010,December 31, 2012, respectively. At December 31, 2011,2013, all pension contributions under the Walker Plans were current for all of the Walker Plans’ sponsoring and participating employers.

In June 2011, we entered into an indemnity agreement between TMEL and Futaba Industrial Co. Ltd. (“Futaba”) which requires Futaba to indemnify TMEL for any cost, loss or liability which TMEL may incur under the performance guarantee agreements.agreements relating to the Futaba-Tenneco U.K. joint venture. The maximum amount reimbursable by Futaba to TMEL under this indemnity agreement is equal to the amount incurred by TMEL under the performance guarantee agreements multiplied by Futaba’s shareholder ownership percentage of the Futaba TennecoFutaba-Tenneco U.K. joint venture. At December 31, 20112013, the maximum amount reimbursable by Futaba to TMEL is approximately $3 million.

$5 million.

We have issued guarantees through letters of credit in connection with some obligations of our affiliates. As of December 31, 2011,2013, we have guaranteed $58$38 million in letters of credit to support some of our subsidiaries’ insurance arrangements, foreign employee benefit programs, environmental remediation activities and cash management and capital requirements.

Negotiable Financial Instruments — One of our European subsidiaries receives payment from one of its OE customers whereby the accounts receivable are satisfied through the delivery of negotiable financial instruments. We may collect these financial instruments before their maturity date by either selling them at a discount or using them to satisfy accounts receivable that have previously been sold to a European bank. Any of these financial instruments which are not sold are classified as other current assets. The amount of these financial instruments that was collected before their maturity date and sold at a discount totaled $10$5 million and $6$6 million at December 31, 20112013 and 2010,December 31, 2012, respectively. No negotiable financial instruments were held by our European subsidiary as of December 31, 20112013 and 2010,December 31, 2012, respectively.

In certain instances, several of our Chinese subsidiaries receive payment from OE customers and satisfy vendor payments through the receipt and delivery of negotiable financial instruments. Financial instruments usedissued to satisfy vendor payables and not redeemed totaled $14$13 million and $8$12 million at December 31, 20112013 and 2010,December 31, 2012, respectively, and were classified as notes payable. Financial instruments received from OE customers and not redeemed totaled $9$12 million and $11$8 million at December 31, 20112013 and 2010,December 31, 2012, respectively. We classify financial

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

instruments received from our OE customers as other current assets if issued by a financial institution of our customers or as customer notes and accounts net if issued by our customer. We classified $9$12 million and $11$8 million in other current assets at December 31, 20112013 and 2010,December 31, 2012, respectively. Some of our Chinese subsidiaries that issue their own negotiable financial instruments to pay vendors are required to maintain a cash balance if they exceed certain credit limits with the financial institution that guarantees those financial instruments. A restricted cash balance was not required at those Chinese subsidiaries at December 31, 2011 and 2010, respectively.

2013 or December 31, 2012.

The negotiable financial instruments received by one of our European subsidiaries and some of our Chinese subsidiaries are checks drawn by our OE customers and guaranteed by their banks that are payable at a future date. The use of these instruments for payment follows local commercial practice. Because negotiable financial instruments are financial obligations of our customers and are guaranteed by our customers’ banks, we believe they represent a lower financial risk than the outstanding accounts receivable that they satisfy which are not guaranteed by a bank.

7.Income Taxes

Supply Chain Financing. Near the end of the second quarter of 2013 certain of our suppliers in the U.S. extended their payment terms to Tenneco. The liquidity benefit to Tenneco from the extended payment terms totaled $10 million at December 31, 2013. These suppliers also began participating in a supply chain financing program under which they securitize their accounts receivables from Tenneco with two financial institutions. The financial institutions participate in the supply chain financing program on an uncommitted basis and can cease purchasing receivables from Tenneco's suppliers at any time. If the financial institutions did not continue to purchase receivables from Tenneco's suppliers under this program, the participating vendors could reduce their payment terms to Tenneco which in turn would cause our borrowings under our revolving credit facility to increase.
Restricted Cash - Two of our Australian subsidiaries have arranged for $5 million in guarantees to be issued by a financial institution to support some of our subsidiaries' insurance arrangements and foreign employee benefit programs. These guarantees were supported by a cash deposit with the financial institution which has been classified as restricted cash on the Tenneco Inc. consolidated balance sheet at December 31, 2013.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7.Income Taxes
The domestic and foreign components of our income before income taxes and noncontrolling interests are as follows:

   Year Ended
December 31,		 
   2011   2010   2009 
   (Millions) 

U.S. income (loss) before income taxes

  $55    $(45)    $ (118) 

Foreign income before income taxes

   216     177     77  
  

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes and noncontrolling interests

  $271    $132    $(41) 
  

 

 

   

 

 

   

 

 

 

 Year Ended December 31,
 2013 2012 2011
 (Millions)
U.S. income before income taxes$150
 $166
 $55
Foreign income before income taxes194
 157
 216
Income before income taxes and noncontrolling interests$344
 $323
 $271
Following is a comparative analysis of the components of income tax expense:

   Year Ended
December 31,		 
   2011  2010   2009 
   (Millions) 

Current —

     

U.S. federal

  $  —   $  —    $(2) 

State and local

   2    1     4  

Foreign

   91    64     35  
  

 

 

  

 

 

   

 

 

 
   93    65     37  
  

 

 

  

 

 

   

 

 

 

Deferred —

     

U.S. federal

   —    —     (18) 

State and local

   —    —     (3) 

Foreign

   (5)   4     (3) 
  

 

 

  

 

 

   

 

 

 
   (5)   4     (24) 
  

 

 

  

 

 

   

 

 

 

Income tax expense

  $88   $69    $13  
  

 

 

  

 

 

   

 

 

 

 Year Ended December 31,
 2013 2012 2011
 (Millions)
Current —     
U.S. federal$25
 $—
 $—
State and local4
 4
 2
Foreign81
 89
 91

110
 93
 93
Deferred —
 
 
U.S. federal(4) (25) —
State and local2
 (20) —
Foreign14
 (29) (5)

12
 (74) (5)
Income tax expense$122
 $19
 $88

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Following is a reconciliation of income taxes computed at the statutory U.S. federal income tax rate (35(35 percent for all years presented) to the income tax expense reflected in the statements of income (loss):

   Year Ended December 31, 
     2011      2010      2009   
   (Millions) 

Income tax expense (benefit) computed at the statutory U.S. federal income tax rate

  $95   $46   $(14) 

Increases (reductions) in income tax expense resulting from:

    

Foreign income taxed at different rates

   (14)   (16)   14  

Taxes on repatriation of dividends

   6    4    4  

State and local taxes on income, net of U.S. federal income tax benefit

   2    2    2  

Changes in valuation allowance for tax loss carryforwards and credits

   (11)   16    5  

Foreign tax holidays

   (4)   (5)   (3) 

Investment and R&D tax credits

   (4)   (2)   (5) 

Foreign earnings subject to U.S. federal income tax

   6    5    3  

Adjustment of prior years taxes

   —    4    —  

Impact of foreign tax law changes

   —    (1)   2  

Tax contingencies

   3    12    6  

Goodwill impairment

   3    —    —  

Other

   6    4    (1) 
  

 

 

  

 

 

  

 

 

 

Income tax expense

  $88   $69   $  13  
  

 

 

  

 

 

  

 

 

 

income:

 Year Ended December 31,
 2013 2012 2011
 (Millions)
Income tax expense computed at the statutory U.S. federal income tax rate$120
 $113
 $95
Increases (reductions) in income tax expense resulting from:
 
 
Foreign income taxed at different rates(21) (21) (14)
Taxes on repatriation of dividends9
 8
 6
Remeasurement of estimated tax on unremitted earnings(17) —
 —
State and local taxes on income, net of U.S. federal income tax benefit6
 4
 2
Changes in valuation allowance for tax loss carryforwards and credits27
 (91) (11)
Foreign tax holidays(5) (5) (4)
Investment and R&D tax credits(8) (1) (4)
Foreign earnings subject to U.S. federal income tax5
 23
 6
Adjustment of prior years taxes(1) (5) —
Impact of tax law changes(3) (1) —
Tax contingencies6
 (6) 3
Goodwill impairment—
 —
 3
Other4
 1
 6
Income tax expense$122
 $19
 $88
The components of our net deferred tax assets were as follows:

   December 31, 
   2011  2010 
   (Millions) 

Deferred tax assets —

   

Tax loss carryforwards:

   

U.S. federal

  $41   $96  

State

   45    43  

Foreign

   57    56  

Investment tax credit benefits

   45    46  

Postretirement benefits other than pensions

   54    52  

Pensions

   79    55  

Bad debts

   3    3  

Sales allowances

   6    6  

Payroll and other accruals

   98    93  

Valuation allowance

   (225)   (247) 
  

 

 

  

 

 

 

Total deferred tax assets

   203    203  
  

 

 

  

 

 

 

Deferred tax liabilities —

   

Tax over book depreciation

   65    82  

Other

   62    54  
  

 

 

  

 

 

 

Total deferred tax liabilities

   127    136  
  

 

 

  

 

 

 

Net deferred tax assets

  $76   $67  
  

 

 

  

 

 

 

Certain amounts in the 2010 presentation were reclassified to conform to the current year presentation.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


 Year Ended December 31,
 2013 2012
 (Millions)
Deferred tax assets —
 
Tax loss carryforwards:
 
U.S. federal$—
 $—
State23
 23
Foreign78
 63
Tax credit benefits88
 51
Postretirement benefits other than pensions43
 50
Pensions36
 87
Bad debts1
 1
Sales allowances6
 6
Payroll and other accruals132
 119
Valuation allowance(135) (118)
Total deferred tax assets272
 282
Deferred tax liabilities —
 
Tax over book depreciation56
 57
Other51
 70
Total deferred tax liabilities107
 127
Net deferred tax assets$165
 $155
U.S. and state tax loss carryforwards have been presented net of uncertain tax positions that if realized, would reduce tax loss carryforwards in 20112013 and 20102012 by $53$4 million and $9$47 million, respectively.

Following is a reconciliation of deferred taxes to the deferred taxes shown in the balance sheet:

   December 31, 
     2011      2010   
   (Millions) 

Balance Sheet:

   

Current portion — deferred tax asset

  $40   $38  

Non-current portion — deferred tax asset

   92    92  

Current portion — deferred tax liability shown in other current liabilities

   (5)   (7) 

Non-current portion — deferred tax liability

   (51)   (56) 
  

 

 

  

 

 

 

Net deferred tax assets

  $76   $67  
  

 

 

  

 

 

 

 Year Ended December 31,
 2013 2012
 (Millions)
Balance Sheet:   
Current portion — deferred tax asset$71
 $72
Non-current portion — deferred tax asset125
 116
Current portion — deferred tax liability shown in other current liabilities(3) (6)
Non-current portion — deferred tax liability(28) (27)
Net deferred tax assets$165
 $155
As a result of the valuation allowances recorded for $225$135 million and $247$118 million at December 31, 20112013 and 2010,2012, respectively, we have potential tax assets that were not recognized on our balance sheet. These unrecognized tax assets resulted primarily from U.S. tax loss carryforwards, foreign tax loss carryforwards, foreign investment tax credits and U.S. state net operating losses that are available to reduce future U.S., U.S. state and foreign tax liabilities.

We reported income tax expense of $88$122 million $69, $19 million and $13$88 million in the years endingended 2013, 2012 and 2011, 2010 and 2009, respectively. The tax expense recorded in 20112013 differs from the expense that would be recorded using a U.S. Federal statutory rate of 35 percent primarily due to a net tax benefit of $7 million primarily related to U.S. taxable income with no associated tax expense due to our net operating loss (“NOL”) carryforward and income generated in lower tax rate jurisdictions, partially offset by the impact of recording a valuation allowance against thea tax benefit for lossesrestructuring activities in certain foreign jurisdictionsSpain and Belgium and U.S. taxes on repatriation of dividends, partially offset by tax adjustments related to recognizing a U.S. tax benefit for foreign earnings.

taxes and a favorable mix of income generated in low tax rate jurisdictions.

We evaluate our deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted. U.S. GAAP requires that companies assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. This assessment considers, among other matters, the nature, frequency and amount of recent losses, the duration of statutory carryforward periods, and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.


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In 2012, we reversed the tax valuation allowance that we recorded in 2008 against our net deferred tax assets in the U.S. based on operating improvements we had made, the outlook for light and commercial vehicle production in the U.S. and the positive impact this should have on our U.S. operations. The net income impact of the tax valuation allowance release in the U.S was a tax benefit of approximately $81 million. We now have a federal net operating loss ("NOL") at December 31, 2013 of $37 million, which expires in 2030. The state NOLs expire in various tax years through 2032.
Valuation allowances have been established in certain foreign jurisdictions for deferred tax assets based on a “more likely than not” threshold. The ability to realize deferred tax assets depends on our ability to generate sufficient taxable income within the carryforward periods provided for in the tax law for each tax jurisdiction. We have considered the following possible sources of taxable income when assessing the realization of our deferred tax assets:

Future reversals of existing taxable temporary differences;

Taxable income or loss, based on recent results, exclusive of reversing temporary differences and carryforwards;

Tax-planning strategies; and

Taxable income in prior carryback years if carryback is permitted under the relevant tax law.

In 2008, given our historical losses in the U.S., we concluded that our ability to fully utilize our NOLs was limited, as we were required to project the continuation2012, after considering all available evidence and all possible sources of the negative economic environment at that time and the impact of the negative operating environment on our tax planning strategies. As a result,taxable income, we recorded a valuation allowance against all of our U.S. deferred$19 million tax assets except for our tax planning strategies which have

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

not yet been implemented and which do not depend upon generating future taxable income. We carry deferred tax assets in the U.S. of $90 million, as of December 31, 2011, relating to the expected utilization of those NOLs. The recording of a valuation allowance does not impact the amount of the NOL that would be available for federal and state income tax purposes in future periods. The federal NOLs expire beginning in tax years ending in 2021 through 2029. The state NOLs expire in various tax years through 2029.

If our operating performance continues to improve on a sustained basis, our conclusion regarding the need for a U.S. valuation allowance could change, resulting in the reversal of some or all of the valuation allowance in the future. Spain for tax credits that may not be utilized due to tax losses in Spain.

The charge to establish the U.S. valuation allowance also includes items related to the losses allocable to certain state jurisdictions where it was determined that tax attributes related to those jurisdictions were potentially not realizable. In addition, the charge to establish the U.S. valuation allowance eliminated the need for certain tax reserves which would need to beallowances recorded if the valuation allowance was reversed. If we were to reverse our U.S. valuation allowance as of December 31, 2011, the impact on earnings would approximate $147 million.

In prior years, we recorded a valuation allowance against deferred tax assets generated by taxable losses in the U.S. as well asSpain and certain other foreign jurisdictions.jurisdictions will impact our provision for income taxes until the valuation allowances are released. Our provision for income taxes will include no tax benefit with respect tofor losses incurred and no tax expense with respect to income generated in these jurisdictions until the respective valuation allowance is eliminated. In certain foreign jurisdictions, we have recorded a tax benefit on NOLs and tax credits with unlimited lives that are supported by tax actions and forecasted profitability. If the tax actions are not successful or losses are incurred, we may need to record a valuation allowance in a future period. We have recorded net deferred tax assets of approximately $23 million in these jurisdictions as of December 31, 2011. These actions will cause variability in our effective tax rate.

We do not provide for U.S. income taxes on unremitted earnings of foreign subsidiaries, except for the earnings of certain of our China operations, as our present intention is to reinvest the unremitted earnings in our foreign operations. Unremitted earnings of foreign subsidiaries were approximately $698$858 million at December 31, 2011.2013. We estimated that the amount of U.S. and foreign income taxes that would be accrued or paid upon remittance of the assets that represent those unremitted earnings was $269 million.

$159 million. The estimated U.S. and foreign income taxes on unremitted earnings may be impacted in the future if we are unable to claim a U.S. foreign tax credit.

We have tax sharing agreements with our former affiliates that allocate tax liabilities for periods prior periodsto year 2000 and establish indemnity rights on certain tax issues.

U.S. GAAP provides that a tax benefit from an uncertain tax position may be recognized when it is “more likely than not” that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.

A reconciliation of our uncertain tax positions is as follows:

   2011  2010  2009 
   (Millions) 

Uncertain tax positions —

    

Balance January 1

  $111   $96   $83  

Gross increases in tax positions in current period

   19    23    17  

Gross increases in tax positions in prior period

   3    4    16  

Gross decreases in tax positions in prior period

   (10)   (6)   —  

Gross decreases — settlements

   —    (2)   (17) 

Gross decreases — statute of limitations expired

   (4)   (4)   (3) 
  

 

 

  

 

 

  

 

 

 

Balance December 31

  $  119   $111   $96  
  

 

 

  

 

 

  

 

 

 

 2013 2012 2011
 (Millions)
Uncertain tax positions —     
Balance January 1$107
 $119
 $111
Gross increases in tax positions in current period15
 13
 19
Gross increases in tax positions in prior period—
 1
 3
Gross decreases in tax positions in prior period(1) (12) (10)
Gross decreases — settlements—
 (5) —
Gross decreases — statute of limitations expired(6) (9) (4)
Balance December 31$115
 $107
 $119
TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Included in the balance of uncertain tax positions were $107 million in 2013, $101 million in 2012, $36 million at both December 31, 2011, and 2010, and $28 million in 2009, of tax benefits, that if recognized, would affect the effective tax rate. We recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense. Related to the uncertain tax positions noted above, we accrued penaltiesPenalties of $2less than $1 million in 2009. No penalties were accrued in 20112013, 2012 and 2010.2011. Additionally, we accrued interest related to uncertain tax positions of $2 million in 2011, less than one$2 million in 2010,2013, less than $1 million in 2012, and zero$2 million in 2009.2011. Our liability for penalties was $2$2 million at 2013, $3 million at December 31, 20112012 and $3$2 million at both December 31, 2010 and 2009,2011, respectively, and our liability for interest was $7$7 million $5, $5 million, and $4$7 million at December 31, 2013, 2012 and 2011, 2010 and 2009, respectively.

Our uncertain tax position at December 31, 20112013 and 20102012 included foreign exposures relating to the disallowance of deductions, global transfer pricing and various other issues. We believe it is reasonably possible that a decrease of up to $4$4 million in

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

unrecognized tax benefits related to the expiration of foreign statute of limitations and the conclusion of foreign income tax examinations may occur within the coming year.

We are subject to taxation in the U.S. and various state and foreign jurisdictions. As of December 31, 2011,2013, our tax years open to examination in primary jurisdictions are as follows:

 Open To Tax
Year

United States — due to NOL

19982000

Spain

China2003
Spain2003

Germany

Canada		20062007

Canada

Brazil		20072008

Belgium

Mexico		20092008

Belgium

2011
Germany2011
United Kingdom

20102012

8.Common Stock
8.
Common Stock

We have authorized 135 million shares ($($0.01 par value) of common stock, of which 62,101,33563,714,728 shares and 61,541,76062,789,382 shares were issued at December 31, 20112013 and 2010,2012, respectively. We held 1,694,6922,844,692 and 1,294,6922,294,692 shares of treasury stock at December 31, 20112013 and 2010,2012, respectively.

Equity Plans — In December 1996, we adopted the 1996 Stock Ownership Plan, which permitted the granting of a variety of awards, including common stock, restricted stock, performance units, stock equivalent units, stock appreciation rights (“SARs”) and stock options to our directors, officers, employees and consultants. The 1996 plan, which terminated as to new awards on December 31, 2001, was renamed the “Stock Ownership Plan.” In December 1999, we adopted the Supplemental Stock Ownership Plan, which permitted the granting of a variety of similar awards to our directors, officers, employees and consultants. We were authorized to deliver up to about 1.1 million treasury shares of common stock under the Supplemental Stock Ownership Plan, which also terminated as to new awards on December 31, 2001. In March 2002, we adopted the 2002 Long-Term Incentive Plan which permitted the granting of a variety of similar awards to our officers, directors, employees and consultants. Up to 4 million shares of our common stock were authorized for delivery under the 2002 Long-Term Incentive Plan. In March 2006, we adopted the 2006 Long-Term Incentive Plan which replaced the 2002 Long-Term Incentive Plan and permits the granting of a variety of similar awards to directors, officers, employees and consultants. On May 13, 2009, our stockholders approved an amendment to the Tenneco Inc. 2006 Long-Term Incentive Plan to increase the shares of common stock available thereunder by 2.3 million.million. Each share underlying an award generally counts as one share against the total plan availability. Eachavailability under the 2009 amendment, each share underlying a full value award (e.g. restricted stock), however, counts as 1.25 shares against the total plan availability. On May 15, 2013 our stockholders approved another amendment to the Tenneco Inc. 2006 Long-Term Incentive Plan to increase the shares of common stock available thereunder by 3.5 million. As part of this amendment, each share underlying a full value award subsequently issued counts as 1.49 shares against total plan availability. As of December 31, 2011,2013, up to 1,569,0253,979,918 shares of our common stock remain authorized for delivery under the 2006 Long-Term Incentive Plan. Our nonqualified stock options have seven to 20 year terms and vest equally over a three-year service period from the date of the grant.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We have granted restricted common stock and stock options to our directors and certain key employees and restricted stock units, payable in cash, to certain key employees. These awards generally require, among other things, that the award holder remain in service to our company during the restriction period, which is currently three years, with a portion of the award vesting equally each year. We also have granted stock equivalent units and long-term performance units to certain key employees that are payable in cash. At December 31, 2011,2013, the long-term performance units outstanding included a three-year grant for 2010-2012 (“the 2010 Grant”)2011-2013 payable in the first quarter of 2013 and2014, a three-year grant for 2011-2013 (“the 2011 Grant”)2012-2014 payable in the first quarter of 2014.2015, and a three-year grant for 2013-2015 payable in the first quarter of 2016. Payment is based on the attainment of specified performance goals. Grant value is based on stock price, cumulative EBITDA and free cashflowcash flow metrics. In addition, we have granted SARs to certain key employees in our Asian and Indian operations that are payable in cash after a three-year service period. The grant value is indexed to the stock price.

In November 2009, we successfully completed the public offering of 12 million shares of common stock at a price of $16.50 per share. We received $198 million in gross proceeds and approximately $188 million in net proceeds, after expenses from the sales of our common stock. We used the proceeds to repay outstanding borrowings under our revolving credit facility and for general corporate purposes.

Accounting Methods — We have recorded compensation expense of $3$6 million, $5 million, and $3 millionin each of the three years ended December 31, 2011, 20102013, 2012 and 2009,2011, respectively, related to nonqualified stock options as part of our selling, general and administrative expense. This resulted in a $0.10 decrease in basic and a $0.09 decrease in diluted earnings per share in 2013, a

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$0.09 decrease in basic and a $0.08 decrease in diluted earnings per share in 2012, and a $0.05 decrease in both basic and diluted earnings per share of $0.05 in both 2011 and 2010, and $0.06 in 2009.2011.

We

For employees eligible to retire at the grant date, we immediately expense stock options and restricted stock awarded to employees who are eligible to retire. Whenstock. If employees become eligible to retire during the vesting period, we immediately recognize theany remaining expense associated with their stock options and restricted stock.

As of December 31, 2011,2013, there was approximately $5$6 million of unrecognized compensation costs related to our stock options awards that we expect to recognize over a weighted average period of 0.71.2 years.

Compensation expense for restricted stock, restricted stock units, long-term performance units and SARs was $11$17 million $14, $16 million, and $5$11 million for each of the years ended 2011, 20102013, 2012 and 2009,2011, respectively, and was recorded in selling, general, and administrative expense on the consolidated statements of income (loss).

income.

Cash received from stock option exercises was $6$15 million in both 20112013, $7 million in 2012, and 2010, and $1$6 million in 2009.2011. Stock option exercises would have generated an excess tax benefit of $4$6 million in 2013 and $10 million in both 20112012 and 2010, and $1 million in 2009. We did not record the excess2011. This tax benefit aswas not recorded because we still have federal net operating losses that have not been utilized.
In 2013 we recorded a tax benefit of $24 million related to the historic tax benefit on stock options from 2006 through 2011 because we began utilizing some of our federal and state net operating losses which are not currently being utilized.

losses.

Assumptions — We calculated the fair values of stock option awards using the Black-Scholes option pricing model with the weighted average assumptions listed below. The fair value of share-based awards is determined at the time the awards are granted which is generally in January of each year, and requires judgment in estimating employee and market behavior.

   Year Ended December 31, 
   2011  2010  2009 

Stock Options Granted

    

Weighted average grant date fair value, per share

  $26.13   $11.76   $1.34  

Weighted average assumptions used:

    

Expected volatility

   70.1%   75.4%   82.6% 

Expected lives

   4.8    4.6    4.5  

Risk-free interest rates

   1.8%   2.2%   1.48% 

Dividends yields

   0.00%   0.00%   0.00% 

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

  
 2013 2012 2011
Stock Options Granted:
 
 
Weighted average grant date fair value, per share$19.84
 $17.35
 $26.13
Weighted average assumptions used:
 
 
Expected volatility66.4% 73.5% 70.1%
Expected lives4.9
 4.7
 4.8
Risk-free interest rates0.7% 0.8% 1.8%
Dividends yields—% —% —%
Expected volatility is calculated based on current implied volatility and historical realized volatility for the Company.

Expected lives of options are based upon the historical and expected time to post-vesting forfeiture and exercise. We believe this method is the best estimate of the future exercise patterns currently available.

The risk-free interest rates are based upon the Constant Maturity Rates provided by the U.S. Treasury. For our valuations, we used the continuous rate with a term equal to the expected life of the options.

Stock Options — The following table reflects the status and activity for all options to purchase common stock for the period indicated:

   Year Ended December 31, 2011 
   Shares
Under
Option		  Weighted  Avg.
Exercise
Prices		   Weighted  Avg.
Remaining
Life in
Years		   Aggregate
Intrinsic
Value		 
   (Millions) 

Outstanding Stock Options

       

Outstanding, January 1, 2011

   3,168,474   $14.27     4.3    $68  

Granted

   201,133    45.42      

Expired

   (56,046)   3.66      

Forfeited

   (13,184)   9.36      

Exercised

   (125,624)   17.10       3  
  

 

 

      

Outstanding, March 31, 2011

   3,174,753   $16.34     4.4    $80  

Granted

   2,711    43.51      

Forfeited

   (23,841)   14.26      

Exercised

   (82,166)   11.50       3  
  

 

 

      

Outstanding, June 30, 2011

   3,071,457   $16.51     4.2    $76  

Granted

   1,649    44.02      

Forfeited

   (450)   4.03      

Exercised

   (115,249)   8.94       3  
  

 

 

      

Outstanding, September 30, 2011

   2,957,407   $16.83     4.0    $54  

Granted

   173    24.97      

Expired

   (10,000)   1.57      

Forfeited

   (17,716)   1.82      

Exercised

   (186,665)   10.19       3  
  

 

 

      

Outstanding, December 31, 2011

   2,743,199   $17.43     4.0    $37  
  

 

 

      

Vested and Expected to Vest, December 31, 2011

   2,700,577    17.17     4.0    $37  
  

 

 

      

Exercisable, December 31, 2011

   2,164,226   $15.95     3.9    $30  
  

 

 

      


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 Year Ended December 31, 2013
 Shares
Under
Option		 Weighted Avg.
Exercise
Prices		 Weighted Avg.
Remaining
Life in Years		 Aggregate
Intrinsic
Value
       (Millions)
Outstanding Stock Options:
 
 
 
Outstanding, January 1, 20132,447,475
 $20.14
 4.1 $29
Granted311,539
 36.29
 
 
Canceled(7,225) 11.73
 
 
Forfeited(14,920) 14.59
 
 
Exercised(82,622) 19.96
 
 1
Outstanding, March 31, 20132,654,247
 $22.12
 4.3 $41
Granted388
 38.90
 
 
Forfeited(450) 21.81
 
 
Exercised(393,442) 22.53
 
 7
Outstanding, June 30, 20132,260,743
 $22.06
 4.7 $44
Granted1,182
 35.41
 
 
Forfeited(283) 8.68
 
 
Exercised(147,753) 15.42
 
 —
Outstanding, September 30, 20132,113,889
 $22.52
 4.6 $56
Granted—
 —
 
 
Canceled—
 —
 
 
Forfeited—
 —
 
 
Exercised(130,316) 16.23
 
 5
Outstanding, December 31, 20131,983,573

$22.93
 4.5 $62
Of the outstanding 1,983,573 options, 1,397,102 are currently exercisable and have an intrinsic value of $51, a weighted average exercise price of 17.82 and a weighted average remaining life of 4.7 years.
The weighted average grant-date fair value of options granted during the years 2013, 2012 and 2011 2010was $19.86, $17.49 and 2009 was $45.37, $11.84 and $1.34,$26.11, respectively. The total intrinsic value of options exercised during the years ended December 31, 2013, 2012, and 2011 2010was $19 million, $10 million and 2009 was $13$13 million $10 million and $4 million,, respectively. The total fair value of shares vested was $3$5 million, $4 million, and $3 millionin both 20112013, 2012 and 2010, and $4 million in 2009.

2011.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restricted Stock — The following table reflects the status for all nonvested restricted shares for the period indicated:

   Year Ended
December 31, 2011		 
   Shares  Weighted Avg.
Grant Date
Fair Value		 

Nonvested Restricted Shares

   

Nonvested balance at January 1, 2011

   558,198   $11.58  

Granted

   141,036    45.42  

Vested

   (268,891)   12.00  

Forfeited

   (4,822)   13.74  
  

 

 

  

Nonvested balance at March 31, 2011

   425,521   $22.51  

Granted

   1,381    43.51  

Vested

   (3,851)   15.47  

Forfeited

   (7,190)   23.82  
  

 

 

  

Nonvested balance at June 30, 2011

 �� 415,861   $22.62  

Granted

   1,042    44.02  

Vested

   (3,206)   15.41  

Forfeited

   (158)   1.86  
  

 

 

  

Nonvested balance at September 30, 2011

   413,539   $22.74  

Granted

   109    24.97  

Vested

   (5,735)   29.92  

Forfeited

   (162)   1.87  
  

 

 

  

Nonvested balance at December 31, 2011

   407,751   $22.64  
  

 

 

  


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 Year Ended December 31, 2013
 Shares Weighted Avg.
Grant Date
Fair Value
Nonvested Restricted Shares
 
Nonvested balance at January 1, 2013348,918
 $31.69
Granted204,731
 36.28
Vested(154,160) 29.54
Forfeited—
 —
Nonvested balance at March 31, 2013399,489
 $34.88
Granted226
 38.90
Vested(15,289) 35.40
Forfeited—
 —
Nonvested balance at June 30, 2013384,426
 $34.86
Granted2,223
 46.91
Vested(16,255) 35.58
Forfeited—
 —
Nonvested balance at September 30, 2013370,394
 $34.90
Granted—
 —
Vested(2,126) 34.93
Forfeited—
 —
Nonvested balance at December 31, 2012368,268
 $34.90
The fair value of restricted stock grants is equal to the average market price of our stock at the date of grant. As of December 31, 2011,2013, approximately $5$6 million of total unrecognized compensation costs related to restricted stock awards is expected to be recognized over a weighted-average period of approximately 1.81.7 years.

The weighted average grant-date fair value of restricted stock granted during the years 2013, 2012 and 2011 2010was $36.40, $30.06, and 2009 was $45.38, $19.60 and $2.02,$45.38, respectively. The total fair value of restricted shares vested was $3$6 million in 20112013, $5 million in 2012 and $2$3 million in both 2010 and 2009.

2011.

Share Repurchase Program — In May 2011,January 2012, our Board of Directors approved a share repurchase program, authorizing us to repurchase up to 600,000 shares of our outstanding common stock over a 12 months period. This share repurchase program was intended to offset dilution from shares of restricted stock and stock options issued in 2012 to employees. We purchased all of the 600,000 shares during the second quarter of 2012 through open market purchases, which were funded through cash from operations, at a total cost of $18 million, at an average price of $29.22 per share. These repurchased shares are held as part of our treasury stock which increased to 2,294,692 shares at December 31, 2012 from 1,694,692 shares at December 31, 2011.
In January 2013, our Board of Directors approved a share repurchase program, authorizing our company to repurchase up to 550,000 shares of our outstanding common stock over a 12 month period. This share repurchase program is intended to offset dilution from shares of restricted stock and stock options issued in 2013 to employees. We purchased 450,000 shares through open market purchases and 100,000 shares from the Tenneco Retirement Plan for Salaried Employees, both of which were funded through cash from operations, at a total cost of $27 million, at an average price of 49.33 per share. These repurchased shares are held as part of our treasury stock which increased to 2,844,692 shares at December 31, 2013 from 2,294,692 shares at December 31, 2012 .
In January 2014, our Board of Directors approved a share repurchase program, authorizing our company to repurchase up to 400,000 shares of our outstanding common stock over a 12 month period. This share repurchase program was intended to offset dilution from shares of restricted stock and stock options that were issued in 2011 to employees. We purchased all of the 400,000 shares through open market purchases, which were funded through cash from operations, as of August 3, 2011 at a total cost of $16 million through this program. These repurchased shares are held as part of our treasury stock which increased to 1,694,692 shares at December 31, 2011 from 1,294,692 shares at December 31, 2010.

In January 2012, our Board of Directors approved a share repurchase program, authorizing our company to repurchase up to 600,000 shares of the Company’s outstanding common stock over a 12 month period. This share repurchase program is intended to offset dilution from shares of restricted stock and stock options issued in 20122014 to employees.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Long-Term Performance Units, Restricted Stock Units and SARs — Long-term performance units, restricted stock units, and SARs are paid in cash and recognized as a liability based upon their fair value. As of December 31, 2011, $72013, $13 million of total unrecognized compensation costs is expected to be recognized over a weighted-average period of approximately 1.2 years.


97

9.Preferred Stock
9.
Preferred Stock

We had 50 million shares of preferred stock ($($0.01 par value) authorized at December 31, 20112013 and 2010,2012, respectively. No shares of preferred stock were outstanding at those dates.

10.Pension Plans, Postretirement and Other Employee Benefits
10.
Pension Plans, Postretirement and Other Employee Benefits

Pension benefits are based on years of service and, for most salaried employees, on average compensation. Our funding policy is to contribute to the plans amounts necessary to satisfy the funding requirement of applicable federal or foreign laws and regulations. Of our $784$863 million benefit obligation at December 31, 2011,2013, approximately $710$779 million required funding under applicable federal and foreign laws. At December 31, 2011,2013, we had approximately $529$726 million in assets to fund that obligation. The balance of our benefit obligation, $74$84 million, did not require funding under applicable federal or foreign laws and regulations. Pension plan assets were invested in the following classes of securities:

   Percentage of Fair Market Value 
   December 31,
2011		  December 31,
2010		 
   US  Foreign  US  Foreign 

Equity Securities

   70%   53%   71%   57% 

Debt Securities

   29%   40%   28%   36% 

Real Estate

   —    2%   —    2% 

Other

   1%   5%   1%   5% 

 Percentage of Fair Market Value
 December 31, 2013 December 31, 2012
 US Foreign US Foreign
Equity Securities71% 62% 70% 59%
Debt Securities29% 31% 30% 33%
Real Estate—
 2% —
 2%
Other—
 5% —% 6%
The assets of some of our pension plans are invested in trusts that permit commingling of the assets of more than one employee benefit plan for investment and administrative purposes. Each of the plans participating in the trust has interests in the net assets of the underlying investment pools of the trusts. The investments for all our pension plans are recorded at estimated fair value, in compliance with the accounting guidance on fair value measurement.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents our plan assets using the fair value hierarchy as of December 31, 20112013 and 2010,2012, respectively. The fair value hierarchy has three levels based on the methods used to determine the fair value. Level 1 assets refer to those asset values based on quoted market prices in active markets for identical assets at the measurement date. Level 2 assets refer to assets with values determined using significant other observable inputs, and Level 3 assets include values determined with non-observable inputs.

   Fair Value Level as of December 31, 2011 
   US   Foreign 

Asset Category

  Level 1   Level 2   Level 3   Level 1   Level 2   Level 3 
   (Millions) 

Equity securities:

            

U.S. large cap

  $24    $102    $—    $23    $9    $—  

U.S. mid cap

   —     —     —     —     2     —  

U.S. Small Cap

   —     18     —     —     1     —  

Non-U.S. large cap

   —     —     —     26     63     —  

Non-U.S. mid cap

   —     17     —     3     19     —  

Non-U.S. small cap

   —     —     —     —     5     —  

Emerging markets

   —     5     —     1     —     —  

Debt securities:

            

U.S. corporate bonds

   —     4     —     —     —     —  

U.S. other fixed income

   —     67     —     —     —     —  

Non-U.S. treasuries/government bonds

   —     —     —     37     35     —  

Non-U.S. corporate bonds

   —     —     —     17     20     —  

Non-U.S. mortgage backed securities

   —     —     —     —     3     —  

Non-U.S. municipal obligations

   —     —     —     1     —     —  

Non-U.S. asset backed securities

   —     —     —     —     3     —  

Non-U.S. other fixed income

   —     —     —     —     1     —  

Real Estate:

            

Non-U.S. real estate

   —     —     —     —     5     —  

Other:

            

Insurance contracts

   —     —     —     —     7     6  

Cash held in bank accounts

   2     —     —     3     —     —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $26    $213    $—    $111    $173    $6  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


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TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

   Fair Value Level as of December 31, 2010 
   US   Foreign 

Asset Category

  Level 1   Level 2   Level 3   Level 1   Level 2   Level 3 
   (Millions) 

Equity securities:

            

U.S. large cap

  $33    $96    $—    $25    $7    $—  

U.S. mid cap

   —     —     —     —     1     —  

U.S. Small Cap

   —     18     —     —     1     —  

Non-U.S. large cap

   —     18     —     36     65     —  

Non-U.S. mid cap

   —     —     —     —     19     —  

Non-U.S. small cap

   —     —     —     —     8     —  

Emerging markets

   —     6     —     1     —     —  

Debt securities:

            

U.S. treasuries/government bonds

   20     —     —     —     —     —  

U.S. corporate bonds

   —     20     —     —     —     —  

U.S. mortgage backed securities

   —     24     —     —     —     —  

U.S. asset backed securities

   —     1     —     —     —     —  

U.S. other fixed income

   —     4     —     —     —     —  

Non-U.S. treasuries/government bonds

   —     1     —     59     5     —  

Non-U.S. corporate bonds

   —     1     —     15     21     —  

Non-U.S. other fixed income

   —     —     —     —     —     6  

Real Estate:

            

Non-U.S. real estate

   —     —     —     —     5     —  

Other:

            

Insurance contracts

   —     —     —     —     7     —  

Cash held in bank accounts

   —     —     —     6     —     —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $53    $189    $—    $142    $139    $6  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 Fair Value Level as of December 31, 2013
 US
Foreign
Asset CategoryLevel 1
Level 2
Level 3
Level 1
Level 2
Level 3
 (Millions)
Equity securities:
 
 
 
 
 
U.S. large cap$41
 $143
 $—
 $31
 $21
 $—
U.S. mid cap—
 —
 —
 4
 4
 —
U.S. Small Cap—
 27
 —
 —
 —
 —
Non-U.S. large cap—
 —
 —
 57
 71
 —
Non-U.S. mid cap—
 27
 —
 20
 19
 —
Non-U.S. small cap—
 —
 —
 1
 7
 —
Emerging markets—
 8
 —
 —
 4
 —
Debt securities:
 
 
 
 
 
U.S. corporate bonds—
 5
 —
 —
 4
 —
U.S. other fixed income—
 96
 —
 —
 —
 —
Non-U.S. treasuries/government bonds—
 —
 —
 35
 25
 —
Non-U.S. corporate bonds—
 —
 —
 18
 18
 —
Non-U.S. mortgage backed securities—
 —
 —
 —
 4
 —
Non-U.S. municipal obligations—
 —
 —
 1
 —
 —
Non-U.S. asset backed securities—
 —
 —
 —
 3
 —
Non-U.S. other fixed income—
 —
 —
 1
 2
 —
Real Estate:
 
 
 
 
 
Non-U.S. real estate—
 —
 —
 1
 5
 —
Other:
 
 
 
 
 
Insurance contracts—
 —
 —
 —
 9
 8
Cash held in bank accounts—
 —
 —
 6
 —
 —
Total$41
 $306
 $—
 $175
 $196
 $8

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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 Fair Value Level as of December 31, 2012
 US Foreign
Asset CategoryLevel 1 Level 2 Level 3 Level 1 Level 2 Level 3
 (Millions)
Equity securities:
 
 
 
 
 
U.S. large cap$29
 $117
 $—
 $26
 $15
 $—
U.S. mid cap—
 —
 —
 2
 5
 —
U.S. Small Cap—
 20
 —
 —
 —
 —
Non-U.S. large cap—
 —
 —
 48
 63
 —
Non-U.S. mid cap—
 20
 —
 13
 16
 —
Non-U.S. small cap—
 —
 —
 1
 4
 —
Emerging markets—
 7
 —
 2
 1
 —
Debt securities:
 
 
 
 
 
U.S. treasuries/government bonds—
 —
 —
 —
 —
 —
U.S. corporate bonds—
 4
 —
 —
 —
 —
U.S. mortgage backed securities—
 —
 —
 —
 —
 —
U.S. asset backed securities—
 —
 —
 —
 —
 —
U.S. other fixed income—
 78
 —
 —
 —
 —
Non-U.S. treasuries/government bonds—
 —
 —
 36
 24
 —
Non-U.S. corporate bonds—
 —
 —
 18
 24
 —
Non-U.S. mortgage backed securities—
 —
 —
 —
 3
 —
Non-U.S. municipal obligations—
 —
 —
 1
 —
 —
Non-U.S. asset backed securities—
 —
 —
 —
 3
 —
Non-U.S. other fixed income—
 —
 —
 1
 —
 —
Real Estate:
 
 
 
 
 
Non-U.S. real estate—
 —
 —
 1
 5
 —
Other:
 
 
 
 
 
Insurance contracts—
 —
 —
 —
 8
 8
Cash held in bank accounts—
 —
 —
 4
 —
 —
Total$29
 $246

$—
 $153
 $171
 $8
Level 1 assets were valued using market prices based on daily net asset value (NAV) or prices available daily through a public stock exchange. Level 2 assets were valued primarily using market prices, sometimes net of estimated realization expenses, and based on broker/dealer markets or in commingled funds where NAV is not available daily or publicly. For insurance contracts, the estimated surrender value of the policy was used to estimate fair market value. Level 3 assets in the Netherlands were valued using an industry standard model based on certain assumptions such as the U-return and estimated technical reserve.

The table below summarizes the changes in the fair value of the Level 3 assets:

   December 31,
2011		   December 31,
2010		 
   Level 3 Assets   Level 3 Assets 
   US   Foreign   US   Foreign 
   (Millions)   (Millions) 

Balance at December 31 of the previous year

  $  —    $6    $  —    $6  

Actual return on plan assets:

        

Relating to assets still held at the reporting date

   —     —     —     —  

Ending Balance at December 31

  $—    $6    $—    $6  
  

 

 

   

 

 

   

 

 

   

 

 

 

 December 31, 2013 December 31, 2012
 Level 3 Assets Level 3 Assets
 US Foreign US Foreign
 (Millions) (Millions)
Balance at December 31 of the previous year$—
 $8
 $—
 $6
Actual return on plan assets:
 
 
 
Relating to assets still held at the reporting date—
 —
 —
 2
Ending Balance at December 31$—
 $8
 $—
 $8
TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table contains information about significant concentrations of risk, including all individual assets that make up more than 5%5 percent of the total assets and any direct investments in Tenneco stock:

Asset Category

  Fair Value Level   Value   Percentage of
Total Assets		 
   (Millions) 

2011:

      

Tenneco Stock

   1    $24     4.6% 

2010:

      

Tenneco Stock

   1    $34     6.3% 


100
Table of Contents
TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Asset CategoryFair Value Level Value Percentage of
Total Assets
 (Millions)
2013:
 
 
Tenneco Stock1
 $41
 5.6%
2012:
 
 
Tenneco Stock1
 $29
 4.7%
Our investment policy for both our domestic and foreign plans is to invest more heavily in equity securities than debt securities. Targeted pension plan allocations are 70 percent in equity securities and 30 percent in debt securities, with acceptable tolerance levels of plus or minus five percent within each category for our domestic plans. Our foreign plans are individually managed to different target levels depending on the investing environment in each country.

Our approach to determining expected return on plan asset assumptions evaluates both historical returns as well as estimates of future returns, and adjusts for any expected changes in the long-term outlook for the equity and fixed income markets for both our domestic and foreign plans.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the change in benefit obligation, the change in plan assets, the development of net amount recognized, and the amounts recognized in the balance sheets for the pension plans and postretirement benefit plan follows:

   Pension  Postretirement 
   2011  2010  2011  2010 
   US  Foreign  US  Foreign  US  US 
   (Millions) 

Change in benefit obligation:

       

Benefit obligation at December 31 of the previous year

  $354   $361   $341   $333   $135   $142  

Currency rate conversion

   —    (6)   —    (3)   —    —  

Settlement

   —    (4)   —    (2)   —    —  

Service cost

   1    6    1    5    1    1  

Interest cost

   20    19    20    19    7    8  

Administrative expenses/taxes paid

   —    (1)   —    (1)   —    —  

Plan amendments

   —    —    —    1    —    —  

Actuarial (gain)/loss

   56    8    22    21    5    (7) 

Benefits paid

   (17)   (15)   (30)   (15)   (8)   (9) 

Participants’ contributions

   —    2    —    3    —    —  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Benefit obligation at December 31

  $414   $370   $354   $361   $140   $135  

Change in plan assets:

       

Fair value at December 31 of the previous year

  $242   $287   $199   $262   $—   $—  

Currency rate conversion

   —    (4)   —    (1)   —    —  

Settlement

   —    (4)   —    (2)   —    —  

Actual return on plan assets

   (7)   —    40    20    —    —  

Employer contributions

   21    24    33    20    9    9  

Prescription drug subsidy received

   —    —    —    —    (1)   —  

Participants’ contributions

   —    2    —    3    —    —  

Benefits paid

   (17)   (15)   (30)   (15)   (8)   (9) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Fair value at December 31

  $239   $290   $242   $287   $—   $—  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Development of net amount recognized:

       

Unfunded status at December 31

  $(175)  $(80)  $(112)  $(74)  $(140)  $(135) 

Unrecognized cost:

       

Actuarial loss

   248    138    165    120    64    63  

Prior service cost/(credit)

   1    9    2    11    (29)   (35) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net amount recognized at December 31

  $74   $67   $55   $57   $(105)  $(107) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Amounts recognized in the balance sheets as of December 31

       

Noncurrent assets

  $—   $—   $—   $1   $—   $—  

Current liabilities

   (3)   (2)   (3)   (3)   (9)   (10) 

Noncurrent liabilities

   (172)   (78)   (109)   (72)   (131)   (125) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net amount recognized

  $(175)  $(80)  $(112)  $(74)  $(140)  $(135) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 


101
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TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


 Pension Postretirement
 2013 2012 2013 2012
 US Foreign US Foreign US US
 (Millions)
Change in benefit obligation:
 
 
 
 
 
Benefit obligation at December 31 of the previous year$461
 $431
 $414
 $370
 $131
 $140
Currency rate conversion—
 (2) —
 13
 —
 —
Settlement—
 (1) —
 (4) —
 —
Curtailment—
 (1) 

 

 

 

Service cost1
 9
 1
 7
 —
 —
Interest cost19
 17
 20
 18
 5
 6
Administrative expenses/taxes paid—
 (2) —
 (1) —
 —
Plan amendments—
 1
 —
 —
 —
 —
Actuarial (gain)/loss(41) 6
 44
 42
 (16) (6)
Benefits paid(19) (18) (18) (16) (8) (9)
Participants’ contributions—
 2
 —
 2
 —
 —
Benefit obligation at December 31$421
 $442
 $461
 $431
 $112
 $131
Change in plan assets:
 
 
 
 
 
Fair value at December 31 of the previous year$275
 $332
 $239
 $290
 $—
 $—
Currency rate conversion—
 (3) —
 11
 —
 —
Settlement—
 (1) —
 (4) —
 —
Actual return on plan assets60
 43
 28
 27
 —
 —
Administrative expenses/taxes paid—
 (2) —
 —
 —
 —
Employer contributions31
 26
 26
 22
 8
 10
Prescription drug subsidy received—
 —
 —
 —
 —
 (1)
Participants’ contributions—
 2
 —
 2
 —
 —
Benefits paid(19) (18) (18) (16) (8) (9)
Fair value at December 31$347
 $379
 $275
 $332
 $—
 $—
Development of net amount recognized:
 
 
 
 
 
Unfunded status at December 31$(74) $(62) $(186) $(99) $(112) $(131)
Unrecognized cost:
 
 
 
 
 
Actuarial loss190
 137
 278
 168
 32
 52
Prior service cost/(credit)1
 7
 1
 8
 (16) (22)
Net amount recognized at December 31$117
 $82
 $93
 $77
 $(96) $(101)
Amounts recognized in the balance sheets as of December 31
 
 
 
 
 
Noncurrent assets—
 11
 —
 —
 —
 —
Current liabilities(6) (2) (3) (2) (8) (8)
Noncurrent liabilities(68) (71) (183) (97) (104) (123)
Net amount recognized$(74) $(62) $(186) $(99) $(112) $(131)
Assets of one plan may not be utilized to pay benefits of other plans. Additionally, the prepaid (accrued) pension cost has been recorded based upon certain actuarial estimates as described below. Those estimates are subject to revision in future periods given new facts or circumstances.

Net periodic pension costs (income) for the years 2011, 2010,2013, 2012 and 2009,2011, consist of the following components:

   2011  2010  2009 
   US  Foreign  US  Foreign  US  Foreign 
   (Millions) 

Service cost — benefits earned during the year

  $1   $6   $1   $5   $1   $4  

Interest cost

   20    19    20    19    20    18  

Expected return on plan assets

   (23)   (20)   (21)   (19)   (22)   (19) 

Curtailment loss

   —    —    —    —    1    —  

Settlement loss

   —    1    6    —    2    —  

Net amortization:

       

Actuarial loss

   4    5    3    3    2    2  

Prior service cost

   —    2    —    2    1    2  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net pension costs

  $2   $13   $9   $10   $5   $7  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 


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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 2013 2012 2011
 US Foreign US Foreign US Foreign
 (Millions)
Service cost — benefits earned during the year$1
 $9
 $1
 $7
 $1
 $6
Interest cost19
 17
 20
 18
 20
 19
Expected return on plan assets(22) (20) (22) (20) (23) (20)
Curtailment loss—
 —
 —
 —
 —
 —
Settlement loss—
 1
 —
 1
 —
 1
Net amortization:
 
 
 
 
 
Actuarial loss9
 10
 7
 7
 4
 5
Prior service cost—
 1
 —
 2
 —
 2
Net pension costs$7
 $18
 $6
 $15
 $2
 $13
Amounts recognized in accumulated other comprehensive loss for pension benefits consist of the following components:

   2011   2010 
   US   Foreign   US   Foreign 
   (Millions) 

Net actuarial loss

  $248    $138    $165    $120  

Prior service cost

   1     9     2     11  
  

 

 

   

 

 

   

 

 

   

 

 

 
  $249    $147    $167    $131  
  

 

 

   

 

 

   

 

 

   

 

 

 

 2013 2012
 US Foreign��US Foreign
 (Millions)
Net actuarial loss$190
 $137
 $278
 $168
Prior service cost1
 7
 1
 8

$191
 $144
 $279
 $176
Amounts recognized for pension and postretirement benefits in other comprehensive income for the year ended December 31, 2013 and 2012 include the following components:
 Year Ended December 31,
 2013 2012
 Before-Tax
Amount		 Tax
Benefit		 Net-of-Tax
Amount		 Before-Tax
Amount		 Tax
Benefit		 Net-of-Tax
Amount
 (Millions)
Defined benefit pension and postretirement plans:
 
 
 
 
 
Change in total actuarial loss$113
 $(41) $72
 $(66) $22
 $(44)
Amortization of prior service cost included in net periodic pension and postretirement cost(5) 2
 (3) (4) 2
 (2)
Amortization of actuarial loss included in net periodic pension and postretirement cost23
 (7) 16
 20
 (6) 14
Other comprehensive income — pension benefits$131
 $(46) $85
 $(50) $18
 $(32)
In 2012,2014, we expect to recognize the following amounts, which are currently reflected in accumulated other comprehensive loss, as components of net periodic benefit cost:

   2012 
   US   Foreign 
   (Millions) 

Net actuarial loss

  $6    $  7  

Prior service cost

   —     1  
  

 

 

   

 

 

 
  $6    $8  
  

 

 

   

 

 

 

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 2014
 US Foreign
 (Millions)
Net actuarial loss$7
 $7
Prior service cost—
 1
 $7
 $8
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for all pension plans with accumulated benefit obligations in excess of plan assets at December 31, 20112013 and 20102012 were as follows:

   December 31,
2011		   December 31,
2010		 
   US   Foreign   US   Foreign 
   (Millions) 

Projected benefit obligation

  $  414    $  363    $  354    $  332  

Accumulated benefit obligation

   414     355     352     328  

Fair value of plan assets

   239     284     242     257  


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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 December 31, 2013 December 31, 2012
 US Foreign US Foreign
 (Millions)
Projected benefit obligation$421
 $289
 $461
 $400
Accumulated benefit obligation421
 286
 461
 389
Fair value of plan assets347
 218
 275
 301
The following estimated benefit payments are payable from the pension plans to participants:

Year

  US   Foreign 
   (Millions) 

2012

  $19    $16  

2013

   24     15  

2014

   22     16  

2015

   20     17  

2016

   20     18  

2017-2021

   122     100  

YearUS Foreign
 (Millions)
2014$24
 $17
201521
 17
201621
 19
201728
 18
201822
 19
2019-2022131
 140
The following assumptions were used in the accounting for the pension plans for the years of 2011, 2010,2013, 2012, and 2009:

   2011  2010 
   US  Foreign  US  Foreign 

Weighted-average assumptions used to determine benefit obligations

     

Discount rate

   4.8%   4.9%   5.6%   5.4% 

Rate of compensation increase

   N/A    3.5%   N/A    3.5% 

   2011  2010  2009 
   US  Foreign  US  Foreign  US  Foreign 

Weighted-average assumptions used to determine net periodic benefit cost

       

Discount rate

   5.6%   5.4%   6.1%   6.0%   6.2%   6.3% 

Expected long-term return on plan assets

   8.3%   6.4%   8.3%   6.9%   8.8%   7.3% 

Rate of compensation increase

   N/A    3.5%   N/A    3.5%   N/A    3.1% 

2011:

 2013
2012
 US Foreign US Foreign
Weighted-average assumptions used to determine benefit obligations
 
 
 
Discount rate4.8% 4.3% 4.1% 4.2%
Rate of compensation increaseN/A
 3.3% N/A
 3.4%
 2013 2012 2011
 US Foreign US Foreign US Foreign
Weighted-average assumptions used to determine net periodic benefit cost
 
 
 
 
 
Discount rate4.1% 4.2% 4.8% 4.9% 5.6% 5.4%
Expected long-term return on plan assets7.8% 6.2% 8.3% 6.3% 8.3% 6.4%
Rate of compensation increaseN/A
 3.4% N/A
 3.5% N/A
 3.5%
We made contributions of $45$57 million to our pension plans during 2011.2013. Based on current actuarial estimates, we believe we will be required to make contributions of $48$47 million to those plans during 2012.2014. Pension contributions beyond 20122014 will be required, but those amounts will vary based upon many factors, including the performance of our pension fund investments during 2012.

2014 and future discount rate changes.

We have life insurance plans which provided benefit to a majority of our U.S. employees. We also have postretirement plans for our U.S. employees hired before January 1, 2001. The plans cover salaried employees retiring on or after attaining age 55 who have at least 10 years of service with us after attaining age 45.us. For hourly employees, the postretirement benefit plans generally cover employees who retire according to one of our

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

hourly employee retirement plans. All of these benefits may be subject to deductibles, co-payment provisions and other limitations, and we have reserved the right to change these benefits. For those employees hired after January 1, 2001, we do not provide any postretirement benefits. Our postretirement healthcare and life insurance plans are not funded. The measurement date used to determine postretirement benefit obligations is December 31.

Net periodic postretirement benefit cost for the years 2011, 2010,2013, 2012, and 2009,2011, consists of the following components:

   2011  2010  2009 
   (Millions) 

Service cost — benefits earned during the year

  $1   $1   $1  

Interest on accumulated postretirement benefit obligation

   7    8    8  

Net amortization:

    

Actuarial loss

   4    4    5  

Prior service credit

   (6)   (6)   (6) 
  

 

 

  

 

 

  

 

 

 

Net periodic postretirement benefit cost

  $6   $7   $8  
  

 

 

  

 

 

  

 

 

 


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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


2013 2012 2011
 (Millions)
Service cost — benefits earned during the year$—
 $1
 $1
Interest on accumulated postretirement benefit obligation5
 6
 7
Net amortization:
 
 
Actuarial loss4
 5
 4
Prior service credit(6) (6) (6)
Net periodic postretirement benefit cost$3
 $6
 $6
In 2012,2014, we expect to recognize the following amounts, which are currently reflected in accumulated other comprehensive loss, as components of net periodic benefit cost:

   2012 
   (Millions) 

Net actuarial loss

  $5  

Prior service credit

   (6) 
  

 

 

 
  $  (1) 
  

 

 

 

 2014
 (Millions)
Net actuarial loss$2
Prior service credit(6)

$(4)
The following estimated postretirement benefit payments are payable from the plan to participants:

Year

  Postretirement
Benefits
   (Millions)

2012

    9 

2013

    10 

2014

    10 

2015

    10 

2016

    10 

2017-2021

    48 

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following estimated

YearPostretirement
Benefits
 (Millions)
2014$8
20158
20168
20178
20188
2019-202238
We do not expect to receive any future subsidies under the Medicare Prescription Drug, Improvement, and Modernization Act are expected to be received:

Year

  Postretirement
Benefits
   (Millions)

2012

    1 

2013

    1 

2014

    1 

2015

    1 

2016

    1 

2017-2021

    4 

Act.

The weighted-average assumed health care cost trend rate used in determining the 20112013 accumulated postretirement benefit obligation was 7.0 percent, declining to 4.5 percent by 2019. For 2012, the health care cost trend rate was 7.5 percent declining to 4.5 percent by 2019 and for 2011, the health care cost trend rate was 8.0 percent declining to 4.5 percent by 2019. The health care cost trend rate was 7.5 percent for 2010 and 8.3 percent in 2009, declining to five percent over succeeding periods.

The following assumptions were used in the accounting for postretirement cost for the years of 2011, 20102013, 2012 and 2009:

   2011  2010 

Weighted-average assumptions used to determine benefit obligations

   

Discount rate

   4.8%   5.6% 

Rate of compensation increase

   N/A    N/A  

   2011  2010  2009 

Weighted-average assumptions used to determine net periodic benefit cost

    

Discount rate

   5.6%   6.1%   6.2% 

Rate of compensation increase

   N/A    N/A    4.0% 

2011:


2013 2012
Weighted-average assumptions used to determine benefit obligations
 
Discount rate4.8% 4.1%
Rate of compensation increaseN/A
 N/A

2013 2012 2011
Weighted-average assumptions used to determine net periodic benefit cost
 
 
Discount rate4.1% 4.8% 5.6%
Rate of compensation increaseN/A
 N/A
 N/A
A one-percentage-point increase in the 20112013 assumed health care cost trend rates would increase total service and interest cost by less than $1$1 million and would increase the postretirement benefit obligation by $10 million.$8 million. A one-percentage-point decrease in the 20112013 assumed health care cost trend rates would decrease the total service and interest cost by less than $1$1 million and decrease the postretirement benefit obligation by $8 million.

$7 million.

Based on current actuarial estimates, we believe we will be required to make postretirement contributions of approximately $9$8 million during 2012.

We have established2014.


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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Effective January 1, 2012, the Tenneco Employee Stock Ownership PlansPlan for Hourly Employees and the benefit of U.S. employees.Tenneco Employee Stock Ownership Plan for Salaried Employees were merged into one plan called the Tenneco 401(k) Retirement Savings Plan (the “Retirement Savings Plan”). Under the plans,plan, subject to limitations in the Internal Revenue Code, participants may elect to defer up to 75 percent of their salary through contributions to the plan, which are invested in selected mutual funds or used to buy our common stock. We match in cash 100 percent on the first three percent and 50 percent on the next two percent of each employee’s contribution up to eight percent of the employee’s salary. In 2009, we temporarily discontinued these matching contributions, as a result of the global economic downturn that began in 2008. We restored the matching contributions to salaried and non-union hourly U.S. employees beginning on January 1, 2010.employee contributions. In connection with freezing the defined benefit pension plans for nearly all U.S. based salaried and non-union hourly employees effective December 31, 2006, and the related replacement of those defined benefit plans with defined contribution plans, we are making additional contributions to the Employee Stock Ownership Plans. We recorded expense for these contributions of approximately $18$23 million $17, $21 million and $10$18 million in 2011, 20102013, 2012 and 2009,2011, respectively. Matching contributions vest immediately. Defined benefit replacement contributions fully vest on the employee’s third anniversary of employment.

11.Segment and Geographic Area Information
In connection with the organizational changes announced on February 14, 2013 that aligned our businesses along product lines, effective with 2013, our three prior geographic reportable segments have each been split into two product segments. Beginning with 2013, we are managed and organized along our two major product lines (clean air and ride performance) and three geographic areas (North America; Europe, South America and India; and Asia Pacific), resulting in six operating segments (North America Clean Air, North America Ride Performance, Europe, South America and India Clean Air, Europe, South America and India Ride Performance, Asia Pacific Clean Air and Asia Pacific Ride Performance). Within each geographical area, each operating segment manufactures and distributes either clean air or ride performance products primarily for the original equipment and aftermarket industries. Each of the six operating segments constitutes a reportable segment. Costs related to other business activities, primarily corporate headquarter functions, are disclosed separately from the six operating segments as "Other." Prior period segment information has been revised to reflect our new reporting segments.
Segment results for 2013, 2012 and 2011 are as follows:

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TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Effective January 1, 2012, the Tenneco Employee Stock Ownership Plan for Hourly Employees and the Tenneco Employee Stock Ownership Plan for Salaried Employees were merged into one plan called the Tenneco 401(k) Retirement Savings Plan (the “Retirement Savings Plan”). The Retirement Savings Plan has been designed to adopt a Safe-Harbor approach approved by the Internal Revenue Service and which will provide for increased company matching contributions at lower percentages of employee deferrals. The company matching contribution will increase from 50 percent on the first eight percent of employee contributions to 100 percent on the first three percent and 50 percent on the next two percent of employee contributions.

11.Segment and Geographic Area Information

We are a global manufacturer with three geographic reportable segments: (1) North America, (2) Europe, South America and India (“Europe”), and (3) Asia Pacific. Each segment manufactures and distributes ride control and emission control products primarily for the automotive industry. We have not aggregated individual operating segments within these reportable segments. We evaluate segment performance based primarily on earnings before interest expense, income taxes, and noncontrolling interests. Products are transferred between segments and geographic areas on a basis intended to reflect as nearly as possible the “market value” of the products.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Segment results for 2011, 2010, and 2009 are as follows:

   Segment 
   North
America		   Europe  Asia
Pacific		   Reclass &
Elims		  Consolidated 
   (Millions) 

At December 31, 2011, and for the Year Then Ended

        

Revenues from external customers

  $3,414    $3,013   $778    $—   $7,205  

Intersegment revenues

   12     156    26     (194)   —  

Interest income

   —     3    1     —    4  

Depreciation and amortization of intangibles

   95     88    24     —    207  

Earnings before interest expense, income taxes, and noncontrolling interests

   216     125    38     —    379  

Total assets

   1,419     1,326    567     25    3,337  

Equity in net assets of unconsolidated affiliates

   —     9    —     —    9  

Expenditures for plant, property and equipment

   88     95    35     —    218  

Noncash items other than depreciation and amortization

   6     12    11     —    29  

At December 31, 2010, and for the Year Then Ended

        

Revenues from external customers

  $2,821    $2,446   $670    $—   $5,937  

Intersegment revenues

   11     148    28     (187)   —  

Interest income

   —     3    1     —    4  

Depreciation and amortization of intangibles

   109     86    21     —    216  

Earnings before interest expense, income taxes, and noncontrolling interests

   155     76    50     —    281  

Total assets

   1,281     1,337    525     24    3,167  

Equity in net assets of unconsolidated affiliates

   —     9    —     —    9  

Expenditures for plant, property and equipment

   59     66    29     —    154  

Noncash items other than depreciation and amortization

   4     6    —     —    10  

At December 31, 2009, and for the Year Then Ended

        

Revenues from external customers

  $2,092    $2,047   $510    $—   $4,649  

Intersegment revenues

   7     162    15     (184)   —  

Interest income

   —     3    1     —    4  

Depreciation and amortization of intangibles

   113     89    19     —    221  

Earnings before interest expense, income taxes, and noncontrolling interests

   42     20    30     —    92  

Total assets

   1,102     1,338    391     10    2,841  

Equity in net assets of unconsolidated affiliates

   —     12    —     —    12  

Expenditures for plant, property and equipment

   45     58    15     —    118  

Noncash items other than depreciation and amortization

   8     (1)   1     —    8  

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


                  
 Clean Air Division
Ride Performance Division      
 North
America
Europe, South America & India
Asia
Pacific
North
America
Europe, South America & India
Asia
Pacific
Other
Reclass & Elims
Total
 (Millions)
At December 31, 2013, and for the Year Ended

 

 

 

 

 

 

 

 

Revenues from external customers$2,659
 $1,933
 $852
 $1,255
 $1,046
 $219
 $—
 $—
 $7,964
Intersegment revenues7
 112
 1
 10
 41
 32
 —
 (203) —
EBIT, Earnings (loss) before interest expense, income taxes, and noncontrolling interests229
 57
 84
 124
 (7) 22
 (85) —
 424
Total assets1,030
 827
 544
 628
 552
 213
 —
 36
 3,830
At December 31, 2012, and for the Year Ended

 

 

 

 

 

 

 

 

Revenues from external customers2,506
 1,726
 694
 1,213
 1,041
 183
 —
 —
 7,363
Intersegment revenues6
 101
 1
 10
 53
 30
 —
 (201) —
EBIT, Earnings (loss) before interest expense, income taxes, and noncontrolling interests202
 54
 71
 122
 41
 5
 (67) —
 428
Total assets1,029
 725
 435
 593
 600
 202
 —
 24
 3,608
At December 31, 2011, and for the Year Ended

 

 

 

 

 

 

 

 

Revenues from external customers$2,288
 $1,849
 $624
 $1,126
 $1,164
 $154
 $—
 $—
 $7,205
Intersegment revenues3
 104
 —
 9
 52
 26
 —
 (194) —
EBIT, Earnings (loss) before interest expense, income taxes, and noncontrolling interests172
 79
 47
 76
 69
 (6) (58) —
 379
Total assets889
 719
 386
 530
 607
 181
 —
 25
 3,337

The following table shows information relating to our external customer revenues for each product or each group of similar products:

   Net Sales
Year Ended December 31,		 
   2011   2010   2009 
   (Millions) 

Emission Control Systems & Products

      

Aftermarket

  $351    $318    $315  

Original Equipment

      

OE Value-add

   2,732     2,223     1,638  

OE Substrate

   1,678     1,284     966  
  

 

 

   

 

 

   

 

 

 
   4,410     3,507     2,604  
  

 

 

   

 

 

   

 

 

 
   4,761     3,825     2,919  
  

 

 

   

 

 

   

 

 

 

Ride Control Systems & Products

      

Aftermarket

   944     851     721  

Original Equipment

   1,500     1,261     1,009  
  

 

 

   

 

 

   

 

 

 
   2,444     2,112     1,730  
  

 

 

   

 

 

   

 

 

 

Total Revenues

  $7,205    $5,937    $4,649  
  

 

 

   

 

 

   

 

 

 


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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 Net Sales
Year Ended December 31,
 2013 2012 2011
 (Millions)
Clean Air Systems & Products     
Aftermarket$327
 $318
 $351
Original Equipment     
OE Value-add3,282
 2,948
 2,732
OE Substrate1,835
 1,660
 1,678
 5,117
 4,608
 4,410
 5,444
 4,926
 4,761
Ride Performance Systems & Products     
Aftermarket953
 944
 944
Original Equipment1,567
 1,493
 1,500
 2,520
 2,437
 2,444
Total Revenues$7,964
 $7,363
 $7,205
      
The following customers accounted for 10 percent or more of our net sales in any of the last three years.

Customer

  2011  2010  2009 

General Motors

   19%   19%   16% 

Ford

   15%   13%   14% 

Customer2013 2012 2011
General Motors15% 17% 19%
Ford14% 15% 15%
The following table shows information relating to the geographic regions in which we operate:

   Geographic Area 
   United
States		   Germany   Canada   China   Other
Foreign(a)		   Reclass &
Elims		  Consolidated 
   (Millions) 

At December 31, 2011, and for the Year Then Ended

             

Revenues from external customers(b)

  $2,795    $826    $343    $567    $2,674    $—   $7,205  

Long-lived assets(c)

   359     110     57     104     530     —    1,160  

Total assets

   1,280     347     163     387     1,251     (91)   3,337  

At December 31, 2010, and for the Year Then Ended

             

Revenues from external customers(b)

  $2,275    $616    $327    $473    $2,246    $—   $5,937  

Long-lived assets(c)

   352     109     64     76     564     —    1,165  

Total assets

   1,147     322     149     321     1,308     (80)   3,167  

At December 31, 2009, and for the Year Then Ended

             

Revenues from external customers(b)

  $1,531    $559    $416    $361    $1,782    $—   $4,649  

Long-lived assets(c)

   373     116     75     61     604     —    1,229  

Total assets

   984     409     125     249     1,153     (79)   2,841  

 Geographic Area
 United
States		 Germany Canada China Other
Foreign(a)		 Reclass &
Elims		 Consolidated
 (Millions)
At December 31, 2013, and for the Year Then Ended             
Revenues from external customers(b)$3,144
 $941
 $387
 $875
 $2,617
 $—
 $7,964
Long-lived assets(c)448
 120
 59
 158
 531
 —
 1,316
Total assets1,552
 358
 182
 602
 1,326
 (190) 3,830
At December 31, 2012, and for the Year Then Ended             
Revenues from external customers(b)$2,975
 $817
 $389
 $661
 $2,521
 $—
 $7,363
Long-lived assets(c)429
 115
 57
 139
 521
 —
 1,261
Total assets1,521
 344
 168
 448
 1,307
 (180) 3,608
At December 31, 2011, and for the Year Then Ended             
Revenues from external customers(b)$2,795
 $826
 $343
 $567
 $2,674
 $—
 $7,205
Long-lived assets(c)359
 110
 57
 104
 530
 —
 1,160
Total assets1,280
 347
 163
 387
 1,251
 (91) 3,337

Note:

(a)

Revenues from external customers and long-lived assets for individual foreign countries other than Germany, Canada, and China are not material.

(b)Revenues are attributed to countries based on location of the shipper.

(c)Long-lived assets include all long-term assets except goodwill, intangibles and deferred tax assets.



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TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12.

12.Commitments and Contingencies

Commitments and Contingencies

Capital Commitments

We estimate that expenditures aggregating approximately $80$100 million will be required after December 31, 20112013 to complete facilities and projects authorized at such date, and we have made substantial commitments in connection with these facilities and projects.

Lease Commitments

We have long-term leases for certain facilities, equipment and other assets. The minimum lease payments under our non-cancelable operating leases with lease terms in excess of one year are $33$40 million in 2012, $24 million in 2013, $17 million in 2014, $10$30 million in 2015, $21 million in 2016, $15 million in 2017, and $8$11 million in both 20162018 and$25 million in subsequent years. The minimum lease payments under our non-cancelable capital leases with lease terms in excess of one year are less than $1$1 million in each of the next five years. Total rental expense for the year 2013, 2012 and 2011 2010was $58 million, $55 million and 2009 was $52$52 million $45 million and $43 million,, respectively.

Environmental Matters, Litigation and Product Warranties

We are involved in environmental remediation matters, legal proceedings, claims, investigations and warranty obligations thatobligations. These matters are typically incidental to the conduct of our business and create the potential for contingent losses. We accrue for potential contingent losses when our review of available facts indicates that it is probable a loss has been incurred and the amount of the loss is reasonably estimable. Each quarter we assess our loss contingencies based upon currently available facts, existing technology, and presently enacted laws and regulations taking into consideration the likely effects of inflation and other societal and economic factors and record adjustments to these reserves as required. As an example, we consider all available evidence including prior experience in remediation of contaminated sites, other companies’ cleanup experiences and data released by the United States Environmental Protection Agency or other organizations when we evaluate our environmental remediation contingencies. Further, all of our loss contingency estimates are subject to revision in future periods based on actual costs or new information. With respect to our environmental liabilities, where future cash flows are fixed or reliably determinable, we have discounted those liabilities. All other environmental liabilities are recorded at their undiscounted amounts. We evaluate recoveries separately from the liability and, when they are assured, recoveries are recorded and reported separately from the associated liability in our consolidated financial statements.

We are subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which we operate. We expense or capitalize, as appropriate, expenditures for ongoing compliance with environmental regulations that relate to current operations. We expense costs related to an existing condition caused by past operations that do not contribute to current or future revenue generation. As of December 31, 2011,2013, we have the obligation to remediate or contribute towards the remediation of certain sites, including one Federal Superfund site. At December 31, 2011,2013, our aggregated estimated share of environmental remediation costs for all these sites on a discounted basis was approximately $17$15 million, of which $5$3 million is recorded in other current liabilities and $12$12 million is recorded in deferred credits and other liabilities in our consolidated balance sheet. For those locations in whichwhere the liability was discounted, the weighted average discount rate used was 1.9 percent.2.8 percent. The undiscounted value of the estimated remediation costs was $20 million.$19 million. Our expected payments of environmental remediation costs are estimated to be approximately $3 million in 2014, $1 million each year beginning 2015 through 2018 and $12 million in aggregate thereafter. Based on information known to us, we have established reserves that we believe are adequate for these costs. Although we believe these estimates of remediation costs are reasonable and are based on the latest available information, the costs are estimates and are subject to revision as more information becomes available about the extent of remediation is required. At some sites, we expect that other parties will contribute towards the remediation costs. In addition, certain environmental statutes provide that our liability could be joint and several, meaning that we could be required to pay in excess of our share of remediation costs. Our understanding of the financial strength of other potentially responsible parties at these sites has been considered, where appropriate, in our determination of our estimated liability. We do not believe that any potential costs associated with our current status as a

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

potentially responsible party in the Federal Superfund site, or as a liable party at the other locations referenced herein, will be material to our consolidated results of operations, financial position or cash flows.

We also from time to time are involved in legal proceedings, claims or investigations. Some of these proceedings allegematters involve allegations of damages against us relating to environmental liabilities (including toxic tort, property damage and remediation), intellectual property matters (including patent, trademark and copyright infringement, and licensing disputes), personal injury claims (including injuries due to product failure, design or warning issues, and other product liability related matters), taxes, employment matters, and commercial or contractual disputes, sometimes related to acquisitions or divestitures. Some of these matters involve allegations relating to legal compliance. For example, one of our Argentine subsidiaries is currently defending against a criminal complaint alleging the failure to comply with laws requiring the proceeds of export transactions to be collected, reported and/or converted to local currency within specified time periods. As another example, in the U.S. we are subject to an audit in 11 states with respect to the payment of unclaimed property to those states, spanning a period as far back

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as over 30 years. We now have practices in place whichWhile we believe ensure that we pay unclaimed property as required. We vigorously defend ourselves against all of these claims. Inclaims, in future periods we could be subject to cash costs or charges to earnings if any of these matters are resolved on unfavorable terms. However, althoughAlthough the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, including our assessment of the merits of the particular claim, we do not expect that thesethe legal proceedings or claims currently pending against us will have any material adverse impact on our future consolidated financial position, results of operations or cash flows.

In addition, we are subject to a number of lawsuits initiated by a significant number of claimants alleging health problems as a result of exposure to asbestos. In the early 2000’s we were named in nearly 20,000 complaints, most of which were filed in Mississippi state court and the vast majority of which made no allegations of exposure to asbestos from our product categories. Most of these claims have been dismissed and our current docket of active and inactive cases is less than 500 cases nationwide. A small number of claims have been asserted by railroad workers alleging exposure to asbestos products in railroad cars manufactured by The Pullman Company, one of our subsidiaries. The balancesubstantial majority of the remaining claims isare related to alleged exposure to asbestos in our automotive products. Only a small percentage of the claimants allege that they were automobile mechanics and a significant number appear to involve workers in other industries or otherwise do not include sufficient information to determine whether there is any basis for a claim against us. We believe, based on scientific and other evidence, it is unlikely that mechanics were exposed to asbestos by our former products and that, in any event, they would not be at increased risk of asbestos-related disease based on their work with these products. Further, many of these cases involve numerous defendants, with the number of each in some cases exceeding 100 defendants from a variety of industries. Additionally, the plaintiffs either do not specify any, or specify the jurisdictional minimum, dollar amount for damages. As major asbestos manufacturers and/or users continue to go out of business or file for bankruptcy, we may experience an increased number of these claims. We vigorously defend ourselves against these claims as part of our ordinary course of business. In future periods, we could be subject to cash costs or charges to earnings if any of these matters are resolved unfavorably to us. To date, with respect to claims that have proceeded sufficiently through the judicial process, we have regularly achieved favorable resolutions. Accordingly, we presently believe that these asbestos-related claims will not have a material adverse impact on our future consolidated financial condition, results of operations or cash flows.

We provide warranties on some of our products. The warranty terms vary but range from one year up to limited lifetime warranties on some of our premium aftermarket products. Provisions for estimated expenses related to product warranty are made at the time products are sold or when specific warranty issues are identified on OE products. These estimates are established using historical information about the nature, frequency, and average cost of warranty claims. We actively study trends of our warranty claims and take action to improve product quality and minimize warranty claims. We believe that the warranty reserve is appropriate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the reserve. The reserve is included in both current and long-term liabilities on the balance sheet.

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Below is a table that shows the activity in the warranty accrual accounts:

   Year Ended
December 31,		 
   2011  2010  2009 
   (Millions) 

Beginning Balance

  $33   $32   $27  

Accruals related to product warranties

   11    19    18  

Reductions for payments made

   (18)   (18)   (13) 
  

 

 

  

 

 

  

 

 

 

Ending Balance

  $26   $33   $32  
  

 

 

  

 

 

  

 

 

 

 Year Ended
December 31,
 2013 2012 2011
 (Millions)
Beginning Balance$23
 $26
 $33
Accruals related to product warranties20
 15
 11
Reductions for payments made(19) (18) (18)
Ending Balance$24
 $23
 $26
In the fourth quarter of 2011, we encountered an issue in our North America OE ride controlperformance business involving struts supplied on one particular OE platform. As a result, we directly incurred approximately $2 million in premium freight and overtime costs. We are continuing to work through detailscosts in the fourth quarter of 2011 and $3 million in 2012. In the first quarter of 2013 we incurred a charge of $2 million in connection with the resolution of all existing claims pertaining to this matter. We paid the customer to determine responsibility for any other costs associated with this issue. We cannot estimate the amount$2 million in the second quarter of these costs at this time, but do not believe they will be material to our annual operating results.

13.Supplemental Guarantor Condensed Consolidating Financial Statements

2013.

13.Supplemental Guarantor Condensed Consolidating Financial Statement
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 2015, 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.


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TENNECO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 Year Ended December 31, 2013
 Guarantor
Subsidiaries		 Nonguarantor
Subsidiaries		 Tenneco Inc.
(Parent
Company)		 Reclass
& Elims		 Consolidated
 (Millions)
Revenues         
Net sales and operating revenues —
 
 
 
 
External$3,498
 $4,466
 $—
 $—
 $7,964
Affiliated companies350
 572
 —
 (922) —
 3,848
 5,038
 —
 (922) 7,964
Costs and expenses         
Cost of sales (exclusive of depreciation and amortization shown below)3,103
 4,553
 —
 (922) 6,734
Goodwill impairment charge—
 —
 —
 —
 —
Engineering, research, and development66
 78
 —
 —
 144
Selling, general, and administrative187
 260
 6
 —
 453
Depreciation and amortization of other intangibles78
 127
 —
 —
 205

3,434
 5,018
 6
 (922) 7,536
Other income (expense)         
Loss on sale of receivables—
 (4) —
 —
 (4)
Other income (expense)(1) 59
 —
 (58) —

(1) 55
 —
 (58) (4)
Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income from affiliated companies413
 75
 (6) (58) 424
Interest expense —
 
 
 
 
External (net of interest capitalized)(2) 5
 77
 —
 80
Affiliated companies (net of interest income)70
 (72) 2
 —
 —
Earnings (loss) before income taxes, noncontrolling interests and equity in net income from affiliated companies345
 142
 (85) (58) 344
Income tax expense60
 62
 —
 —
 122
Equity in net income (loss) from affiliated companies32
 —
 268
 (300) —
Net income (loss)317
 80
 183
 (358) 222
Less: Net income attributable to noncontrolling interests—
 39
 —
 —
 39
Net income (loss) attributable to Tenneco Inc.$317
 $41
 $183
 $(358) $183
Comprehensive income (loss) attributable to Tenneco Inc.$390
 $16
 $183
 $(358) $231

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


STATEMENT OF COMPREHENSIVE INCOME (LOSS)

  For the Year Ended December 31, 2011 
  Guarantor
Subsidiaries		  Nonguarantor
Subsidiaries		  Tenneco Inc.
(Parent
Company)		  Reclass
& Elims		  Consolidated 
  (Millions) 

Revenues

     

Net sales and operating revenues —

     

External

 $3,103   $4,102   $—   $—   $7,205  

Affiliated companies

  162    514    —    (676)   —  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  3,265    4,616    —    (676)   7,205  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Costs and expenses

     

Cost of sales (exclusive of depreciation and amortization shown below)

  2,764    3,949    —    (676)   6,037  

Goodwill impairment charge

  —    11    —    —    11  

Engineering, research, and development

  57    76    —    —    133  

Selling, general, and administrative

  144    281    3    —    428  

Depreciation and amortization of other intangibles

  74    133    —    —    207  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  3,039    4,450    3    (676)   6,816  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other income (expense)

     

Loss on sale of receivables

  —    (5)   —    —    (5) 

Other income (expense)

  80    1    —    (86)   (5) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  80    (4)   —    (86)   (10) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income from affiliated companies

  306    162    (3)   (86)   379  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Interest expense —

     

External (net of interest capitalized)

  (1)   6    103    —    108  

Affiliated companies (net of interest income)

  211    (72)   (139)   —    —  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings (loss) before income taxes, noncontrolling interests and equity in net income from affiliated companies

  96    228    33    (86)   271  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income tax expense (benefit)

  12    76    —    —    88  

Equity in net income (loss) from affiliated companies

  116    —    124    (240)   —  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

  200    152    157    (326)   183  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Less: Net income attributable to noncontrolling interests

  —    26    —    —    26  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to Tenneco Inc.

 $200   $126   $157   $  (326)  $157  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 For the Year Ended December 31, 2012
 Guarantor
Subsidiaries		 Nonguarantor
Subsidiaries		 Tenneco Inc.
(Parent
Company)		 Reclass
& Elims		 Consolidated
 (Millions)
Revenues         
Net sales and operating revenues —         
External$3,331
 $4,032
 $—
 $—
 $7,363
Affiliated companies182
 547
 —
 (729) —

3,513
 4,579
 —
 —
 7,363
Costs and expenses         
Cost of sales (exclusive of depreciation and amortization shown below)3,056
 3,843
 —
 (729) 6,170
Goodwill impairment charge—
 —
 —
 —
 —
Engineering, research, and development57
 69
 —
 —
 126
Selling, general, and administrative198
 224
 5
 —
 427
Depreciation and amortization of other intangibles72
 133
 —
 —
 205

3,383
 4,269
 5
 (729) 6,928
Other income (expense)         
Loss on sale of receivables—
 (4) —
 —
 (4)
Other income (expense)115
 (71) —
 (47) (3)

115
 (75) —
 (47) (7)
Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income from affiliated companies245
 235
 (5) (47) 428
Interest expense —         
External (net of interest capitalized)—
 5
 100
 —
 105
Affiliated companies (net of interest income)212
 (81) (131) —
 —
Earnings (loss) before income taxes, noncontrolling interests and equity in net income from affiliated companies33
 311
 26
 (47) 323
Income tax expense(39) 58
 —
 —
 19
Equity in net income (loss) from affiliated companies217
 —
 249
 (466) —
Net income (loss)289
 253
 275
 (513) 304
Less: Net income attributable to noncontrolling interests—
 29
 —
 —
 29
Net income (loss) attributable to Tenneco Inc.$289
 $224
 $275
 $(513) $275
Comprehensive income (loss) attributable to Tenneco Inc.$277
 $210
 $275
 $(513) $249

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


STATEMENT OF COMPREHENSIVE INCOME (LOSS)

  For the Year Ended December 31, 2010 
  Guarantor
Subsidiaries		  Nonguarantor
Subsidiaries		  Tenneco Inc.
(Parent
Company)		  Reclass
& Elims		  Consolidated 
  (Millions) 

Revenues

     

Net sales and operating revenues —

     

External

 $2,571   $3,366   $—   $—   $5,937  

Affiliated companies

  130    472    —    (602)   —  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  2,701    3,838    —    (602)   5,937  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Costs and expenses

     

Cost of sales (exclusive of depreciation and amortization shown below)

  2,331    3,171    —    (602)   4,900  

Engineering, research, and development

  48    69    —    —    117  

Selling, general, and administrative

  153    261    3    —    417  

Depreciation and amortization of other intangibles

  86    130    —    —    216  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  2,618    3,631    3    (602)   5,650  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other income (expense)

     

Loss on sale of receivables

  —    (3)   —    —    (3) 

Other income (expense)

  12    1    —    (16)   (3) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  12    (2)   —    (16)   (6) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income from affiliated companies

  95    205    (3)   (16)   281  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Interest expense —

     

External (net of interest capitalized)

  (2)   7    144    —    149  

Affiliated companies (net of interest income)

  186    (54)   (132)   —    —  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings (loss) before income taxes, noncontrolling interests and equity in net income from affiliated companies

  (89)   252    (15)   (16)   132  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income tax expense (benefit)

  7    62    —    —    69  

Equity in net income (loss) from affiliated companies

  154    —    54    (208)   —  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

  58    190    39    (224)   63  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Less: Net income attributable to noncontrolling interests

  —    24    —    —    24  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to Tenneco Inc.

 $58   $166   $39   $  (224)  $39  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 For the Year Ended December 31, 2011
 Guarantor
Subsidiaries		 Nonguarantor
Subsidiaries		 Tenneco Inc.
(Parent
Company)		 Reclass
& Elims		 Consolidated
 (Millions)
Revenues
 
 
 
 
Net sales and operating revenues —
 
 
 
 
External$3,103
 $4,102
 $—
 $—
 $7,205
Affiliated companies162
 514
 —
 (676) —

3,265
 4,616
 —
 (676) 7,205
Costs and expenses
 
 
 
 
Cost of sales (exclusive of depreciation and amortization shown below)2,764
 3,949
 —
 (676) 6,037
Goodwill impairment charge—
 11
 —
 —
 11
Engineering, research, and development57
 76
 —
 —
 133
Selling, general, and administrative144
 281
 3
 —
 428
Depreciation and amortization of other intangibles74
 133
 —
 —
 207

3,039
 4,450
 3
 (676) 6,816
Other income (expense)
 
 
 
 
Loss on sale of receivables—
 (5) —
 —
 (5)
Other income (expense)80
 1
 —
 (86) (5)

80
 (4) —
 (86) (10)
Earnings (loss) before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies306
 162
 (3) (86) 379
Interest expense —
 
 
 
 
External (net of interest capitalized)(1) 6
 103
 —
 108
Affiliated companies (net of interest income)211
 (72) (139) —
 —
Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies96
 228
 33
 (86) 271
Income tax expense12
 76
 —
 —
 88
Equity in net income (loss) from affiliated companies116
 —
 124
 (240) —
Net income (loss)200
 152
 157
 (326) 183
Less: Net income attributable to noncontrolling interests—
 26
 —
 —
 26
Net income (loss) attributable to Tenneco Inc.$200
 $126
 $157
 $(326) $157
Comprehensive income (loss) attributable to Tenneco Inc.$105
 $81
 $157
 $(326) $17


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

STATEMENT OF INCOME (LOSS)

  For the Year Ended December 31, 2009 
  Guarantor
Subsidiaries		  Nonguarantor
Subsidiaries		  Tenneco Inc.
(Parent
Company)		  Reclass
& Elims		  Consolidated 
  (Millions) 

Revenues

     

Net sales and operating revenues —

     

External

 $1,915   $2,734   $—   $—   $4,649  

Affiliated companies

  92    399    —    (491)   —  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  2,007    3,133    —    (491)   4,649  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Costs and expenses

     

Cost of sales (exclusive of depreciation and amortization shown below)

  1,836    2,530    —    (491)   3,875  

Engineering, research, and development

  36    61    —    —    97  

Selling, general, and administrative

  105    236    3    —    344  

Depreciation and amortization of other intangibles

  91    130    —    —    221  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  2,068    2,957    3    (491)   4,537  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other income (expense)

     

Loss on sale of receivables

  —    (9)   —    —    (9) 

Other income (expense)

  (2)   4    —    (13)   (11) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  (2)   (5)   —    (13)   (20) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings (loss) before interest expense, income taxes, noncontrolling interests, and equity in net income from affiliated companies

  (63)   171    (3)   (13)   92  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Interest expense —

     

External (net of interest capitalized)

  (1)   4    130    —    133  

Affiliated companies (net of interest income)

  140    (15)   (125)   —    —  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings (loss) before income taxes, noncontrolling interests, and equity in net income from affiliated companies

  (202)   182    (8)   (13)   (41) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income tax expense (benefit)

  (1)   33    (19)   —    13  

Equity in net income (loss) from affiliated companies

  124    —    (84)   (40)   —  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

  (77)   149    (73)   (53)   (54) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Less: Net income attributable to noncontrolling interests

  —    19    —    —    19  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to Tenneco Inc.

 $(77)  $130   $(73)  $(53)  $(73) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 


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, net387
 1,306
 16
 (649) 1,060
Inventories279
 377
 —
 —
 656
Deferred income taxes87
 —
 7
 (23) 71
Prepayments and other35
 188
 —
 —
 223
Total current assets794
 2,145
 23
 (672) 2,290
Other assets:
 
 
 
 
Investment in affiliated companies944
 —
 696
 (1,640) —
Notes and advances receivable from affiliates1,026
 7,320
 4,826
 (13,172) —
Long-term receivables, net12
 2
 —
 —
 14
Goodwill22
 47
 —
 —
 69
Intangibles, net13
 17
 —
 —
 30
Deferred income taxes72
 9
 44
 —
 125
Pension Assets—
 —
 —
 —
 —
Other44
 60
 23
 —
 127

2,133
 7,455
 5,589
 (14,812) 365
Plant, property, and equipment, at cost1,173
 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 — affiliated247
 176
 10
 (433) —
Accounts payable521
 1,011
 —
 (173) 1,359
Accrued taxes9
 31
 —
 —
 40
Other128
 285
 9
 (66) 356
Total current liabilities905
 1,571
 34
 (672) 1,838
Long-term debt — non-affiliated—
 8
 1,011
 —
 1,019
Long-term debt — affiliated1,700
 7,338
 4,134
 (13,172) —
Deferred income taxes—
 28
 —
 —
 28
Postretirement benefits and other liabilities357
 92
 —
 4
 453
Commitments and contingencies
 
 
 
 
Total liabilities2,962
 9,037
 5,179
 (13,840) 3,338
Redeemable noncontrolling interests—
 20
 —
 —
 20
Tenneco Inc. Shareholders’ equity331
 1,313
 433
 (1,644) 433
Noncontrolling interests—
 39
 —
 —
 39
Total equity331
 1,352
 433
 (1,644) 472
Total liabilities, redeemable noncontrolling interests and equity$3,293
 $10,409
 $5,612
 $(15,484) $3,830

114
Table of Contents
TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


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  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 December 31, 2012
 Guarantor
Subsidiaries		 Nonguarantor
Subsidiaries		 Tenneco Inc.
(Parent
Company)		 Reclass
& Elims		 Consolidated
 (Millions)
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents$4
 $219
 $—
 $—
 $223
Receivables, net341
 1,268
 30
 (653) 986
Inventories278
 389
 —
 —
 667
Deferred income taxes91
 —
 6
 (25) 72
Prepayments and other28
 148
 —
 —
 176
Total current assets742
 2,024
 36
 (678) 2,124
Other assets:
 
 
 
 
Investment in affiliated companies551
 —
 717
 (1,268) —
Notes and advances receivable from affiliates957
 4,495
 4,594
 (10,046) —
Long-term receivables, net2
 2
 —
 —
 4
Goodwill21
 51
 —
 —
 72
Intangibles, net18
 17
 —
 —
 35
Deferred income taxes55
 1
 60
 —
 116
Other31
 75
 29
 —
 135

1,635
 4,641
 5,400
 (11,314) 362
Plant, property, and equipment, at cost1,098
 2,267
 —
 —
 3,365
Less — Accumulated depreciation and amortization(763) (1,480) —
 —
 (2,243)

335
 787
 —
 —
 1,122
Total assets$2,712
 $7,452
 $5,436
 $(11,992) $3,608
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Short-term debt (including current maturities of long-term debt)
 
 
 
 
Short-term debt — non-affiliated$—
 $112
 $1
 $—
 $113
Short-term debt — affiliated250
 173
 10
 (433) —
Accounts payable423
 954
 —
 (191) 1,186
Accrued taxes16
 34
 —
 —
 50
Other135
 210
 9
 (54) 300
Total current liabilities824
 1,483
 20
 (678) 1,649
Long-term debt — non-affiliated—
 8
 1,059
 —
 1,067
Long-term debt — affiliated1,447
 4,533
 4,066
 (10,046) —
Deferred income taxes—
 27
 —
 —
 27
Postretirement benefits and other liabilities438
 118
 —
 3
 559
Commitments and contingencies
 
 
 
 
Total liabilities2,709
 6,169
 5,145
 (10,721) 3,302
Redeemable noncontrolling interests—
 15
 —
 —
 15
Tenneco Inc. Shareholders’ equity3
 1,223
 291
 (1,271) 246
Noncontrolling interests—
 45
 —
 —
 45
Total equity3
 1,268
 291
 (1,271) 291
Total liabilities, redeemable noncontrolling interests and equity$2,712
 $7,452
 $5,436
 $(11,992) $3,608


115
Table of Contents
TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

BALANCE SHEET

  December 31, 2010 
  Guarantor
Subsidiaries		  Nonguarantor
Subsidiaries		  Tenneco Inc.
(Parent
Company)		  Reclass
& Elims		  Consolidated 
  (Millions) 
ASSETS     

Current assets:

     

Cash and cash equivalents

 $—   $233   $—   $—   $233  

Receivables, net

  402    1,106    24    (706)   826  

Inventories

  221    326    —    —    547  

Deferred income taxes

  103    —    —    (65)   38  

Prepayments and other

  35    111    —    —    146  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total current assets

  761    1,776    24    (771)   1,790  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other assets:

     

Investment in affiliated companies

  391    —    707    (1,098)   —  

Notes and advances receivable from affiliates

  4,119    788    5,853    (10,760)   —  

Long-term receivables, net

  1    8    —    —    9  

Goodwill

  22    67    —    —    89  

Intangibles, net

  14    18    —    —    32  

Deferred income taxes

  37    21    34    —    92  

Other

  26    46    33    —    105  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  4,610    948    6,627    (11,858)   327  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Plant, property, and equipment, at cost

  997    2,112    —    —    3,109  

Less — Accumulated depreciation and amortization

  (713)   (1,346)   —    —    (2,059) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  284    766    —    —    1,050  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

 $5,655   $3,490   $6,651   $(12,629)  $3,167  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
LIABILITIES AND SHAREHOLDERS’ EQUITY     

Current liabilities:

     

Short-term debt (including current maturities of long-term debt)

     

Short-term debt — non-affiliated

 $—   $62   $1   $—   $63  

Short-term debt — affiliated

  214    371    10    (595)   —  

Trade payables

  367    773    —    (92)   1,048  

Accrued taxes

  20    31    —    —    51  

Other

  130    213    47    (84)   306  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total current liabilities

  731    1,450    58    (771)   1,468  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Long-term debt — non-affiliated

  —    11    1,149    —    1,160  

Long-term debt — affiliated

  4,583    768    5,409    (10,760)   —  

Deferred income taxes

  —    56    —    —    56  

Postretirement benefits and other liabilities

  347    85    —    4    436  

Commitments and contingencies

     
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities

  5,661    2,370    6,616    (11,527)   3,120  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Redeemable noncontrolling interests

  —    12    —    —    12  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Tenneco Inc. Shareholders’ equity

  (6)   1,069    35    (1,102)   (4) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Noncontrolling interests

  —    39    —    —    39  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total equity

  (6)   1,108    35    (1,102)   35  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities, redeemable noncontrolling interests and equity

 $5,655   $3,490   $6,651   $(12,629)  $3,167  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


STATEMENT OF CASH FLOWS

  Year Ended December 31, 2011 
  Guarantor
Subsidiaries		  Nonguarantor
Subsidiaries		  Tenneco Inc.
(Parent
Company)		  Reclass
& Elims		  Consolidated 
  (Millions) 

Operating Activities

     

Net cash provided (used) by operating activities

 $401   $83    $ (239)  $—   $245  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Investing Activities

     

Proceeds from sale of assets

  3    1    —    —    4  

Cash payments for plant, property, and equipment

  (69)   (144)   —    —    (213) 

Cash payments for software related intangible assets

  (4)   (11)   —    —    (15) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash used by investing activities

  (70)   (154)   —    —    (224) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Financing Activities

     

Issuance of long-term debt

  —    5    —    —    5  

Debt issuance cost on long-term debt

  —    —    (1)   —    (1) 

Retirement of long-term debt

  —    (1)   (23)   —    (24) 

Increase (decrease) in bank overdrafts

  —    3    —    —    3  

Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt

  —    6    24    —    30  

Intercompany dividends and net increase (decrease) in intercompany obligations

  (330)   75    255    —    —  

Capital contribution from noncontrolling interest partner

  —    1    —    —    1  

Purchase of additional noncontrolling equity interest

  —    (4)   —    —    (4) 

Distribution to noncontrolling interests partners

  —    (20)   —    —    (20) 

Purchase of common stock under the share repurchase program

  —    —    (16)   —    (16) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash provided (used) by financing activities

  (330)   65    239    —    (26) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

  —    (14)   —    —    (14) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Increase (decrease) in cash and cash equivalents

  1    (20)   —    —    (19) 

Cash and cash equivalents, January 1

  —    233    —    —    233  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents, December 31 (Note)

 $1   $213   $—   $ —   $214  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 Year Ended December 31, 2013
 Guarantor
Subsidiaries		 Nonguarantor
Subsidiaries		 Tenneco Inc.
(Parent
Company)		 Reclass
& Elims		 Consolidated
 (Millions)
Operating Activities         
Net cash provided (used) by operating activities$270
 $185
 $48
 $—
 $503
Investing Activities
 
 
 
 
Proceeds from sale of assets1
 7
 —
 —
 8
Cash payments for plant, property, and equipment(102) (142) —
 —
 (244)
Cash payments for software related intangible assets(19) (6) —
 —
 (25)
Changes in restricted cash—
 (5) —
 —
 (5)
Net cash used by investing activities(120) (146) —
 —
 (266)
Financing Activities
 
 
 
 
Retirement of long-term debt—
 (2) (14) —
 (16)
Tax benefit from stock-based compensation—
 —
 24
 —
 24
Purchase of common stock under the share repurchase program—
 —
 (27) —
 (27)
Issuance of common stock—
 —
 20
 —
 20
Increase in bank overdrafts—
 (6) —
 —
 (6)
Net increase in revolver borrowings and short-term debt excluding current maturities of long-term debt and short-term borrowings secured by accounts receivable—
 (43) 21
 —
 (22)
Net increase in short-term borrowings secured by accounts receivable—
 —
 (40) —
 (40)
Intercompany dividends and net increase (decrease) in intercompany obligations(148) 180
 (32) —
 —
Purchase of noncontrolling equity interest—
 (69) —
 —
 (69)
Distribution to noncontrolling interests partners—
 (39) —
 —
 (39)
Net cash provided (used) by financing activities(148) 21
 (48) —
 (175)
Effect of foreign exchange rate changes on cash and cash equivalents—
 (10) —
 —
 (10)
Increase in cash and cash equivalents2
 50
 —
 —
 52
Cash and cash equivalents, January 14
 219
 —
 —
 223
Cash and cash equivalents, December 31 (Note)$6
 $269
 $—
 $—
 $275
Note:Cash and cash equivalents include highly liquid investments with a maturity of three months or less at the date of purchase.


116
Table of Contents
TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


STATEMENT OF CASH FLOWS

  Year Ended December 31, 2010 
  Guarantor
Subsidiaries		  Nonguarantor
Subsidiaries		  Tenneco Inc.
(Parent
Company)		  Reclass
& Elims		  Consolidated 
  (Millions) 

Operating Activities

     

Net cash provided (used) by operating activities

 $97   $380   $  (233)   $  —   $244  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Investing Activities

     

Proceeds from sale of assets

  1    2    —    —    3  

Cash payments for plant, property, and equipment

  (50)   (101)   —    —    (151) 

Cash payments for software related intangible assets

  (7)   (5)   —    —    (12) 

Investments and other

  —    3    —    —    3  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash used by investing activities

  (56)   (101)   —    —    (157) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Financing Activities

     

Issuance of long-term debt

  —    5    875    —    880  

Debt issuance cost on long-term debt

  —    —    (24)   —    (24) 

Retirement of long-term debt

  —    (4)   (860)   —    (864) 

Increase (decrease) in bank overdrafts

  —    2    —    —    2  

Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt

  —    (10)   —    —    (10) 

Intercompany dividends and net increase (decrease) in intercompany obligations

  (61)   (181)   242    —    —  

Distribution to noncontrolling interests partners

  —    (14)   —    —    (14) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash provided (used) by financing activities

  (61)   (202)   233    —    (30) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

  —    9    —    —    9  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Increase (decrease) in cash and cash equivalents

  (20)   86    —    —    66  

Cash and cash equivalents, January 1

  20    147    —    —    167  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents, December 31 (Note)

 $—   $233   $—   $  —   $233  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 Year Ended December 31, 2012
 Guarantor
Subsidiaries
Nonguarantor
Subsidiaries
Tenneco Inc.
(Parent
Company)
Reclass
& Elims
Consolidated
 (Millions)
Operating Activities
 
 
 
 
Net cash provided (used) by operating activities$385
 $206
 $(226) $—
 $365
Investing Activities
 
 
 
 
Proceeds from sale of assets—
 3
 —
 —
 3
Cash payments for plant, property, and equipment(101) (155) —
 —
 (256)
Cash payments for software related intangible assets(6) (7) —
 —
 (13)
Cash payments for net assets purchased(7) —
 —
 —
 (7)
Net cash used by investing activities(114) (159) —
 —
 (273)
Financing Activities
 
 
 
 
Retirement of long-term debt—
 (1) (410) —
 (411)
Issuance of long-term debt—
 —
 250
 —
 250
Debt issuance cost on long-term debt—
 —
 (13) —
 (13)
Purchase of common stock under the share repurchase program—
 —
 (18) —
 (18)
Issuance of common stock—
 —
 5
 —
 5
Increase 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 receivable—
 48
 19
 —
 67
Net increase in short-term borrowings secured by accounts receivable—
 —
 50
 —
 50
Intercompany dividends and net increase (decrease) in intercompany obligations(268) (75) 343
 —
 —
Capital contribution from noncontrolling interest partner—
 5
 —
 —
 5
Distribution to noncontrolling interests partners—
 (29) —
 —
 (29)
Net cash provided (used) by financing activities(268) (47) 226
 —
 (89)
Effect of foreign exchange rate changes on cash and cash equivalents—
 6
 —
 —
 6
Increase (decrease) in cash and cash equivalents3
 6
 —
 —
 9
Cash and cash equivalents, January 11
 213
 —
 —
 214
Cash and cash equivalents, December 31 (Note)$4
 $219
 $—
 $—
 $223
Note:Cash and cash equivalents include highly liquid investments with a maturity of three months or less at the date of purchase.


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TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


STATEMENT OF CASH FLOWS

  Year Ended December 31, 2009 
  Guarantor
Subsidiaries		  Nonguarantor
Subsidiaries		  Tenneco Inc.
(Parent
Company)		  Reclass
& Elims		  Consolidated 
  (Millions) 

Operating Activities

     

Net cash provided (used) by operating activities

 $347   $  160   $  (266)   $  —   $241  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Investing Activities

     

Proceeds from sale of assets

  —    5    —    —    5  

Cash payments for plant, property, and equipment

  (42)   (78)   —    —    (120) 

Acquisition of business (net of cash acquired)

  —    1    —    —    1  

Cash payments for software related intangible assets

  (2)   (4)   —    —    (6) 

Investment and other

  —    1    —    —    1  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash used by investing activities

  (44)   (75)   —    —    (119) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Financing Activities

     

Issuance of common shares

  —    —    188    —    188  

Issuance of long-term debt

  —    —    6    —    6  

Debt issuance cost on long-term debt

  —    —    (8)   —    (8) 

Retirement of long-term debt

  —    (5)   (17)   —    (22) 

Increase (decrease) in bank overdrafts

  —    (23)   —    —    (23) 

Net increase (decrease) in revolver borrowings and short-term debt excluding current maturities of long-term debt

  —    21    (239)   —    (218) 

Intercompany dividends and net increase (decrease) in intercompany obligations

  (299)   (37)   336    —    —  

Distribution to noncontrolling interests partners

  —    (10)   —    —    (10) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash provided (used) by financing activities

  (299)   (54)   266    —    (87) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

  —    6    —    —    6  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Increase (decrease) in cash and cash equivalents

  4    37    —    —    41  

Cash and cash equivalents, January 1

  16    110    —    —    126  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents, December 31 (Note)

 $20   $147   $—   $—   $167  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 Year Ended December 31, 2011
 Guarantor
Subsidiaries		 Nonguarantor
Subsidiaries		 Tenneco Inc.
(Parent
Company)		 Reclass
& Elims		 Consolidated
 (Millions)
Operating Activities
 
 
 
 
Net cash provided (used) by operating activities$401
 $83
 $(239) $—
 $245
Investing Activities
 
 
 
 
Proceeds from sale of assets3
 1
 —
 —
 4
Cash payments for plant, property, and equipment(69) (144) —
 —
 (213)
Cash payments for software related intangible assets(4) (11) —
 —
 (15)
Cash payments for net assets purchased—
 —
 —
 —
 —
Net cash used by investing activities(70) (154) —
 —
 (224)
Financing Activities
 
 
 
 
Retirement of long-term debt—
 (1) (23) —
 (24)
Issuance of long-term debt—
 5
 —
 —
 5
Debt issuance cost on long-term debt—
 —
 (1) —
 (1)
Purchase of common stock under the share repurchase program—
 —
 (16) —
 (16)
Increase in bank overdrafts—
 3
 —
 —
 3
Net decrease in revolver borrowings and short-term debt excluding current maturities of long-term debt—
 6
 24
 —
 30
Net increase in short-term borrowings secured by accounts receivable—
 —
 —
 —
 —
Intercompany dividends and net increase (decrease) in intercompany obligations(330) 75
 255
 ���
 —
Capital contribution from noncontrolling interest partner—
 1
 —
 —
 1
Purchase of noncontrolling equity interest—
 (4) —
 —
 (4)
Distribution to noncontrolling interests partners—
 (20) —
 —
 (20)
Net cash provided (used) by financing activities(330) 65
 239
 —
 (26)
Effect of foreign exchange rate changes on cash and cash equivalents—
 (14) —
 —
 (14)
Increase (decrease) in cash and cash equivalents1
 (20) —
 —
 (19)
Cash and cash equivalents, January 1—
 233
 —
 —
 233
Cash and cash equivalents, December 31 (Note)$1
 $213
 $—
 $—
 $214
Note:Cash and cash equivalents include highly liquid investments with a maturity of three months or less at the date of purchase.



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Table of Contents
TENNECO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14.

Quarterly Financial Data (Unaudited)
QuarterNet Sales
and
Operating
Revenues		 Cost of Sales
(Excluding
Depreciation and
Amortization)		 Earnings Before
Interest Expense,
Income Taxes
and Noncontrolling
Interests		 Net Income
Attributable
to Tenneco
Inc.
 (Millions)
2013
 
 
 
1st$1,903
 $1,604
 $93
 $54
2nd2,067
 1,736
 141
 63
3rd1,963
 1,691
 72
 12
4th2,031
 1,703
 118
 54

$7,964
 $6,734
 $424
 $183
2012
 
 
 
1st$1,912
 $1,607
 $96
 $30
2nd1,920
 1,595
 137
 87
3rd1,778
 1,494
 111
 125
4th1,753
 1,474
 84
 33

$7,363
 $6,170
 $428
 $275
QuarterBasic
Earnings 
per Share of
Common Stock		 Diluted
Earnings
per Share of
Common Stock
2013   
1st$0.90
 $0.88
2nd1.04
 1.02
3rd0.19
 0.19
4th0.90
 0.88
Full Year3.03
 2.97
2012   
1st$0.50
 $0.49
2nd1.45
 1.42
3rd2.09
 2.05
4th0.55
 0.54
Full Year4.58
 4.50
14.
Quarterly Financial Data (Unaudited)

Quarter

  Net Sales
and
Operating
Revenues		   Cost of Sales
(Excluding
Depreciation and
Amortization)		   Earnings Before
Interest  Expense,
Income Taxes
and Noncontrolling
Interests		   Net Income  (Loss)
Attributable
to Tenneco
Inc.		 
   (Millions) 

2011

        

1st

  $1,760    $1,466    $94    $47  

2nd

   1,888     1,565     113     50  

3rd

   1,773     1,492     84     30  

4th

   1,784     1,514     88     30  
  

 

 

   

 

 

   

 

 

   

 

 

 
  $7,205    $6,037    $379    $157  
  

 

 

   

 

 

   

 

 

   

 

 

 

2010

        

1st

  $1,316    $1,073    $59    $7  

2nd

   1,502     1,222     93     40  

3rd

   1,542     1,280     67     10  

4th

   1,577     1,325     62     (18) 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $5,937    $4,900    $281    $39  
  

 

 

   

 

 

   

 

 

   

 

 

 

Quarter

  Basic
Earnings  (Loss)
per Share of
Common Stock		  Diluted
Earnings  (Loss)
per Share of
Common Stock		 

2011

   

1st

  $0.78   $0.75  

2nd

   0.84    0.81  

3rd

   0.51    0.49  

4th

   0.50    0.49  

Full Year

   2.62    2.55  

2010

   

1st

  $0.11   $0.11  

2nd

   0.68    0.66  

3rd

   0.17    0.17  

4th

   (0.31)   (0.31) 

Full Year

   0.65    0.63  

Note:The sum of the quarters may not equal the total of the respective year’s earnings per share on either a basic or diluted basis due to changes in the weighted average shares outstanding throughout the year.

(The preceding notes are an integral part of the foregoing consolidated financial statements.)

SCHEDULE VALUATION AND QUALIFYING ACCOUNTS


119

SCHEDULE II

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

Column A

  Column B   Column C   Column D   Column E 
       Additions         

Description

  Balance
at
Beginning
of Year		   Charged
to
Costs  and
Expenses		   Charged
to
Other
Accounts		   Deductions   Balance
at End of
Year		 
   (Millions) 

Allowance for Doubtful Accounts and Notes Receivable Deducted from Assets to Which it Applies:

          

Year Ended December 31, 2011

  $20     1     —     4    $17  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Year Ended December 31, 2010

  $25     2     —     7    $20  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Year Ended December 31, 2009

  $24     5     —     4    $25  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Column AColumn B Column C Column D Column E
  
Additions    
DescriptionBalance
at
Beginning
of Year		 Charged
to
Costs and
Expenses		 Charged
to
Other
Accounts		 Deductions Balance
at End of
Year
 (Millions)
Allowance for Doubtful Accounts and Notes Receivable Deducted from Assets to Which it Applies:
 
 
 
 
Year Ended December 31, 2013$14
 1
 —
 1
 $14
Year Ended December 31, 2012$17
 3
 —
 6
 $14
Year Ended December 31, 2011$20
 1
 —
 4
 $17

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ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.CONTROLS AND PROCEDURES.

ITEM 9A.CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the year covered by this report. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by our company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.

See Item 8, “Financial Statements and Supplementary Data” for management’s report on internal control over financial reporting and the report of our independent registered public accounting firm thereon.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2011,2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.OTHER INFORMATION.

ITEM 9B.OTHER INFORMATION.
None.

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.


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PART III
ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The sections entitled “Election of Directors” and “Corporate Governance” in our definitive Proxy Statement for the Annual Meeting of Stockholders to be held May 16, 201214, 2014 are incorporated herein by reference. In addition, Item 4.1 of this Annual Report on Form 10-K, which appears at the end of Part I, is incorporated herein by reference.

A copy of our Code of Ethical Conduct for Financial Managers, which applies to our Chief Executive Officer, Chief Financial Officer, Controller and other key financial managers, is filed as Exhibit 14 to this Form 10-K. We have posted a copy of the Code of Ethical Conduct for Financial Managers on our Internet website atwww.tenneco.com. We will make a copy of this code available to any person, without charge, upon written request to Tenneco Inc., 500 North Field Drive, Lake Forest, Illinois 60045, Attn: General Counsel. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K and applicable NYSE rules regarding amendments to or waivers of our Code of Ethical Conduct by posting this information on our Internet website atwww.tenneco.com.

ITEM 11.EXECUTIVE COMPENSATION.

ITEM 11.EXECUTIVE COMPENSATION.
The section entitled “Executive Compensation” in our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 16, 201214, 2014 is incorporated herein by reference.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The section entitled “Ownership of Common Stock” in our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 16, 201214, 2014 is incorporated herein by reference.

Securities Authorized for Issuance under Equity Compensation Plans

The following table shows, as of December 31, 2011,2013, information regarding outstanding awards available under our compensation plans (including individual compensation arrangements) under which our equity securities may be delivered:

Plan category

  (a)
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights(1)		   (b)
Weighted-
average exercise
price of
outstanding
options,
warrants and
rights		   (c)
Number of
securities
available for
future
issuance
(excluding
shares in
column (a))(1)		 

Equity compensation plans approved by security holders:

      

Stock Ownership Plan(2)

   79,155    $20.39     —  

2002 Long-Term Incentive Plan (as amended)(3)

   659,810    $6.06     —  

2006 Long-Term Incentive Plan(4)

   2,004,234    $19.30     1,569,025  

Plan category (a)
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights(1)		 (b)
Weighted-
average exercise
price of
outstanding
options,
warrants and
rights		 (c)
Number of
securities
available for
future
issuance
(excluding
shares in
column (a))(1)
Equity compensation plans approved by security holders: 
 
 
Stock Ownership Plan(2) 76,075
 $20.34
 —
2002 Long-Term Incentive Plan (as amended)(3) 12,628
 $9.74
 —
2006 Long-Term Incentive Plan (as amended)(4) 1,894,870
 $23.12
 3,979,918
(1)Reflects the number of shares of the Company’s common stock. Does not include 436,662388,851 shares that may be issued in settlement of common stock equivalent units that were (i) credited to outside directors as payment for their retainer and other fees or (ii) credited to any of our executive officers who have elected to defer a portion of their compensation. In general, these units are settled in cash. At the option of the Company, however, the units may be settled in shares of the Company’s common stock.

(2)This plan terminated as to new awards on December 31, 2001 (except awards pursuant to commitments outstanding at that date).

(3)This plan terminated as to new awards upon adoption of our 2006 Long-term Incentive Plan (except awards pursuant to commitments outstanding on that date).

(4)Does not include 407,751368,268 shares subject to outstanding restricted stock (vest over time) as of December 31, 20112013 that were issued at a weighted average grant date fair value of $22.64.$34.92. Under this plan, as of December 31, 2011,2013, a maximum of 1,255,2202,671,086 shares remained available for delivery under full value awards (i.e., bonus stock, stock equivalent units, performance units, restricted stock and restricted stock units).



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Table of Contents

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The subsections entitled “The Board of Directors and its Committees — General” and “Transactions with Related Persons” under the section entitled “Corporate Governance” in our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 16, 201214, 2014 are incorporated herein by reference.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The sections entitled “Ratify Appointment of Independent Public Accountants — Audit, Audit-Related, Tax and All Other Fees” and “Ratify Appointment of Independent Public Accountants — Pre-Approval Policy” in our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 16, 201214, 2014 are incorporated herein by reference.



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Table of Contents

PART IV
ITEM 15.

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITEM 8

See “Index to Financial Statements of Tenneco Inc. and Consolidated Subsidiaries” set forth in Item 8, “Financial Statements and Supplementary Data” for a list of financial statements filed as part of this Report.

INDEX TO SCHEDULE INCLUDED IN ITEM 8

 Page

Schedule of Tenneco Inc. and Consolidated Subsidiaries — Schedule II — Valuation and qualifying accounts — three years ended December 31, 2011

2013
119
120

SCHEDULES OMITTED AS NOT REQUIRED OR INAPPLICABLE

Schedule I — Condensed financial information of registrant

Schedule III — Real estate and accumulated depreciation

Schedule IV — Mortgage loans on real estate

Schedule V — Supplemental information concerning property — casualty insurance operations


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Table of Contents

EXHIBITS

The following exhibits are filed with this Annual Report on Form 10-K for the fiscal year ended December 31, 2011,2013, or incorporated herein by reference (exhibits designated by an asterisk are filed with the report; all other exhibits are incorporated by reference):

INDEX TO EXHIBITS

Exhibit

Number

 

Description

2—None.
3.1(a)—Restated Certificate of Incorporation of the registrant dated December 11, 1996 (incorporated herein by reference to Exhibit 3.1(a) of the registrant’s Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-12387).
3.1(b)—Certificate of Amendment, dated December 11, 1996 (incorporated herein by reference to Exhibit 3.1(c) of the registrant’s Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-12387).
3.1(c)—Certificate of Ownership and Merger, dated July 8, 1997 (incorporated herein by reference to Exhibit 3.1(d) of the registrant’s Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-12387).
3.1(d)—Certificate of Designation of Series B Junior Participating Preferred Stock dated September 9, 1998 (incorporated herein by reference to Exhibit 3.1(d) of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, File No. 1-12387).
3.1(e)—Certificate of Elimination of the Series A Participating Junior Preferred Stock of the registrant dated September 11, 1998 (incorporated herein by reference to Exhibit 3.1(e) of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, File No. 1-12387).
3.1(f)—Certificate of Amendment to Restated Certificate of Incorporation of the registrant dated November 5, 1999 (incorporated herein by reference to Exhibit 3.1(f) of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387).
3.1(g)—Certificate of Amendment to Restated Certificate of Incorporation of the registrant dated November 5, 1999 (incorporated herein by reference to Exhibit 3.1(g) of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387).
3.1(h)—Certificate of Ownership and Merger merging Tenneco Automotive Merger Sub Inc. with and into the registrant, dated November 5, 1999 (incorporated herein by reference to Exhibit 3.1(h) of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387).
3.1(i)—Certificate of Amendment to Restated Certificate of Incorporation of the registrant dated May 9, 2000 (incorporated herein by reference to Exhibit 3.1(i) of the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, File No. 1-12387).
3.1(j)—Certificate of Ownership and Merger merging Tenneco Inc. with and into the registrant, dated October 27, 2005 (incorporated herein by reference to Exhibit 99.1 of the registrant’s Current Report on Form 8-K dated October 28, 2005, File No. 1-12387).
3.2—By-laws of the registrant, as amended March 4, 2008 (incorporated herein by reference to Exhibit 99.1 of the registrant’s Current Report on Form 8-K event date March 4, 2008, File No. 1-12387).
3.3—Certificate of Incorporation of Tenneco Global Holdings Inc. (“Global”), as amended (incorporated herein by reference to Exhibit 3.3 of the registrant’s Registration Statement on Form S-4, Reg. No. 333-93757).
3.4—By-laws of Global (incorporated herein by reference to Exhibit 3.4 of the registrant’s Registration Statement on Form S-4, Reg. No. 333-93757).

Exhibit

Number

Description

3.5—Certificate of Incorporation of TMC Texas Inc. (“TMC”) (incorporated herein by reference to Exhibit 3.5 of the registrant’s Registration Statement on Form S-4, Reg. No. 333-93757).
3.6—By-laws of TMC (incorporated herein by reference to Exhibit 3.6 of the registrant’s Registration Statement on Form S-4, Reg. No. 333-93757).
3.7—Amended and Restated Certificate of Incorporation of Tenneco International Holding Corp. (“TIHC”) dated as of April 29, 2010 (incorporated herein by reference to Exhibit 3.1 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, File No. 1-12387).
3.8—Amended and Restated By-laws of TIHC (incorporated herein by reference to Exhibit 3.8 of the registrant’s Registration Statement on Form S-4, Reg. No. 333-93757).
3.9—Certificate of Incorporation of Clevite Industries Inc. (“Clevite”), as amended (incorporated herein by reference to Exhibit 3.9 of the registrant’s Registration Statement on Form S-4, Reg. No. 333-93757).
3.10—By-laws of Clevite (incorporated herein by reference to Exhibit 3.10 of the registrant’s Registration Statement on Form S-4, Reg. No. 333-93757).


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Table of Contents

Exhibit
Number
Description
3.11—Amended and Restated Certificate of Incorporation of The Pullman Company (“Pullman”) (incorporated herein by reference to Exhibit 3.11 of the registrant’s Registration Statement on Form S-4, Reg. No. 333-93757).
3.12—By-laws of Pullman (incorporated herein by reference to Exhibit 3.12 of the registrant’s Registration Statement on Form S-4, Reg. No. 333-93757).
3.13—Certificate of Incorporation of Tenneco Automotive Operating Company Inc. (“Operating”) (incorporated herein by reference to Exhibit 3.13 of the registrant’s Registration Statement on Form S-4, Reg. No. 333-93757).
3.14—By-laws of Operating (incorporated herein by reference to Exhibit 3.14 of the registrant’s Registration Statement on Form S-4, Reg. No. 333-93757).
4.1(a)4.1—Indenture, dated as of November 1, 1996, between the registrant and The Chase Manhattan Bank, as Trustee (incorporated herein by reference to Exhibit 4.1 of the registrant’s Registration Statement on Form S-4, Registration No. 333-14003).
4.1(b)—Third Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between the registrant and The Chase Manhattan Bank, as Trustee (incorporated herein by reference to Exhibit 4.3(d) of the registrant’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387).
4.1(c)—Fourth Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between the registrant and The Chase Manhattan Bank, as Trustee (incorporated herein by reference to Exhibit 4.3(e) of the registrant’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387).
4.1(d)—Eleventh Supplemental Indenture, dated October 21, 1999, to Indenture dated November 1, 1996 between The Chase Manhattan Bank, as Trustee, and the registrant (incorporated herein by reference to Exhibit 4.2(l) of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387).
4.2—Specimen stock certificate for Tenneco Inc. common stock (incorporated herein by reference to Exhibit 4.3 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006, File No. 1-12387).
4.3(a)4.2(a)—SecondThird Amended and Restated Credit Agreement, dated as of March 16, 2007,22, 2012, among Tenneco Inc., JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto (incorporated herein by reference to Exhibit 99.1 of the registrant’s Current Report on Form 8-K dated March 16, 2007).

Exhibit

Number

Description

4.3(b)—Guarantee and Collateral Agreement, dated as of March 16, 2007 (amending and restating the Guarantee and Collateral Agreement dated as of November 4, 1999, as previously amended and amended and restated), among Tenneco Inc., various of its subsidiaries and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 99.2 of the registrant’s Current Report on Form 8-K dated March 16, 2007).
4.3(c)—Waiver, dated July 23, 2007, to Second Amended and Restated Credit Agreement, dated as March 16, 2007, by and among the registrant, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto (incorporated herein by reference to Exhibit 4.5(c) of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2007, File No. 1-12387).
4.3(d)—Second Amendment, dated November 26, 2007, to Second Amended and Restated Credit Agreement, dated as March 16, 2007, by and among the registrant, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto (incorporated herein by reference to Exhibit 4.5(d) of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2007, File No. 1-12387).
4.3(e)—Third Amendment, dated as of December 23, 2008, to Second Amended and Restated Credit Agreement, dated as of March 16, 2007, by and among the registrant, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K dated December 23, 2008).
4.3(f)—Fourth Amendment, dated as of February 23, 2009, to Second Amended and Restated Credit Agreement, dated as of March 16, 2007, by and among the registrant, JP Morgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto (incorporated herein by reference to Exhibit 4.1 of the registrant’s Current Report on Form 8-K dated February 23, 2009)March 22, 2012).
4.3(g)4.2(b)—Fifth Amendment to the Second AmendedGuarantee and Restated CreditCollateral Agreement, dated June 3, 2010, byas of March 22, 2012 (amending and restating the Guarantee and Collateral Agreement dated as of March 17, 2007, as previously amended and restated), among the registrant,Tenneco Inc., various of its subsidiaries of the registrant and JP MorganJPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 99.14.2 of the registrant’s Current Report on Form 8-K filed June 9, 2010, File No. 1-12387)dated March 22, 2012).
4.3(h)4.3—Sixth Amendment to the Second Amended and Restated Credit Agreement, dated November 15, 2010, by and among the registrant, various subsidiaries of the registrant and JP Morgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 4.1 of the registrant’s Current Report on Form 8-K filed November 30, 2010, File No. 1-12387).
4.4(a)—Indenture, dated as of November 19, 2007, by and among the registrant, the subsidiary guarantors party thereto and Wells Fargo Bank, N.A., as trustee (incorporated herein by reference to Exhibit 4.9(a) of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2007, File No. 1-12387).
4.4(b)—Agreement of Resignation, Appointment and Acceptance between Tenneco Inc., Wells Fargo Bank, National Association and Bank of New York Mellon Trust Company, N.A. (incorporated herein by reference to Exhibit 10.1 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-12387).
4.5—Indenture, dated August 3, 2010, among the registrant, various subsidiaries of the registrant and U.S. Bank National Association, as trustee (incorporated herein by reference to Exhibit 4.1 of the registrant’s Current Report on Form 8-K filed August 3, 2010, File No. 1-12387).
4.64.4—Indenture, dated December 23, 2010, among the registrant, various subsidiaries of the registrant and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.1 of the registrant’s Current Report on Form 8-K filed December 23, 2010, File No. 1-12387).
94.5—None.

Exhibit

Number

Description

  10.1—Distribution Agreement, dated November 1, 1996, by and among El Paso Tennessee Pipeline Co., theThe registrant and Newport News Shipbuilding Inc. (incorporated herein by referenceis a party to Exhibit 2other agreements for unregistered long-term debt securities, which do not exceed 10% of the registrant’s Form 10, File No. 1-12387).total assets. The registrant agrees to furnish a copy of such agreements to the Commission upon request.
  10.29—Amendment No. 1 to Distribution Agreement, dated as of December 11, 1996, by and among El Paso Tennessee Pipeline Co., the registrant, and Newport News Shipbuilding Inc. (incorporated herein by reference to Exhibit 10.2 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387).
  10.3—Debt and Cash Allocation Agreement, dated December 11, 1996, by and among El Paso Tennessee Pipeline Co., the registrant, and Newport News Shipbuilding Inc. (incorporated herein by reference to Exhibit 10.3 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387).
  10.4—Benefits Agreement, dated December 11, 1996, by and among El Paso Tennessee Pipeline Co., the registrant, and Newport News Shipbuilding Inc. (incorporated herein by reference to Exhibit 10.4 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387).
  10.5—Insurance Agreement, dated December 11, 1996, by and among El Paso Tennessee Pipeline Co., the registrant, and Newport News Shipbuilding Inc. (incorporated herein by reference to Exhibit 10.5 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387).
  10.6—Tax Sharing Agreement, dated December 11, 1996, by and among El Paso Tennessee Pipeline Co., Newport News Shipbuilding Inc., the registrant, and El Paso Natural Gas Company (incorporated herein by reference to Exhibit 10.6 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387).
  10.7—First Amendment to Tax Sharing Agreement, dated as of December 11, 1996, among El Paso Tennessee Pipeline Co., the registrant, El Paso Natural Gas Company and Newport News Shipbuilding Inc. (incorporated herein by reference to Exhibit 10.7 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387).None
+10.810.1—Change of Control Severance Benefits Plan for Key Executives (incorporated herein by reference to Exhibit 10.13 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387).
+10.910.2—Stock Ownership Plan (incorporated herein by reference to Exhibit 10.1010.14 of the registrant’s Registration Statement on Form S-4, Reg. No. 333-93757).
+10.1010.3—Key Executive Pension Plan (incorporated herein by reference to Exhibit 10.11 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-12387).
+10.1110.4—Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.12 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-12387).
+10.1210.5—Supplemental Executive Retirement Plan (incorporated herein by reference to Exhibit 10.13 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-12387).
  10.13+10.6—Human Resources Agreement by and between the registrant and Tenneco Packaging Inc. dated November 4, 1999 (incorporated herein by reference to Exhibit 99.1 of the registrant’s Current Report on Form 8-K dated November 4, 1999, File No. 1-12387).
  10.14—Tax Sharing Agreement by and between the registrant and Tenneco Packaging Inc. dated November 3, 1999 (incorporated herein by reference to Exhibit 99.2 of the registrant’s Current Report on Form 8-K dated November 4, 1999, File No. 1-12387).

Exhibit

Number

Description

  10.15—Amended and Restated Transition Services Agreement by and between the registrant and Tenneco Packaging Inc. dated as of November 4, 1999 (incorporated herein by reference to Exhibit 10.21 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387).
+10.16—Amendment No. 1 to Change in Control Severance Benefits Plan for Key Executives (incorporated herein by reference to Exhibit 10.23 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-12387).
+10.1710.7—Form of Indemnity Agreement entered into between the registrant and the following directors of the registrant: Paul Stecko M. Kathryn Eickhoff and Dennis Severance (incorporated herein by reference to Exhibit 10.29 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, File No. 1-12387).
+10.1810.8—Letter Agreement dated July 27, 2000 between the registrant and Timothy E. Jackson (incorporated herein by reference to Exhibit 10.27 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-12387).
+10.19—Letter Agreement dated as of June 1, 2001 between the registrant and Hari Nair (incorporated herein by reference to Exhibit 10.28 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12387).
+10.20—2002 Long-Term Incentive Plan (As Amended and Restated Effective March 11, 2003) (incorporated herein by reference to Exhibit 10.26 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, File No. 1-12387).
+10.2110.9—Amendment No. 1 to Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.27 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-12387).



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Table of Contents

+10.22
Exhibit
Number
 —Supplemental Stock Ownership Plan (incorporated herein by reference to Exhibit 10.28 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-12387).Description
+10.2310.10—Form of Stock Option Agreement for employees under the 2002 Long-Term Incentive Plan, as amended (providing for a ten year option term) (incorporated herein by reference to Exhibit 99.2 of the registrant’s Current Report on Form 8-K dated January 13, 2005, File No. 1-12387).
+10.2410.11—Form of Stock Option Agreement for non-employee directors under the 2002 Long-Term Incentive Plan, as amended (providing for a ten year option term) (incorporated herein by reference to Exhibit 99.3 of the registrant’s Current Report on Form 8-K dated January 13, 2005, File No. 1-12387).
+10.25—Form of Stock Option Agreement for employees under the 2002 Long-Term Incentive Plan, as amended (providing for a seven year option term) (incorporated herein by reference to Exhibit 99.2 of the registrant’s Current Report on Form 8-K dated January 17, 2005, File No. 1-12387).
+10.26—Form of Stock Option Agreement for non-employee directors under the 2002 Long-Term Incentive Plan, as amended (providing for a seven year option term) (incorporated herein by reference to Exhibit 99.3 of the registrant’s Current Report on Form 8-K dated January 17, 2005, File No. 1-12387).
+10.27—Amendment No. 1 to the Key Executive Pension Plan (incorporated herein by reference to Exhibit 10.39 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 1-12387).
+10.2810.12—Amendment No. 1 to the Supplemental Executive Retirement Plan (incorporated herein by reference to Exhibit 10.40 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, File No. 1-12387).

Exhibit

Number

Description

+10.2910.13—Second Amendment to the Key Executive Pension Plan (incorporated herein by reference to Exhibit 10.41 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, File No. 1-12387).
+10.3010.14—Amendment No. 2 to the Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.42 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, File No. 1-12387).
+10.3110.15—Supplemental Retirement Plan (incorporated herein by reference to Exhibit 10.43 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, File No. 1-12387).
+10.3210.16—Supplemental Pension Plan for Management (incorporated herein by reference to Exhibit 10.45 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, File No. 1-12387).
+10.3310.17—Amended and Restated Value Added (“TAVA”) Incentive Compensation Plan, effective January 1, 2006 (incorporated herein by reference to Exhibit 10.47 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2005, File No. 1-12387).
+10.3410.18—Tenneco Inc. 2006 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 99.1 of the registrant’s Current Report on Form 8-K, dated May 9, 2006).
+10.3510.19—Form of Restricted Stock Award Agreement for non-employee directors under the Tenneco Inc. 2006 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 99.2 of the registrant’s Current Report on Form 8-K, dated May 9, 2006).
+10.36—Form of Stock Option Agreement for employees under the Tenneco Inc. 2006 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 99.3 of the registrant’s Current Report on Form 8-K, dated May 9, 2006).
+10.3710.20—Form of Restricted Stock Award Agreement for employees under the Tenneco Inc. 2006 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 99.4 of the registrant’s Current Report on Form 8-K, dated May 9, 2006).
+10.38—Form of First Amendment to the Tenneco Inc. Supplemental Pension Plan for Management (incorporated herein by reference to Exhibit 10.56 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006, File No. 1-12387).
+10.3910.21—Form of First Amendment to the Tenneco Inc. Supplemental Retirement Plan (incorporated herein by reference to Exhibit 10.57 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006, File No. 1-12387).
+10.4010.22—Letter Agreement dated January 5, 2007 between the registrant and Hari N. Nair (incorporated herein by reference to Exhibit 10.60 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006, File No. 1-12387).
+10.41—Letter Agreement between Tenneco Inc. and Gregg Sherrill (incorporated herein by reference to Exhibit 99.2 of the registrant’s Current Report on Form 8-K dated as of January 5, 2007, File No. 1-12387).
+10.42—Letter Agreement between Tenneco Inc. and Gregg Sherrill, dated as of January 15, 2007 (incorporated herein by reference to Exhibit 99.1 of the registrant’s Current Report on Form 8-K dated as of January 15, 2007, File No. 1-12387).
+10.43—Form of Restricted Stock Agreement between Tenneco Inc. and Gregg M. Sherrill (incorporated herein by reference to Exhibit 10.63 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006, File No. 1-12387).
+10.44—Form of Long-Term Performance Unit Award Under the 2006 Long-Term Incentive Plan (stub period award for 2007) (incorporated herein by reference to Exhibit 10.64 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, File No. 1-12387).

Exhibit

Number

Description

+10.45—Form of Long-Term Performance Unit Award Under the 2006 Long-Term Incentive Plan (three-year award for 2007-2009 period) (incorporated herein by reference to Exhibit 10.65 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, File No. 1-12387).
+10.46—Tenneco Inc. Change in Control Severance Benefit Plan for Key Executives, as Amended and Restated effective December 12, 2007 (incorporated herein by reference to Exhibit 10.61 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
+10.4710.23—Form of Long-Term Performance Unit Award Under the 2006 Long-Term Incentive Plan (stub period award for 2008) (incorporated herein by reference to Exhibit 10.67 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2007, File No. 1-12387).
+10.48—Form of Long-Term Performance Unit Award Under the 2006 Long-Term Incentive Plan (three-year award for periods commencing with 2008) (incorporated herein by reference to Exhibit 10.68 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2007, File No. 1-12387).
+10.49—Letter Agreement dated January 5, 2007 between the registrant and Timothy E. Jackson (incorporated herein by reference to Exhibit 10.69 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2007, File No. 1-12387).
+10.50—Excess Benefit Plan, including Supplements for Gregg M. Sherrill and Kenneth R. Trammell (incorporated herein by reference to Exhibit 10.65 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
+10.5110.24—Amendment No. 2 to Change in Control Severance Benefit Plan for Key Executives (incorporated herein by reference to Exhibit 10.66 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
+10.5210.25—Incentive Deferral Plan, as Amended and Restated Effective as of January 1, 2008 (incorporated herein by reference to Exhibit 10.67 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
+10.5310.26—Code Section 409A Amendment to 2002 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.68 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
+10.5410.27—Code Section 409A Amendment to 2006 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.69 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
+10.5510.28—Code Section 409A to Excess Benefit Plan (incorporated herein by reference to Exhibit 10.70 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
+10.5610.29—Code Section 409A Amendment to Supplemental Retirement Plan (incorporated herein by reference to Exhibit 10.71 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).



127
Table of Contents

+10.57
Exhibit
Number
 —Description
+10.30—Code Section 409A Amendment to Supplemental Pension Plan for Management (incorporated herein by reference to Exhibit 10.72 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
+10.5810.31—Code Section 409A Amendment to Amended and Restated Value Added (“TAVA”) Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.73 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
+10.5910.32—Code Section 409A Amendment to Letter Agreement between the registrant and Gregg M. Sherrill (incorporated herein by reference to Exhibit 10.74 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).

Exhibit

Number

Description

+10.60—Code Section 409A Amendment to Letter Agreement between the registrant and Hari N. Nair (incorporated herein by reference to Exhibit 10.75 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
+10.61—Code Section 409A Amendment to Letter Agreement between the registrant and Timothy E. Jackson (incorporated herein by reference to Exhibit 10.76 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
  10.62—Second Amended and Restated Receivables Purchase Agreement, dated as of May 4, 2005, among the registrant, as Servicer, Tenneco Automotive RSA Company, as Seller, Jupiter Securitization Corporation and Liberty Street Funding Corp., as Conduits The Bank of Nova Scotia, JP Morgan Chase Bank, N.A. and the Committed Purchasers from time to time party thereto, and Amendments 1 through 10 thereto (incorporated herein by reference to Exhibit 10.77 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
  10.63—Amendment No. 11, dated as of April 29, 2009, to Second Amended and Restated Receivable Purchase Agreement (incorporated herein by reference to Exhibit 10.1 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, File No. 1-12387).
+10.64—Tenneco Inc. 2006 Long-Term Incentive Plan (as amended and restated effective March 11, 2009) (incorporated herein by reference to Appendix A of the registrant’s proxy statement on Schedule 14A, filed with the Securities and Exchange Commission on March 31, 2009, File No. 1-12387).
  10.65+10.33—Amendment No. 12, dated as of June 25, 2009, to Second Amended and Restated Receivable Purchase Agreement (incorporated herein by reference to Exhibit 10.1 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, File No. 1-12387).
  10.66—Amendment No. 13, dated as of July 31, 2009, to Second Amended and Restated Receivable Purchase Agreement (incorporated herein by reference to Exhibit 10.2 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, File No. 1-12387).
  10.67—Underwriting Agreement, dated November 18, 2009, between Tenneco Inc. and the underwriters named therein (incorporated herein by reference to Exhibit 1.1 of the registrant’s Current Report on Form 8-K filed November 19, 2009, File No. 1-12387).
+10.68—Amendment No. 2, effective January 15, 2010, to Amended and Restated Tenneco Value Added Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.70 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2009, File No. 1-12387).
+10.6910.34—Amendment dated December 18, 2009, to Tenneco Inc. Incentive Deferral Plan (incorporated herein by reference to Exhibit 10.71 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2009, File No. 1-12387).
+10.7010.35—Form of Amendment toTenneco Inc. Three Year Long-Term Performance Unit Award under the 2006 Long-Term Incentive Plan (three year award for 2007-2009 period)Agreement (incorporated herein by reference to Exhibit 10.7210.1 of the registrant’s AnnualCurrent Report on Form 10-K for the year ended December 31, 2009,8-K dated as of March 15, 2010, File No. 1-12387).
+10.7110.36—Form of Amendment to Long-Term Performance Unit Award under theTenneco Inc. 2006 Long-Term Incentive Plan (three year award for 2008-2010 period)Restricted Stock Award Agreement (incorporated herein by reference to Exhibit 10.7310.1 of the registrant’s AnnualQuarterly Report on Form 10-K10-Q for the yearquarter ended December 31, 2009,September 30, 2010, File No. 1-12387).
  10.72+10.37—Second Amendment to Tenneco Inc. Incentive Deferral Plan effective as of January 1, 2011 (incorporated herein by reference to Exhibit 10.1 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, File No. 1-12387).
+10.38—First Amendment No. 14, dated February 19, 2010, to SecondTenneco Inc. Change in Control Severance Benefit Plan for Key Executives, as Amended and Restated Receivables Purchaseeffective December 12, 2007 (incorporated herein by reference to Exhibit 10.3 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, File No. 1-12387).
+10.39—Form of Restricted Stock Award for Non-Employee Directors under Tenneco Inc. 2006 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K dated January 18, 2012, File No. 1-12387).
+10.40—Form of Restricted Stock Award for Employees under Tenneco Inc. 2006 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.2 of the registrant’s Current Report on Form 8-K dated January 18, 2012, File No. 1-12387).
+10.41—Form of Non-Qualified Stock Option Agreement for Employees under Tenneco Inc. 2006 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.3 of the registrant’s Current Report on Form 8-K dated January 18, 2012, File No. 1-12387).
+10.42—Letter Agreement between Tenneco Inc. and Gregg M. Sherrill (incorporated herein by reference to Exhibit 99.2 of the registrant's Current Report on Form 8-K dated as of January 5, 2007. File No. 1-12387).
+10.43—Letter Agreement between Tenneco Inc. and Gregg M. Sherrill, dated as of January 15, 2007 (incorporated herein by reference to Exhibit 99.1 of the registrant’s Current Report on Form 8-K dated as of January 15, 2007, File No. 1-12387).
+10.44—Code Section 409A Amendment to Letter Agreement between the registrant and Gregg M. Sherrill (incorporated herein by reference to Exhibit 10.74 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2009,2008, File No. 1-12387).
+10.45—Letter Agreement dated January 5, 2007 between registrant and Hari N. Nair (incorporated herein by Exhibit 10.28 of the registrant's Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
+10.46—Letter Agreement dated January 5, 2007 between the registrant and Hari N. Nair (incorporated herein by reference to Exhibit 10.60 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006, File No. 1-12387).
+10.47—Code Section 409A Amendment to Letter Agreement between the registrant and Hari N. Nair (incorporated herein by reference to Exhibit 10.75 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-12387).
+10.48—General Manager Service Contract, dated as of March 1, 2007, between Heinrich Gillet GmbH and Josep Fornos (incorporated herein by reference from Exhibit 10.87 of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2011, File No. 1-12387).




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Exhibit

Number

 

Description

  10.73*+10.49—Letter of Understanding, dated as of January 2012, between Tenneco Inc. and Josep Fornos.
10.50—Third Amended and Restated Receivables Purchase Agreement, dated as of March 26, 2010, among Tenneco Automotive RSA Company, as Seller, Tenneco Automotive Operating Company Inc., as Servicer, Falcon Asset Securitization Company LLC and Liberty Street Funding LLC, as Conduits, the Committed Purchasers from time to time party thereto, JPMorgan Chase Bank, N.A., The Bank of Nova Scotia and Wells Fargo Bank, N.A., as Co-Agents and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K dated as of March 26, 2010, File No. 1-12387).
  10.7410.51—Intercreditor Agreement, dated as of March 26, 2010, among Tenneco Automotive RSA Company, Tenneco Automotive Operating Company Inc., JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A. (incorporated herein by reference to Exhibit 10.2 of the registrant’s Current Report on Form 8-K dated as of March 26, 2010, File No. 1-12387).
  10.7510.52—Omnibus Amendment No. 4, dated as of March 26, 2010, to Receivables Sale Agreements, as amended (incorporated herein by reference to Exhibit 10.3 of the registrant’s Current Report on Form 8-K dated as of March 26, 2010, File No. 1-12387).
  10.7610.53—SLOT Receivables Purchase Agreement, dated as of March 26, 2010, among Tenneco Automotive RSA Company, as Seller, Tenneco Automotive Operating Company Inc., as Servicer, and Wells Fargo Bank, N.A., individually and as SLOT Agent (incorporated herein by reference to Exhibit 10.4 of the registrant’s Current Report on Form 8-K dated as of March 26, 2010, File No. 1-12387).
  10.7710.54—Fourth Amended and Restated Performance Undertaking, dated as of March 26, 2010, by the registrant in favor of Tenneco Automotive RSA Company (incorporated herein by reference to Exhibit 10.5 of the registrant’s Current Report on Form 8-K dated as of March 26, 2010, File No. 1-12387).
+10.7810.55—Form of Tenneco Inc. Three Year Long-Term Performance Unit Award Agreement (incorporated herein by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K dated as of March 15, 2010, File No. 1-12387).
+10.79—Form of Tenneco Inc. 2006 Long-Term Incentive Plan Restricted Stock Award Agreement (incorporated herein by reference to Exhibit 10.1 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, File No. 1-12387).
+10.80—Second Amendment to Tenneco Inc. Incentive Deferral Plan effective as of January 1, 2011 (incorporated herein by reference to Exhibit 10.1 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, File No. 1-12387).
  10.81—Amendment No. 1 to Third Amended and Restated Receivables Purchase Agreement, dated as of March 25, 2011, among Tenneco Automotive RSA Company, as Seller, Tenneco Automotive Operating Company Inc., as Servicer, Falcon Asset Securitization Company LLC and Liberty Street Funding LLC, as Conduits, the Committed Purchasers from time to time party thereto, JPMorgan Chase Bank, N.A., The Bank of Nova Scotia and Wells Fargo Bank, N.A., as Co-Agents and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated herein by reference from Exhibit 10.1 of the registrant’s Current Report on Form 8-K dated as of March 29, 2011, File No. 1-12387).
  10.8210.56—Amendment No. 1 to SLOT Receivables Purchase Agreement, dated as of March 25, 2011, among Tenneco Automotive RSA Company, as Seller, Tenneco Automotive Operating Company Inc. as Servicer, and Wells Fargo Bank, N.A., individually and as SLOT Agent (incorporated herein by reference from Exhibit 10.2 of the registrant’s Current Report on Form 8-K dated as of March 29, 2011, File No. 1-12387).
+10.8310.57—First Amendment No. 2 to Tenneco Inc. Change in Control Severance Benefit Plan for Key Executives, asThird Amended and Restated effective December 12, 2007Receivables Purchase Agreement, dated as of March 23, 2012 (incorporated herein by reference to Exhibit 10.3 of the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, File No. 1-12387).

Exhibit

Number

Description

  +10.84—Form of Restricted Stock Award for Non-Employee Directors (incorporated herein by reference tofrom Exhibit 10.1 of the registrant’s Current Report on Form 8-K dated January 18,as of March 26, 2012, File No. 1-12387).
  +10.8510.58—FormAmendment No. 2 to SLOT Receivables Purchase Agreement, dated as of Restricted Stock Award for EmployeesMarch 23, 2012 (incorporated herein by reference tofrom Exhibit 10.2 of the registrant’s Current Report on Form 8-K dated January 18,as of March 26, 2012, File No. 1-12387).
  +10.8610.59—Form of Non-Qualified Stock OptionOmnibus Amendment No. 5 to Receivables Sale Agreements and Amendment No. 3 to Third Amended and Restated Receivables Purchase Agreement, for Employeesdated March 22, 2013 (incorporated herein by reference from Exhibit 10.1 of the registrant’s Current Report on Form 8-K dated as of March 22, 2013, File No. 1-12387).
10.60—Amendment No. 3 to SLOT Receivables Purchase Agreement, dated as of March 22, 2013 (incorporated herein by reference from Exhibit 10.2 of the registrant’s Current Report on Form 8-K dated as of March 22, 2013, File No. 1-12387).
10.61—Amendment No. 4 to SLOT Receivables Purchase Agreement, dated May 22, 2013 (incorporated herein by reference from Exhibit 10.41of the registrant’s Current Report on Form 8-K dated as of May 28, 2013, File No. 1-12387).
+10.62—Tenneco Inc. Executive Bonus Plan (incorporated herein by reference from Exhibit 99.1 of the registrant’s Current Report on Form 8-K dated as of January 15, 2014, File No. 1-12387).
+10.63—Amended and Restated Tenneco Inc. 2006 Long-Term Incentive Plan (effective March 18, 2013) (incorporated by reference to Appendix A of the Company’s Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on April 3, 2013).
+10.64—Form of Restricted Stock Award Agreement for Employees under Tenneco Inc. 2006 Long-Term Incentive Plan (awards after May 21, 2013) (incorporated herein by reference from Exhibit 10.3 of the registrant’s Current Report on Form 8-K dated January 18, 2012,as of May 21, 2013, File No. 1-12387).
+*10.87
Exhibit
Number
 Description


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Table of Contents

+10.65—General Manager Service Contract,Form of Stock Option Award Agreement for Employees under Tenneco Inc. 2006 Long-Term Incentive Plan (awards after May 21, 2013) (incorporated herein by reference from Exhibit 10.4 of the registrant’s Current Report on Form 8-K dated as of March 1, 2007, between Heinrich Gillet GmbH and Josep Fornos.May 21, 2013, File No. 1-12387).
+*10.8810.66—LetterForm of Understanding,Tenneco Inc. Long-Term Performance Unit Award Agreement under Tenneco Inc. 2006 Long-Term Incentive Plan (grants after January 14, 2014) (incorporated herein by reference from Exhibit 99.2 of the registrant’s Current Report on Form 8-K dated as of December 2, 2010, between Tenneco Inc. and Josep Fornos.January 15, 2014, File No. 1-12387).
11—None.
  *12*12—Computation of Ratio of Earnings to Fixed Charges.
13—None.
14—Tenneco Inc. Code of Ethical Conduct for Financial Managers (incorporated herein by reference from Exhibit 99.3 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-12387).
    16.116—Letter from Deloitte & Touche LLP to the Securities and Exchange Commission dated August 6, 2009 (incorporated herein by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K dated August 6, 2009, File No. 1-12387).
    16.2—Letter from Deloitte & Touche LLP to the Securities and Exchange Commission dated March 3, 2010 (incorporated herein by reference to Exhibit 16.1 of the registrant’s Current Report on Form 8-K dated March 3, 2010, File No. 1-12387).
    18—None.
  *2118—None.
*21—List of Subsidiaries of Tenneco Inc.
22—None.
  *23.1*23.1—Consent of PricewaterhouseCoopers LLP.
  *23.2*24.1—Consent of Deloitte & Touche LLP.
  *24—Powers of Attorney.
  *31.1*31.1—Certification of Gregg M. Sherrill under Section 302 of the Sarbanes-Oxley Act of 2002.
  *31.2*31.2—Certification of Kenneth R. Trammell under Section 302 of the Sarbanes-Oxley Act of 2002.
  *32.1*32.1—Certification of Gregg M. Sherrill and Kenneth R. Trammell under Section 906 of the Sarbanes-Oxley Act of 2002.
33—None.
34—None.
35—None.
99—None.
100—None.
101—None.
*101.INS—XBRL Instance Document.
*101.SCH—XBRL Taxonomy Extension Schema Document.
*101.CAL—XBRL Taxonomy Extension Calculation Linkbase Document.
*101.DEF—XBRL Taxonomy Extension Definition Linkbase Document.
*101.LAB—XBRL Taxonomy Extension Label Linkbase Document.
*101.PRE—XBRL Taxonomy Extension Presentation Linkbase Document.

*Filed herewith.

+Indicates a management contract or compensatory plan or arrangement.


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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TENNECO INC.
By
/S/    GREGG M. SHERRILL        
 Gregg M. Sherrill
 Chairman and Chief Executive Officer

Date: February 24, 2012

28, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed by the following persons in the capacities indicated on February 24, 2011.

28, 2014.

Signature

 

Title

/S/    GREGG M. SHERRILL        

Gregg M. Sherrill

 

/S/    GREGG M. SHERRILL     
Chairman President and Chief Executive Officer

and Director (principal executive officer)

Gregg M. Sherrill

/S/    KENNETH R. TRAMMELL        

Kenneth R. Trammell

 

/S/    KENNETH R. TRAMMELL     
Executive Vice President and Chief Financial

Officer (principal financial officer)

Kenneth R. Trammell

*

Paul D. Novas

 Vice President and Controller (principal accounting officer)
Paul D. Novas

*

Director
Thomas C. Freyman
*Director
Dennis J. Letham

 

Director

*

Director
Hari N. Nair

 

Director

*

Director
Roger B. Porter

 

Director

*

Director
David B. Price, Jr.

 

Director

*

Director
Paul T. Stecko

 

Director

*

Mitsunobu Takeuchi

 

Director

*

Director
Jane L. Warner

 

Director

*By:  

 

*BY:  
/S/    KENNETH R. TRAMMELL

Kenneth R. Trammell

Attorney in fact

 

158


131