e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended June 30,
2009
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission file number 1-12387
TENNECO INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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76-0515284
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification
No.)
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500 North Field Drive, Lake Forest, Illinois
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60045
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(Address of principal executive
offices)
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(Zip Code)
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Registrants telephone number, including area code:
(847) 482-5000
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 o
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 o No o
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):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange Act).
Yes o No þ
Indicate the number of shares outstanding of each of the
issuers classes of common stock as of the latest
practicable date.
Common Stock, par value $0.01 per share: 47,282,669 shares
outstanding as of July 31, 2009.
TABLE OF
CONTENTS
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Page
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4
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Tenneco Inc. and Consolidated Subsidiaries
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4
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5
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6
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7
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8
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9
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11
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41
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67
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68
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Item 1. Legal Proceedings
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*
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69
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69
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Item 3. Defaults Upon Senior Securities
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*
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69
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Item 5. Other Information
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*
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Item 6. Exhibits
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EX-10.1 |
EX-10.2 |
EX-12 |
EX-15 |
EX-31.1 |
EX-31.2 |
EX-32.1 |
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* |
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No response to this item is included herein for the reason that
it is inapplicable or the answer to such item is negative. |
1
CAUTIONARY
STATEMENT FOR PURPOSES OF THE SAFE HARBOR
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This Quarterly 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 2 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:
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general economic, business and market conditions, including
without limitation the severe financial difficulties facing a
number of companies in the automotive industry as a result of
the current global economic crisis, including the potential
impact thereof on labor unrest, supply chain disruptions,
weakness in demand and the collectibility of any accounts
receivable due to us from such companies;
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our ability to access the capital or credit markets and the cost
of capital, including the recent global financial and liquidity
crisis, changes in interest rates, market perceptions of the
sector in which we operate or ratings of our securities;
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the recent volatility in the credit markets, the losses which
may be sustained by our lenders due to their lending and other
financial relationships and the general instability of financial
institutions due to a weakened economy;
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changes in consumer demand, prices and our ability to have our
products included on top selling vehicles, such as the
significant shift in consumer preferences from light trucks,
which tend to be higher margin products for our customers and
us, to other vehicles in light of higher fuel cost and the
impact of the current global economic crisis, and other factors
impacting the cyclicality of automotive production and sales of
automobiles which include our products, and the potential
negative impact on our revenues and margins from such products;
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changes in automotive manufacturers production rates and
their actual and forecasted requirements for our products, such
as the recent and significant production cuts by automotive
manufacturers in response to difficult economic conditions;
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the overall highly competitive nature of the automotive parts
industry, and our resultant inability to realize the sales
represented by our awarded book of business (which is based on
anticipated pricing for the applicable program over its life,
and is subject to increases or decreases due to changes in
customer requirements, customer and consumer preferences, and
the number of vehicles actually produced by customers);
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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;
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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 platforms);
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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, and price recovery efforts with
aftermarket and OE customers;
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the cyclical nature of the global vehicle industry, including
the performance of the global aftermarket sector and the longer
product lives of automobile parts;
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2
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our continued success in cost reduction and cash management
programs and our ability to execute restructuring and other cost
reduction plans and to realize anticipated benefits from these
plans;
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costs related to product warranties;
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the impact of consolidation among automotive parts suppliers and
customers on our ability to compete;
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operating hazards associated with our business;
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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;
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the negative impact of higher fuel prices and overall market
weakness on discretionary purchases of aftermarket products by
consumers;
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the cost and outcome of existing and any future legal
proceedings;
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economic, exchange rate and political conditions in the foreign
countries where we operate or sell our products;
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customer acceptance of new products;
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new technologies that reduce the demand for certain of our
products or otherwise render them obsolete;
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our ability to realize our business strategy of improving
operating performance;
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our inability to successfully integrate any acquisitions that we
complete;
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changes by the Financial Accounting Standards Board or the
Securities and Exchange Commission of authoritative generally
accepted accounting principles or policies;
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changes in accounting estimates and assumptions, including
changes based on additional information;
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potential legislation, regulatory changes and other governmental
actions, including the ability to receive regulatory approvals
and the timing of such approvals;
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the impact of changes in and compliance with laws and
regulations, including environmental laws and regulations,
environmental liabilities in excess of the amount reserved and
the adoption of the current mandated timelines for worldwide
emission regulation;
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the potential impairment in the carrying value of our long-lived
assets and goodwill or our deferred tax assets;
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potential volatility in our effective tax rate;
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acts of war
and/or
terrorism, including, but not limited to, the events taking
place in the Middle East, the current military action in Iraq
and Afghanistan, and the current situation in North Korea, 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
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the timing and occurrence (or non-occurrence) of other
transactions, events and circumstances which may be beyond our
control.
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The risks included here are not exhaustive. Refer to
Part I, Item 1A Risk Factors
in our annual report on
Form 10-K
for the year ended December 31, 2008, 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.
3
PART I.
FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS (UNAUDITED)
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Tenneco Inc.
We have reviewed the accompanying condensed consolidated balance
sheet of Tenneco Inc. and consolidated subsidiaries (the
Company) as of June 30, 2009, and the related
condensed consolidated statements of income (loss), cash flows,
comprehensive income (loss) for the three-month and six-month
periods ended June 30, 2009 and 2008, and of changes in
shareholders equity for the six-month periods ended
June 30, 2009 and 2008. These interim financial statements
are the responsibility of the Companys management.
We conducted our reviews in accordance with the standards of the
Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting
Oversight Board (United States), the objective of which is the
expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to such condensed consolidated
interim financial statements for them to be in conformity with
accounting principles generally accepted in the United States of
America.
We have previously audited, in accordance with the standards of
the Public Company Accounting Oversight Board (United States),
the consolidated balance sheet of Tenneco Inc. and subsidiaries
as of December 31, 2008, and the related consolidated
statements of income (loss), cash flows, changes in
shareholders equity, and comprehensive income (loss) and
financial statement schedule for the year then ended prior to
retrospective adjustment for the adoption of FASB Statement
No. 160, Noncontrolling Interests in Consolidated
Financial Statements an amendment of ARB
No. 51, (not presented herein); and in our report dated
February 27, 2009, we expressed an unqualified opinion on
those consolidated financial statements and financial statement
schedule. We also audited the adjustments described in
Note 1 that were applied to retrospectively adjust the
December 31, 2008 consolidated balance sheet of the Company
(not presented herein). In our opinion, such adjustments are
appropriate and have been properly applied to the previously
issued consolidated balance sheet in deriving the accompanying
retrospectively adjusted condensed consolidated balance sheet as
of December 31, 2008.
DELOITTE & TOUCHE LLP
Chicago, Illinois
August 6, 2009
4
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Three Months
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Three Months
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Six Months
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Six Months
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Ended
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Ended
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Ended
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Ended
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June 30,
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June 30,
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June 30,
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June 30,
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2009
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2008
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2009
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2008
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(Millions Except Share and Per Share Amounts)
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Revenues
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Net sales and operating revenues
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$
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1,106
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$
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1,651
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$
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2,073
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$
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3,211
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Costs and expenses
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Cost of sales (exclusive of depreciation and amortization shown
below)
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913
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1,383
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1,740
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2,709
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Engineering, research, and development
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24
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34
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45
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70
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Selling, general, and administrative
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88
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102
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166
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207
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Depreciation and amortization of other intangibles
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55
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57
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107
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112
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1,080
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1,576
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2,058
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3,098
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Other income (expense)
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Loss on sale of receivables
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(2
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(2
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(4
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(4
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Other income (expense)
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(7
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2
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(7
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5
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(9
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(11
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)
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1
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Income before interest expense, income taxes, and
noncontrolling interests
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17
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75
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4
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114
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Interest expense (net of interest capitalized of $1 million
for each of the three months ended June 30, 2009 and 2008,
and $2 million and $3 million for the six months ended
June 30, 2009 and 2008, respectively)
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35
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33
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66
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58
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Income tax expense
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11
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27
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14
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32
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Net income (loss)
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(29
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)
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15
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(76
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24
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Less: Net income attributable to noncontrolling interests
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4
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2
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6
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5
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Net income (loss) attributable to Tenneco Inc.
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$
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(33
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$
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13
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$
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(82
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$
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19
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Earnings (loss) per share
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Weighted average shares of common stock outstanding
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Basic
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46,660,573
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46,404,077
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46,668,343
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46,320,774
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Diluted
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46,660,573
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47,729,214
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46,668,343
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47,719,218
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Basic earnings (loss) per share of common stock
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$
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(0.72
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)
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$
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0.26
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$
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(1.76
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)
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$
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0.40
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Diluted earnings (loss) per share of common stock
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$
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(0.72
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)
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$
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0.26
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$
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(1.76
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)
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$
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0.39
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The accompanying notes to condensed consolidated financial
statements are an integral part of these condensed consolidated
statements of income (loss).
5
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June 30,
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December 31,
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2009
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2008
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(Millions)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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111
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$
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126
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Receivables
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Customer notes and accounts, net
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581
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529
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Other
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56
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45
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Inventories
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Finished goods
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189
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211
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Work in process
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124
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143
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Raw materials
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96
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114
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Materials and supplies
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43
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45
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Deferred income taxes
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24
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18
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Prepayments and other
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114
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107
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Total current assets
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1,338
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1,338
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Other assets:
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Long-term receivables, net
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9
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11
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Goodwill
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95
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95
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Intangibles, net
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25
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26
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Deferred income taxes
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61
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|
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|
88
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Other
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|
122
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|
|
125
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|
|
|
|
|
|
|
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|
312
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|
|
|
345
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|
|
|
|
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Plant, property, and equipment, at cost
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3,040
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|
|
|
2,960
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Less Accumulated depreciation and amortization
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(1,923
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)
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|
|
(1,815
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
1,117
|
|
|
|
1,145
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|
|
|
|
|
|
|
|
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Total assets
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|
$
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2,767
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|
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$
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2,828
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LIABILITIES AND SHAREHOLDERS EQUITY
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Current liabilities:
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|
|
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Short-term debt (including current maturities of long-term debt)
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$
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65
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|
$
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49
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|
Trade payables
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|
|
701
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|
|
|
790
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|
Accrued taxes
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|
|
47
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|
|
|
30
|
|
Accrued interest
|
|
|
23
|
|
|
|
22
|
|
Accrued liabilities
|
|
|
221
|
|
|
|
201
|
|
Other
|
|
|
41
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,098
|
|
|
|
1,157
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
1,455
|
|
|
|
1,402
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
33
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
Postretirement benefits
|
|
|
373
|
|
|
|
377
|
|
|
|
|
|
|
|
|
|
|
Deferred credits and other liabilities
|
|
|
71
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,030
|
|
|
|
3,048
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests
|
|
|
4
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Tenneco Inc. Shareholders equity:
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
|
|
|
Premium on common stock and other capital surplus
|
|
|
2,813
|
|
|
|
2,809
|
|
Accumulated other comprehensive loss
|
|
|
(279
|
)
|
|
|
(318
|
)
|
Retained earnings (accumulated deficit)
|
|
|
(2,584
|
)
|
|
|
(2,502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(50
|
)
|
|
|
(11
|
)
|
Less Shares held as treasury stock, at cost
|
|
|
240
|
|
|
|
240
|
|
|
|
|
|
|
|
|
|
|
Total Tenneco Inc. shareholders equity
|
|
|
(290
|
)
|
|
|
(251
|
)
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests
|
|
|
23
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
(267
|
)
|
|
|
(227
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interests and equity
|
|
$
|
2,767
|
|
|
$
|
2,828
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to condensed consolidated financial
statements are an integral part of these condensed consolidated
balance sheets.
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions)
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(29
|
)
|
|
$
|
15
|
|
|
$
|
(76
|
)
|
|
$
|
24
|
|
Adjustments to reconcile net income (loss) to cash provided
(used) by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of other intangibles
|
|
|
55
|
|
|
|
57
|
|
|
|
107
|
|
|
|
112
|
|
Deferred income taxes
|
|
|
(4
|
)
|
|
|
(13
|
)
|
|
|
(3
|
)
|
|
|
(18
|
)
|
Stock-based compensation
|
|
|
2
|
|
|
|
2
|
|
|
|
4
|
|
|
|
5
|
|
Loss on sale of assets
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
|
|
5
|
|
Changes in components of working capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in receivables
|
|
|
(3
|
)
|
|
|
(61
|
)
|
|
|
(57
|
)
|
|
|
(148
|
)
|
(Increase) decrease in inventories
|
|
|
33
|
|
|
|
(4
|
)
|
|
|
67
|
|
|
|
(47
|
)
|
(Increase) decrease in prepayments and other current assets
|
|
|
(4
|
)
|
|
|
(22
|
)
|
|
|
(5
|
)
|
|
|
(39
|
)
|
Increase (decrease) in payables
|
|
|
38
|
|
|
|
27
|
|
|
|
(36
|
)
|
|
|
50
|
|
Increase (decrease) in accrued taxes
|
|
|
22
|
|
|
|
26
|
|
|
|
19
|
|
|
|
25
|
|
Increase (decrease) in accrued interest
|
|
|
(9
|
)
|
|
|
(10
|
)
|
|
|
1
|
|
|
|
(1
|
)
|
Increase (decrease) in other current liabilities
|
|
|
(2
|
)
|
|
|
27
|
|
|
|
(5
|
)
|
|
|
16
|
|
Changes in long-term assets
|
|
|
4
|
|
|
|
14
|
|
|
|
6
|
|
|
|
9
|
|
Changes in long-term liabilities
|
|
|
6
|
|
|
|
2
|
|
|
|
1
|
|
|
|
5
|
|
Other
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
4
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by operating activities
|
|
|
112
|
|
|
|
58
|
|
|
|
31
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of assets
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
Cash payments for plant, property, and equipment
|
|
|
(30
|
)
|
|
|
(64
|
)
|
|
|
(66
|
)
|
|
|
(127
|
)
|
Cash payments for software related intangible assets
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
(8
|
)
|
Acquisition of business, net of cash acquired
|
|
|
|
|
|
|
(19
|
)
|
|
|
1
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities
|
|
|
(32
|
)
|
|
|
(85
|
)
|
|
|
(67
|
)
|
|
|
(152
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Issuance of long-term debt
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Debt issuance cost of long-term debt
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
Retirement of long-term debt
|
|
|
(7
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
(3
|
)
|
Increase (decrease) in bank overdrafts
|
|
|
(11
|
)
|
|
|
3
|
|
|
|
(24
|
)
|
|
|
|
|
Net increase (decrease) in revolver borrowings and short-term
debt excluding current maturities of long-term debt
|
|
|
(62
|
)
|
|
|
30
|
|
|
|
75
|
|
|
|
121
|
|
Distributions to noncontrolling interest partners
|
|
|
(10
|
)
|
|
|
(2
|
)
|
|
|
(10
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities
|
|
|
(90
|
)
|
|
|
31
|
|
|
|
27
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash and cash
equivalents
|
|
|
8
|
|
|
|
(1
|
)
|
|
|
(6
|
)
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(2
|
)
|
|
|
3
|
|
|
|
(15
|
)
|
|
|
(24
|
)
|
Cash and cash equivalents, April 1 and January 1,
respectively
|
|
|
113
|
|
|
|
161
|
|
|
|
126
|
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, June 30 (Note)
|
|
$
|
111
|
|
|
$
|
164
|
|
|
$
|
111
|
|
|
$
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
43
|
|
|
$
|
39
|
|
|
$
|
65
|
|
|
$
|
61
|
|
Cash paid during the period for income taxes (net of refunds)
|
|
|
8
|
|
|
|
12
|
|
|
|
12
|
|
|
|
24
|
|
Non-cash Investing and Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period ended balance of payable for plant, property, and
equipment
|
|
$
|
11
|
|
|
$
|
22
|
|
|
$
|
11
|
|
|
$
|
22
|
|
|
|
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 condensed consolidated financial
statements are an integral part of these condensed consolidated
statements of cash flows.
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
(Millions Except Share Amounts)
|
|
|
Tenneco Inc. Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1
|
|
|
48,314,490
|
|
|
$
|
|
|
|
|
47,892,532
|
|
|
$
|
|
|
Issued pursuant to benefit plans
|
|
|
289,189
|
|
|
|
|
|
|
|
233,315
|
|
|
|
|
|
Stock options exercised
|
|
|
41,460
|
|
|
|
|
|
|
|
84,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
|
48,645,139
|
|
|
|
|
|
|
|
48,210,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium on Common Stock and Other Capital Surplus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1
|
|
|
|
|
|
|
2,809
|
|
|
|
|
|
|
|
2,800
|
|
Premium on common stock issued pursuant to benefit plans
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
|
|
|
|
|
2,813
|
|
|
|
|
|
|
|
2,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1
|
|
|
|
|
|
|
(318
|
)
|
|
|
|
|
|
|
(73
|
)
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
|
|
|
|
|
(279
|
)
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained Earnings (Accumulated Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1
|
|
|
|
|
|
|
(2,502
|
)
|
|
|
|
|
|
|
(2,087
|
)
|
Net income (loss) attributable to Tenneco Inc.
|
|
|
|
|
|
|
(82
|
)
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
|
|
|
|
|
(2,584
|
)
|
|
|
|
|
|
|
(2,068
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Common Stock Held as Treasury Stock, at
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1 and June 30
|
|
|
1,294,692
|
|
|
|
240
|
|
|
|
1,294,692
|
|
|
|
240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Tenneco Inc. shareholders equity
|
|
|
|
|
|
$
|
(290
|
)
|
|
|
|
|
|
$
|
490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1
|
|
|
|
|
|
$
|
24
|
|
|
|
|
|
|
$
|
25
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
Dividend declared
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
|
|
|
|
$
|
23
|
|
|
|
|
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
|
$
|
(267
|
)
|
|
|
|
|
|
$
|
516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to condensed consolidated financial
statements are an integral part
of these condensed consolidated statements of changes in
shareholders equity.
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2009
|
|
|
|
Tenneco Inc.
|
|
|
Noncontrolling Interests
|
|
|
Total
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Other
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
|
(Millions)
|
|
|
Net Income (Loss)
|
|
|
|
|
|
$
|
(33
|
)
|
|
|
|
|
|
$
|
4
|
|
|
|
|
|
|
$
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance April 1
|
|
$
|
(82
|
)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
(82
|
)
|
|
|
|
|
Translation of foreign currency statements
|
|
|
79
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Liability for Pension Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance April 1 and June 30
|
|
|
(276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
$
|
(279
|
)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
(279
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
$
|
46
|
|
|
|
|
|
|
$
|
4
|
|
|
|
|
|
|
$
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2008
|
|
|
|
Tenneco Inc.
|
|
|
Noncontrolling Interests
|
|
|
Total
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Other
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
|
(Millions)
|
|
|
Net Income (Loss)
|
|
|
|
|
|
$
|
13
|
|
|
|
|
|
|
$
|
2
|
|
|
|
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance April 1
|
|
$
|
139
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
139
|
|
|
|
|
|
Translation of foreign currency statements
|
|
|
12
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Liability for Pension Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance April 1 and June 30
|
|
|
(158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
$
|
(7
|
)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
$
|
25
|
|
|
|
|
|
|
$
|
2
|
|
|
|
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2009
|
|
|
|
Tenneco Inc.
|
|
|
Noncontrolling Interests
|
|
|
Total
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Other
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
|
(Millions)
|
|
|
Net Income (Loss)
|
|
|
|
|
|
$
|
(82
|
)
|
|
|
|
|
|
$
|
6
|
|
|
|
|
|
|
$
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1
|
|
$
|
(42
|
)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
(42
|
)
|
|
|
|
|
Translation of foreign currency statements
|
|
|
39
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Liability for Pension Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1 and June 30
|
|
|
(276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
$
|
(279
|
)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
(279
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
$
|
(43
|
)
|
|
|
|
|
|
$
|
6
|
|
|
|
|
|
|
$
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2008
|
|
|
|
Tenneco Inc.
|
|
|
Noncontrolling Interests
|
|
|
Total
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Other
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
|
(Millions)
|
|
|
Net Income (Loss)
|
|
|
|
|
|
$
|
19
|
|
|
|
|
|
|
$
|
5
|
|
|
|
|
|
|
$
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1
|
|
$
|
85
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
$85
|
|
|
|
|
|
Translation of foreign currency statements
|
|
|
66
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
66
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Liability for Pension Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1 and June 30
|
|
|
(158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30
|
|
$
|
(7
|
)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
$(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
$
|
85
|
|
|
|
|
|
|
$
|
5
|
|
|
|
|
|
|
$
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes to condensed consolidated financial
statements are an integral part
of these condensed consolidated statements of comprehensive
income (loss).
10
TENNECO
INC.
(Unaudited)
(1) As you read the accompanying financial statements you
should also read our Annual Report
on
Form 10-K
for the year ended December 31, 2008.
In our opinion, the accompanying unaudited financial statements
contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly Tenneco Inc.s
financial position, results of operations, cash flows, changes
in shareholders equity, and comprehensive income (loss)
for the periods indicated. We have prepared the unaudited
condensed consolidated financial statements pursuant to the
rules and regulations of the U.S. Securities and Exchange
Commission for interim financial information. Accordingly, they
do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of
America (GAAP) for annual financial statements.
Our condensed consolidated financial statements include all
majority-owned subsidiaries. We carry investments in
20 percent to 50 percent owned companies as an equity
method investment, at cost plus equity in undistributed earnings
since the date of acquisition and cumulative translation
adjustments. We have eliminated all intercompany transactions.
We have evaluated all subsequent events through August 6,
2009, the date the financial statements were issued.
Certain reclassifications have been made to the prior period
cash flow statements to conform to the current year
presentation. We have reclassified $(16) million and
$(19) million from the line item other operating activities
for the three months and six months ended June 30, 2008,
respectively, into two new line items, change in long-term
assets and change in long-term liabilities to provide additional
details on our cash flow statement. We have also reclassified
$1 million and $5 million from the line item increase
(decrease) in payables and $1 million and $1 million
from the line item increase (decrease) in other current
liabilities to the line item other operating activities for the
three months and six months ended June 30, 2008,
respectively to classify currency movement with the related line
items. We have also reclassified several amounts within the
operating section of the cash flow statement, none of which were
significant, to conform to the current year presentation.
Additionally, we have reclassified $3 million for the three
months ended June 30, 2008, from the line item increase
(decrease) in payables in the operating section of the cash flow
to a new line item increase (decrease) in bank overdrafts in the
financing section. The increase (decrease) in bank overdrafts
for the six months ended June 30, 2008 was less than
$1 million.
On January 1, 2009, we adopted Statement of Financial
Accounting Standards (SFAS) No. 160, Noncontrolling
Interests in Consolidated Financial Statements
(SFAS No. 160) which required us to reclassify
retrospectively for all periods presented, noncontrolling
ownership interests (formerly called minority interests) from
the mezzanine section of the balance sheet between liabilities
and equity to the equity section of the balance sheet, and to
change our presentation of net income (loss) in the condensed
consolidated statements of cash flows to include the portion of
net income (loss) attributable to noncontrolling ownership
interests. We have also expanded our financial statement
presentation and disclosure of noncontrolling ownership
interests on our condensed consolidated statements of income
(loss), condensed consolidated statements of comprehensive
income (loss) and condensed consolidated statements of changes
in shareholders equity in accordance with the new
SFAS No. 160 disclosure requirements.
We are subject to the requirements of EITF Topic
No. D-98,
Classification and Measurement of Redeemable
Securities (EITF D-98), which interprets
Rule 5-02.28
of
Regulation S-X.
Rule 5-02.28
requires shares whose redemption are outside of the control of
the issuer to be classified outside of permanent equity. We have
noncontrolling interests in three joint ventures with redemption
features that could require us to purchase the noncontrolling
interest at fair value in the event of a change in control of
Tenneco Inc. Additionally, a noncontrolling interest in a third
joint venture requires us to purchase the noncontrolling
interest at fair value in the event of default or under certain
other circumstances. 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 mezzanine section of our
condensed consolidated balance sheets in accordance with
11
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
EITF D-98. EITF D-98 does not impact the accounting for
noncontrolling interests on our condensed consolidated
statements of net income (loss).
(2) In September 2006, the Financial Accounting Standards
Board (FASB) issued SFAS No. 157 Fair Value
Measurement (SFAS No. 157) which was
effective for financial statements issued for fiscal years
beginning after November 15, 2007. We have adopted the
measurement and disclosure provisions of SFAS No. 157
relating to our financial assets and liabilities which are
measured on a recurring basis starting on January 1, 2008.
On January 1, 2009, we adopted the measurement and
disclosure provision of SFAS No. 157 relating to our
non-recurring nonfinancial assets and liabilities. The adoption
of SFAS No. 157 did not have a material impact on our
fair value measurements. SFAS No. 157 defines fair
value as the price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal most
advantageous market for the asset or liability in an orderly
transaction between market participants. SFAS No. 157
establishes a fair value hierarchy, which 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 fair value of our recurring financial assets and liabilities
at June 30, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
(Millions)
|
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
n/a
|
|
|
$
|
3
|
|
|
|
n/a
|
|
Foreign exchange forward contracts We use
foreign exchange 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 do not enter into
derivative financial instruments for speculative purposes. The
fair value of our foreign exchange forward contracts is based on
a 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. We have not designated our
foreign exchange forward contracts as hedging instruments under
FASB Statement No. 133, Derivative Instruments and
Hedging Activities. Accordingly, the change in fair
value of these foreign exchange forward contracts is recorded as
part of currency gains (losses) within cost of sales in the
condensed 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 condensed consolidated balance sheet. The
fair value of our foreign exchange forward contracts, presented
on a gross basis by derivative contract at June 30, 2009
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Derivative Instruments
|
|
|
|
Asset
|
|
|
Liability
|
|
|
|
|
|
|
Derivatives
|
|
|
Derivatives
|
|
|
Total
|
|
|
Foreign exchange forward contracts
|
|
$
|
4
|
|
|
$
|
1
|
|
|
$
|
3
|
|
12
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
The following table summarizes by major currency the notional
amounts, weighted-average settlement rates, and fair value for
foreign currency forward purchase and sale contracts as of
June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
|
Weighted Average
|
|
|
Fair Value in
|
|
|
|
|
|
in Foreign Currency
|
|
|
Settlement Rates
|
|
|
U.S. Dollars
|
|
|
|
|
|
(Millions Except Settlement Rates)
|
|
|
|
|
|
Australian dollars
|
|
Purchase
|
|
|
37
|
|
|
|
0.806
|
|
|
$
|
30
|
|
|
|
Sell
|
|
|
(3
|
)
|
|
|
0.806
|
|
|
|
(3
|
)
|
British pounds
|
|
Purchase
|
|
|
26
|
|
|
|
1.645
|
|
|
|
44
|
|
|
|
Sell
|
|
|
(25
|
)
|
|
|
1.646
|
|
|
|
(42
|
)
|
European euro
|
|
Purchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sell
|
|
|
(25
|
)
|
|
|
1.404
|
|
|
|
(35
|
)
|
South African rand
|
|
Purchase
|
|
|
396
|
|
|
|
0.130
|
|
|
|
51
|
|
|
|
Sell
|
|
|
(26
|
)
|
|
|
0.130
|
|
|
|
(3
|
)
|
U.S. dollars
|
|
Purchase
|
|
|
6
|
|
|
|
1.004
|
|
|
|
6
|
|
|
|
Sell
|
|
|
(58
|
)
|
|
|
1.001
|
|
|
|
(58
|
)
|
Other
|
|
Purchase
|
|
|
911
|
|
|
|
0.016
|
|
|
|
14
|
|
|
|
Sell
|
|
|
(1
|
)
|
|
|
0.860
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) The carrying and estimated fair values of our financial
instruments by class at June 30, 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount
|
|
|
Fair Value
|
|
|
|
(Millions)
|
|
|
|
Asset (Liabilities)
|
|
|
Long-term debt (including current maturities)
|
|
$
|
(1,460
|
)
|
|
$
|
(1,232
|
)
|
Instruments with off-balance sheet risk:
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
3
|
|
|
|
3
|
|
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 secured, senior and senior subordinated 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.
(4) 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. As of June 30, 2009, the senior credit
facility consisted of a five-year, $144 million term loan A
maturing in March 2012, a five-year, $550 million revolving
credit facility maturing in March 2012, and a seven-year
$130 million
tranche B-1
letter of credit/revolving loan facility maturing in March 2014.
Our outstanding debt also includes $245 million of
101/4 percent
senior secured notes due July 15, 2013, $250 million
of
81/8 percent
senior notes due November 15, 2015, and $500 million
of
85/8 percent
senior subordinated notes due November 15, 2014. At
June 30, 2009, we had unused borrowing capacity of
$333 million under our $680 million revolving credit
facility with $299 million in outstanding borrowings and
$48 million in letters of credit.
13
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
The term loan A facility is payable in twelve consecutive
quarterly installments, commencing June 30, 2009, as
follows: $6 million due each of June 30,
September 30, December 31, 2009 and March 31,
2010, $15 million due each of June 30,
September 30, December 31, 2010 and March 31,
2011, and $17 million due each of June 30,
September 30, December 31, 2011 and March 16,
2012. Over the next twelve months we plan to repay
$32 million of the senior term loan due 2012 by increasing
our revolver borrowings which are classified as long-term debt.
Accordingly, we have classified the $32 million repayment
as long-term debt. The revolving credit facility requires that
any amounts drawn be repaid by March 2012. Prior to that date,
funds may be borrowed, repaid and re-borrowed under the
revolving credit facility without premium or penalty. Letters of
credit may be issued under the revolving credit facility.
The
tranche B-1
letter of credit/revolving loan facility requires repayment by
March 2014. We can borrow 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, outstanding
letters of credit reduce our availability to borrow revolving
loans under this portion of the facility. We pay the
tranche B-1
lenders interest equal to LIBOR plus a margin, which is offset
by the return on the funds deposited with the administrative
agent by the lenders which earn interest at an annual rate
approximately equal to LIBOR less 25 basis points.
Outstanding revolving loans reduce the funds on deposit with the
administrative agent which in turn reduce the earnings of those
deposits.
On February 23, 2009, in light of the challenging
macroeconomic environment and auto production outlook, we
amended our senior credit facility to increase the allowable
consolidated net leverage ratio (consolidated indebtedness net
of cash divided by consolidated EBITDA as defined in the senior
credit facility agreement) and reduce the allowable consolidated
interest coverage ratio (consolidated EBITDA divided by
consolidated interest expense as defined in the senior credit
facility agreement). The financial ratios required under the
senior credit facility for 2009 and beyond are set forth below.
As of June 30, 2009, we were in compliance with all the
financial covenants and operational restrictions of the senior
credit facility.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
Leverage
|
|
|
Coverage
|
|
Period Ending
|
|
Ratio
|
|
|
Ratio
|
|
|
March 31, 2009
|
|
|
5.50
|
|
|
|
2.25
|
|
June 30, 2009
|
|
|
7.35
|
|
|
|
1.85
|
|
September 30, 2009
|
|
|
7.90
|
|
|
|
1.55
|
|
December 31, 2009
|
|
|
6.60
|
|
|
|
1.60
|
|
March 31, 2010
|
|
|
5.50
|
|
|
|
2.00
|
|
June 30, 2010
|
|
|
5.00
|
|
|
|
2.25
|
|
September 30, 2010
|
|
|
4.75
|
|
|
|
2.30
|
|
December 31, 2010
|
|
|
4.50
|
|
|
|
2.35
|
|
March 31, 2011
|
|
|
4.00
|
|
|
|
2.55
|
|
June 30, 2011
|
|
|
3.75
|
|
|
|
2.55
|
|
September 30, 2011
|
|
|
3.50
|
|
|
|
2.55
|
|
December 31, 2011
|
|
|
3.50
|
|
|
|
2.55
|
|
Each quarter thereafter
|
|
|
3.50
|
|
|
|
2.75
|
|
14
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
Beginning February 23, 2009 and following each fiscal
quarter thereafter, the margin we pay on borrowings under our
term loan A and revolving credit facility incurred interest at
an annual rate equal to, at our option, either (i) the
London Interbank Offered Rate plus a margin of 550 basis
points, or (ii) a rate consisting of the greater of
(a) the JPMorgan Chase prime rate plus a margin of
450 basis points, and (b) the Federal Funds rate plus
50 basis points plus a margin of 450 basis points. The
margin we pay on these borrowings will be reduced by
50 basis points following each fiscal quarter for which our
consolidated net leverage ratio is less than 5.0, and will be
further reduced by an additional 50 basis points following
each fiscal quarter for which the consolidated net leverage
ratio is less than 4.0.
Also beginning February 23, 2009 and following each fiscal
quarter thereafter, the margin we pay on borrowings under our
tranche B-1
facility incurred interest at an annual rate equal to, at our
option, either (i) the London Interbank Offered Rate plus a
margin of 550 basis points, or (ii) a rate consisting
of the greater of (a) the JPMorgan Chase prime rate plus a
margin of 450 basis points, and (b) the Federal Funds
rate plus 50 basis points plus a margin of 450 basis
points. The margin we pay on these borrowings will be reduced by
50 basis points following each fiscal quarter for which our
consolidated net leverage ratio is less than 5.0.
The February 23, 2009 amendment to our senior credit
facility also placed further restrictions on our operations
including limitations on: (i) debt incurrence,
(ii) incremental loan extensions, (iii) liens,
(iv) restricted payments, (v) optional prepayments of
junior debt, (vi) investments, (vii) acquisitions, and
(viii) mandatory prepayments. The definition of EBIDTA was
amended to allow for $40 million of cash restructuring
charges taken after the date of the amendment and
$4 million annually in aftermarket changeover costs. We
agreed to pay each consenting lender a fee. The lender fee plus
amendment costs were approximately $8 million.
On December 24, 2008, we amended our senior secured credit
facility to increase the margin we pay on the borrowings from
1.50% to 3.00% on revolver loans, term loan A and
tranche B-1
loans, from 0.50% to 2.00% on prime-based loans, from 1.00% to
2.50% on federal funds based loans and from 0.35% to 0.50% on
the commitment fee associated with the facility. In addition, we
agreed to pay each consenting lender a fee. The lender fee plus
amendment costs were approximately $3 million.
In December 2008, we terminated the
fixed-to-floating
interest rate swaps we entered into in April 2004. The change in
the market value of these swaps was recorded as part of interest
expense with an offset to other long-term assets or liabilities.
(5) In accordance with SFAS No. 109
Accounting for Income Taxes
(SFAS No. 109), we evaluate our deferred income taxes
quarterly to determine if valuation allowances are required or
should be adjusted. SFAS No. 109 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 been 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 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; and
|
|
|
|
Tax-planning strategies.
|
15
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
In 2008, we recorded tax expense of $289 million primarily
related to establishing a valuation allowance against our net
deferred tax assets in the U.S. During the first six months
of 2009, we recorded an additional valuation allowance of
$19 million primarily related to U.S. tax benefits
recorded on first six months 2009 U.S. losses. In the
U.S., we utilize the results from 2008 and a projection of
our results for 2009 as a measure of the cumulative losses in
recent years. Accounting standards do not permit us to give any
consideration to a likely economic recovery in the U.S. or
the recent new business we have won particularly in the
commercial vehicle segment in evaluating the requirement to
record a valuation allowance. Consequently, we concluded that
our ability to fully utilize our NOLs was limited due to
projecting the current negative economic environment into the
future and the impact of the current negative operating
environment on our tax planning strategies. As a result of tax
planning strategies which have not yet been implemented but
which we plan to implement and which do not depend upon
generating future taxable income, we continue to carry deferred
tax assets in the U.S. of $70 million relating to the
expected utilization of those NOLs. The federal NOL expires
beginning in 2020 through 2028. The state NOLs expire in various
years through 2028.
If our operating performance improves 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.
We are required to record a valuation allowance against deferred
tax assets generated by taxable losses in each period in the
U.S. as well as in other foreign countries. Our future
provision for income taxes will include no tax benefit with
respect to losses incurred and no tax expense with respect to
income generated in these jurisdictions until the respective
valuation allowance is eliminated. This will cause variability
in our effective tax rate.
(6) We have an agreement to sell an interest in some of our
U.S. trade accounts receivable to a third party.
Receivables become eligible for the program on a daily basis, at
which time the receivables are sold to the third party without
recourse, net of a discount, through a wholly-owned subsidiary.
Under this agreement, as well as individual agreements with
third parties in Europe, we have sold accounts receivable of
$172 million and $216 million at June 30, 2009
and 2008, respectively. We recognized a loss of $2 million
for each of the three month periods ended June 30, 2009 and
2008 and $4 million for each of the six month periods ended
June 30, 2009 and 2008 on these sales of trade accounts,
representing the discount from book values at which these
receivables were sold to the third party. The discount rate
varies based on funding cost incurred by the third party, which
has averaged approximately five percent during 2009. In the
U.S. securitization program, we retain ownership of the
remaining interest in the pool of receivables not sold to the
third party. The retained interest represents a credit
enhancement for the program. We record the retained interest
based upon the amount we expect to collect from our customers,
which approximates book value.
In January 2009, the U.S. securitization program was
amended and extended to March 2, 2009 at a facility size of
$120 million. These revisions had the affect of reducing
the amount of receivables sold by approximately $10 million
to $30 million compared to the terms of the previous
program. On February 23, 2009, this program was extended
for 364 days to February 22, 2010 at a facility size
of $100 million. In April 2009, we further amended the
U.S. securitization program by removing receivables related
to General Motors Corporation and Chrysler LLC from the program.
The program was further amended in June 2009 to include
receivables from Chrysler Group LLC and in July 2009 to include
receivables from General Motors Company.
Removing General Motors Corporation and Chrysler LLC from our
existing securitization program allowed us to sell all or a
portion of those receivables into the supplier program
established by the United States Treasury Department created to
support suppliers to domestic OEMs. Those receivables sold into
the program are paid in cash on the original due date of the
accounts receivable. We elected to end our participation in the
U.S. Treasury program in July. As of June 30, 2009, we
sold $23 million into the program and recorded a loss of
less than $1 million.
16
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
(7) 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. In the fourth quarter of 2001, our Board of Directors
approved a restructuring plan, a project known as Project
Genesis, which was designed to lower our fixed costs, relocate
capacity, reduce our work force, improve efficiency and
utilization, and better optimize our global footprint. We have
subsequently engaged in various other restructuring projects
related to Project Genesis. We incurred $40 million in
restructuring and related costs during 2008, of which
$17 million was recorded in cost of sales and
$23 million was recorded in selling, general,
administrative and engineering expense. In the second quarter of
2009, we incurred $3 million in restructuring and related
costs, of which $1 million was recorded in cost of sales,
$1 million was recorded in selling, general, administrative
and engineering expense and $1 million was recorded in
depreciation and amortization expense. In the first half of
2009, we incurred $6 million in restructuring and related
costs, of which $3 million was recorded in cost of sales,
$1 million was recorded in selling, general, administrative
and engineering expense and $2 million was recorded in
depreciation and amortization expense.
Under the terms of our amended and restated senior credit
agreement that took effect on February 23, 2009, we are
allowed to exclude $40 million of cash charges and
expenses, before taxes, related to cost reduction initiatives
incurred after February 23, 2009 from the calculation of
the financial covenant ratios required under our senior credit
facility. As of June 30, 2009, we have excluded
$4 million in allowable charges relating to restructuring
initiatives against the $40 million available under the
terms of the February 2009 amended and restated senior credit
facility.
On January 13, 2009, we announced that we will postpone
closing an original equipment ride control plant in the United
States as part of our current global restructuring program. We
still expect, as announced in October 2008, the elimination of
1,100 positions and estimate that we will record up to
$31 million in charges, of which approximately
$25 million represents cash expenditures, in connection
with the restructuring program announced in the fourth quarter
of 2008. We recorded $24 million of these charges in 2008,
$3 million in each of the first and second quarters of 2009
and expect to record the remaining $1 million during the
rest of 2009.
(8) 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. We
record liabilities when environmental assessments indicate that
remedial efforts are probable and the costs can be reasonably
estimated. Estimates of the liability are 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. 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. These estimated liabilities are
subject to revision in future periods based on actual costs or
new information. Where future cash flows are fixed or reliably
determinable, we have discounted the 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.
As of June 30, 2009, we have the obligation to remediate or
contribute towards the remediation of certain sites, including
two existing Superfund sites. At June 30, our estimated
share of environmental remediation costs at these sites was
approximately $17 million. 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
17
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
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.
The $17 million noted above includes $5 million of
estimated environmental remediation costs that result from the
recent bankruptcy of Mark IV Industries. Prior to our
acquisition of The Pullman Company, Pullman had sold certain
assets to Mark IV. As partial consideration for the purchase of
these assets, Mark IV agreed to assume Pullmans and
its subsidiaries historical obligations to contribute
towards the environmental remediation of certain sites.
Mark IV recently filed a petition for insolvency under
Chapter 11 of the United States Bankruptcy Code and
notified Pullman that it no longer intends to continue to
contribute toward the remediation of those sites. We are
conducting a thorough analysis and review of these matters and
it is possible that our estimate may change as additional
information becomes available to us.
We do not believe that any potential costs associated with our
current status as a potentially responsible party in the
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 are from time to time involved in legal proceedings, claims
or investigations that are incidental to the conduct of our
business. Some of these proceedings allege 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 warnings issues, and other
product liability related matters), taxes, employment matters,
and commercial or contractual disputes, sometimes related to
acquisitions or divestitures. For example, one of our Argentina
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. We
vigorously defend ourselves against all of these claims. In
future periods, we could be subjected to cash costs or non-cash
charges to earnings if any of these matters is resolved on
unfavorable terms. However, although 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 these legal
proceedings or claims 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. A small percentage 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. Nearly all of the claims are
related to alleged exposure to asbestos in our automotive
emission control products. Only a small percentage of these
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 muffler
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 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 non-cash charges to earnings
if any of these matters is resolved unfavorably to us. To date,
with respect to claims that have proceeded sufficiently through
the judicial process, we have regularly achieved favorable
resolution. During the first six months of 2009, dismissals were
initiated on behalf of 6 plaintiffs and are in process; we were
dismissed from an additional 697
18
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
cases. 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:
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions)
|
|
|
Beginning Balance January 1,
|
|
$
|
27
|
|
|
$
|
25
|
|
Accruals related to product warranties
|
|
|
7
|
|
|
|
8
|
|
Reductions for payments made
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
Ending Balance June 30,
|
|
$
|
28
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
(9) Earnings (loss) per share of common stock outstanding
were computed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions Except Share and Per Share Amounts)
|
|
|
Basic earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Tenneco Inc.
|
|
$
|
(33
|
)
|
|
$
|
13
|
|
|
$
|
(82
|
)
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares of common stock outstanding
|
|
|
46,660,573
|
|
|
|
46,404,077
|
|
|
|
46,668,343
|
|
|
|
46,320,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per average share of common stock
|
|
$
|
(0.72
|
)
|
|
$
|
0.26
|
|
|
$
|
(1.76
|
)
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Tenneco Inc.
|
|
$
|
(33
|
)
|
|
$
|
13
|
|
|
$
|
(82
|
)
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares of common stock outstanding
|
|
|
46,660,573
|
|
|
|
46,404,077
|
|
|
|
46,668,343
|
|
|
|
46,320,774
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock
|
|
|
|
|
|
|
42,862
|
|
|
|
|
|
|
|
93,229
|
|
Stock options
|
|
|
|
|
|
|
1,282,275
|
|
|
|
|
|
|
|
1,305,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares of common stock outstanding including dilutive
securities
|
|
|
46,660,573
|
|
|
|
47,729,214
|
|
|
|
46,668,343
|
|
|
|
47,719,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per average share of common stock
|
|
$
|
(0.72
|
)
|
|
$
|
0.26
|
|
|
$
|
(1.76
|
)
|
|
$
|
0.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the net loss for the three months and six months
ended June 30, 2009, the calculation of diluted loss per
share does not include the dilutive effect of 698,919 stock
options for the three month period, and 397,078
19
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
stock options for the six month period. In addition, for the
three month periods ended June 30, 2009 and 2008, options
to purchase 3,079,921 and 2,019,993 shares of common stock
and 651,291 and 592,212 shares of restricted stock were
outstanding, respectively, but not included in the computation
of diluted earnings (loss) per share because the options were
anti-dilutive. For the six month periods ended June 30,
2009 and 2008, options to purchase 3,381,762 and
1,997,053 shares of common stock and 651,291 and
541,845 shares of restricted stock were outstanding,
respectively, but not included in the computation of diluted
earnings (loss) per share as they were anti-dilutive.
(10) Equity Plans Tenneco has granted 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.
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.
Each share underlying an award generally counts as one share
against the total plan availability. Each share underlying a
full value award (e.g. restricted stock), however, counts as
1.25 shares against the total plan availability.
Accounting Methods The impact of recognizing
compensation expense related to nonqualified stock options is
contained in the table below.
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions)
|
|
|
Selling, general and administrative
|
|
$
|
2
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
Loss before interest expense, income taxes and noncontrolling
interests
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Income tax benefit
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Decrease in basic earnings per share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.03
|
)
|
Decrease in diluted earnings per share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.03
|
)
|
We immediately expense stock options awarded to employees who
are eligible to retire. When employees become eligible to retire
during the vesting period, we accelerate the expense associated
with their stock options.
As of June 30, 2009, there was approximately
$4 million of unrecognized compensation costs related to
these stock-based awards that we expect to recognize over a
weighted average period of 1.4 years.
Compensation expense for restricted stock, long-term performance
units and SARs, was approximately $3 million and
$2 million, for the six months ended June 30, 2009 and
2008, respectively, and was recorded in selling, general, and
administrative expense on the statement of income (loss).
Cash received from stock option exercises during the six months
ended June 30, 2009 was less than $1 million. Stock
option exercises during the first six months of 2009 would have
generated an excess tax benefit of less than $1 million.
Pursuant to footnote 82 of SFAS No. 123(R), this
benefit would not have been recorded as we have federal and
state net operating losses which are not currently being
utilized.
20
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
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. If
actual results differ significantly from these estimates,
stock-based compensation expense and our results of operations
could be materially impacted.
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Stock Options Granted
|
|
|
|
|
|
|
|
|
Weighted average grant date fair value, per share
|
|
$
|
1.31
|
|
|
$
|
8.08
|
|
Weighted average assumptions used:
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
82.6
|
%
|
|
|
37.7
|
%
|
Expected lives
|
|
|
4.5
|
|
|
|
4.1
|
|
Risk-free interest rates
|
|
|
1.5
|
%
|
|
|
2.8
|
%
|
Dividends yields
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
Weighted Avg.
|
|
|
|
|
|
|
Shares
|
|
|
Weighted Avg.
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Under
|
|
|
Exercise
|
|
|
Life in
|
|
|
Intrinsic
|
|
|
|
Option
|
|
|
Prices
|
|
|
Years
|
|
|
Value
|
|
|
|
(Millions)
|
|
|
Outstanding Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 1, 2009
|
|
|
3,149,376
|
|
|
$
|
15.16
|
|
|
|
4.1
|
|
|
$
|
1
|
|
Granted
|
|
|
697,600
|
|
|
|
1.99
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(12,994
|
)
|
|
|
19.41
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2009
|
|
|
3,833,982
|
|
|
$
|
12.75
|
|
|
|
5.0
|
|
|
$
|
|
|
Granted
|
|
|
12,159
|
|
|
|
6.61
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(25,841
|
)
|
|
|
26.31
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(41,460
|
)
|
|
|
2.29
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, June 30, 2009
|
|
|
3,778,840
|
|
|
$
|
12.75
|
|
|
|
4.7
|
|
|
$
|
5
|
|
21
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
Restricted Stock The following table reflects
the status for all nonvested restricted shares for the period
indicated:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30, 2009
|
|
|
|
|
|
|
Weighted Avg.
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Nonvested Restricted Shares
|
|
|
|
|
|
|
|
|
Nonvested balance at January 1, 2009
|
|
|
435,468
|
|
|
$
|
24.58
|
|
Granted
|
|
|
434,735
|
|
|
|
1.96
|
|
Vested
|
|
|
(204,965
|
)
|
|
|
24.17
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at March 31, 2009
|
|
|
665,238
|
|
|
$
|
9.92
|
|
Granted
|
|
|
5,622
|
|
|
|
6.61
|
|
Vested
|
|
|
(19,569
|
)
|
|
|
12.75
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested balance at June 30, 2009
|
|
|
651,291
|
|
|
$
|
9.81
|
|
The fair value of restricted stock grants is equal to the
average market price of our stock at the date of grant. As of
June 30, 2009, approximately $4 million of total
unrecognized compensation costs related to restricted stock
awards is expected to be recognized over a weighted-average
period of approximately 1.4 years.
Long-Term Performance Units and SARs
Long-term performance units and SARs are paid in cash and
recognized as a liability based upon their fair value. As of
June 30, 2009, $1 million of total unrecognized
compensation costs is expected to be recognized over the
weighted-average period of approximately 1.4 years.
(11) Net periodic pension costs (income) and postretirement
benefit costs (income) consist of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
US
|
|
|
Foreign
|
|
|
US
|
|
|
Foreign
|
|
|
US
|
|
|
US
|
|
|
|
(Millions)
|
|
|
Service cost benefits earned during the period
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
Interest cost
|
|
|
5
|
|
|
|
4
|
|
|
|
5
|
|
|
|
4
|
|
|
|
2
|
|
|
|
3
|
|
Expected return on plan assets
|
|
|
(6
|
)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
Settlement loss
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
Prior service cost
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension and postretirement costs
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
US
|
|
|
Foreign
|
|
|
US
|
|
|
Foreign
|
|
|
US
|
|
|
US
|
|
|
|
(Millions)
|
|
|
Service cost benefits earned during the period
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
|
|
|
$
|
1
|
|
Interest cost
|
|
|
10
|
|
|
|
8
|
|
|
|
10
|
|
|
|
8
|
|
|
|
4
|
|
|
|
5
|
|
Expected return on plan assets
|
|
|
(11
|
)
|
|
|
(9
|
)
|
|
|
(11
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
Settlement loss
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
|
3
|
|
|
|
3
|
|
Prior service cost
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension and postretirement costs
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2009, we made pension
contributions of approximately $6 million for our domestic
pension plans and $9 million for our foreign pension plans.
Based on current actuarial estimates, we believe we will be
required to make approximately $12 million in contributions
for the remainder of 2009.
We made postretirement contributions of approximately
$5 million during the first six months of 2009. Based on
current actuarial estimates, we believe we will be required to
make approximately $5 million in contributions for the
remainder of 2009.
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 fair value measurement
requirements of SFAS No. 157.
The Tenneco Pension Plan for Hourly Employees, Tenneco Clevite
Division Retirement Plan, Tenneco Angola Hourly Bargaining
Pension Plan and Tenneco Local 878 (UAW) Retirement Income Plan
pension plans were merged into the Tenneco Retirement Plan for
Salaried Employees effective December 31, 2008. The plans
were merged to reduce the cost of plan administration. There
were no changes to the terms of the plans or to the benefits
provided.
(12) On September 1, 2008, we acquired the suspension
business of Gruppo Marzocchi, an Italian based worldwide leader
in supplying suspension technology in the two wheeler market.
The consideration paid for the Marzocchi acquisition included
cash of approximately $1 million, plus the assumption of
Marzocchis net debt (debt less cash acquired) of about
$5 million. The Marzocchi acquisition is accounted for as a
purchase business combination with assets acquired and
liabilities assumed recorded in our consolidated balance sheet
as of September 1, 2008, including $8 million in
goodwill as of June 30, 2009. In February 2009, we recorded
an opening balance sheet adjustment of $1 million to cash,
as a result of an expected post-closing purchase price
settlement with Marzocchi, which resulted in a corresponding
decrease to goodwill. The acquisition of the Gruppo Marzocchi
suspension business includes a manufacturing facility in
Bologna, Italy, associated engineering and intellectual
property, the Marzocchi brand name, sales, marketing and
customer service operations in the United States and Canada, and
purchasing and sales operations in Taiwan. The final allocation
of the purchase price is pending the fair value appraisal of the
long-lived assets acquired which will be completed by the third
quarter of 2009.
On May 30, 2008, we acquired from Delphi Automotive Systems
LLC certain ride control assets and inventory at Delphis
Kettering, Ohio facility for a cash payment of $19 million.
We are utilizing a portion of the purchased assets in other
locations to grow our OE ride control business globally. We
finalized the purchase price allocation during the second
quarter of 2009. Adjustments recorded to the opening balance
sheet were not significant. The
23
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
calculated fair value of the purchased assets included
Level 2 observable inputs and Level 3 unobservable
inputs that utilized our own assumptions. The fair value of the
inventory items was calculated at current replacement cost while
the fair value of the machinery and equipment purchased was
based on values existing in the used-asset market. In
conjunction with the purchase agreement, we entered into an
agreement to lease a portion of the Kettering facility from
Delphi and we have entered into a long-term supply agreement
with General Motors Corporation to continue supplying passenger
car shocks and struts to General Motors from the Kettering
facility. The agreement has been assumed by the new General
Motors Company.
(13) In June 2009, the FASB issued SFAS No. 168,
The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles-a
replacement of FASB Statement No. 162
(SFAS No. 168). The FASB Accounting Standards
Codification is the source of authoritative U.S. generally
accepted accounting principles (GAAP) recognized by the FASB.
SFAS No. 162, A Hierarchy of Generally Accepted
Accounting Principles arranged sources of GAAP in a
hierarchy based on level of authority for users to apply
accordingly. SFAS No. 168 amends
SFAS No. 162 by stating that all content within the
codification carry the same level of authority.
SFAS No. 168 is effective for financial statements
issued for interim and annual periods ending after
September 15, 2009. We do not expect the adoption of
SFAS No. 168 to have a material impact on our
condensed consolidated financial statements and related
disclosures.
In June 2009, the FASB issued SFAS No. 167,
Amendments to FASB Interpretation No. 46(R)
(SFAS No. 167). SFAS No. 167 amends
FIN 46(R), Consolidation of Variable Interest
Entities, by changing the consolidation guidance
applicable to a variable interest entity (VIE) and amending the
guidance governing the determination of whether an enterprise is
the primary beneficiary of a VIE by requiring a qualitative
rather than quantitative analysis. SFAS No. 167 also
requires continuous reassessments of whether an enterprise is
the primary beneficiary of a VIE and enhanced disclosures about
an entitys involvement with a VIE. SFAS No. 167
is effective for a reporting entitys first annual
reporting period that begins after November 15, 2009, and
for interim and annual reporting periods thereafter. We are
evaluating SFAS No. 167 to determine the effect on our
condensed consolidated financial statements and related
disclosures.
In June 2009, the FASB issued SFAS No. 166,
Accounting for Transfers of Financial Assets-an amendment
of SFAS No. 140 (SFAS No. 166).
SFAS No. 166 amends SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, by eliminating the
concept of a qualifying special purpose entity (QSPE),
clarifying and amending the derecognition criteria for a
transfer to be accounted for as a sale, amending and clarifying
the unit of account eligible for sale accounting and requiring
that a transferor initially measure at fair value and recognize
all assets obtained and liabilities incurred as a result of a
transfer of a financial asset or group of financial assets
accounted for as a sale. Additionally, all existing QSPEs
must be evaluated for consolidation by reporting entities in
accordance with the applicable consolidation guidance.
SFAS No. 166 requires additional disclosures about a
transferors continuing involvement with transfers of
financial assets accounted for as sales, the risks inherent in
the transferred financial assets that have been retained, and
the nature and financial effect of restrictions on the
transferors assets that continue to be reported in the
statement of financial position. SFAS No. 166 is
effective for a reporting entitys first annual reporting
period that begins after November 15, 2009, and for interim
and annual reporting periods thereafter. We are evaluating
SFAS No. 166 to determine the effect on our condensed
consolidated financial statements and related disclosures.
In May 2009, the FASB issued SFAS No. 165,
Subsequent Events (SFAS No. 165).
SFAS No. 165 requires the disclosure of the date
through which an entity has evaluated subsequent events and the
basis for that date, that is, whether that date represents the
date the financial statements were issued or were available to
be issued. SFAS No. 165 is effective for interim or
annual reporting periods ending after June 15, 2009. We
have incorporated the disclosure requirement of
SFAS No. 165 as of June 30, 2009 within footnote
1 of our notes to condensed consolidated financial statements.
24
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
In April 2009, the FASB issued FASB Staff Position (FSP)
FAS 107-1
and APB 28-1
Interim Disclosures about Fair Value of Financial
Instruments
(FSP 107-1
and APB
28-1). The
objective of this FSP is to require public companies to disclose
information relating to fair value of financial instruments for
interim and annual reporting periods. This FSP will require
additional disclosure for all financial instruments for which it
is practicable to estimate fair value, including the fair value
and carrying value and the significant assumptions used to
estimate the fair value of these financial instruments.
FSP 107-1
and APB 28-1
is effective for interim reporting periods ending after
June 15, 2009 on a prospective basis with comparative
disclosures only for periods after initial adoption. We have
incorporated the disclosure requirements of
FSP 107-1
and APB 28-1
as of June 30, 2009 within footnote 3 of our notes to
condensed consolidated financial statements.
In April 2009, the FASB issued FSP
FAS 157-4
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly (FSP
FAS 157-4).
This FSP provides additional guidance on determining fair value
when the volume and level of activity for a level 2 or
level 3 asset or liability have significantly decreased
when compared with normal market activity for that asset or
liability (or similar assets or liabilities). This FSP amends
FAS 157 to require companies to disclose in interim and
annual periods the inputs and valuation technique(s) used to
measure fair value and changes in valuation techniques and
related inputs if applicable. Additionally, this FSP requires
disclosure of major equity and debt security types as described
in paragraph 19 of SFAS No. 115 Accounting
for Certain Investments in Debt and Equity Securities and
SFAS No. 124-2
Recognition and Presentation of
Other-Than-Temporary
Impairments, for all equity and debt securities measured
at fair value even if these securities are not within the scope
of SFAS No. 115. The adoption of FSP
FAS 157-4
is effective for interim and annual reporting periods ending
after June 15, 2009 on a prospective basis with comparative
disclosures only for periods after initial adoption. The
adoption of FSP
FAS 157-4
did not have a material impact on our condensed consolidated
financial statement at June 30, 2009.
In April 2009, the FASB issued FSP FAS 141(R)-1
Accounting for Assets Acquired and Liabilities Assumed in
a Business Combination that Arise from Contingencies (FSP
FAS 141(R)-1). FSP FAS 141(R)-1 expands disclosure in
the reporting period in which a company recognizes as a result
of a business acquisition, assets and liabilities arising from
contingencies. Expanded disclosures include the amounts
recognized at the acquisition date and the measurement basis
applied, the nature of contingencies and for contingencies that
are not recognized at the acquisition date, the disclosures
required by SFAS No. 5 Accounting for
Contingencies if the criteria for disclosure are met. FSP
FAS 141(R)-1 is effective for business combinations with an
acquisition date on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008.
The adoption of SFAS 141(R)-1 did not have a material
impact to our condensed consolidated financial statements.
In December 2008, the FASB issued FSP FAS 132(R)-1
Employers Disclosure about Postretirement Benefit
Plan Assets (FSP FAS 132(R)-1). FSP FAS 132(R)-1
amends SFAS No. 132(R), Employers
Disclosure about Pensions and Other Postretirement
Benefits, and provides guidance on disclosure for an
employers plan assets of a defined benefit pension or
other postretirement plan. FSP FAS 132(R)-1 requires
disclosure of plan asset investment policies and strategies, the
fair value of each major category of plan assets, information
about inputs and valuation techniques used to develop fair value
measurements of plan assets, and additional disclosure about
significant concentrations of risk in plan assets for an
employers pension and other postretirement plans. FSP
FAS 132(R)-1 is effective for fiscal years ending after
December 15, 2009. We do not believe the adoption of FSP
FAS 132(R)-1 will have a material impact on our condensed
consolidated financial statements, however, we will expand our
footnote disclosures relating to our pension plan to meet the
disclosure requirements of FSP FAS 132(R)-1.
In December 2008, the FASB issued FSP
FAS 140-4
and FIN 46(R)-8 Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities (FSP
FAS 140-4
and FIN 46(R)-8). The objective of this FSP is to
provide greater transparency to financial statement users about
a transferors continuing involvement with transferred
financial assets and an enterprises involvement with
variable
25
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
interest entities and qualifying special-purpose entities. This
FSP amends SFAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, to require public entities to provide
additional disclosures about transfers of financial assets.
Additionally, this FSP amends FASB Interpretation
No. 46-R,
Consolidation of Variable Interest Entities, to
require public enterprises to provide additional disclosures
about their involvement with variable interest entities. FSP
FAS 140-4
and FIN 46(R)-8 is effective for the first reporting period
(interim or annual) ending after December 15, 2008. The
adoption of FSP
FAS 140-4
and FIN 46(R)-8 did not have a material impact on our
condensed consolidated financial statements or disclosures.
In September 2008, the Emerging Issues Task Force (EITF) issued
EITF Issue
No. 08-7
(EITF 08-7),
Accounting for Defensive Intangible Assets.
EITF 08-7
defines a defensive intangible asset as an intangible asset
acquired by an entity in a business combination or an asset
acquisition that the entity does not intend to actively use but
rather intends to lock up the asset to prevent
competitors from obtaining access to the asset.
EITF 08-7
requires a defensive intangible asset to be accounted for as a
separate unit of accounting and should be assigned a useful life
that reflects the entitys consumption of the expected
benefits related to the asset.
EITF 08-7
is effective prospectively for intangible assets acquired on or
after the beginning of the first annual reporting period
beginning on or after December 15, 2008. The adoption of
EITF 08-7
did not have a material impact on our condensed consolidated
financial statements or disclosures.
In September 2008, the EITF issued EITF Issue
No. 08-6
(EITF 08-6),
Equity Method Investment Accounting Considerations.
EITF 08-6
requires that the initial carrying value of an equity method
investment should be based on the cost accumulation model
described in SFAS No. 141(R), Business
Combinations.
EITF 08-6
also concluded that an equity method investor (1) should
not separately test an investees underlying
indefinite-life intangible assets for impairment,
(2) should account for an investees share as if the
equity method investor sold a proportionate share of its
investment and (3) should continue applying the guidance of
APB Opinion No. 18, The Equity Method of Accounting
for Investors of Common Stock, upon a change in the
investors accounting from the equity to the cost method.
EITF 08-6
is effective on a prospective basis in fiscal years beginning on
or after December 15, 2008 including interim periods within
those fiscal years. The adoption of
EITF 08-6
did not have a material impact on our condensed consolidated
financial statements or disclosures.
In June 2008, the FASB issued FSP
EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based
Payment Transactions are Participating Securities (FSP
EITF 03-6-1).
FSP
EITF 03-6-1
requires that unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating and shall be included
in the computation of EPS pursuant to the two-class method. FSP
EITF 03-6-1
is effective for financial statements issued for fiscal years
beginning after December 15, 2008 and interim periods
within those years. The adoption of FSP
EITF 03-6-1
did not have any effect on our condensed consolidated financial
statements and related disclosures.
In April 2008, the FASB issued
FSP 142-3,
Determination of Useful Life of Intangible Assets
(FSP 142-3).
FSP 142-3
amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful
life of a recognized intangible asset under FASB Statement
No. 142, Goodwill and Other Intangible Assets,
and requires additional disclosure relating to an entitys
renewal or extension of recognized intangible assets.
FSP 142-3
is effective for financial statements issued for fiscal years
beginning after December 15, 2008 and interim periods
within those fiscal years. The adoption of
FSP 142-3
did not have a material impact on our condensed consolidated
financial statements.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133
(SFAS No. 161). SFAS No. 161 requires
enhanced disclosures about an entitys derivative and
hedging activities including how and why an entity uses
derivative instruments, how an entity accounts for derivatives
and hedges and how derivative instruments and related hedged
items affect an entitys financial position, financial
performance and cash flows. SFAS No. 161 is effective
for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008. We adopted
26
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
SFAS No. 161 on a prospective basis on January 1,
2009 and have incorporated the disclosure requirements within
footnote 2 of our notes to condensed consolidated financial
statements.
In February 2008, the FASB issued
FSP 140-3,
Accounting for Transfers of Financial Assets and
Repurchase Financing Transactions
(FSP 140-3).
FSP 140-3
provides guidance on accounting for a transfer of a financial
asset and a repurchase financing which is a repurchase agreement
that relates to a previously transferred financial asset between
the same counterparties that is entered into contemporaneously
with, or in contemplation of, the initial transfer.
FSP 140-3
is effective for financial statements issued for fiscal years
beginning after November 15, 2008, and interim periods
within those fiscal years. The adoption of
FSP 140-3
did not have a material impact on our condensed consolidated
financial statements and related disclosures.
In December 2007, the FASB issued SFAS No. 141
(Revised 2007), Business Combinations
(SFAS No. 141(R)). SFAS No. 141(R) requires
an acquirer to recognize the assets acquired, the liabilities
assumed, contractual contingencies and any noncontrolling
interest in the acquiree at the acquisition date at their fair
values as of that date. SFAS No. 141(R) provides
guidance on the accounting for acquisition-related costs,
restructuring costs related to the acquisition and the
measurement of goodwill and a bargain purchase.
SFAS No. 141(R) applies prospectively to business
combinations for which the acquisition date is on or after
December 15, 2008. The adoption of
SFAS No. 141(R) did not have a material impact to our
condensed consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements-an amendment of ARB No. 51
(SFAS No. 160). SFAS No. 160 amends ARB 51
to establish accounting and reporting standards for the
noncontrolling (minority) interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarified that a
noncontrolling interest in a subsidiary is an ownership interest
in the consolidated entity that should be reported as equity in
the condensed consolidated financial statements, establishes a
single method of accounting for changes in a parents
ownership interest in a subsidiary that does not result in
deconsolidation and provides for expanded disclosure in the
condensed consolidated financial statements relating to the
interests of the parents owners and the interests of the
noncontrolling owners of the subsidiary. SFAS No. 160
applies prospectively (except for the presentation and
disclosure requirements) for fiscal years and interim periods
within those fiscal years beginning on or after
December 15, 2008. The presentation and disclosure
requirements will be applied retrospectively for all periods
presented. The adoption of this statement has changed the
presentation of our condensed consolidated financial statements
based on the new disclosure requirements for noncontrolling
interests.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurement (SFAS No. 157).
This statement defines fair value, establishes a fair value
hierarchy for measuring fair value under generally accepted
accounting principles and expands disclosures about fair value
measurements. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after
November 15, 2007.
FSP 157-2
issued in February 2008 delays the effective date of
SFAS No. 157 for nonfinancial assets and nonfinancial
liabilities to fiscal years beginning after November 15,
2008 and interim periods within those fiscal years. We have
adopted the measurement and disclosure provisions of
SFAS No. 157 relating to our financial assets and
financial liabilities which are measured on a recurring basis
(at least annually) effective January 1, 2008. We have
adopted the measurement and disclosure provisions of
SFAS 157 for our nonfinancial assets and liabilities on
January 1, 2009. As a result of adopting
SFAS No. 157, we have added additional disclosures in
footnote 2 of our notes to condensed consolidated financial
statements, relating to the fair value of our financial and
non-financial assets and liabilities.
(14) 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,
our senior secured notes, our senior notes and our senior
subordinated 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. The $245 million senior secured notes is also
secured by second-priority liens on substantially all our
domestic assets, excluding some of the stock of our domestic
27
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
subsidiaries. No assets or capital stock of our direct or
indirect foreign subsidiaries secure these notes. You should
also read Note 17 of the condensed consolidated financial
statements of Tenneco Inc., where we present the Supplemental
Guarantor Condensed Consolidating Financial Statements.
We have issued guarantees through letters of credit in
connection with some obligations of our affiliates. As of
June 30, 2009, we have guaranteed $48 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 as they do not meet our
definition of cash equivalents. The amount of these financial
instruments that was collected before their maturity date and
sold at a discount totaled $4 million as of June 30,
2009, compared with $23 million at December 31, 2008.
No negotiable financial instruments were held by our European
subsidiary as of June 30, 2009 or December 31, 2008.
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 $11 million and $6 million at
June 30, 2009 and December 31, 2008, respectively, and
were classified as notes payable. Financial instruments received
from OE customers and not redeemed totaled $13 million and
$6 million at June 30, 2009 and December 31,
2008, respectively, and were classified as other current assets.
One of our Chinese subsidiaries that issues its own negotiable
financial instruments to pay its vendors is 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 that
Chinese subsidiary at June 30, 2009 and December 31,
2008.
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.
(15) The deterioration in the global economy and global
credit markets in the past year has negatively impacted global
business activity in general, and specifically the automotive
industry in which we operate. The market turmoil and tightening
of credit, as well as the dramatic decline in the housing market
in the United States and Western Europe, have led to a lack of
consumer confidence evidenced by a rapid decline in light
vehicle purchases in 2008 and the first six months of 2009.
Light vehicle production during the first six months of 2009
decreased by 50 percent in North America and
34 percent in Europe as compared to the first six months of
2008.
In response to current economic conditions, some of our
customers have eliminated or are expected to eliminate certain
light vehicle models or brands in order to remain or become
financially viable. While we do not believe that models
eliminated to date will have a significant impact to us, changes
in the models produced by our customers or sales of their brands
may have an adverse effect on our market share. Additional
declines in consumer demand would have a further adverse effect
on the financial condition of our OE customers, and on our
future results of operations. Continued or further financial
difficulties at any of our major customers could have an adverse
impact on the level of our future revenues and collection of our
receivables from such customers.
28
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
Other than the impact from production shutdowns during the
second quarter, we incurred no other economic loss from the
bankruptcy filings of Chrysler LLC or General Motors
Corporation. We have collected substantially all of our
pre-petition receivables from Chrysler LLC and General Motors
Corporation.
Further deterioration in the industry may have an impact on our
ability to meet future financial covenants which would require
us to enter into negotiations with our senior credit lenders to
request additional covenant relief. Such conditions and events
may also result in incremental charges related to impairment of
goodwill, intangible assets and long-lived assets, and in
charges to record an additional valuation allowance against our
deferred tax assets. In addition, a bankruptcy filing by a
significant customer could result in a condition of default
under our U.S. accounts receivables securitization
agreement, terminating future purchases of receivables under
that agreement, which would have an adverse effect on our
liquidity. See Note 6 of our notes to condensed
consolidated financial statements.
In the event that economic conditions diminish our future
revenues, we would pursue a range of actions 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.
(16) 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 income 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.
29
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
The following table summarizes certain Tenneco Inc. segment
information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
|
|
|
|
North
|
|
|
|
|
|
Asia
|
|
|
Reclass &
|
|
|
|
|
|
|
America
|
|
|
Europe
|
|
|
Pacific
|
|
|
Elims
|
|
|
Consolidated
|
|
|
|
(Millions)
|
|
|
At June 30, 2009 and for the Three Months Then Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
468
|
|
|
$
|
520
|
|
|
$
|
118
|
|
|
$
|
|
|
|
$
|
1,106
|
|
Intersegment revenues
|
|
|
2
|
|
|
|
34
|
|
|
|
3
|
|
|
|
(39
|
)
|
|
|
|
|
Income before interest expense, income taxes, and noncontrolling
interests
|
|
|
6
|
|
|
|
6
|
|
|
|
5
|
|
|
|
|
|
|
|
17
|
|
At June 30, 2008 and for the Three Months Then Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
674
|
|
|
$
|
815
|
|
|
$
|
162
|
|
|
$
|
|
|
|
$
|
1,651
|
|
Intersegment revenues
|
|
|
3
|
|
|
|
38
|
|
|
|
5
|
|
|
|
(46
|
)
|
|
|
|
|
Income before interest expense, income taxes, and noncontrolling
interests
|
|
|
17
|
|
|
|
48
|
|
|
|
10
|
|
|
|
|
|
|
|
75
|
|
At June 30, 2009 and for the Six Months Then Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
937
|
|
|
$
|
926
|
|
|
$
|
210
|
|
|
$
|
|
|
|
$
|
2,073
|
|
Intersegment revenues
|
|
|
3
|
|
|
|
72
|
|
|
|
5
|
|
|
|
(80
|
)
|
|
|
|
|
Income before interest expense, income taxes, and noncontrolling
interests
|
|
|
10
|
|
|
|
(11
|
)
|
|
|
5
|
|
|
|
|
|
|
|
4
|
|
Total assets
|
|
|
1,070
|
|
|
|
1,354
|
|
|
|
331
|
|
|
|
12
|
|
|
|
2,767
|
|
At June 30, 2008 and for the Six Months Then Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
1,357
|
|
|
$
|
1,551
|
|
|
$
|
303
|
|
|
$
|
|
|
|
$
|
3,211
|
|
Intersegment revenues
|
|
|
5
|
|
|
|
105
|
|
|
|
9
|
|
|
|
(119
|
)
|
|
|
|
|
Income before interest expense, income taxes, and noncontrolling
interests
|
|
|
26
|
|
|
|
73
|
|
|
|
15
|
|
|
|
|
|
|
|
114
|
|
Total assets
|
|
|
1,655
|
|
|
|
1,806
|
|
|
|
414
|
|
|
|
17
|
|
|
|
3,892
|
|
(17) Supplemental guarantor condensed consolidating
financial statements are presented below:
Basis of
Presentation
Subject to limited exceptions, all of our existing and future
material domestic 100% owned subsidiaries (which are referred to
as the Guarantor Subsidiaries) fully and unconditionally
guarantee our senior subordinated notes due in 2014, our senior
notes due in 2015 and our senior secured notes due 2013 on a
joint and several basis. We have not presented separate
financial statements and other disclosures concerning each of
the Guarantor Subsidiaries because management has determined
that such information is not material to the holders of the
notes. Therefore, the Guarantor Subsidiaries are combined in the
presentation below.
These condensed consolidating financial statements are presented
on the equity method. Under this method, our investments are
recorded at cost and adjusted for our ownership share of a
subsidiarys 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.
30
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
STATEMENT
OF INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
Tenneco Inc.
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
(Parent
|
|
|
Reclass &
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Company)
|
|
|
Elims
|
|
|
Consolidated
|
|
|
|
(Millions)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$
|
434
|
|
|
$
|
672
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,106
|
|
Affiliated companies
|
|
|
18
|
|
|
|
82
|
|
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
452
|
|
|
|
754
|
|
|
|
|
|
|
|
(100
|
)
|
|
|
1,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (exclusive of depreciation and amortization shown
below)
|
|
|
440
|
|
|
|
573
|
|
|
|
|
|
|
|
(100
|
)
|
|
|
913
|
|
Engineering, research, and development
|
|
|
8
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
Selling, general, and administrative
|
|
|
25
|
|
|
|
62
|
|
|
|
1
|
|
|
|
|
|
|
|
88
|
|
Depreciation and amortization of other intangibles
|
|
|
23
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
496
|
|
|
|
683
|
|
|
|
1
|
|
|
|
(100
|
)
|
|
|
1,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of receivables
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
Other income (loss)
|
|
|
12
|
|
|
|
(6
|
)
|
|
|
1
|
|
|
|
(14
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
(8
|
)
|
|
|
1
|
|
|
|
(14
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before interest expense, income taxes,
noncontrolling interests, and equity in net income from
affiliated companies
|
|
|
(32
|
)
|
|
|
63
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External (net of interest capitalized)
|
|
|
(1
|
)
|
|
|
2
|
|
|
|
34
|
|
|
|
|
|
|
|
35
|
|
Affiliated companies (net of interest income)
|
|
|
35
|
|
|
|
(4
|
)
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
4
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
Equity in net income (loss) from affiliated companies
|
|
|
53
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(17
|
)
|
|
|
58
|
|
|
|
(33
|
)
|
|
|
(37
|
)
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Tenneco Inc.
|
|
$
|
(17
|
)
|
|
$
|
54
|
|
|
$
|
(33
|
)
|
|
$
|
(37
|
)
|
|
$
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
STATEMENT
OF INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
Tenneco Inc.
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
(Parent
|
|
|
Reclass &
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Company)
|
|
|
Elims
|
|
|
Consolidated
|
|
|
|
(Millions)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$
|
569
|
|
|
$
|
1,082
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,651
|
|
Affiliated companies
|
|
|
12
|
|
|
|
50
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
581
|
|
|
|
1,132
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
1,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (exclusive of depreciation and amortization shown
below)
|
|
|
515
|
|
|
|
930
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
1,383
|
|
Engineering, research, and development
|
|
|
13
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
Selling, general, and administrative
|
|
|
35
|
|
|
|
66
|
|
|
|
1
|
|
|
|
|
|
|
|
102
|
|
Depreciation and amortization of other intangibles
|
|
|
20
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
583
|
|
|
|
1,054
|
|
|
|
1
|
|
|
|
(62
|
)
|
|
|
1,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of receivables
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
Other income (loss)
|
|
|
4
|
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before interest expense, income taxes,
noncontrolling interests, and equity in net income from
affiliated companies
|
|
|
2
|
|
|
|
78
|
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External (net of interest capitalized)
|
|
|
(2
|
)
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
33
|
|
Affiliated companies (net of interest income)
|
|
|
27
|
|
|
|
3
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
(4
|
)
|
|
|
29
|
|
|
|
2
|
|
|
|
|
|
|
|
27
|
|
Equity in net income (loss) from affiliated companies
|
|
|
40
|
|
|
|
|
|
|
|
22
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
21
|
|
|
|
46
|
|
|
|
13
|
|
|
|
(65
|
)
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Tenneco Inc.
|
|
$
|
21
|
|
|
$
|
44
|
|
|
$
|
13
|
|
|
$
|
(65
|
)
|
|
$
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
STATEMENT
OF INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
Tenneco Inc.
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
(Parent
|
|
|
Reclass &
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Company)
|
|
|
Elims
|
|
|
Consolidated
|
|
|
|
(Millions)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$
|
857
|
|
|
$
|
1,216
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,073
|
|
Affiliated companies
|
|
|
40
|
|
|
|
170
|
|
|
|
|
|
|
|
(210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
897
|
|
|
|
1,386
|
|
|
|
|
|
|
|
(210
|
)
|
|
|
2,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (exclusive of depreciation and amortization shown
below)
|
|
|
801
|
|
|
|
1,149
|
|
|
|
|
|
|
|
(210
|
)
|
|
|
1,740
|
|
Engineering, research, and development
|
|
|
14
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
45
|
|
Selling, general, and administrative
|
|
|
49
|
|
|
|
115
|
|
|
|
2
|
|
|
|
|
|
|
|
166
|
|
Depreciation and amortization of other intangibles
|
|
|
45
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
909
|
|
|
|
1,357
|
|
|
|
2
|
|
|
|
(210
|
)
|
|
|
2,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of receivables
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
Other income (loss)
|
|
|
(3
|
)
|
|
|
9
|
|
|
|
1
|
|
|
|
(14
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
5
|
|
|
|
1
|
|
|
|
(14
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before interest expense, income taxes,
noncontrolling interests, and equity in net income from
affiliated companies
|
|
|
(15
|
)
|
|
|
34
|
|
|
|
(1
|
)
|
|
|
(14
|
)
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External (net of interest capitalized)
|
|
|
(1
|
)
|
|
|
2
|
|
|
|
65
|
|
|
|
|
|
|
|
66
|
|
Affiliated companies (net of interest income)
|
|
|
67
|
|
|
|
(6
|
)
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
5
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
Equity in net income (loss) from affiliated companies
|
|
|
21
|
|
|
|
|
|
|
|
(77
|
)
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(65
|
)
|
|
|
29
|
|
|
|
(82
|
)
|
|
|
42
|
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Tenneco Inc.
|
|
$
|
(65
|
)
|
|
$
|
23
|
|
|
$
|
(82
|
)
|
|
$
|
42
|
|
|
$
|
(82
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
STATEMENT
OF INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
Tenneco Inc.
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
(Parent
|
|
|
Reclass &
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Company)
|
|
|
Elims
|
|
|
Consolidated
|
|
|
|
(Millions)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$
|
1,233
|
|
|
$
|
1,978
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,211
|
|
Affiliated companies
|
|
|
42
|
|
|
|
233
|
|
|
|
|
|
|
|
(275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,275
|
|
|
|
2,211
|
|
|
|
|
|
|
|
(275
|
)
|
|
|
3,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (exclusive of depreciation and amortization shown
below)
|
|
|
1,102
|
|
|
|
1,882
|
|
|
|
|
|
|
|
(275
|
)
|
|
|
2,709
|
|
Engineering, research, and development
|
|
|
28
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
70
|
|
Selling, general, and administrative
|
|
|
72
|
|
|
|
133
|
|
|
|
2
|
|
|
|
|
|
|
|
207
|
|
Depreciation and amortization of other intangibles
|
|
|
41
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,243
|
|
|
|
2,128
|
|
|
|
2
|
|
|
|
(275
|
)
|
|
|
3,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of receivables
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
Other income (loss)
|
|
|
10
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before interest expense, income taxes,
noncontrolling interests, and equity in net income from
affiliated companies
|
|
|
42
|
|
|
|
80
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External (net of interest capitalized)
|
|
|
(2
|
)
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
58
|
|
Affiliated companies (net of interest income)
|
|
|
65
|
|
|
|
(2
|
)
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
(4
|
)
|
|
|
31
|
|
|
|
5
|
|
|
|
|
|
|
|
32
|
|
Equity in net income (loss) from affiliated companies
|
|
|
34
|
|
|
|
|
|
|
|
25
|
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
17
|
|
|
|
51
|
|
|
|
19
|
|
|
|
(63
|
)
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Tenneco Inc.
|
|
$
|
17
|
|
|
$
|
46
|
|
|
$
|
19
|
|
|
$
|
(63
|
)
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
BALANCE
SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
|
|
|
|
|
|
|
Tenneco Inc.
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
(Parent
|
|
|
Reclass &
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Company)
|
|
|
Elims
|
|
|
Consolidated
|
|
|
|
(Millions)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
111
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
111
|
|
Receivables, net
|
|
|
423
|
|
|
|
849
|
|
|
|
35
|
|
|
|
(670
|
)
|
|
|
637
|
|
Inventories
|
|
|
173
|
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
452
|
|
Deferred income taxes
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
(42
|
)
|
|
|
24
|
|
Prepayments and other
|
|
|
15
|
|
|
|
99
|
|
|
|
4
|
|
|
|
(4
|
)
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
611
|
|
|
|
1,404
|
|
|
|
39
|
|
|
|
(716
|
)
|
|
|
1,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in affiliated companies
|
|
|
446
|
|
|
|
|
|
|
|
573
|
|
|
|
(1,019
|
)
|
|
|
|
|
Notes and advances receivable from affiliates
|
|
|
3,701
|
|
|
|
241
|
|
|
|
5,744
|
|
|
|
(9,686
|
)
|
|
|
|
|
Long-term receivables, net
|
|
|
4
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Goodwill
|
|
|
22
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
95
|
|
Intangibles, net
|
|
|
16
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
Deferred income taxes
|
|
|
51
|
|
|
|
25
|
|
|
|
12
|
|
|
|
(27
|
)
|
|
|
61
|
|
Other
|
|
|
32
|
|
|
|
62
|
|
|
|
28
|
|
|
|
|
|
|
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,272
|
|
|
|
415
|
|
|
|
6,357
|
|
|
|
(10,732
|
)
|
|
|
312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant, property, and equipment, at cost
|
|
|
1,036
|
|
|
|
2,004
|
|
|
|
|
|
|
|
|
|
|
|
3,040
|
|
Less Accumulated depreciation and amortization
|
|
|
(709
|
)
|
|
|
(1,214
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,923
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
327
|
|
|
|
790
|
|
|
|
|
|
|
|
|
|
|
|
1,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
5,210
|
|
|
$
|
2,609
|
|
|
$
|
6,396
|
|
|
$
|
(11,448
|
)
|
|
$
|
2,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt (including current maturities of long-term debt)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt non-affiliated
|
|
$
|
|
|
|
$
|
64
|
|
|
$
|
1
|
|
|
$
|
|
|
|
$
|
65
|
|
Short-term debt affiliated
|
|
|
207
|
|
|
|
319
|
|
|
|
10
|
|
|
|
(536
|
)
|
|
|
|
|
Trade payables
|
|
|
248
|
|
|
|
571
|
|
|
|
|
|
|
|
(118
|
)
|
|
|
701
|
|
Accrued taxes
|
|
|
25
|
|
|
|
26
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
47
|
|
Other
|
|
|
134
|
|
|
|
164
|
|
|
|
45
|
|
|
|
(58
|
)
|
|
|
285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
614
|
|
|
|
1,144
|
|
|
|
56
|
|
|
|
(716
|
)
|
|
|
1,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt non-affiliated
|
|
|
|
|
|
|
10
|
|
|
|
1,445
|
|
|
|
|
|
|
|
1,455
|
|
Long-term debt affiliated
|
|
|
4,301
|
|
|
|
200
|
|
|
|
5,185
|
|
|
|
(9,686
|
)
|
|
|
|
|
Deferred income taxes
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
(27
|
)
|
|
|
33
|
|
Postretirement benefits and other liabilities
|
|
|
350
|
|
|
|
90
|
|
|
|
|
|
|
|
4
|
|
|
|
444
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,265
|
|
|
|
1,504
|
|
|
|
6,686
|
|
|
|
(10,425
|
)
|
|
|
3,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tenneco Inc. Shareholders equity
|
|
|
(55
|
)
|
|
|
1,078
|
|
|
|
(290
|
)
|
|
|
(1,023
|
)
|
|
|
(290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
(55
|
)
|
|
|
1,101
|
|
|
|
(290
|
)
|
|
|
(1,023
|
)
|
|
|
(267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interests and equity
|
|
$
|
5,210
|
|
|
$
|
2,609
|
|
|
$
|
6,396
|
|
|
$
|
(11,448
|
)
|
|
$
|
2,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
BALANCE
SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
Tenneco Inc.
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
(Parent
|
|
|
Reclass
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Company)
|
|
|
& Elims
|
|
|
Consolidated
|
|
|
|
(Millions)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
16
|
|
|
$
|
110
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
126
|
|
Receivables, net
|
|
|
461
|
|
|
|
792
|
|
|
|
33
|
|
|
|
(712
|
)
|
|
|
574
|
|
Inventories
|
|
|
193
|
|
|
|
320
|
|
|
|
|
|
|
|
|
|
|
|
513
|
|
Deferred income taxes
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
(40
|
)
|
|
|
18
|
|
Prepayments and other
|
|
|
24
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
752
|
|
|
|
1,305
|
|
|
|
33
|
|
|
|
(752
|
)
|
|
|
1,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in affiliated companies
|
|
|
399
|
|
|
|
|
|
|
|
614
|
|
|
|
(1,013
|
)
|
|
|
|
|
Notes and advances receivable from affiliates
|
|
|
3,641
|
|
|
|
234
|
|
|
|
5,605
|
|
|
|
(9,480
|
)
|
|
|
|
|
Long-term receivables, net
|
|
|
1
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
Goodwill
|
|
|
22
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
95
|
|
Intangibles, net
|
|
|
17
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
Deferred income taxes
|
|
|
64
|
|
|
|
24
|
|
|
|
46
|
|
|
|
(46
|
)
|
|
|
88
|
|
Other
|
|
|
36
|
|
|
|
66
|
|
|
|
23
|
|
|
|
|
|
|
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,180
|
|
|
|
416
|
|
|
|
6,288
|
|
|
|
(10,539
|
)
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant, property, and equipment, at cost
|
|
|
1,039
|
|
|
|
1,921
|
|
|
|
|
|
|
|
|
|
|
|
2,960
|
|
Less Accumulated depreciation and amortization
|
|
|
(687
|
)
|
|
|
(1,128
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
352
|
|
|
|
793
|
|
|
|
|
|
|
|
|
|
|
|
1,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
5,284
|
|
|
$
|
2,514
|
|
|
$
|
6,321
|
|
|
$
|
(11,291
|
)
|
|
$
|
2,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt (including current maturities of long-term debt)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt non-affiliated
|
|
$
|
|
|
|
$
|
49
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
49
|
|
Short-term debt affiliated
|
|
|
174
|
|
|
|
371
|
|
|
|
10
|
|
|
|
(555
|
)
|
|
|
|
|
Trade payables
|
|
|
332
|
|
|
|
594
|
|
|
|
|
|
|
|
(136
|
)
|
|
|
790
|
|
Accrued taxes
|
|
|
12
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
Other
|
|
|
132
|
|
|
|
169
|
|
|
|
48
|
|
|
|
(61
|
)
|
|
|
288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
650
|
|
|
|
1,201
|
|
|
|
58
|
|
|
|
(752
|
)
|
|
|
1,157
|
|
Long-term debt non-affiliated
|
|
|
|
|
|
|
12
|
|
|
|
1,390
|
|
|
|
|
|
|
|
1,402
|
|
Long-term debt affiliated
|
|
|
4,229
|
|
|
|
127
|
|
|
|
5,124
|
|
|
|
(9,480
|
)
|
|
|
|
|
Deferred income taxes
|
|
|
43
|
|
|
|
54
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
51
|
|
Postretirement benefits and other liabilities
|
|
|
345
|
|
|
|
89
|
|
|
|
|
|
|
|
4
|
|
|
|
438
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,267
|
|
|
|
1,483
|
|
|
|
6,572
|
|
|
|
(10,274
|
)
|
|
|
3,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tenneco Inc. Shareholders equity
|
|
|
17
|
|
|
|
1,000
|
|
|
|
(251
|
)
|
|
|
(1,017
|
)
|
|
|
(251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
17
|
|
|
|
1,024
|
|
|
|
(251
|
)
|
|
|
(1,017
|
)
|
|
|
(227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interests and equity
|
|
$
|
5,284
|
|
|
$
|
2,514
|
|
|
$
|
6,321
|
|
|
$
|
(11,291
|
)
|
|
$
|
2,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
STATEMENT
OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
Tenneco Inc.
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
(Parent
|
|
|
Reclass &
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Company)
|
|
|
Elims
|
|
|
Consolidated
|
|
|
|
(Millions)
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by operating activities
|
|
$
|
103
|
|
|
$
|
84
|
|
|
$
|
(75
|
)
|
|
$
|
|
|
|
$
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payment for plant, property, and equipment
|
|
|
(8
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
Cash payment for software related intangible assets
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities
|
|
|
(8
|
)
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of long-term debt
|
|
|
|
|
|
|
(1
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
(7
|
)
|
Increase (decrease) in bank overdrafts
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
Net increase (decrease) in revolver borrowings and short-term
debt excluding current maturities of long-term debt
|
|
|
|
|
|
|
1
|
|
|
|
(63
|
)
|
|
|
|
|
|
|
(62
|
)
|
Intercompany dividends and net increase (decrease) in
intercompany obligations
|
|
|
(103
|
)
|
|
|
(41
|
)
|
|
|
144
|
|
|
|
|
|
|
|
|
|
Distribution to noncontrolling interest partners
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities
|
|
|
(103
|
)
|
|
|
(62
|
)
|
|
|
75
|
|
|
|
|
|
|
|
(90
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash and cash
equivalents
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(8
|
)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
Cash and cash equivalents, April 1
|
|
|
8
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, June 30 (Note)
|
|
$
|
|
|
|
$
|
111
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: |
Cash and cash equivalents include highly liquid investments with
a maturity of three months or less at the date of purchase.
|
37
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
STATEMENT
OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
Tenneco Inc.
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
(Parent
|
|
|
Reclass &
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Company)
|
|
|
Elims
|
|
|
Consolidated
|
|
|
|
(Millions)
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by operating activities
|
|
$
|
76
|
|
|
$
|
52
|
|
|
$
|
(70
|
)
|
|
$
|
|
|
|
$
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of assets
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Cash payment for plant, property, and equipment
|
|
|
(20
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
(64
|
)
|
Cash payment for software related intangible assets
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
Acquisition of business (net of cash acquired)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities
|
|
|
(41
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
(85
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in bank overdrafts
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Net increase (decrease) in revolver borrowings and short-term
debt excluding current maturities of long-term debt
|
|
|
|
|
|
|
2
|
|
|
|
28
|
|
|
|
|
|
|
|
30
|
|
Intercompany dividends and net increase (decrease) in
intercompany obligations
|
|
|
(31
|
)
|
|
|
(11
|
)
|
|
|
42
|
|
|
|
|
|
|
|
|
|
Distribution to noncontrolling interest partners
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities
|
|
|
(31
|
)
|
|
|
(8
|
)
|
|
|
70
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash and cash
equivalents
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Cash and cash equivalents, April 1
|
|
|
2
|
|
|
|
159
|
|
|
|
|
|
|
|
|
|
|
|
161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, June 30 (Note)
|
|
$
|
6
|
|
|
$
|
158
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: |
Cash and cash equivalents include highly liquid investments with
a maturity of three months or less at the date of purchase.
|
38
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
STATEMENT
OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
Tenneco Inc.
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
(Parent
|
|
|
Reclass &
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Company)
|
|
|
Elims
|
|
|
Consolidated
|
|
|
|
(Millions)
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by operating activities
|
|
$
|
40
|
|
|
$
|
128
|
|
|
$
|
(137
|
)
|
|
$
|
|
|
|
$
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of assets
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Cash payment for plant, property, and equipment
|
|
|
(24
|
)
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
(66
|
)
|
Cash payment for software related intangible assets
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
Acquisition of business (net of cash acquired)
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities
|
|
|
(25
|
)
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of long-term debt
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Debt issuance cost of long-term debt
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
(8
|
)
|
Retirement of long-term debt
|
|
|
|
|
|
|
(2
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
(8
|
)
|
Increase (decrease) in bank overdrafts
|
|
|
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
Net increase (decrease) in revolver borrowings and short-term
debt excluding current maturities of long-term debt
|
|
|
|
|
|
|
15
|
|
|
|
60
|
|
|
|
|
|
|
|
75
|
|
Intercompany dividends and net increase (decrease) in
intercompany obligations
|
|
|
(31
|
)
|
|
|
(58
|
)
|
|
|
89
|
|
|
|
|
|
|
|
|
|
Distribution to noncontrolling interest partners
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities
|
|
|
(31
|
)
|
|
|
(79
|
)
|
|
|
137
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash and cash
equivalents
|
|
|
|
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(16
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
Cash and cash equivalents, January 1
|
|
|
16
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, June 30 (Note)
|
|
$
|
|
|
|
$
|
111
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: |
Cash and cash equivalents include highly liquid investments with
a maturity of three months or less at the date of purchase.
|
39
TENNECO
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
STATEMENT
OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
Tenneco Inc.
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
(Parent
|
|
|
Reclass &
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Company)
|
|
|
Elims
|
|
|
Consolidated
|
|
|
|
(Millions)
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by operating activities
|
|
$
|
(15
|
)
|
|
$
|
42
|
|
|
$
|
(33
|
)
|
|
$
|
|
|
|
$
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of assets
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Cash payment for plant, property, and equipment
|
|
|
(53
|
)
|
|
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
|
(127
|
)
|
Cash payment for software related intangible assets
|
|
|
(5
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Acquisition of business (net of cash acquired)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities
|
|
|
(77
|
)
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
(152
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Retirement of long-term debt
|
|
|
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
(3
|
)
|
Net increase (decrease) in revolver borrowings and short-term
debt excluding current maturities of long-term debt
|
|
|
|
|
|
|
2
|
|
|
|
119
|
|
|
|
|
|
|
|
121
|
|
Intercompany dividends and net increase (decrease) in
intercompany obligations
|
|
|
92
|
|
|
|
(7
|
)
|
|
|
(85
|
)
|
|
|
|
|
|
|
|
|
Distribution to noncontrolling interest partners
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities
|
|
|
92
|
|
|
|
(10
|
)
|
|
|
33
|
|
|
|
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash and cash
equivalents
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
Cash and cash equivalents, January 1
|
|
|
6
|
|
|
|
182
|
|
|
|
|
|
|
|
|
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, June 30 (Note)
|
|
$
|
6
|
|
|
$
|
158
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: |
Cash and cash equivalents include highly liquid investments with
a maturity of three months or less at the date of purchase
|
40
|
|
ITEM 2.
|
MANAGEMENTS
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 condensed
consolidated financial statements and related notes beginning on
page 4.
Executive
Summary
We are one of the worlds leading manufacturers of
automotive emission control and ride control products and
systems. 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 and Fric
Rottm
ride control products and
Walker®,
Fonostm,
and
Gillettm
emission control products. Worldwide we serve more than 37
different original equipment manufacturers, and our products or
systems are included on eight of the top 10 passenger car models
produced for sale in Europe and eight of the top 10 light truck
models produced for sale in North America for 2008. Our
aftermarket customers are comprised of full-line and specialty
warehouse distributors, retailers, jobbers, installer chains and
car dealers. As of December 31, 2008, we operated 83
manufacturing facilities worldwide and employed approximately
21,000 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
wages and benefits, maximizing efficiencies in manufacturing
processes, fixing or eliminating unprofitable businesses 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.
The deterioration in the global economy and global credit
markets in the past year has negatively impacted global business
activity in general, and specifically the automotive industry in
which we operate. The market turmoil and tightening of credit,
as well as the dramatic decline in the housing market in the
United States and Western Europe, have led to a lack of consumer
confidence evidenced by a rapid decline in light vehicle
purchases in 2008 and the first six months of 2009. Light
vehicle production during the first six months of 2009 decreased
by 50 percent in North America and 34 percent in
Europe as compared to the first six months of 2008.
In response to current economic conditions, some of our
customers have eliminated or are expected to eliminate certain
light vehicle models or brands in order to remain or become
financially viable. While we do not believe that models
eliminated to date will have a significant impact to us, changes
in the models produced by our customers or sales of their brands
may have an adverse effect on our market share. Additional
declines in consumer demand would have a further adverse effect
on the financial condition of our OE customers, and on our
future results of operations. Continued or further financial
difficulties at any of our major customers could have an adverse
impact on the level of our future revenues and collection of our
receivables from such customers.
Further deterioration in the industry may have an impact on our
ability to meet future financial covenants which would require
us to enter into negotiations with our senior credit lenders to
request additional covenant relief. Such conditions and events
may also result in incremental charges related to impairment of
goodwill, intangible assets and long-lived assets, and in
charges to record an additional valuation allowance against our
deferred tax assets. In addition, a bankruptcy filing by a
significant customer could result in a condition of default
under our U.S. accounts receivables securitization
agreement, terminating future purchases of receivables under
that agreement, which would have an adverse effect on our
liquidity. See Note 6 of our notes to condensed
consolidated financial statements.
In the event that economic conditions diminish our future
revenues, we would pursue a range of actions to meet our cash
flow needs. Such actions include additional restructuring
initiatives and other cost reductions, sales of
41
assets, reductions to working capital and capital spending,
issuance of equity and other alternatives to enhance our
financial and operating position.
Other than the impact from production shutdowns during the
second quarter, we incurred no other economic loss from the
bankruptcy filings of Chrysler or General Motors. On
April 30, 2009, Chrysler LLC and its U.S. subsidiaries
filed for bankruptcy protection under Chapter 11 of the
U.S. Bankruptcy Code. Chrysler formed a new company in
partnership with Fiat (Chrysler Group LLC) which, on
June 10, 2009, purchased certain assets of Chrysler LLC in
a sale under Section 363 of the Bankruptcy Code
(Section 363). We collected substantially all of our
pre-petition receivables and Chrysler Group LLC has assumed
substantially all of the contracts which we had with Chrysler
LLC.
On June 1, 2009, General Motors Corporation and certain of
its U.S. subsidiaries filed for bankruptcy protection under
Chapter 11 of the U.S. Bankruptcy Code. On
July 10, 2009, a new company, General Motors Company, which
is initially owned by the U.S. government, the UAW Retiree
Medical Benefits Trust, the Canadian government, the Ontario
government and the former bondholders of General Motors
Corporation, purchased certain of the assets of General Motors
Corporation in a sale under Section 363. We collected
substantially all of our pre-petition receivables and General
Motors Company has assumed substantially all of the contracts
which we had with General Motors Corporation.
In April 2009, we removed both Chrysler LLC and General Motors
Corporation from our U.S. accounts receivable
securitization program. With respect to certain of our
U.S. sales to General Motors Corporation, we participated
in the U.S. Treasury Departments Auto Supplier
Support program. We have now opted out of that program and both
Chrysler Group LLC and General Motors Company have been added
back into our U.S. securitization program.
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 Risk
Factors included in our Annual Report on
Form 10-K
for the year ended December 31, 2008.
Total revenues for the second quarter of 2009 were
$1,106 million, compared to $1,651 million in the
second quarter of 2008. Excluding the impact of currency and
substrate sales, revenue was down $217 million or
17 percent due to lower
year-over-year
OE vehicle production levels in most geographic regions.
Gross margin in the second quarter of 2009 was
17.5 percent, up from 16.2 percent in 2008. The
improvement, despite lower
year-over-year
sales, was driven by our cost reduction efforts, restructuring
savings and lower restructuring and related charges partially
offset by lower OE production volumes and manufacturing fixed
cost absorption. The second quarters gross margin
performance was the best gross margin performance since the
third quarter of 2006, reflecting the effectiveness of the
companys restructuring and operational cost reduction
actions globally, as well as the benefit from a stronger mix
between OE and aftermarket revenues as aftermarket revenues
typically carry higher gross margins.
Selling, general and administrative expense was down
$14 million in the second quarter of 2009, at
$88 million, compared to $102 million in the second
quarter of 2008. Cost reduction efforts, which included
restructuring savings and employee salary reductions drove the
improvement. The second quarter of 2009 included $1 million
in restructuring and related expense compared to $7 million
in aftermarket customer changeover costs and $3 million in
restructuring and related expense in the second quarter of 2008.
Engineering expense was $24 million and $34 million in
the second quarter of 2009 and 2008, respectively. Cost
reduction efforts, including engineering cost recoveries and
employee salary reductions, reduced engineering costs. Selling,
general, administrative and engineering expenses increased to
10.1 percent of revenues from 8.2 percent of revenues
in 2008 due to lower
year-over-year
revenues.
Earnings before interest expense, taxes and noncontrolling
interests (EBIT) was $17 million for the second
quarter of 2009 compared to $75 million in the second
quarter of 2008. Lower OE production volumes globally and the
related manufacturing fixed cost absorption reduced EBIT by
$89 million in addition to $9 million of
42
unfavorable currency
year-over-year.
We offset a portion of this negative impact, primarily through
cost reduction efforts and savings from restructuring activities.
Total revenues for the first six months of 2009 were
$2,073 million, compared to $3,211 million for the
first six months of 2008. Excluding the impact of currency and
substrate sales, revenue was down $429 million, from
$2,384 million to $1,955 million, driven by lower
year-over-year
OE vehicle production levels in almost every geographic region.
Gross margin in the first half of 2009 was 16.1 percent, up
0.5 percentage points from 15.6 percent in 2008. Cost
reduction actions, customer recoveries, manufacturing
efficiencies, lower restructuring charges and the benefit from a
stronger mix between OE and aftermarket revenues drove the
improvement.
Selling, general and administrative expense was down
$41 million in the first half of 2009, at
$166 million, compared to $207 million in the first
half of 2008. Cost reduction efforts, which included
restructuring savings, employee furloughs and salary reductions
drove the improvement. The first six months of 2009 included
$1 million in restructuring and related expense compared to
$7 million in aftermarket customer changeover costs and
$4 million in restructuring and related expense in the
first six months of 2008. Engineering expense was
$45 million and $70 million in the first half of 2009
and 2008, respectively. Cost reduction efforts including
engineering cost recoveries, employee furloughs and salary
reductions reduced engineering costs. Selling, general,
administrative and engineering expenses increased in the first
six months of 2009 to 10.2 percent of revenues from
8.6 percent of revenues in the first six months of 2008 due
to lower
year-over-year
revenues.
EBIT was $4 million for the first half of 2009, down from
$114 million in 2008. Lower OE production volumes globally
and the related manufacturing fixed cost absorption reduced EBIT
by $189 million in addition to $22 million of negative
currency
year-over-year.
We offset almost half of this negative impact, primarily through
lower selling, general and administrative spending, customer
recovery of engineering costs, cost reduction actions and
savings from restructuring activities.
Results
from Operations
Net
Sales and Operating Revenues for the Three Months Ended
June 30, 2009 and 2008
The following tables reflect our revenues for the second quarter
of 2009 and 2008. 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 2008 table since
this is the base period for measuring the effects of currency
during 2009 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 revenue represented
by substrate sales in the following tables. 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 precious metals such as
platinum, palladium and rhodium. These are supplied to us by
Tier 2 suppliers and 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. Changes in commodity prices as well as changes in the
mix of vehicles produced by our customers as a result of the
economic crisis have recently reduced the percentage of our
revenue related to substrates. 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
43
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 catalytic converter
and diesel particulate filter sales removes this impact.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Substrate
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
Excluding
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
Excluding
|
|
|
Currency and
|
|
|
|
|
|
|
Currency
|
|
|
Excluding
|
|
|
Currency
|
|
|
Substrate
|
|
|
|
Revenues
|
|
|
Impact
|
|
|
Currency
|
|
|
Impact
|
|
|
Sales
|
|
|
|
(Millions)
|
|
|
North America Original Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
$
|
76
|
|
|
$
|
(2
|
)
|
|
$
|
78
|
|
|
$
|
|
|
|
$
|
78
|
|
Emission Control
|
|
|
242
|
|
|
|
(1
|
)
|
|
|
243
|
|
|
|
109
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total North America Original Equipment
|
|
|
318
|
|
|
|
(3
|
)
|
|
|
321
|
|
|
|
109
|
|
|
|
212
|
|
North America Aftermarket
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
|
109
|
|
|
|
(2
|
)
|
|
|
111
|
|
|
|
|
|
|
|
111
|
|
Emission Control
|
|
|
41
|
|
|
|
(1
|
)
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total North America Aftermarket
|
|
|
150
|
|
|
|
(3
|
)
|
|
|
153
|
|
|
|
|
|
|
|
153
|
|
Total North America
|
|
|
468
|
|
|
|
(6
|
)
|
|
|
474
|
|
|
|
109
|
|
|
|
365
|
|
Europe Original Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
|
106
|
|
|
|
(16
|
)
|
|
|
122
|
|
|
|
|
|
|
|
122
|
|
Emission Control
|
|
|
223
|
|
|
|
(77
|
)
|
|
|
300
|
|
|
|
80
|
|
|
|
220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Europe Original Equipment
|
|
|
329
|
|
|
|
(93
|
)
|
|
|
422
|
|
|
|
80
|
|
|
|
342
|
|
Europe Aftermarket
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
|
56
|
|
|
|
(9
|
)
|
|
|
65
|
|
|
|
|
|
|
|
65
|
|
Emission Control
|
|
|
45
|
|
|
|
(9
|
)
|
|
|
54
|
|
|
|
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Europe Aftermarket
|
|
|
101
|
|
|
|
(18
|
)
|
|
|
119
|
|
|
|
|
|
|
|
119
|
|
South America & India
|
|
|
90
|
|
|
|
(18
|
)
|
|
|
108
|
|
|
|
14
|
|
|
|
94
|
|
Total Europe, South America & India
|
|
|
520
|
|
|
|
(129
|
)
|
|
|
649
|
|
|
|
94
|
|
|
|
555
|
|
Asia
|
|
|
88
|
|
|
|
|
|
|
|
88
|
|
|
|
19
|
|
|
|
69
|
|
Australia
|
|
|
30
|
|
|
|
(13
|
)
|
|
|
43
|
|
|
|
4
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Asia Pacific
|
|
|
118
|
|
|
|
(13
|
)
|
|
|
131
|
|
|
|
23
|
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Tenneco
|
|
$
|
1,106
|
|
|
$
|
(148
|
)
|
|
$
|
1,254
|
|
|
$
|
226
|
|
|
$
|
1,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Substrate
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
Excluding
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
Excluding
|
|
|
Currency and
|
|
|
|
|
|
|
Currency
|
|
|
Excluding
|
|
|
Currency
|
|
|
Substrate
|
|
|
|
Revenues
|
|
|
Impact
|
|
|
Currency
|
|
|
Impact
|
|
|
Sales
|
|
|
North America Original Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
$
|
121
|
|
|
$
|
|
|
|
$
|
121
|
|
|
$
|
|
|
|
$
|
121
|
|
Emission Control
|
|
|
395
|
|
|
|
|
|
|
|
395
|
|
|
|
192
|
|
|
|
203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total North America Original Equipment
|
|
|
516
|
|
|
|
|
|
|
|
516
|
|
|
|
192
|
|
|
|
324
|
|
North America Aftermarket
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
|
114
|
|
|
|
|
|
|
|
114
|
|
|
|
|
|
|
|
114
|
|
Emission Control
|
|
|
44
|
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total North America Aftermarket
|
|
|
158
|
|
|
|
|
|
|
|
158
|
|
|
|
|
|
|
|
158
|
|
Total North America
|
|
|
674
|
|
|
|
|
|
|
|
674
|
|
|
|
192
|
|
|
|
482
|
|
Europe Original Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
|
131
|
|
|
|
|
|
|
|
131
|
|
|
|
|
|
|
|
131
|
|
Emission Control
|
|
|
447
|
|
|
|
|
|
|
|
447
|
|
|
|
159
|
|
|
|
288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Europe Original Equipment
|
|
|
578
|
|
|
|
|
|
|
|
578
|
|
|
|
159
|
|
|
|
419
|
|
Europe Aftermarket
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
|
69
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
69
|
|
Emission Control
|
|
|
60
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Europe Aftermarket
|
|
|
129
|
|
|
|
|
|
|
|
129
|
|
|
|
|
|
|
|
129
|
|
South America & India
|
|
|
108
|
|
|
|
|
|
|
|
108
|
|
|
|
17
|
|
|
|
91
|
|
Total Europe, South America & India
|
|
|
815
|
|
|
|
|
|
|
|
815
|
|
|
|
176
|
|
|
|
639
|
|
Asia
|
|
|
105
|
|
|
|
|
|
|
|
105
|
|
|
|
35
|
|
|
|
70
|
|
Australia
|
|
|
57
|
|
|
|
|
|
|
|
57
|
|
|
|
3
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Asia Pacific
|
|
|
162
|
|
|
|
|
|
|
|
162
|
|
|
|
38
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Tenneco
|
|
$
|
1,651
|
|
|
$
|
|
|
|
$
|
1,651
|
|
|
$
|
406
|
|
|
$
|
1,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from our North American operations decreased
$206 million in the second quarter of 2009 compared to the
same period last year. Lower sales from both North American OE
business units and lower aftermarket revenues drove the decline.
North American OE emission control revenues were down
$153 million in the second quarter of 2009; excluding
unfavorable currency and substrate sales, revenues were down
$69 million compared to last year. This decrease was mainly
due to lower OE production volumes
year-over-year,
particularly impacted by GM and Chrysler plant shutdowns. North
American OE ride control revenues for the second quarter of 2009
were down $43 million from the prior year, excluding
$2 million of unfavorable currency. The decline was also
driven by lower OE production volumes, particularly impacted by
GM and Chrysler plant shutdowns. Our total North American OE
revenues, excluding substrate sales and currency, decreased
35 percent in the second quarter of 2009 compared to second
quarter of 2008. North American light vehicle production
decreased 49 percent. Industry Class 8 commercial
vehicle production was down 57 percent and industry
Class 5-7
commercial vehicle production was down 53 percent in second
quarter of 2009 as compared to the previous year comparable
period. Aftermarket revenues for North America were
$150 million in the second quarter of 2009, a decrease of
$8 million compared to the prior year. Excluding
$3 million in unfavorable currency, aftermarket revenues
were down $5 million driven by lower sales in both product
lines due to lower volumes. Net of unfavorable currency,
aftermarket ride control revenues decreased two percent in the
second quarter of 2009 while aftermarket emission control
revenues decreased four percent in the second quarter of 2009.
45
Our European, South American and Indian segments revenues
decreased $295 million, or 36 percent, in the second
quarter of 2009 compared to last year. The second quarter total
European light vehicle industry production was down
27 percent when compared to the second quarter of 2008.
Europe OE emission control revenues of $223 million in the
second quarter of 2009 were down 50 percent as compared to
the second quarter of last year. Excluding $77 million of
unfavorable currency and a reduction in substrate sales, Europe
OE emission control revenues decreased 23 percent from
2008. Europe OE ride control revenues of $106 million in
the second quarter of 2009 were down 20 percent
year-over-year.
Excluding unfavorable currency, revenues decreased by eight
percent in the 2009 second quarter due to the lower production
volumes. European aftermarket revenues decreased 22 percent
or $28 million in the second quarter of 2009 compared to
last year. When adjusted for currency, aftermarket revenues were
down eight percent. Excluding the negative $9 million
impact of currency, ride control aftermarket revenues were down
seven percent while emission control aftermarket revenues were
down nine percent, excluding $9 million in unfavorable
currency. The decrease was driven by overall market declines
affecting emission control products across the region and ride
control products, mostly in Eastern Europe. South American and
Indian revenues were $90 million during the second quarter
of 2009, compared to $108 million in the prior year. When
unfavorable currency and substrates are excluded, revenue was up
$3 million compared to the second quarter of last year. Our
South American revenues benefited from new platform launches and
our Indian operations benefited from higher volumes.
Revenues from our Asia Pacific segment, which includes Australia
and Asia, decreased $44 million to $118 million in the
second quarter of 2009 compared to the same period last year.
Excluding the impact of substrate sales and currency, revenues
decreased to $108 million from $124 million in the
prior year. Asian revenues for the second quarter of 2009 were
$88 million, down 16 percent from last year. Lower
substrate sales in China was the primary reason for the decline.
Excluding substrate sales, Asian revenue decreased
$1 million when compared with last year. Second quarter
revenues for Australia decreased 47 percent to
$30 million. Excluding higher substrate sales and
$13 million of unfavorable currency, Australian revenue
decreased 26 percent due to industry light vehicle
production declines with customers taking significant plant
shutdowns.
46
Net
Sales and Operating Revenues for the Six Months Ended
June 30, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Substrate
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
Excluding
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
Excluding
|
|
|
Currency and
|
|
|
|
|
|
|
Currency
|
|
|
Excluding
|
|
|
Currency
|
|
|
Substrate
|
|
|
|
Revenues
|
|
|
Impact
|
|
|
Currency
|
|
|
Impact
|
|
|
Sales
|
|
|
|
(Millions)
|
|
|
North America Original Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
$
|
162
|
|
|
$
|
(6
|
)
|
|
$
|
168
|
|
|
$
|
|
|
|
$
|
168
|
|
Emission Control
|
|
|
489
|
|
|
|
(3
|
)
|
|
|
492
|
|
|
|
223
|
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total North America Original Equipment
|
|
|
651
|
|
|
|
(9
|
)
|
|
|
660
|
|
|
|
223
|
|
|
|
437
|
|
North America Aftermarket
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
|
208
|
|
|
|
(4
|
)
|
|
|
212
|
|
|
|
|
|
|
|
212
|
|
Emission Control
|
|
|
78
|
|
|
|
(2
|
)
|
|
|
80
|
|
|
|
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total North America Aftermarket
|
|
|
286
|
|
|
|
(6
|
)
|
|
|
292
|
|
|
|
|
|
|
|
292
|
|
Total North America
|
|
|
937
|
|
|
|
(15
|
)
|
|
|
952
|
|
|
|
223
|
|
|
|
729
|
|
Europe Original Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
|
197
|
|
|
|
(37
|
)
|
|
|
234
|
|
|
|
|
|
|
|
234
|
|
Emission Control
|
|
|
410
|
|
|
|
(170
|
)
|
|
|
580
|
|
|
|
149
|
|
|
|
431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Europe Original Equipment
|
|
|
607
|
|
|
|
(207
|
)
|
|
|
814
|
|
|
|
149
|
|
|
|
665
|
|
Europe Aftermarket
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
|
87
|
|
|
|
(17
|
)
|
|
|
104
|
|
|
|
|
|
|
|
104
|
|
Emission Control
|
|
|
74
|
|
|
|
(16
|
)
|
|
|
90
|
|
|
|
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Europe Aftermarket
|
|
|
161
|
|
|
|
(33
|
)
|
|
|
194
|
|
|
|
|
|
|
|
194
|
|
South America & India
|
|
|
158
|
|
|
|
(40
|
)
|
|
|
198
|
|
|
|
25
|
|
|
|
173
|
|
Total Europe, South America & India
|
|
|
926
|
|
|
|
(280
|
)
|
|
|
1,206
|
|
|
|
174
|
|
|
|
1,032
|
|
Asia
|
|
|
155
|
|
|
|
1
|
|
|
|
154
|
|
|
|
37
|
|
|
|
117
|
|
Australia
|
|
|
55
|
|
|
|
(29
|
)
|
|
|
84
|
|
|
|
7
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Asia Pacific
|
|
|
210
|
|
|
|
(28
|
)
|
|
|
238
|
|
|
|
44
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Tenneco
|
|
$
|
2,073
|
|
|
$
|
(323
|
)
|
|
$
|
2,396
|
|
|
$
|
441
|
|
|
$
|
1,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Substrate
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
Excluding
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
Excluding
|
|
|
Currency and
|
|
|
|
|
|
|
Currency
|
|
|
Excluding
|
|
|
Currency
|
|
|
Substrate
|
|
|
|
Revenues
|
|
|
Impact
|
|
|
Currency
|
|
|
Impact
|
|
|
Sales
|
|
|
|
(Millions)
|
|
|
North America Original Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
$
|
233
|
|
|
$
|
|
|
|
$
|
233
|
|
|
$
|
|
|
|
$
|
233
|
|
Emission Control
|
|
|
833
|
|
|
|
|
|
|
|
833
|
|
|
|
409
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total North America Original Equipment
|
|
|
1,066
|
|
|
|
|
|
|
|
1,066
|
|
|
|
409
|
|
|
|
657
|
|
North America Aftermarket
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
|
212
|
|
|
|
|
|
|
|
212
|
|
|
|
|
|
|
|
212
|
|
Emission Control
|
|
|
79
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total North America Aftermarket
|
|
|
291
|
|
|
|
|
|
|
|
291
|
|
|
|
|
|
|
|
291
|
|
Total North America
|
|
|
1,357
|
|
|
|
|
|
|
|
1,357
|
|
|
|
409
|
|
|
|
948
|
|
Europe Original Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
|
260
|
|
|
|
|
|
|
|
260
|
|
|
|
|
|
|
|
260
|
|
Emission Control
|
|
|
873
|
|
|
|
|
|
|
|
873
|
|
|
|
314
|
|
|
|
559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Europe Original Equipment
|
|
|
1,133
|
|
|
|
|
|
|
|
1,133
|
|
|
|
314
|
|
|
|
819
|
|
Europe Aftermarket
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ride Control
|
|
|
116
|
|
|
|
|
|
|
|
116
|
|
|
|
|
|
|
|
116
|
|
Emission Control
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Europe Aftermarket
|
|
|
216
|
|
|
|
|
|
|
|
216
|
|
|
|
|
|
|
|
216
|
|
South America & India
|
|
|
202
|
|
|
|
|
|
|
|
202
|
|
|
|
31
|
|
|
|
171
|
|
Total Europe, South America & India
|
|
|
1,551
|
|
|
|
|
|
|
|
1,551
|
|
|
|
345
|
|
|
|
1,206
|
|
Asia
|
|
|
195
|
|
|
|
|
|
|
|
195
|
|
|
|
63
|
|
|
|
132
|
|
Australia
|
|
|
108
|
|
|
|
|
|
|
|
108
|
|
|
|
10
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Asia Pacific
|
|
|
303
|
|
|
|
|
|
|
|
303
|
|
|
|
73
|
|
|
|
230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Tenneco
|
|
$
|
3,211
|
|
|
$
|
|
|
|
$
|
3,211
|
|
|
$
|
827
|
|
|
$
|
2,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from our North American operations decreased
$420 million in the first six months of 2009 compared to
the same period last year. Reduced OE and aftermarket revenues
drove the decline. North American OE emission control revenues
were down $344 million in the first six months of 2009.
Excluding substrate sales and currency impact, revenues were
down $155 million compared to last year. This decrease was
primarily due to significantly lower light vehicle OE
production, as discussed in the three month discussion above.
North American OE ride control revenues for the first six months
of 2009 were down $71 million from the prior year. Again,
the decrease was primarily due to significantly lower light
vehicle OE production, as discussed in the three month
discussion above. Our total North American OE revenues,
excluding substrate sales and currency, decreased
34 percent in the first six months of 2009 compared to the
first six months of 2008, as compared to the North American
light vehicle production rate decrease of 50 percent.
Aftermarket revenues for North America were $286 million in
the first six months of 2009, a decrease of $5 million
compared to the prior year. Excluding currency, aftermarket ride
control revenues were even with the first six months of 2008
while aftermarket emission control revenues increased two
percent in the first six months of 2009 when compared to prior
year.
European, South American and Indian segments revenues
decreased $625 million, or 40 percent, in the first
six months of 2009 compared to last year. European light vehicle
industry production for the first six months of 2009 decreased
34 percent from the first six months of 2008. Europe OE emission
control revenues of $410 million in the first six months of
2009 were down 53 percent as compared to the first six
months of last year. Excluding substrate sales and unfavorable
impact of $170 million due to currency, Europe OE emission
control revenues
48
decreased 23 percent over 2008. Europe OE ride control
revenues of $197 million in the first six months of 2009
were down 24 percent
year-over-year.
Excluding currency, revenues decreased by 10 percent in the
first six months of 2009 due to lower production volumes.
European aftermarket revenues decreased $55 million in the
first six months of 2009 compared to last year. When
adjusted for currency, aftermarket revenues were down
10 percent. Excluding the $17 million negative impact
of currency, ride control aftermarket revenues were down
11 percent. Emission control aftermarket revenues were down
nine percent, excluding $16 million of negative currency,
due to lower volumes which more than offset improved pricing.
South American and Indian revenues were $158 million during
the first six months of 2009, compared to $202 million in
the prior year. Excluding negative currency and substrate sales,
South American and Indian revenue was up $2 million from
last year.
Revenues from our Asia Pacific segment decreased
$93 million to $210 million in the first six months of
2009 compared to the same period last year. Excluding the impact
of substrate sales and currency, revenues decreased to
$194 million from $230 million in the prior year.
Asian revenues for the first six months of 2009 were
$155 million, down 20 percent from last year. This
decrease was primarily due to lower substrate sales in China.
Revenues for the first six months of 2009 for Australia
decreased 49 percent to $55 million from
$108 million. Excluding substrate sales and unfavorable
currency, Australian revenue was down $21 million.
EBIT
for the three months ended June 30, 2009 and
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
|
(Millions)
|
|
|
North America
|
|
$
|
6
|
|
|
$
|
17
|
|
|
$
|
(11
|
)
|
Europe, South America & India
|
|
|
6
|
|
|
|
48
|
|
|
|
(42
|
)
|
Asia Pacific
|
|
|
5
|
|
|
|
10
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17
|
|
|
$
|
75
|
|
|
$
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions)
|
|
|
North America
|
|
|
|
|
|
|
|
|
Restructuring and related expenses
|
|
$
|
1
|
|
|
$
|
1
|
|
Environmental reserve(1)
|
|
|
5
|
|
|
|
|
|
Changeover costs for new aftermarket customers(2)
|
|
|
|
|
|
|
7
|
|
Europe, South America & India
|
|
|
|
|
|
|
|
|
Restructuring and related expenses
|
|
|
2
|
|
|
|
3
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
Restructuring and related expenses
|
|
|
|
|
|
|
2
|
|
|
|
|
(1) |
|
Represents a reserve related to environmental liabilities of a
company Tenneco acquired in 1996, at locations never operated by
Tenneco, and for which that acquired company had been
indemnified by Mark IV Industries, which declared
bankruptcy in the second quarter of 2009. |
|
(2) |
|
Represents costs associated with changing new aftermarket
customers from their prior suppliers to an inventory of our
products. Although our aftermarket business regularly incurs
changeover costs, we specifically identify in the table above
those changeover costs that, based on the size or number of
customers involved, we believe are of an unusual nature for the
quarter in which they were incurred. |
49
EBIT for North American operations was $6 million in the
second quarter of 2009, compared to $17 million one year
ago. The benefits to EBIT from lower SGA&E spending,
restructuring savings, and manufacturing efficiencies partially
offset lower OE production volumes and related manufacturing
fixed cost absorption, which together had the most significant
negative impact on EBIT. Currency had a $1 million
unfavorable impact on North American EBIT. Restructuring and
related expenses of $1 million were included in both second
quarters of 2009 and 2008. The second quarter of 2009 included a
$5 million charge for an environmental reserve while the
second quarter of 2008 included $7 million of aftermarket
changeover costs.
Our European, South American and Indian segments EBIT was
$6 million for the second quarter of 2009 compared to
$48 million during the same period last year. European,
South American and Indian segments EBIT benefited from
reduced SGA&E spending, restructuring savings and new OE
platform launches. These improvements were more than offset by
significantly lower OE production volumes and related
manufacturing fixed cost absorption. Currency had a
$6 million unfavorable impact on European, South American
and Indian segments EBIT. Included in second quarter 2009
European, South American and Indian segments EBIT was
$2 million in restructuring and related expenses compared
to $3 million for the second quarter of 2008.
EBIT for our Asia Pacific segment in the second quarter of 2009
was $5 million compared to $10 million in the second
quarter of 2008. Lower production volumes in Australia and the
related manufacturing fixed cost absorption were the primary
drivers of the EBIT decline
year-over-year.
EBIT was also negatively impacted by $2 million of currency
in the second quarter of 2009 when compared to last year. The
second quarter of 2008 included $2 million in restructuring
and related expenses.
Currency had a $9 million unfavorable impact on overall
company EBIT for the three months ended June 30, 2009, as
compared to the prior year.
EBIT
as a Percentage of Revenue
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
North America
|
|
|
1
|
%
|
|
|
3
|
%
|
Europe, South America & India
|
|
|
1
|
%
|
|
|
6
|
%
|
Asia Pacific
|
|
|
4
|
%
|
|
|
6
|
%
|
Total Tenneco
|
|
|
2
|
%
|
|
|
5
|
%
|
In North America, EBIT as a percentage of revenue for the second
quarter of 2009 was down two percentage points when compared to
last year. The decline in EBIT from lower OE production volumes
and the related manufacturing fixed cost absorption, lower
aftermarket sales, environmental charge and unfavorable currency
was partially offset as a percentage of revenue by manufacturing
efficiencies, lower aftermarket changeover costs, restructuring
savings and other cost reduction efforts. In Europe, South
America and India, EBIT margin for the second quarter of 2009
was five percentage points lower than prior year due to
significantly lower OE production volumes and related
manufacturing fixed cost absorption and unfavorable currency,
partially offset by reduced SGA&E spending, restructuring
savings, and lower restructuring and related expenses. EBIT as a
percentage of revenue for our Asia Pacific segment decreased two
percentage points in the second quarter of 2009 versus the prior
year as lower production volumes in Australia and the related
manufacturing fixed cost absorption and unfavorable currency
were partially offset by cost reduction efforts and lower
restructuring and related expenses.
50
EBIT
for the Six Months Ended June 30, 2009 and
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
|
(Millions)
|
|
|
North America
|
|
$
|
10
|
|
|
$
|
26
|
|
|
$
|
(16
|
)
|
Europe, South America & India
|
|
|
(11
|
)
|
|
|
73
|
|
|
|
(84
|
)
|
Asia Pacific
|
|
|
5
|
|
|
|
15
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4
|
|
|
$
|
114
|
|
|
$
|
(110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions)
|
|
|
North America
|
|
|
|
|
|
|
|
|
Restructuring and related expenses
|
|
$
|
3
|
|
|
$
|
2
|
|
Environmental reserve(1)
|
|
|
5
|
|
|
|
|
|
Changeover costs for new aftermarket customers(2)
|
|
|
|
|
|
|
7
|
|
Europe, South America & India
|
|
|
|
|
|
|
|
|
Restructuring and related expenses
|
|
|
3
|
|
|
|
6
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
Restructuring and related expenses
|
|
|
|
|
|
|
2
|
|
|
|
|
(1) |
|
Represents a reserve related to environmental liabilities of a
company Tenneco acquired in 1996, at locations never operated by
Tenneco, and for which that acquired company had been
indemnified by Mark IV Industries, which declared
bankruptcy in the second quarter of 2009. |
|
(2) |
|
Represents costs associated with changing new aftermarket
customers from their prior suppliers to an inventory of our
products. Although our aftermarket business regularly incurs
changeover costs, we specifically identify in the table above
those changeover costs that, based on the size or number of
customers involved, we believe are of an unusual nature for the
quarter in which they were incurred. |
EBIT from North American operations decreased to
$10 million in the first six months of 2009, from
$26 million one year ago. The benefits to EBIT from new
platform launches, manufacturing efficiencies, reduced
SGA&E spending, lower customer changeover costs,
restructuring savings and customer recoveries partially offset
lower OE production volumes and related manufacturing fixed cost
absorption. Currency had a $7 million unfavorable impact on
North American EBIT. Restructuring and related expenses of
$3 million and an environmental charge of $5 million
were included in the first half of 2009 compared to
$2 million of restructuring and related expenses and
$7 million of aftermarket changeover costs in the first
half of 2008.
Our European, South American and Indian segments EBIT was
a loss of $11 million for the first six months of 2009
compared to $73 million of earnings during the same period
last year. The decline was driven by significantly lower OE
production volumes and related manufacturing fixed cost
absorption. Reduced selling, general, administrative and
engineering costs, restructuring savings, lower restructuring
and related expenses and cost reduction efforts only partially
offset the decline. Restructuring and related expenses of
$3 million were included in EBIT for the first six months
of 2009, a decrease of $3 million from the same period last
year. Currency had a $12 million unfavorable impact on the
first six months EBIT of 2009.
EBIT for our Asia Pacific segment in the first six months of
2009 was $5 million compared to $15 million in the
first six months of 2008. Lower production volumes in Asia and
Australia and the related manufacturing fixed
51
cost absorption reduced EBIT. This decline was partially offset
by manufacturing efficiencies, lower restructuring and related
expenses, decreased selling, general and administrative costs
and other cost reduction efforts. Currency had a negative impact
on EBIT of $3 million in the first six months of 2009.
Included in EBIT for the first six months of 2008 was
$2 million of restructuring and related expenses.
Currency had a $22 million unfavorable impact on overall
company EBIT for the six months ended June 30, 2009, as
compared to the prior year.
EBIT
as a Percentage of Revenue
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
North America
|
|
|
1
|
%
|
|
|
2
|
%
|
Europe, South America & India
|
|
|
(1
|
)%
|
|
|
5
|
%
|
Asia Pacific
|
|
|
2
|
%
|
|
|
5
|
%
|
Total Tenneco
|
|
|
|
|
|
|
4
|
%
|
In North America, EBIT as a percentage of revenue for the first
six months of 2009 was down one percentage point when compared
to last year. The decline in EBIT from lower OE production
volumes and the related manufacturing fixed cost absorption,
higher restructuring and related expenses, an environmental
reserve and unfavorable currency was only partially offset as a
percentage of revenue by lower SGA&E spending,
restructuring savings, new platform launches and customer
recoveries. During the first six months of 2009, North American
results included lower aftermarket changeover costs. In Europe,
South America and India, EBIT margin for the first six months of
2009 was six percentage points lower than prior year due to
significantly lower OE production volumes and related
manufacturing fixed cost absorption and unfavorable currency,
partially offset by reduced SGA&E spending, restructuring
savings and new OE platform launches. Restructuring and related
expenses were lower than prior year. EBIT as a percentage of
revenue for our Asia Pacific segment decreased three percentage
points in the first six months of 2009 versus the prior year as
lower production volumes in China and Australia and the related
manufacturing fixed cost absorption and unfavorable currency
were partially offset by cost reduction efforts and improved
manufacturing efficiencies.
Interest
Expense, Net of Interest Capitalized
We reported interest expense in the second quarter of 2009 of
$35 million net of interest capitalized of $1 million
($34 million in our U.S. operations and
$1 million in our foreign operations), up from
$33 million net of interest capitalized of $1 million
(all in our U.S. operations) from the second quarter of
2008. Excluding the $4 million increase to interest expense
from marking to market our interest rate swaps in the second
quarter of 2008, interest expense increased in the second
quarter of 2009 compared to the prior year as a result of our
higher borrowing spreads under our amended credit agreement
partially offset by lower LIBOR rates and an increase in our
variable rate debt.
We reported interest expense for the first half of 2009 of
$66 million net of interest capitalized of $2 million
($65 million in our U.S. operations and
$1 million in our foreign operations), up from
$58 million net of interest capitalized of $3 million
(all in our U.S. operations) a year ago. The requirement to
mark to market the interest rate swaps decreased interest
expense by $1 million for the first six months of 2008.
On June 30, 2009, we had $1.010 billion in long-term
debt obligations that have fixed interest rates. Of that amount,
$245 million is fixed through July 2013, $500 million
is fixed through November 2014, $250 million is fixed
through November 2015, and the remainder is fixed from 2009
through 2025. We also have $450 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
Managements Discussion and Analysis.
52
Income
Taxes
We reported income tax expense of $11 million in the second
quarter of 2009. The tax expense recorded differs from a
statutory rate of 35 percent because of $18 million in
tax charges primarily related to the impact of not benefiting
tax losses in the U.S. and certain foreign jurisdictions.
We reported income tax expense of $27 million in the second
quarter of 2008 which included a $13 million non-cash
charge for tax liabilities related to changes in inter-company
billing arrangements.
Income tax expense was $14 million for the first six months
of 2009, compared to $32 million for the first six months
of 2008. The tax expense recorded for the first six months of
2009 differs from a statutory rate of 35 percent because of
$36 million in tax charges primarily related to the impact
of not benefiting tax losses in the U.S. and certain
foreign jurisdictions. The tax expense recorded for the first
six months of 2008 includes $14 million of non-cash charges
related to changes in our estimates for tax matters subject to
audit and for tax liabilities related to changes in
inter-company billing arrangements.
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. In the fourth quarter of 2001, our Board of Directors
approved a restructuring plan, a project known as Project
Genesis, which was designed to lower our fixed costs, relocate
capacity, reduce our work force, improve efficiency and
utilization, and better optimize our global footprint. We have
subsequently engaged in various other restructuring projects
related to Project Genesis. We incurred $40 million in
restructuring and related costs during 2008, of which
$17 million was recorded in cost of sales and
$23 million was recorded in selling, general,
administrative and engineering expense. In the second quarter of
2009, we incurred $3 million in restructuring and related
costs, of which $1 million was recorded in cost of sales,
$1 million was recorded in selling, general, administrative
and engineering expense and $1 million was recorded in
depreciation and amortization expense. In the first half of
2009, we incurred $6 million in restructuring and related
costs, of which $3 million was recorded in cost of sales,
$1 million was recorded in selling, general, administrative
and engineering expense and $2 million was recorded in
depreciation and amortization expense.
Under the terms of our amended and restated senior credit
agreement that took effect on February 23, 2009, we are
allowed to exclude $40 million of cash charges and
expenses, before taxes, related to cost reduction initiatives
incurred after February 23, 2009 from the calculation of
the financial covenant ratios required under our senior credit
facility. As of June 30, 2009, we have excluded
$4 million in allowable charges relating to restructuring
initiatives against the $40 million available under the
terms of the February 2009 amended and restated senior credit
facility.
On January 13, 2009, we announced that we will postpone
closing an original equipment ride control plant in the United
States as part of our current global restructuring program. We
still expect, as announced in October 2008, the elimination of
1,100 positions and estimate that we will record up to
$31 million in charges, of which approximately
$25 million represents cash expenditures, in connection
with the restructuring program announced in the fourth quarter
of 2008. We recorded $24 million of these charges in 2008,
$3 million in each of the first and second quarters of 2009
and expect to record the remaining $1 million during the
rest of 2009. We expect to generate approximately
$58 million in annual savings beginning in 2009 related to
this restructuring program. Various restructuring projects
announced prior to the fourth quarter of 2008 are still being
completed, and when complete, will generate an additional
$7 million in annual savings.
Earnings
(Loss) Per Share
We reported a net loss attributable to Tenneco Inc. of
$33 million or $0.72 per diluted common share for the
second quarter of 2009, as compared to net income attributable
to Tenneco Inc. of $13 million or $0.26 per diluted common
share for the second quarter of 2008. Included in the results
for the second quarter of 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 $0.50.
Included in the results for the second quarter of 2008 were
negative impacts from expenses related to our restructuring
activities, the negative impact of new
53
aftermarket changeover costs and tax adjustments. The net impact
of these items decreased earnings per diluted share by $0.45.
Please read the Notes to the condensed consolidated financial
statements for more detailed information on earnings per share.
We reported a net loss attributable to Tenneco Inc of
$82 million or $1.76 per diluted common share for the first
half of 2009, as compared to net income of $19 million or
$0.39 per diluted common share for the first half of 2008.
Included in the results for the first half of 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 $0.92.
Included in the results for the first half of 2008 were negative
impacts from expenses related to our restructuring activities,
the negative impact of new aftermarket changeover costs and tax
charges. The net impact of these items decreased earnings per
diluted share by $0.52.
Cash
Flows for the Three Months Ended June 30, 2009 and
2008
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions)
|
|
|
Cash provided (used) by:
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
112
|
|
|
$
|
58
|
|
Investing activities
|
|
|
(32
|
)
|
|
|
(85
|
)
|
Financing activities
|
|
|
(90
|
)
|
|
|
31
|
|
Operating
Activities
For the three months ended June 30, 2009, operating
activities provided $112 million in cash compared to
$58 million in cash provided during the same period last
year. For the three months ended June 30, 2009, working
capital provided cash of $75 million versus a cash use of
$17 million for the three months ended June 30, 2008.
Receivables were a use of cash of $3 million compared to a
use of cash of $61 million in the prior year. This
improvement was despite a
year-over-year
decrease of $21 million in securitized accounts receivable
and was primarily driven by lower year-over-year sales.
Inventory cash flow improved by $37 million as a result of
our intense focus to reduce inventory levels. Accounts payable
provided cash of $38 million compared to last years
cash inflow of $27 million, an improvement of
$11 million. Cash taxes were $8 million for the three
months ended June 30, 2009, compared to $12 million in
the prior year. Our cash flow from operations in the second
quarter of 2009 was our best second quarter operating cash flow
in our 10 year history as a stand alone company.
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 as they do not meet our
definition of cash equivalents. The amount of these financial
instruments that was collected before their maturity date
totaled $4 million as of June 30, 2009, compared with
$10 million at the same date in 2008. No negotiable
financial instruments were held by our European subsidiary as of
June 30, 2009 or June 30, 2008.
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 $11 million and
$14 million at June 30, 2009 and 2008, respectively,
and were classified as notes payable. Financial instruments
received from OE customers and not redeemed totaled
$13 million and $11 million at June 30, 2009 and
2008, respectively, and were classified as other current assets.
One of our Chinese subsidiaries that issues its own negotiable
financial instruments to pay its vendors is 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 that
Chinese subsidiary at June 30, 2009 and 2008.
54
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 $53 million lower in
the second quarter of 2009 compared to the same period a year
ago. Cash payments for plant, property and equipment were
$30 million in the second quarter of 2009 versus payments
of $64 million in the second quarter of 2008. Cash of
$19 million was used to acquire the Kettering, Ohio ride
control operations during the second quarter of 2008. Cash
payments for software-related intangible assets were
$2 million in the second quarter of 2009 compared to
$3 million in the second quarter of 2008.
Financing
Activities
Cash flow from financing activities was a $90 million
outflow in the second quarter of 2009 compared to an inflow of
$31 million in the same period of 2008. The decrease was
mainly due to lower
year-over-year
borrowings against our revolver during the second quarter of
2009 as compared to the second quarter of 2008. Borrowings from
our revolving credit facility are utilized as needed to
supplement our cash flows from operating activities to fund our
working capital requirements.
Cash
Flows for the Six Months Ended June 30, 2009 and
2008
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions)
|
|
|
Cash provided (used) by:
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
31
|
|
|
$
|
(6
|
)
|
Investing activities
|
|
|
(67
|
)
|
|
|
(152
|
)
|
Financing activities
|
|
|
27
|
|
|
|
115
|
|
Operating
Activities
For the six months ended June 30, 2009, operating
activities provided $31 million in cash compared to
$6 million in cash used during the same period last year.
For the six months ended June 30, 2009, cash used for
working capital was $16 million versus $144 million
for the six months ended June 30, 2008. Receivables were a
use of cash of $57 million compared to a cash use of
$148 million in the prior year. Inventory represented a
cash inflow of $67 million during the six months ended
June 30, 2009, an improvement of $114 million over the
prior year. The
year-over-year
improvement of inventory was primarily a result of our intense
focus to reduce inventory levels. Accounts payable used cash of
$36 million, a decrease from last years cash inflow
of $50 million due to the rapid decline in production
levels. Cash taxes were $12 million for the six months
ended June 30, 2009, compared to $24 million in the
prior year.
Investing
Activities
Cash used for investing activities was $85 million lower in
the first half of 2009 compared to the same period a year ago.
Cash payments for plant, property and equipment were
$66 million in the first half of 2009 versus payments of
$127 million in the first six months of 2008. The decrease
of $61 million in cash payments for plant, property and
equipment was a result of our efforts to conserve cash. We
anticipate our capital spending for the entire 2009 year to
be $140 million. Cash of $19 million was used to
acquire ride control assets at Delphis Kettering, Ohio
location during the first half of 2008. Cash payments for
software-related intangible assets were $4 million in the
first six months of 2009 compared to $8 million in the
first six months of 2008.
55
Financing
Activities
Cash flow from financing activities was a $27 million
inflow in the first six months of 2009 compared to an inflow of
$115 million in the same period of 2008. The primary reason
for the change is attributable to a decrease in year-over-year
borrowings against our revolver during the first six months of
2009 as compared to the same period in 2008. Borrowings from our
revolving credit facility are utilized as needed to supplement
our cash flows from operating activities to fund our working
capital requirements.
Outlook
We are cautiously optimistic that the worst of the global
automotive downturn is behind us. Current industry conditions
remain weak in most regions of the world and economic conditions
are fragile, making it difficult to predict when we will see the
beginning of a sustainable recovery. Furthermore, the fact that
sales levels in many key markets have been buoyed by government
stimulus programs adds to the challenge of predicting a recovery
given the uncertainty as to when many of these programs will end
and their impact on future sales.
According to Global Insight, light vehicle production is
expected to be down year-over-year in most geographic regions
throughout the world for the second half of the year. North
American light vehicle production levels are expected to decline
12 percent in the second half of 2009 as compared to 2008.
Second half vehicle production in Europe is expected to fall
year-over-year
by five percent. Global Insight projects production in the
second half of the year to decline in South America by
seven percent, while Indias light vehicle production
is projected to increase by 19 percent. China light vehicle
production is expected to increase by eight percent
year-over-year,
while Australias production is projected to decline by
four percent in the second half of the year.
As the outlook for the rest of the year remains uncertain, it is
still not possible to provide any OE revenue guidance at this
time. Future global OE production projections are too unreliable
for us to provide guidance regarding our OE revenue growth.
Although numerous governments have enacted incentive programs,
which are positively impacting vehicle sales, and the
uncertainty over the GM and Chrysler bankruptcies has been
alleviated, we are not anticipating a significant industry sales
recovery over the remainder of 2009. However, the majority of
vehicle inventory corrections were achieved in the first half of
2009 and we expect stronger OE production volumes in the second
half of the year as production begins to track more closely with
sales.
We will continue to plan conservatively for the remainder of the
year and we will not let up on our cost reduction and cash
generation initiatives. These strategies have proven effective
in helping us manage through this tough and unstable environment
during the first six months of the year. At the same time, we
are continuing to make progress on achieving our long-term
growth strategies. We will continue to work on striking the
right balance between taking the actions necessary to withstand
this current economic downturn and keeping us positioned and
prepared to capitalize on an eventual recovery, especially given
that our growth is more a function of new content and expansion
into the commercial vehicle markets than light vehicle volume
recovery. As early as the end of this year, we have new programs
launching that require higher emission control content. We are
targeting investments in the regulatory-driven technologies and
capabilities required to support these light and commercial
vehicle launches that ramp up in 2010.
We continue to focus globally on controlling discretionary
spending, increasing productivity and reducing costs through Six
Sigma, Lean manufacturing and restructuring activities.
We have revised our full year guidance down on capital spending
to $140 million from $160 million, as well as our
guidance on cash taxes from $40 - $45 million to
$35 - $40 million.
Critical
Accounting Policies
We prepare our condensed consolidated financial statements in
accordance with accounting principles generally accepted in the
United States of America. Preparing our condensed 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
56
the condensed 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. 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 $416 million, and $827 million for the first six
months of 2009 and 2008, 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).
Warranty
Reserves
Where we have offered product warranty, we also provide for
warranty costs. Those estimates are based upon historical
experience and upon specific warranty issues as they arise.
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 condensed consolidated financial
statements.
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
preproduction design and development costs recorded in
prepayments and other and long-term receivables totaled
$12 million on the balance sheet at both June 30, 2009
and December 31, 2008, respectively. In addition, plant,
property and equipment included $53 million at both
June 30, 2009 and December 31, 2008, respectively, for
original equipment tools and dies that we own, and prepayments
and other included $18 million and $22 million at
June 30, 2009 and December 31, 2008, respectively, for
in-process tools and dies that we are building for our original
equipment customers.
Income
Taxes
In accordance with SFAS No. 109 Accounting for
Income Taxes (SFAS No. 109), we evaluate our
deferred income taxes quarterly to determine if valuation
allowances are required or should be adjusted.
SFAS No. 109 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 been 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 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; and
|
|
|
|
Tax-planning strategies.
|
57
In 2008, we recorded tax expense of $289 million primarily
related to establishing a valuation allowance against our net
deferred tax assets in the U.S. During the first six months
of 2009, we recorded an additional valuation allowance of
$19 million primarily related to U.S. tax benefits
recorded on first six months 2009 U.S. losses. In the
U.S., we utilize the results from 2008 and a projection of
our results for 2009 as a measure of the cumulative losses in
recent years. Accounting standards do not permit us to give any
consideration to a likely economic recovery in the U.S. or
the recent new business we have won particularly in the
commercial vehicle segment in evaluating the requirement to
record a valuation allowance. Consequently, we concluded that
our ability to fully utilize our NOLs was limited due to
projecting the current negative economic environment into the
future and the impact of the current negative operating
environment on our tax planning strategies. As a result of tax
planning strategies which have not yet been implemented but
which we plan to implement and which do not depend upon
generating future taxable income, we continue to carry deferred
tax assets in the U.S. of $70 million relating to the
expected utilization of those NOLs. The federal NOL expires
beginning in 2020 through 2028. The state NOLs expire in various
years through 2028.
If our operating performance improves 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.
We are required to record a valuation allowance against deferred
tax assets generated by taxable losses in each period in the
U.S. as well as in other foreign countries. Our future
provision for income taxes will include no tax benefit with
respect to losses incurred and no tax expense with respect to
income generated in these jurisdictions until the respective
valuation allowance is eliminated. This will cause variability
in our effective tax rate.
Goodwill
and Other Intangible Assets
As required by SFAS No. 142, Goodwill and Other
Intangible Assets, we evaluate goodwill for impairment in
the fourth quarter of each year, or more frequently if events
indicate it is warranted. We compare the estimated fair value of
our reporting units with goodwill to the carrying value of the
units 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. These estimates are based on assumptions
that we believe to be reasonable, but which are inherently
uncertain.
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 starts with high-quality
investment-grade bonds adjusted for an incremental yield based
on actual historical performance. This incremental yield
adjustment is the result of selecting securities whose yields
are higher than the normal bonds that comprise the
index. Based on this approach, for 2009 we left the weighted
average discount rate for all our pension plans unchanged at
6.2 percent. The discount rate for postretirement benefits
was also left unchanged at 6.2 percent for 2009.
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
58
and fixed income markets. As a result, our estimate of the
weighted average long-term rate of return on plan assets for all
of our pension plans was left unchanged at 7.9 percent for
2009.
Except in the U.K., 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 June 30, 2009, all legal funding
requirements had been met. Other postretirement benefit
obligations, such as retiree medical, and certain foreign
pension plans are funded as the obligations become due.
Changes
in Accounting Pronouncements
Footnote 13 in our Notes to Condensed Consolidated Financial
Statements located in Part I Item 1 of this
Form 10-Q
is incorporated herein by reference.
Liquidity
and Capital Resources
Capitalization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
% Change
|
|
|
|
(Millions)
|
|
|
Short-term debt and maturities classified as current
|
|
$
|
65
|
|
|
$
|
49
|
|
|
|
33
|
%
|
Long-term debt
|
|
|
1,455
|
|
|
|
1,402
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
1,520
|
|
|
|
1,451
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total redeemable noncontrolling interests
|
|
|
4
|
|
|
|
7
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncontrolling interests
|
|
|
23
|
|
|
|
24
|
|
|
|
(4
|
)
|
Tenneco Inc. Shareholders equity
|
|
|
(290
|
)
|
|
|
(251
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
(267
|
)
|
|
|
(227
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
1,257
|
|
|
$
|
1,231
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General. Short-term debt, which includes
maturities classified as current and borrowings by foreign
subsidiaries, was $65 million and $49 million as of
June 30, 2009 and December 31, 2008, respectively.
Borrowings under our revolving credit facilities, which are
classified as long-term debt, were $299 million and
$239 million as of June 30, 2009 and December 31,
2008, respectively.
The
2009 year-to-date
decrease in total equity primarily resulted from a
$39 million increase of translation of foreign balances
into U.S. dollars and a net loss attributable to Tenneco
Inc. of $82 million. While our book equity balance was
negative at June 30, 2009, it had no effect on our business
operations. We have no debt covenants that are based upon our
book equity, and there are no other agreements that are
adversely impacted by our negative book equity.
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. As of
June 30, 2009, the senior credit facility consisted of a
five- year, $144 million term loan A maturing in March
2012, a five-year, $550 million revolving credit facility
maturing in March 2012, and a seven-year $130 million
tranche B-1
letter of credit/revolving loan facility maturing in
March 2014. Our outstanding debt also includes
$245 million of
101/4 percent
senior secured notes due July 15, 2013, $250 million
of
81/8 percent
senior notes due November 15, 2015, and $500 million
of
85/8 percent
senior subordinated notes due November 15, 2014. At
June 30, 2009 we had unused borrowing capacity of
$333 million under our $680 million revolving credit
facility with $299 million in outstanding borrowings and
$48 million in letters of credit.
The term loan A facility is payable in twelve consecutive
quarterly installments, commencing June 30, 2009 as
follows: $6 million due each of June 30,
September 30, December 31, 2009 and March 31,
2010, $15 million due each of June 30,
September 30, December 31, 2010 and March 31,
2011, and $17 million due each of June 30,
59
September 30, December 31, 2011 and March 16,
2012. Over the next twelve months we plan to repay
$32 million of the senior term loan due 2012 by increasing
our revolver borrowings which are classified as long-term debt.
Accordingly, we have classified the $32 million repayment
as long-term debt. The revolving credit facility requires that
any amounts drawn be repaid by March 2012. Prior to that date,
funds may be borrowed, repaid and re-borrowed under the
revolving credit facility without premium or penalty. Letters of
credit may be issued under the revolving credit facility.
The
tranche B-1
letter of credit/revolving loan facility requires repayment by
March 2014. We can borrow 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 outstanding
letters of credit reduce our availability to borrow revolving
loans under this portion of the facility. We pay the
tranche B-1
lenders interest equal to LIBOR plus a margin, which is offset
by the return on the funds deposited with the administrative
agent by the lenders which earn interest at an annual rate
approximately equal to LIBOR less 25 basis points.
Outstanding revolving loans reduce the funds on deposit with the
administrative agent which in turn reduce the earnings of those
deposits.
On February 23, 2009, in light of the challenging
macroeconomic environment and auto production outlook, we
amended our senior credit facility to increase the allowable
consolidated net leverage ratio (consolidated indebtedness net
of cash divided by consolidated EBITDA as defined in the senior
credit facility agreement) and reduce the allowable consolidated
interest coverage ratio (consolidated EBITDA divided by
consolidated interest expense as defined in the senior credit
facility agreement). These changes are detailed in Liquidity and
Capital Resources Senior Credit Facility
Other Terms and Conditions.
Beginning February 23, 2009 and following each fiscal
quarter thereafter, the margin we pay on borrowings under our
term loan A and revolving credit facility incurred interest at
an annual rate equal to, at our option, either (i) the
London Interbank Offered Rate plus a margin of 550 basis
points, or (ii) a rate consisting of the greater of
(a) the JPMorgan Chase prime rate plus a margin of
450 basis points, and (b) the Federal Funds rate plus
50 basis points plus a margin of 450 basis points. The
margin we pay on these borrowings will be reduced by
50 basis points following each fiscal quarter for which our
consolidated net leverage ratio is less than 5.0, and will be
further reduced by an additional 50 basis points following
each fiscal quarter for which the consolidated net leverage
ratio is less than 4.0.
Also beginning February 23, 2009 and following each fiscal
quarter thereafter, the margin we pay on borrowings under our
tranche B-1
facility incurred interest at an annual rate equal to, at our
option, either (i) the London Interbank Offered Rate plus a
margin of 550 basis points, or (ii) a rate consisting
of the greater of (a) the JPMorgan Chase prime rate plus a
margin of 450 basis points, and (b) the Federal Funds
rate plus 50 basis points plus a margin of 450 basis
points. The margin we pay on these borrowings will be reduced by
50 basis points following each fiscal quarter for which our
consolidated net leverage ratio is less than 5.0.
The February 23, 2009 amendment to our senior credit
facility also placed further restrictions on our operations
including limitations on: (i) debt incurrence,
(ii) incremental loan extensions, (iii) liens,
(iv) restricted payments, (v) optional prepayments of
junior debt, (vi) investments, (vii) acquisitions, and
(viii) mandatory prepayments. The definition of EBIDTA was
amended to allow for $40 million of cash restructuring
charges taken after the date of the amendment and
$4 million annually in aftermarket changeover costs. We
agreed to pay each consenting lender a fee. The lender fee plus
amendment costs were approximately $8 million.
On December 24, 2008, we amended our senior secured credit
facility to increase the margin we pay on the borrowings from
1.50% to 3.00% on revolver loans, term loan A and
tranche B-1
loans; from 0.50% to 2.00% on prime based loans; from 1.00% to
2.50% on federal funds based loans and from 0.35% to 0.50% on
the commitment fee associated with the facility. In addition, we
agreed to pay each consenting lender a fee. The lender fee plus
amendment costs were approximately $3 million.
60
In December 2008, we terminated the
fixed-to-floating
interest rate swaps we entered into in April 2004. The change in
the market value of these swaps was recorded as part of interest
expense with an offset to other long-term assets or liabilities.
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) the London Interbank
Offered Rate plus a margin as set forth in the table below; or
(ii) a rate consisting of the greater of the JPMorgan Chase
prime rate or the Federal Funds rate, plus a margin as set forth
in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
|
3/16/2007
|
|
|
12/24/2008
|
|
|
2/23/2009
|
|
|
3/2/2009
|
|
|
|
|
|
|
thru
|
|
|
thru
|
|
|
thru
|
|
|
thru
|
|
|
Beginning
|
|
|
|
12/23/2008
|
|
|
2/22/2009
|
|
|
3/1/2009
|
|
|
5/14/2009
|
|
|
5/15/2009
|
|
|
Applicable Margin over LIBOR for Revolving Loans
|
|
|
1.50
|
%
|
|
|
3.00
|
%
|
|
|
5.50
|
%
|
|
|
4.50
|
%
|
|
|
5.00
|
%
|
Applicable Margin over LIBOR for Term Loan A Loans
|
|
|
1.50
|
%
|
|
|
3.00
|
%
|
|
|
5.50
|
%
|
|
|
4.50
|
%
|
|
|
5.00
|
%
|
Applicable Margin over LIBOR for
Tranche B-1
Loans
|
|
|
1.50
|
%
|
|
|
3.00
|
%
|
|
|
5.50
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Applicable Margin for Prime-based Loans
|
|
|
0.50
|
%
|
|
|
2.00
|
%
|
|
|
4.50
|
%
|
|
|
3.50
|
%
|
|
|
4.00
|
%
|
Applicable Margin for Federal Funds based Loans
|
|
|
1.00
|
%
|
|
|
2.50
|
%
|
|
|
5.00
|
%
|
|
|
4.00
|
%
|
|
|
4.50
|
%
|
Commitment Fee
|
|
|
0.35
|
%
|
|
|
0.50
|
%
|
|
|
0.75
|
%
|
|
|
0.50
|
%
|
|
|
0.50
|
%
|
Senior Credit Facility Other Terms and
Conditions. As described above, we are highly
leveraged. 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 first and second quarters of 2009, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31, 2009
|
|
|
June 30, 2009
|
|
|
|
Req.
|
|
|
Act.
|
|
|
Req.
|
|
|
Act.
|
|
|
Leverage Ratio (maximum)
|
|
|
5.50
|
|
|
|
4.72
|
|
|
|
7.35
|
|
|
|
5.77
|
|
Interest Coverage Ratio (minimum)
|
|
|
2.25
|
|
|
|
2.91
|
|
|
|
1.85
|
|
|
|
2.21
|
|
61
The financial ratios required under the senior credit facility
for the remainder of 2009 and beyond are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
Leverage
|
|
|
Coverage
|
|
Period Ending
|
|
Ratio
|
|
|
Ratio
|
|
|
September 30, 2009
|
|
|
7.90
|
|
|
|
1.55
|
|
December 31, 2009
|
|
|
6.60
|
|
|
|
1.60
|
|
March 31, 2010
|
|
|
5.50
|
|
|
|
2.00
|
|
June 30, 2010
|
|
|
5.00
|
|
|
|
2.25
|
|
September 30, 2010
|
|
|
4.75
|
|
|
|
2.30
|
|
December 31, 2010
|
|
|
4.50
|
|
|
|
2.35
|
|
March 31, 2011
|
|
|
4.00
|
|
|
|
2.55
|
|
June 30, 2011
|
|
|
3.75
|
|
|
|
2.55
|
|
September 30, 2011
|
|
|
3.50
|
|
|
|
2.55
|
|
December 31, 2011
|
|
|
3.50
|
|
|
|
2.55
|
|
Each quarter thereafter
|
|
|
3.50
|
|
|
|
2.75
|
|
The senior credit facility agreement provides the ability to
refinance our senior subordinated notes
and/or our
senior secured notes (i) in exchange for permitted
financing indebtedness (as defined in the senior credit facility
agreement); (ii) in exchange for shares of common stock; or
(iii) in an amount equal to the sum of (iv) the net
cash proceeds of equity issued after March 16, 2007, plus
(v) the portion of annual excess cash flow (as defined in
the senior credit facility agreement) that is not required to be
applied to the payment of the credit facilities and which is not
used for other purposes, provided that the amount of the
subordinated notes and the aggregate amount of the senior
secured notes and the subordinated notes that may be refinanced
is capped based upon the pro forma consolidated leverage ratio
after giving effect to such refinancing as shown in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Subordinated
|
|
|
|
|
|
|
Notes and Senior
|
|
|
|
Senior Subordinated
|
|
|
Secured Notes
|
|
|
|
Notes Aggregate
|
|
|
Aggregate
|
|
Pro forma Consolidated Leverage Ratio
|
|
Maximum Amount
|
|
|
Maximum Amount
|
|
(Millions)
|
|
|
|
|
|
|
|
Greater than or equal to 3.0x
|
|
$
|
0
|
|
|
$
|
10
|
|
Greater than or equal to 2.5x
|
|
$
|
100
|
|
|
$
|
300
|
|
Less than 2.5x
|
|
$
|
125
|
|
|
$
|
375
|
|
In addition, the senior secured notes may be refinanced with
(i) the net cash proceeds of incremental facilities and
permitted refinancing indebtedness (as defined in the senior
credit facility agreement), (ii) shares of common stock,
(iii) the net cash proceeds of any new senior or
subordinated unsecured indebtedness, (iv) proceeds of
revolving credit loans (as defined in the senior credit facility
agreement), (v) up to 200 million of unsecured
indebtedness of the companys foreign subsidiaries and
(vi) cash generated by the companys operations
provided that the amount of the senior secured notes that may be
refinanced is capped based upon the pro forma consolidated
leverage ratio after giving effect to such refinancing as shown
in the following table:
|
|
|
|
|
|
|
Aggregate Senior and
|
|
|
|
Subordinate Note
|
|
Pro forma Consolidated Leverage Ratio
|
|
Maximum Amount
|
|
(Millions)
|
|
|
|
|
Greater than or equal to 3.0x
|
|
$
|
10
|
|
Greater than or equal to 2.5x
|
|
$
|
300
|
|
Less than 2.5x
|
|
$
|
375
|
|
The senior credit facility agreement also contains 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 amended and restated
agreement); (iii) liquidations and dissolutions;
(iv) incurring additional indebtedness or guarantees;
(v) investments and acquisitions; (vi) dividends and
share
62
repurchases; (vii) mergers and consolidations; and
(viii) refinancing of subordinated and
101/4 percent
senior secured 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 June 30, 2009, we were in
compliance with all the financial covenants and operational
restrictions of the 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 Secured, Senior and Subordinated
Notes. As of June 30, 2009, our outstanding
debt also includes $245 million of
101/4 percent
senior secured notes due July 15, 2013, $250 million
of
81/8 percent
senior notes due November 15, 2015, and $500 million
of
85/8 percent
senior subordinated notes due November 15, 2014. We can
redeem some or all of the notes at any time after July 15,
2008 in the case of the senior secured notes, November 15,
2009 in the case of the senior subordinated notes and
November 15, 2011 in the case of the senior notes. If we
sell certain of our assets or experience specified kinds of
changes in control, we must offer to repurchase the notes. We
are permitted to redeem up to 35 percent of the senior
notes with the proceeds of certain equity offerings completed
before November 15, 2010.
Our senior secured, senior and senior subordinated 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 proforma basis, be
greater than 2.00. We have not incurred any of the types of
indebtedness not otherwise permitted by the indentures. 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. In addition, the
senior secured notes and related guarantees are secured by
second priority liens, subject to specified exceptions, on all
of our and our subsidiary guarantors assets that secure
obligations under our senior credit facility, except that only a
portion of the capital stock of our subsidiary guarantors
domestic subsidiaries is provided as collateral and no assets or
capital stock of our direct or indirect foreign subsidiaries
secure the notes or guarantees. There are no significant
restrictions on the ability of the subsidiaries that have
guaranteed these notes to make distributions to us. The senior
subordinated notes rank junior in right of payment to our senior
credit facility and any future senior debt incurred. As of
June 30, 2009, we were in compliance with the covenants and
restrictions of these indentures.
Accounts Receivable Securitization. In
addition to our senior credit facility, senior secured notes,
senior notes and senior subordinated notes, we also sell some of
our accounts receivable on a nonrecourse basis in North America
and Europe. In North America, we have an accounts receivable
securitization program with two commercial banks and we have
sold some of our GM receivables into the U.S. Treasury
program. We sell original equipment and aftermarket receivables
on a daily basis under the bank program. We had sold accounts
receivable under the bank program of $66 million and
$101 million at June 30, 2009 and December 31,
2008, respectively. This program is subject to cancellation
prior to its maturity date if we (i) fail to pay interest
or principal payments on an amount of indebtedness exceeding
$50 million, (ii) default on the financial covenant
ratios under the senior credit facility, or (iii) fail to
maintain certain financial ratios in connection with the
accounts receivable securitization program. In January 2009, the
U.S. program was amended and extended to March 2, 2009
at a facility size of $120 million. These revisions had the
affect of reducing the amount of receivables sold by
approximately $10 million to $30 million compared to
the terms of the previous program. On February 23, 2009
this program was renewed for 364 days to February 22,
2010 at a facility size of $100 million. As part of the
renewal, the margin we pay the banks increased. In April 2009,
we further amended the U.S. Securitization program by
removing receivables related to General Motors Corporation and
Chrysler LLC from the program. The program was further amended
in June 2009 to include receivables from Chrysler Group LLC and
in July 2009 to include receivables from General Motors Company.
Removing General Motors Corporation and Chrysler LLC from our
existing securitization program allowed us to guarantee all or a
portion of those receivables into the supplier program
established by the United States Treasury Department created to
support suppliers to domestic OEMs. While the funding costs
incurred by the banks are expected to be down in 2009, we
estimate that the additional margin would otherwise increase the
loss we record on the sale of receivables by approximately
$4 million annually. The loss we
63
incurred under the U.S. Treasury program was 2% of the
receivable. We elected to end our participation in the
U.S. Treasury program in July 2009. We also sell some
receivables in our European operations to regional banks in
Europe. At June 30, 2009, we had sold $106 million of
accounts receivable in Europe up from $78 million at
December 31, 2008. The arrangements to sell receivables in
Europe are provided under 9 separate arrangements, by various
financial institutions in each of the foreign jurisdictions. The
commitments for these arrangements are generally for one year
but some may be cancelled with 90 day notice prior to
renewal. In four instances, the arrangement provides for
cancellation by financial institution at any time upon
30 days, or less, notification. If we were not able to sell
receivables under either the North American or European
securitization programs, our borrowings under our revolving
credit agreements may 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.
Capital Requirements. We believe that cash
flows from operations, combined with 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 for the following year. Our ability to meet the
financial covenants depends upon a number of operational and
economic factors, many of which are beyond our control. Factors
that could impact our ability to comply with the financial
covenants include the rate at which consumers continue to buy
new vehicles and the rate at which they continue to repair
vehicles already in service, as well as our ability to
successfully implement our restructuring plans and offset higher
raw material prices. Further deterioration in North American
vehicle production levels, weakening in the global aftermarket,
or a further reduction in vehicle production levels in Europe,
beyond our expectations, could impact our ability to meet our
financial covenant ratios. 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.
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
following table summarizes by major currency the notional
amounts, weighted-average settlement rates, and fair value for
foreign currency forward purchase and sale contracts as of
June 30, 2009. 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
64
rates and discounted future expected cash flows utilizing market
interest rates with similar quality and maturity
characteristics. All contracts in the following table mature in
2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
|
|
|
Notional Amount
|
|
|
Weighted Average
|
|
|
Fair Value in
|
|
|
|
|
|
in Foreign Currency
|
|
|
Settlement Rates
|
|
|
U.S. Dollars
|
|
|
|
|
|
(Millions Except Settlement Rates)
|
|
|
Australian dollars
|
|
Purchase
|
|
|
37
|
|
|
|
0.806
|
|
|
$
|
30
|
|
|
|
Sell
|
|
|
(3
|
)
|
|
|
0.806
|
|
|
|
(3
|
)
|
British pounds
|
|
Purchase
|
|
|
26
|
|
|
|
1.645
|
|
|
|
44
|
|
|
|
Sell
|
|
|
(25
|
)
|
|
|
1.646
|
|
|
|
(42
|
)
|
European euro
|
|
Purchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sell
|
|
|
(25
|
)
|
|
|
1.404
|
|
|
|
(35
|
)
|
South African rand
|
|
Purchase
|
|
|
396
|
|
|
|
0.130
|
|
|
|
51
|
|
|
|
Sell
|
|
|
(26
|
)
|
|
|
0.130
|
|
|
|
(3
|
)
|
U.S. dollars
|
|
Purchase
|
|
|
6
|
|
|
|
1.004
|
|
|
|
6
|
|
|
|
Sell
|
|
|
(58
|
)
|
|
|
1.001
|
|
|
|
(58
|
)
|
Other
|
|
Purchase
|
|
|
911
|
|
|
|
0.016
|
|
|
|
14
|
|
|
|
Sell
|
|
|
(1
|
)
|
|
|
0.860
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 five to ten years. On
June 30, 2009, we had $1.010 billion in long-term debt
obligations that have fixed interest rates. Of that amount,
$245 million is fixed through July 2013, $500 million
is fixed through November 2014, $250 million is fixed
through November 2015, and the remainder is fixed from 2009
through 2025. We also have $450 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
Managements Discussion and Analysis.
We estimate that the fair value of our long-term debt at
June 30, 2009 was about 84 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 $5 million.
Environmental
and Other Matters
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. We record
liabilities when environmental assessments indicate that
remedial efforts are probable and the costs can be reasonably
estimated. Estimates of the liability are 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. 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. These estimated liabilities are
subject to revision in future periods based on actual costs or
new information. Where future cash flows are fixed or reliably
determinable, we have discounted the 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.
65
As of June 30, 2009, we have the obligation to remediate or
contribute towards the remediation of certain sites, including
two existing Superfund sites. At June 30, our estimated
share of environmental remediation costs at these sites was
approximately $17 million. 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.
The $17 million noted above includes $5 million of
estimated environmental remediation costs that result from the
recent bankruptcy of Mark IV Industries. Prior to our
acquisition of The Pullman Company, Pullman had sold certain
assets to Mark IV. As partial consideration for the purchase of
these assets, Mark IV agreed to assume Pullmans and
its subsidiaries historical obligations to contribute
towards the environmental remediation of certain sites.
Mark IV recently filed a petition for insolvency under
Chapter 11 of the United States Bankruptcy Code and
notified Pullman that it no longer intends to continue to
contribute toward the remediation of those sites. We are
conducting a thorough analysis and review of these matters and
it is possible that our estimate may change as additional
information becomes available to us. We do not believe that any
potential costs associated with our current status as a
potentially responsible party in the 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 that are incidental to the conduct of
our business. Some of these proceedings allege 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 warnings issues, and other
product liability related matters), taxes, employment matters,
and commercial or contractual disputes, sometimes related to
acquisitions or divestitures. For example, one of our Argentina
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. We
vigorously defend ourselves against all of these claims. In
future periods, we could be subjected to cash costs or non-cash
charges to earnings if any of these matters is resolved on
unfavorable terms. However, although 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 these legal
proceedings or claims 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. A small percentage 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. Nearly all of the claims are
related to alleged exposure to asbestos in our automotive
emission control products. Only a small percentage of these
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 muffler
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 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 non-cash charges to earnings
if any of these matters is resolved unfavorably to us. To date,
with respect to claims that have proceeded sufficiently through
the judicial process, we have regularly achieved favorable
resolution. During the first six months of 2009, dismissals were
initiated on behalf of 6 plaintiffs and are in process; we were
dismissed from an additional 697
66
cases. 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.
Employee
Stock Ownership Plans
We have established Employee Stock Ownership Plans for the
benefit of our domestic employees. Under the plans, 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. Prior to January 1,
2009, we matched in cash 50 percent of each employees
contribution up to eight percent of the employees salary.
We have temporarily discontinued these matching contributions to
salaried and hourly U.S. employees as a result of the
recent global economic downturn. We will continue to reevaluate
the Companys ability to restore the matching contribution
for the U.S. employees. 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. These additional contributions are not affected by the
temporary disruption of matching contributions discussed above.
We recorded expense for these contributions of approximately
$4 million and $9 million for the six months ended
June 30, 2009 and 2008, respectively. Matching
contributions vest immediately. Defined benefit replacement
contributions fully vest on the employees third
anniversary of employment.
|
|
ITEM 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
For information regarding our exposure to interest rate risk and
foreign currency exchange risk, see the caption entitled
Derivative Financial Instruments in
Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations, which is
incorporated herein by reference.
67
|
|
ITEM 4.
|
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 quarter covered by this report. Based on their evaluation,
our Chief Executive Officer and Chief Financial Officer have
concluded that the companys 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.
Changes
in Internal Control Over Financial Reporting
There have been no changes in our internal control over
financial reporting during the quarter ended June 30, 2009,
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
68
PART II
We are exposed to certain risks and uncertainties that could
have a material adverse impact on our business, financial
condition and operating results. There have been no material
changes to the Risk Factors described in Part I,
Item 1A of our Annual Report on
Form 10-K
for the year ended December 31, 2008.
|
|
ITEM 2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
(a) None.
(b) Not applicable.
(c) 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 second quarter of 2009. All of these
purchases reflect shares withheld upon vesting of restricted
stock, to satisfy statutory minimum tax withholding obligations.
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Average
|
|
Period
|
|
Shares Purchased
|
|
|
Price Paid
|
|
|
April 2009
|
|
|
|
|
|
$
|
|
|
May 2009
|
|
|
5,556
|
|
|
$
|
6.50
|
|
June 2009
|
|
|
5,434
|
|
|
$
|
8.15
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,990
|
|
|
$
|
7.32
|
|
We presently have no publicly announced repurchase plan or
program, but intend to continue to satisfy statutory minimum tax
withholding obligations in connection with the vesting of
outstanding restricted stock through the withholding of shares.
|
|
ITEM 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
We held our annual stockholders meeting on May 13,
2009, to consider and vote on three separate proposals:
(1) a proposal to elect Charles W. Cramb, Dennis J. Letham,
Frank E. Macher, Hari N. Nair, Roger B. Porter, David B.
Price, Jr., Gregg M. Sherrill, Paul T. Stecko, Mitsunobu
Takeuchi and Jane L. Warner as directors of our company for a
term expiring at our next annual stockholders meeting
(2) a proposal to ratify the appointment of
Deloitte & Touche LLP as independent public
accountants for 2009 and (3) a proposal to amend the
Tenneco Inc. 2006 Long-Term Incentive Plan to increase the
shares of the Companys common stock available for
delivering under the plan by 2.3 million additional shares,
with each share underlying an option counting as one share and
each share underlying a full value counting as 1.25 shares
against the total plan availability. The following sets forth
the vote results with respect to these proposals at the meeting:
Election
of Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes For
|
|
|
Votes Against
|
|
|
Abstentions
|
|
|
Charles W. Cramb
|
|
|
37,264,185
|
|
|
|
1,645,959
|
|
|
|
1,272,308
|
|
Dennis J. Letham
|
|
|
37,392,691
|
|
|
|
1,434,372
|
|
|
|
1,337,388
|
|
Frank E. Macher
|
|
|
37,309,972
|
|
|
|
1,551,667
|
|
|
|
1,302,814
|
|
Hari N. Nair
|
|
|
36,566,152
|
|
|
|
2,995,295
|
|
|
|
603,005
|
|
Roger B. Porter
|
|
|
36,243,146
|
|
|
|
2,618,784
|
|
|
|
1,302,522
|
|
David B. Price, Jr.
|
|
|
36,164,851
|
|
|
|
2,702,070
|
|
|
|
1,297,532
|
|
Gregg M. Sherrill
|
|
|
37,106,665
|
|
|
|
2,210,855
|
|
|
|
846,932
|
|
Paul T. Stecko
|
|
|
35,430,127
|
|
|
|
4,137,793
|
|
|
|
596,533
|
|
Mitsunobu Takeuchi
|
|
|
37,853,404
|
|
|
|
1,075,131
|
|
|
|
1,235,917
|
|
Jane L. Warner
|
|
|
36,628,109
|
|
|
|
2,262,672
|
|
|
|
1,273,671
|
|
69
Ratification
of Appointment of Deloitte & Touche LLP
|
|
|
|
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
|
Abstentions
|
|
|
38,193,092
|
|
|
970,624
|
|
|
|
1,000,737
|
|
Ratification
of Amendment to the Tenneco Inc. 2006 Long-Term Incentive
Plan
|
|
|
|
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
|
Abstentions
|
|
|
24,129,265
|
|
|
9,541,792
|
|
|
|
109,629
|
|
70
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, Tenneco Inc. has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
TENNECO INC.
|
|
|
|
By:
|
/s/ Kenneth
R. Trammell
|
Kenneth R. Trammell
Executive Vice President and Chief
Financial Officer
Dated: August 6, 2009
71
INDEX TO
EXHIBITS
TO
QUARTERLY REPORT ON
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 2009
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
|
|
Description
|
|
|
*10
|
.1
|
|
|
|
Amendment No. 12, dated June 25, 2009, to the Second
Amended and Restated Receivables Purchase Agreement, dated as of
May 4, 2005, among Tenneco Automotive Operating Company Inc., as
Servicer, Tenneco Automotive RSA Company, as Seller, Falcon
Asset Securitization Company LLC as assignee of 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.
|
|
*10
|
.2
|
|
|
|
Amendment No. 13, dated July 31, 2009, to the Second Amended and
Restated Receivables Purchase Agreement, dated as of May 4,
2005, among Tenneco Automotive Operating Company Inc., as
Servicer, Tenneco Automotive RSA Company, as Seller, Falcon
Asset Securitization Company LLC as assignee of 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.
|
|
10
|
.3
|
|
|
|
Tenneco Inc. 2006 Long-Term Incentive Plan (as Amended and
Restated Effective March 11, 2009) (incorporated by
reference to Appendix A of the Companys Proxy
Statement on Schedule 14A, filed with the Securities and
Exchange Commission on March 31, 2009).
|
|
*12
|
|
|
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
*15
|
|
|
|
|
Letter of Deloitte and Touche LLP regarding interim financial
information.
|
|
*31
|
.1
|
|
|
|
Certification of Gregg M. Sherrill under Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
*31
|
.2
|
|
|
|
Certification of Kenneth R. Trammell under Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
*32
|
.1
|
|
|
|
Certification of Gregg M. Sherrill and Kenneth R. Trammell under
Section 906 of the Sarbanes-Oxley Act of 2002.
|
72