SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

For the Quarterly Period Ended ~~March 31,~~June 30, 2019

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes þ☑ No ¨☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of Class A Voting Common Stock, par value $0.01 per share: ~~57,124,067~~57,126,858 shares outstanding as of ~~May 7,~~August 2, 2019. The number of shares of Class B Non-Voting Common Stock, par value $0.01 per share: 23,793,669 shares outstanding as of ~~May 7,~~August 2, 2019.

TABLE OF CONTENTS



		Page
Part I — Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	6
	Condensed Consolidated Statements of Income (Loss)	6
	Condensed Consolidated Statements of Comprehensive Income (Loss)	7
	Condensed Consolidated Balance Sheets	8
	Condensed Consolidated Statements of Cash Flows	9
	Condensed Consolidated Statements of Changes in Shareholders’ Equity	10
	Notes to Condensed Consolidated Financial Statements	1112
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5259
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6778
Item 4.	Controls and Procedures	6879

Part II — Other Information
Item 1.	Legal Proceedings	6980
Item 1A.	Risk Factors	6980
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7081
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Mine Safety Disclosures	*
Item 5.	Other Information	*
Item 6.	Exhibits	7182



*	No response to this item is included herein for the reason that it is inapplicable or the answer to such item is negative.

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

This 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. The words “may,” “will,” “believe,” “should,” “could,” “plan,” “expect,” “anticipate,” “estimate,” and similar expressions (and variations thereof), identify these forward-looking statements. Although we believe ~~that~~ the expectations reflected in these forward-looking statements are based on reasonable assumptions, these expectations may not prove to be correct. Because these forward-looking statements are also subject to risks and uncertainties, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include:

general economic, business and market conditions;

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

the cost and outcome of existing and any future claims, legal proceedings or investigations, including, but not limited to, any of the foregoing arising in connection with the ongoing global antitrust investigation, product performance, product safety or intellectual property rights;

changes in consumer demand, prices and our ability to have our products included on top selling vehicles, including any shifts in consumer preferences away from historically higher margin products for our customers and us, to other lower margin vehicles, for which we may or may not have supply arrangements, and the cyclical nature of the global vehicle industry, including the performance of the global aftermarket sector;

changes in consumer demand for our OEoriginal equipment products or aftermarket products, or changes in automotive and commercial vehicle manufacturers’ production rates and their actual and forecasted requirements for our products, due to difficult economic conditions and/or regulatory or legal changes affecting internal combustion engines and/or aftermarket products;

our dependence on certain large customers, including the loss of any of our large original equipment manufacturer ~~(“OE”)~~ 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 OE customers or any change in customer demand due to delays in the adoption or enforcement of worldwide emissions regulations;

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

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

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

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

our ability to comply with the covenants contained in our debt instruments;

our working capital requirements;

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

risks inherent in operating a multi-national company, including economic conditions, such as currency exchange and inflation rates, and political conditions in the countries where we operate or sell our products, adverse changes in trade agreements, tariffs, immigration policies, political stability, and tax and other laws, and potential disruptions of production and supply;

increasing competition from lower cost, private-label products;

damage to the reputation of one or more of our leading brands;

the effect of improvements in automotive parts on aftermarket demand for some of our products;

industrywide strikes, labor disruptions at our facilities or any labor or other economic disruptions at any of our significant customers or suppliers or any of our customers’ other suppliers;

developments relating to our intellectual property, including our ability to adapt to changes in technology;

costs related to product warranties and other customer satisfaction actions;

the failure or breach of our information technology systems, including the consequences of any misappropriation, exposure or corruption of sensitive information stored on such systems and the interruption to our business ~~that~~ such failure or breach may cause;

the effect of consolidation among vehicle parts suppliers and customers on our ability to compete in the highly competitive automotive and commercial vehicle supplier industry;

changes in distribution channels or competitive conditions in the markets and countries where we operate;

the evolution towards autonomous vehicles, and car and ride sharing;

customer acceptance of new products;

our ability to successfully integrate, and benefit from, any acquisitions ~~that~~ we complete;

our ability to effectively manage our joint ventures and other third-party relationships;

the potential impairment in the carrying value of our long-lived assets, goodwill, ~~other~~or indefinite-lived intangible assets or our inability to realize our deferred tax assets;

the negative effect of fuel price volatility on transportation and logistics costs, raw material costs, discretionary purchases of vehicles or aftermarket products, and demand for off-highway equipment;

increases in the costs of raw materials or components, including our ability to successfully reduce the effect of any such cost increases through materials substitutions, cost reduction initiatives, customer recovery, and other methods;

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

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

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

the effect of the extensive, increasing, and changing laws and regulations to which we are subject, including environmental laws and regulations, which may result in our incurrence of environmental liabilities in excess of the amount reserved or increased costs or loss of revenues relating to products subject to changing regulation;

potential volatility in our effective tax rate;

disasters, such as fires, earthquakes and flooding, and any resultant disruptions in the supply or production of goods or services to us or by us, in demand by our customers or in the operation of our system, disaster recovery capabilities or business continuity capabilities;

acts of war and/or terrorism, as well as actions taken or to be taken by the United States and other governments as a result of further acts or threats of terrorism, and the effect of these acts on economic, financial, and social conditions in the countries where we operate;

pension obligations and other postretirement benefits;

our hedging activities to address commodity price fluctuations; and

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

In addition, important factors related to the acquisition of Federal-Mogul LLC ("Federal-Mogul") and the planned separation of our company into a powertrain technology company and an aftermarket and ride performance company that could cause actual results to differ materially from the expectations reflected in the forward-looking statements, including:

the risk ~~that~~ the ~~benefits of the acquisition of Federal-Mogul, including synergies, may not be fully realized or may take longer to realize than expected;~~

~~the risk that the acquisition of Federal-Mogul may not advance our business strategy;~~

~~the risk that we may experience difficulty integrating or separating employees or operations;~~

the risk that the transaction may have an adverse effect on existing arrangements with us, including those related to transition, manufacturing and supply services and tax matters, our ability to retain and hire key personnel or our ability to maintain relationships with customers, suppliers or other business partners;

~~the risk that the company~~Company may not complete a separation of its powertrain technology business and its aftermarket and ride performance business (or achieve some or all of the anticipated benefits of ~~such a~~the separation);

the risk ~~that~~ the combined company and each separate company following the ~~spin-off~~separation will underperform relative to our expectations;

the ongoing transaction costs and risk ~~that~~ we may incur greater costs following separation of the ~~spin-off; and~~business;

the risk ~~that~~ the spin-off is determined to be a taxable ~~transaction.~~transaction;

the risk the benefits of the acquisition of Federal-Mogul, including synergies, may not be fully realized or may take longer to realize than expected;

the risk the acquisition of Federal-Mogul may not advance our business strategy;

the risk we may experience difficulty integrating or separating employees or operations; and

the risk the transaction may have an adverse effect on existing arrangements with us, including those related to transition, manufacturing and supply services, and tax matters; our ability to retain and hire key personnel; or our ability to maintain relationships with customers, suppliers or other business partners.

The risks included here are not exhaustive. Refer to “Part II, Item 1A — Risk Factors” herein and “Part I, Item 1A — Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018 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 effect 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. Unless otherwise indicated in this report, the forward-looking statements in this report are made as of the date of this report, and, except as required by law, the Company does not undertake any obligation, and disclaims any obligation, to publicly disclose revisions or updates to any forward-looking statements.

PART I

FINANCIAL INFORMATION

ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TENNECO INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited)

(in millions, except share and per share amounts)


	Three Months Ended March 31,					Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018		2019			2018
Revenues
Net sales and operating revenues	$	4,484		$	2,581	$	4,504		$	2,533	$	8,988		$	5,114

Costs and expenses
Cost of sales	3,864			2,193		3,793			2,134		7,657			4,327
Selling, general, and administrative	316			151		288			154		604			305
Depreciation and amortization	169			60		169			60		338			120
Engineering, research, and development	92			40		78			39		170			79
Restructuring charges and asset impairments	24			12		61			29		85			41
Goodwill impairment charge	60			—		—			—		60			—
	4,525			2,456		4,389			2,416		8,914			4,872
Other expense (income)
Non-service pension and other postretirement benefit costs (credits)	2			3		4			3		6			6
Equity in (earnings) losses of nonconsolidated affiliates, net of tax	(16		)	—		(17		)	—		(33		)	—
Other expense (income), net	(3		)	—		(13		)	3		(16		)	3
	(17		)	3		(26		)	6		(43		)	9
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	(24		)	122		141			111		117			233
Interest expense	81			23		82			22		163			45
Earnings (loss) before income taxes and noncontrolling interests	(105		)	99		59			89		(46		)	188
Income tax expense (benefit)	—			25		14			26		14			51
Net income (loss)	(105		)	74		45			63		(60		)	137
Less: Net income (loss) attributable to noncontrolling interests	12			14		19			16		31			30
Net income (loss) attributable to Tenneco Inc.	$	(117	)	$	60	$	26		$	47	$	(91	)	$	107
Earnings (loss) per share
Basic earnings (loss) per share:
Earnings (loss) per share	$	(1.44	)	$	1.17	$	0.32		$	0.92	$	(1.13	)	$	2.08
Weighted average shares outstanding	80,874,637			51,211,643		80,920,825			51,258,668		80,897,731			51,232,639
Diluted earnings (loss) per share:
Earnings (loss) per share	$	(1.44	)	$	1.17	$	0.32		$	0.92	$	(1.13	)	$	2.07
Weighted average shares outstanding	80,874,637			51,501,643		80,920,825			51,607,224		80,897,731			51,546,015

See accompanying notes to the condensed consolidated financial statements.

TENNECO INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(in millions)


	Three Months Ended March 31,					Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018		2019			2018			2019			2018
Net income (loss)	$	(105	)	$	74	$	45		$	63		$	(60	)	$	137
Other comprehensive income (loss) — net of tax
Foreign currency translation adjustment	35			27		(18		)	(99		)	17			(72		)
Cash flow hedges	4			—		(3		)	—			1			—
Defined benefit plans	1			3		(2		)	4			(1		)	7
	40			30		(23		)	(95		)	17			(65		)
Comprehensive income (loss)	(65		)	104		22			(32		)	(43		)	72
Less: Comprehensive income (loss) attributable to noncontrolling interests	18			22		18			9			36			31
Comprehensive income (loss) attributable to common shareholders	$	(83	)	$	82	$	4		$	(41	)	$	(79	)	$	41

See accompanying notes to the condensed consolidated financial statements.

TENNECO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in millions, except shares)


	March 31, 2019			December 31, 2018			June 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	357		$	697		$	384		$	697
Restricted cash	6			5			6			5
Receivables:
Customer notes and accounts, net	2,738			2,487			2,754			2,487
Other	105			85			93			85
Inventories	2,266			2,245			2,207			2,245
Prepayments and other current assets	555			590			550			590
Total current assets	6,027			6,109			5,994			6,109
Property, plant and equipment, net	3,519			3,501			3,569			3,501
Long-term receivables, net	9			10			10			10
Goodwill	791			869			799			869
Intangibles, net	1,687			1,519			1,649			1,519
Investments in nonconsolidated affiliates	528			544			531			544
Deferred income taxes	471			467			480			467
Other assets	584			213			560			213
Total assets	$	13,616		$	13,232		$	13,592		$	13,232
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt, including current maturities of long-term debt	$	159		$	153		$	170		$	153
Accounts payable	2,861			2,759			2,725			2,759
Accrued compensation and employee benefits	363			343			391			343
Accrued income taxes	30			64			—			64
Accrued expenses and other current liabilities	994			1,001			1,024			1,001
Total current liabilities	4,407			4,320			4,310			4,320
Long-term debt	5,417			5,340			5,508			5,340
Deferred income taxes	110			88			110			88
Pension and postretirement benefits	1,138			1,167			1,129			1,167
Deferred credits and other liabilities	564			263			546			263
Commitments and contingencies (Note 13)
Total liabilities	11,636			11,178			11,603			11,178
Redeemable noncontrolling interests	153			138			145			138
Tenneco Inc. shareholders’ equity:
Preferred stock — $0.01 par value; none issued	—			—			—			—
Class A voting stock — $0.01 par value; shares issued: March 31, 2019 — 71,750,146 and December 31, 2018 — 71,675,379	1			1
Class B non-voting convertible stock — $0.01 par value; shares issued: March 31, 2019 — 23,793,669 and December 31, 2018 — 23,793,669	—			—
Class A voting stock — $0.01 par value; shares issued: June 30, 2019 — 71,746,952 and December 31, 2018 — 71,675,379							1			1
Class B non-voting convertible stock — $0.01 par value; shares issued: June 30, 2019 — 23,793,669 and December 31, 2018 — 23,793,669							—			—
Additional paid-in capital	4,365			4,360			4,371			4,360
Accumulated other comprehensive loss	(658		)	(692		)	(680		)	(692		)
Accumulated deficit	(1,150		)	(1,013		)	(1,124		)	(1,013		)
	2,558			2,656			2,568			2,656
Shares held as treasury stock — at cost: March 31, 2019 and December 31, 2018 — 14,592,888 shares	(930		)	(930		)
Shares held as treasury stock — at cost: June 30, 2019 and December 31, 2018 — 14,592,888 shares							(930		)	(930		)
Total Tenneco Inc. shareholders’ equity	1,628			1,726			1,638			1,726
Noncontrolling interests	199			190			206			190
Total equity	1,827			1,916			1,844			1,916
Total liabilities, redeemable noncontrolling interests and equity	$	13,616		$	13,232		$	13,592		$	13,232

See accompanying notes to the condensed consolidated financial statements.

TENNECO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in millions)


	Three Months Ended March 31,						Six Months Ended June 30,
	2019			2018			2019			2018
Operating Activities
Net income (loss)	$	(105	)	$	74		$	(60	)	$	137
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
Goodwill impairment charge	60			—			60			—
Depreciation and amortization	169			60			338			120
Deferred income taxes	(8		)	(1		)	(14		)	(9		)
Stock-based compensation	7			5			13			7
Restructuring charges and asset impairments, net of cash paid	(14		)	(4		)	14			10
Change in pension and other postretirement benefit plans	(17		)	—			(32		)	2
Equity in earnings of nonconsolidated affiliates	(16		)	—			(33		)	—
Cash dividends received from nonconsolidated affiliates	15			—			27			—
Loss (gain) on sale of assets							(1		)	—
Changes in operating assets and liabilities:
Receivables	(312		)	(221		)	(401		)	(233		)
Inventories	11			(32		)	101			(51		)
Payables and accrued expenses	157			185			48			206
Accrued interest and income taxes	(38		)	(4		)
Accrued interest and accrued income taxes							(66		)	(2		)
Other assets and liabilities	(59		)	(62		)	(94		)	(109		)
Net cash provided (used) by operating activities	(150		)	—			(100		)	78
Investing Activities
Proceeds from sale of assets	1			2			5			5
Net proceeds from sale of business	22			—			22			—
Cash payments for property, plant, and equipment	(210		)	(89		)	(379		)	(174		)
Acquisition of business, net of cash acquired	(158		)	—			(158		)	—
Proceeds from deferred purchase price of factored receivables	60			34			147			66
Other	2			—			(1		)	2
Net cash used by investing activities	(283		)	(53		)	(364		)	(101		)
Financing Activities
Proceeds from term loans and notes	28			6			111			9
Repayments of term loans and notes	(64		)	(13		)	(190		)	(28		)
Borrowings on revolving lines of credit	2,119			1,267			4,525			2,669
Payments on revolving lines of credit	(1,981		)	(1,189		)	(4,254		)	(2,614		)
Issuance (repurchase) of common shares	(2		)	(2		)	(2		)	(1		)
Cash dividends	(20		)	(13		)	(20		)	(25		)
Net increase (decrease) in bank overdrafts	(1		)	(4		)	(8		)	(7		)
Other	(3		)	(30		)	(1		)	(22		)
Distributions to noncontrolling interest partners	(1		)	—			(20		)	(28		)
Net cash provided (used) by financing activities	75			22			141			(47		)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	19			3			11			(11		)
Decrease in cash, cash equivalents and restricted cash	(339		)	(28		)	(312		)	(81		)
Cash, cash equivalents and restricted cash, beginning of period	702			318			702			318
Cash, cash equivalents and restricted cash, end of period	$	363		$	290		$	390		$	237
Supplemental Cash Flow Information
Cash paid during the period for interest	$	74		$	23		$	145		$	40
Cash paid during the period for income taxes, net of refunds	$	43		$	25		$	100		$	56
Non-cash Investing Activities
Period end balance of accounts payable for property, plant, and equipment	$	101		$	55		$	116		$	54
Deferred purchase price of receivables factored in the period	$	58		$	37		$	52		$	71

See accompanying notes to the condensed consolidated financial statements.

TENNECO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(in millions)


	Tenneco Inc. Shareholders' equity																						Tenneco Inc. Shareholders' equity
	$0.01 Par Value Common Stock		Treasury Stock			Additional Paid-In Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Tenneco Inc. Shareholders' Equity			Noncontrolling Interests			Total Equity			$0.01 Par Value Common Stock		Treasury Stock			Additional Paid-In Capital		Accumulated Deficit				Accumulated Other Comprehensive Income (Loss)			Total Tenneco Inc. Shareholders' Equity			Noncontrolling Interests			Total Equity
Balance as of December 31, 2018	$	1	$	(930	)	$	4,360	$	(1,013	)	$	(692	)	$	1,726		$	190		$	1,916		$	1	$	(930	)	$	4,360	$	(1,013	)		$	(692	)	$	1,726		$	190		$	1,916
Net income (loss)	—		—			—		(117		)	—			(117		)	7			(110		)	—		—			—		(117		)		—			(117		)	7			(110		)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments											29			29			4			33														29			29			4			33
Derivatives											4			4			—			4														4			4			—			4
Defined benefit plans											1			1			—			1														1			1			—			1
Comprehensive income (loss)														(83		)	11			(72		)															(83		)	11			(72		)
Common stock issued	—		—			5		—			—			5			—			5
Stock-based compensation, net																							—		—			5		—			—	—			5			—			5
Cash dividends ($0.25 per share)	—		—			—		(20		)	—			(20		)	—			(20		)	—		—			—		(20		)		—			(20		)	—			(20		)
Purchase accounting measurement period adjustment	—		—			—		—			—			—			(1		)	(1		)	—		—			—		—				—			—			(1		)	(1		)
Distributions declared to noncontrolling interests	—		—			—		—			—			—			(1		)	(1		)	—		—			—		—				—			—			(1		)	(1		)
Balance as of March 31, 2019	$	1	$	(930	)	$	4,365	$	(1,150	)	$	(658	)	$	1,628		$	199		$	1,827		1		(930		)	4,365		(1,150		)		(658		)	1,628			199			1,827
Net income (loss)																							—		—			—		26				—			26			9			35
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments																																		(17		)	(17		)	—			(17		)
Derivatives																																		(3		)	(3		)	—			(3		)
Defined benefit plans																																		(2		)	(2		)	—			(2		)
Comprehensive income (loss)																																					4			9			13
Stock-based compensation, net																							—		—			6		—				—			6			—			6
Distributions declared to noncontrolling interests																							—		—			—		—				—			—			(2		)	(2		)
Balance as of June 30, 2019																							$	1	$	(930	)	$	4,371	$	(1,124	)		$	(680	)	$	1,638		$	206		$	1,844


	Tenneco Inc. Shareholders' equity																					Tenneco Inc. Shareholders' equity
	$0.01 Par Value Common Stock		Treasury Stock			Additional Paid-In Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Tenneco Inc. Shareholders' Equity			Noncontrolling Interests		Total Equity			$0.01 Par Value Common Stock		Treasury Stock			Additional Paid-In Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Tenneco Inc. Shareholders' Equity			Noncontrolling Interests			Total Equity
Balance as of December 31, 2017	$	1	$	(930	)	$	3,112	$	(1,009	)	$	(538	)	$	636		$	46	$	682		$	1	$	(930	)	$	3,112	$	(1,009	)	$	(538	)	$	636		$	46		$	682
Net Income (loss)	—		—			—		60			—			60			7		67			—		—			—		60			—			60			7			67
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments											19			19			7		26													19			19			7			26
Defined benefit plans											3			3			—		3													3			3			—			3
Comprehensive income (loss)														82			14		96																82			14			96
Adjustments to adopt new accounting standards	—		—			—		(1		)	—			(1		)	—		(1		)	—		—			—		(1		)	—			(1		)	—			(1		)
Common stock issued	—		—			3		—			—			3			—		3
Stock-based compensation, net																						—		—			3		—			—			3			—			3
Cash dividends ($0.25 per share)	—		—			—		(13		)	—			(13		)	—		(13		)	—		—			—		(13		)	—			(13		)	—			(13		)
Balance as of March 31, 2018	$	1	$	(930	)	$	3,115	$	(963	)	$	(516	)	$	707		$	60	$	767		1		(930		)	3,115		(963		)	(516		)	707			60			767
Net Income (loss)																						—		—			—		47			—			47			7			54
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments																																(92		)	(92		)	(5		)	(97		)
Derivatives																																—			—			—			—
Defined benefit plans																																4			4			—			4
Comprehensive income (loss)																																			(41		)	2			(39		)
Stock-based compensation, net																						—		—			3		—			—			3			—			3
Cash dividends ($0.25 per share)																						—		—			—		(12		)	—			(12		)				(12		)
Distributions declared to noncontrolling interests																						—		—			—		—			—			—			(18		)	(18		)
Balance as of June 30, 2018																						$	1	$	(930	)	$	3,118	$	(928	)	$	(604	)	$	657		$	44		$	701

See accompanying notes to the condensed consolidated financial statements.

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions, except share and per share amounts, or as otherwise noted)

1. Description of Business

Tenneco Inc. ("Tenneco" or "the Company") was formed under the laws of Delaware in 1996. Tenneco designs, manufactures, and sells products and services for light vehicle, commercial truck, off-highway, industrial, and aftermarket customers. The Company is one of the world's leading manufacturers of clean air, powertrain, and ride performance products and systems, and serves both original equipment manufacturers ("OEM") and replacement markets worldwide.

On January 10, 2019, the Company completed the acquisition of a 90.5% ownership interest in Öhlins Intressenter AB (“Öhlins”, the "Öhlins Acquisition"), a Swedish technology company that develops premium suspension systems and components for the automotive and motorsport industries. On October 1, 2018, the Company completed the acquisition of a 100% ownership interest in Federal-Mogul LLC ("Federal-Mogul Acquisition," and together with the Öhlins Acquisition, the "Acquisitions"), a global supplier of technology and innovation in vehicle and industrial products for fuel economy, emissions reductions, and safety systems.

2. Summary of Significant Accounting Policies

Basis of Presentation — Interim Financial Statements

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. These statements include all adjustments (consisting of normal recurring adjustments) management believes are necessary to fairly state the results of operations, comprehensive income, financial position, changes in shareholders' equity, and cash flows. The Company's management believes the disclosures are adequate to make the information presented not misleading when read in conjunction with the audited consolidated financial statements and the notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the Securities and Exchange Commission on March 18, 2019. Operating results for the three and six months ended ~~March 31,~~June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

The Company expects to separate its businesses to form two new, independent publicly traded companies, an Aftermarket and Ride Performance company ("DRiV") and a new Powertrain Technology company ("New Tenneco"). The Company ~~has revised its timing target for~~currently expects the separation of the ~~business and now expects the~~businesses to occur through a spinoff transaction of DRiV ~~spinoff to occur~~in mid-2020. In preparation for the spinoff, the Company began to manage and report its DRiV businesses through two new operating segments, in the first quarter of 2019, as compared to the three operating segments it had previously reported. The DRiV operating segments consist of Motorparts and Ride Performance. The new Motorparts operating segment consists of the previously reported Aftermarket operating segment as well as the aftermarket portion of the previously reported Motorparts operating segment. The Ride Performance operating segment consists of the previously reported Ride Performance operating segment as well as the OE Braking business that was included in the previously reported Motorparts operating segment. As such, prior period operating segment results and related disclosures have been conformed to reflect the Company's current operating segments. The future New Tenneco consists of two existing operating segments, Powertrain and Clean Air. See Note 17, Segment Information.

Redeemable Noncontrolling Interests — The Company has noncontrolling interests with redemption features. These redemption features could require the Company to make an offer to purchase the noncontrolling interests at fair value in the event of a change in control of Tenneco Inc. or certain of its subsidiaries. The redemption of these redeemable noncontrolling interests is not solely within the Company's control. Accordingly, these noncontrolling interests are presented in the temporary equity section of the Company's condensed consolidated balance sheets. The Company does not believe it is probable the redemption features related to these noncontrolling interest securities will be triggered, as a change in control event is generally not probable until it occurs, except as discussed in Note 3, Acquisitions and Divestitures, for the redeemable noncontrolling interests from the Acquisitions.

The following is a rollforward of activities in the Company's redeemable noncontrolling ~~interests for the three months ended March 31, 2019 and 2018:~~interests:



	Six Months Ended June 30,
	2019			2018
Balance at beginning of period	$	138		$	42
Net income (loss) attributable to redeemable noncontrolling interests	15			16
Other comprehensive income (loss)	1			(1		)
Acquisition and other	16			—
Purchase accounting measurement period adjustment	(8		)	—
Dividends declared	(17		)	(19		)
Balance at end of period	$	145		$	38

Three months ended March 31,
2019 2018
Balance at beginning of period $ 138
$ 42
Net income (loss) attributable to redeemable noncontrolling interests 5
7
Other comprehensive income (loss) 2
1
Acquisition and other 16
—
Purchase accounting measurement period adjustment (8 ) —
Balance at end of period $ 153
$ 50

The Company recorded a decrease to the redeemable noncontrolling interests of $8 million from the Federal-Mogul Acquisition, as a result of adjustments made in the measurement period to the preliminary purchase price allocation. The purchase price allocations for the Acquisitions are preliminary and subject to finalization. The Company's current estimates and assumptions may change as a result. See Note 3, Acquisitions and Divestitures for additional information.

Earnings (loss) per ~~share:~~

share — Basic earnings (loss) per share is calculated by dividing net earnings (loss) by the weighted average shares outstanding during the period. Diluted earnings (loss) per share reflects the weighted average effect of all potentially dilutive securities from the date of issuance. Actual weighted average shares outstanding used in calculating earnings (loss) per share were:

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Three months ended March 31,
2019 2018
Weighted average shares of common stock outstanding 80,874,637
51,211,643
Effect of dilutive securities:
Restricted stock, PSUs and RSUs —
216,351
Stock options —
73,649
Dilutive shares outstanding 80,874,637
51,501,643



	Three Months Ended June 30,		Six months ended June 30,
	2019	2018	2019	2018
Weighted average shares of common stock outstanding	80,920,825	51,258,668	80,897,731	51,232,639
Effect of dilutive securities:
Restricted stock, PSUs and RSUs	—	298,826	—	251,971
Stock options	—	49,730	—	61,405
Dilutive shares outstanding	80,920,825	51,607,224	80,897,731	51,546,015

For the three and six months ended ~~March 31,~~June 30, 2019, the calculation of diluted earnings (loss) per share excluded 1,990,099 and 1,850,850 of share-based awards, as the effect on the calculation would have been anti-dilutive. For the three and six months ended June 30, 2018, the calculation of diluted earnings (loss) per share excluded ~~1,714,950~~123,773 and ~~174~~123,947 of share-based ~~awards. The~~awards, as the effect ~~of including these securities in~~on the calculation ~~of diluted earnings (loss) per share~~ would have been anti-dilutive.

Revision of Previously Issued Financial Statements

The Company identified an error in the accounting for certain costs capitalized into inventory that did not constitute inventoriable costs in its historical financial statements. The Company also revised for other immaterial errors related to various line items. As a result, certain amounts in the condensed consolidated financial statements have been revised for the three ~~months~~and six month periods ended ~~March 31,~~June 30, 2018. These revisions were not material to the previously issued financial statements and are presented in the tables below.

Reclassifications: Certain amounts in the prior years have been aggregated or disaggregated to conform to current year presentation. These reclassifications have no effect on previously reported earnings before income taxes and noncontrolling interests or net income, other comprehensive income (loss), current or total assets, current or total liabilities, and the cash provided (used) by operating, investing or financing activities within the condensed consolidated financial statements.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

The following tables present the ~~effect~~effects of these reclassifications and revisions for the condensed consolidated financial statement line items adjusted in the affected periods included within this quarterly report:

Three Months Ended March 31, 2018
As Reported Reclasses As Reclassified Revisions As Revised
Condensed consolidated statement of income (loss)
Revenues
Net sales and operating revenues $ 2,574
$ —
$ 2,574
$ 7
$ 2,581
Costs and expenses
Cost of sales 2,198
(9 ) 2,189
4
2,193
Selling, general, and administrative 153
(2 ) 151
—
151
Depreciation and amortization 59
—
59
1
60
Engineering, research, and development 41
(1 ) 40
—
40
Restructuring charges and asset impairments —
12
12
—
12
2,451
—
2,451
5
2,456
Other expense (income)
Loss on sale of receivables 3
(3 ) —
—
—
Non-service pension and other postretirement benefit costs (credits) —
3
3
—
3
Other expense (income), net 3
(3 ) —
—
—
6
(3 ) 3
—
3
Earnings (loss) before interest expense, income taxes, and noncontrolling interests 117
3
120
2
122
Interest expense 20
3
23
—
23
Earnings (loss) before income taxes and noncontrolling interests 97
—
97
2
99
Income tax expense (benefit) 25

25
—
25
Net income (loss) 72
—
72
2
74
Less: Net income (loss) attributable to noncontrolling interests 14
14
—
14
Net income (loss) attributable to Tenneco Inc. $ 58
$ —
$ 58
$ 2
$ 60
Earnings (loss) per share
Basic earnings (loss) per share of common stock $ 1.13
$ —
$ 1.13
$ 0.04
$ 1.17
Diluted earnings (loss) per share of common stock $ 1.13
$ —
$ 1.13
$ 0.04
$ 1.17

Three Months Ended March 31, 2018
As Reported Reclasses As Reclassified Revisions As Revised
Condensed consolidated statement of comprehensive income (loss)
Net income (loss) $ 72
$ —
$ 72
$ 2
$ 74
Other comprehensive income (loss)—net of tax
Foreign currency translation adjustment 27
—
27
—
27
Defined benefit plans 3
—
3
—
3
30
—
30
—
30
Comprehensive income (loss) 102
—
102
2
104
Less: Comprehensive income (loss) attributable to noncontrolling interests 22
—
22
—
22
Comprehensive income (loss) attributable to common shareholders $ 80
$ —
$ 80
$ 2
$ 82



	Three Months Ended June 30, 2018
	As Reported		Reclasses			As Reclassified		Revisions			As Revised
Condensed consolidated statement of income (loss)
Revenues
Net sales and operating revenues	$	2,537	$	—		$	2,537	$	(4	)	$	2,533
Costs and expenses
Cost of sales	2,159		(23		)	2,136		(2		)	2,134
Selling, general, and administrative	156		(2		)	154		—			154
Depreciation and amortization	59		—			59		1			60
Engineering, research, and development	42		(4		)	38		1			39
Restructuring charges and asset impairments	—		29			29		—			29
	2,416		—			2,416		—			2,416
Other expense (income)
Loss on sale of receivables	2		(2		)	—		—			—
Non-service pension and other postretirement benefit costs (credits)	—		3			3		—			3
Other expense (income), net	6		(3		)	3		—			3
	8		(2		)	6		—			6
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	113		2			115		(4		)	111
Interest expense	20		2			22		—			22
Earnings (loss) before income taxes and noncontrolling interests	93		—			93		(4		)	89
Income tax expense (benefit)	27		—			27		(1		)	26
Net income (loss)	66		—			66		(3		)	63
Less: Net income (loss) attributable to noncontrolling interests	16		—			16		—			16
Net income (loss) attributable to Tenneco Inc.	$	50	$	—		$	50	$	(3	)	$	47
Earnings (loss) per share
Basic earnings (loss) per share of common stock	$	0.98	$	—		$	0.98	$	(0.06	)	$	0.92
Diluted earnings (loss) per share of common stock	$	0.98	$	—		$	0.98	$	(0.06	)	$	0.92

Three Months Ended March 31, 2018
As Reported Reclasses As Reclassified Revisions As Revised
Condensed consolidated statements of cash flow
Operating Activities
Net income (loss) $ 72
$ —
$ 72
$ 2
$ 74
Net cash provided by (used by) operating activities —
—
—
—
—

Investing Activities
Net cash used by investing activities (53 ) —
(53 ) —
(53 )

Financing Activities
Proceeds from term loans and notes —
—
—
6
6
Repayments of term loans and notes —
(6 ) (6 ) (7 ) (13 )
Retirement of long-term debt (6 ) 6
—
—
—
Borrowings on revolving lines of credit —
—
—
1,267
1,267
Payments on revolving lines of credit —
—
—
(1,189 ) (1,189 )
Net increase (decrease) in revolver borrowings 77
—
77
(77 ) —
Issuance (repurchase) of common shares (2 ) —
(2 ) —
(2 )
Cash dividends (13 ) —
(13 ) —
(13 )
Net increase (decrease) in bank overdrafts (4 ) —
(4 ) —
(4 )
Net increase (decrease) in short-term borrowings secured by accounts receivable (30 ) 30
—
—
—
Other —
(30 ) (30 ) —
(30 )
Net cash provided by (used by) financing activities 22
—
22
—
22
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash 3
—
3
—
3
Increase (decrease) in cash, cash equivalents and restricted cash (28 ) —
(28 ) —
(28 )
Cash, cash equivalents and restricted cash, beginning of period 318
—
318
—
318
Cash, cash equivalents and restricted cash, end of period $ 290
$ —
$ 290
$ —
$ 290



	Three Months Ended June 30, 2018
	As Reported			Reclasses		As Reclassified			Revisions			As Revised
Condensed consolidated statement of comprehensive income (loss)
Net income (loss)	$	66		$	—	$	66		$	(3	)	$	63
Other comprehensive income (loss)—net of tax
Foreign currency translation adjustment	(100		)	—		(100		)	1			(99		)
Defined benefit plans	4			—		4			—			4
	(96		)	—		(96		)	1			(95		)
Comprehensive income (loss)	(30		)	—		(30		)	(2		)	(32		)
Less: Comprehensive income (loss) attributable to noncontrolling interests	9			—		9			—			9
Comprehensive income (loss) attributable to common shareholders	$	(39	)	$	—	$	(39	)	$	(2	)	$	(41	)

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Three Months Ended March 31, 2018
As Reported Revisions As Revised
Condensed consolidated statements of changes in shareholders' equity
Accumulated Deficit
Balance January 1 $ (946 ) $ (63 ) $ (1,009 )
Net income (loss) attributable to Tenneco Inc. 58
2
60
Cash dividends declared (13 ) —
(13 )
Adjustments to adopt new accounting standards (1 ) —
(1 )
Balance March 31 $ (902 ) $ (61 ) $ (963 )
Accumulated Other Comprehensive Income (loss)
Balance January 1 $ (541 ) $ 3
$ (538 )
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment 19
—
19
Defined benefit plans 3
—
3
Balance March 31 $ (519 ) $ 3
$ (516 )
Total Tenneco Inc. Shareholders' Equity
Balance January 1 $ 696
$ (60 ) $ 636
Net income (loss) attributable to Tenneco Inc. 58
2
60
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment 19
—
19
Defined benefit plans 3
—
3
Comprehensive income (loss) 80
2
82
Adjustments to adopt new accounting standards (1 ) —
(1 )
Cash dividends (13 ) —
(13 )
Common Stock Issued 3
—
3
Balance March 31 $ 765
$ (58 ) $ 707
Total Equity
Balance January 1 $ 742
$ (60 ) $ 682
Net income (loss) 65
2
67
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment 26
—
26
Defined benefit plans 3
—
3
Comprehensive income (loss) 94
2
96
Common Stock Issued 3
—
3
Cash dividends (13 ) —
(13 )
Adjustments to adopt new accounting standards (1 ) —
(1 )
Balance March 31 $ 825
$ (58 ) $ 767



	Six months ended June 30, 2018
	As Reported		Reclasses			As Reclassified		Revisions			As Revised
Condensed consolidated statement of income (loss)
Revenues
Net sales and operating revenues	$	5,111	$	—		$	5,111	$	3		$	5,114
Costs and expenses
Cost of sales	4,357		(32		)	4,325		2			4,327
Selling, general, and administrative	309		(4		)	305		—			305
Depreciation and amortization	118		—			118		2			120
Engineering, research, and development	83		(5		)	78		1			79
Restructuring charges and asset impairments	—		41			41		—			41
	4,867		—			4,867		5			4,872
Other expense (income)
Loss on sale of receivables	5		(5		)	—		—			—
Non-service pension and other postretirement benefit costs (credits)	—		6			6		—			6
Other expense (income), net	9		(6		)	3		—			3
	14		(5		)	9		—			9
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	230		5			235		(2		)	233
Interest expense	40		5			45		—			45
Earnings (loss) before income taxes and noncontrolling interests	190		—			190		(2		)	188
Income tax expense (benefit)	52		—			52		(1		)	51
Net income (loss)	138		—			138		(1		)	137
Less: Net income (loss) attributable to noncontrolling interests	30		—			30		—			30
Net income (loss) attributable to Tenneco Inc.	$	108	$	—		$	108	$	(1	)	$	107
Earnings (loss) per share
Basic earnings (loss) per share of common stock	$	2.12	$	—		$	2.12	$	(0.04	)	$	2.08
Diluted earnings (loss) per share of common stock	$	2.10	$	—		$	2.10	$	(0.03	)	$	2.07



	Six months ended June 30, 2018
	As Reported			Reclasses		As Reclassified			Revisions			As Revised
Condensed consolidated statement of comprehensive income (loss)
Net income (loss)	$	138		$	—	$	138		$	(1	)	$	137
Other comprehensive income (loss)—net of tax
Foreign currency translation adjustment	(73		)	—		(73		)	1			(72		)
Defined benefit plans	7			—		7			—			7
	(66		)	—		(66		)	1			(65		)
Comprehensive income (loss)	72			—		72			—			72
Less: Comprehensive income (loss) attributable to noncontrolling interests	31			—		31			—			31
Comprehensive income (loss) attributable to common shareholders	$	41		$	—	$	41		$	—		$	41

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Six months ended June 30, 2018
	As Reported			Reclasses			As Reclassified			Revisions			As Revised
Condensed consolidated statements of cash flow
Operating Activities
Net income (loss)	$	138		$	—		$	138		$	(1	)	$	137
Net cash provided by (used by) operating activities	78			—			78			—			78

Investing Activities
Net cash used by investing activities	(101		)	—			(101		)	—			(101		)

Financing Activities
Proceeds from term loans and notes	—			—			—			9			9
Repayments of term loans and notes	—			(12		)	(12		)	(16		)	(28		)
Retirement of long-term debt	(12		)	12			—			—			—
Borrowings on revolving lines of credit	—			—			—			2,669			2,669
Payments on revolving lines of credit	—			—			—			(2,614		)	(2,614		)
Net increase (decrease) in revolver borrowings	48			—			48			(48		)	—
Issuance (repurchase) of common shares	(1		)	—			(1		)	—			(1		)
Cash dividends	(25		)	—			(25		)	—			(25		)
Debt issuance cost of long-term debt	(2		)	2			—			—			—
Purchase of common stock under the share repurchase program	—			—			—			—			—
Net increase (decrease) in bank overdrafts	(7		)	—			(7		)	—			(7		)
Net increase (decrease) in short-term borrowings secured by accounts receivable	(20		)	20			—			—			—
Other	—			(22		)	(22		)	—			(22		)
Distributions to noncontrolling interest partners	(28		)	—			(28		)	—			(28		)
Net cash provided by (used by) financing activities	(47		)	—			(47		)	—			(47		)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(11		)	—			(11		)	—			(11		)
Increase (decrease) in cash, cash equivalents and restricted cash	(81		)	—			(81		)	—			(81		)
Cash, cash equivalents and restricted cash, beginning of period	318			—			318			—			318
Cash, cash equivalents and restricted cash, end of period	$	237		$	—		$	237		$	—		$	237

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Three Months Ended June 30, 2018
	As Reported			Revisions			As Revised
Condensed consolidated statements of changes in shareholders' equity
Accumulated Deficit
Balance March 31	$	(902	)	$	(61	)	$	(963	)
Net income (loss) attributable to Tenneco Inc.	50			(3		)	47
Cash dividends declared	(12		)	—			(12		)
Balance June 30	$	(864	)	$	(64	)	$	(928	)
Accumulated Other Comprehensive Income (loss)
Balance March 31	$	(519	)	$	3		$	(516	)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment	(93		)	1			(92		)
Defined benefit plans	4			—			4
Balance June 30	$	(608	)	$	4		$	(604	)
Total Tenneco Inc. Shareholders' Equity
Balance March 31	$	765		$	(58	)	$	707
Net income (loss) attributable to Tenneco Inc.	50			(3		)	47
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment	(93		)	1			(92		)
Defined benefit plans	4			—			4
Comprehensive income (loss)	(39		)	(2		)	(41		)
Cash dividends	(12		)	—			(12		)
Common Stock Issued	3			—			3
Balance June 30	$	717		$	(60	)	$	657
Total Equity
Balance March 31	$	825		$	(58	)	$	767
Net income (loss)	57			(3		)	54
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment	(98		)	1			(97		)
Defined benefit plans	4			—			4
Comprehensive income (loss)	(37		)	(2		)	(39		)
Common Stock Issued	3			—			3
Cash dividends	(30		)	—			(30		)
Balance June 30	$	761		$	(60	)	$	701

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Six months ended June 30, 2018
	As Reported			Revisions			As Revised
Condensed consolidated statements of changes in shareholders' equity
Accumulated Deficit
Balance January 1	$	(946	)	$	(63	)	$	(1,009	)
Net income (loss) attributable to Tenneco Inc.	108			(1		)	107
Cash dividends declared	(25		)	—			(25		)
Adjustments to adopt new accounting standards	(1		)	—			(1		)
Balance June 30	$	(864	)	$	(64	)	$	(928	)
Accumulated Other Comprehensive Income (loss)
Balance January 1	$	(541	)	$	3		$	(538	)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment	(74		)	1			(73		)
Defined benefit plans	7			—			7
Balance June 30	$	(608	)	$	4		$	(604	)
Total Tenneco Inc. Shareholders' Equity
Balance January 1	$	696		$	(60	)	$	636
Net income (loss) attributable to Tenneco Inc.	108			(1		)	107
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment	(74		)	1			(73		)
Defined benefit plans	7			—			7
Comprehensive income (loss)	41			—			41
Adjustments to adopt new accounting standards	(1		)	—			(1		)
Cash dividends	(25		)	—			(25		)
Common Stock Issued	6			—			6
Balance June 30	$	717		$	(60	)	$	657
Total Equity
Balance January 1	$	742		$	(60	)	$	682
Net income (loss)	122			(1		)	121
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment	(72		)	1			(71		)
Defined benefit plans	7			—			7
Comprehensive income (loss)	57			—			57
Common Stock Issued	6			—			6
Cash dividends	(43		)	—			(43		)
Adjustments to adopt new accounting standards	(1		)	—			(1		)
Balance June 30	$	761		$	(60	)	$	701

New Accounting Pronouncements

Adoption of New Accounting Standards

Comprehensive income— In February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The amendments in this update allow a reclassification from accumulated other comprehensive income (loss) to accumulated deficit for stranded tax effects resulting from the Tax Cuts and Jobs Act ("TCJA"). The Company has elected not to adopt the optional reclassification.

Leases — In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update supersedes the lease requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash ~~flow~~flows arising from a lease. For public business entities, the standard is effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods within those annual periods. The Company adopted this update on January 1, 2019 using the modified retrospective method without the recasting of comparative periods’ financial information, as permitted by the transition guidance.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

The Company adopted the package of practical expedients that allows companies to not reassess ~~and will carry forward historical~~its previous conclusions related to contracts that contain leases, existing lease classification, and initial direct ~~costs.~~costs, and to carry forward its historical conclusions. It elected the land easements practical expedient allowing the Company not to reassess whether existing or expired land easements not accounted for as leases under previous guidance are or contain leases under the new guidance. It also did not adopt the hindsight practical expedient and has also made an accounting policy election to exempt leases with an initial term of twelve months or less from balance sheet recognition. Instead, short-term leases will be expensed over the lease term. As a part of the implementation ~~efforts,~~effort, the Company reviewed its internal control structure and modified and augmented existing controls, as necessary.

~~Adoption~~The adoption of the new standard resulted in the recording of additional lease assets and lease liabilities of $387 million and $383 million, and a reduction of favorable lease intangibles of $4 million as of January 1, 2019. The standard did not materially affect the Company's condensed consolidated financial position or results of operations and had no effect on cash flows. See Note 14, Leases.

Accounting Standards Issued But Not Yet Adopted

Intangibles— In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. The amendments in this update are effective for interim and annual periods for the Company beginning on January 1, 2020, with early adoption permitted. The amendments in this update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently evaluating the potential effect of this new guidance on its financial statements.

Retirement benefits — In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20). The amendments in this update remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this update are effective for fiscal years ending after December 15, 2020 with early adoption permitted. The Company is currently evaluating the potential effect of this new guidance on its financial statements.

Fair value measurements — In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). The new guidance modifies disclosure requirements related to fair value measurement. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. The Company is currently evaluating the potential effect of this new guidance on its financial statements.

3. Acquisitions and Divestitures

The preliminary allocation of the purchase price of the assets acquired and liabilities assumed, including the residual amount recognized as goodwill, is based upon estimated information and is subject to change within the measurement period. The measurement period is a period not to exceed one year from the acquisition date during which the Company may adjust estimated or provisional amounts recorded during purchase accounting if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date. Any adjustments to amounts recorded in purchase accounting that do not qualify as measurement period adjustments are included in earnings in the period identified.

The fair values of the assets acquired and liabilities assumed are based on preliminary estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. While the Company believes these preliminary estimates provide a reasonable basis for estimating the fair value of the assets acquired and liabilities assumed, it will continue to evaluate available information prior to finalization of the amounts.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

Öhlins Intressenter AB Acquisition

The purchase price for the 90.5% ownership interest in Öhlins was $162 million. The remaining 9.5% ownership interest in Öhlins (the “KÖ Interest”) was retained by K Öhlin Holding AB (“Köhlin”). Köhlin has an irrevocable right at any time after the third anniversary of the Öhlins Acquisition to sell the KÖ Interest to the Company. As the redemption of this redeemable noncontrolling interest is not solely within the Company's control, the noncontrolling interest is presented in the temporary equity section of the Company's condensed consolidated balance sheets. The fair value of the KÖ Interest was $17 million and represents its current redemption value at ~~March 31,~~June 30, 2019.

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the acquisition ~~date:~~date and the measurement period adjustments made during the six months ended June 30, 2019:



	Initial Allocation		Adjustments			Revised Allocation
Cash, cash equivalents and restricted cash	$	4	$	—		$	4
Customer notes and accounts receivable	19		—			19
Inventories	31		—			31
Prepayments and other current assets	2		—			2
Property, plant, and equipment	8		—			8
Goodwill	28		2			30
Intangibles	135		(2		)	133
Other assets	9		—			9
Total assets acquired	$	236	$	—		$	236

Short-term debt, including current maturities of long-term debt	$	10	$	—		$	10
Accounts payable	11		—			11
Accrued compensation and employee benefits	12		—			12
Deferred income taxes	18		—			18
Deferred credits and other liabilities	6		—			6
Total liabilities assumed	57		—			57
Redeemable noncontrolling interest	17		—			17
Net assets acquired	$	162	$	—		$	162

Cash, cash equivalents and restricted cash $ 4
Customer notes and accounts receivable 19
Inventories 31
Prepayments and other current assets 2
Property, plant, and equipment 8
Goodwill 28
Intangibles 135
Other assets 9
Total assets acquired 236

Short-term debt, including current maturities of long-term debt 10
Accounts payable 11
Accrued compensation and employee benefits 12
Deferred income taxes 18
Deferred credits and other liabilities 6
Total liabilities assumed 57
Redeemable noncontrolling interest 17
Net assets acquired $ 162

The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the inventory, intangible assets, right of use assets, and deferred income tax assets and liabilities.

Goodwill of ~~$28~~$30 million was recognized as part of the acquisition and is reflected in the Ride Performance segment. During the three months ended June 30, 2019, the Company adjusted the initial allocation of the total purchase consideration, which resulted in a $2 million increase to goodwill. The goodwill consists of the Company’s expected future economic benefits that will result from the acquisition of Öhlins’ technology, which will allow the Company to more rapidly grow its product offerings for current and future customers, as well as assist the Company in obtaining a larger share of business in developing mobility markets. None of the goodwill is deductible for tax purposes.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

Other intangible assets acquired include the following:



	Estimated Fair Value		Weighted-Average Useful Lives
Definite-lived intangible assets:
Customer platforms and relationships	$	37	10 years
Technology rights	41		10 years
Total definite-lived intangible assets	78

Indefinite-lived intangible assets:
Trade names and trademarks	55
Total	$	133

Estimated Fair Value Weighted-Average Useful Lives
Definite-lived intangible assets:
Customer platforms and relationships $ 39
10 years
Technology rights 41
10 years
Total definite-lived intangible assets 80

Indefinite-lived intangible assets:
Trade names and trademarks 55

Total $ 135

The Company recorded a $5 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation and recognized $2$3 million and $5 million as a non-cash charge to cost of goods sold during the three and six months ended ~~March 31,~~June 30, 2019 related to the amortization of this step-up, as the acquired inventory was sold. ~~The Company expects to recognize the remaining amortization of the inventory step-up during 2019.~~

~~Pro Forma Results~~

~~Pro forma results of operations have not been presented because the effects of the Öhlins Acquisition were not material to the Company’s condensed consolidated results of operations.~~

~~Acquisition of Federal-Mogul~~

During the three months ended March 31, 2019, the Company made measurement period adjustments based on further evaluation of available information to facts and circumstances that existed as of the acquisition date.

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the acquisition date and the measurement period adjustments made during the three months ended March 31, 2019:

Initial Allocation Adjustments Revised Allocation
Cash, cash equivalents and restricted cash $ 277
$ —
$ 277
Customer notes and accounts receivable 1,258
—
1,258
Other receivables 62
—
62
Inventories 1,551
—
1,551
Prepayments and other current assets 198
—
198
Property, plant and equipment 1,711
(28 ) 1,683
Long-term receivables 48
—
48
Goodwill 825
(46 ) 779
Intangibles 1,530
71
1,601
Investments in nonconsolidated affiliates 528
(15 ) 513
Deferred income taxes 166
—
166
Other assets 55
—
55
Total assets acquired 8,209
(18 ) 8,191

Short-term debt, including current maturities of long-term debt 130
—
130
Accounts payable 957
—
957
Accrued compensation and employee benefits 231
—
231
Accrued income taxes 49
—
49
Accrued expenses and other current liabilities 522
—
522
Long-term debt 1,315
—
1,315
Deferred income taxes 56
—
56
Pension and postretirement benefits 879
—
879
Deferred credits and other liabilities 124
(9 ) 115
Total liabilities assumed 4,263
(9 ) 4,254
Redeemable noncontrolling interests 96
(8 ) 88
Noncontrolling interests 143
(1 ) 142
Net assets and noncontrolling interests acquired $ 3,707
$ —
$ 3,707

The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair value of property, plant and equipment; intangible assets; unconsolidated affiliates; deferred income tax assets and liabilities; redeemable noncontrolling interests; and noncontrolling interests.

Goodwill of $409 million was allocated to the Powertrain segment, $315 million was allocated to the Motorparts segment, and $55 million was allocated to the Ride Performance segment. The goodwill consists of the Company's expected future economic benefits that will arise from expected future product sales and synergies from combining Federal-Mogul with its existing portfolio of products. None of the goodwill is deductible for tax purposes.

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

~~Other intangible assets acquired include the following:~~

Estimated Fair Value Weighted-Average Useful Lives
Definite-lived intangible assets:
Customer platforms and relationships $ 978
10 years
Technology rights 68
10 years
Packaged kits know-how 54
10 years
Catalogs 40
10 years
Licensing agreements 64
4.5 years
Land use rights 30
42.8 years
Total definite-lived intangible assets 1,234
10.5 years

Indefinite-lived intangible assets:
Trade names and trademarks 367

Total $ 1,601

The Company recorded a $152 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation and recognized $41 million as a non-cash charge to cost of goods sold during the three months ended March 31, 2019 related to the amortization of this step-up, as the acquired inventory was sold. The Company recognized $105 million as a non-cash charge to cost of goods sold during the year ended December 31, 2018 and expects to recognize the remaining amortization of the inventory step-up during 2019.

In addition, the Company acquired $83 million in redeemable noncontrolling interests related to a subsidiary from the Federal-Mogul Acquisition. The Company initiated the process to make a tender offer for the shares it does not own due to the change in control in accordance with local regulations triggered by the acquisition. It is probable these shares will become redeemable during 2019 under the tender offer at a price that is representative of fair value and as a result, the noncontrolling interest is presented in the temporary equity section of the Company’s condensed consolidated balance sheets. The carrying amount for this redeemable noncontrolling interest represents its current redemption value at March 31, 2019.

The Company's condensed consolidated statements of income (loss) for the three months ended March 31, 2019 included net sales and operating revenues of $1,906 million and net loss of $39 million associated with the operating results of Federal-Mogul.

Pro Forma Results

Pro forma results of operations have not been presented because the effects of the Öhlins Acquisition were not material to the Company’s condensed consolidated results of operations.

Acquisition of Federal-Mogul

During the six months ended June 30, 2019, the Company made measurement period adjustments based on further evaluation of available information to facts and circumstances that existed as of the acquisition date.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Initial Allocation		Adjustments			Revised Allocation
Cash, cash equivalents and restricted cash	$	277	$	—		$	277
Customer notes and accounts receivable	1,258		—			1,258
Other receivables	62		—			62
Inventories	1,551		(5		)	1,546
Prepayments and other current assets	198		1			199
Property, plant and equipment	1,711		(28		)	1,683
Long-term receivables	48		—			48
Goodwill	825		(40		)	785
Intangibles	1,530		71			1,601
Investments in nonconsolidated affiliates	528		(15		)	513
Deferred income taxes	166		—			166
Other assets	55		(6		)	49
Total assets acquired	$	8,209	$	(22	)	$	8,187

Short-term debt, including current maturities of long-term debt	$	130	$	—		$	130
Accounts payable	957		—			957
Accrued compensation and employee benefits	231		—			231
Accrued income taxes	49		—			49
Accrued expenses and other current liabilities	522		(8		)	514
Long-term debt	1,315		—			1,315
Deferred income taxes	56		—			56
Pension and postretirement benefits	879		—			879
Deferred credits and other liabilities	124		(5		)	119
Total liabilities assumed	4,263		(13		)	4,250
Redeemable noncontrolling interests	96		(8		)	88
Noncontrolling interests	143		(1		)	142
Net assets and noncontrolling interests acquired	$	3,707	$	—		$	3,707

Goodwill of $412 million was allocated to the Powertrain segment, $318 million was allocated to the Motorparts segment, and $55 million was allocated to the Ride Performance segment. The goodwill consists of the Company's expected future economic benefits that will arise from expected future product sales and synergies from combining Federal-Mogul with its existing portfolio of products. None of the goodwill is deductible for tax purposes.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Other intangible assets acquired include the following:



	Estimated Fair Value		Weighted-Average Useful Lives
Definite-lived intangible assets:
Customer platforms and relationships	$	978	10 years
Technology rights	68		10 years
Packaged kits know-how	54		10 years
Catalogs	40		10 years
Licensing agreements	64		4.5 years
Land use rights	30		42.8 years
Total definite-lived intangible assets	1,234		10.5 years

Indefinite-lived intangible assets:
Trade names and trademarks	367
Total	$	1,601

The Company recorded a $152 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The Company recognized $3 million and $44 million as a non-cash charge to cost of goods sold during the three and six months ended June 30, 2019 related to the amortization of this step-up, as the acquired inventory was sold. The Company recognized $105 million as a non-cash charge to cost of goods sold during the year ended December 31, 2018 and expects to recognize the remaining amortization of the inventory step-up during 2019.

The Company's condensed consolidated statements of income (loss) for the six months ended June 30, 2019 included net sales and operating revenues of $3,762 million and net income of $17 million associated with the operating results of Federal-Mogul.

Pro Forma Results

The following table summarizes, on a pro forma basis, the combined results of operations of the Company and the Federal-Mogul Acquisition, and the related financing, if the transaction had occurred as of January 1, 2017. The pro forma results are not necessarily indicative of either the actual consolidated results had the Federal-Mogul Acquisition occurred on January 1, 2017 or of future consolidated operating results.



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019			2018
Net sales and operating revenues	$	4,504	$	4,618	$	8,988		$	9,298
Earnings (loss) before income taxes and noncontrolling interests	$	171	$	232	$	201		$	458
Net income (loss) attributable to Tenneco Inc.	$	43	$	78	$	(27	)	$	171
Basic earnings (loss) per share of common stock	$	0.54	$	0.97	$	(0.33	)	$	2.13
Diluted earnings (loss) per share of common stock	$	0.54	$	0.96	$	(0.33	)	$	2.12

For the Three Months Ended March 31,
2019 2018
Net sales and operating revenues $ 4,484
$ 4,680
Earnings (loss) before income taxes and noncontrolling interests $ 30
$ 226
Net income (loss) attributable to Tenneco Inc. $ (70 ) $ 93
Basic earnings (loss) per share of common stock $ (0.87 ) $ 1.16
Diluted earnings (loss) per share of common stock $ (0.87 ) $ 1.16

These pro forma amounts have been calculated after applying the Company's accounting policies and the results presented above primarily reflect: (i) depreciation adjustments relating to fair value adjustments to property, plant, and equipment; (ii) amortization adjustments relating to fair value estimates of intangible assets; (iii) incremental interest expense, net on assumed indebtedness, the new credit facility, debt issuance costs, and fair value adjustments to debt; and (iv) cost of goods sold

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

adjustments relating to fair value adjustments to inventory. Pro forma adjustments described above have been tax affected using the Company's effective rate during the respective periods.

Assets Held for Sale

On March 1, 2019, the Company sold its wipers business in the Motorparts segment for a sale price of $29 million, subject to adjustment based on terms of the sale agreement. Proceeds from the sale were $22 million, subject to customary working capital adjustments. Certain assets and liabilities of the business are still classified as held for sale within the condensed consolidated balance sheet as of ~~March 31,~~June 30, 2019 and are expected to transfer in the second half of 2019.

The related assets and liabilities were classified as held for sale as of ~~March 31,~~June 30, 2019 and December 31, 2018:



	June 30, 2019		December 31, 2018
Assets
Inventories	$	3	$	33
Other current assets	—		5
Long-lived assets	1		23
Total assets held for sale	$	4	$	61
Liabilities
Accounts payable	$	2	$	21
Accrued liabilities	—		7
Other liabilities	1		11
Total liabilities held for sale	$	3	$	39

March 31, 2019 December 31, 2018
Assets
Inventories $ 3
$ 33
Other current assets —
5
Long-lived assets 1
23
Total assets held for sale $ 4
$ 61
Liabilities
Accounts payable $ 2
$ 21
Accrued liabilities —
7
Other liabilities 1
11
Total liabilities held for sale $ 3
$ 39

4. Restructuring Charges and Asset Impairments, Net

Restructuring and Other Charges

The Company's restructuring activities are undertaken as necessary to execute management's strategy and streamline operations, consolidate and take advantage of available capacity and resources, and ultimately achieve net cost reductions. Restructuring activities include efforts to integrate and rationalize the Company's businesses and to relocate operations to best cost locations.

The Company's restructuring charges consist primarily of employee costs (principally severance and/or termination benefits), and facility closure and other costs.

For the three and six months ended ~~March 31,~~June 30, 2019 and 2018, restructuring charges, net and asset impairments by segment are as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Clean Air	$	15	$	17	$	20	$	18
Powertrain	17		—		18		—
Ride Performance	22		9		35		17
Motorparts	7		1		11		4
Corporate	—		2		1		2
	$	61	$	29	$	85	$	41

Three Months Ended March 31,
2019 2018
Clean Air $ 5
$ 1
Powertrain 1
—
Ride Performance 13
8
Motorparts 4
3
Corporate 1
—

$ 24
$ 12

Presented within the table above are asset impairments of $1 million in the Clean Air segment and $1 million in the Motorparts segment incurred during the three and six months ended June 30, 2019.

During the three and six months ended ~~March 31,~~June 30, 2019, the Company incurred ~~charges for the following items:~~

~~The Company incurred $5~~$3 million and $9 million in restructuring and related costs ~~related to the accelerated move of the Beijing Ride Performance plant. The Company anticipates the move to be completed~~and reduced previously recorded estimates by ~~the second quarter of 2019.~~

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

In October 2018, the Company announced a plan to close its Ride Performance plants in Owen Sound, Ontario and Hartwell, Georgia as part of an initiative to realign its manufacturing footprint, to enhance operational efficiency, and respond to changing market conditions and capacity requirements. The Company expects to complete the closure of the two facilities in the second quarter of 2020. The Company recorded charges of $6$2 million ~~during the first quarter of 2019.~~

~~The Company incurred $6 million in restructuring and related costs~~ related to a restructuring plan designed to achieve a portion of the synergies the Company anticipates achieving in connection with the Federal-Mogul Acquisition. Pursuant to the plan, the Company will reduce its headcount globally across all segments. The Company began implementing headcount reductions in January 2019 and these actions will continue throughout 2019. The Federal-Mogul Acquisition is discussed further in Note 3, Acquisitions and Divestitures.

~~The~~ During the three and six months ended June 30, 2019, the Company also incurred $3$17 million and $28 million in restructuring and related costs related to ~~the closing of~~plant relocation and closures within its ~~Clean Air plant in Rennes, France.~~Ride Performance segment. The Company ~~anticipates~~expects the ~~closure~~actions to be completed by the ~~end~~second quarter of ~~2019.~~2020.

~~The Company incurred an additional $4 million in restructuring and related costs for cost improvement initiatives at various other operations around the world.~~

During the three and six months ended ~~March 31,~~June 30, 2018, the Company incurred ~~charges for the following items:~~

~~The Company incurred~~ $7 million and $14 million in restructuring and related costs related to the accelerated move of the Beijing Ride Performance plant.

~~The Company incurred an additional $5 million in restructuring and related costs for cost improvement initiatives at various other operations around the world.~~

Restructuring Reserve Rollforward

Amounts related to activities that were charges to restructuring reserves, including costs incurred to support future structural cost reductions, by reportable segments are as follows:

Three months ended March 31, 2019
Reportable Segments
Clean Air Powertrain Ride Performance Motorparts Total Reportable Segments Corporate Total
Balance at beginning of period $ 17
$ 15
$ 25
$ 43
$ 100
$ 3
$ 103
Provisions 5
1
13
4
23
1
24
Payments (6 ) (3 ) (13 ) (14 ) (36 ) (2 ) (38 )
Balance at end of period $ 16
$ 13
$ 25
$ 33
$ 87
$ 2
$ 89

Three months ended March 31, 2018
Reportable Segments
Clean Air Powertrain Ride Performance Motorparts Total Reportable Segments Corporate Total
Balance at beginning of period $ 14
$ —
$ 7
$ 4
$ 25
$ —
$ 25
Provisions 1
—
8
3
12
—
12
Payments (5 ) —
(9 ) (2 ) (16 ) —
(16 )
Balance at end of period $ 10
$ —
$ 6
$ 5
$ 21
$ —
$ 21

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)



	Reportable Segments
	Clean Air			Powertrain			Ride Performance			Motorparts			Total Reportable Segments			Corporate			Total
Balance as of December 31, 2018	$	17		$	15		$	25		$	43		$	100		$	3		$	103
Provisions	5			1			13			4			23			1			24
Payments	(6		)	(3		)	(13		)	(14		)	(36		)	(2		)	(38		)
Balance as of March 31, 2019	16			13			25			33			87			2			89
Provisions	14			17			22			8			61			—			61
Revisions to estimates	—			—			—			(2		)	(2		)	—			(2		)
Payments	(2		)	(4		)	(19		)	(7		)	(32		)	(1		)	(33		)
Balance as of June 30, 2019	$	28		$	26		$	28		$	32		$	114		$	1		$	115



	Reportable Segments
	Clean Air			Powertrain		Ride Performance			Motorparts			Total Reportable Segments			Corporate		Total
Balance as of December 31, 2017	$	14		$	—	$	7		$	4		$	25		$	—	$	25
Provisions	1			—		8			3			12			—		12
Payments	(5		)	—		(9		)	(2		)	(16		)	—		(16		)
Balance as of March 31, 2018	10			—		6			5			21			—		21
Provisions	17			—		9			1			27			2		29
Payments	(3		)	—		(10		)	(2		)	(15		)	—		(15		)
Balance as of June 30, 2018	$	24		$	—	$	5		$	4		$	33		$	2	$	35

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

The following table provides a summary of the Company's restructuring liabilities and related activity for each type of exit costs:


	Three months ended March 31, 2019									Three months ended March 31, 2018									Employee Costs			Facility Closure and Other Costs			Total
	Employee Costs			Facility Closure and Other Costs			Total			Employee Costs			Facility Closure and Other Costs			Total
Balance at beginning of period	$	98		$	5		$	103		$	19		$	6		$	25
Balance as of December 31, 2018																			$	98		$	5		$	103
Provisions	11			13			24			10			2			12			11			13			24
Payments	(25		)	(13		)	(38		)	(13		)	(3		)	(16		)	(25		)	(13		)	(38		)
Balance at end of period	$	84		$	5		$	89		$	16		$	5		$	21
Balance as of March 31, 2019																			84			5			89
Provisions																			44			17			61
Revisions to estimates																			(2		)	—			(2		)
Payments																			(16		)	(17		)	(33		)
Balance as of June 30, 2019																			$	110		$	5		$	115



	Employee Costs			Facility Closure and Other Costs			Total
Balance as of December 31, 2017	$	19		$	6		$	25
Provisions	10			2			12
Payments	(13		)	(3		)	(16		)
Balance as of March 31, 2018	16			5			21
Provisions	26			3			29
Payments	(12		)	(3		)	(15		)
Balance as of June 30, 2018	$	30		$	5		$	35

5. Inventories

At ~~March 31,~~June 30, 2019 and December 31, 2018, inventory consists of the following:



	June 30, 2019		December 31, 2018
Finished goods	$	1,110	$	1,116
Work in process	497		562
Raw materials	489		457
Materials and supplies	111		110
	$	2,207	$	2,245

March 31, 2019 December 31, 2018
Finished goods $ 1,181
$ 1,116
Work in process 526
562
Raw materials 450
457
Materials and supplies 109
110
$ 2,266
$ 2,245

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

6. Goodwill and Other Intangible Assets

At ~~March 31,~~June 30, 2019 and December 31, 2018, goodwill consists of the following:



	Six Months Ended June 30, 2019
	Clean Air		Powertrain		Ride Performance			Motorparts			Total
Gross carrying amount at December 31, 2018	$	22	$	388	$	210		$	611		$	1,231
Measurement period adjustments	—		21		—			(67		)	(46		)
Acquisitions	—		—		28			—			28
Gross carrying amount at March 31, 2019	22		409		238			544			1,213
Measurement period adjustments	—		3		2			3			8
Foreign exchange	—		—		—			—			—
Gross carrying amount at June 30, 2019	22		412		240			547			1,221

Accumulated impairment loss at December 31, 2018	—		—		(143		)	(219		)	(362		)
Impairment	—		—		(60		)	—			(60		)
Accumulated impairment loss at March 31, 2019	—		—		(203		)	(219		)	(422		)
Foreign exchange	—		—		—			—			—
Accumulated impairment loss at June 30, 2019	—		—		(203		)	(219		)	(422		)

Net carrying value at end of period	$	22	$	412	$	37		$	328		$	799

Three Months Ended March 31, 2019
Clean Air Powertrain Ride Performance Motorparts Total
Gross carrying amount at beginning of period $ 22
$ 388
$ 210
$ 611
$ 1,231
Measurement period adjustments —
21
—
(67 ) (46 )
Acquisitions —
—
28
—
28
Gross carrying amount at end of period 22
409
238
544
1,213

Accumulated impairment loss at beginning of period —
—
(143 ) (219 ) (362 )
Impairment —
—
(60 ) —
(60 )
Accumulated impairment loss at end of period —
—
(203 ) (219 ) (422 )

Net carrying value at end of period $ 22
$ 409
$ 35
$ 325
$ 791

The Öhlins Acquisition resulted in ~~$28~~$30 million of goodwill which was included in the Ride Performance segment.

During the ~~three~~six months ended ~~March 31,~~June 30, 2019, the Company made the following adjustments to goodwill in the measurement period to the preliminary purchase price allocation for the ~~Federal-Mogul Acquisition which affected~~Acquisitions:

an increase of $2 million for the ~~amount of goodwill recognized~~Öhlins Acquisition; and

a net ~~reduction~~decrease of ~~$46~~$40 million ~~was recorded.~~for the Federal-Mogul Acquisition.

The purchase price allocations for the Acquisitions are preliminary and subject to finalization. The Company's current estimates and assumptions may change as a result. See Note 3, Acquisitions and Divestitures for additional information.

During the ~~three months ended March 31,~~first quarter of 2019, the Company performed a review of potential triggering events, including, among other items, its market capitalization levels and the reorganization of its reporting structure, and concluded no events indicated (other than the reorganization of its reporting structure) it was more likely than not the fair values of its reporting units had declined to below their carrying values at March 31, 2019. If the Company’s market capitalization remains depressed for a sustained period of time or declines further, and if such a decline becomes indicative the fair value of the Company’s reporting units have declined to below their carrying values, an interim goodwill impairment test may need to be performed in future periods and may result in a material non-cash goodwill impairment charge.

~~As noted above,~~ the Company reorganized the reporting structure of its Aftermarket, Ride Performance, and Motorparts segments and the underlying reporting units within those segments. The Company reassigned assets and liabilities (excluding goodwill) to the reporting units affected. Goodwill was then reassigned to the reporting units using a relative fair value approach based on the fair value of the elements transferred and the fair value of the elements remaining within the original reporting units. The Company tested goodwill for impairment on a pre-reorganization basis and determined there was no impairment for the affected reporting units. The Company also performed an impairment analysis on a post-reorganization basis and determined $60 million of goodwill was impaired for two reporting units within its Ride Performance segment, one of which was a full impairment of the goodwill. As a result, this non-cash charge was recorded in the six months ended June 30, 2019. Goodwill allocated to other reporting units was supported by the valuation performed at that time.

During the three months ended June 30, 2019, the Company performed a review of potential triggering events, and concluded no events indicated it was more likely than not that the fair values of its reporting units had declined to below their carrying values at June 30, 2019. The Company considered the results of the post-reorganized reporting unit changes that occurred in the first quarter of 2019, which indicated nine reporting units with goodwill. Three of these nine reporting units have fair values that are within 15% of their carrying values and are reporting units that were acquired as part of the Acquisitions within the last year. The goodwill balance as of June 30, 2019 attributable to these three reporting units was $442 million. Management compared its future projected cash flows for these three reporting units as of June 30, 2019 compared to the future projected cash flows utilized in the valuation performed during the first quarter of 2019 and concluded there is no indication the carrying value of its reporting units would be less than their fair values.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

~~Reporting Units~~

~~The Company has nine~~If the Company’s market capitalization remains at current levels for a sustained period of time or declines further, and if such a decline becomes indicative the fair value of its reporting units ~~that~~ have ~~goodwill at March 31, 2019. The following table categorizes~~declined to below their carrying values, the ~~Company’s goodwill by reporting unit according~~Company will need to determine the ~~level of excess between the reporting unit’s~~ fair value ~~and carrying value giving effect to the first quarter~~of its reporting units which may result in a material non-cash goodwill impairment ~~charges:~~charge in a future period.

Fair value exceeds
carrying value Goodwill
Reporting units 1-6 < 15% $ 354
Reporting units 7-9 > 15% 437
$ 791

At ~~March 31,~~June 30, 2019 and December 31, 2018, the Company's intangible assets consist of the following:



		June 30, 2019							December 31, 2018
	Useful Lives	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Gross Carrying Value		Accumulated Amortization			Net Carrying Value
Definite-lived intangible assets:
Customer relationships and platforms	10 years	$	1,014	$	(75	)	$	939	$	964	$	(24	)	$	940
Customer contract	10 years	8		(6		)	2		8		(5		)	3
Patents	10 to 17 years	1		(1		)	—		1		(1		)	—
Technology rights	10 to 30 years	136		(31		)	105		98		(27		)	71
Packaged kits know-how	10 years	54		(4		)	50		36		(1		)	35
Catalogs	10 years	40		(3		)	37		—		—			—
Licensing agreements	3 to 5 years	63		(11		)	52		66		(3		)	63
Land use rights	28 to 46 years	46		(2		)	44		44		(2		)	42
		1,362		(133		)	1,229		1,217		(63		)	1,154
Indefinite-lived intangible assets:
Trade names and trademarks		420		—			420		365		—			365
Total		$	1,782	$	(133	)	$	1,649	$	1,582	$	(63	)	$	1,519

March 31, 2019 December 31, 2018
Useful Lives Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value
Definite-lived intangible assets:
Customer relationships and platforms 10 years $ 1,019
$ (50 ) $ 969
$ 964
$ (24 ) $ 940
Customer contract 10 years 8
(6 ) 2
8
(5 ) 3
Patents 10 to 17 years 1
(1 ) —
1
(1 ) —
Technology rights 10 to 30 years 135
(28 ) 107
98
(27 ) 71
Packaged kits know-how 10 years 54
(3 ) 51
36
(1 ) 35
Catalogs 10 years 40
(2 ) 38
—
—
—
Licensing agreements 3 to 5 years 63
(7 ) 56
66
(3 ) 63
Land use rights 28 to 46 years 45
(2 ) 43
44
(2 ) 42
1,365
(99 ) 1,266
1,217
(63 ) 1,154
Indefinite-lived intangible assets:
Trade names and trademarks 421
—
421
365
—
365
Total $ 1,786
$ (99 ) $ 1,687
$ 1,582
$ (63 ) $ 1,519

The Company recorded definite-lived and indefinite-lived intangible assets of ~~$135~~$133 million as a result of the Öhlins Acquisition.

During the ~~three~~six months ended ~~March 31,~~June 30, 2019, the Company made the following adjustments to definite-lived and indefinite-lived intangible assets in the measurement period to the preliminary purchase price allocation for the ~~Federal-Mogul Acquisition which affected~~Acquisitions:

a decrease of $2 million was recognized for the ~~amount of definite-lived~~Öhlins Acquisition; and ~~indefinite-lived intangible assets recognized and~~

a net increase of $71 million was ~~recorded.~~recognized for the Federal-Mogul Acquisition.

~~During the three months ended March 31, 2019 and 2018,~~The amortization expense associated with definite-lived intangible assets was ~~$35 million and less than $1 million which is included in "Depreciation and amortization" within the condensed consolidated statements of income (loss).~~as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Amortization expense	$	33	$	—	$	68	$	1

The expected future amortization expense for the Company's definite-lived intangible assets is as follows:



	2019		2020		2021		2022		2023		2024 and thereafter		Total
Expected amortization expense	$	70	$	139	$	138	$	134	$	130	$	618	$	1,229

2019 2020 2021 2022 2023 2024 and thereafter Total
Expected amortization expense $ 106
$ 140
$ 139
$ 134
$ 131
$ 616
$ 1,266

7. Investment in Nonconsolidated Affiliates

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

The Company has investments in several nonconsolidated affiliates, which are primarily located in China, Korea, Turkey, and the U.S. The Company generally equates control to ownership percentage whereby investments more than 50% owned are consolidated.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

The Company's ownership interest in affiliates accounted for under the equity method is as follows:


	March 31, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Anqing TP Goetze Piston Ring Company Limited (China)	35.7	%	35.7	%	35.7	%	35.7	%
Anqing TP Powder Metallurgy Co., Ltd (China)	20.0	%	20.0	%	20.0	%	20.0	%
Dongsuh Federal-Mogul Industrial Co. Ltd. (Korea)	50.0	%	50.0	%	50.0	%	50.0	%
Farloc Argentina SAIC Y F (Argentina)	23.9	%	23.9	%	23.9	%	23.9	%
Federal-Mogul Powertrain Otomotiv A.S. (Turkey)	50.0	%	50.0	%	50.0	%	50.0	%
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti. (Turkey)	25.0	%	25.0	%	25.0	%	25.0	%
Federal-Mogul TP Liners, Inc. (USA)	46.0	%	46.0	%	46.0	%	46.0	%
Frenos Hidraulicos Automotrices, S.A. de C.V. (Mexico)	49.0	%	49.0	%	49.0	%	49.0	%
JURID do Brasil Sistemas Automotivos Ltda. (Brazil)	19.9	%	19.9	%	19.9	%	19.9	%
KB Autosys Co., Ltd. (Korea)	33.6	%	33.6	%	33.6	%	33.6	%
Montagewerk Abgastechnik Emden GmbH (Germany)	50.0	%	50.0	%	50.0	%	50.0	%

The Company's investments in its nonconsolidated affiliates at ~~March 31,~~June 30, 2019 and December 31, 2018 are:

The following table represents the activity from the Company's investments in its nonconsolidated affiliates for the three and six months ended ~~March 31,~~June 30, 2019 and 2018:

Three Months Ended March 31,
2019 2018
Equity earnings (losses) of nonconsolidated affiliates, net of tax $ 16
$ —
Cash dividends received from nonconsolidated affiliates $ 15
$ —

During the ~~three~~six months ended ~~March 31,~~June 30, 2019, the Company made adjustments in the measurement period to the preliminary purchase price allocation for the Federal-Mogul Acquisition which resulted in a reduction to the fair value of its investments in nonconsolidated affiliates of $15 million. The purchase price allocation is preliminary and subject to the finalization. The Company's current estimates and assumptions may change as more information becomes available. See Note 3, Acquisitions and Divestitures, for additional information.

The following tables present summarized aggregated financial information of the Company's nonconsolidated affiliates for the three and six months ended ~~March 31,~~June 30, 2019. The amounts represent 100% of the interest in the nonconsolidated affiliates and not the Company's proportionate share:

Three Months ended March 31, 2019
Statements of Income Otomotiv A.S. Anqing TP Goetze Other Total
Sales $ 91
$ 39
$ 125
$ 255
Gross profit $ 21
$ 16
$ 23
$ 60
Income from continuing operations $ 19
$ 11
$ 13
$ 43
Net income $ 18
$ 9
$ 11
$ 38

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

See Note 18, Related Party Transactions, for additional information on balances and transactions with equity method investments.

8. Derivatives and Hedging Activities

The Company is exposed to market risk, such as fluctuations in foreign currency exchange rates, commodity prices, equity compensation liabilities, and changes in interest rates, which may result in cash flow risks. For exposures not offset within its operations, the Company ~~enters~~may enter into various derivative transactions pursuant to its risk management policies, which prohibit holding or issuing derivative financial instruments for speculative purposes. Designation of derivative instruments is performed on a transaction basis to support hedge accounting. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the fair value or cash flows of the underlying exposures being hedged. The Company assesses the initial and ongoing effectiveness of its hedging relationships in accordance with its documented policy.

Foreign Currency Risk— The Company manufactures and sells its products in North America, South America, Asia, Europe, Australia and Africa. As a result, the Company's financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets in which the Company manufactures and sells its products. The Company generally tries to use natural hedges within its foreign currency activities, including the matching of revenues and costs, to minimize foreign currency risk. Where natural hedges are not in place, the Company considers managing certain aspects of its foreign currency activities and larger transactions through the use of foreign currency options or forward contracts. Principal currencies hedged have historically included the U.S. dollar, euro, British pound, Polish zloty, Mexican peso, and Canadian dollar.

Concentrations of Credit Risk— Financial instruments including cash equivalents and derivative contracts expose the Company to counterparty credit risk for non-performance. The Company's counterparties for cash equivalents and derivative contracts are banks and financial institutions that meet the Company's requirement of high credit standing. The Company's counterparties for derivative contracts are substantial investment and commercial banks with significant experience using such derivatives. The Company manages its credit risk through policies requiring minimum credit standing and limiting credit exposure to any one counterparty and through monitoring counterparty credit risks. The Company's concentration of credit risk related to derivative contracts at ~~March 31,~~June 30, 2019 and 2018 is not material.

Other— The Company presents its derivative positions and any related material collateral under master netting agreements on a net basis. For derivatives designated as cash flow hedges, changes in the time value are excluded from the assessment of hedge effectiveness. Unrealized gains and losses associated with ineffective hedges, determined using the hypothetical derivative method, are recognized in "Cost of sales" in the condensed consolidated statements of income (loss). Derivative gains and losses included in accumulated other comprehensive income (loss) for effective hedges are reclassified into operations upon recognition of the hedged transaction. Derivative gains and losses associated with undesignated hedges are recognized in "Cost of sales" in the condensed consolidated statements of income (loss).

Derivative Instruments

Foreign Currency Forward Contracts— The Company enters into foreign currency forward purchase and sale contracts to mitigate its exposure to changes in exchange rates on certain intercompany and third-party trade receivables and payables. In managing its foreign currency exposures, the Company identifies and aggregates existing offsetting positions and then hedges residual exposures through third-party derivative contracts. The gains or losses on these contracts is recognized in "Cost of sales" in the condensed consolidated statements of income (loss). The fair value of foreign currency forward contracts are recorded in "Prepayments and other current assets" or "Accrued expenses and other current liabilities" in the condensed consolidated balance sheets. The fair value of the Company's foreign currency forward contracts was a net asset position of less than $1 million at ~~March 31,~~June 30, 2019 and December 31, 2018.

The following table summarizes by position the notional amounts for foreign currency forward contracts as of ~~March 31,~~June 30, 2019 (all of which mature in 2019):

Notional Amount
Long positions $ (33 )
Short positions $ 33

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

Cash-Settled Share Swap Transactions— In ~~2017,~~May 2019, the Company entered into an amended and restated equity swap agreement. The Company selectively uses cash-settled share swaps to reduce market risk associated with its deferred compensation liabilities. These equity deferred compensation liabilities increase as the Company's stock price increases and

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

decrease as the Company's stock price decreases. In contrast, the value of the swap agreement moves in the opposite direction of these liabilities, allowing the Company to fix a portion of the liabilities at a stated amount. As of ~~March 31,~~June 30, 2019, the Company had hedged its deferred compensation liability related to approximately 250,000 common share equivalents. The fair value of the equity swap agreement is recorded in "Prepayments and other current assets" in the condensed consolidated balance sheets. The fair value of the Company's equity swap agreement was a net asset position of $3 million at ~~March 31,~~June 30, 2019 and $4 million at December 31, 2018.

Cash Flow Hedges — Commodity Price Risk — The Company’s production processes are dependent upon the supply of certain raw materials that are exposed to price fluctuations on the open market. The primary purpose of the Company’s commodity price forward contract activity is to manage the volatility associated with forecasted purchases for up to eighteen months in the future. The Company monitors its commodity price risk exposures regularly to maximize the overall effectiveness of its commodity forward contracts. Principal raw materials hedged include copper ~~tin,~~ and ~~zinc.~~tin. In certain instances within this program, foreign currency forwards may be used in order to match critical terms for commodity exposure.

The Company has designated these contracts as cash flow hedging instruments. The Company records unrecognized gains and losses in other comprehensive income (loss) (“OCI or OCL”) and makes regular reclassifying adjustments into “Cost of sales” within the condensed consolidated statements of income (loss) when the underlying hedged transaction is recognized in earnings. The Company had commodity derivatives outstanding with an equivalent notional amount of ~~$26~~$25 million as of ~~March 31,~~June 30, 2019 and $27 million as of December 31, 2018. Substantially all of the commodity price hedge contracts mature within one year.

Net Investment Hedge — Foreign Currency Borrowings — The Company has foreign currency denominated debt, ~~€769~~€774 million of which was designated as a net investment hedge in certain foreign subsidiaries and affiliates of the Company. Changes to its carrying value are included in shareholders' equity in the foreign currency translation component of OCL and offset against the translation adjustment on the underlying net assets of those foreign subsidiaries and affiliates, which are also recorded in OCL. The Company’s debt instruments are discussed further in Note 10, Debt and Other Financing Arrangements.

The following table is a summary of the carrying value of derivative and non-derivative instruments designated as hedges as of ~~March 31,~~June 30, 2019:

The following table represents the effects before reclassification into net income of derivative and non-derivative instruments designated as hedges in accumulated other comprehensive income (loss) ~~as of March 31, 2019:~~three and six month periods ended June 30, 2019 and 2018:

Amount of gain (loss) recognized in accumulated OCI or OCL (effective portion):    Three months ended March 31, 2019
Commodity price hedge contracts designated as cash flow hedges    $ 4
Foreign currency borrowings designated as net investment hedges    $ (19 )

The Company estimates $4$1 million included in accumulated OCI or OCL as of ~~March 31,~~June 30, 2019 will be reclassified into earnings within the following 12 months.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

9. Fair Value of Financial Instruments

A three-level valuation hierarchy, based upon observable and unobservable inputs, is used for fair value measurements.

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions based on the best evidence available. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy definition prioritizes the inputs used in measuring fair value into the following levels:

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents assets and liabilities included in the Company's condensed consolidated balance sheets as of ~~March 31,~~June 30, 2019 and December 31, 2018 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:

March 31, 2019 December 31, 2018
Fair value
hierarchy Carrying
Amount Fair
Value Carrying
Amount Fair
Value
Derivative instruments:
Equity swap agreement Level 2 $ 3
$ 3
$ 4
$ 4
Commodity contracts Level 2 $ 2
$ 2
$ (2 ) $ (2 )

Cash-Settled Share Swap Transactions — The fair value of the equity swap agreement is recorded in "Prepayments and other current assets" in the condensed consolidated balance sheets.

Commodity and Foreign Currency Contracts — The Company calculates the fair value of its commodity contracts and foreign currency contracts using quoted commodity forward rates and quoted currency forward rates, to calculate forward values, and then discounts the forward values. The discount rates for all derivative contracts are based on quoted bank deposit rates. The fair value of the Company's foreign currency forward contracts was a net asset position of less than $1 million at ~~March 31,~~June 30, 2019 and December 31, 2018.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

In addition to items measured at fair value on a recurring basis, assets may be measured at fair value on a nonrecurring basis. These assets include long-lived assets and intangible assets which may be written down to fair value as a result of impairment.

The Company has determined the fair value measurements related to each of these rely primarily on Company-specific inputs and the Company's assumptions about the use of the assets, as observable inputs are not available (level 3). To determine the fair value of long-lived asset groups, the Company utilizes discounted cash flows expected to be generated by the long-lived asset group.

The Company evaluates the carrying value of its goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of each year. These fair value measurements require the Company to make significant assumptions and estimates about the extent and timing of future cash flows, discount rates, and growth rates, which are subject to a high degree of uncertainty. The Company believes the assumptions and estimates used to determine the estimated fair value are reasonable, but different assumptions could materially affect the estimated fair value.

During the ~~three months ended March 31, 2019,~~first quarter, the Company reorganized ~~its~~the reporting structure of its Aftermarket, Ride Performance, and Motorparts segments and the underlying reporting units within those segments. The Company reassigned assets and liabilities (excluding goodwill) to the reporting units affected. Goodwill was then reassigned to the reporting units using a relative fair value approach based on the fair value of the elements transferred and the fair value of the elements remaining within the original reporting units. The Company tested goodwill for impairment on a pre-reorganization basis and determined there was no impairment for the affected reporting units. The Company also performed an impairment analysis on a post-reorganization basis

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

and determined $60 million of goodwill was impaired for two reporting units within its Ride Performance segment, one of which was a full impairment of the goodwill. As a result, this non-cash charge was recorded in the six months ended June 30, 2019. Goodwill allocated to other reporting units was supported by the valuation performed at that time. See Note 6, Goodwill and Other Intangible Assets.

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

Financial Instruments Not Carried at Fair Value

Estimated fair values of the Company's outstanding debt were:

March 31, 2019 December 31, 2018
Fair value
hierarchy Carrying
Amount Fair
Value Carrying
Amount Fair
Value
Long-term debt (including current maturities):
Term loans and senior notes Level 2 $ 5,386
$ 5,285
$ 5,307
$ 5,218

The fair value of the Company's public senior notes and private borrowings under its senior credit facility is based on observable inputs, and its borrowings on the revolving credit facility approximate fair value. The Company also had ~~$104~~$91 million and $106 million at ~~March 31,~~June 30, 2019 and December 31, 2018 in other debt whose carrying value approximates fair value, which consists primarily of foreign debt with maturities of one year or less.

Assets and Liabilities Not Carried at Fair Value

The carrying value of cash and cash equivalents, restricted cash, short and long-term receivables, accounts payable, and short-term debt approximates fair value.

10. Debt and Other Financing Arrangements

A summary of our long-term debt obligations at ~~March 31,~~June 30, 2019 and December 31, 2018 is set forth in the following table:



	June 30, 2019				December 31, 2018
	Principal		Carrying Amount ⁽¹⁾		Principal		Carrying Amount ⁽¹⁾
Credit Facilities
Revolver Borrowings
Due 2023	$	250	$	250	$	—	$	—
Term Loans
LIBOR plus 1.75% Term Loan A due 2019 through 2023	1,658		1,649		1,700		1,691
LIBOR plus 3.00% Term Loan B due 2019 through 2025⁽²⁾	1,692		1,626		1,700		1,629
Senior Unsecured Notes
$225 million of 5.375% Senior Notes due 2024	225		222		225		222
$500 million of 5.000% Senior Notes due 2026	500		494		500		493
Senior Secured Notes
€415 million 4.875% Euro Fixed Rate Notes due 2022	472		489		476		496
€300 million of Euribor plus 4.875% Euro Floating Rate Notes due 2024	341		345		344		349
€350 million of 5.000% Euro Fixed Rate Notes due 2024	398		422		401		427
Other debt, primarily foreign instruments	93		91		108		106
			5,588				5,413
Less - maturities classified as current			80				73
Total long-term debt			$	5,508			$	5,340

March 31, 2019 December 31, 2018
Principal
Carrying Amount ⁽¹⁾
Principal
Carrying Amount ⁽¹⁾
Credit Facilities
Revolver Borrowings
Due 2023 $ 132
$ 132
$ —
$ —
Term Loans
LIBOR plus 1.75% Term Loan A due 2019 through 2023 1,679
1,670
1,700
1,691
LIBOR plus 2.75% Term Loan B due 2019 through 2025 1,696
1,628
1,700
1,629
Senior Unsecured Notes
$225 million of 5.375% Senior Notes due 2024 225
222
225
222
$500 million of 5.000% Senior Notes due 2026 500
493
500
493
Senior Secured Notes
415 million 4.875% Euro Fixed Rate Notes due 2022 466
483
476
496
300 million of Euribor plus 4.875% Euro Floating Rate Notes due 2024 337
341
344
349
350 million of 5.000% Euro Fixed Rate Notes due 2024 393
417
401
427
Other debt, primarily foreign instruments 105
104
108
106
5,490
5,413
Less - maturities classified as current 73
73
Total long-term debt $ 5,417
$ 5,340

(1) Carrying amount is net of unamortized debt issuance costs and debt discounts or premiums. Total unamortized debt issuance costs were ~~$86~~$83 million and $90 million as of ~~March 31,~~June 30, 2019 and December 31, 2018. Total unamortized debt (premium) discount, net was ~~$(45)~~$(43) million and $(49) million as of ~~March 31,~~June 30, 2019 and December 31, 2018.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

(2) As of December 31, 2018, the rate on Term Loan B was LIBOR plus 2.75%.

On October 1, 2018, the Company entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and other lenders (the "New Credit Facility") in connection with the Federal-Mogul Acquisition. The New Credit Facility provides $4.9 billion of total debt financing, consisting of a five-year $1.5 billion revolving credit facility, a five-year $1.7

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

billion term loan A facility ("Term Loan A") and a seven-year $1.7 billion term loan B facility ("Term Loan B").

~~The effective interest rate on the Term Loan A was 4.396% and 6.031% on Term Loan B.~~

The Company has outstanding 5.375% senior unsecured notes due December 15, 2024 ("2024 Senior Notes") and 5.000% senior unsecured notes due July 15, 2026 ("2026 Senior Notes" and together with the 2024 Senior Notes, the "Senior Unsecured Notes"). The Company has outstanding 5.000% euro denominated fixed rate notes which are due July 15, 2024 ("5.000% Euro Fixed Rate Notes"), 4.875% euro denominated fixed rate notes due April 15, 2022 ("4.875% Euro Fixed Rate Notes"), and floating rate notes due April 15, 2024 ("Euro Floating Rate Notes", together with the 5.000% Euro Fixed Rate Notes and the 4.875% Euro Fixed Notes, the "Senior Secured Notes").

The Company had availability on its credit facilities as of ~~March 31,~~June 30, 2019 as follows:

Interest expense associated with the amortization of the debt issuance costs and original issue discounts recognized in the Company's condensed consolidated statements of income (loss) consist of the following:

Included in the table above, is the amortization of debt issuance costs on the revolver, which are ~~$21~~$20 million at ~~March 31,~~June 30, 2019 and are recorded in ~~"Prepayments and other current~~"Other assets" in the condensed consolidated balance sheets. In addition, there was a $3 million and $6 million reduction to interest expense during the three and six months ended ~~March 31,~~June 30, 2019 related to the accretion of the debt premium on the Senior Secured Notes.

New Credit Facility — Other Terms and Conditions— The New Credit Facility also contains two financial maintenance covenants for the revolving credit facility and the Term Loan A facility including a requirement to have a consolidated net leverage ratio (as defined in the New Credit Facility) as of the end of each fiscal quarter of not greater than 4.0 to 1 through September 30, 2019, 3.75 to 1 through September 30, 2020 and 3.5 to 1 thereafter; and a requirement to maintain a consolidated interest coverage ratio (as defined in the New Credit Facility) for any period of four consecutive fiscal quarters of not less than 2.75 to 1.

Senior Unsecured Notes and Senior Secured Notes — Other Terms and Conditions— The Senior Unsecured Notes and Senior Secured Notes contain covenants that will, among other things, limit the Company's ability to create liens and enter into sale and leaseback transactions. In addition, the Senior Secured Notes and 2024 Senior Unsecured Notes also require that, as a condition precedent to incurring certain types of indebtedness not otherwise permitted, the Company's consolidated fixed

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

charge coverage ratio, as calculated on a pro forma basis, be greater than 2.00, as well as containing restrictions on its operations, including limitations on: (i) incurring additional indebtedness; (ii) paying dividends; (iii) distributions and stock repurchases; (iv) investments; (v) asset sales and (vi) mergers and consolidations.

Subject to limited exceptions, all of the Company's existing and future material domestic wholly owned subsidiaries fully and unconditionally guarantee its Senior Unsecured Notes and Senior Secured Notes on a joint and several basis. There are no

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

significant restrictions on the ability of the subsidiaries that have guaranteed the Company's Senior Notes to make distributions to the Company.

As of ~~March 31,~~June 30, 2019, the Company was in compliance with all of its financial covenants.

Accounts Receivable Securitization and Factoring

On-Balance Sheet Arrangements — The Company has securitization programs for some of its accounts ~~receivable,~~receivables, with limited recourse provisions. Borrowings on these securitization programs, which are recorded in short-term debt, at ~~March 31,~~June 30, 2019 and December 31, 2018 are as follows:

March 31, 2019 December 31, 2018
Borrowings on securitization programs $ 3
$ 6

Off-Balance Sheet Arrangements— In the Company's European and U.S. accounts receivable factoring programs, accounts receivables are transferred in their entirety to the acquiring entities and are accounted for as a sale. The fair value of assets received as proceeds in exchange for the transfer of accounts receivable under these factoring programs approximates the fair value of such receivables. Certain programs in Europe have deferred purchase price arrangements with the banks.

The Company is the servicer of the receivables under some of these arrangements and is responsible for performing all accounts receivable administration functions. Where the Company receives a fee to service and monitor these transferred accounts receivables, such fees are sufficient to offset the costs and as such, a servicing asset or liability is not recorded as a result of such activities.

In the U.S and Canada, the Company participates in supply chain financing programs with certain of the Company's aftermarket customers through a drafting program.

The amounts outstanding for these factoring and drafting arrangements as of ~~March 31,~~June 30, 2019 and December 31, 2018 are as follows:

The deferred purchase price receivable as of ~~March 31,~~June 30, 2019 and December 31, 2018 is as follows:

Proceeds from the factoring of accounts receivable qualifying as sales are as follows:

Financing charges associated with the factoring of receivables are as follows:

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Three months ended March 31,
2019 2018
Financing charges on sale of receivables^(a)
$ 8
$ 3
^(a)Amount is included in "Interest expense" in the condensed consolidated statements of income (loss).



	Three months ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Financing charges on sale of receivables^(a)	$	6	$	2	$	14	$	5
^(a)Amount is included in "Interest expense" in the condensed consolidated statements of income (loss).

If the Company were not able to factor receivables or sell drafts under either of these programs, its borrowings under its revolving credit agreement might increase. These programs provide the Company with access to cash at costs that are generally favorable to alternative sources of financing and allow the Company to reduce borrowings under its revolving credit agreement.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

11. Pension Plans, Postretirement and Other Employee Benefits

The Company sponsors several defined benefit pension plans ("Pension Benefits") and health care and life insurance benefits ("Other Postretirement Benefits", or "OPEB") for certain employees and retirees around the world.

Components of net periodic benefit cost (credit) for the three months ended ~~March 31,~~June 30, 2019 and 2018 are as follows:

~~Long-term Rate~~Components of ~~Return~~

~~The weighted-average long-term rate of return on assets~~net periodic benefit cost (credit) for the ~~U.S. pension plans in determining~~six months ended June 30, 2019 ~~annual net periodic pension costs (credits) is 6.25%.~~and 2018 are as follows:



	Six Months Ended June 30
	Pension												Other Postretirement Benefits
	2019						2018						Other Postretirement Benefits
	US			Non-U.S.			US			Non-U.S.			2019			2018
Service cost	$	1		$	12		$	—		$	5		$	—		$	—
Interest cost	27			12			5			6			7			3
Expected return on plan assets	(34		)	(9		)	(7		)	(10		)	—			—
Net amortization:
Actuarial loss	2			3			2			4			2			4
Prior service cost (credit)	—			—			—			—			(4		)	(1		)
Net pension and postretirement costs (credits)	$	(4	)	$	18		$	—		$	5		$	5		$	6

For interim tax reporting, the Company estimates its annual effective tax rate and applies it to year-to-date ordinary income. Jurisdictions where no tax benefit can be recognized due to a valuation allowance are excluded from the estimated annual effective tax rate. The effect of including these jurisdictions on the quarterly effective rate calculation could result in a higher or lower effective tax rate during a ~~particular~~ quarter due to the mix and timing of actual earnings versus annual projections. The tax effects of certain items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

~~The~~For the three months ended June 30, 2019, the Company ~~recognized no~~recorded income tax expense of $14 million on income from continuing operations before income taxes of $59 million. This compares to income tax expense of $26 million on income from continuing operations before income taxes of $89 million in the same period of 2018.

For the six months ended June 30, 2019, the Company recorded income tax expense of $14 million on loss from continuing operations before income taxes of $46 million. This compares to income tax expense of $51 million on income from continuing operations before income taxes of $188 million in the same period of 2018.

Income tax expense for the three and six months ended ~~March 31,~~June 30, 2019 differs from the U.S. statutory rate due primarily to pre-tax income taxed at rates higher than the U.S. statutory rate and ~~$25 million in~~pre-tax losses with no tax benefit.

Income tax expense for the three and six months ended ~~March 31, 2018. The~~June 30, 2018 differs from the U.S. statutory rate due primarily to $2 million of tax expense ~~recorded in the three months ended March 31, 2019 included a tax benefit of $2 million relating to~~for changes in the toll tax, ~~as discussed below.~~pre-tax income taxed at rates lower than the U.S. statutory rate, and pre-tax losses with no tax benefit. In addition, during the three and six months ended June 30, 2018, a $5 million and $7 million tax benefit was recognized related to acquisition charges.

On December 22, 2017, the Tax Cuts and Jobs Act ("TCJA") was enacted into U.S. law, which, among other provisions, lowered the corporate income tax rate effective January 1, 2018 from 35% to 21%, and implemented significant changes with respect to U.S. tax treatment of earnings originating from outside the U.S. Many of the provisions of TCJA are subject to regulatory interpretation and U.S. state conforming enactments. The Internal Revenue Service (IRS) issued final regulations, effective on February 5, 2019, which provided additional guidance to assist taxpayers in computing the toll tax. Based on the final regulations a $2 million discrete benefit was recorded in income tax expense during the ~~three~~six months ended ~~March 31,~~June 30, 2019.

The Company evaluates its deferred tax assets quarterly to determine if valuation allowances are required or should be adjusted. 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. If recent operational improvements continue in our foreign subsidiaries or if certain restructuring steps are completed as part of the Federal-Mogul Acquisition and anticipated spin-off of DRiV, the Company believes it is reasonably possible sufficient positive evidence may be available to release all, or a portion, of its valuation allowance in the next twelve months in certain jurisdictions. This may result in a one-time tax benefit of up to ~~$51~~$45 million, primarily related to Spain ~~China~~ and the Czech Republic.

The Company believes it is reasonably possible up to $11 million in unrecognized tax benefits related to the expiration of foreign statute of limitations and the conclusion of income tax examinations may be recognized within the next twelve months.

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

13. Commitments and Contingencies

Environmental Matters

The Company is subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which it operates. The Company has been notified by the U.S. Environmental Protection Agency, other national environmental agencies, and various provincial and state agencies it may be a potentially responsible party (“PRP”) under such laws for the cost of remediating hazardous substances pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") and other national and state or provincial environmental laws. PRP designation typically requires the funding of site investigations and subsequent remedial activities. Many of the sites that are likely to be the costliest to remediate are often current or former commercial waste disposal facilities to which numerous companies sent wastes. Despite the potential joint and several liability which might be imposed on the Company under CERCLA and some of the other laws pertaining to these

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

sites, its share of the total waste sent to these sites generally has been small. The Company believes its exposure for liability at these sites is not material.

On a global basis, the Company has also identified certain other present and former properties at which it may be responsible for cleaning up or addressing environmental contamination, in some cases as a result of contractual commitments and/or federal or state environmental laws. The Company is seeking to resolve its responsibilities for those sites for which a claim has been received.

The Company expenses or capitalizes, as appropriate, expenditures for ongoing compliance with environmental regulations. As of ~~March 31,~~June 30, 2019, the Company has an obligation to remediate or contribute towards the remediation of certain sites, including the sites discussed above at which it may be a PRP.

The Company maintains the aggregated estimated share of environmental remediation costs for all these sites on a discounted basis in the condensed consolidated balance sheets as follows:



	June 30, 2019		December 31, 2018
Accrued expenses and other current liabilities	$	8	$	12
Deferred credits and other liabilities	30		28
	$	38	$	40

March 31, 2019 December 31, 2018
Accrued expenses and other current liabilities $ 10
$ 12
Deferred credits and other liabilities 29
28
$ 39
$ 40

For those locations where the liability was discounted, the weighted average discount rate used was ~~1.7%~~1.4% and 2.9% at ~~March 31,~~June 30, 2019 and December 31, 2018.

The Company's expected payments of environmental remediation costs for non-indemnified locations are estimated to be approximately:



	2019		2020		2021		2022		2023		2024 and thereafter
Expected payments	$	7	$	5	$	3	$	3	$	2	$	16

2019 2020 2021 2022 2023 2024 and thereafter
Expected payments $ 8
$ 6
$ 3
$ 2
$ 2
$ 17

Based on information known to the Company from site investigations and the professional judgment of consultants, the Company has established reserves it believes are adequate for these costs. Although the Company believes these estimates of remediation costs are reasonable and are based on the latest available information, the costs are estimates, difficult to quantify based on the complexity of the issues, and are subject to revision as more information becomes available about the extent of remediation required. At some sites, the Company expects other parties will contribute to the remediation costs. In addition, certain environmental statutes provide the Company's liability could be joint and several, meaning the Company could be required to pay amounts in excess of its share of remediation costs. The financial strength of the other PRPs at these sites has been considered, where appropriate, in the determination of the estimated liability. The Company does not believe any potential costs associated with its current status as a PRP, or as a liable party at the other locations referenced herein, will be material to its annual consolidated financial position, results of operations, or liquidity.

Asset Retirement Obligations

The Company’s primary asset retirement obligations ("ARO") activities relate to the removal of hazardous building materials at its facilities. The Company records an ARO at fair value upon initial recognition when the amount is probable and can be

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

reasonably estimated. ARO fair values are determined based on the Company’s determination of what a third party would charge to perform the remediation activities, generally using a present value technique.

The Company maintains ARO liabilities in the condensed consolidated balance sheets as follows:



	June 30, 2019		December 31, 2018
Accrued expenses and other current liabilities	$	3	$	3
Deferred credits and other liabilities	12		12
	$	15	$	15

March 31, 2019 December 31, 2018
Accrued expenses and other current liabilities $ 3
$ 3
Deferred credits and other liabilities 12
12
$ 15
$ 15

Antitrust Investigations and Litigation

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

On March 25, 2014, representatives of the European Commission (EC) were at Tenneco GmbH's Edenkoben, Germany administrative facility to gather information in connection with an ongoing global antitrust investigation concerning multiple automotive suppliers. On the same date, the Company also received a related subpoena from the U.S. Department of Justice (“DOJ”).

On November 5, 2014, the DOJ granted conditional leniency to ~~Tenneco,~~the Company, its subsidiaries, and its 50% affiliates as of such date ("2014 Tenneco Entities") pursuant to an agreement the Company entered into under the Antitrust Division's Corporate Leniency Policy. This agreement provides important benefits to the 2014 Tenneco Entities in exchange for the Company's self-reporting of matters to the DOJ and its continuing full cooperation with the DOJ's resulting investigation. For example, the DOJ will not bring any criminal antitrust prosecution against the 2014 Tenneco Entities, nor seek any criminal fines or penalties, in connection with the matters the Company reported to the DOJ. Additionally, there are limits on the liability of the 2014 Tenneco Entities related to any follow-on civil antitrust litigation in the United States. The limits include single rather than treble damages, as well as relief from joint and several antitrust liability with other relevant civil antitrust action defendants. These limits are subject to the Company satisfying the DOJ and any court presiding over such follow-on civil litigation.

On April 27, 2017, the Company received notification from the EC that it has administratively closed its global antitrust inquiry regarding the production, assembly, and supply of complete exhaust systems. No charges against the Company or any other competitor were initiated at any time and the EC inquiry is now closed.

Certain other competition agencies are also investigating possible violations of antitrust laws relating to products supplied by the Company and its subsidiaries, including Federal-Mogul. The Company has cooperated and continues to cooperate fully with all of these antitrust investigations and take other actions to minimize its potential exposure.

The Company and certain of its competitors are also currently defendants in civil putative class action litigation and are subject to similar claims filed by other plaintiffs, in the United States and Canada. More related lawsuits may be filed, including in other jurisdictions. Plaintiffs in these cases generally allege that defendants have engaged in anticompetitive conduct, in violation of federal and state laws, relating to the sale of automotive exhaust systems or components thereof. Plaintiffs seek to recover, on behalf of themselves and various purported classes of purchasers, injunctive relief, damages and attorneys’ fees. However, as explained above, because the DOJ granted conditional leniency to the 2014 Tenneco Entities, the Company's civil liability in U.S. follow-on actions with respect to these entities is limited to single damages and the Company will not be jointly and severally liable with the other defendants, provided that the Company has satisfied its obligations under the DOJ leniency agreement and approval is granted by the presiding court. Typically, exposure for follow-on actions in Canada is less than the exposure for U.S. follow-on actions.

Following the ~~EC’s~~EC's decision to administratively close its antitrust inquiry into exhaust systems in 2017, receipt by the 2014 Tenneco Entities of conditional leniency from the DOJ and discussions during the third quarter of 2017 following the appointment of a special settlement master in the civil putative class action cases pending against the Company and/or certain of its competitors in the United States, the Company continues to vigorously defend itself and/or take actions to minimize its potential exposure to matters pertaining to the global antitrust investigation, including engaging in settlement discussions when it is in the best interests of the Company and its stockholders. For example, in October 2017, the Company settled an administrative action brought by Brazil's competition authority for an amount that was not material. In December 2018, the Company settled a separate administrative action brought by Brazil’s competition authority against a Federal-Mogul subsidiary, also for an amount that was not material.

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

Additionally, in February 2018, the Company settled civil putative class action litigation in the United States brought by classes of direct purchasers, end-payors and auto dealers. No other classes of plaintiffs have brought claims against the Company in the United States. Based upon those earlier developments, including settlement discussions, ~~The~~the Company established a reserve of $132 million in its second quarter 2017 financial results for settlement costs that were probable, reasonably estimable, and expected to be necessary to resolve its antitrust matters globally, which primarily involves the resolution of civil suits and related claims. Of the $132 million reserve that was established, $79 million was paid through ~~March 31,~~June 30, 2019 resulting in a remaining reserve of $53 million as of ~~March 31,~~June 30, 2019, which is recorded in accrued expenses and other current liabilities in the Company's condensed consolidated balance sheets. While the Company, including its Federal-Mogul subsidiaries, continues to cooperate with certain competition agencies investigating possible violations of antitrust laws relating to products supplied by the Company, and the Company may be subject to other civil lawsuits and/or related claims, no amount of this reserve is attributable to matters with the DOJ or the EC, and no such amount is expected based on current information.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

The Company's reserve for its antitrust matters is based upon all currently available information and an assessment of the probability of events for those matters where the Company can make a reasonable estimate of the costs to resolve such outstanding matters. The Company's estimate involves significant judgment, given the number, variety and potential outcomes of actual and potential claims, the uncertainty of future rulings and approvals by a court or other authority, the behavior or incentives of adverse parties or regulatory authorities, and other factors outside of its control. As a result, the Company's reserve may change from time to time, and actual costs may vary. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, the Company does not expect ~~that~~ any such change in the reserve will have a material adverse effect on the Company's annual ~~condensed~~ consolidated financial position, results of operations or liquidity.

Other Legal Proceedings, Claims and Investigations

For many years the Company has been and continues to be subject to lawsuits initiated by claimants alleging health problems as a result of exposure to asbestos. The Company's current docket of active and inactive cases is less than 500 cases in the United States and less than 50 in Europe.

With respect to the claims filed in the United States, the substantial majority of the claims are related to alleged exposure to asbestos in the Company's line of Walker® exhaust automotive products although a significant number of those claims appear also to involve occupational exposures sustained in industries other than automotive. A small number of claims have been asserted against one of the Company's subsidiaries by railroad workers alleging exposure to asbestos products in railroad cars. The Company believes, based on scientific and other evidence, it is unlikely that U.S. claimants were exposed to asbestos by the Company's former products and that, in any event, they would not be at increased risk of asbestos-related disease based on their work with these products. Further, many of these cases involve numerous defendants, with the number in some cases exceeding 100 defendants from a variety of industries. Additionally, in many cases the plaintiffs either do not specify any, or specify the jurisdictional minimum, dollar amount for damages.

With respect to the claims filed in Europe, the substantial majority relate to occupational exposure claims brought by current and former employees of Federal-Mogul facilities in France and amounts paid out were not material. A small number of occupational exposure claims have also been asserted against Federal-Mogul entities in Italy and Spain.

As major asbestos manufacturers and/or users continue to go out of business or file for bankruptcy, the Company may experience an increased number of these claims. The Company vigorously defends itself against these claims as part of its ordinary course of business. In future periods, the Company could be subject to cash costs or charges to earnings if any of these matters are resolved unfavorably to the Company. To date, with respect to claims that have proceeded sufficiently through the judicial process, the Company has regularly achieved favorable resolutions. Accordingly, the Company presently believes that these asbestos-related claims will not have a material adverse effect on the Company's ~~condensed~~annual consolidated financial position, results of operations or liquidity.

The Company is also from time to time involved in other legal proceedings, claims or investigations. Some of these matters involve allegations of damages against the Company relating to environmental liabilities (including toxic tort, property damage and remediation), intellectual property matters (including patent, trademark and copyright infringement, and licensing disputes), personal injury claims (including injuries due to product failure, design or warning issues, and other product liability related matters), taxes, unclaimed property, employment matters, and commercial or contractual disputes, sometimes related to acquisitions or divestitures. Additionally, some of these matters involve allegations relating to legal compliance.

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

While the Company vigorously defends itself against all of these legal proceedings, claims and investigations and take other actions to minimize its potential exposure, in future periods, the Company could be subject to cash costs or charges to earnings if any of these matters are resolved on unfavorable terms. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, including the Company's assessment of the merits of the particular claim, except as described above under "Antitrust Investigations", the Company does expect the legal proceedings, claims or investigations currently pending against it will have any material adverse effect on its ~~condensed~~annual consolidated financial position, results of operations or liquidity.

Warranty Matters

The Company provides warranties on some of its products. The warranty terms vary but range from one year up to limited lifetime warranties on some of its 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 with the Company's products. These estimates are established using historical information about the nature, frequency, and average cost of warranty claims. The

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Company believes 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 condensed consolidated balance sheets.

Below is a table that shows the activity in the warranty accrual accounts:



	2019			2018
Balance as of December 31 of the prior year	$	45		$	26
Accruals related to product warranties	5			6
Reductions for payments made	(2		)	(3		)
Foreign currency	—			—
Balance as of March 31	$	48		$	29
Accruals related to product warranties	16			2
Reductions for payments made	(11		)	(2		)
Foreign currency	—			—
Balance as of June 30	$	53		$	29

Three months ended March 31,
2019 2018
Balance at beginning of period $ 45
$ 26
Accruals related to product warranties 5
6
Reductions for payments made (2 ) (3 )
Foreign currency —
—
Balance at end of period $ 48
$ 29

14. Leases

The Company has operating and finance leases for real estate and equipment. Generally, the leases have remaining terms ofone month to ten years. Leases with an initial term of 12 months or less which do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

In addition, some leases include options to terminate the lease. The Company generally negotiates these termination clauses in anticipation of any changes in market conditions; however, because a termination option requires approval from management, the Company assumes the majority of its termination options will not be exercised when determining the lease term.

The Company has elected the practical expedient to not separate non-lease components from the lease components to which they relate, and instead account for each separate lease and non-lease component associated with that lease component as a single lease component for all underlying asset classes. Accordingly, all costs associated with a lease contract are accounted for as lease cost. Lease expense is recorded in operating expenses in the results of operations.

Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable portion of lease payments is not included in the computation of the right of use assets or lease liabilities. Rather, variable payments, other than those dependent upon a market index or rate, are expensed when the obligation for those payments is incurred and are included in ~~lease expense in~~"Cost of sales" and "Selling, general, and administrative" within the ~~results~~condensed consolidated statements of ~~operations.~~income (loss).

The Company does not include significant restrictions or covenants in ~~our~~its lease agreements, and residual value guarantees are generally not included within ~~our~~its operating leases.

The components of lease expense were as follows:



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease expense	$	30	$	64
Short-term lease expense	2		4
Variable lease expense	12		20
Total lease expense	$	44	$	88

Other information related to leases was as follows:



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	41	$	82

Supplemental balance sheet information related to leases was as follows:

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

~~The components of lease cost were as follows:~~



	June 30, 2019
Operating leases
Operating lease right-of-use assets ^(a)	$	344

Other current liabilities ^(b)	$	99
Other long-term liabilities ^(c)	239
Total operating lease liabilities	$	338

Finance leases
Property, plant and equipment, gross	$	2
Accumulated depreciation	—
Total finance lease right-of-use assets	$	2

Other current liabilities ^(b)	$	1
Other long-term liabilities ^(c)	1
Total finance lease liabilities	$	2

(a) Included in "Other assets" in the condensed consolidated balance sheets.
(b) Included in "Accrued expenses and other current liabilities" in the condensed consolidated balance sheets.
(c) Included in "Deferred credits and other liabilities" in the condensed consolidated balance sheets.

Three months ended March 31, 2019
Operating lease cost $ 33
Short-term lease expense 1
Variable lease cost 8
Total lease cost $ 42

~~Other information related to leases was as follows:~~

Three months ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 41

~~Supplemental balance sheet information related to leases was as follows:~~

March 31, 2019
Operating leases
Operating lease right-of-use assets ^(a)
$ 362

Other current liabilities ^(b)
$ 101
Other long-term liabilities ^(c)
256
Total operating lease liabilities $ 357

Finance leases
Property, plant and equipment, gross $ 2
Accumulated depreciation —
Total finance lease right-of-use assets $ 2

Other current liabilities ^(b)
$ 1
Other long-term liabilities ^(c)
1
Total finance lease liabilities $ 2

(a) Included in "Other assets" in the condensed consolidated balance sheets.
(b) Included in "Accrued expenses and other current liabilities" in the condensed consolidated balance sheets.
(c) Included in "Deferred credits and other liabilities" in the condensed consolidated balance sheets.



	~~March 31,~~June 30, 2019
	Weighted average remaining lease term	Weighted average discount rate
Operating leases	~~5.29~~4.96 years	4.26	%
Finance leases	~~3.23~~3.05 years	~~4.85~~5.08	%

Maturities of lease liabilities under non-cancellable leases as of June 30, 2019 were as follows:

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

~~Maturities of lease liabilities under non-cancellable leases as of March 31, 2019 were as follows:~~

Year ending December 31 Operating leases Finance leases
2019 (excluding the three months ended March 31, 2019) $ 85
$ 1
2020 91
1
2021 69
—
2022 48
—
2023 34
—
Thereafter 55
—
Total future undiscounted lease payments 382
2
Less imputed interest (25 ) —
Total reported lease liability $ 357
$ 2

Future minimum operating lease payments at December 31, 2018 are as follows:

2019 $ 120
2020 100
2021 86
2022 68
2023 56
Beyond 2023 53
$ 483

15. Share-Based Compensation

Share-Based Compensation Expense

The total share-based compensation expense was as follows:

Three Months Ended March 31,
2019 2018
Cash-settled share-based compensation expense (benefit) $ (1 ) $ (1 )
Share-settled share-based compensation expense (benefit) 7
5
$ 6
$ 4

Prior to 2018, the Company has granted restricted stock units ("RSUs") and long-term performance units ("LTPUs") to certain key employees that are payable in cash. These awards are classified as liabilities and are valued based on the fair value of the award at the grant date and are remeasured at each reporting date until settlement with compensation expense being recognized in proportion to the completed requisite period up until date of settlement. At ~~March 31,~~June 30, 2019, the LTPUs outstanding included a three-year grant for 2017-2019 payable in the first quarter of 2020.

As of ~~March 31,~~June 30, 2019, $1 million of total unrecognized compensation costs is expected to be recognized on the cash-settled awards over a weighted-average period of less than 1 year.

Share-Settled Awards

The Company has granted restricted stock to its directors and certain key employees as well as RSUs and ~~PSUs~~performance share units ("PSUs") that are payable in common stock to certain key employees. These awards are settled in shares upon vesting and recognized in equity based on their fair value.

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

The following table reflects the status for all nonvested restricted shares, share-settled RSUs, and PSUs ~~for the period indicated:~~as of June 30, 2019 and December 31, 2018:

As of ~~March 31,~~June 30, 2019, approximately ~~$63~~$54 million of total unrecognized compensation costs is expected to be recognized on the share-settled awards over a weighted-average period of approximately 32 years.

16. Shareholders' Equity

Common Stock Outstanding

The Company has authorized 175,000,000 shares and 135,000,000 shares ($0.01 par value) of Class A Common Stock at ~~March 31,~~June 30, 2019 and 2018. The Company has authorized 25,000,000 shares ($0.01 par value) of Class B Common Stock at ~~March 31,~~June 30, 2019.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Total common stock outstanding and changes in common stock issued are as follows:

Class A Common Stock Class B Common Stock
Three Months March 31 Three Months March 31
2019 2018 2019
Shares issued at beginning of period 71,675,379
66,033,509
23,793,669
Issuance (repurchased) pursuant to benefit plans 120,622
(15,906 ) —
Restricted stock forfeited and withheld for taxes (54,293 ) (5,108 ) —
Stock options exercised 8,438
4,779
—
Shares issued at end of period 71,750,146
66,017,274
23,793,669

Treasury stock 14,592,888
14,592,888
—
Total shares outstanding 57,157,258
51,424,386
23,793,669

The Company had 50,000,000 shares of preferred stock ($0.01 par value) authorized at both ~~March 31,~~June 30, 2019 and 2018. No shares of preferred stock were issued or outstanding at those dates.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

Accumulated Other Comprehensive Income (Loss)

The following represents the Company's changes in accumulated other comprehensive income (loss) by component, net of tax for the three and six months ended ~~March 31,~~June 30, 2019 and 2018:



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Foreign currency translation adjustments and other
Balance at beginning of period	$	(366	)	$	(244	)	$	(395	)	$	(263	)
Other comprehensive income (loss) before reclassifications adjustments	(16		)	(94		)	11			(75		)
Reclassification from other comprehensive income (loss)	—			—			—			—
Other comprehensive income (loss)	(16		)	(94		)	11			(75		)
Income tax provision (benefit)	(1		)	2			1			2
Balance at end of period	$	(383	)	$	(336	)	$	(383	)	$	(336	)

Pensions and other postretirement benefits
Balance at beginning of period	$	(296	)	$	(272	)	$	(297	)	$	(275	)
Other comprehensive income (loss) before reclassifications	—			—			—			—
Reclassification from other comprehensive income (loss)	2			5			3			9
Other comprehensive income (loss)	2			5			3			9
Income tax provision (benefit)	(4		)	(1		)	(4		)	(2		)
Balance at end of period	$	(298	)	$	(268	)	$	(298	)	$	(268	)

Cash flow hedge instruments
Balance at beginning of period	$	4		$	—		$	—		$	—
Other comprehensive income (loss) before reclassifications	(3		)	—			1			—
Reclassification from other comprehensive income (loss)	—			—			—			—
Other comprehensive income (loss)	(3		)	—			1			—
Income tax provision (benefit)	—			—			—			—
Balance at end of period	$	1		$	—		$	1		$	—

Other comprehensive income (loss) attributable to noncontrolling interests	$	(1	)	$	(7	)	$	5		$	1

Three Months Ended March 31
2019 2018
Foreign currency translation adjustments and other
Balance at beginning of period $ (395 ) $ (263 )
Other comprehensive income (loss) before reclassifications adjustments 27
19
Reclassification from other comprehensive income (loss) —
—
Other comprehensive income (loss) (368 ) (244 )
Income tax provision (benefit) 2
—
Balance at end of period $ (366 ) $ (244 )

Pensions and other postretirement benefits
Balance at beginning of period $ (297 ) $ (275 )
Other comprehensive income (loss) before reclassifications —
—
Reclassification from other comprehensive income (loss) 1
4
Other comprehensive income (loss) (296 ) (271 )
Income tax provision (benefit) —
(1 )
Balance at end of period $ (296 ) $ (272 )

Cash flow hedge instruments
Balance at beginning of period $ —
$ —
Other comprehensive income (loss) before reclassifications 4
—
Reclassification from other comprehensive income (loss) —
—
Other comprehensive income (loss) 4
—
Income tax provision (benefit) —
—
Balance at end of period $ 4
$ —

Other comprehensive income (loss) attributable to noncontrolling interests $ 6
$ 8

17. Segment Information

The Company expects to separate its businesses to form two new, independent publicly traded companies and ~~now~~currently expects the DRiV ~~spinoff~~spin-off to occur ~~mid-2020.As~~in mid-2020. As such, the Company began to manage and report its DRiV businesses through two new operating segments, in the first quarter of 2019, as compared to the three operating segments it had previously reported. The DRiV operating segments consist of Motorparts and Ride Performance. The new Motorparts operating segment consists of the previously reported Aftermarket operating segment as well as the aftermarket portion of the previously reported Motorparts operating segment. The Ride Performance operating segment consists of the previously reported Ride Performance operating segment as well as the OE Braking business that was included in the previously reported Motorparts operating segment. As such, prior period operating segment results have been conformed to reflect the Company's current operating segments. The future New Tenneco consists of two existing operating segments, Powertrain and Clean Air. Costs related to other business activities, primarily corporate headquarter functions, are disclosed separately from the four operating segments as "Corporate."

Management uses EBITDA including noncontrolling interests as the key performance measure of segment profitability and uses the measure in its financial and operational decision making processes, for internal reporting, and for planning and forecasting purposes to effectively allocate resources. EBITDA including noncontrolling interests is defined as earnings before interest expense, income taxes, noncontrolling interests, and depreciation and amortization. Segment assets are not presented as it is not a measure reviewed by the Chief Operating Decision Maker in allocating resources and assessing performance.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

EBITDA including noncontrolling interests should not be considered a substitute for results prepared in accordance with US GAAP and should not be considered an alternative to net income, which is the most directly comparable financial measure to EBITDA including noncontrolling interests that is in accordance with US GAAP. EBITDA including noncontrolling interests, as determined and measured by the Company, should not be compared to similarly titled measures reported by other companies.

The following table summarizes certain of the Company's segment information:

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Three Months Ended March 31,
2019 2018
EBITDA including noncontrolling interests by Segments:
Clean Air $ 131
$ 157
Powertrain 113
—
Ride Performance (45 ) 24
Motorparts 45
45
Corporate (99 ) (44 )
Total EBITDA including noncontrolling interests 145
182
Less: Depreciation and amortization (169 ) (60 )
Earnings (loss) before interest expense, income taxes, and noncontrolling interests (24 ) 122
Less: Interest expense (81 ) (23 )
Less: Income tax expense (benefit) —
(25 )
Net income (loss) $ (105 ) $ 74

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

Revenue from contracts with customers is disaggregated by customer type and geography, as it depicts the nature and amount of the Company’s revenue that is aligned with the Company's key growth strategies. In the following tables, revenue is disaggregated accordingly:

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

18. Related Party Transactions

Amounts presented as Icahn Automotive Group LLC represent the Company's activity with Auto Plus and Pep Boys. See Note 7, Investment in Nonconsolidated Affiliates, for further information for companies within the tables below that represent equity method investments.

~~TENNECO INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)~~

~~(Unaudited)~~

The following ~~table is a summary~~tables are summaries of the net sales, purchases, and royalty and other income from related parties for the three and six months ended ~~March 31,~~June 30, 2019:

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Three Months Ended March 31, 2019
Net Sales Purchases Royalty and Other Income
Icahn Automotive Group LLC $ 43
$ —
$ 1
PSC Metals, Inc. $ 1
$ —
$ —
Anqing TP Goetze Piston Ring Company Limited $ —
$ 14
$ —
Anqing TP Powder Metallurgy Company Limited $ —
$ 1
$ —
Dongsuh Federal-Mogul Industrial Co., Ltd. $ 1
$ 2
$ —
Federal-Mogul Powertrain Otomotiv A.S. $ 27
$ 55
$ 1
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti. $ —
$ 3
$ —
Federal-Mogul Izmit Piston ve Pim Uretim Tesisleri A.S. $ 1
$ 4
$ —
Federal-Mogul TP Liners, Inc. $ 4
$ —
$ —
Montagewerk Abgastechnik Emden GmbH $ 2
$ —
$ —

~~During the three months ended March 31, 2018, the Company had sales to Montagewerk Abgastechnik Emden GmbH of $4 million.~~

The following table is a summary of amounts due to and from the Company's related parties as of ~~March 31,~~June 30, 2019 and December 31, 2018:

Federal-Mogul Izmit Piston ve Pim Uretim Tesisleri A.S.

Montagewerk Abgastechnik Emden GmbH

March 31, 2019 December 31, 2018
Receivables Payables and accruals Receivables Payables and accruals
Icahn Automotive Group LLC $ 59
$ 1
$ 60
$ 12
Anqing TP Goetze Piston Ring Company Limited $ 1
$ 16
$ 1
$ 22
Anqing TP Powder Metallurgy Company Limited $ —
$ 1
$ 1
$ 1
Dongsuh Federal-Mogul Industrial Co., Ltd. $ 1
$ 2
$ 1
$ 2
Federal-Mogul Powertrain Otomotiv A.S. $ 16
$ 27
$ 9
$ 16
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti. $ —
$ 1
$ —
$ 1
Federal-Mogul Izmit Piston ve Pim Uretim Tesisleri A.S.

$ —
$ 3
$ —
$ —
Federal-Mogul TP Liners, Inc. $ 2
$ 8
$ 2
$ 7
Montagewerk Abgastechnik Emden GmbH

$ —
$ 1
$ —
$ —

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

19. Supplemental Guarantor Condensed Consolidating Financial Statements

Basis of Presentation

Substantially all of the Company's existing and future material domestic 100% owned subsidiaries (which are referred to as the Guarantor Subsidiaries) fully and unconditionally guarantee its senior notes on a joint and several basis. However, a subsidiary’s guarantee may be released in certain customary circumstances such as a sale of the subsidiary or all or substantially all of its assets in accordance with the indenture applicable to the notes. The Guarantor Subsidiaries are combined in the presentation below.

These consolidating financial statements are presented on the equity method. Under this method, the Company's investments are recorded at cost and adjusted for its ownership share of a subsidiary’s cumulative results of operations, capital contributions and distributions, and other equity changes. You should read the condensed consolidating financial information of the Guarantor Subsidiaries in connection with the Company's condensed consolidated financial statements and related notes of which this note is an integral part.

The accompanying supplemental guarantor consolidating financial statements have been updated to reflect the revision as described in Note 2, Summary of Significant Accounting Policies.

As discussed in Note 3, Acquisitions and Divestitures, the allocation of the purchase price to the assets acquired and liabilities assumed, including the entities to which it is allocated, is preliminary and subject to change during the measurement period.

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

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

December 31, 2018
Guarantor
Subsidiaries Nonguarantor
Subsidiaries Tenneco Inc.
(Parent
Company) Reclass
& Elims Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 329
$ 364
$ 4
$ —
$ 697
Restricted cash —
5
—
—
5
Receivables, net 943
1,629
—
—
2,572
Inventories, net 958
1,287
—
—
2,245
Prepayments and other current assets 254
311
25
—
590
Total current assets 2,484
3,596
29
—
6,109
Property, plant and equipment, net 1,131
2,361
9
—
3,501
Investment in affiliated companies 1,421
—
4,856
(6,277 ) —
Long-term receivables, net 9
1
—
—
10
Goodwill 263
383
223
—
869
Intangibles, net 1,007
510
2
—
1,519
Investments in nonconsolidated affiliates
43
501
—
—
544
Deferred income taxes 255
200
12
—
467
Other assets 48
180
—
(15 ) 213
Total assets $ 6,661
$ 7,732
$ 5,131
$ (6,292 ) $ 13,232
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt, including current maturities of long-term debt $ 1
$ 152
$ —
$ —
$ 153
Accounts payable 858
1,894
7
—
2,759
Accrued compensation and employee benefits 88
255
—
—
343
Accrued income taxes —
52
27
(15 ) 64
Accrued expenses and other current liabilities 436
488
77
—
1,001
Total current liabilities 1,383
2,841
—
111
(15 ) 4,320
Long-term debt 3
32
5,305
—
5,340
Intercompany due to (due from) 2,726
(215 ) (2,511 ) —
—
Deferred income taxes —
88
—
—
88
Postretirement benefits and other liabilities 225
705
500
—
1,430
Commitments and contingencies

Total liabilities 4,337
3,451
3,405
(15 ) 11,178
Redeemable noncontrolling interests —
138
—
—
138
Tenneco Inc. shareholders’ equity 2,324
3,953
1,726
(6,277 ) 1,726
Noncontrolling interests —
190
—
—
190
Total equity 2,324
4,143
1,726
(6,277 ) 1,916
Total liabilities, redeemable noncontrolling interests and equity $ 6,661
$ 7,732
$ 5,131
$ (6,292 ) $ 13,232

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)



	June 30, 2019
	Guarantor Subsidiaries		Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	216	$	165		$	3		$	—		$	384
Restricted cash	—		6			—			—			6
Receivables, net	965		1,882			—			—			2,847
Inventories, net	927		1,280			—			—			2,207
Prepayments and other current assets	193		329			28			—			550
Total current assets	2,301		3,662			31			—			5,994
Property, plant and equipment, net	1,142		2,418			9			—			3,569
Investment in affiliated companies	1,637		—			5,204			(6,841		)	—
Long-term receivables, net	9		1			—			—			10
Goodwill	470		329			—			—			799
Intangibles, net	971		678			—			—			1,649
Investments in nonconsolidated affiliates	42		489			—			—			531
Deferred income taxes	256		212			12			—			480
Other assets	150		396			14			—			560
Total assets	$	6,978	$	8,185		$	5,270		$	(6,841	)	$	13,592
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt, including current maturities of long-term debt	$	1	$	154		$	15		$	—		$	170
Accounts payable	904		1,821			—			—			2,725
Accrued compensation and employee benefits	87		304			—			—			391
Accrued income taxes	—		—			—			—			—
Accrued expenses and other current liabilities	426		542			56			—			1,024
Total current liabilities	1,418		2,821			71			—			4,310
Long-term debt	250		11			5,247			—			5,508
Intercompany due to (due from)	1,905		(196		)	(1,709		)	—			—
Deferred income taxes	—		110			—			—			110
Pension, postretirement benefits and other liabilities	817		835			23			—			1,675
Commitments and contingencies
Total liabilities	4,390		3,581			3,632			—			11,603
Redeemable noncontrolling interests	—		145			—			—			145
Tenneco Inc. shareholders’ equity	2,588		4,253			1,638			(6,841		)	1,638
Noncontrolling interests	—		206			—			—			206
Total equity	2,588		4,459			1,638			(6,841		)	1,844
Total liabilities, redeemable noncontrolling interests and equity	$	6,978	$	8,185		$	5,270		$	(6,841	)	$	13,592

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

(Unaudited)

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Three Months Ended March 31, 2018
Guarantor
Subsidiaries Nonguarantor
Subsidiaries Tenneco Inc.
(Parent
Company) Reclass
& Elims Consolidated
Operating Activities
Net cash provided by (used in) operating activities $ (27 ) $ 32
$ (5 ) $ —
$ —
Investing Activities
Proceeds from sale of assets —
2
—
—
2
Cash payments for property, plant and equipment (40 ) (49 ) —
—
(89 )
Proceeds from deferred purchase price of factored receivables —
34
—
—
34
Net cash used in investing activities (40 ) (13 ) —
—
(53 )
Financing Activities
Proceeds from term loans and notes —
6
—
—
6
Repayments of term loans and notes (5 ) (8 ) —
—
(13 )
Borrowings on revolving lines of credit 1,093
8
166
—
1,267
Payments on revolving lines of credit (1,026 ) (12 ) (151 ) —
(1,189 )
Issuance (repurchase) of common shares —
—
(2 ) —
(2 )
Cash dividends —
—
(13 ) —
(13 )
Net increase (decrease) in bank overdrafts —
(4 ) —
—
(4 )
Other —
(30 ) —
—
(30 )
Intercompany dividends and net (decrease) increase in intercompany obligations 3
(7 ) 4
—
—
Net cash (used in) provided by financing activities 65
(47 ) 4
—
22
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash —
3
—
—
3
Increase (decrease) in cash, cash equivalents and restricted cash (2 ) (25 ) (1 ) —
(28 )
Cash, cash equivalents and restricted cash, January 1 7
311
—
—
318
Cash, cash equivalents and restricted cash, March 31 $ 5
$ 286
$ (1 ) $ —
$ 290

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References herein to "Tenneco", the "Company", "we", "us", and "our" refer to Tenneco Inc. and its consolidated subsidiaries. Unless otherwise stated, all comparisons of ~~March 31,~~June 30, 2019 financial results are to ~~March 31,~~June 30, 2018 financial results.

The following Management's Discussion and Analysis of ~~financial condition~~Financial Condition and ~~results~~Results of ~~operations~~Operations ("MD&A") should be read in conjunction with the condensed consolidated financial statements and related notes included in Item 1 of this quarterly report on Form 10-Q and the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the Securities and Exchange Commission ("SEC") on March 18, 2019 (the "2018 Form 10-K").

We are one of the world's leading manufacturers of clean air, powertrain, and ride performance products and systems for light vehicle, commercial truck, off-highway, industrial, and aftermarket customers. Both original equipment (OE) vehicle designers and manufacturers and the repair and replacement markets, or aftermarket, are served globally through leading brands, including Monroe^®, Champion^®, Öhlins^®, MOOG^®, Walker^®, Fel-Pro^®, Wagner^®, Ferodo^®, Rancho^®, Thrush^®, National^®, and Sealed Power^®, among others.

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, 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 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 effect of any such cost increases through material substitutions, cost reduction initiatives, and other methods.

Öhlins Intressenter AB Acquisition

On January 10, 2019, we completed the acquisition of a 90.5% ownership interest in Öhlins Intressenter AB (the "Öhlins Acquisition"), a Swedish technology company that develops premium suspension systems and components for the automotive and motorsport industries. The purchase price was $162 million. See Note 3, Acquisitions and Divestitures, of our condensed consolidated financial statements for additional information.

Federal-Mogul Acquisition

On October 1, 2018, we completed the acquisition of a 100% ownership interest in Federal-Mogul LLC (the "Federal-Mogul Acquisition", and together with the Öhlins Acquisition, the "Acquisitions"). See Note 3, Acquisitions and Divestitures, of our condensed consolidated financial statements for additional information.

Spin-Off Transaction and Change in Reportable Segments

Following the closing of the Federal-Mogul Acquisition, we agreed to use our reasonable best efforts to pursue the separation of the combined company. As such, we expect to separate our businesses to form two new, independent publicly traded companies, an Aftermarket and Ride Performance company ("DRiV") and a new Powertrain Technology company ("New Tenneco"). We ~~have revised our timing target for~~currently expect the separation of the business ~~and now expect the DRiV spinoff~~ to occur ~~mid-2020.~~mid-2020 through a spin-off transaction of DRiV. In the first quarter of 2019, we began to manage and report our DRiV businesses through two new operating segments as compared to the three operating segments we had previously reported. The DRiV operating segments consist of Motorparts and Ride Performance. The new Motorparts operating segment consists of the previously reported Aftermarket operating segment as well as the aftermarket portion of the previously reported Motorparts operating segment. The Ride Performance operating segment consists of the previously reported Ride Performance operating segment as well as the OE Braking business that was included in the previously reported Motorparts operating segment. As such, prior period operating segment results and related disclosures have been conformed to reflect our current operating segments. The future New Tenneco consists of two existing operating segments, Powertrain and Clean Air. Costs related to other business activities, primarily corporate headquarter functions, are disclosed separately from the four operating segments as "Corporate."

See Note 17, Segment Information, of our condensed consolidated financial statements for additional information.

Financial Results for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2019



~~Delaware~~Title of each class	Trading Symbol	~~76-0515284~~Name of each exchange on which registered
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~ Class A Voting Common Stock, par value $0.01 per share	TEN	~~(I.R.S. Employer~~ ~~Identification No.)~~

~~500 North Field Drive, Lake Forest, Illinois~~		~~60045~~
~~(Address of principal executive offices)~~		~~(Zip Code)~~New York Stock Exchange



~~Title of each class~~	~~Trading Symbol~~	~~Name of each exchange on which registered~~
~~Class A Voting Common Stock, par value $0.01 per share~~	~~TEN~~	~~New York Stock Exchange~~



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



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



Large accelerated filerþ	☑	Accelerated filer¨	☐
Non-accelerated filer¨	☐	Smaller reporting company ¨	☐
		Emerging growth company¨	☐



	Three months ended March 31,
	2019			2018
Balance at beginning of period	$	138		$	42
Net income (loss) attributable to redeemable noncontrolling interests	5			7
Other comprehensive income (loss)	2			1
Acquisition and other	16			—
Purchase accounting measurement period adjustment	(8		)	—
Balance at end of period	$	153		$	50



	For the Three Months Ended March 31,
	2019			2018
Net sales and operating revenues	$	4,484		$	4,680
Earnings (loss) before income taxes and noncontrolling interests	$	30		$	226
Net income (loss) attributable to Tenneco Inc.	$	(70	)	$	93
Basic earnings (loss) per share of common stock	$	(0.87	)	$	1.16
Diluted earnings (loss) per share of common stock	$	(0.87	)	$	1.16



	Fair value exceeds
	carrying value	Goodwill
Reporting units 1-6	< 15%	$	354
Reporting units 7-9	> 15%	437
		$	791



	Three Months Ended June 30, 2019
Statements of Income	Otomotiv A.S.		Anqing TP Goetze		Other		Total
Sales	$	85	$	39	$	120	$	244
Gross profit	$	22	$	10	$	23	$	55
Income from continuing operations	$	17	$	9	$	11	$	37
Net income	$	21	$	9	$	11	$	41


		Carrying Value					Carrying Value
	Balance sheet classification	March 31, 2019		December 31, 2018		Balance sheet classification	June 30, 2019		December 31, 2018
Commodity price hedge contracts designated as cash flow hedges	Prepayments and other current assets	$	2	$	—	Accrued expenses and other current liabilities	$	—	$	2
Commodity price hedge contracts designated as cash flow hedges	Accrued expenses and other current liabilities	$	—	$	2
Foreign currency borrowings designated as net investment hedges	Long-term debt	$	862	$	863	Long-term debt	$	880	$	863



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.



		June 30, 2019				December 31, 2018
	Fair value hierarchy	Carrying Amount		Fair Value		Carrying Amount			Fair Value
Derivative instruments:
Equity swap agreement	Level 2	$	3	$	3	$	4		$	4
Commodity contracts	Level 2	$	—	$	—	$	(2	)	$	(2	)


	Credit Facilities as of March 31, 2019			Credit Facilities as of June 30, 2019
	Term	Available^(b)		Term	Available^(b)
	(in billions)				(in billions)
Tenneco Inc. revolving credit facility ^(a)	2023	$	1.3	2023	$	1.2
Tenneco Inc. Term Loan A	2023	—		2023	—
Tenneco Inc. Term Loan B	2025	—		2025	—
Subsidiaries’ credit agreements	2018-2028	0.1		2020	0.2
		$	1.4		$	1.4


^(a)	The Company is required to pay commitment fees under the revolving credit facility on the unused portion of the total commitment.


^(b)	Letters of credit reduce the available borrowings under the revolving credit facility, as of ~~March 31,~~June 30, 2019 the revolving credit facility had $20 million in letters of credit outstanding.



	June 30, 2019		December 31, 2018
Borrowings on securitization programs	$	4	$	6



	March 31, 2019		December 31, 2018
Deferred purchase price receivable	$	58	$	154


	Three Months Ended March 31,																	Three Months Ended June 30
	Pension												Other Postretirement Benefits					Pension												Other Postretirement Benefits
	2019						2018						Other Postretirement Benefits					2019						2018						Other Postretirement Benefits
	U.S.			Non-U.S.			U.S.			Non-U.S.			2019			2018		US			Non-U.S.			US			Non-U.S.			2019			2018
Service cost	$	1		$	6		$	—		$	3		$	—		$	—	$	—		$	6		$	—		$	2		$	—		$	—
Interest cost	13			7			3			3			3			2		14			5			2			3			4			1
Expected return on plan assets	(17		)	(5		)	(4		)	(5		)	—			—		(17		)	(4		)	(3		)	(5		)	—			—
Net amortization:
Actuarial loss	1			1			1			2			1			1		1			2			1			2			1			3
Prior service cost (credit)	—			—			—			—			(2		)	—		—			—			—			—			(2		)	(1		)
Net pension and postretirement costs (credits)	$	(2	)	$	9		$	—		$	3		$	2		$	3	$	(2	)	$	9		$	—		$	2		$	3		$	3



	Three months ended March 31, 2019
Operating lease cost	$	33
Short-term lease expense	1
Variable lease cost	8
Total lease cost	$	42



Year ending December 31	Operating leases			Finance leases
2019 (excluding the six months ended June 30, 2019)	$	56		$	1
2020	97			1
2021	75			—
2022	53			—
2023	37			—
Thereafter	57			—
Total future undiscounted lease payments	375			2
Less imputed interest	(37		)	—
Total reported lease liability	$	338		$	2


	Restricted Stock				Share-Settled RSUs				PSUs				Restricted Stock				Share-Settled RSUs				PSUs
	Shares		Weighted Avg. Grant Date Fair Value		Units		Weighted Avg. Grant Date Fair Value		Units		Weighted Avg. Grant Date Fair Value		Shares		Weighted Avg. Grant Date Fair Value		Units		Weighted Avg. Grant Date Fair Value		Units		Weighted Avg. Grant Date Fair Value
Nonvested Restricted Shares
Nonvested balance at beginning of period	178,550		$	55.46	440,403		$	47.99	227,049		$	49.18	178,550		$	55.46	440,403		$	47.99	227,049		$	49.18
Granted	34,009		34.66		856,808		34.25		628,990		24.77		34,009		34.66		867,137		34.21		634,511		24.77
Vested	(166,444	)	49.86		(83,109	)	55.00		—		—		(172,050	)	50.12		(88,590	)	54.60		—		—
Forfeited	(1,262	)	61.61		(17,772	)	42.82		(15,065	)	50.75		(3,329	)	62.12		(50,113	)	41.26		(43,527	)	43.61
Nonvested balance at end of period	44,853		$	62.49	1,196,330		$	38.22	840,974		$	34.44	37,180		$	63.30	1,168,837		$	38.04	818,033		$	34.25



	Class A Common Stock				Class B Common Stock
	Six Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019
Shares issued at beginning of period	71,675,379		66,033,509		23,793,669
Issuance (repurchased) pursuant to benefit plans	123,216		(15,906	)	—
Restricted stock forfeited and withheld for taxes	(60,081	)	(7,590	)	—
Stock options exercised	8,438		(6,975	)	—
Shares issued at end of period	71,746,952		66,003,038		23,793,669

Treasury stock	14,592,888		14,592,888		—
Total shares outstanding	57,154,064		51,410,150		23,793,669



	Class A Common Stock				Class B Common Stock
	Three Months March 31				Three Months March 31
	2019		2018		2019
Shares issued at beginning of period	71,675,379		66,033,509		23,793,669
Issuance (repurchased) pursuant to benefit plans	120,622		(15,906	)	—
Restricted stock forfeited and withheld for taxes	(54,293	)	(5,108	)	—
Stock options exercised	8,438		4,779		—
Shares issued at end of period	71,750,146		66,017,274		23,793,669

Treasury stock	14,592,888		14,592,888		—
Total shares outstanding	57,157,258		51,424,386		23,793,669



	Three Months Ended March 31
	2019			2018
Foreign currency translation adjustments and other
Balance at beginning of period	$	(395	)	$	(263	)
Other comprehensive income (loss) before reclassifications adjustments	27			19
Reclassification from other comprehensive income (loss)	—			—
Other comprehensive income (loss)	(368		)	(244		)
Income tax provision (benefit)	2			—
Balance at end of period	$	(366	)	$	(244	)

Pensions and other postretirement benefits
Balance at beginning of period	$	(297	)	$	(275	)
Other comprehensive income (loss) before reclassifications	—			—
Reclassification from other comprehensive income (loss)	1			4
Other comprehensive income (loss)	(296		)	(271		)
Income tax provision (benefit)	—			(1		)
Balance at end of period	$	(296	)	$	(272	)

Cash flow hedge instruments
Balance at beginning of period	$	—		$	—
Other comprehensive income (loss) before reclassifications	4			—
Reclassification from other comprehensive income (loss)	—			—
Other comprehensive income (loss)	4			—
Income tax provision (benefit)	—			—
Balance at end of period	$	4		$	—

Other comprehensive income (loss) attributable to noncontrolling interests	$	6		$	8


	Reportable Segments										Reportable Segments
By Customer Type	Clean Air		Powertrain		Ride Performance		Motorparts		Total		Clean Air		Powertrain		Ride Performance		Motorparts		Total
Three Months Ended March 31, 2019
Three Months Ended June 30, 2019
OE - Substrate	$	706	$	—	$	—	$	—	$	706	$	777	$	—	$	—	$	—	$	777
OE - Value add	1,073		1,175		733		—		2,981		1,050		1,133		709		—		2,892
Aftermarket	—		—		—		797		797		—		—		—		835		835
Total	$	1,779	$	1,175	$	733	$	797	$	4,484	$	1,827	$	1,133	$	709	$	835	$	4,504
Three Months Ended March 31, 2018
Three Months Ended June 30, 2018
OE - Substrate	$	652	$	—	$	—	$	—	$	652	$	621	$	—	$	—	$	—	$	621
OE - Value add	1,104		—		513		—		1,617		1,073		—		506		—		1,579
Aftermarket	—		—		—		312		312		—		—		—		333		333
Total	$	1,756	$	—	$	513	$	312	$	2,581	$	1,694	$	—	$	506	$	333	$	2,533



	Reportable Segments
By Geography	Clean Air		Powertrain		Ride Performance		Motorparts		Total
Three Months Ended March 31, 2019
North America	$	793	$	405	$	232	$	507	$	1,937
Europe, Middle East and Africa	641		575		378		237		1,831
Rest of world	345		195		123		53		716
Total	$	1,779	$	1,175	$	733	$	797	$	4,484
Three Months Ended March 31, 2018
North America	$	768	$	—	$	180	$	188	$	1,136
Europe, Middle East and Africa	657		—		225		108		990
Rest of world	331		—		108		16		455
Total	$	1,756	$	—	$	513	$	312	$	2,581



	Three Months Ended June 30, 2019
	Net Sales		Purchases		Royalty and Other Income
Icahn Automotive Group LLC	$	47	$	—	$	1
PSC Metals, Inc.	$	—	$	—	$	—
Anqing TP Goetze Piston Ring Company Limited	$	—	$	15	$	1
Anqing TP Powder Metallurgy Company Limited	$	1	$	2	$	—
Dongsuh Federal-Mogul Industrial Co., Ltd.	$	2	$	5	$	—
Federal-Mogul Powertrain Otomotiv A.S.	$	15	$	49	$	1
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti.	$	—	$	2	$	—
Federal-Mogul Izmit Piston ve Pim Uretim Tesisleri A.S.	$	1	$	4	$	—
Federal-Mogul TP Liners, Inc.	$	4	$	—	$	1
Frenos Hidraulicos Auto	$	1	$	—	$	—
Montagewerk Abgastechnik Emden GmbH	$	—	$	—	$	—


•	an increase in engineering, research and development of $91 million primarily due to the Acquisitions;



						2019 vs. 2018
	Three Months Ended March 31					Increase / (Decrease)
	2019			2018		$ Change			% Change ⁽¹⁾
	(millions, except percent, share, and per share amounts)
Revenues
Net sales and operating revenues	$	4,484		$	2,581	$	1,903		74	%
Costs and expenses
Cost of sales	3,864			2,193		1,671			76	%
Selling, general, and administrative	316			151		165			109	%
Depreciation and amortization	169			60		109			182	%
Engineering, research, and development	92			40		52			130	%
Restructuring charges and asset impairments	24			12		12			100	%
Goodwill impairment charge	60			—		60			n/m
	4,525			2,456		2,069			84	%
Other expense (income)
Non-service pension and other postretirement benefit costs (credits)	2			3		(1		)	(33	)%
Equity in (earnings) losses of nonconsolidated affiliates, net of tax	(16		)	—		(16		)	n/m
Other expense (income), net	(3		)	—		(3		)	n/m
	(17		)	3		(20		)	n/m
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	(24		)	122		(146		)	(120	)%
Interest expense	81			23		58			252	%
Earnings (loss) before income taxes and noncontrolling interests	(105		)	99		(204		)	(206	)%
Income tax expense (benefit)	—			25		(25		)	(100	)%
Net income (loss)	(105		)	74		(179		)	(242	)%
Less: Net income (loss) attributable to noncontrolling interests	12			14		(2		)	(14	)%
Net income (loss) attributable to Tenneco Inc.	$	(117	)	$	60	$	(177	)	(295	)%
Earnings (loss) per share
Basic earnings (loss) per share:
Earnings (loss) per share	$	(1.44	)	$	1.17	$	(2.61	)
Weighted average shares outstanding	80,874,637			51,211,643		29,662,994
Diluted earnings (loss) per share:
Earnings (loss) per share	$	(1.44	)	$	1.17	$	(2.61	)
Weighted average shares outstanding	80,874,637			51,501,643		29,372,994


Three-months ended March 31, 2018	$	2,581
Three-months ended June 30, 2018				$	2,533
Acquisitions	1,935			1,881
Drivers in the change of organic revenues:
Volume and mix	89			162
Currency exchange rates	(127		)	(74		)
Others	6			2
Three-months ended March 31, 2019	$	4,484
Three-months ended June 30, 2019				$	4,504


	Segment Revenue																								Segment Revenue
	New Tenneco									DRiV															New Tenneco									DRiV
	Clean Air					Powertrain				Ride Performance					Motorparts					Total Revenues					Clean Air					Powertrain				Ride Performance					Motorparts					Total Revenues
Three months ended March 31,	2019			2018		2019		2018		2019			2018		2019			2018		2019			2018
Three months ended June 30,																									2019			2018		2019		2018		2019			2018		2019			2018		2019			2018
Revenues	$	1,779		$	1,756	$	1,175	$	—	$	733		$	513	$	797		$	312	$	4,484		$	2,581	$	1,827		$	1,694	$	1,133	$	—	$	709		$	506	$	835		$	333	$	4,504		$	2,533
																									—
Value-add revenues	1,073			1,104		1,175		—		733			513		797			312		$	3,778		$	1,929	1,050			1,073		1,133		—		709			506		835			333		3,727			1,912
Currency effect on value-add revenue	(51		)	—		—		—		(31		)	—		(18		)	—		(100		)	—		(31		)	—		—		—		(20		)	—		(8		)	—		(59		)	—
Value-add revenue excluding currency	$	1,124		$	1,104	$	1,175	$	—	$	764		$	513	$	815		$	312	$	3,878		$	1,929	$	1,081		$	1,073	$	1,133	$	—	$	729		$	506	$	843		$	333	$	3,786		$	1,912

Substrate sales	$	706		$	652															$	706		$	652	$	777		$	621	$	—	$	—	$	—		$	—	$	—		$	—	$	777		$	621
Effect of Acquisitions						$	1,175			$	244				$	516				$	1,935				$	—		$	—	$	1,133	$	—	$	221		$	—	$	527		$	—	$	1,881		$	—


										Three Months Ended June 30,						Six Months Ended June 30,						Three Months			Six Months
	Three Months Ended March 31,									2019			2018			2019			2018			2019 vs 2018			2019 vs 2018
	2019			2018			2019 vs 2018			(Millions)
EBITDA including noncontrolling interests by Segments:
Clean Air	$	131		$	157		$	(26	)	$	152		$	142		$	283		$	299		$	10		$	(16	)
Powertrain	113			—			113			100			—			213			—			100			213
Ride Performance	(45		)	24			(69		)	26			20			(19		)	44			6			(63		)
Motorparts	45			45			—			110			55			155			100			55			55
Corporate	(99		)	(44		)	(55		)	(78		)	(46		)	(177		)	(90		)	(32		)	(87		)
Total EBITDA including noncontrolling interests ⁽¹⁾	$	145		$	182		$	(37	)
Total EBITDA including noncontrolling interests										$	310		$	171		$	455		$	353		$	139		$	102