UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-Q

(Mark One)



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

For the Quarterly Period Ended June 30, ~~2019~~2020



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

Commission file number 1-12387

TENNECO INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

500 North Field Drive, Lake Forest, Illinois

(Address of principal executive offices)

76-0515284

(I.R.S. Employer

Identification No.)

60045

(Zip Code)

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

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



Title of each class	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
Preferred Stock Purchase Rights		New York Stock Exchange

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

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 ☑ 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,”~~filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



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

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 ☑

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: ~~57,126,858~~60,953,834 shares outstanding as of August ~~2, 2019.~~4, 2020. The number of shares of Class B Non-Voting Common Stock, par value $0.01 per share: ~~23,793,669~~20,308,454 shares outstanding as of August ~~2, 2019.~~4, 2020.

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	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5945
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7870
Item 4.	Controls and Procedures	7971

Part II — Other Information
Item 1.	Legal Proceedings	8072
Item 1A.	Risk Factors	8072
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8174
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Mine Safety Disclosures	*
Item 5.	Other Information	*
Item 6.	Exhibits	8275



*	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 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;~~conditions, including the effects of the COVID-19 pandemic;

disasters, local and global public health emergencies or other catastrophic events, such as fires, earthquakes and flooding, pandemics or epidemics (including the COVID-19 pandemic), where we or other customers do business 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;

our ability (or inability) to successfully execute cost reduction, performance improvement and other plans, including our plans to respond to the COVID-19 pandemic and our previously announced accelerated performance improvement plan ("Accelerate"), and to realize the anticipated benefits from these plans;

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 and our financial flexibility to respond to the COVID-19 pandemic;

our ability to maintain compliance with the agreements governing our indebtedness and otherwise have sufficient liquidity through the COVID-19 pandemic;

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

our working capital requirements;

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 for our original equipment ("OE") products or aftermarket products, 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~~ arrangements;

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

~~changes in consumer demand for our original equipment products or aftermarket products, or~~ changes in automotive and commercial vehicle ~~manufacturers’~~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~~OE manufacturer 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 ~~customers~~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);

~~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~~impact of improvements in automotive parts on aftermarket demand for some of our products;

~~industrywide~~industry-wide 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;~~technology and the availability and effectiveness of legal protection for our innovations and brands;

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~~impact 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 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, ~~or indefinite-lived~~and other intangible assets or ~~our~~the inability to fully realize our deferred tax assets;

the negative ~~effect~~impact 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~~impact of any such cost increases through materials substitutions, cost reduction initiatives, customer recovery, and other methods;

changes by the Financial Accounting Standards Board ("FASB") or the Securities and Exchange Commission ("SEC") of ~~authoritative~~ generally accepted accounting principles or ~~policies;~~other authoritative guidance;

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

any changes by the International Organization for Standardization ~~(ISO)~~("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~~impact 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~~impact 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~~this report includes forward-looking statements regarding the ~~acquisition~~Company's ongoing review of ~~Federal-Mogul LLC ("Federal-Mogul")~~strategic alternatives and the ~~planned~~potential separation of ~~our company~~the Company into a powertrain technology company and an aftermarket and ride performance ~~company~~company. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements ~~including:~~include (in addition to the risks set forth above):

the ability to identify and consummate strategic alternatives that yield additional value for shareholders;

the timing, benefits, and outcome of the Company's strategic review process;

the structure, terms, and specific risk and uncertainties associated with any potential strategic alternative;

potential disruptions in our business and stock price as a result of our exploration, review, and pursuit of any strategic alternatives;

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

the ~~separation);~~ability to retain and hire key personnel and maintain relationships with customers, suppliers or other business partners;

the potential diversion of management's attention resulting from a separation;

the risk the combined company and each separate company following ~~the~~a separation will underperform relative to our expectations;

the ongoing transaction costs and risk we may incur greater costs following a separation of the business;

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

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

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

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

the risk ~~the~~a 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.~~

matters.

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~~2019 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 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 June 30,					Six Months Ended June 30,					Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018		2019			2018		2020			2019			2020			2019
Revenues
Net sales and operating revenues	$	4,504		$	2,533	$	8,988		$	5,114	$	2,637		$	4,504		$	6,473		$	8,988

Costs and expenses
Cost of sales	3,793			2,134		7,657			4,327
Cost of sales (exclusive of depreciation and amortization)											2,498			3,801			5,837			7,671
Selling, general, and administrative	288			154		604			305		195			292			444			610
Depreciation and amortization	169			60		338			120		159			169			330			338
Engineering, research, and development	78			39		170			79		55			78			132			170
Restructuring charges and asset impairments	61			29		85			41
Goodwill impairment charge	—			—		60			—
Restructuring charges, net and asset impairments											121			49			605			65
Goodwill and intangible impairment charges											—			—			383			60
	4,389			2,416		8,914			4,872		3,028			4,389			7,731			8,914
Other expense (income)
Non-service pension and other postretirement benefit costs (credits)	4			3		6			6
Equity in (earnings) losses of nonconsolidated affiliates, net of tax	(17		)	—		(33		)	—
Other expense (income), net	(13		)	3		(16		)	3
Other income (expense)
Non-service pension and other postretirement benefit (costs) credits											1			(4		)	2			(6		)
Equity in earnings (losses) of nonconsolidated affiliates, net of tax											4			17			17			33
Other income (expense), net											11			13			19			16
	(26		)	6		(43		)	9		16			26			38			43
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	141			111		117			233		(375		)	141			(1,220		)	117
Interest expense	82			22		163			45		(66		)	(82		)	(141		)	(163		)
Earnings (loss) before income taxes and noncontrolling interests	59			89		(46		)	188		(441		)	59			(1,361		)	(46		)
Income tax expense (benefit)	14			26		14			51
Income tax (expense) benefit											101			(14		)	195			(14		)
Net income (loss)	45			63		(60		)	137		(340		)	45			(1,166		)	(60		)
Less: Net income (loss) attributable to noncontrolling interests	19			16		31			30		10			19			23			31
Net income (loss) attributable to Tenneco Inc.	$	26		$	47	$	(91	)	$	107	$	(350	)	$	26		$	(1,189	)	$	(91	)
Earnings (loss) per share
Basic earnings (loss) per share:
Earnings (loss) per share	$	0.32		$	0.92	$	(1.13	)	$	2.08	$	(4.30	)	$	0.32		$	(14.64	)	$	(1.13	)
Weighted average shares outstanding	80,920,825			51,258,668		80,897,731			51,232,639		81,350,773			80,920,825			81,259,667			80,897,731
Diluted earnings (loss) per share:
Earnings (loss) per share	$	0.32		$	0.92	$	(1.13	)	$	2.07	$	(4.30	)	$	0.32		$	(14.64	)	$	(1.13	)
Weighted average shares outstanding	80,920,825			51,607,224		80,897,731			51,546,015		81,350,773			80,920,825			81,259,667			80,897,731

See accompanying notes to the condensed consolidated financial statements.

TENNECO INC.

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

(in millions)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Net income (loss)	$	45		$	63		$	(60	)	$	137		$	(340	)	$	45		$	(1,166	)	$	(60	)
Other comprehensive income (loss) — net of tax
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	(18		)	(99		)	17			(72		)	42			(18		)	(177		)	17
Cash flow hedges	(3		)	—			1			—			4			(3		)	2			1
Defined benefit plans	(2		)	4			(1		)	7			(5		)	(2		)	(1		)	(1		)
	(23		)	(95		)	17			(65		)	41			(23		)	(176		)	17
Comprehensive income (loss)	22			(32		)	(43		)	72			(299		)	22			(1,342		)	(43		)
Less: Comprehensive income (loss) attributable to noncontrolling interests	18			9			36			31			17			18			10			36
Comprehensive income (loss) attributable to common shareholders	$	4		$	(41	)	$	(79	)	$	41		$	(316	)	$	4		$	(1,352	)	$	(79	)

See accompanying notes to the condensed consolidated financial statements.

TENNECO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in millions, except shares)


	June 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	384		$	697		$	1,362		$	564
Restricted cash	6			5			9			2
Receivables:
Customer notes and accounts, net	2,754			2,487			2,100			2,438
Other	93			85			85			100
Inventories	2,207			2,245			1,656			1,999
Prepayments and other current assets	550			590			632			632
Total current assets	5,994			6,109			5,844			5,735
Property, plant and equipment, net	3,569			3,501
Property, plant, and equipment, net							2,939			3,627
Long-term receivables, net	10			10			10			10
Goodwill	799			869			505			775
Intangibles, net	1,649			1,519			1,239			1,422
Investments in nonconsolidated affiliates	531			544			513			518
Deferred income taxes	480			467			818			607
Other assets	560			213			527			532
Total assets	$	13,592		$	13,232		$	12,395		$	13,226
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt, including current maturities of long-term debt	$	170		$	153		$	222		$	185
Accounts payable	2,725			2,759			1,992			2,647
Accrued compensation and employee benefits	391			343			331			325
Accrued income taxes	—			64			48			72
Accrued expenses and other current liabilities	1,024			1,001			1,043			1,070
Total current liabilities	4,310			4,320			3,636			4,299
Long-term debt	5,508			5,340			6,629			5,371
Deferred income taxes	110			88			88			106
Pension and postretirement benefits	1,129			1,167			1,112			1,145
Deferred credits and other liabilities	546			263			502			490
Commitments and contingencies (Note 13)
Total liabilities	11,603			11,178			11,967			11,411
Redeemable noncontrolling interests	145			138			79			196
Tenneco Inc. shareholders’ equity:
Preferred stock — $0.01 par value; none issued	—			—			—			—
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	—			—
Class A voting stock — $0.01 par value; shares issued: June 30, 2020 — 75,546,691 and December 31, 2019 — 71,727,061							1			1
Class B non-voting convertible stock — $0.01 par value; shares issued: June 30, 2020 — 20,308,454 and December 31, 2019 — 23,793,669							—			—
Additional paid-in capital	4,371			4,360			4,433			4,432
Accumulated other comprehensive loss	(680		)	(692		)	(874		)	(711		)
Accumulated deficit	(1,124		)	(1,013		)	(2,556		)	(1,367		)
	2,568			2,656			1,004			2,355
Shares held as treasury stock — at cost: June 30, 2019 and December 31, 2018 — 14,592,888 shares	(930		)	(930		)
Shares held as treasury stock — at cost: June 30, 2020 and December 31, 2019 — 14,592,888							(930		)	(930		)
Total Tenneco Inc. shareholders’ equity	1,638			1,726			74			1,425
Noncontrolling interests	206			190			275			194
Total equity	1,844			1,916			349			1,619
Total liabilities, redeemable noncontrolling interests and equity	$	13,592		$	13,232		$	12,395		$	13,226

See accompanying notes to the condensed consolidated financial statements.

TENNECO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in millions)


	Six Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2020			2019
Operating Activities
Net income (loss)	$	(60	)	$	137		$	(1,166	)	$	(60	)
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
Goodwill impairment charge	60			—
Adjustments to reconcile net income (loss) to cash (used) provided by operating activities:
Goodwill and intangible impairment charges							383			60
Depreciation and amortization	338			120			330			338
Deferred income taxes	(14		)	(9		)	(242		)	(14		)
Stock-based compensation	13			7			9			13
Restructuring charges and asset impairments, net of cash paid	14			10			540			14
Change in pension and other postretirement benefit plans	(32		)	2			(26		)	(32		)
Equity in earnings of nonconsolidated affiliates	(33		)	—			(17		)	(33		)
Cash dividends received from nonconsolidated affiliates	27			—			18			27
Loss (gain) on sale of assets	(1		)	—			(1		)	(1		)
Changes in operating assets and liabilities:
Receivables	(401		)	(233		)	174			(401		)
Inventories	101			(51		)	292			101
Payables and accrued expenses	48			206			(540		)	48
Accrued interest and accrued income taxes	(66		)	(2		)	(17		)	(66		)
Other assets and liabilities	(94		)	(109		)	(68		)	(94		)
Net cash provided (used) by operating activities	(100		)	78
Net cash (used) provided by operating activities							(331		)	(100		)
Investing Activities
Acquisitions, net of cash acquired							—			(158		)
Proceeds from sale of assets	5			5			5			5
Net proceeds from sale of business	22			—			—			22
Cash payments for property, plant, and equipment	(379		)	(174		)	(212		)	(379		)
Acquisition of business, net of cash acquired	(158		)	—
Proceeds from deferred purchase price of factored receivables	147			66			91			147
Other	(1		)	2			1			(1		)
Net cash used by investing activities	(364		)	(101		)
Net cash (used) provided by investing activities							(115		)	(364		)
Financing Activities
Proceeds from term loans and notes	111			9			96			111
Repayments of term loans and notes	(190		)	(28		)	(133		)	(190		)
Debt issuance costs of long-term debt							(16		)	—
Borrowings on revolving lines of credit	4,525			2,669			4,821			4,525
Payments on revolving lines of credit	(4,254		)	(2,614		)	(3,536		)	(4,254		)
Issuance (repurchase) of common shares	(2		)	(1		)	(1		)	(2		)
Cash dividends	(20		)	(25		)	—			(20		)
Net increase (decrease) in bank overdrafts	(8		)	(7		)	59			(8		)
Other	(1		)	(22		)	(1		)	(1		)
Distributions to noncontrolling interest partners	(20		)	(28		)	(2		)	(20		)
Net cash provided (used) by financing activities	141			(47		)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	11			(11		)
Decrease in cash, cash equivalents and restricted cash	(312		)	(81		)
Cash, cash equivalents and restricted cash, beginning of period	702			318
Cash, cash equivalents and restricted cash, end of period	$	390		$	237
Net cash (used) provided by financing activities							1,287			141
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash							(36		)	11
Increase (decrease) in cash, cash equivalents, and restricted cash							805			(312		)
Cash, cash equivalents, and restricted cash, beginning of period							566			702
Cash, cash equivalents, and restricted cash, end of period							$	1,371		$	390
Supplemental Cash Flow Information
Cash paid during the period for interest	$	145		$	40		$	123		$	145
Cash paid during the period for income taxes, net of refunds	$	100		$	56		$	75		$	100
Lease assets obtained in exchange for new operating lease liabilities							$	54		$	33
Non-cash inventory charge due to aftermarket product line exit							$	82		$	—
Non-cash Investing Activities
Period end balance of accounts payable for property, plant, and equipment	$	116		$	54		$	86		$	116
Deferred purchase price of receivables factored in the period	$	52		$	71		$	95		$	52
Reduction in assets from redeemable noncontrolling interest transaction with owner							$	53		$	—

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
Balance at December 31, 2019																								$	1	$	(930	)	$	4,432		$	(1,367	)	$	(711	)	$	1,425		$	194		$	1,619
Net income (loss)	—		—			—		(117		)		—			(117		)	7			(110		)									(839		)				(839		)	2			(837		)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments												29			29			4			33														(199		)	(199		)	(13		)	(212		)
Derivatives												4			4			—			4														(2		)	(2		)	—			(2		)
Defined benefit plans												1			1			—			1														4			4			—			4
Comprehensive income (loss)															(83		)	11			(72		)															(1,036		)	(11		)	(1,047		)
Stock-based compensation, net	—		—			5		—			—	—			5			—			5			—		—			2			—			—			2			—			2
Cash dividends ($0.25 per share)	—		—			—		(20		)		—			(20		)	—			(20		)
Purchase accounting measurement period adjustment	—		—			—		—				—			—			(1		)	(1		)
Distributions declared to noncontrolling interests	—		—			—		—				—			—			(1		)	(1		)
Balance as of March 31, 2019	1		(930		)	4,365		(1,150		)		(658		)	1,628			199			1,827
Reclassification of redeemable noncontrolling interest to permanent equity																								—		—			—			—			—			—			82			82
Redeemable noncontrolling interest transaction with owner																								—		—			(7		)	—			—			(7		)	—			(7		)
Balance at March 31, 2020																								1		(930		)	4,427			(2,206		)	(908		)	384			265			649
Net income (loss)	—		—			—		26				—			26			9			35											(350		)				(350		)	6			(344		)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments												(17		)	(17		)	—			(17		)												35			35			4			39
Derivatives												(3		)	(3		)	—			(3		)												4			4			—			4
Defined benefit plans												(2		)	(2		)	—			(2		)												(5		)	(5		)	—			(5		)
Comprehensive income (loss)															4			9			13																	(316		)	10			(306		)
Stock-based compensation, net	—		—			6		—				—			6			—			6			—		—			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
Balance as of June 30, 2020																								$	1	$	(930	)	$	4,433		$	(2,556	)	$	(874	)	$	74		$	275		$	349

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, 2017	$	1	$	(930	)	$	3,112	$	(1,009	)	$	(538	)	$	636		$	46		$	682
Net Income (loss)	—		—			—		60			—			60			7			67
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments											19			19			7			26
Defined benefit plans											3			3			—			3
Comprehensive income (loss)														82			14			96
Adjustments to adopt new accounting standards	—		—			—		(1		)	—			(1		)	—			(1		)
Stock-based compensation, net	—		—			3		—			—			3			—			3
Cash dividends ($0.25 per share)	—		—			—		(13		)	—			(13		)	—			(13		)
Balance as of March 31, 2018	1		(930		)	3,115		(963		)	(516		)	707			60			767
Net Income (loss)	—		—			—		47			—			47			7			54
Balance at December 31, 2018																							$	1	$	(930	)	$	4,360	$	(1,013	)	$	(692	)	$	1,726		$	190		$	1,916
Net income (loss)																														(117		)				(117		)	7			(110		)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments											(92		)	(92		)	(5		)	(97		)											29			29			4			33
Derivatives											—			—			—			—													4			4			—			4
Defined benefit plans											4			4			—			4													1			1			—			1
Comprehensive income (loss)														(41		)	2			(39		)														(83		)	11			(72		)
Stock-based compensation, net	—		—			3		—			—			3			—			3			—		—			5		—			—			5			—			5
Cash dividends ($0.25 per share)	—		—			—		(12		)	—			(12		)				(12		)	—		—			—		(20		)	—			(20		)	—			(20		)
Purchase accounting measurement period adjustment																							—		—			—		—			—			—			(1		)	(1		)
Distributions declared to noncontrolling interests	—		—			—		—			—			—			(18		)	(18		)	—		—			—		—			—			—			(1		)	(1		)
Balance as of June 30, 2018	$	1	$	(930	)	$	3,118	$	(928	)	$	(604	)	$	657		$	44		$	701
Balance at March 31, 2019																							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 at June 30, 2019																							$	1	$	(930	)	$	4,371	$	(1,124	)	$	(680	)	$	1,638		$	206		$	1,844

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)~~(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"~~(“Federal-Mogul”) (the “Federal-Mogul Acquisition”), a global supplier of technology and innovation in vehicle and industrial products for fuel economy, emissions reductions, and safety systems. Federal-Mogul serves the world’s foremost OEM and servicers (“OES”, and together with OEM, “OE”) of automotive, light, medium and heavy-duty commercial vehicles, off road, agricultural, marine, rail, aerospace, and power generation and industrial equipment, as well as the worldwide aftermarket.

The Company has previously announced its review of a full range of strategic options to enhance shareholder value creation, including a potential separation of the Company into an Aftermarket and Ride Performance company and a new Powertrain Technology company. Current end-market conditions and the effects of the ongoing COVID-19 pandemic are affecting the Company's ability to complete a separation. In light of these ongoing conditions, the Company is pursuing additional options to optimize shareholder value creation, including a focus on operational improvements, reducing structural costs, lowering capital intensity, and reducing debt.

Beginning in the third quarter of 2020, the Motorparts segment will initiate a rationalization of its supply chain and distribution network to achieve supply chain efficiencies and improve throughput to its customers. As a result, certain assets including inventory, real estate, and personal property will no longer be utilized. As such, during the three and six months ended June 30, 2020, the Motorparts segment recognized an $82 million non-cash charge to write-down inventory to its net realizable value, a $16 million impairment charge to write-down property, plant, and equipment to its fair value, and a $9 million impairment charge to its operating lease right-of-use assets. Additionally, the Motorparts segment recognized $4 million in restructuring charges related to cash severance expected to be paid. Refer to Note 4, Restructuring Charges, Net and Asset Impairments for additional information.

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,~~2019, which was filed with the Securities and Exchange Commission on March ~~18, 2019.~~2, 2020. Operating results for the three and six months ended June 30, ~~2019~~2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~2020. There are many uncertainties related to the COVID-19 global pandemic that could negatively affect the Company's results of operations, financial position, and cash flows. In response to the expected economic effects of COVID-19, the Company implemented and plans to continue various cost reduction initiatives, including, but not limited to reductions to salary costs and unpaid furloughs; the restructuring actions as discussed in Note 4, Restructuring Charges, Net and Asset Impairments; and the deferral of the Company’s portion of its 2020 employer paid payroll taxes and its U.S. qualified pension plan contributions under the Coronavirus Aid, Relief, and Economic Security Act.

At June 30, 2020, the Company was in compliance with all financial covenants under its credit agreement. On May 5, 2020, the Company entered into a third amendment to its credit agreement to increase the maximum leverage ratio and decrease the minimum interest coverage ratio. The amendment is discussed in more detail in Note 10, Debt and Other Financing Arrangements.

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 currently expects the separation of the businesses to occur through a spinoff transaction of DRiV in mid-2020. In preparation for the spinoff, the Company began to manage and report its DRiV businesses through two new operating segments,

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Reclassifications: Certain amounts in the ~~first quarter~~prior period have been aggregated or disaggregated to conform to current year presentation. These reclassifications included reclassifying amounts from restructuring charges, net and asset impairments to cost of ~~2019, as compared to~~sales (exclusive of depreciation and amortization), and selling, general, and administrative expenses. These reclassifications affected 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~~six months ended June 30, 2019 and have no effect on previously reported ~~Aftermarket~~net income within the condensed consolidated statements of income (loss), other comprehensive income (loss) within the condensed consolidated statements of comprehensive income (loss), and the cash (used) provided by operating, ~~segment as well as~~investing or financing activities within the ~~aftermarket portion~~condensed consolidated statements 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.cash flows.

Redeemable ~~Noncontrolling Interests —~~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.~~subsidiaries or the passage of time.

At June 30, 2020 and December 31, 2019, the Company held redeemable noncontrolling interests of $50 million and $44 million which were not currently redeemable or probable of becoming redeemable. The redemption of these redeemable noncontrolling interests is not solely within the Company's ~~control. Accordingly, these noncontrolling interests~~control, therefore, they 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~~occurs. As such, these noncontrolling interests have not been remeasured to redemption value.

In addition, at June 30, 2020 and December 31, 2019, the Company held redeemable noncontrolling interests of $29 million and $152 million which were currently redeemable or probable of becoming redeemable. These noncontrolling interests are also presented in the temporary equity section of the Company's condensed consolidated balance sheets and have been remeasured to redemption value. The Company immediately recognizes changes to redemption value as ~~discussed~~a component of net income (loss) attributable to noncontrolling interests in the condensed consolidated statements of income (loss). These redeemable noncontrolling interests include the following:

During the first quarter of 2020, the Company completed the process to make a tender offer of the shares it did not own for a subsidiary in India acquired by the Company as part of the Federal-Mogul Acquisition on October 1, 2018, in accordance with local regulations. As a result of completing the tender offer, the redeemable noncontrolling interest was no longer redeemable or probable of becoming redeemable and the amount of $82 million was reclassified to permanent equity during the six months ended June 30, 2020. Refer to Note ~~3, Acquisitions~~17, Related Party Transactions, for additional information related to the tender offer of this noncontrolling interest; and ~~Divestitures, for~~

A 9.5% ownership interest in Öhlins Intressenter AB (the “KÖ Interest”) was retained by K Öhlin Holding AB (“Köhlin”), as a result of the Öhlins acquisition on January 10, 2019. Köhlin has an irrevocable right at any time after the third anniversary of the Öhlins acquisition to sell the KÖ Interest to the Company. Since it is probable the KÖ Interest will become redeemable, the Company recognized the change in carrying value and recorded an adjustment of $10 million during the six months ended June 30, 2020 to reflect its redemption value of $29 million at June 30, 2020.

For the six months ended June 30, 2019, the Company recorded a decrease to the redeemable noncontrolling interests of $8 million, as a result of adjustments made in the measurement period to the preliminary purchase price allocation from the ~~Acquisitions.~~Federal-Mogul Acquisition.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

The following is a rollforward of activities in the Company's redeemable noncontrolling interests:


	Six Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2020			2019
Balance at beginning of period	$	138		$	42		$	196		$	138
Net income (loss) attributable to redeemable noncontrolling interests	15			16			5			15
Other comprehensive income (loss)	1			(1		)	(4		)	1
Acquisition and other	16			—			—			16
Noncontrolling interest tender offer redemption							(46		)	—
Redemption value measurement adjustment							10			—
Purchase accounting measurement period adjustment	(8		)	—			—			(8		)
Reclassification of noncontrolling interest to permanent equity							(82		)	—
Dividends declared	(17		)	(19		)	—			(17		)
Balance at end of period	$	145		$	38		$	79		$	145

Income taxes: On December 22, 2017, the Tax Cuts and Jobs Act ("TCJA") was enacted into U.S. law, which, among other provisions, included an anti-deferral provision (the Global Intangible Low-Taxed Income tax or "GILTI") effective from 2018 wherein taxes on foreign income are imposed in excess of a deemed return on tangible assets of non-U.S. corporations. The Company ~~recorded a decrease~~has elected the “tax law ordering approach” in that the Company will look to tax law ordering to determine whether its net operating loss ("NOL") carryforward deferred tax asset is expected to be realized. Based on the ~~redeemable noncontrolling interests of $8 million from~~tax law ordering approach, NOL carryforwards are realizable if they will reduce the ~~Federal-Mogul Acquisition, as a result of adjustments made in~~expected tax liability when utilized, regardless if 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 assumptions50% GILTI deduction or related foreign tax credits may ~~change as a result. See Note 3, Acquisitions and Divestitures for additional information.~~have been available.

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 June 30,		Six months ended June 30,		Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018	2020	2019	2020	2019
Weighted average shares of common stock outstanding	80,920,825	51,258,668	80,897,731	51,232,639	81,350,773	80,920,825	81,259,667	80,897,731
Effect of dilutive securities:
Restricted stock, PSUs and RSUs	—	298,826	—	251,971
Restricted stock, PSUs, and RSUs					—	—	—	—
Stock options	—	49,730	—	61,405	—	—	—	—
Dilutive shares outstanding	80,920,825	51,607,224	80,897,731	51,546,015	81,350,773	80,920,825	81,259,667	80,897,731

For the three and six months ended June 30, 2020, the calculation of diluted earnings (loss) per share excluded 3,133,035 and 2,508,565 of share-based awards, as the effect on the calculation would have been anti-dilutive. For the three and six months ended 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~~

New Accounting Pronouncements

Adoption of New Accounting Standards

Income Taxes— In December 2019, the ~~three~~Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2019-12: Simplifying the Accounting for Income Taxes (Topic 740), which removes certain exceptions to the general principles in Topic 740 and ~~six months ended June 30, 2018,~~improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The ASU allows certain simplifications in the ~~calculation of diluted earnings (loss) per share excluded 123,773 and 123,947 of share-based awards, as the~~annual effective tax rate computations, which did not have a material effect on the ~~calculation 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~~early adopted this ASU on a result, certain amounts in the condensed consolidated financial statements have been revised for the three and six month periods ended 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.prospective basis beginning January 1, 2020.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

The following tables present the 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 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 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)~~

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 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 its previous conclusions related to contracts that contain leases, existing lease classification, and initial direct 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 effort, the Company reviewed its internal control structure and modified and augmented existing controls, as necessary.

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,~~On January 1, 2020, the ~~FASB issued~~Company adopted ASU 2018-15, ~~Intangibles-Goodwill~~Intangibles – Goodwill and ~~Other-Internal-Use~~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~~Contract, which includes amendments ~~in this update~~to align the ~~requirements~~accounting for ~~capitalizing implementation~~ costs incurred into implement a ~~hosting~~cloud computing arrangement that is a service contract with the ~~requirements for~~guidance on capitalizing ~~implementation~~ costs ~~incurred to develop~~associated with developing or ~~obtain~~obtaining internal-use ~~software (and hosting arrangements that include an internal-use software license).~~software. The ~~accounting for the service element of~~Company adopted this guidance on 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~~prospective basis beginning on January 1, 2020 ~~with early~~and the effects of the adoption ~~permitted. The amendments in this update should be applied either retrospectively or prospectively to all implementation costs incurred after~~were not material on the ~~date of adoption. The Company is currently evaluating the potential effect of this new guidance on its~~consolidated 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~~new standard (i) requires the removal of disclosures that are no longer ~~are~~ considered cost ~~beneficial, clarify the~~beneficial; (ii) clarifies specific requirements of ~~disclosures,~~certain disclosures; and ~~add~~(iii) adds new disclosure requirements, ~~identified as relevant.~~including reasons for significant gains and losses related to changes in the benefit obligation. The amendments in this update are effective for fiscal years ending after December 15, ~~2020 with early adoption permitted.~~2020. The Company ~~is currently evaluating~~will adopt the ~~potential effect of this new guidance on its~~enhanced disclosures in the consolidated financial ~~statements.~~

~~Fair value measurements~~ — ~~In August 2018,~~statements for 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 afteryear ending 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.31, 2020.

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~~On January 10, 2019, the Company completed the acquisition of a 90.5% ownership interest in Öhlins ~~was~~Intressenter AB (“Öhlins”, the “Öhlins Acquisition”), a Swedish technology company that develops premium suspension systems and components for the automotive and motorsport industries for a purchase price of $162 ~~million.~~million (including $4 million of cash acquired). The remaining 9.5% ownership interest in Öhlins ~~(the “KÖ Interest”)~~ was retained by ~~K Öhlin Holding AB (“~~Kö~~hlin”).~~hlin. 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~~Refer to Note 2, Summary 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 ofSignificant Accounting Policies, for further information on the KÖ ~~Interest was $17 million and represents its current redemption value at June 30, 2019.~~Interest.

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 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

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 $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

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 $3 million and $5 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.

~~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

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 $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.

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 June 30, 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~~Pro forma ~~basis, the combined~~ results of operations have not been presented because the effects of the ~~Company and~~Öhlins Acquisition were not material to 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~~Company’s condensed consolidated results ~~had~~of operations.

Assets Held for Sale

As the ~~Federal-Mogul Acquisition occurred~~Company continues to rationalize its product portfolio and focus on ~~January 1, 2017 or~~core production lines, the Company has classified a non-core business in the Motorparts segment as held for sale. At June 30, 2020, expected proceeds from a sale would be approximately $16 million, which is representative of ~~future consolidated operating results.~~its fair value. The related assets and liabilities were classified as held for sale at June 30, 2020 and December 31, 2019. The sale is expected to occur within the next twelve months.

The related assets and liabilities for this non-core business are classified as held for sale at June 30, 2020 and December 31, 2019:

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



	June 30, 2020			December 31, 2019
Assets
Receivables	$	3		$	5
Inventories	7			8
Other current assets	2			1
Long-lived assets	16			18
Goodwill	3			4
Impairment on carrying value	(7		)	(8		)
Total assets held for sale	$	24		$	28
Liabilities
Accounts payable	$	2		$	4
Accrued liabilities	2			2
Total liabilities held for sale	$	4		$	6

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~~Additionally, during the three months ended June 30, 2020, the Company identified approximately $16 million of property, plant, and equipment, primarily land and buildings and non-core machinery and equipment, and $2 million of related liabilities across multiple segments that are expected be sold in the next twelve months. The related assets and liabilities have been ~~tax affected using~~classified as held for sale at June 30, 2020 and are not included in the ~~Company's effective rate~~table above. The Company recognized a non-cash impairment charge of $1 million during the ~~respective periods.~~three and six months ended June 30, 2020 related to these assets held for sale.

~~Assets Held~~The assets and liabilities held for ~~Sale~~sale are recorded in prepayments and other current assets and accrued expenses and other current liabilities in the condensed consolidated balance sheets at June 30, 2020 and December 31, 2019.

On March 1, 2019, in accordance with a stock and asset purchase agreement, the Company sold ~~its wipers~~certain assets and liabilities related to a non-core business, ~~in the Motorparts segment for a~~and received sale ~~price~~proceeds 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~~adjustments, in the ~~business are still classified as held for sale within the condensed consolidated balance sheet as of~~six months ended 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 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

4. Restructuring Charges, Net 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~~exit costs. The 2019 amounts below reflect the reclassifications to the prior period as discussed in Note 2, Summary of Significant Accounting Policies.

For the three and six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, 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 June 30, 2020
	Clean Air		Powertrain		Ride Performance		Motorparts			Corporate		Total
Severance and other charges, net	$	22	$	36	$	18	$	15		$	1	$	92

Asset impairments related to restructuring actions	—		3		—		25			—		28
Other non-restructuring asset impairments	—		—		—		—			1		1
Impairment of assets held for sale	—		1		—		(1		)	—		—
Total asset impairment charges	—		4		—		24			1		29
Total restructuring charges, net and asset impairments	$	22	$	40	$	18	$	39		$	2	$	121



	Three Months Ended June 30, 2019
	Clean Air		Powertrain		Ride Performance		Motorparts		Corporate		Total
Severance and other charges, net	$	14	$	17	$	10	$	6	$	—	$	47
Other non-restructuring asset impairments	1		—		—		1		—		2
Total restructuring charges, net and asset impairments	$	15	$	17	$	10	$	7	$	—	$	49

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Six Months Ended June 30, 2020
	Clean Air		Powertrain		Ride Performance		Motorparts			Corporate		Total
Severance and other charges, net	$	22	$	37	$	24	$	17		$	5	$	105

Asset impairments related to restructuring actions	—		3		—		25			—		28
Other non-restructuring asset impairments	—		—		455		—			17		472
Impairment of assets held for sale	—		1		—		(1		)	—		—
Total asset impairment charges	—		4		455		24			17		500
Total restructuring charges, net and asset impairments	$	22	$	41	$	479	$	41		$	22	$	605



	Six Months Ended June 30, 2019
	Clean Air		Powertrain		Ride Performance		Motorparts		Corporate		Total
Severance and other charges, net	$	19	$	18	$	15	$	10	$	1	$	63
Other non-restructuring asset impairments	1		—		—		1		—		2
Total restructuring charges, net and asset impairments	$	20	$	18	$	15	$	11	$	1	$	65

~~Presented within~~Severance and other charges, net

Severance and other charges, net for the ~~table above are asset impairments~~three and six months ended June 30, 2020 include the following actions:

In conjunction with the Company's previously announced Project Accelerate, and in response to the COVID-19 global pandemic, the Company is executing global headcount reductions, subject to negotiation with works councils in certain jurisdictions. The Company began implementing these actions during the second quarter of $12020 and expects to complete them during 2021. During the three and six months ended June 30, 2020, the Company recognized a charge of $25 million in connection with the ~~Clean Air~~cash severance costs expected to be paid in connections with these actions.

In addition to the actions above, the Company initiated several other cost reduction initiatives across all segments and regions aimed at optimizing the Company's cost structure. During the three and six months ended June 30, 2020, the Company recognized cash severance charges of $32 million expected to be paid under these programs.

During the three and six months ended June 30, 2020, the Powertrain segment ~~and $1~~incurred $20 million in restructuring and other costs, of which $16 million is related to plant relocations and closures, and $4 million is related to a cost reduction program in one of its product lines.

During the three and six months ended June 30, 2020, the Company incurred $4 million and $10 million in restructuring and other costs related to previously announced plant relocation and closures within its Ride Performance segment.

Beginning in the third quarter of 2020, the Motorparts segment ~~incurred~~will initiate a rationalization of its supply chain and distribution network to achieve supply chain efficiencies and improve throughput to its customers; as discussed in Note 1, Description of Business. During the three and six months ended June 30, 2020, the Motorparts segment recognized $4 million in restructuring charges related to cash severance expected to be paid in connection with these actions. In addition, the Motorparts segment also recognized charges during the three and six months ended June 30, ~~2019.~~2020 of $3 million in connection with an infrastructure cost reduction program in one of its regions.

The Company also incurred $4 million in cash severance costs for the elimination of certain redundant positions within its corporate component in the six months ended June 30, 2020.

On June 30, 2020, the Company approved a voluntary termination program within the Powertrain segment at one of its European bearings plants aimed at reducing headcount, as negotiated with the works council and union. The Company anticipates implementing headcount reductions during 2020 and continuing into 2021 through a voluntary early retirement program and a voluntary special termination program. Restructuring and related charges are expected to be incurred in the second half of 2020 and 2021 aggregate to approximately $31 million. The charges are expected to be comprised of approximately $10 million for postemployment benefits, including an early retirement program and $21 million of special termination benefits. In addition, the Company expects to incur additional costs of approximately $2 million for customer validation, equipment transfer, and related expenditures.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

During the three and six months ended June 30, 2019, the Company incurred $3 million and $9 million in restructuring and related costs and reduced previously recorded estimates by $2 million related to a restructuring plan designed to achieve a portion of the synergies the Company ~~anticipates~~anticipated achieving in connection with the Federal-Mogul Acquisition. Pursuant to the plan, the Company ~~will reduce~~reduced 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. During the three and six months ended June 30, 2019, the ~~Company also~~Ride Performance segment incurred ~~$17~~$5 million and ~~$28~~$8 million in restructuring and ~~related~~other costs related to plant ~~relocation~~relocations and ~~closures within its Ride Performance segment. The Company expects the actions to be completed by the second quarter of 2020.~~

During the three and six months ended June 30, 2018, the Company incurred $7 million and $14 million in restructuring and related costs related to the accelerated move of the Beijing Ride Performance plant.closures.

Restructuring ~~Reserve Rollforward~~reserve rollforward

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

~~TENNECO INC.~~

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

~~(Unaudited)~~



	Reportable Segments
	Clean Air			Powertrain			Ride Performance			Motorparts			Total Reportable Segments			Corporate			Total
Balance at December 31, 2019	$	23		$	30		$	23		$	16		$	92		$	9		$	101
Provisions	—			2			7			2			11			4			15
Revisions to estimates	—			(1		)	(1		)	—			(2		)	—			(2		)
Payments	(4		)	(4		)	(9		)	(4		)	(21		)	(9		)	(30		)
Foreign currency	—			—			(1		)	—			(1		)	—			(1		)
Balance at March 31, 2020	19			27			19			14			79			4			83
Provisions	24			36			18			17			95			1			96
Revisions to estimates	(2		)	—			—			(2		)	(4		)	—			(4		)
Payments	(6		)	(6		)	(17		)	(5		)	(34		)	(1		)	(35		)
Balance at June 30, 2020	$	35		$	57		$	20		$	24		$	136		$	4		$	140



	Reportable Segments
	Clean Air			Powertrain			Ride Performance			Motorparts			Total Reportable Segments			Corporate			Total
Balance at December 31, 2018	$	17		$	15		$	25		$	43		$	100		$	3		$	103
Provisions	5			1			5			4			15			1			16
Payments	(6		)	(3		)	(5		)	(14		)	(28		)	(2		)	(30		)
Balance at March 31, 2019	16			13			25			33			87			2			89
Provisions	14			17			10			8			49			—			49
Revisions to estimates	—			—			—			(2		)	(2		)	—			(2		)
Payments	(2		)	(4		)	(7		)	(7		)	(20		)	(1		)	(21		)
Balance at 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, 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:

Employee Costs Facility Closure and Other Costs Total
Balance as of December 31, 2018 $ 98
$ 5
$ 103
Provisions 11
13
24
Payments (25 ) (13 ) (38 )
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			Six Months Ended June 30, 2020									Six Months Ended June 30, 2019
Balance as of December 31, 2017	$	19		$	6		$	25
										Employee Costs			Facility Closure and Other Costs			Total			Employee Costs			Facility Closure and Other Costs			Total
Balance at beginning of period										$	97		$	4		$	101		$	98		$	5		$	103
Provisions	10			2			12			10			5			15			11			5			16
Revisions to estimates										(2		)	—			(2		)	—			—			—
Payments	(13		)	(3		)	(16		)	(23		)	(7		)	(30		)	(25		)	(5		)	(30		)
Balance as of March 31, 2018	16			5			21
Foreign currency										(1		)	—			(1		)	—			—			—
Balance at March 31										81			2			83			84			5			89
Provisions	26			3			29			90			6			96			44			5			49
Revisions to estimates										(4		)	—			(4		)	(2		)	—			(2		)
Payments	(12		)	(3		)	(15		)	(31		)	(4		)	(35		)	(16		)	(5		)	(21		)
Balance as of June 30, 2018	$	30		$	5		$	35
Balance at end of period										$	136		$	4		$	140		$	110		$	5		$	115

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Asset impairments

During the three and six months ended June 30, 2020, as a result of the actions in the Motorparts segment discussed above, asset impairment charges of $25 million were recognized which included $16 million related to the write-down of property, plant, and equipment to its fair value, and $9 million of impairment charge to its operating lease right-of-use assets. Refer to Note 1, Description of Business, for additional information.

During the three and six months ended June 30, 2020, the Powertrain segment incurred $3 million in asset impairment charges in connection with its plant relocation and closure actions.

Refer to Note 3, Acquisitions and Divestitures, for additional information on impairments of assets held for sale.

The Company evaluates its long-lived assets for impairment whenever events or circumstances indicate the value of these long-lived asset groups are not recoverable. During the first quarter of 2020, the Company concluded impairment triggers had occurred for certain long-lived asset groups in the Ride Performance segment as a result of the effects of the COVID-19 global pandemic on the Company's projected financial information. Accordingly, the Company tested these long-lived asset groups for recoverability by performing undiscounted cash flow analyses. Based on these analyses, the net carrying values of these asset groups exceeded their undiscounted future cash flows. As such, the Company estimated the fair values of these asset groups at March 31, 2020 and compared them to their carrying values. As the net carrying values of these long-lived asset groups exceeded their fair values, the Company recorded long-lived asset impairment charges for property, plant, and equipment of $455 million during the six months ended June 30, 2020. Refer to Note 9, Fair Value for additional information on the fair value estimates used in these analyses.

As a result of changes in the business, the Company assessed and concluded an impairment trigger had occurred for certain long-lived asset groups in its corporate component. Accordingly, the Company tested these long-lived asset groups for recoverability. The Company estimated the fair value of these asset groups and compared it to the carrying value. As the net carrying value exceeded fair value, the Company recorded long-lived asset impairment charges of $1 million and $17 million during the three and six months ended June 30, 2020. Included in the asset impairment charges for the six months ended June 30, 2020 are $11 million related to property, plant, and equipment and $6 million related to operating lease right-of-use assets.

There are many uncertainties regarding the COVID-19 global pandemic that could negatively affect the Company's results of operations, financial position, and cash flows. As a result, if there is an adverse change to the Company’s projected financial information, due to business performance or market conditions, this may be indicative the value of its long-lived assets are not recoverable, which may result in additional non-cash long-lived asset impairment charges in a future period.

5. Inventories

At June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, inventory consists of the following:


	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Finished goods	$	1,110	$	1,116	$	728	$	1,027
Work in process	497		562		427		460
Raw materials	489		457		400		408
Materials and supplies	111		110		101		104
	$	2,207	$	2,245	$	1,656	$	1,999

6. Goodwill and Other Intangible Assets

During the three months ended June 30, 2020, 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. There are many uncertainties regarding the COVID-19 global pandemic that could negatively affect the Company's results of operations, financial position, and cash flows. As a result, if there is an adverse change to the Company’s projected financial information, due to business performance or market conditions, this may be indicative that the fair value of its reporting units have declined below their carrying values, which may result in non-cash goodwill or intangible asset impairment charges in a future period.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

During the first quarter of 2020, the Company concluded it was more likely than not that the fair values of certain of its reporting units and its indefinite-lived intangible assets had declined to below their carrying values as a result of the effects of the COVID-19 global pandemic on the Company's projected financial information. The Company completed a goodwill impairment analysis for four of its reporting units with goodwill in the Powertrain, Motorparts, and Ride Performance segments. The difference between the reporting units' carrying values and fair values were recognized as impairment charges. The Company recognized $267 million in non-cash impairment charges related to its goodwill during the six months ended June 30, 2020, which represented full impairments of the goodwill in 1 reporting unit in the Powertrain segment and 1 reporting unit in the Ride Performance segment, and partial impairments of goodwill in 1 reporting unit in the Powertrain segment and 1 reporting unit in the Motorparts segment.

During the first quarter of 2020, the Company also completed an analysis to determine the fair value of its trade names and trademarks for its reporting units in the Ride Performance and Motorparts segments. It was determined their carrying values exceeded their fair values and the Company recognized $51 million in non-cash impairment charges related to these indefinite-lived intangible assets during the six months ended June 30, 2020, which represented a full impairment of the trade names and trademarks in 1 of the reporting units in the Motorparts segment, and a partial impairment of the trade names and trademarks in 1 of the reporting units in the Ride Performance segment and 1 of the reporting units in the Motorparts segment.

As discussed in more details in Note 4, Restructuring Charges, Net and Asset Impairments, the Company concluded impairment triggers had occurred for certain long-lived asset groups within the Ride Performance segment. As a result, the Company recorded non-cash impairment charges of $65 million related to its definite-lived intangible assets during the three months ended March 31, 2020, which represented full impairments of the definite-lived intangible assets in these 2 reporting units.

Impairment charges for goodwill and intangible assets recognized by segment during the six months ended June 30, 2020 consist of the following:



	Six Months Ended June 30, 2020
	Powertrain		Ride Performance		Motorparts		Total
Goodwill impairment charges	$	160	$	37	$	70	$	267
Trade names and trademarks intangible asset impairment charges	—		11		40		51
Definite-lived intangible asset impairment charges	—		65		—		65
	$	160	$	113	$	110	$	383

The following table shows a summary of the number of reporting units with goodwill in each segment and whether or not the reporting unit's fair value exceeds its carrying value by more or less than 10% based on each respective reporting units most recent goodwill impairment analysis:



	Segments
	Clean Air		Powertrain		Ride Performance		Motorparts
Number of reporting units with goodwill	3		1		1		1

Number of reporting units where fair value exceeds carrying value:
Greater than 10%	3		—		1		—
Less than 10%	—		1		—		1

Goodwill for reporting units where fair value exceeds carrying value:
Greater than 10%	$	22	$	—	$	7	$	—
Less than 10%	—		165		—		311
	$	22	$	165	$	7	$	311

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

At June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, 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



	Clean Air		Powertrain			Ride Performance			Motorparts			Total
Gross carrying amount at December 31, 2019	$	22	$	343		$	259		$	620		$	1,244
Foreign exchange	—		—			(3		)	—			(3		)
Gross carrying amount at March 31, 2020	22		343			256			620			1,241
Foreign exchange	—		—			3			—			3
Gross carrying amount at June 30, 2020	22		343			259			620			1,244

Accumulated impairment loss at December 31, 2019	—		(18		)	(212		)	(239		)	(469		)
Impairment	—		(160		)	(37		)	(70		)	(267		)
Accumulated impairment loss at March 31, 2020	—		(178		)	(249		)	(309		)	(736		)
Foreign exchange	—		—			(3		)	—			(3		)
Accumulated impairment loss at June 30, 2020	—		(178		)	(252		)	(309		)	(739		)

Net carrying value at end of period	$	22	$	165		$	7		$	311		$	505

The Öhlins Acquisition resulted in $30 million of goodwill which was included in the Ride Performance segment. During the six months ended June 30, 2019, the Company made the following adjustments to goodwill in the measurement period to the preliminary purchase price allocation for the Acquisitions:

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

~~a net decrease of $40 million 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 first quarter of 2019, 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~~2 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~~At June 30, 2020 and December 31, 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 resultsCompany's intangible assets consist 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.following:



		June 30, 2020							December 31, 2019
	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	$	988	$	(233	)	$	755	$	988	$	(123	)	$	865
Customer contract	10 years	8		(6		)	2		8		(6		)	2
Patents	10 to 17 years	1		(1		)	—		1		(1		)	—
Technology rights	10 to 30 years	133		(44		)	89		133		(37		)	96
Packaged kits know-how	10 years	54		(9		)	45		54		(7		)	47
Catalogs	10 years	47		(8		)	39		47		(6		)	41
Licensing agreements	3 to 5 years	63		(27		)	36		63		(18		)	45
Land use rights	28 to 46 years	46		(4		)	42		47		(3		)	44
		1,340		(332		)	1,008		1,341		(201		)	1,140
Indefinite-lived intangible assets:
Trade names and trademarks							231							282
Total							$	1,239						$	1,422

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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 have declined to below their carrying values, the Company will need to determine the fair value of its reporting units which may result in a material non-cash goodwill impairment charge in a future period.

~~At 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

The Company recorded definite-lived and indefinite-lived intangible assets of $133 million as a result of the Öhlins Acquisition. During the six months ended 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 Acquisitions:

~~a decrease of $2 million was recognized for the Öhlins Acquisition; and~~

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

The amortization expense associated with definite-lived intangible assets ~~was~~is as follows:

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



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Amortization expense	$	32	$	33	$	66	$	68

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



	2020		2021		2022		2023		2024		2025 and thereafter		Total
Expected amortization expense	$	66	$	127	$	124	$	121	$	113	$	457	$	1,008

7. Investment in Nonconsolidated Affiliates

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:


	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
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 June 30, ~~2019~~2020 and December 31, ~~2018 are:~~2019 is as follows:



	June 30, 2020		December 31, 2019
Investments in nonconsolidated affiliates	$	513	$	518

June 30, 2019 December 31, 2018
Investments in nonconsolidated affiliates $ 531
$ 544

The carrying amount of the Company's investments in its nonconsolidated affiliates accounted for under the equity method exceeded its share of the underlying net assets by $263 million and $251 million at June 30, 2020 and December 31, 2019.

The following table represents the activity from the Company's investments in its nonconsolidated affiliates for the three and six months ended June 30, ~~2019~~2020 and ~~2018:~~2019:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Equity earnings (losses) of nonconsolidated affiliates, net of tax	$	17	$	—	$	33	$	—
Equity in earnings (losses) of nonconsolidated affiliates, net of tax									$	4	$	17	$	17	$	33
Cash dividends received from nonconsolidated affiliates	$	12	$	—	$	27	$	—	$	5	$	12	$	18	$	27

During the six months ended 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.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

The following tables present summarized aggregated financial information of the Company's nonconsolidated affiliates for the three and six months ended June 30, 2020 and 2019. The amounts represent 100% of the interest in the nonconsolidated affiliates and not the Company's proportionate share:


	Three Months Ended June 30, 2019								Three Months Ended June 30, 2020
Statements of Income	Otomotiv A.S.		Anqing TP Goetze		Other		Total		Otomotiv A.S.		Anqing TP Goetze		Other		Total
Sales	$	85	$	39	$	120	$	244	$	24	$	11	$	41	$	76
Gross profit	$	22	$	10	$	23	$	55	$	6	$	5	$	6	$	17
Income from continuing operations	$	17	$	9	$	11	$	37	$	4	$	4	$	2	$	10
Net income	$	21	$	9	$	11	$	41	$	5	$	4	$	2	$	11

~~TENNECO INC.~~

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

~~(Unaudited)~~



	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



	Six Months Ended June 30, 2020
Statements of Income	Otomotiv A.S.		Anqing TP Goetze		Other		Total
Sales	$	120	$	41	$	146	$	307
Gross profit	$	32	$	11	$	26	$	69
Income from continuing operations	$	27	$	11	$	11	$	49
Net income	$	23	$	10	$	8	$	41



	Six Months Ended June 30, 2019
Statements of Income	Otomotiv A.S.		Anqing TP Goetze		Other		Total
Sales	$	176	$	78	$	245	$	499
Gross profit	$	43	$	26	$	46	$	115
Income from continuing operations	$	36	$	20	$	24	$	80
Net income	$	39	$	18	$	22	$	79

~~See~~Refer to Note ~~18,~~17, 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 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.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Market Risks

Foreign Currency Exchange Rate 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 exchange rate 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, Singapore dollar, Thailand bhat, South African rand, 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 June 30, ~~2019~~2020 and ~~2018~~December 31, 2019 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~~cost of ~~sales"~~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~~cost of ~~sales"~~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 isare recognized ~~in "Cost~~as foreign currency gains (losses) within cost of ~~sales"~~sales in the condensed consolidated statements of income (loss). The fair value of foreign currency forward contracts ~~are~~is recorded in ~~"Prepayments~~prepayments and other current ~~assets"~~assets or ~~"Accrued~~accrued expenses and other current ~~liabilities"~~liabilities in the condensed consolidated balance sheets. The fair value of these derivative instruments is not considered material to the ~~Company's foreign currency forward contracts was a net asset position of less than $1 million at June 30, 2019 and December 31, 2018.~~condensed consolidated financial statements, refer to Note 9, Fair Value for additional information.

The following table summarizes by position the notional amounts for foreign currency forward contracts ~~as of~~at June 30, ~~2019~~2020 (all of which mature in ~~2019)~~2020):


	Notional Amount			Notional Amount
Long positions	$	(26	)	$	54
Short positions	$	26		$	(54	)

~~Cash-Settled Share Swap Transactions~~— In 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)

Cash-Settled Share and Index Swap Transactions

The Company selectively uses swaps to reduce market risk associated with its deferred compensation liabilities, which increase as the Company's stock price increases and decrease as the Company's stock price decreases. ~~In contrast, the value of the~~The Company has entered into a cash-settled share swap agreement that moves in the opposite direction of these liabilities, allowing the Company to fix a portion of the liabilities at a stated amount. ~~As of~~At June 30, ~~2019,~~2020, the Company ~~had~~ hedged its deferred compensation liability related to approximately ~~250,000~~1,350,000 common share ~~equivalents.~~equivalents, an increase of 750,000 common share equivalents from December 31, 2019. In the first quarter of 2020, the Company entered into an S&P 500 index fund ETF swap agreement to further reduce its market risk, which will act as a natural hedge offsetting an equivalent amount of indexed investments in the Company's deferred compensation plans. The fair value of ~~the equity~~these swap ~~agreement~~agreements is recorded in ~~"Prepayments~~prepayments and other current ~~assets"~~assets or accrued expenses and other current liabilities in the condensed consolidated balance sheets. The fair value of these derivative instruments is not considered material to the ~~Company's equity swap agreement was a net asset position of $3 million at June 30, 2019 and $4 million at December 31, 2018.~~condensed consolidated financial statements, refer to Note 9, Fair Value for additional information.

Hedging Instruments

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 ~~tin.~~nickel. 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~~cost of ~~sales”~~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 ~~$25~~$16 million ~~as of~~and $19 million at June 30, ~~2019~~2020 and ~~$27 million as of~~ December 31, ~~2018.~~2019. 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, ~~€774~~€782 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 the condensed consolidated statements of changes 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~~at June 30, 2020 and December 31, 2019:


		Carrying Value					Carrying Value
	Balance sheet classification	June 30, 2019		December 31, 2018		Balance sheet classification	June 30, 2020		December 31, 2019
Commodity price hedge contracts designated as cash flow hedges	Accrued expenses and other current liabilities	$	—	$	2	Prepayments and other current assets	$	1	$	—
Foreign currency borrowings designated as net investment hedges	Long-term debt	$	880	$	863	Long-term debt	$	878	$	850

The following table represents the ~~effects~~amount of gain (loss) recognized in accumulated other comprehensive income (loss) before ~~reclassification~~any reclassifications into net income of(loss) for derivative and non-derivative instruments designated as hedges ~~in accumulated other comprehensive income (loss)~~for the three and six ~~month periods~~months ended June 30, ~~2019~~2020 and ~~2018:~~2019:


	Amount of gain (loss) recognized in accumulated OCI or OCL (effective portion):
	Three Months Ended June 30,			Six Months Ended June 30,		Three Months Ended June 30,						Six Months Ended June 30,
	2019			2019		2020			2019			2020			2019
Commodity price hedge contracts designated as cash flow hedges	$	(3	)	$	1	$	5		$	(3	)	$	2		$	1
Foreign currency borrowings designated as net investment hedges	$	(12	)	$	7	$	(16	)	$	(12	)	$	(2	)	$	7

The Company estimates approximately $1 million included in accumulated OCI or OCL ~~as of~~at June 30, ~~2019~~2020 will be reclassified into ~~earnings~~net income (loss) within the following 12twelve months. Refer to Note 15, Shareholders' Equity for further information.

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. 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:



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~~the Company's own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the assets and liabilities included in the Company's condensed consolidated balance sheets ~~as of~~at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 that are recognized at fair value on a recurring basis and indicate the fair value hierarchy utilized to determine such fair ~~value:~~values:

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 )



		June 30, 2020				December 31, 2019
	Fair value hierarchy	Carrying Amount		Fair Value		Carrying Amount			Fair Value
Derivative asset (liability) instruments:
Swap agreements	Level 2	$	1	$	1	$	(1	)	$	(1	)
Commodity contracts	Level 2	$	1	$	1	$	—		$	—

Asset and Liability Instruments

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

Cash-Settled Share and Index Swap ~~Transactions~~ — Agreements

The Company's stock price is used as an observable input in determining the fair value of the ~~equity~~cash-settled share swap ~~agreement~~agreement. The S&P 500 index ETF price is ~~recorded~~used as an observable input in ~~"Prepayments and other current assets" in~~determining the ~~condensed consolidated balance sheets.~~fair value of this swap agreement.

Commodity Contracts 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 June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

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.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Long-Lived Assets

The Company ~~has determined~~evaluates its long-lived assets for impairment whenever events or circumstances indicate the value of these long-lived asset groups are not recoverable. During the first quarter of 2020, the Company concluded certain impairment triggers had occurred for certain long-lived asset groups as a result of the effects of the COVID-19 global pandemic on the Company's projected financial information. After failing the undiscounted cash flow recoverability test, the Company estimated the fair values of these long-lived asset groups and compared them to their net carrying values. The fair value measurements related to ~~each of~~ these long-lived asset groups 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 the long-lived asset groups, the Company ~~utilizes discounted cash flows expected~~utilized an asset-based approach. The Company believes the assumptions and estimates used to ~~be generated by~~determine the estimated fair values of the long-lived asset ~~group.~~groups are reasonable; however, these estimates and assumptions are subject to a high degree of uncertainty. Due to the many variables inherent in estimating fair value differences in assumptions could have a material effect on the results of the analyses.

As the net carrying values of the long-lived asset groups exceeded their fair values, the Company recorded long-lived asset impairment charges consisting of $65 million of definite-lived intangible assets and $455 million of property, plant, and equipment, during the six months ended June 30, 2020. Refer to Note 4, Restructuring Charges, Net and Asset Impairments for additional information on asset impairments and refer to Note 6, Goodwill and Other Intangible Assets, for additional information on the definite-lived intangible asset impairments.

Goodwill and Indefinite-Lived Intangible Assets

The Company evaluates the carrying value of its goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of each ~~year.~~year, or more frequently if events or circumstances indicate these assets might be impaired. During the first quarter of 2020, the Company concluded it was more likely than not that the fair values of certain of its reporting units and its indefinite-lived intangible assets had declined to below their carrying values as a result of the effects of the COVID-19 global pandemic on the Company's projected financial information. The Company completed analyses to estimate the fair values of these reporting units and its trade names and trademarks. These fair value measurements require the Company to make significant assumptions and estimates about the ~~extent~~(i) projected operating margins, (ii) revenue growth rate, and ~~timing of future cash flows,~~(iii) discount ~~rates, and growth rates,~~rate, which is risk-adjusted based on the aforementioned items, as observable inputs are ~~subject to a high degree of uncertainty.~~not available (level 3). The Company believes the assumptions and estimates used to determine the estimated fair value are ~~reasonable, but different~~reasonable; however, these estimates and assumptions are subject to a high degree of uncertainty. Due to the many variables inherent in estimating fair value, differences in assumptions could ~~materially affect~~have a material effect on the ~~estimated fair value.~~results of the analyses.

During the first quarter of 2020, it was determined the carrying values of certain reporting units, and the Company's trade names and trademarks exceeded their fair values. As result, the Company recognized $267 million in non-cash impairment charges related to its goodwill and $51 million in non-cash impairment charges related to its indefinite-lived intangible assets during the six months ended June 30, 2020. Refer to Note 6, Goodwill and Other Intangible Assets, for additional information on the goodwill and indefinite-lived intangible asset impairments.

During the first quarter of 2019, 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~~Refer to Note 6, Goodwill and ~~liabilities (excluding goodwill) to the reporting units affected. Goodwill was then reassigned to the reporting units using a relative fair value approach based~~Other Intangible Assets, for additional information 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 recordedrecognized 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.~~

Financial Instruments Not Carried at Fair Value

~~Estimated~~The estimated fair ~~values~~value of the Company's outstanding debt ~~were:~~is as follows:


		June 30, 2019				December 31, 2018					June 30, 2020				December 31, 2019
	Fair value hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair value hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt (including current maturities):
Term loans and senior notes	Level 2	$	5,247	$	5,035	$	5,307	$	5,218	Level 2	$	5,121	$	4,641	$	5,179	$	5,113

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 ~~$91~~$169 million and ~~$106~~$192 million at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 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~~

TENNECO INC.

~~The carrying value of cash and cash equivalents, restricted cash, short and long-term receivables, accounts payable, and short-term debt approximates fair value.~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

10. Debt and Other Financing Arrangements

Long-Term Debt

A summary of ~~our~~the Company's long-term debt obligations at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 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



	June 30, 2020				December 31, 2019
	Principal		Carrying Amount ^(a)		Principal		Carrying Amount ^(a)
Credit Facilities
Revolver Borrowings
Due 2023	$	1,500	$	1,500	$	183	$	183
Term Loans
LIBOR plus 2.00% Term Loan A due 2019 through 2023^(b)	1,572		1,561		1,615		1,608
LIBOR plus 3.00% Term Loan B due 2019 through 2025	1,675		1,614		1,683		1,623
Senior Unsecured Notes
$225 million of 5.375% Senior Notes due 2024	225		223		225		222
$500 million of 5.000% Senior Notes due 2026	500		494		500		494
Senior Secured Notes
€415 million 4.875% Euro Fixed Rate Notes due 2022	466		477		465		479
€300 million of Euribor plus 4.875% Euro Floating Rate Notes due 2024	337		340		336		340
€350 million of 5.000% Euro Fixed Rate Notes due 2024	393		412		392		413
Other debt, primarily foreign instruments	13		12		14		13
			6,633				5,375
Less - maturities classified as current			4				4
Total long-term debt			$	6,629			$	5,371

~~(1)~~


^(a)	Carrying amount is net of unamortized debt issuance costs and debt discounts or premiums. Total unamortized debt issuance costs were $80 million and $76 million at June 30, 2020 and December 31, 2019. Total unamortized debt (premium) discount, net was $(32) million and $(37) million at June 30, 2020 and December 31, 2019.


^(b)	The interest rate on Term Loan A at December 31, 2019 was LIBOR plus 1.75%.

Short-Term Debt

The Company's short-term debt ~~issuance costs and debt discounts or premiums. Total unamortized debt issuance costs were $83 million and $90 million as of~~at June 30, ~~2019~~2020 and December 31, ~~2018. Total unamortized debt (premium) discount, net was $(43) million~~2019 consists of the following:



	June 30,		December 31,
	2020		2019
Maturities classified as current	$	4	$	4
Short-term borrowings^(a)	157		179
Bank overdrafts	61		2
Total short-term debt	$	222	$	185

^(a)Includes borrowings under both committed credit facilities and ~~$(49) million as~~uncommitted lines of ~~June 30, 2019~~credit and ~~December 31, 2018.~~similar arrangements.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

~~(2) As~~Amortization of ~~December 31, 2018,~~debt issuance costs and original issue discounts (premiums)

Interest expense associated with the ~~rate on Term Loan B was LIBOR plus 2.75%.~~amortization of the debt issuance costs and original issue discounts (premiums) recognized in the Company's condensed consolidated statements of income (loss) for the three and six months ended June 30, 2020 and 2019 is as follows:



	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
Amortization of debt issuance fees	$	5		$	4	$	10		$	9
Accretion of debt premium	$	(2	)	$	—	$	(6	)	$	(6	)

~~Term Loans~~

~~On October 1, 2018,~~Included in the ~~Company entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent~~table above is the amortization of debt issuance costs on the revolver of $1 million in both the three months ended June 30, 2020 and 2019, and $3 million and $2 million in the six months ended June 30, 2020 and 2019. The unamortized debt issuance costs related to the revolver is included in other ~~lenders (the "New Credit Facility")~~assets 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 billion term loan A facility ("Term Loan A") and a seven-year $1.7 billion term loan B facility ("Term Loan B").condensed consolidated balance sheets.

~~Senior Notes~~

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").

Credit Facilities

Financing Arrangements

The ~~Company had availability~~table below shows the Company's borrowing capacity on ~~its~~committed credit facilities ~~as of~~at June 30, ~~2019 as follows:~~2020:

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



	Committed Credit Facilities at June 30, 2020
	Term	Available^(b)
		(in billions)
Tenneco Inc. revolving credit facility ^(a)	2023	$	—
Tenneco Inc. Term Loan A	2023	—
Tenneco Inc. Term Loan B	2025	—
Subsidiaries’ credit agreements	2020 - 2028	—
		$	—


^(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 June 30, 2019 the revolving credit facility had $20 million in letters of credit outstanding.~~facility.

~~Interest expense associated~~The Company also had $65 million of outstanding letters of credit under uncommitted facilities at June 30, 2020.

At June 30, 2020, the Company had liquidity of $1.4 billion comprised entirely of cash. At June 30, 2020, the Company has fully utilized its $1.5 billion revolving credit facility.

Term Loans

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 ~~amortization~~Federal-Mogul Acquisition, which has been amended by the first amendment, dated February 14, 2020 ("the "First Amendment"), by the second amendment, dated February 14, 2020 ("the Second Amendment"), and by the third amendment, dated May 5, 2020 (the "Third Amendment"). 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 billion term loan A facility ("Term Loan A"), and a seven-year $1.7 billion term loan B facility ("Term Loan B"). The Company paid $8 million in one-time fees in connection with the ~~debt issuance costs~~First Amendment and ~~original issue discounts recognized~~Second Amendment, and $10 million in one-time fees in connection with the ~~Company's condensed consolidated statements~~Third Amendment.

New Credit Facility — Interest Rates and Fees

The Third Amendment provides for an increase to the margin applicable to borrowings under the revolving credit facility and

the Term Loan A facility at certain leverage levels as set forth below as one of ~~income (loss) consist of~~several conditions for obtaining the ~~following:~~less restrictive financial maintenance covenants described below under New Credit Facility — Other Terms and Conditions:

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Amortization of debt issuance fees $ 4
$ 1
$ 9
$ 2



Consolidated net leverage ratio	Interest rate
greater than 6.0 to 1	LIBOR plus 2.50%
less than 6.0 to 1 and greater than 4.5 to 1	LIBOR plus 2.25%

~~Included~~

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Initially, and so long as the Company’s corporate family rating is Ba3 (with a stable outlook) or higher from Moody’s Investors Service, Inc. (“Moody’s”) and BB- (with a stable outlook) or higher from Standard & Poor’s Financial Services LLC (“S&P”), the interest rate on borrowings under the Term Loan B facility will be LIBOR plus 2.75%; at any time the foregoing conditions are not satisfied, the interest rate on the Term Loan B facility will be LIBOR plus 3.00%. When the Term Loan B facility is no longer outstanding and the Company and its subsidiaries have no other secured indebtedness (with certain exceptions set forth in the ~~table above, is~~New Credit Facility), and upon the ~~amortization of debt issuance costs~~Company achieving and maintaining two or more corporate credit and/or corporate family ratings higher than or equal to BBB- from S&P, BBB- from Fitch Ratings Inc. (“Fitch”) and/or Baa3 from Moody’s (in each case, with a stable or positive outlook), the collateral under the New Credit Facility may be released. On June 3, 2019, Moody’s lowered our corporate family rating to B1 and the interest rate on borrowings under the ~~revolver, which are $20 million at June 30, 2019 and are recorded in "Other assets" in the condensed consolidated balance sheets. In addition, there~~term loan B was ~~a $3 million and $6 million reduction~~raised to ~~interest expense during the three and six months ended June 30, 2019 related to the accretion of the debt premium on the Senior Secured Notes.~~LIBOR plus 3.00%.

New Credit Facility — Other Terms and Conditions — ~~The New Credit Facility also contains two~~After giving effect to the Third Amendment, the Company must comply with certain less restrictive financial maintenance covenants for the revolving credit facility and the Term Loan A ~~facility including~~facility. The financial maintenance covenants are subject to several covenant reset triggers (“Covenant Reset Triggers”) that limit certain activities of the Company by implementing more restrictive affirmative and negative covenants, as more fully described below. If a Covenant Reset Trigger occurs, the financial maintenance covenants revert back to the previous financial maintenance covenants in effect immediately prior to the Third Amendment (and described above) (the “Prior Financial Covenants”). The financial maintenance covenants include (i) a requirement to have a senior secured leverage ratio (as defined in the New Credit Facility), with step-downs, as detailed in the table below; (ii) a requirement to have a consolidated net leverage ratio (as defined in the New Credit Facility), with step-downs, 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~~ follows:



(i) Senior secured net leverage ratio		(ii) Consolidated net leverage ratio
not greater than 6.75 to 1	at June 30, 2020	not greater than 4.50 to 1	at March 31, 2020
not greater than 9.50 to 1	at September 30, 2020	not greater than 5.25 to 1	at March 31, 2022
not greater than 8.75 to 1	at December 31, 2020	not greater than 4.75 to 1	at June 30, 2022
not greater than 8.25 to 1	at March 31, 2021	not greater than 4.25 to 1	at September 30, 2022
not greater than 4.50 to 1	at June 30, 2021	not greater than 3.75 to 1	thereafter
not greater than 4.25 to 1	at September 30, 2021
not greater than 4.00 to 1	at December 31, 2021

and ~~3.5 to 1 thereafter; and~~(iii) 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 2.00 to 1 as of June 30, 2020, 1.50 to 1 through March 31, 2021, and 2.75 to 1. 1 thereafter.

The Company may make a one-time election to revert back to the Prior Financial Covenants and terminate the Covenant Reset Triggers upon delivery of a covenant reset certificate that attests to compliance with the Prior Financial Covenants as of the end of the relevant fiscal period (“Covenant Reset Certificate”).

The Covenant Reset Triggers include certain limitations on the ability of the Company and its restricted subsidiaries to, among other things, (a) incur additional indebtedness, (b) enter into additional sales and leasebacks, (c) create additional liens over their assets, (d) pay dividends or distributions to Tenneco’s stockholders, (e) prepay certain unsecured indebtedness of the Company or its restricted subsidiaries (as more fully described below), (f) make additional investments, (g) dispose of material intellectual property, and (h) reinvest the proceeds of certain asset sales in the business in lieu of repaying indebtedness, each as more specifically described in the Third Amendment. These limitations are in addition to other affirmative and negative covenants (with customary exceptions, materiality qualifiers and limitations) in the New Credit Agreement, including with respect to: financial reporting; payment of taxes; maintenance of existence; compliance with law and material contractual obligations; maintenance of property and insurance; inspection of property, books and records; notices of certain events; compliance with environmental laws; provision and maintenance of collateral perfection; satisfaction of the financial maintenance covenants described above; incurrence of indebtedness; permitting liens over assets; mergers, consolidations, dispositions or other fundamental transactions; dispositions and asset sales; restricted payments; investments; compliance with limitations on certain transactions with nonconsolidated affiliates; sale and leaseback transactions; changes in fiscal periods; negative pledge clauses in certain contracts; changes to lines of business; prepayments and modifications of certain subordinated indebtedness (as more fully described below); use of proceeds; transactions involving special purpose finance subsidiaries; and transactions related to effectuating a spin-off (as defined in the New Credit Agreement), each as more specifically described in the New Credit Agreement.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

After giving effect to the Third Amendment, so long as no default exists under its New Credit Facility, the Company would be permitted to (i) make regularly scheduled interest and principal payments as and when due in respect of the Senior Unsecured Notes, (ii) refinance the Senior Unsecured Notes with the net cash proceeds of permitted refinancing indebtedness (as defined in the New Credit Facility); (iii) make payments in respect of the Senior Unsecured Notes in an amount equal to the net cash proceeds of qualified capital stock (as defined in the New Credit Facility) issued after May 5, 2020; (iv) convert any Senior Unsecured Notes into qualified capital stock issued after May 5, 2020; and (v) make additional payments of the Senior Unsecured Notes provided that after giving effect to such additional payments the consolidated leverage ratio would be equal to or less than 2.00 to 1 after giving effect to such additional payments. The foregoing limitations regarding repayment and refinancing of the Senior Unsecured Notes and such incremental equivalent debt apply from the effectiveness of the Third Amendment until delivery of a Covenant Reset Certificate.

The covenants in the New Credit Facility generally prohibit the Company from repaying certain subordinated indebtedness. So long as no default exists, the Company would, under its New Credit Facility, be permitted to repay or refinance its subordinated indebtedness (i) with the net cash proceeds of permitted refinancing indebtedness (as defined in the New Credit Facility); (ii) in an amount equal to the net cash proceeds of qualified capital stock (as defined in the New Credit Facility) issued after October 1, 2018; (iii) in exchange for qualified capital stock issued after October 1, 2018; and (iv) with additional payments provided that such additional payments are capped based on a pro forma consolidated leverage ratio after giving effect to such additional payments.

Such additional payments on subordinated indebtedness (x) will not be permitted at any time the pro forma consolidated leverage ratio is greater than 2.00 to 1 after giving effect to such additional payments and (y) will be permitted in an unlimited amount at any time the pro forma consolidated leverage ratio is equal to or less than 2.00 to 1 after giving effect to such additional payments.

The New Credit Facility contains customary representations and warranties, including, as a condition to future revolver borrowings, that all such representations and warranties are true and correct, in all material respects, on the date of borrowing, including representations (with customary exceptions, materiality qualifiers and limitations) as to: existence; compliance with law; power, authority and enforceability; no violation of law or material contracts; material litigation; no default under the New Credit Agreement and related documents; ownership of property, including material intellectual property; payment of material taxes; compliance with margin stock regulations; labor matters; ERISA; Investment Company Act matters; subsidiaries; use of loan proceeds; environmental matters; accuracy of information; security documents; solvency; anti-corruption laws and sanctions; and that since December 31, 2017 there has been no development or event that has had a material adverse effect on the business or financial condition of the Company and its subsidiaries, each as more specifically described in the New Credit Facility.

The New Credit Facility includes customary events of default and other provisions that could require all amounts due thereunder to become immediately due and payable, either automatically or at the option of the lenders, if the Company fails to comply with the terms of the New Credit Facility or if other customary events occur. These events of default (with customary exceptions, materiality qualifiers, limitations and grace periods) include (i) failure to pay obligations under the New Credit Agreement when due; (ii) material inaccuracy of representations and warranties; (iii) failure to comply with the covenants in the New Credit Facility and related documents (as summarized above); (iv) cross-default to material indebtedness; (v) commencement of bankruptcy or insolvency proceedings; (vi) ERISA events; (vii) certain material judgments; (viii) invalidity of unenforceability of security and guarantee documents; and (ix) change of control, each as more specifically described in the New Credit Facility.

Senior Notes

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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

~~As of~~At June 30, ~~2019,~~2020, the Company was in compliance with all of its financial covenants.

Other Debt

Other debt consists primarily of subsidiary debt.

Accounts Receivable Securitization and Factoring

On-Balance Sheet Arrangements —

The Company has securitization programs for some of its accounts ~~receivables,~~receivable, with limited recourse provisions. Borrowings on these securitization programs, which are recorded in short-term debt, at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 are as follows:

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



	June 30, 2020		December 31, 2019
Borrowings on securitization programs	$	3	$	4

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~~Some of these 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.~~programs.

The ~~amounts~~amount of accounts receivable outstanding and derecognized for these factoring and drafting arrangements ~~as of~~was $0.9 billion and $1.0 billion at June 30, ~~2019~~2020 and December 31, ~~2018 are as follows:~~

June 30, 2019 December 31, 2018
(in billions)
Accounts receivable outstanding and derecognized $ 1.1
$ 1.0

~~The~~2019. In addition, the deferred purchase price receivable ~~as of~~was $38 million and $33 million at June 30, ~~2019~~2020 and December 31, ~~2018 is as follows:~~

June 30, 2019 December 31, 2018
Deferred purchase price receivable $ 52
$ 154
2019.

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

Three months ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
(in billions)
Proceeds from factoring qualifying as sales $ 1.3
$ 0.7
$ 2.5
$ 1.5
and drafting programs was $0.7 billion and $1.3 billion for the three months ended June 30, 2020 and 2019 and was $1.9 billion and $2.5 billion for the six months ended June 30, 2020 and 2019.

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

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

The following table represents the Company's expenses associated with these arrangements for the three and six months ended June 30, 2020 and 2019:

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).



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Loss on sale of receivables^(a)	$	4	$	6	$	10	$	14

^(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.~~financing.

~~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 and six months ended June 30, ~~2019~~2020 and ~~2018~~2019 are as follows:


	Three Months Ended June 30																		Three Months Ended June 30,
	Pension												Other Postretirement Benefits						Pension Benefits												Other Postretirement Benefits
	2019						2018						Other Postretirement Benefits						2020						2019						Other Postretirement Benefits
	US			Non-U.S.			US			Non-U.S.			2019			2018			U.S.			Non-U.S.			U.S.			Non-U.S.			2020			2019
Service cost	$	—		$	6		$	—		$	2		$	—		$	—		$	1		$	6		$	—		$	6		$	—		$	—
Interest cost	14			5			2			3			4			1			10			5			14			5			3			4
Expected return on plan assets	(17		)	(4		)	(3		)	(5		)	—			—			(16		)	(4		)	(17		)	(4		)	—			—
Net amortization:
Actuarial loss	1			2			1			2			1			3			1			2			1			2			—			1
Prior service cost (credit)	—			—			—			—			(2		)	(1		)	—			—			—			—			(2		)	(2		)
Net pension and postretirement costs (credits)	$	(2	)	$	9		$	—		$	2		$	3		$	3		$	(4	)	$	9		$	(2	)	$	9		$	1		$	3

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


	Six Months Ended June 30																		Six Months Ended June 30,
	Pension												Other Postretirement Benefits						Pension Benefits												Other Postretirement Benefits
	2019						2018						Other Postretirement Benefits						2020						2019						Other Postretirement Benefits
	US			Non-U.S.			US			Non-U.S.			2019			2018			U.S.			Non-U.S.			U.S.			Non-U.S.			2020			2019
Service cost	$	1		$	12		$	—		$	5		$	—		$	—		$	1		$	12		$	1		$	12		$	—		$	—
Interest cost	27			12			5			6			7			3			20			9			27			12			5			7
Expected return on plan assets	(34		)	(9		)	(7		)	(10		)	—			—			(32		)	(8		)	(34		)	(9		)	—			—
Net amortization:
Actuarial loss	2			3			2			4			2			4			3			4			2			3			1			2
Prior service cost (credit)	—			—			—			—			(4		)	(1		)	—			—			—			—			(4		)	(4		)
Net pension and postretirement costs (credits)	$	(4	)	$	18		$	—		$	5		$	5		$	6		$	(8	)	$	17		$	(4	)	$	18		$	2		$	5

12. Income Taxes

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 tax rate calculation could result in a higher or lower effective tax rate during a 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.

For the three months ended June 30, ~~2019,~~2020, the Company recorded income tax benefit of $101 million on loss from continuing operations before income taxes of $441 million. This compares to 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.~~three months ended June 30, 2019.

For the six months ended June 30, ~~2019,~~2020, the Company recorded income tax benefit of $195 million on loss from continuing operations before income taxes of $1.4 billion. This compares to 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.~~2019.

Income tax benefit for the three months ended June 30, 2020 differs from the U.S. statutory rate due primarily to pre-tax income taxed at rates higher than the U.S. statutory tax rate and pre-tax losses with no tax benefit.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Income tax benefit for the six months ended June 30, 2020 differs from the U.S. statutory rate due primarily to $111 million of tax benefit recognized related to asset impairment charges of $883 million, pre-tax income taxed at rates higher than the U.S. statutory tax rate, and pre-tax losses with no tax benefit.

Income tax expense for the three and six months ended 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 pre-tax losses with no tax benefit.

Income tax expense for the three and six months ended June 30, 2018 differs from the U.S. statutory rate due primarily to $2 million of tax expense for changes in the toll tax, 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 six months ended 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~~There are many uncertainties regarding the COVID-19 global pandemic that could negatively affect the Company's results of operations, financial position, and cash flows. As a result, if there is an adverse change to the Company’s business performance or the market conditions 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~~which it operates, it is reasonably possible ~~sufficient positive evidence~~there may be ~~available~~sufficient negative evidence for a valuation allowance to ~~release all, or a portion, of its valuation allowance~~be recorded in the next twelve ~~months in certain jurisdictions.~~months. This may result in a one-time charge to income tax ~~benefit~~expense of up to ~~$45~~$595 million, primarily related to ~~Spain~~the U.S., China, France, Poland, and ~~the Czech Republic.~~Spain.

The Company believes it is reasonably possible up to ~~$11~~$51 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.

After considering the effect of COVID-19 on the 2020 forecast, the Company is not projecting sufficient income to utilize its 2011 and 2012 foreign tax credit carryforwards of $29 million and $21 million. The Company has certain U.S. reserves that provide positive evidence these foreign tax credits would be utilized in the event of an assessment by the U.S. tax authorities; therefore, it has netted the foreign tax credit carryforward deferred tax assets with its uncertain tax position liability on the condensed consolidated balance sheets. Should the 2011 and 2012 foreign tax credit carryforwards expire without utilization, the foreign tax credit carryforward deferred tax assets would be written off with a charge to income tax expense.

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~~At June 30, ~~2019,~~2020, 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~~Company's estimated share of environmental remediation costs for all these sites ~~on a discounted basis~~is recognized in the condensed consolidated balance sheets on a discounted basis and the amounts at June 30, 2020 and December 31, 2019 are 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
TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	June 30, 2020		December 31, 2019
Accrued expenses and other current liabilities	$	9	$	8
Deferred credits and other liabilities	26		28
	$	35	$	36

For those locations where the liability was discounted, the weighted average discount rate used was ~~1.4%~~0.45% and ~~2.9%~~1.30% at June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

The Company's expected payments offor 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



	2020		2021		2022		2023		2024		2025 and thereafter
Expected payments	$	5	$	4	$	2	$	2	$	2	$	15

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 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

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 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.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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 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.

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 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~~$109 million ~~was~~has been paid through June 30, ~~2019 resulting~~2020, which included $30 million paid in ~~a remaining reserve of $53 million as of~~the six months ended June 30, ~~2019,~~2020 from amounts that were included in the reserve. In connection with the resolution of certain claims, $9 million was released from the reserve in the third quarter of 2019. At June 30, 2020, the reserve was $14 million, of which is$2 million was recorded in accrued expenses and other current liabilities and $12 million was recorded in deferred credits and other 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 any such change in the reserve will have a material adverse effect on the Company's annual 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.~~defendants. Additionally, in many cases the plaintiffs either do not specify any, or specify the jurisdictional minimum, dollar amount for damages.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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 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, advertising matters, and commercial or contractual disputes, sometimes related to acquisitions or divestitures. Additionally, some of these matters involve allegations relating to legal compliance.

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 not expect the legal proceedings, claims or investigations currently pending against it will have any material adverse effect on its annual consolidated financial position, results of operations or liquidity.

Asset Retirement Obligations

The Company's ARO liabilities at June 30, 2020 and December 31, 2019 are as follows:



	June 30, 2020		December 31, 2019
Accrued expenses and other current liabilities	$	3	$	3
Deferred credits and other liabilities	12		13
	$	15	$	16

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

~~14. Leases~~

~~The Company has operating and finance leases for real estate and equipment. Generally, the leases have remaining terms of~~one 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 "Cost of sales" and "Selling, general, and administrative" within the condensed consolidated statements of income (loss).

~~The Company does not include significant restrictions or covenants in its lease agreements, and residual value guarantees are generally not included within 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 following represents the changes in the Company's warranty accrual for the three and six months ended June 30, 2020 and 2019:

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 June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Balance at beginning of period	$	51		$	48		$	54		$	45
Accruals related to product warranties	1			16			4			21
Reductions for payments made	(1		)	(11		)	(7		)	(13		)
Foreign currency	(1		)	—			(1		)	—
Balance at end of period	$	50		$	53		$	50		$	53



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

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

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

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

~~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.~~14. Share-Based Compensation

~~Share-Based Compensation Expense~~

~~The total~~Share-based compensation expense is included in selling, general, and administrative expenses in the condensed consolidated statements of income (loss). Total share-based compensation expense ~~was~~(benefit) for the three and six months ended June 30, 2020 and 2019 is as follows:


	Three Months Ended June 30,					Six Months Ended June 30,			Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018			2019	2018		2020		2019		2020		2019
Cash-settled share-based compensation expense (benefit)	$	1	$	(2	)	—	(3	)	$	1	$	1	$	1	$	—
Share-settled share-based compensation expense (benefit)	6		2			13	7		7		6		9		13
	$	7	$	—		13	4		$	8	$	7	$	10	$	13

Cash-Settled Awards

~~Prior to 2018, the~~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 June 30, ~~2019, the LTPUs outstanding included a three-year grant for 2017-2019 payable in the first quarter of 2020.~~

~~As of June 30, 2019, $1~~2020, approximately $5 million of total unrecognized compensation costs is expected to be recognized on the cash-settled ~~awards~~RSU's over a ~~weighted-average~~weighted average period of ~~less than 1 year.~~approximately 3 years.

Share-Settled Awards

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

The following table reflects the status ~~for~~of all nonvested restricted shares, share-settled RSUs, and PSUs ~~as of~~for the six months ended June 30, ~~2019 and December 31, 2018:~~2020:


	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 balance at beginning of period	178,550		$	55.46	440,403		$	47.99	227,049		$	49.18	35,630		$	63.27	1,125,346		$	37.91	806,233		$	34.12
Granted	34,009		34.66		867,137		34.21		634,511		24.77		169,781		9.15		1,511,307		7.83		6,654		12.26
Vested	(172,050	)	50.12		(88,590	)	54.60		—		—		(200,223	)	40.69		(289,074	)	41.39		—		—
Forfeited	(3,329	)	62.12		(50,113	)	41.26		(43,527	)	43.61		(1,781	)	58.01		(339,120	)	34.93		(264,471	)	28.91
Nonvested balance at end of period	37,180		$	63.30	1,168,837		$	38.04	818,033		$	34.25	3,407		$	59.87	2,008,459		$	27.60	548,416		$	36.15

~~As of~~At June 30, ~~2019,~~2020, approximately ~~$54~~$27 million of total unrecognized compensation costs is expected to be recognized on the share-settled awards over a ~~weighted-average~~weighted average period of approximately 2 years.

~~16.~~15. 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 June 30, ~~2019~~2020 and ~~2018.~~December 31, 2019. The Company has authorized 25,000,000 shares ($0.01 par value) of Class B Common Stock at June 30, 2020 and December 31, 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	Six Months Ended June 30,
	Six Months Ended June 30,				Six Months Ended June 30,	Class A Common Stock				Class B Common Stock
	2019		2018		2019	2020		2019		2020		2019
Shares issued at beginning of period	71,675,379		66,033,509		23,793,669	71,727,061		71,675,379		23,793,669		23,793,669
Issuance (repurchased) pursuant to benefit plans	123,216		(15,906	)	—	458,855		123,216		—		—
Restricted stock forfeited and withheld for taxes	(60,081	)	(7,590	)	—	(124,440	)	(60,081	)	—		—
Stock options exercised	8,438		(6,975	)	—	—		8,438		—		—
Class B common stock converted to Class A common stock						3,485,215		—		(3,485,215	)	—
Shares issued at end of period	71,746,952		66,003,038		23,793,669	75,546,691		71,746,952		20,308,454		23,793,669

Treasury stock	14,592,888		14,592,888		—	14,592,888		14,592,888		—		—
Total shares outstanding	57,154,064		51,410,150		23,793,669	60,953,803		57,154,064		20,308,454		23,793,669

Class B Common Stock Conversion

Effective April 1, 2020, Icahn Enterprises L.P. ("IEP") exercised its right to convert 3,485,215 shares of the Company’s Class B Common Stock into 3,485,215 shares of the Company’s Class A Common Stock. As a result, IEP holds 9,136,392 shares, or approximately 14.99%, of the Company’s outstanding Class A Common Stock and 20,308,454 shares of the Company’s outstanding Class B Common Stock.

Preferred Stock

The Company had 50,000,000 shares of preferred stock ($0.01 par value) authorized at both June 30, ~~2019~~2020 and ~~2018.~~December 31, 2019. No shares of preferred stock were issued or outstanding at those dates.

Shareholder Rights Plan

On April 15, 2020, the Company's Board of Directors approved a Section 382 Rights Plan, which will expire on the earliest to occur of (i) the close of business on the day following the certification of the voting results of the Company’s 2021 annual meeting of stockholders, if at such stockholder meeting or any other meeting of stockholders of the Company duly held prior to such meeting, a proposal to ratify the Section 382 Rights Plan has not been passed by the requisite vote of the Company’s stockholders; (ii) the date on which the Board of Directors determines in its sole discretion that (x) the Section 382 Rights Plan is no longer necessary for the preservation of material valuable tax attributes or (y) the tax attributes have been fully utilized and may no longer be carried forward; and (iii) the close of business on October 2, 2021.

Pursuant to the Section 382 Rights Plan, our Board of Directors declared a dividend of (i) one preferred share purchase right (a “Class A Right”), payable on April 27, 2020, for each share of Class A Voting Common Stock and (ii) one preferred share purchase right (a “Class B Right” and, together with the Class A Rights, the “Rights”), payable on April 27, 2020, for each share of Class B Non-Voting Common Stock, in each case, outstanding on April 27, 2020 to the stockholders of record on that date. Each Right, which is exercisable only in the event that any person or group acquires 4.9% or more of the Company’s outstanding shares of Class A Voting Common Stock (with certain limited exceptions), would entitle any holder other than the person or group whose ownership position has exceeded the ownership limit to purchase common stock having a value equal to twice the exercise price of the Right, or, at the election of the Board of Directors, to exchange each Right for one share of Class A Common Stock per Class A Right or one share of Class B Non-Voting Common Stock per Class B Right.

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 June 30, ~~2019~~2020 and ~~2018:~~2019:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
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
Foreign currency translation adjustments and other:
Balance at beginning of period	$	(296	)	$	(272	)	$	(297	)	$	(275	)	$	(568	)	$	(366	)	$	(369	)	$	(395	)
Other comprehensive income (loss) before reclassifications	—			—			—			—			34			(16		)	(165		)	11
Reclassification from other comprehensive income (loss)	2			5			3			9			—			—			—			—
Other comprehensive income (loss)	2			5			3			9			34			(16		)	(165		)	11
Income tax provision (benefit)	(4		)	(1		)	(4		)	(2		)
Income tax benefit (provision)													1			(1		)	1			1
Balance at end of period	$	(298	)	$	(268	)	$	(298	)	$	(268	)	(533		)	(383		)	(533		)	(383		)

Cash flow hedge instruments
Pensions and other postretirement benefits:
Balance at beginning of period	$	4		$	—		$	—		$	—		(338		)	(296		)	(342		)	(297		)
Other comprehensive income (loss) before reclassifications	(3		)	—			1			—			—			—			—			—
Reclassification from other comprehensive income (loss)	—			—			—			—			1			2			4			3
Other comprehensive income (loss)	(3		)	—			1			—			1			2			4			3
Income tax provision (benefit)	—			—			—			—
Income tax benefit (provision)													(6		)	(4		)	(5		)	(4		)
Balance at end of period	$	1		$	—		$	1		$	—		(343		)	(298		)	(343		)	(298		)

Cash flow hedge instruments:
Balance at beginning of period													(2		)	4			—			—
Other comprehensive income (loss) before reclassifications													5			(3		)	2			1
Reclassification from other comprehensive income (loss)													—			—			—			—
Other comprehensive income (loss)													5			(3		)	2			1
Income tax benefit (provision)													(1		)	—			—			—
Balance at end of period													2			1			2			1

Accumulated other comprehensive loss at end of period													$	(874	)	$	(680	)	$	(874	)	$	(680	)

Other comprehensive income (loss) attributable to noncontrolling interests	$	(1	)	$	(7	)	$	5		$	1		$	7		$	(1	)	$	(13	)	$	5

~~17.~~16. Segment Information

The Company expects to separate its businesses to form two new, independent publicly traded companies and currently expects the DRiV spin-off to occur 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~~4 operating ~~segments,~~segments: Powertrain, Clean Air, Ride Performance, and ~~Clean Air.~~Motorparts. Costs related to other business activities, primarily corporate headquarter functions, are disclosed separately from the ~~four~~4 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~~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 USU.S. 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 USU.S. 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~~Segment results for the ~~Company's segment information:~~three and six months ended June 30, 2020 and 2019 are as follows:


	Reportable Segments																		Reportable Segments
	Clean Air		Powertrain		Ride Performance		Motorparts		Total		Corporate			Reclass & Elims			Total		Clean Air		Powertrain		Ride Performance		Motorparts		Total		Reclass & Elims			Total
For the Three Months Ended June 30, 2020
Revenues from external customers																			$	1,140	$	602	$	336	$	559	$	2,637	$	—		$	2,637
Intersegment revenues																			$	3	$	21	$	21	$	6	$	51	$	(51	)	$	—
Equity in earnings of nonconsolidated affiliates, net of tax																			$	—	$	2	$	1	$	1	$	4	$	—		$	4
For the Three Months Ended June 30, 2019
Revenues from external customers	$	1,827	$	1,133	$	709	$	835	$	4,504	$	—		$	—		$	4,504	$	1,827	$	1,133	$	709	$	835	$	4,504	$	—		$	4,504
Intersegment revenues	$	—	$	40	$	38	$	11	$	89	$	—		$	(89	)	$	—	$	—	$	40	$	38	$	11	$	89	$	(89	)	$	—
EBITDA, including noncontrolling interests	$	152	$	100	$	26	$	110	$	388	$	(78	)	$	—		$	310
For the Three Months Ended June 30, 2018
Equity in earnings of nonconsolidated affiliates, net of tax																			$	—	$	14	$	1	$	2	$	17	$	—		$	17
For the Six Months Ended June 30, 2020
Revenues from external customers	$	1,694	$	—	$	506	$	333	$	2,533	$	—		$	—		$	2,533	$	2,685	$	1,599	$	924	$	1,265	$	6,473	$	—		$	6,473
Intersegment revenues	$	—	$	—	$	5	$	—	$	5	$	—		$	(5	)	$	—	$	9	$	59	$	50	$	15	$	133	$	(133	)	$	—
EBITDA, including noncontrolling interests	$	142	$	—	$	20	$	55	$	217	$	(46	)	$	—		$	171
Equity in earnings of nonconsolidated affiliates, net of tax																			$	—	$	13	$	1	$	3	$	17	$	—		$	17
For the Six Months Ended June 30, 2019
Revenues from external customers																			$	3,606	$	2,308	$	1,442	$	1,632	$	8,988	$	—		$	8,988
Intersegment revenues																			$	—	$	86	$	84	$	22	$	192	$	(192	)	$	—
Equity in earnings of nonconsolidated affiliates, net of tax																			$	—	$	27	$	2	$	4	$	33	$	—		$	33

Reportable Segments
Clean Air Powertrain Ride Performance Motorparts Total Corporate Reclass & Elims Total
For the Six Months Ended June 30, 2019
Revenues from external customers $ 3,606
$ 2,308
$ 1,442
$ 1,632
$ 8,988
$ —
$ —
$ 8,988
Intersegment revenues $ —
$ 86
$ 84
$ 22
$ 192
$ —
$ (192 ) $ —
EBITDA, including noncontrolling interests $ 283
$ 213
$ (19 ) $ 155
$ 632
$ (177 ) $ —
$ 455
For the Six Months Ended June 30, 2018
Revenues from external customers $ 3,450
$ —
$ 1,019
$ 645
$ 5,114
$ —
$ —
$ 5,114
Intersegment revenues $ —
$ —
$ 11
$ —
$ 11
$ —
$ (11 ) $ —
EBITDA, including noncontrolling interests $ 299
$ —
$ 44
$ 100
$ 443
$ (90 ) $ —
$ 353

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Segment EBITDA including noncontrolling interests and the reconciliation to earnings (loss) before interest expense, income taxes, and noncontrolling interests are as ~~follow:~~follows:


	Three Months Ended June 30						Six Months Ended June 30						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
EBITDA including noncontrolling interests by Segments:
EBITDA including noncontrolling interests by segment:
Clean Air	$	152		142			$	283		$	299		$	17		$	152		$	116		$	283
Powertrain	100			—			213			—			(62		)	100			(132		)	213
Ride Performance	26			20			(19		)	44			(70		)	26			(647		)	(19		)
Motorparts	110			55			155			100			(52		)	110			(92		)	155
Total reportable segments													(167		)	388			(755		)	632
Corporate	(78		)	(46		)	(177		)	(90		)	(49		)	(78		)	(135		)	(177		)
Total EBITDA including noncontrolling interests	310			171			455			353
Depreciation and amortization	(169		)	(60		)	(338		)	(120		)	(159		)	(169		)	(330		)	(338		)
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	141			111			117			233			(375		)	141			(1,220		)	117
Interest expense	(82		)	(22		)	(163		)	(45		)	(66		)	(82		)	(141		)	(163		)
Income tax (expense) benefit	(14		)	(26		)	(14		)	(51		)	101			(14		)	195			(14		)
Net income (loss)	$	45		$	63		$	(60	)	$	137		$	(340	)	$	45		$	(1,166	)	$	(60	)

Disaggregated Revenue

Original Equipment

Value-Added Sales

OE revenue is generated from providing original equipment manufacturers and servicers with products for automotive, heavy duty, and industrial applications. Supply relationships typically extend over the life of the related vehicle, subject to interim design and technical specification revisions, and do not require the customer to purchase a minimum quantity.

Substrate/Passthrough Sales

Generally, in connection with the sale of exhaust systems to certain OE manufacturers, the Company purchases catalytic converters and diesel particulate filters or components thereof including precious metals (“substrates”) on behalf of its customers which are used in the assembled system. These substrates are included in inventory and are “passed through” to the customer at cost, plus a small margin. Since the Company takes title to the substrate inventory and has responsibility for both the delivery and quality of the finished product including the substrates, the revenues and related expenses are recorded at gross amounts.

Aftermarket

Aftermarket revenue is generated from providing products for the global vehicle aftermarket to a wide range of warehouse distributors, retail parts stores, and mass merchants that distribute these products to customers ranging from professional service providers to “do-it-yourself” consumers.

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. Certain amounts in the prior period for the Ride Performance segment have been reclassified from OE - Value add to Aftermarket to conform with the current year presentation. This reclassification affected the three and six months ended June 30, 2019 and has no effect on the previously reported totals. In the following tables, revenue is disaggregated accordingly:


	Reportable Segments										Reportable Segments
By Customer Type	Clean Air		Powertrain		Ride Performance		Motorparts		Total		Clean Air		Powertrain		Ride Performance		Motorparts		Total
Three Months Ended June 30, 2020
OE - Substrate											$	623	$	—	$	—	$	—	$	623
OE - Value add											517		602		326		—		1,445
Aftermarket											—		—		10		559		569
Total											$	1,140	$	602	$	336	$	559	$	2,637
Three Months Ended June 30, 2019
OE - Substrate	$	777	$	—	$	—	$	—	$	777	$	777	$	—	$	—	$	—	$	777
OE - Value add	1,050		1,133		709		—		2,892		1,050		1,133		695		—		2,878
Aftermarket	—		—		—		835		835		—		—		14		835		849
Total	$	1,827	$	1,133	$	709	$	835	$	4,504	$	1,827	$	1,133	$	709	$	835	$	4,504
Three Months Ended June 30, 2018
Six Months Ended June 30, 2020
OE - Substrate	$	621	$	—	$	—	$	—	$	621	$	1,323	$	—	$	—	$	—	$	1,323
OE - Value add	1,073		—		506		—		1,579		1,362		1,599		899		—		3,860
Aftermarket	—		—		—		333		333		—		—		25		1,265		1,290
Total	$	1,694	$	—	$	506	$	333	$	2,533	$	2,685	$	1,599	$	924	$	1,265	$	6,473
Six Months Ended June 30, 2019
OE - Substrate											$	1,483	$	—	$	—	$	—	$	1,483
OE - Value add											2,123		2,308		1,414		—		5,845
Aftermarket											—		—		28		1,632		1,660
Total											$	3,606	$	2,308	$	1,442	$	1,632	$	8,988



	Reportable Segments
By Geography	Clean Air		Powertrain		Ride Performance		Motorparts		Total
Three Months Ended June 30, 2020
North America	$	335	$	168	$	81	$	389	$	973
Europe, Middle East and Africa	248		263		161		135		807
Rest of world	557		171		94		35		857
Total	$	1,140	$	602	$	336	$	559	$	2,637
Three Months Ended June 30, 2019
North America	$	800	$	398	$	228	$	536	$	1,962
Europe, Middle East and Africa	609		540		349		241		1,739
Rest of world	418		195		132		58		803
Total	$	1,827	$	1,133	$	709	$	835	$	4,504
Six Months Ended June 30, 2020
North America	$	1,039	$	512	$	279	$	865	$	2,695
Europe, Middle East and Africa	813		755		458		332		2,358
Rest of world	833		332		187		68		1,420
Total	$	2,685	$	1,599	$	924	$	1,265	$	6,473
Six Months Ended June 30, 2019
North America	$	1,593	$	803	$	460	$	1,043	$	3,899
Europe, Middle East and Africa	1,250		1,115		727		478		3,570
Rest of world	763		390		255		111		1,519
Total	$	3,606	$	2,308	$	1,442	$	1,632	$	8,988

17. Related Party Transactions

The following table summarizes the net sales, purchases, and royalty and other income to and from related parties for the three and six months ended June 30, 2020 and 2019:



	Three Months Ended June 30,
	2020						2019
	Net Sales		Purchases		Royalty and Other		Net Sales		Purchases		Royalty and Other
Anqing TP Goetze Piston Ring Company Limited	$	1	$	16	$	1	$	—	$	15	$	1
Anqing TP Powder Metallurgy Company Limited	$	2	$	1	$	—	$	1	$	2	$	—
Dongsuh Federal-Mogul Industrial Co., Ltd.	$	—	$	1	$	—	$	2	$	5	$	—
Federal-Mogul Powertrain Otomotiv A.S.	$	5	$	17	$	2	$	16	$	53	$	1
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti.	$	—	$	1	$	—	$	—	$	2	$	—
Federal-Mogul TP Liners, Inc.	$	3	$	4	$	—	$	4	$	—	$	1
Frenos Hidraulicos Autos	$	—	$	—	$	—	$	1	$	—	$	—
Icahn Automotive Group LLC	$	32	$	—	$	1	$	47	$	—	$	1
Montagewerk Abgastechnik Emden GmbH	$	1	$	—	$	—	$	—	$	—	$	—
PSC Metals, Inc.	$	1	$	—	$	—	$	—	$	—	$	—

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Reportable Segments
By Customer Type Clean Air Powertrain Ride Performance Motorparts Total
Six Months Ended June 30, 2019
OE - Substrate $ 1,483
$ —
$ —
$ —
$ 1,483
OE - Value add 2,123
2,308
1,442
—
5,873
Aftermarket —
—
—
1,632
1,632
Total $ 3,606
$ 2,308
$ 1,442
$ 1,632
$ 8,988
Six Months Ended June 30, 2018
OE - Substrate $ 1,273
$ —
$ —
$ —
$ 1,273
OE - Value add 2,177
—
1,019
—
3,196
Aftermarket —
—
—
645
645
Total $ 3,450
$ —
$ 1,019
$ 645
$ 5,114

Reportable Segments
By Geography Clean Air Powertrain Ride Performance Motorparts Total
Three Months Ended June 30, 2019
North America $ 800
$ 398
$ 228
$ 536
$ 1,962
Europe, Middle East and Africa 609
540
349
241
1,739
Rest of world 418
195
132
58
803
Total $ 1,827
$ 1,133
$ 709
$ 835
$ 4,504
Three Months Ended June 30, 2018
North America $ 745
$ —
$ 185
$ 210
$ 1,140
Europe, Middle East and Africa 623
—
212
105
940
Rest of world 326
—
109
18
453
Total $ 1,694
$ —
$ 506
$ 333
$ 2,533



	Six Months Ended June 30,
	2020						2019
	Net Sales		Purchases		Royalty and Other		Net Sales		Purchases		Royalty and Other
Anqing TP Goetze Piston Ring Company Limited	$	5	$	26	$	1	$	—	$	29	$	—
Anqing TP Powder Metallurgy Company Limited	$	3	$	2	$	—	$	1	$	3	$	—
Dongsuh Federal-Mogul Industrial Co., Ltd.	$	1	$	3	$	—	$	3	$	7	$	—
Federal-Mogul Powertrain Otomotiv A.S.	$	17	$	76	$	6	$	44	$	112	$	2
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti.	$	—	$	2	$	—	$	—	$	5	$	—
Federal-Mogul TP Liners, Inc.	$	7	$	16	$	—	$	8	$	—	$	1
Frenos Hidraulicos Autos	$	—	$	—	$	—	$	1	$	—	$	—
Icahn Automotive Group LLC	$	65	$	—	$	2	$	90	$	—	$	2
Montagewerk Abgastechnik Emden GmbH	$	4	$	—	$	—	$	2	$	—	$	—
PSC Metals, Inc.	$	1	$	—	$	—	$	1	$	—	$	—

Reportable Segments
By Geography Clean Air Powertrain Ride Performance Motorparts Total
Six Months Ended June 30, 2019
North America $ 1,593
$ 803
$ 460
$ 1,043
$ 3,899
Europe, Middle East and Africa 1,250
1,115
727
478
3,570
Rest of world 763
390
255
111
1,519
Total $ 3,606
$ 2,308
$ 1,442
$ 1,632
$ 8,988
Six Months Ended June 30, 2018
North America $ 1,513
$ —
$ 365
$ 398
$ 2,276
Europe, Middle East and Africa 1,280
—
437
213
1,930
Rest of world 657
—
217
34
908
Total $ 3,450
$ —
$ 1,019
$ 645
$ 5,114

~~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.

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

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 $ —
$ —
$ —

Six Months Ended June 30, 2019
Net Sales Purchases Royalty and Other Income
Icahn Automotive Group LLC $ 90
$ —
$ 2
PSC Metals, Inc. $ 1
$ —
$ —
Anqing TP Goetze Piston Ring Company Limited $ —
$ 29
$ —
Anqing TP Powder Metallurgy Company Limited $ 1
$ 3
$ —
Dongsuh Federal-Mogul Industrial Co., Ltd. $ 3
$ 7
$ —
Federal-Mogul Powertrain Otomotiv A.S. $ 42
$ 104
$ 2
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti. $ —
$ 5
$ —
Federal-Mogul Izmit Piston ve Pim Uretim Tesisleri A.S. $ 2
$ 8
$ —
Federal-Mogul TP Liners, Inc. $ 8
$ —
$ 1
Frenos Hidraulicos Auto $ 1
$ —
$ —
Montagewerk Abgastechnik Emden GmbH $ 2
$ —
$ —

~~TENNECO INC.~~

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

~~(Unaudited)~~

The following table is a summary of amounts due to and from the Company's related parties ~~as of~~at June 30, ~~2019~~2020 and December 31, ~~2018:~~2019:

June 30, 2019 December 31, 2018
Receivables Payables and accruals Receivables Payables and accruals
Icahn Automotive Group LLC $ 54
$ 2
$ 60
$ 12
Anqing TP Goetze Piston Ring Company Limited $ 2
$ 22
$ 1
$ 22
Anqing TP Powder Metallurgy Company Limited $ —
$ 1
$ 1
$ 1
Dongsuh Federal-Mogul Industrial Co., Ltd. $ —
$ 2
$ 1
$ 2
Federal-Mogul Powertrain Otomotiv A.S. $ 12
$ 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
$ 7
$ 2
$ 7
Farloc Argentina SAIC $ 1
$ 1
$ —
$ —
Montagewerk Abgastechnik Emden GmbH

$ —
$ —
$ —
$ —



	June 30, 2020				December 31, 2019
	Receivables		Payables and Accruals		Receivables		Payables and Accruals
Anqing TP Goetze Piston Ring Company Limited	$	2	$	22	$	1	$	26
Anqing TP Powder Metallurgy Company Limited	$	1	$	1	$	—	$	1
Dongsuh Federal-Mogul Industrial Co., Ltd.	$	—	$	1	$	—	$	2
Farloc Argentina SAIC	$	—	$	—	$	1	$	—
Federal-Mogul Powertrain Otomotiv A.S.	$	8	$	24	$	8	$	31
Federal-Mogul TP Liners, Inc.	$	1	$	4	$	2	$	7
Icahn Automotive Group LLC	$	45	$	8	$	52	$	10
Montagewerk Abgastechnik Emden GmbH	$	3	$	—	$	1	$	—

~~TENNECO INC.~~

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

~~(Unaudited)~~

Refer to Note 7, Investment in Nonconsolidated Affiliates, for further information for companies within the tables above that represent equity method investments.

~~19. Supplemental Guarantor Condensed Consolidating Financial Statements~~Amounts presented as Icahn Automotive Group LLC represent the Company's activities with Auto Plus and Pep Boys.

~~Basis of Presentation~~

~~Substantially all~~As part of the ~~Company's existing and future material domestic 100% owned subsidiaries (which are referred~~Federal-Mogul Acquisition, the Company acquired a redeemable noncontrolling interest related to asa subsidiary in India. In accordance with local regulations, the ~~Guarantor Subsidiaries) fully and unconditionally guarantee its senior notes on~~Company initiated a ~~joint and several basis. However,~~process to make a ~~subsidiary’s guarantee may be released in certain customary circumstances such as a sale~~tender offer of the ~~subsidiary or all or substantially all of its assets in accordance with the indenture applicable~~shares it did not own due to the ~~notes.~~change in control triggered by the Federal-Mogul Acquisition. The ~~Guarantor Subsidiaries are combined in~~Company entered into separate agreements with IEP subsequent to the ~~presentation below.~~

~~These consolidating financial statements are presented~~purchase agreement whereby IEP agreed to fund and execute the tender offer for the shares 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 informationbehalf of the ~~Guarantor Subsidiaries~~Company. During the first quarter of 2020, the tender offer for the shares was completed. Since the transaction was funded and executed by IEP, the completion of the tender offer resulted in ~~connection with~~an adjustment to additional paid-in capital during the ~~Company's condensed consolidated financial statements and related notes~~six months ended June 30, 2020. Immediately following the completion of ~~which~~the tender offer, the shares of this ~~note is an integral part.~~

~~The accompanying supplemental guarantor consolidating financial statements have been updated~~noncontrolling interest not owned by the Company were no longer redeemable, or probable of becoming redeemable; therefore, the noncontrolling interest was reclassified from temporary equity to ~~reflect~~permanent equity during the ~~revision as described in~~six months ended June 30, 2020. Refer to 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.

~~Distributions~~

~~There are no significant restrictions~~Policies, for further information on ~~the ability of the Guarantor Subsidiaries to make distributions.~~

~~TENNECO INC.~~

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

~~(Unaudited)~~

~~STATEMENT OF COMPREHENSIVE INCOME (LOSS)~~

Three Months Ended June 30, 2019
Guarantor
Subsidiaries Nonguarantor
Subsidiaries Tenneco Inc.
(Parent
Company) Reclass
& Elims Consolidated
Revenues
Net sales and operating revenues:
External $ 1,690
$ 2,814
$ —
$ —
$ 4,504
Affiliated companies 235
283
—
(518 ) —
1,925
3,097
—
(518 ) 4,504
Costs and expenses
Cost of sales 1,618
2,692
1
(518 ) 3,793
Restructuring charges and asset impairments 43
18
—
—
61
Engineering, research, and development 30
48
—
—
78
Selling, general, and administrative 148
143
(3 ) —
288
Depreciation and amortization 81
88
—
—
169
1,920
2,989
(2 ) (518 ) 4,389
Other expense (income)
Non-service postretirement benefit costs (1 ) 5
—
—
4
Equity in (income) losses of nonconsolidated affiliates, net of tax (1 ) (16 ) —
—
(17 )
Other (income) expense, net 30
(43 ) —
—
(13 )
28
(54 ) —
—
(26 )
Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies (23 ) 162
2
—
141
Interest expense:
External, net of interest capitalized (6 ) 12
76
—
82
Affiliated companies, net of interest income (6 ) 11
(5 ) —
—
Earnings (loss) before income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies (11 ) 139
(69 ) —
59
Income tax expense (benefit) —
27
(13 ) —
14
Equity in net income (loss) from affiliated companies 93
—
82
(175 ) —
Net income (loss) 82
112
26
(175 ) 45
Less: Net income (loss) attributable to noncontrolling interests —
19
—
—
19
Net income (loss) attributable to Tenneco Inc. $ 82
$ 93
$ 26
$ (175 ) $ 26
Comprehensive income (loss) attributable to Tenneco Inc. $ 51
$ 67
$ (86 ) $ (28 ) $ 4

~~TENNECO INC.~~

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

~~(Unaudited)~~

~~STATEMENT OF COMPREHENSIVE INCOME (LOSS)~~

Three Months Ended June 30, 2018
Guarantor
Subsidiaries Nonguarantor
Subsidiaries Tenneco Inc.
(Parent
Company) Reclass
& Elims Consolidated
Revenues
Net sales and operating revenues:
External $ 1,028
$ 1,505
$ —
$ —
$ 2,533
Affiliated companies 134
156
—
(290 ) —
1,162
1,661
—
(290 ) 2,533
Costs and expenses
Cost of sales 984
1,440
—
(290 ) 2,134
Restructuring charges and asset impairments
2
27
—
—
29
Engineering, research, and development 19
20
—
—
39
Selling, general, and administrative 82
72
—
—
154
Depreciation and amortization 24
36
—
—
60
1,111
1,595
—
(290 ) 2,416
Other expense (income)
Non-service postretirement benefit costs 3
—
—
—
3
Other (income) expense, net 15
(22 ) —
10
3
18
(22 ) —
10
6
Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies 33
88
—
(10 ) 111
Interest expense:
External, net of interest capitalized 10
3
9
—
22
Affiliated companies, net of interest income (4 ) —
4
—
—
Earnings (loss) before income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies 27
85
(13 ) (10 ) 89
Income tax (benefit) expense (2 ) 28
—
—
26
Equity in net income (loss) from affiliated companies 37
—
60
(97 ) —
Net income (loss) 66
57
47
(107 ) 63
Less: Net income (loss) attributable to noncontrolling interests —
16
—
—
16
Net income (loss) attributable to Tenneco Inc. $ 66
$ 41
$ 47
$ (107 ) $ 47
Comprehensive income (loss) attributable to Tenneco Inc. $ 66
$ 41
$ (41 ) $ (107 ) $ (41 )

~~TENNECO INC.~~

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

~~(Unaudited)~~

Six Months Ended June 30, 2019
Guarantor
Subsidiaries Nonguarantor
Subsidiaries Tenneco Inc.
(Parent
Company) Reclass
& Elims Consolidated
Revenues
Net sales and operating revenues:
External $ 3,381
$ 5,607
$ —
$ —
$ 8,988
Affiliated companies 453
564
—
(1,017 ) —
3,834
6,171
—
(1,017 ) 8,988
Costs and expenses
Cost of sales 3,294
5,380
—
(1,017 ) 7,657
Restructuring charges and asset impairments 51
34
—
—
85
Goodwill impairment charge 33
27
—
—
60
Engineering, research, and development 69
101
—
—
170
Selling, general, and administrative 326
278
—
—
604
Depreciation and amortization 164
174
—
—
338
3,937
5,994
—
(1,017 ) 8,914
Other expense (income)
Non-service postretirement benefit costs (1 ) 7
—
—
6
Equity in losses of nonconsolidated affiliates, net of tax (2 ) (31 ) —
—
(33 )
Other (income) expense, net 23
(39 ) —
—
(16 )
20
(63 ) —
—
(43 )
Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies (123 ) 240
—
—
117
Interest expense:
External, net of interest capitalized 5
17
141
—
163
Affiliated companies, net of interest income (14 ) 19
(5 ) —
—
Earnings (loss) before income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies (114 ) 204
(136 ) —
(46 )
Income tax expense (benefit) (18 ) 57
(25 ) —
14
Equity in net income (loss) from affiliated companies 72
—
20
(92 ) —
Net income (loss) (24 ) 147
(91 ) (92 ) (60 )
Less: Net income (loss) attributable to noncontrolling interests —
31
—
—
31
Net income (loss) attributable to Tenneco Inc. $ (24 ) $ 116
$ (91 ) $ (92 ) $ (91 )
Comprehensive income (loss) attributable to Tenneco Inc. $ (17 ) $ 128
$ (79 ) $ (111 ) $ (79 )

~~TENNECO INC.~~

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

~~(Unaudited)~~

Six Months Ended June 30, 2018
Guarantor
Subsidiaries Nonguarantor
Subsidiaries Tenneco Inc.
(Parent
Company) Reclass
& Elims Consolidated
Revenues
Net sales and operating revenues:
External $ 2,060
$ 3,054
$ —
$ —
$ 5,114
Affiliated companies 257
312
—
(569 ) —
2,317
3,366
—
(569 ) 5,114
Costs and expenses
Cost of sales 1,991
2,905
—
(569 ) 4,327
Restructuring charges and asset impairments
3
38
—
—
41
Engineering, research, and development 37
42
—
—
79
Selling, general, and administrative 155
150
—
—
305
Depreciation and amortization 47
73
—
—
120
2,233
3,208
—
(569 ) 4,872
Other expense (income)
Non-service postretirement benefit costs 6
—
—
—
6
Other (income) expense, net 24
(31 ) —
10
3
30
(31 ) —
10
9
Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies 54
189
—
(10 ) 233
Interest expense:

External, net of interest capitalized 20
6
19
—
45
Affiliated companies, net of interest income (7 ) —
7
—
—
Earnings (loss) before income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies 41
183
(26 ) (10 ) 188
Income tax (benefit) expense (1 ) 52
—
—
51
Equity in net income (loss) from affiliated companies 85
—
133
(218 ) —
Net income (loss) 127
131
107
(228 ) 137
Less: Net income (loss) attributable to noncontrolling interests —
30
—
—
30
Net income (loss) attributable to Tenneco Inc. $ 127
$ 101
$ 107
$ (228 ) $ 107
Comprehensive income (loss) attributable to Tenneco Inc. $ 127
$ 101
$ 41
$ (228 )
$ 41

~~TENNECO INC.~~

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

~~(Unaudited)~~

~~BALANCE SHEETS~~

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)~~

~~BALANCE SHEETS~~

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)~~

~~STATEMENT OF CASH FLOWS~~

Six Months Ended June 30, 2019
Guarantor
Subsidiaries Nonguarantor
Subsidiaries Tenneco Inc.
(Parent
Company) Reclass
& Elims Consolidated
Operating Activities
Net cash provided by (used in) operating activities $ (8 ) $ (2 ) $ (90 ) $ —
$ (100 )
Investing Activities
Acquisition of business, net of cash acquired —
(158 ) —
—
—
(158 )
Proceeds from sale of assets 1
4
—
—
5
Cash payments for property, plant and equipment (118 ) (261 ) —
—
(379 )
Net proceeds from sale of business 6
16
—
—
22
Other 1
(2 ) —
—
(1 )
Proceeds from deferred purchase price of factored receivables —
147
—
—
147
Net cash used in investing activities (110 ) (254 ) —
—
(364 )
Financing Activities
Cash dividends —
—
(20 ) —
(20 )
Repayment of term loans and notes —
(139 ) (51 ) —
(190 )
Proceeds from term loans and notes —
111
—
—
111
Issuance (repurchase) of common shares —
—
(2 ) —
(2 )
Decrease in bank overdrafts —
(8 ) —
—
(8 )
Borrowings on revolving lines of credit 4,047
117
361
—
4,525
Payments on revolving lines of credit (3,797 ) (111 ) (346 ) —
(4,254 )
Other —
(1 ) —
—
(1 )
Intercompany dividends and net (decrease) increase in intercompany obligations (245 ) 98
147
—
—
Distribution to noncontrolling interests partners —
(20 ) —
—
(20 )
Net cash (used in) provided by financing activities 5
47
89
—
141
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash —
11
—
—
11
Increase (decrease) in cash, cash equivalents and restricted cash (113 ) (198 ) (1 ) —
(312 )
Cash, cash equivalents and restricted cash, January 1 329
369
4
—
702
Cash, cash equivalents and restricted cash, June 30 $ 216
$ 171
$ 3
$ —
$ 390

~~TENNECO INC.~~

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

~~(Unaudited)~~

~~STATEMENT OF CASH FLOWS~~

Six Months Ended June 30, 2018
Guarantor
Subsidiaries Nonguarantor
Subsidiaries Tenneco Inc.
(Parent
Company) Reclass
& Elims Consolidated
Operating Activities
Net cash provided by (used in) operating activities $ 79
$ 13
$ (5 ) $ (9 ) $ 78
Investing Activities
Proceeds from sale of assets 1
4
—
—
5
Cash payments for property, plant and equipment (77 ) (97 ) —
—
(174 )
Proceeds from deferred purchase price of factored receivables —
66
—
—
66
Other 2
—
—
—
2
Net cash used in investing activities (74 ) (27 ) —
—
(101 )
Financing Activities
Proceeds from term loans and notes —
9
—
—
9
Repayments of term loans and notes (10 ) (18 ) —
—
(28 )
Borrowings on revolving lines of credit 2,349
45
275
—
2,669
Payments on revolving lines of credit (2,315 ) (38 ) (261 ) —
(2,614 )
Issuance (repurchase) of common shares —
—
(1 ) —
(1 )
Cash dividends —
—
(25 ) —
(25 )
Net increase (decrease) in bank overdrafts —
(7 ) —
—
(7 )
Distribution to noncontrolling interests partners —
(28 ) —
—
(28 )
Other (2 ) (20 ) —
—
(22 )
Intercompany dividends and net (decrease) increase in intercompany obligations (32 ) 6
17
9
—
Net cash (used in) provided by financing activities (10 ) (51 ) 5
9
(47 )
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash —
(11 ) —
—
(11 )
Increase (decrease) in cash, cash equivalents and restricted cash (5 ) (76 ) —
—
(81 )
Cash, cash equivalents and restricted cash, January 1 7
311
—
—
318
Cash, cash equivalents and restricted cash, June 30 $ 2
$ 235
$ —
$ —
$ 237

this noncontrolling interest.

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 June 30, ~~2019~~2020 financial results are to June 30, ~~2018~~2019 financial results.

The following Management's Discussion and Analysis of Financial Condition and Results of 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,~~2019, which was filed with the Securities and Exchange Commission ("SEC") on March ~~18, 2019~~2, 2020 (the ~~"2018~~"2019 Form 10-K").

EXECUTIVE OVERVIEW

Our Business

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)~~("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~~Tenneco consists of four operating segments, Clean Air, Powertrain, Ride Performance, and Motorparts:

The Clean Air segment designs, manufactures, and distributes a variety of products and systems designed to reduce pollution and optimize engine performance, acoustic tuning, and weight on a vehicle for OE customers;

The Powertrain segment focuses on original equipment powertrain products for automotive, heavy duty, and industrial applications;

The Ride Performance segment designs, manufactures, markets, and distributes a variety of ride performance solutions and systems to a global OE customer base, including noise, vibration, and harshness performance materials, advanced suspension technologies, ride control, and braking; and

The Motorparts segment engineers, manufactures, sources, and distributes a broad portfolio of products in the global vehicle aftermarket while also servicing the original equipment and original equipment servicers market with products, including vehicle braking systems and a wide variety of chassis, engine, sealing, wiper, filter, lighting, and other general maintenance applications.

The COVID-19 global pandemic has negatively affected the global economy, disrupted global supply chains, and created extreme volatility and disruptions to capital and credit markets in the global financial markets. We have responded quickly to protect our team members’ health and safety while taking aggressive actions to mitigate the financial effect of the pandemic on us. In response to the pandemic, we expanded on structural cost reductions, and implemented a range of temporary cost reductions including plant closures, deferment of discretionary spending, and the reduction of capital expenditures. In addition, on April 15, 2020, our Board of Directors adopted a shareholder rights plan designed to protect the availability of our tax assets in the current volatile market environment and, on May 5, 2020, we entered into a third amendment to our credit agreement to increase the maximum leverage ratio and decrease the minimum interest coverage ratio. There are many uncertainties related to COVID-19 that could negatively affect our results of operations, financial position, and cash flows. After considering the effect of COVID-19 on our 2020 forecast, we believe we will comply with our financial covenants, as required by our amended credit agreement and we believe our liquidity position continues to be adequate based on our current estimates and forecasts.

Other factors that we expect will 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 that are critical to our success include adjusting to economic challenges such as increases in the cost of raw materials and our ability to successfully reduce the 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~~

Beginning in the ~~acquisition~~third quarter of 2020, the Motorparts segment will initiate a rationalization of its supply chain and distribution network to achieve supply chain efficiencies and improve throughput to its customers. As a result, certain assets including inventory, real estate, and personal property will no longer be utilized. As such, during the three and six months ended June 30, 2020, the Motorparts segment recognized an $82 million non-cash charge to write-down inventory to its net realizable value, a $16 million impairment charge to write-down property, plant, and equipment to its fair value, and a $9 million impairment charge to its operating lease right-of-use assets. Additionally, the Motorparts segment recognized $4 million in restructuring charges related to cash severance expected to be paid.

Separation Transaction

We have previously announced our review of a ~~90.5% ownership interest in Öhlins Intressenter AB (the "Öhlins Acquisition"),~~full range of strategic options to enhance shareholder value creation, including 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~~potential separation of the ~~combined company. As such, we expect to separate our businesses to form two new, independent publicly traded companies,~~Company into an Aftermarket and Ride Performance company ~~("DRiV")~~ and a new Powertrain Technology ~~company ("New Tenneco"). We currently expect~~company. Current end-market conditions and the ~~separation~~effects of the ~~business~~ongoing COVID-19 pandemic are affecting our ability to ~~occur mid-2020 through~~complete a ~~spin-off transaction~~separation. In light of ~~DRiV. In the first quarter of 2019,~~these ongoing conditions, we ~~began~~are pursuing additional options to ~~manage~~optimize shareholder value creation, including a focus on operational improvements, reducing structural costs, lowering capital intensity, 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.~~

reducing debt.

Financial Results for the Six Months Ended June 30, ~~2019~~2020

Consolidated revenues were ~~$8,988~~$6,473 million, ~~an increase~~a decrease of ~~$3,874~~$2,515 million, or ~~76%~~28%, for the six months ended June 30, ~~2019.~~2020. The ~~Acquisitions increased revenues by $3,816 million, or 75%. The remaining increase in revenues was primarily driven by~~primary driver of the ~~net favorable effects of organic growth from higher~~decrease is lower sales volume and mix of ~~$251~~$2,229 million, largely attributable to the effects of COVID-19. The remaining decrease is attributable to a decrease in revenues of $60 million, or less than 1%, related to the net effects of acquisitions and ~~the favorable effect of other of $8 million, partially offset by~~divestitures, the unfavorable effects of foreign currency exchange of ~~$201~~$205 million, and the net unfavorable effects of other of $21 million.

Cost of sales ~~was $7,657~~were $5,837 million, ~~an increase~~a decrease of ~~$3,330~~$1,834 million, or ~~77%~~24%, for the six months ended June 30, ~~2019.~~2020. The ~~Acquisitions increased cost~~primary driver of the decrease is from lower sales ~~by $3,202~~volume of $1,618 million, ~~or 74%.~~largely attributable to the effects of COVID-19. The remaining ~~increase~~decrease is attributable to a decrease in cost of sales ~~was primarily driven by incremental costs~~of $55 million, or less than 1%, related to ~~higher sales volume~~the net effects of acquisitions and ~~mix of $256 million,~~divestitures, the ~~unfavorable~~favorable effects of materials sourcing of $9$22 million, the favorable effects of foreign currency exchange of $181 million, and ~~an increase in~~the net favorable effects of other costs of ~~$25 million, which~~$40 million. This was partially offset by a ~~favorable effect~~non-cash charge of ~~foreign currency exchange~~$82 million related to the write-down of ~~$162 million.~~inventory in the Motorparts segment in connection with its initiative to rationalize its supply chain and distribution network.

Net ~~income decreased~~loss increased by ~~$197~~$1,106 million to a net loss of $1,166 million for the six months ended June 30, 2020 as compared to a net loss of $60 million for the six months ended June 30, ~~2019 as compared to $137 million of net income for the six months ended June 30, 2018.~~2019. The ~~decrease~~increase was primarily driven by:

an increase in ~~selling, general,~~restructuring charges, net and ~~administrative costs~~asset impairments of $540 million primarily ~~due~~related to the ~~effect~~impairment of long-lived asset groups triggered by the effects of the ~~Acquisitions of $289 million~~COVID-19 global pandemic on the Company's projected financial information, global headcount and ~~an increase in acquisition~~cost reduction initiatives, and ~~spin related costs of $33 million;~~

~~an increase in depreciation~~other actions to optimize our distribution footprint and ~~amortization of $218 million primarily due to the Acquisitions;~~warehousing locations; and


•	an increase in ~~engineering, research~~goodwill and ~~development~~intangible impairment charges of $91323 million ~~primarily due to the Acquisitions;~~, which was comprised of an increase in goodwill impairment charges of $207 million, $65 million of definite-lived intangible asset impairments, and $51 million of indefinite-lived intangible asset impairments.

~~an increase in restructuring charges of $44 million related to higher costs for facility closure and other costs;~~

~~a goodwill impairment charge of $60 million as a result of our change in operating segments; and~~

~~an increase in interest expense and other financing charges of $118 million.~~

These unfavorable effects were partially offset by:

a decrease in selling, general, and administrative costs of $166 million, primarily due to $41 million in lower acquisition and expected separation costs, and the favorable effects of cost reduction initiatives implemented in response to the effects of COVID-19, including unpaid furloughs, net pay decreases, temporary support programs, and other compensation related expenses;

a decrease in engineering, research, and development of $38 million primarily due to the effects of COVID-19 and cost reduction initiatives; and

an increase in ~~equity earnings in nonconsolidated affiliates of $33 million, which was the result of the Federal-Mogul Acquisition; and~~

~~a reduction in~~ income tax ~~expense~~benefit of ~~$37 million.~~$209 million primarily resulting from the impairment charges recognized in the six months ended June 30, 2020.

Recent Trends and Market Conditions

There is inherent uncertainty in the continuation of the trends discussed below. In addition, there may be other factors or trends that can have an effect on our business. Our business and operating results are affected by the relative strength of:

General economic conditions

Our OE business is directly related to automotive vehicle production by our customers. Automotive production levels depend on a number of factors, including global and regional economic conditions. Demand for aftermarket products is driven by three primary factors: the number of vehicles in operation; the average age of vehicles; and vehicle usage trends (primarily distance traveled).

The decline in value-add revenue for the three and six months ended June 30, 2020 was $1,713 million and $2,355 million which is largely attributable to the effects of the COVID-19 global pandemic. We expect the effects of the COVID-19 outbreak will likely continue during the second half of our fiscal year and, accordingly, we cannot predict the extent to which COVID-19 will ultimately affect our business, results of operations or financial condition. As customer demand increases, we expect to face periods where payments will become due to suppliers for our existing and additional inventories to support renewed production before we have generated new receivables from customers from that renewed production. It is our intent to maintain a consistent balance between our payables and receivables during this time.

Cost reductions and other responses to COVID-19

The Company has implemented a range of actions aimed at temporarily reducing costs and preserving liquidity in response to the effects and anticipated effects to our business resulting from COVID-19 as described under “Liquidity and Capital Resources - Liquidity and Financing Arrangements”. The Company will continue to evaluate further ways to manage costs in line with reduced revenue.

Global light vehicle production levels (According to IHS Markit, July, ~~2019)~~2020)

For the three months ended June 30, 2020, global light vehicle production was down across most major markets in which we operate and down 45% overall compared to same period in the prior year. Production levels in North America declined 69%, production in South America was down 82%, Europe production decreased 62%, and India declined 86%, while China light vehicle production improved 9%.

Global light vehicle production decreased by 8%33% overall for the first half of 2020 compared to the same period in the prior year. There were significant declines globally, notably, a 40% decline in both North America and Europe, a 51% decline in both South America and India, and a decline in China of 20%.

Global commercial truck production levels (According to IHS Markit, August, 2020)

For the three months ~~ending~~ended June 30, ~~2019~~2020, global commercial truck production was down across most major markets in which we operate and down 32% overall compared to the same period in the prior year. Production ~~levels were~~decreased 73% in North America, production in Brazil was down ~~in the major markets in which we operate. North~~71%, Europe production was down 55%, and ~~South American light vehicle production decreased by 2% in each region. European production decreased by 7%~~India declined 90%, while China ~~decreased by 16% and India decreased by 12%~~was up 18%.

Global ~~light vehicle~~commercial truck production decreased by 7%29% overall for the first half of ~~2019~~2020 compared to the same period in the prior year. ~~North and South American light vehicle production decreased 3% in each region. European production decreased by 6%, while China decreased by 13% and India decreased by 7%.~~

Global commercial vehicle production decreased by 4% for the three months ending June 30, 2019 compared to the same period in the prior year. Consistent with the first quarter of 2019, commercial vehicle production increasedThere were significant declines globally, notably, a 48% decline in North America, a 35% decline in Brazil, ~~and~~a 39% decline in Europe, ~~while production~~a 1% decline in China, and ~~India declined. Commercial vehicle production in North America was up 6%, production in Brazil rose 4% and European commercial vehicle production increased 1%. China posted~~ a ~~decrease for the second quarter of 2019 of 9% and India experienced a decrease of 12%.~~

Global commercial vehicle production decreased by 4% for the first half of 2019 compared to the same period in the prior year. Production in North America was up 6%, production in Brazil rose 4% and European commercial vehicle production increased 1%. Commercial vehicle production decreased in China by 9% anddecline in India ~~by 13%~~of 74%.

Part replacement trends

The strength of our aftermarket business is influenced by several key drivers. These include the vehicle population (or ~~"parc")~~"VIO", vehicles in operation), average vehicle age, fuel prices, and vehicle distance traveled. The ~~vehicle parc~~VIO is estimated to have expanded in most major markets, including the U.S., China, and ~~Germany.~~Germany over recent years. Average vehicle ages also increased, despite growth in new vehicle sales, in most regions. Vehicle distance traveled varies by region and is sensitive to several factors, including fuel prices, and transportation alternatives.

Geopolitical risk

We conduct business globally, which subjects us to numerous risks and uncertainties including, without limitation, “Brexit” implications, joint ventures in unstable regions, and substantial new tariffs. For example, we have operations in the U.K. which may be materially affected by the U.K.'s referendum to leave the European Union, which has created uncertainty in both the U.K. and Europe. We also have an interest in a Turkish joint venture, which may be affected by recent turmoil in that region. In addition, we do business in Mexico and China where there could be potential changes in trade agreements (e.g., the North American Free Trade Agreement) and new or changed tariffs in the U.S. (such as those relating to China).

Foreign currencies

Given the global nature of our operations, we are subject to fluctuations in foreign ~~exchanges~~exchange rates and there has been significant volatility in foreign currency rates.

Business Strategy

~~The~~Many of the key components of our business strategy are ~~as follows:~~described below. As we continue to monitor and respond to the COVID-19 global pandemic, we expect that certain of these business strategies will be secondary to our attention to the pandemic and our response and mitigation measures worldwide.

Continue to optimize ~~our operations~~operational performance by aggressively pursuing cost competitiveness in all business segments and continuing to drive ~~productivity in existing operations~~cash flow generation and meet capital allocation objectives

We operate within competitive industries and our management teams continuously analyze opportunities to reduce costs and improve productivity. We assess individual opportunities to execute our strategy based upon estimated sales and margin growth, cost reduction potential, internal investment returns, and other criteria, to make investment decisions on a case-by-case basis.

~~We will~~As we continue to ~~focus on operational excellence by optimizing~~expand our ~~manufacturing footprint, further developing our engineering~~distribution and service capabilities managing the complexities of our global supply chain to realize purchasing economies of scale while satisfying diverse and global requirements, and supporting our businesses with robust information technology systems. We will make investments in our operations and infrastructure as required to achieve our strategic goals.

Weglobally, we seek to continue optimizing our performance through enhanced efficiencies in order to meet the world-class delivery performance our customers increasingly require. We have made and will continue to make investments in our global distribution network ~~through~~to maximize our ~~new multi-product distribution centers, the implementation~~manufacturing footprint and manage complexities of ~~automated picking technology,~~our supply chain. By achieving efficiency gains and ~~a more efficient replenishment system with the objective of improving inventory visibility~~cost competitiveness, we strive to generate strong cash flow and ~~availability, and lowering costs.~~meet our capital allocation objectives, including deleveraging our balance sheet.

~~Execute~~From a ~~Spin-Off Transaction~~design perspective, we will bring a lean mindset to our portfolio to ensure standardization, remove redundancies, reduce transit costs, leverage economies of scale, and optimize manufacturing productivity. We will also continually look for ways to innovate and leverage cross- and up-sell opportunities to the market through a customer-centric product development process. From a manufacturing perspective, we will maintain a continuous improvement philosophy by streamlining plant operations and our network, and executing projects to improve efficiency.

Serving our customers also requires that we compete effectively at the unit cost level, in ~~mid-2020~~

particular with OE customers. We ~~completed~~are making concerted and systematic efforts to continuously improve our position on the ~~Federal-Mogul Acquisition on October 1, 2018. We~~cost curve for each of our component part categories. In doing so, we will continue to ~~seek synergies~~be a preferred supplier to optimize the two independent companies in preparation for the anticipated separation. This optimization should present additional opportunities for cost reduction, increased profitability, and cash flow.our customers.

~~Assess~~We will be mindful of the changing market conditions that might necessitate adjustments to our resources and manufacturing capacity around the world. We will also remain committed to protecting the environment as well as the health and safety of our employees.

Pursue focused ~~acquisition and investment~~transactional opportunities, ~~that provide~~consistent with our capital allocation priorities, product line ~~expansion,~~enhancements, technological advancements, geographic positioning, penetration of emerging markets and market share growth

~~We completed the Öhlins Acquisition, a Swedish technology company~~Throughout our history, we have successfully identified and capitalized on acquisitions, alliances, and divestitures to achieve strategic growth and alignment. Through these transactions, we have (1) expanded our product portfolio with complementary technologies; (2) realized incremental business from existing customers; (3) gained access to new customers; (4) achieved leadership positions in geographic regions outside North America; and (5) re-focused on areas that ~~develops premium suspension systems and components for the automotive and motorsport industries.~~ will contribute to our profitable growth.

We intend to continue to explore strategic alliances, joint ventures, acquisitions, divestitures, and other transactions that complement, expand, enhance or ~~enhance~~realign our existing products, technology, systems development efforts, customer base and/or global presence. We are committed to developing a broader ecosystem-based approach that allows us to work with new and existing customers, suppliers, and entrants to provide timely and leading-edge solutions across the mobility market. We will align with companies that have proven products, proprietary technology, advanced research capabilities, broad geographic reach, and/or strong market positions to further strengthen our product leadership, technology position, global reach, and customer relationships.

Adapt cost structure to economic realities

We aggressively respond to difficult economic environments, ~~executing comprehensive restructuring and cost-reduction initiatives, and realigning~~aligning our operations to any resulting reductions in production levels and replacement ~~demand.~~demand and executing comprehensive restructuring and cost-reduction initiatives. Suppliers must ~~also~~ continually identify and implement product innovation and cost reduction activities to fund customer annual price concession expectations in order to retain current business ~~and~~as well as to be competitively positioned for future new business opportunities.

Original Equipment Specific Strategies

The converging forces of connectivity, autonomy, electrification, and shared mobility are spawning a new age of automotive autonomy and a unique opportunity to position our business for significant growth and profitability. We strive to strengthen our global position by designing, manufacturing, delivering, and marketing technologically innovative products and ~~systems~~solutions for OE manufacturers. The key components of our OE strategy are ~~as follows:~~described below:

Capitalize on our breadth of technology, differentiated products, and global reach to support and strengthen relationships with existing and emerging OE customers across the world

We conduct business with nearly all of the major automotive OE customers around the world. Within the highly competitive automotive parts industry, we seek to extend the significant advantages that come from our world-class global manufacturing, engineering and distribution footprint and global sourcing capabilities. This footprint enables the design, production and delivery of premium parts emphasizing quality, safety and reliability virtually anywhere in the world and also supports the continual innovation of new products, technologies, and solutions for new and existing OE customers.

Maintain technological leadership to drive further growth from secular market trends

In order to maintain our strong market positions, we are focused on meeting changing performance requirements and keeping up with emerging OE trends such as connectivity, autonomy, shared mobility, and electrification. In pursuit of delivering the ideal ride characteristics for any application, our ride performance division will leverage its innovative technology, NVH performance materials, differentiated products, and advanced system capabilities to provide innovative solutions. Aligning product lines and technical capabilities creates an ideal foundation to meet changing performance requirements for comfort and safety and again ultimately reinventing the ride of the future. The addition of Öhlins to the portfolio will accelerate the development of advanced technology suspension solutions, while also fast-tracking time to market. That acquisition is yet another example of our strategy to leverage key technologies that will better position us to take advantage of secular trends. It also enhances our portfolio in broader mobility markets through the addition of Öhlins’ range of premium OE and aftermarket automotive and motorsports performance products. In addition, our suite of mobility solutions under development represents an opportunity to drive greater partnership with OE manufacturers and broader mobility ecosystem players, creating and capturing value, and growth with higher value content per vehicle.

OE manufacturers are responding to changing end customer trends and preferences alongside their own challenging cost structures by reducing design and production complexities and investing in advanced technologies that enable vehicle electrification and autonomy. We anticipate that OE suppliers with high technology capabilities in vehicle system integration will be able to enable a more seamless transition to next-generation electric vehicles and become preferred suppliers to OE manufacturers. ~~In order~~Though many vehicle and customer requirements will evolve, we believe one of the remaining characteristics that will continue to ~~maintain~~provide differentiated experience and value in the future of mobility is the ride experience. By leveraging our ~~strong market positions, we are focused on meeting these changing requirements~~deep component level expertise as well as working with partners across the broader mobility ecosystem, our intent is to lead in the next generation development of motion management products, systems and ~~keeping up with new OE trends. In addition, our suite of~~ solutions ~~represents an opportunity~~ to ~~drive greater partnership with OE manufacturers, capturing growth with higher value content per vehicle.~~engineer the ideal ride for any customer.

Penetrate adjacent market segments

We seek to penetrate a variety of adjacent sales opportunities and achieve growth in higher-margin businesses by ~~leveraging~~applying our design, engineering and manufacturing capabilities. For example, we aggressively leverage our technology and engineering leadership in powertrain, clean air, ride performance and aftermarket into adjacent sales opportunities for heavy-duty trucks, buses, agricultural equipment, construction machinery, and other vehicles in other regions around the world.

We design and launch clean air products for commercial vehicle customers such as Caterpillar, for whom we are their global diesel clean air system integrator, John Deere, Navistar, Deutz, Daimler Trucks, Scania, Weichai Power, FAW Group, and Kubota. We also engineer and build modular NOx-reduction systems for large engines that meet standards of the International Maritime Organization, among others.

Aftermarket Specific Strategies

Our aftermarket business strategy incorporates a go-to-market model that we believe differentiates us from our competitors and creates structural support for sustained revenue growth. The model is designed to drive revenue growth by capitalizing on three of the company’s key competitive strengths: a leading portfolio of products and brands; extensive global manufacturing, distribution and service capabilities; and market intelligence gathered from the company’s distributors, installers and consumers.

We expect this distinctive go-to-market model will result in a sustainable competitive advantage, particularly as the industry trends previously mentioned disrupt the traditional aftermarket landscape and business practices. We expect the demand for replacement parts to increase ~~steadily~~ as a result of ~~the anticipated significant increase in vehicles in operation (“VIO”) through 2040,~~ the increase in the average age of VIO and the increase in the average miles driven per year. The characteristics of aftermarket sales and distribution are defined regionally, which require regionally focused strategies to address the key success factors of our customers. The key components of our aftermarket strategy are described below:

Leverage the strength of our global aftermarket leading brands positions, product portfolio and range, marketing and selling expertise, and distribution and logistics capabilities

Our aftermarket business ~~has a portfolio of~~includes multiple leading brands with strong product offerings. Our portfolio includes the industry’s most well-respected and enduring brands.

We will leverage our go-to-market model to build upon our brand strengths and grow our global aftermarket business by consistently delivering differentiated benefits, by growing our brand equity among our target end-customers, and by leveraging our broad product coverage and extensive distribution network. We ~~intend~~are in an outstanding position to capitalize on aftermarket trends and expand in ~~established~~mature markets ~~(North~~(e.g., North America, Europe, and Australia) as well as high-growth regions ~~(China,~~(i.e. China, South America, India, and Southeast and Northeast Asia). Important focus areas are enhancing our presence in high-growth markets; leveraging our portfolio and strong presence in suspension to expand our business globally; and diversifying outside of chassis with our sealing, engine and underhood products, as well as other components.

Continue to strengthen our aftermarket capabilities and product offerings in mature markets, including North America and Europe

The scale of our aftermarket business allows for strong distribution channels that significantly enhance our go-to-market capabilities across mature markets in North America and Europe. We continually rationalize our already strong distribution networks with the goal of improved customer service at a lower cost. This is achieved by continually harnessing and leveraging market intelligence and sharing information with our channel partners to drive best practices in go-to-market, manufacturing and distribution processes.

The North America and Europe go-to-market capabilities will be defined by positioning our distribution and installer partners for success. We believe this will require maintaining ~~a vast~~an extensive catalog of products to provide the ability to address customer requirements quickly and easily. ~~This~~Managing a large and complex catalog of products requires an understanding of the composition of the car parc within the regions including wear patterns, typical replacement rates based on weather, road quality, and average miles driven ~~annually, which~~annually. These compositions differ significantly by ~~region.~~region, which will affect the range and frequency of replacement part requirements. The understanding of these regional dynamics will help us provide the right parts when they are needed and achieve the industry’s best “Order to Delivery” times. We will continue to innovate product solutions that will be cost competitive and reliable, reduce install time, reduce the number of unique parts that installers need to inventory on-site, reduce the number of unique installer tools and equipment required, and improve installer safety.

In addition to having a comprehensive product offering, we also strive to maintain very close relationships with our customers and help position them for success. We have launched a series of ~~‘Tech First’~~“Tech First” initiatives to provide online, on demand, and onsite technical training and support to vehicle repair technicians who use and install our products in North America, Europe, and China and plan to expand into South America. This initiative included Garage Gurus™, a network of technical support centers that provide some of the most comprehensive training programs in the industry ~~that~~to educate our partners and customers with emerging vehicle technologies and vehicle repair operational skills. We believe it is key to our strategy to provide aftermarket parts that are simple to install and to make sure our customers have the resources to know how to install these parts properly. In having the right products and resources for our customers, we believe we will continue to be a preferred aftermarket supplier and continue to drive growth in the Americas and emerging economic areas.

Increase aftermarket position in high-growth regions, notably in Asia Pacific

The Asia Pacific region, particularly the high-growth markets of China and India, presents a significant opportunity for us to expand our business. We have made investments in distribution and in our sales force in both China and the rest of Asia to help drive growth in this increasingly important ~~region, where~~region. We must take into account the different operational requirements in Asia Pacific in order to drive aftermarket growth in this region.

The Asia Pacific light vehicle and commercial vehicle aftermarket industry is fragmented with a large number of small distributors and ~~installers.~~installers that require different strategies and solutions than more mature consolidated markets. Distribution in smaller volumes will require us to have a hub and spoke warehousing approach to compete on the basis of optimal “Order to Delivery” timeliness while maintaining a broad range of products.

Additionally, buying online is the preferred purchase method for many smaller distribution and installer partners. The sophistication of the existing online marketplaces in Asia Pacific will require us to develop adaptive and flexible omnichannel tools in order to compete effectively.

We believe that developing a competitive online platform for our Asia Pacific customers will be the foundation for us to build a digital platform that will improve our competitiveness globally.

Critical Accounting Estimates

Refer to our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, which was filed with the ~~Securities and Exchange Commission~~SEC on March ~~18, 2019. Also refer to Note 6, Goodwill and Other Intangible Assets, for additional discussion on our goodwill.~~2, 2020.

Non-GAAP Measures

~~As a result of the Federal-Mogul Acquisition, we changed our key performance measure.~~ We ~~now utilize~~use EBITDA including noncontrolling interests as the key performance measure of segment profitability and use the measure in our financial and operational ~~decision making~~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. ~~Prior period results have been conformed to reflect the change in our key performance measure.~~ 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. EBITDA including noncontrolling interests, as determined and measured by us, should not be compared to similarly titled measures reported by other companies.

RESULTS OF OPERATIONS

For the Three and Six Months Ended June 30, ~~2019~~2020 compared to the Three and Six Months Ended June 30, ~~2018~~2019

Consolidated Results of Operations

The following table presents our condensed consolidated results of ~~operations~~operations. The amounts for the three and ~~reflects~~six months ended June 30, 2019 below reflect the ~~revisions~~reclassifications to the prior period as discussed in Part I, Item ~~1 — Condensed Consolidated Financial Statements (Unaudited).~~I.


	Three Months Ended June 30,					Increase / (Decrease)					Six Months Ended June 30,					Increase / (Decrease)					Three Months Ended June 30,						Increase / (Decrease)					Six Months Ended June 30,						Increase / (Decrease)
	2019			2018		$ Change			% Change ⁽¹⁾		2019			2018		$ Change			% Change ⁽¹⁾		2020			2019			$ Change			% Change ⁽¹⁾		2020			2019			$ Change			% Change ⁽¹⁾
	(millions, except percent, share, and per share amounts)																				(millions, except percent, share, and per share amounts)
Revenues
Net sales and operating revenues	$	4,504		$	2,533	$	1,971		78	%	$	8,988		$	5,114	$	3,874		76	%	$	2,637		$	4,504		$	(1,867	)	(41	)%	$	6,473		$	8,988		$	(2,515	)	(28	)%
Costs and expenses
Cost of sales	3,793			2,134		1,659			78	%	7,657			4,327		3,330			77	%
Cost of sales (exclusive of depreciation and amortization)																					2,498			3,801			(1,303		)	(34	)%	5,837			7,671			(1,834		)	(24	)%
Selling, general, and administrative	288			154		134			87	%	604			305		299			98	%	195			292			(97		)	(33	)%	444			610			(166		)	(27	)%
Depreciation and amortization	169			60		109			182	%	338			120		218			182	%	159			169			(10		)	(6	)%	330			338			(8		)	(2	)%
Engineering, research, and development	78			39		39			100	%	170			79		91			115	%	55			78			(23		)	(29	)%	132			170			(38		)	(22	)%
Restructuring charges and asset impairments	61			29		32			110	%	85			41		44			107	%
Goodwill impairment charge	—			—		—			n/m		60			—		60			n/m
Restructuring charges, net and asset impairments																					121			49			72			147	%	605			65			540			n/m
Goodwill and intangible impairment charges																					—			—			—			—	%	383			60			323			n/m
	4,389			2,416		1,973			82	%	8,914			4,872		4,042			83	%	3,028			4,389			(1,361		)	(31	)%	7,731			8,914			(1,183		)	(13	)%
Other expense (income)
Non-service pension and other postretirement benefit costs (credits)	4			3		1			33	%	6			6		—			—	%
Equity in (earnings) losses of nonconsolidated affiliates, net of tax	(17		)	—		(17		)	n/m		(33		)	—		(33		)	n/m
Other expense (income), net	(13		)	3		(16		)	n/m		(16		)	3		(19		)	n/m
Other income (expense)
Non-service pension and other postretirement benefit (costs) credits																					1			(4		)	5			n/m		2			(6		)	8			n/m
Equity in earnings (losses) of nonconsolidated affiliates, net of tax																					4			17			(13		)	(76	)%	17			33			(16		)	(48	)%
Other income (expense), net																					11			13			(2		)	(15	)%	19			16			3			19	%
	(26		)	6		(32		)	n/m		(43		)	9		(52		)	n/m		16			26			(10		)	(38	)%	38			43			(5		)	(12	)%
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	141			111		30			27	%	117			233		(116		)	(50	)%	(375		)	141			(516		)	n/m		(1,220		)	117			(1,337		)	n/m
Interest expense	82			22		60			273	%	163			45		118			262	%	(66		)	(82		)	(16		)	(20	)%	(141		)	(163		)	(22		)	(13	)%
Earnings (loss) before income taxes and noncontrolling interests	59			89		(30		)	(34	)%	(46		)	188		(234		)	(124	)%	(441		)	59			(500		)	n/m		(1,361		)	(46		)	(1,315		)	n/m
Income tax expense (benefit)	14			26		(12		)	(46	)%	14			51		(37		)	(73	)%
Income tax (expense) benefit																					101			(14		)	115			n/m		195			(14		)	209			n/m
Net income (loss)	45			63		(18		)	(29	)%	(60		)	137		(197		)	(144	)%	(340		)	45			(385		)	n/m		(1,166		)	(60		)	(1,106		)	n/m
Less: Net income (loss) attributable to noncontrolling interests	19			16		3			19	%	31			30		1			3	%	10			19			(9		)	(47	)%	23			31			(8		)	(26	)%
Net income (loss) attributable to Tenneco Inc.	$	26		$	47	$	(21	)	(45	)%	$	(91	)	$	107	$	(198	)	(185	)%	$	(350	)	$	26		$	(376	)	n/m		$	(1,189	)	$	(91	)	$	(1,098	)	n/m
Earnings (loss) per share
Basic earnings (loss) per share:
Earnings (loss) per share	$	0.32		$	0.92						$	(1.13	)	$	2.08						$	(4.30	)	$	0.32							$	(14.64	)	$	(1.13	)
Weighted average shares outstanding	80,920,825			51,258,668							80,897,731			51,232,639							81,350,773			80,920,825								81,259,667			80,897,731
Diluted earnings (loss) per share:
Earnings (loss) per share	$	0.32		$	0.92						$	(1.13	)	$	2.07						$	(4.30	)	$	0.32							$	(14.64	)	$	(1.13	)
Weighted average shares outstanding	80,920,825			51,607,224							80,897,731			51,546,015							81,350,773			80,920,825								81,259,667			80,897,731

(1) Percentages above denoted as "n/m" are not meaningful to present in the table.

Revenues

Three-months ended: Revenues ~~increased~~decreased by ~~$1,971~~$1,867 million, or ~~78%~~41%, as compared to the three months ended June 30, ~~2018.~~2019. The ~~Acquisitions increased revenues by $1,881 million, or 74%. The remaining increase in revenues was~~ primarily ~~driven by~~driver of the ~~net favorable effects of organic growth from higher~~decrease is lower sales volume and mix of ~~$162~~$1,730 million, largely attributable to the effects of COVID-19. The remaining decrease is attributable to a decrease in revenues of $15 million, or less than 1%, related to the net effects of acquisitions and ~~the favorable effect of other of $2 million, partially offset by~~divestitures, the unfavorable effects of foreign currency exchange of ~~$74~~$108 million, and the net unfavorable effects of other of $14 million.

The table below reflects our consolidated revenues for the three months ended June 30, ~~2019~~2020 and ~~2018~~2019 (amounts in millions):


Three-months ended June 30, 2018	$	2,533
Acquisitions	1,881
Three months ended June 30, 2019				$	4,504
Acquisitions and divestitures, net				(15		)
Drivers in the change of organic revenues:
Volume and mix	162			(1,730		)
Currency exchange rates	(74		)	(108		)
Others	2			(14		)
Three-months ended June 30, 2019	$	4,504
Three months ended June 30, 2020				$	2,637

Six-months ended: Revenues ~~increased~~decreased by ~~$3,874~~$2,515 million, or ~~76%~~28%, as compared to the six months ended June 30, ~~2018.~~2019. The ~~Acquisitions increased revenues by $3,816 million, or 75%. The remaining increase in revenues was primarily driven by~~primary driver of the ~~net favorable effects of organic growth from higher~~decrease is lower sales volume and mix of ~~$251~~$2,229 million, largely attributable to the effects of COVID-19. The remaining decrease is attributable to a decrease in revenues of $60 million, or less than 1%, related to the net effects of acquisitions and ~~the favorable effect of other of $8 million, partially offset by~~divestitures, the unfavorable effects of foreign currency exchange of ~~$201~~$205 million, and the net unfavorable effects of other of $21 million.

The table below reflects our consolidated revenues for the six months ended June 30, ~~2019~~2020 and ~~2018~~2019 (amounts in millions):


Six months ended June 30, 2018	$	5,114
Acquisitions	3,816
Six months ended June 30, 2019				$	8,988
Acquisitions and divestitures, net				(60		)
Drivers in the change of organic revenues:
Volume and mix	251			(2,229		)
Currency exchange rates	(201		)	(205		)
Others	8			(21		)
Six months ended June 30, 2019	$	8,988
Six months ended June 30, 2020				$	6,473

Cost of ~~Sales~~sales

Three-months ended: Cost of sales ~~increased~~decreased by ~~$1,659~~$1,303 million, or ~~78%~~34%, as compared to the three months ended June 30, ~~2018.~~2019. The ~~Acquisitions increased cost~~primary driver of the decrease is lower costs resulting from lower sales ~~by $1,569~~volume of $1,233 million, ~~or 74%.~~largely attributable to the effects of COVID-19. The remaining ~~increase~~decrease is attributable to a decrease in cost of sales ~~was primarily driven by incremental costs~~of $12 million, or less than 1%, related to ~~higher sales volume~~the net effects of acquisitions and ~~mix~~divestitures, the favorable effects of ~~$164~~foreign currency exchange of $92 million, and the net favorable effects of other costs of $50 million. This was partially offset by the unfavorable effects of materials sourcing of $2 million ~~partially offset by a favorable effect of foreign currency exchange of $61 million~~ and a ~~decrease~~non-cash charge of $82 million related to the write-down of inventory in ~~other costs of $15 million.~~the Motorparts segment in connection with its initiative to rationalize its supply chain and distribution network.

The table below reflects our consolidated cost of sales for the three months ended June 30, ~~2019~~2020 and ~~2018~~2019 (amounts in millions):


Three months ended June 30, 2018	$	2,134
Acquisitions	1,569
Drivers in the change of organic revenues:
Three months ended June 30, 2019				$	3,801
Acquisitions and divestitures, net				(12		)
Drivers in the change of organic cost of sales:
Volume and mix	164			(1,233		)
Material	2			2
Currency exchange rates	(61		)	(92		)
Inventory write-down				82
Others	(15		)	(50		)
Three months ended June 30, 2019	$	3,793
Three months ended June 30, 2020				$	2,498

Six-months ended:Cost of sales ~~increased~~decreased by ~~$3,330~~$1,834 million, or ~~77%~~24%, as compared to the six months ended June 30, ~~2018.~~2019. The ~~Acquisitions increased cost~~primary driver of the decrease is from lower sales ~~by $3,202~~volume of $1,618 million, ~~or 74%.~~largely attributable to the effects of COVID-19. The remaining ~~increase~~decrease is attributable to a decrease in cost of sales ~~was primarily driven by incremental costs~~of $55 million, or less than 1%, related to ~~higher sales volume~~the net effects of acquisitions and ~~mix of $256 million,~~divestitures, the ~~unfavorable~~favorable effects of materials sourcing of $9$22 million, the favorable effects of foreign currency exchange of $181 million, and ~~an increase in~~the net favorable effects of other costs of ~~$25 million, which~~$40 million. This was partially offset by a ~~favorable effect~~non-cash charge of ~~foreign currency exchange~~$82 million related to the write-down of ~~$162 million.~~inventory in the Motorparts segment in connection with its initiative to rationalize its supply chain and distribution network.

The table below reflects our consolidated cost of sales for the six months ended June 30, ~~2019~~2020 and ~~2018~~2019 (amounts in millions):


Six months ended June 30, 2018	$	4,327
Acquisitions	3,202
Drivers in the change of organic revenues:
Six months ended June 30, 2019				$	7,671
Acquisitions and divestitures, net				(55		)
Drivers in the change of organic cost of sales:
Volume and mix	256			(1,618		)
Material	9			(22		)
Currency exchange rates	(162		)	(181		)
Inventory write-down				82
Others	25			(40		)
Six months ended June 30, 2019	$	7,657
Six months ended June 30, 2020				$	5,837

Selling, general, and administrative (SG&A)

Three-months ended: SG&A ~~increased~~decreased by ~~$134~~$97 million asto $195 million compared to $292 million for the three months ended June 30, ~~2018.~~2019. The ~~increase~~decrease was primarily due to ~~the effect of the Acquisitions of $141~~$18 million ~~and an increase~~ in lower acquisition and ~~spin related~~expected separation costs, and the favorable effects of ~~$7 million, partially offset by a decrease of $7 million in~~ cost reduction ~~initiatives.~~initiatives implemented in response to the effects of COVID-19, including unpaid furloughs, net pay decreases, temporary support programs, and other compensation related expenses during the three months ended June 30, 2020.

Six-months ended: SG&A ~~increased~~decreased by ~~$299~~$166 million asto $444 million compared to $610 million for the six months ended June 30, ~~2018.~~2019. The ~~increase~~decrease was primarily due to ~~the effect of the Acquisitions of $289~~$41 million ~~an increase~~ in lower acquisition and ~~spin related~~expected separation costs, ~~of $33 million,~~ and ~~an increase related to spending for~~the favorable effects of cost reduction initiatives implemented in response to the effects of ~~$1 million.~~COVID-19, including unpaid furloughs, net pay decreases, temporary support programs, and other compensation related expenses during the six months ended June 30, 2020.

Depreciation and amortization

Three-months ended: Depreciation and amortization ~~increased~~decreased by ~~$109~~$10 million to $159 million as compared to $169 million for the three months ended June 30, ~~2018. The increase was due~~2019, primarily attributable to the ~~effect~~impairments on property, plant, and equipment recognized in the first quarter of ~~the Acquisitions.~~2020.

Six-months ended: Depreciation and amortization ~~increased~~ decreasedby ~~$218~~$8 million to $330 millionascompared to $338 millionfor the six months ended June 30, ~~2018. The increase was due~~2019, primarily attributable to the ~~effect~~impairments on property, plant, and equipment recognized in the first quarter of ~~the Acquisitions.~~2020.

Engineering, research, and development

Three-months ended: Engineering, research, and development decreased by $23 million to $55 million as compared to $78 million for the three months ended June 30, 2019. The decrease was due primarily to the effects of COVID-19 and the favorable effects of cost reduction initiatives.

Six-months ended: Engineering, research, and development decreased by $38 million to $132 million as compared to $170 million for the six months ended June 30, 2019. The decrease was due primarily to the effects of COVID-19 and the favorable effects of cost reduction initiatives.

Restructuring charges, net and asset impairments

Three-months ended: Restructuring charges, net and asset impairments increased by ~~$39~~$72 million to $121 million as compared to $49 million for the three months ended June 30, 2019. The increase is primarily attributable to an increase of $45 million for cash severance costs expected to be paid as part of global headcount and cost reduction actions across all segments and regions; asset impairments charges in the Motorparts segment of $25 million related to its initiative to rationalize its supply chain and distribution network; and asset impairment charges of $3 million in the Powertrain segment in connection with certain plant relocations and closures during the three months ended June 30, 2020. In addition, there was a decrease of $1 million in other asset impairments for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019.

Six-months ended:Restructuring charges, net and asset impairments increased by $540 million to $605 million as compared to $65 million for the six months ended June 30, 2019. The increase is primarily attributable to property, plant, and equipment asset impairments in the Ride Performance segment of $455 million; an increase of $42 million for cash severance costs expected to be paid as part of global headcount and cost reduction actions across all segments and regions; asset impairment charges in the Motorparts segment of $25 million related to its initiative to rationalize its supply chain and distribution network; asset impairment charges of $3 million in the Powertrain segment in connection with certain plant relocations and closures; and an asset impairment charge of $17 million for operating lease right-of-use assets in the corporate component during the six months ended June 30, 2020. In addition, there was a decrease of $2 million in other asset impairments for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019.

Goodwill and intangible impairment charges

Three-months ended: There was no goodwill and intangible impairment charge recorded in either the three months ended June 30, 2020 and 2019.

Six-months ended:Goodwill and intangible impairment charges increased by$323 million to $383 million as compared to $60 million for the six months ended June 30, 2019. The increase is primarily attributable to $267 million of goodwill impairment charges, $65 million of definite-lived intangible asset impairments, and $51 million of indefinite-lived intangible asset impairments during the six months ended June 30, 2020, which was the result of the effects of COVID-19. This compared to a $60 million goodwill impairment charge for the six months ended June 30, 2019, which was the result of a reorganization of reporting units within the Motorparts and Ride Performance segments.

Non-service pension and postretirement benefit (costs) credits

Three-months ended: Non-service pension and postretirement benefit (costs) credits increased by $5 million to a net credit of $1 million as compared to a net cost of $4 million for the three months ended June 30, 2019. The change was primarily attributable to a decrease in the discount rate and lower amortization, which was partially offset by a decrease in the long-term rate of return.

Six-months ended: Non-service pension and postretirement benefit (costs) credits increased by $8 million to a net credit of $2 million as compared to a net cost of $6 million for the six months ended June 30, 2019. The change was primarily attributable to a decrease in the discount rate, which was partially offset by a decrease in the long-term rate of return.

Equity in earnings (losses) of nonconsolidated affiliates, net of tax

Three-months ended: Equity in earnings (losses) of nonconsolidated affiliates, net of tax decreased by $13 million as compared to the three months ended June 30, ~~2018.~~2019. The ~~increase was due~~decrease is primarily attributable to the ~~effect~~effects of the ~~Acquisitions.~~COVID-19 global pandemic on the equity in earnings (losses) of our nonconsolidated affiliates located in Turkey, Korea, and the U.S.

Six-months ended:~~Engineering, research, and development increased~~Equity in earnings (losses) of nonconsolidated affiliates, net of tax decreased by ~~$91~~$16 million as compared to the six months ended June 30, ~~2018.~~2019. The ~~increase was due~~decrease is primarily attributable to the ~~effect~~effects of the ~~Acquisitions.~~COVID-19 global pandemic on the equity in earnings (losses) of our nonconsolidated affiliates located in Turkey, Korea, and the U.S.

~~Restructuring charges and asset impairments~~Other income (expense), net

Three-months ended: ~~Restructuring charges increased~~Other income (expense), net decreased by ~~$32~~$2 million as compared to the three months ended June 30, ~~2018. The increase~~2019. This is primarily attributable to ~~higher costs related~~a decrease in income from an EPA mandate to ~~facility closure and other costs incurred~~which we were the beneficiary during the three months ended June 30, 2020 as compared to the three months ended June 30, 2019.

Six-months ended:~~Restructuring charges~~Other income (expense), net increased by ~~$44~~$3 million as compared to the six months ended June 30, ~~2018. The increase~~2019. This is primarily attributable to ~~higher costs related~~an increase in income from an EPA mandate to ~~facility closure and other costs incurred~~which we were the beneficiary during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019.

~~Goodwill impairment charge~~Interest expense

Three-months ended: ~~There was no goodwill impairment charge recorded in the three months ended June 30, 2019, and resulted in no change~~Interest expense decreased by $16 million as compared to the three months ended June 30, ~~2018.~~

~~Six-months ended:~~ ~~During~~2019. The decrease was primarily attributable to lower interest rates on our variable rate debt, slightly offset by interest expense on higher borrowings on the ~~six months ended June 30, 2019, there was reorganization~~revolver. Interest expense includes financing charges on sales of ~~reporting units within the Aftermarket, Ride Performance, and Motorparts segments,~~accounts receivable, which ~~resulted in a goodwill impairment of $60~~decreased by $2 million ~~all of which was within the Ride Performance segment.~~

~~Non-service pension and postretirement benefit costs (credits)~~

~~Three-months ended:~~ ~~Non-service pension and postretirement benefit costs (credits) increased $1 million for the three months ended June 30, 2019~~ as compared to the three months ended June 30, ~~2018.~~2019.

Six-months ended: Interest expense decreased by $22 million as compared to the six months ended June 30, 2019. The ~~Federal-Mogul Acquisition increased non-service pension and postretirement benefit costs by $3 million, which~~decrease was ~~partially~~primarily attributable to lower interest rates on our variable rate debt, slightly offset by interest expense on higher borrowings on the ~~recognition~~revolver. Interest expense includes financing charges on sales of $2accounts receivable, which decreased by $4 million as compared to the six months ended June 30, 2019.

Income tax (expense) benefit

Three-months ended: Income tax benefit increased by $115 million to an income tax benefit of $101 million as compared to an income tax expense of $14 million in ~~prior service credits during~~the three months ended June 30, 2019. Income tax (expense) benefit for the three months ended June 30, 2020 differs from the U.S. statutory tax rate due primarily to pre-tax income taxed at rates higher than the U.S. statutory tax rate and pre-tax losses with no tax benefit.

Six-months ended: Income tax benefit increased by $209 million to an income tax benefit of $195 million as compared to an income tax expense of $14 million in the six months ended June 30, 2019. Income tax (expense) benefit for the six months ended June 30, 2020 differs from the U.S. statutory tax rate due primarily to $111 million of tax benefit recognized related to asset impairment charges, pre-tax income taxed at rates higher than the U.S. statutory tax rate, and pre-tax losses with no tax benefit.

Net income (loss)

Three-months ended: Net loss increased by $385 million to a net loss of $340 million as compared to a net income of $45 million for the three months ended June 30, 2019 as a result of the ~~plan amendment recognized at December 31, 2018 for one of our postretirement medical benefits plan.~~aforementioned items.

Six-months ended:~~Non-service pension and postretirement benefit costs (credits) remained consistent for the six months ended June 30, 2019~~Net loss increased by $1,106 million to a net loss of $1,166 million as compared to a net loss of $60 million for the six months ended June 30, 2018. The Federal-Mogul Acquisition increased non-service pension and postretirement benefit costs by $5 million, which was partially offset by the recognition of $4 million in prior service credits during the six months ended June 30, 2019 as a result of the ~~plan amendment recognized at December 31, 2018 for one of our postretirement medical benefit plans.~~

~~Equity in (earnings) losses of nonconsolidated affiliates, net of tax~~

~~Three-months ended:~~ Equity in (earnings) losses of nonconsolidated affiliates, net of tax increased by $17 million as compared to the three months ended June 30, 2018. The increase was due to the Federal-Mogul Acquisition.

~~Six-months ended:~~ ~~Equity in (earnings) losses of nonconsolidated affiliates, net of tax increased by $33 million as compared to the six months ended June 30, 2018. The increase was due to the Federal-Mogul Acquisition.~~

~~Other expense (income), net~~

~~Three-months ended:~~ Other income, net increased by $16 million as compared to the three months ended June 30, 2018. The Acquisitions increased other income, net by $7 million. Excluding the Acquisitions, the increase was primarily attributable to income from an Environmental Protection Agency ("EPA") mandate to which we were a party.

~~Six-months ended:~~ Other income, net increased by $19 million as compared to the six months ended June 30, 2018. The Acquisitions increased other income, net by $12 million. Excluding the Acquisitions, the increase was primarily attributable to income from an EPA mandate to which we were a beneficiary.

~~Interest expense~~

~~Three-months ended:~~ Interest expense increased by $60 million as compared to the three months ended June 30, 2018. The increase was primarily attributable to higher interest expense pertaining to the five-year $1,700 million term loan A facility and the seven-year $1,700 million term loan B facility that were entered into in connection with the Federal-Mogul Acquisition, and interest expense on the debt assumed in the Federal-Mogul Acquisition.

Interest expense includes financing charges on sales of accounts receivable, which increased by $4 million as compared to the three months ended June 30, 2018. The increase is primarily attributable to the Federal-Mogul Acquisition.

~~Six-months ended:~~ Interest expense increased by $118 million as compared to the six months ended June 30, 2018. The increase was primarily attributable to higher interest expense pertaining to the five-year $1,700 million term loan A facility and the seven-year $1,700 million term loan B facility that were entered into in connection with the Federal-Mogul Acquisition, and interest expense on the debt assumed in the Federal-Mogul Acquisition.

Interest expense includes financing charges on sales of accounts receivable, which increased by $9 million as compared to the six months ended June 30, 2018. The increase is primarily attributable to the Federal-Mogul Acquisition.

~~Income tax expense (benefit)~~

~~Three-months ended:~~ ~~Income tax expense decreased by $12 million as compared to the three months ended June 30, 2018. The decrease was primarily attributable to a decrease in pre-tax earnings.~~

~~Six-months ended:~~ ~~Income tax expense decreased by $37 million as compared to the six months ended June 30, 2018. The decrease was primarily attributable to a decrease in pre-tax earnings.~~

~~Net income (loss)~~

~~Three-months ended:~~ ~~Net income decreased by $18 million to $45 million for the three months ended June 30, 2019 as compared to $63 million of net income for the three months ended June 30, 2018, as result of the~~ aforementioned items.

~~Six-months ended:~~ Net income decreased by $197 million to a net loss of $60 million for the six months ended June 30, 2019 as compared to $137 million of net income for the six months ended June 30, 2018, as result of the aforementioned items.

Earnings (loss) before interest expense, income taxes, noncontrolling interests, and depreciation and amortization (“EBITDA including noncontrolling interests”)

The following table presents the reconciliation from ~~net income (loss) attributable to Tenneco Inc. to~~ EBITDA including noncontrolling interests to net income (loss) for the three and six months ended June 30, ~~2019~~2020 and ~~2018~~2019 (amounts in millions):


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Total EBITDA including noncontrolling interests	$	310		$	171		$	455		$	353
Depreciation and amortization	(169		)	(60		)	(338		)	(120		)
EBITDA including noncontrolling interests:
Clean Air													$	17		$	152		$	116		$	283
Powertrain													(62		)	100			(132		)	213
Ride Performance													(70		)	26			(647		)	(19		)
Motorparts													(52		)	110			(92		)	155
Corporate													(49		)	(78		)	(135		)	(177		)
Depreciation													(159		)	(169		)	(330		)	(338		)
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	141			111			117			233			(375		)	141			(1,220		)	117
Interest expense	(82		)	(22		)	(163		)	(45		)	(66		)	(82		)	(141		)	(163		)
Income tax (expense) benefit	(14		)	(26		)	(14		)	(51		)	101			(14		)	195			(14		)
Net income (loss)	45			63			(60		)	137			$	(340	)	$	45		$	(1,166	)	$	(60	)
Less: Net income (loss) attributable to noncontrolling interests	19			16			31			30
Net income (loss) attributable to Tenneco Inc.	$	26		$	47		$	(91	)	$	107

~~Three-months ended:~~ See "Segment Results of Operations" for further information on EBITDA including noncontrolling interests increased by $139 million as compared to the three months ended June 30, 2018, as a result of the aforementioned items. See "Non-GAAP Measures" for further discussion on the use of non-GAAP measures.

~~Six-months ended:~~ EBITDA including noncontrolling interests increased by $102 million as compared to the six months ended June 30, 2018, as a result of the aforementioned items. See "Non-GAAP Measures" for further discussion on the use of non-GAAP measures.interests.

Segment Results of Operations

Overview of Net Sales and Operating Revenues

Our Clean Air segment has substrate sales. Substrates are porous ceramic filters coated with a catalyst - typically, precious metals such as platinum, palladium and rhodium. We do not manufacture substrates, as they are supplied to us by Tier 2 suppliers generally as directed by our OE customers. We generally earn a small margin on these components of the system. These substrate components have been increasing as a percentage of our revenue as the need for more sophisticated emission control solutions increases to meet more stringent environmental regulations, and as we capture more diesel aftertreatment business. While these substrates dilute our gross margin percentage, they are a necessary component of an emission control system.

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

We disclose substrate sales amounts because we believe investors utilize this information to understand the effect of this portion of our revenues on our overall business and because it removes the effect of potentially volatile precious metals pricing from our revenues. While our OE customers generally assume the risk of precious metals pricing volatility, it affects our reported revenues.

The table below reflects our segment revenues for the three months ended June 30, ~~2019~~2020 and ~~2018~~2019 (amounts in millions):

Segment Revenue

New Tenneco DRiV

Clean Air Powertrain Ride Performance Motorparts Total Revenues
Three months ended June 30, 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
Revenues $ 1,827
$ 1,694
$ 1,133
$ —
$ 709
$ 506
$ 835
$ 333
$ 4,504
$ 2,533

—

Value-add revenues 1,050
1,073
1,133
—
709
506
835
333
3,727
1,912
Currency effect on value-add revenue (31 ) —
—
—
(20 ) —
(8 ) —
(59 ) —
Value-add revenue excluding currency $ 1,081
$ 1,073
$ 1,133
$ —
$ 729
$ 506
$ 843
$ 333
$ 3,786
$ 1,912

Substrate sales $ 777
$ 621
$ —
$ —
$ —
$ —
$ —
$ —
$ 777
$ 621
Effect of Acquisitions $ —
$ —
$ 1,133
$ —
$ 221
$ —
$ 527
$ —
$ 1,881
$ —



	Segments
	Clean Air					Powertrain					Ride Performance					Motorparts					Total Revenues
For the Three Months Ended June 30,	2020			2019		2020			2019		2020			2019		2020			2019		2020			2019
Revenues	$	1,140		$	1,827	$	602		$	1,133	$	336		$	709	$	559		$	835	$	2,637		$	4,504

Value-add revenues	517			1,050		602			1,133		336			709		559			835		2,014			3,727
Currency effect on value-add revenue	(16		)	—		(35		)	—		(15		)	—		(27		)	—		(93		)	—
Value-add revenue excluding currency	$	533		$	1,050	$	637		$	1,133	$	351		$	709	$	586		$	835	$	2,107		$	3,727

Substrate sales	$	623		$	777	$	—		$	—	$	—		$	—	$	—		$	—	$	623		$	777

The table below reflects our segment revenues for the six months ended June 30, ~~2019~~2020 and ~~2018~~2019 (amounts in millions):

Segment Revenue
New Tenneco DRiV
Clean Air Powertrain Ride Performance Motorparts Total Revenues
Six months ended June 30, 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
Revenues $ 3,606
$ 3,450
$ 2,308
$ —
$ 1,442
$ 1,019
$ 1,632
$ 645
$ 8,988
$ 5,114

Value-add revenues 2,123
2,177
2,308
—
1,442
1,019
1,632
645
7,505
3,841
Currency effect on value-add revenue (82 ) —
—
—
(51 ) —
(26 ) —
(159 ) —
Value-add revenue excluding currency $ 2,205
$ 2,177
$ 2,308
$ —
$ 1,493
$ 1,019
$ 1,658
$ 645
$ 7,664
$ 3,841

Substrate sales $ 1,483
$ 1,273
$ —
$ —
$ —
$ —
$ —
$ —
$ 1,483
$ 1,273
Effect of Acquisitions $ —
$ —
$ 2,308
$ —
$ 465
$ —
$ 1,043
$ —
$ 3,816
$ —



	Segments
	Clean Air					Powertrain					Ride Performance					Motorparts					Total Revenues
For the Six Months Ended June 30,	2020			2019		2020			2019		2020			2019		2020			2019		2020			2019
Revenues	$	2,685		$	3,606	$	1,599		$	2,308	$	924		$	1,442	$	1,265		$	1,632	$	6,473		$	8,988

Value-add revenues	1,362			2,123		1,599			2,308		924			1,442		1,265			1,632		5,150			7,505
Currency effect on value-add revenue	(35		)	—		(61		)	—		(32		)	—		(46		)	—		(174		)	(28		)
Value-add revenue excluding currency	$	1,397		$	2,123	$	1,660		$	2,308	$	956		$	1,442	$	1,311		$	1,632	$	5,324		$	7,533

Substrate sales	$	1,323		$	1,483	$	—		$	—	$	—		$	—	$	—		$	—	$	1,323		$	1,483

Segment Revenue

Clean Air

Three-months ended: Clean Air revenue ~~increased $133~~decreased $687 million, or 8%38%, as compared to the three months ended June 30, ~~2018. Higher~~2019. While higher sales volumes in Asia Pacific resulted in revenue growth, this improvement was more than offset by lower sales volumes primarily in North America, South America and Europe for light vehicle ~~sales~~ and ~~commercial truck~~off-highway and other revenues ~~contributed $183~~contributing a net $646 million to the ~~increase, while~~decrease. In addition, foreign currency exchange had a ~~$46~~$31 million unfavorable effect on Clean Air ~~revenues.~~revenue while other unfavorable effects decreased revenue by $10 million.

~~Six-Months~~Six-months ended:Clean ~~Air~~air revenue ~~increased $156~~decreased $921 million, or 5%26%, as compared to the six months ended June 30, ~~2018. Higher~~2019. While higher sales volumes in Asia Pacific resulted in revenue growth, this improvement was more than offset by lower sales volumes primarily in North America, South America and Europe for light vehicle and ~~commercial truck sales contributed $287~~off-highway and other revenues contributing a net $834 million to the ~~increase, while~~decrease. In addition, foreign currency exchange had a ~~$124~~$66 million unfavorable effect on Clean Air ~~revenues.~~revenue while other unfavorable effects decreased revenue by $21 million.

Powertrain

~~Three~~Three-months ended: Powertrain revenue decreased $531 million, or 47%, as compared to the three months ended June 30, 2019. Lower light vehicle, commercial truck, industrial, off-highway and other vehicle revenue contributed $489 million to the decrease, foreign currency exchange had a $35 million unfavorable effect on Powertrain revenue, while other unfavorable effects decreased revenue by $7 million.

Six-months ended: ~~As a result of the Federal-Mogul Acquisition,~~ Powertrain revenue ~~was $1,133~~decreased$709 million ~~and $2,308 million for~~, or 31%, as compared to the ~~three and~~ six months ended June 30, 2019 ~~respectively.~~. Lower light vehicle, commercial truck, industrial, off-highway and other vehicle revenue contributed $634 million to the decrease, foreign currency exchange had a $61 million unfavorable effect on Powertrain revenue, while other unfavorable effects decreased revenue by $14 million.

Ride Performance

Three-months ended: Ride Performance revenue ~~increased $203~~decreased $373 million, or ~~40%~~53%, as compared to the three months ended June 30, ~~2018. The Acquisitions increased revenue by $221 million. Excluding the Acquisitions, revenue decreased by $18~~2019. Lower light vehicle, commercial truck and off-highway and other vehicle revenues contributed $354 million ~~due~~ to the ~~unfavorable effects~~decrease, as well as a decrease in revenues from divestitures of $2 million, foreign currency exchange ~~of $20~~had a $15 million ~~and net~~ unfavorable ~~volume and mix of $1 million, partially offset~~effect on Ride Performance revenue, while other unfavorable effects decreased revenue by ~~net favorable other of $3~~$2 million.

Six-months ended: Ride ~~Performance~~performance revenue ~~increased $423~~decreased$518 million, or ~~42%~~36%, as compared to the six months ended June 30, ~~2018. The Acquisitions increased revenue by $465 million. Excluding the Acquisitions, revenue decreased by $42~~2019. Lower light vehicle, commercial truck and off-highway and other vehicle revenues contributed $460 million ~~due~~ to the ~~unfavorable effects~~decrease, as well as a decrease in revenues from divestitures of $21 million, foreign currency exchange ~~of $51~~had a $32 million ~~partially offset~~unfavorable effect on Ride Performance revenue, while other unfavorable effects decreased revenue by ~~net favorable volume and mix of~~ $5 ~~million and $4 million favorable other.~~million.

Motorparts

Three-months ended: Motorparts revenue ~~increased $502~~decreased $276 million, or ~~151%~~33%, as compared to the three months ended June 30, ~~2018. The Federal-Mogul Acquisition increased revenue by $527 million. Excluding the Federal-Mogul Acquisition, revenue decreased by $25~~2019. Lower volume contributed $241 million ~~due~~ to the ~~net unfavorable effects~~decrease, as well as a decrease in revenues from divestitures of ~~$20~~$13 million, ~~from lower volume~~ and ~~the unfavorable effects of~~ foreign currency exchange ~~of $8~~had a $27 million unfavorable effect on Motorparts revenues. The unfavorable effects were partially offset by ~~$3 million~~other net favorable ~~other.~~effects of $5 million.

Six-months ended:Motorparts revenue ~~increased $987~~decreased$367 million, or ~~153%~~22%, as compared to the six months ended June 30, ~~2018. The Federal-Mogul Acquisition increased revenue by $1,043 million. Excluding~~2019. Lower volume contributed $301 million to the ~~Federal-Mogul Acquisition, revenue decreased by $56~~decrease, as well as a decrease in revenues from divestitures of $39 million, ~~which was due to unfavorable volume~~ and ~~mix of $41 million and the unfavorable effects of~~ foreign currency exchange ~~of $26~~had a $46 million unfavorable effect on Motorparts revenues. The unfavorable effects were partially offset by ~~$11 million~~other net favorable effects of ~~other.~~$19 million.

~~Earnings before Interest Expense, Income Taxes, Noncontrolling Interests and Depreciation and Amortization (“~~EBITDA including noncontrolling ~~interests”)~~interests

The following table presents the EBITDA including noncontrolling interests by segment for the three and six months ended June 30, ~~2019~~2020 and ~~2018~~2019 (amounts in millions):

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

⁽¹⁾ ~~See "Non-GAAP Measures" for further discussion on the use of non-GAAP measures.~~



	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30			Six Months Ended June 30
	2020			2019		2020			2019			2020 vs 2019 Change			2020 vs 2019 Change
EBITDA including noncontrolling interests by segment:
Clean Air	$	17		$	152	$	116		$	283		$	(135	)	$	(167	)
Powertrain	$	(62	)	$	100	$	(132	)	$	213		$	(162	)	$	(345	)
Ride Performance	$	(70	)	$	26	$	(647	)	$	(19	)	$	(96	)	$	(628	)
Motorparts	$	(52	)	$	110	$	(92	)	$	155		$	(162	)	$	(247	)

Clean Air

Three-months ended: Clean Air EBITDA including noncontrolling interests ~~increased $10~~decreased $135 million as compared to the three months ended June 30, ~~2018.~~2019. The ~~increase~~decrease is primarily attributable to ~~strong light vehicle~~lower sales volume and ~~commercial truck sales,~~unfavorable mix, partially offset by lower selling, general, and administrative costs ~~and improved operating efficiencies, offset by unfavorable foreign exchange.~~during the three months ended June 30, 2020 as compared to the three months ended June 30, 2019.

Six-months ended: Clean Air EBITDA including noncontrolling interests decreased ~~$16~~$167 million as compared to the six months ended June 30, ~~2018.~~2019. The decrease is primarily attributable to ~~unfavorable operating performance, incremental costs for process harmonization, higher restructuring costs,~~lower sales volume and unfavorable ~~effects of foreign currency exchange,~~mix, partially offset by ~~stronger light vehicle~~favorable operating performance and ~~commercial truck~~lower selling, general, and administrative costs during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019.

Powertrain

Three-months ended: Powertrain EBITDA including noncontrolling interests decreased $162 million as compared to the three months ended June 30, 2019. The decrease is primarily attributable to lower sales volume and unfavorable mix, and an increase in cash severance charges expected to be paid of $19 million that was recognized during the three months ended June 30, 2020 as compared to the three months ended June 30, 2019. These unfavorable factors were partially offset by favorable operating performance and lower selling, general, and administrative costs.

~~Powertrain~~

~~Three and~~ Six-months ended:~~As a result of the Federal-Mogul Acquisition,~~ Powertrain EBITDA including noncontrolling interests ~~was $100~~decreased $345 million ~~and $213 million for~~as compared to the ~~three and~~ six months ended June 30, ~~2019, respectively.~~2019. The decrease is primarily attributable to lower sales volume and unfavorable mix, an increase in cash severance charges expected to be paid of $19 million, and a goodwill impairment charge in the amount of $160 million recognized during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. These unfavorable factors were partially offset by favorable operating performance and lower selling, general, and administrative costs.

Ride Performance

~~Three-Months~~Three-months ended: Ride Performance EBITDA including noncontrolling interests ~~increased $6~~decreased $96 million as compared to the three months ended June 30, ~~2018. The Acquisitions contributed $9 million of additional EBITDA, thus resulting in a total decrease of $3 million without Acquisitions.~~2019. The decrease is primarily attributable to ~~incremental restructuring costs and the unfavorable effects of foreign currency,~~lower sales volume, partially ~~offset by net favorable volume and mix and lower one-time selling, general and administrative costs.~~

~~Six-Months ended:~~ Ride Performance EBITDA including noncontrolling interests decreased $63 million as compared to the six months ended June 30, 2018. While the Acquisitions contributed $17 million of additional EBITDA, this increase is more than offset by a goodwill impairment charge of $60 million taken in the six months ended June 30, 2019 as a result of an operating segment reorganization. Also contributing to the decrease in EBITDA was unfavorable operating performance, higher selling, general, administrative and engineering costs, and the unfavorable effects of foreign currency, which were partially offset by net favorable volume and mix.

~~Motorparts~~

~~Three-months ended:~~ Motorparts EBITDA including noncontrolling interests increased $55 million compared to the three months ended June 30, 2018. The Federal-Mogul Acquisition contributed $75 million of EBITDA including noncontrolling interests to the second quarter 2019 results. The increase in EBITDA attributable to the acquisition was offset primarily by an unfavorable warranty charge, incremental purchase accounting charges, unfavorable operating performance, net unfavorable volume and mix and incremental restructuring charges.

~~Six-months ended:~~ Motorparts EBITDA including noncontrolling interests increased $55 million as compared to the six months ended June 30, 2018. The Federal-Mogul Acquisition contributed $142 million of EBITDA including noncontrolling interests to the results for the six months ended June 30, 2019. The increase in EBITDA attributable to the acquisition was offset primarily by purchase accounting charges, unfavorable performance, net unfavorable volume and mix, incremental costs associated with a warranty charge, and costs associated with process harmonization.

~~Corporate~~

~~Three-months ended:~~ Corporate EBITDA including noncontrolling interests decreased $32 million as compared to the three months ended June 30, 2018. The decrease is primarily attributable to higher acquisition and spin costs and higher corporate costs post Federal-Mogul Acquisition, offset by lower selling, general, and administrative costs.

Six-months ended: ~~Corporate~~Ride Performance EBITDA including noncontrolling interests decreased ~~$87~~$628 million as compared to the six months ended June 30, ~~2018.~~2019. The decrease is primarily attributable to ~~higher acquisition~~asset impairment charges of $455 million and ~~spin costs~~goodwill and ~~higher corporate costs post Federal-Mogul Acquisition,~~intangible impairment charges of $113 million recognized during the six months ended June 30, 2020 as compared to a goodwill impairment charge of $60 million recognized during the six months ended June 30, 2019. Also contributing to the decrease is lower sales volume and unfavorable mix, partially offset by lower selling, general, and administrative costs.

Motorparts

Three-months ended: Motorparts EBITDA including noncontrolling interests decreased $162 million as compared to the three months ended June 30, 2019. The decrease is primarily attributable to lower sales volumes, a non-cash charge to cost of sales of $82 million related to the write-down of inventory recognized in connection with its initiative to rationalize its supply chain and distribution network, and the recognition of restructuring related asset impairment charges of $25 million during the three months ended June 30, 2020 as compared to the three months ended June 30, 2019. These unfavorable factors were partially offset by favorable operating performance and lower selling, general, and administrative costs.

Six-months ended: Motorparts EBITDA including noncontrolling interests decreased $247 million as compared to the six months ended June 30, 2019. The decrease is primarily attributable to lower sales volumes, goodwill and intangible impairment charges of $110 million, a non-cash charge to cost of sales of $82 million related to the write-down of inventory recognized in connection with its initiative to rationalize its supply chain and distribution network, and the recognition of restructuring related asset impairment charges of $25 million during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. These unfavorable factors were partially offset by favorable operating performance and lower selling, general, and administrative costs.

The EBITDA including noncontrolling interests results shown in the preceding table include the following items, certain of which may have an effect on the comparability of EBITDA including noncontrolling interests results between periods (amounts in millions):

Reportable Segments
Clean Air Powertrain Ride Performance Motorparts Total Corporate Reclass & Elims Total
Three Months Ended June 30, 2019
Costs to achieve synergies ⁽¹⁾

Restructuring related to synergy initiatives $ —
$ 1
$ (1 ) $ 4
$ 4
$ —
$ —
$ 4
Other cost to achieve synergies —
1
—
—
1
2
—
3
Total costs to achieve synergies —
2
(1 ) 4
5
2
—
7

Restructuring and related expenses

Other restructuring charges 14
16
23
2
55
—
—
55
Asset impairments 1
—
—
1
2
—
—
2
Total restructuring and related expenses 15
16
23
3
57
—
—
57

Cost reduction initiatives ⁽²⁾
—
—
—
—
—
2
—
2
Acquisition and expected spin costs ⁽³⁾
—
—
—
1
1
26
—
27
Process harmonization⁽⁴⁾
1
—
—
—
1
—
—
1
Purchase accounting charges ⁽⁵⁾
—
—
2
1
3
—
—
3
Warranty charge ⁽⁷⁾
—
—
—
7
7
—
—
7
Total adjustments $ 16
$ 18
$ 24
$ 16
$ 74
$ 30
$ —
$ 104



	Reportable Segments
	Clean Air			Powertrain		Ride Performance		Motorparts			Total		Corporate		Total
Three Months Ended June 30, 2020
Restructuring charges, net	$	22		$	36	$	18	$	15		$	91	$	1	$	92
Restructuring related costs	(1		)	1		11		2			13		—		13
Inventory write-down⁽¹⁾	—			—		—		82			82		—		82
Asset impairments restructuring related	—			3		—		25			28		—		28
Other non-restructuring asset impairments	—			1		—		(1		)	—		1		1
Acquisition and expected separation costs ⁽²⁾	—			—		—		—			—		8		8
Total adjustments	$	21		$	41	$	29	$	123		$	214	$	10	$	224

Reportable Segments
Clean Air Powertrain Ride Performance Motorparts Total Corporate Reclass & Elims Total
Three Months Ended June 30, 2018
Costs to achieve synergies ⁽¹⁾

Restructuring related to synergy initiatives $ 6
$ —
$ —
$ —
$ 6
$ 2
$ —
$ 8
Other cost to achieve synergies —
—
—
1
1
—
—
1
Total costs to achieve synergies 6
—
—
1
7
2
—
9

Restructuring and related expenses

Other restructuring charges 11
—
8
2
21
—
—
21
Asset impairments —
—
—
—
—
—
—
—
Total restructuring and related expenses 11
—
8
2
21
—
—
21

Cost reduction initiatives —
—
10
—
10
—
—
10
Acquisition and expected spin costs ⁽³⁾
—
—
—
18
—
18
Environmental charge ⁽⁶⁾
—
—
—
—
—
4
—
4
Total adjustments $ 17
$ —
$ 18
$ 3
$ 38
$ 24
$ —
$ 62

(1) Non-cash charge to write-down inventory in the Motorparts segment in connection with its initiative to rationalize its supply chain and distribution network.

(2) Costs related to acquisitions and costs related to expected separation.



	Reportable Segments
	Clean Air		Powertrain		Ride Performance		Motorparts		Total		Corporate		Total
Three Months Ended June 30, 2019
Costs to achieve synergies ⁽¹⁾	$	—	$	1	$	—	$	—	$	1	$	2	$	3
Restructuring and related expenses	14		17		22		6		59		—		59
Other non-restructuring asset impairments	1		—		—		1		2		—		2
Cost reduction initiatives⁽²⁾	—		—		—		—		—		2		2
Acquisition and expected separation costs ⁽³⁾			—		—		1		1		26		27
Process harmonization ⁽⁴⁾	1		—		—		—		1		—		1
Purchase accounting adjustments ⁽⁵⁾	—		—		2		1		3		—		3
Warranty charge ⁽⁶⁾	—		—		—		7		7		—		7
Total adjustments	$	16	$	18	$	24	$	16	$	74	$	30	$	104

(1) Cost to achieve synergies related to the Acquisitions.

(2) Costs related to cost reduction initiatives.

(3) Costs related to ~~the Acquisitions~~acquisitions and costs related to expected ~~spin.~~separation.

(4) ~~Change~~Charge due to process harmonization.

(5) This primarily relates to a non-cash charge to cost of goods sold for the amortization of the inventory fair value step-up recorded as part of the Acquisitions.

(6) ~~Not used in the table above.~~

~~(7)~~ Charge related to warranty. Although we regularly incur warranty costs, this specific charge is of an unusual nature in the period incurred.

~~(8) Environmental~~



	Reportable Segments
	Clean Air		Powertrain		Ride Performance		Motorparts			Total		Corporate		Total
Six Months Ended June 30, 2020
Restructuring charges, net	$	22	$	37	$	24	$	17		$	100	$	5	$	105
Restructuring related costs	—		—		30		3			33		1		34
Inventory write-down⁽¹⁾	—		—		—		82			82		—		82
Asset impairments restructuring related	—		3		—		25			28		—		28
Other non-restructuring asset impairments	—		1		455		(1		)	455		17		472
Acquisition and expected separation costs ⁽²⁾	4		—		—		—			4		29		33
Goodwill and intangibles impairment charge	—		160		113		110			383		—		383
Total adjustments	$	26	$	201	$	622	$	236		$	1,085	$	52	$	1,137

(1) Non-cash charge to write-down inventory in the Motorparts segment in connection with its initiative to rationalize its supply chain and distribution network.

(2) Costs related to ~~an acquired site whereby an indemnification reverted back~~acquisitions and costs related to ~~the Company resulting from a 2009 bankruptcy filing of Mark IV Industries.~~expected separation.

Reportable Segments
Clean Air Powertrain Ride Performance Motorparts Total Corporate Reclass & Elims Total
Six Months Ended June 30, 2019
Costs to achieve synergies ⁽¹⁾

Restructuring related to synergy initiatives $ 1
$ 1
$ 2
$ 7
$ 11
$ —
$ —
$ 11
Other cost to achieve synergies —
1
—
—
1
2
—
3
Total costs to achieve synergies 1
2
2
7
12
2
—
14

Restructuring and related expenses
Other restructuring charges 18
17
33
3
71
1
—
72
Asset impairments 1
—
—
1
2
—
—
2
Total restructuring and related expenses 19
17
33
4
73
1
—
74

Cost reduction initiatives ⁽²⁾
—
—
—
—
—
10
—
10
Acquisition and expected spin costs ⁽³⁾
—
—
—
1
1
66
—
67
Process harmonization⁽⁴⁾
5
—
—
5
10
—
—
10
Purchase accounting charges ⁽⁵⁾
—
2
5
37
44
—
—
44
Goodwill impairment charge ⁽⁶⁾
—
—
60
—
60
—
—
60
Warranty charge ⁽⁷⁾
—
—
—
—
7
7
—
—
7
Total adjustments $ 25
$ 21
$ 100
$ 61
$ 207
$ 79
$ —
$ 286



	Reportable Segments
	Clean Air		Powertrain		Ride Performance		Motorparts		Total		Corporate		Total
Six Months Ended June 30, 2019
Costs to achieve synergies ⁽¹⁾	$	—	$	1	$	—	$	—	$	1	$	2	$	3
Restructuring and related expenses	19		18		35		10		82		1		83
Other non-restructuring asset impairments	1		—		—		1		2		—		2
Cost reduction initiatives ⁽²⁾	—		—		—		—		—		10		10
Acquisition and expected separation costs ⁽³⁾	—		—		—		1		1		66		67
Process harmonization ⁽⁴⁾	5		—		—		5		10		—		10
Purchase accounting charges ⁽⁵⁾	—		2		5		37		44		—		44
Goodwill impairment charge ⁽⁶⁾	—		—		60		—		60		—		60
Warranty charge ⁽⁷⁾	—		—		—		7		7		—		7
Total adjustments	$	25	$	21	$	100	$	61	$	207	$	79	$	286

Reportable Segments
Clean Air Powertrain Ride Performance Motorparts Total Corporate Reclass & Elims Total
Six months ended June 30, 2018
Costs to achieve synergies ⁽¹⁾

Restructuring related to synergy initiatives $ 6
$ —
$ —
$ —
$ 6
$ 2
$ —
$ 8
Other cost to achieve synergies —
—
—
1
1
—
—
1
Total costs to achieve synergies 6
—
—
1
7
2
—
9

Restructuring and related expenses
Other restructuring charges 12
—
17
4
33
—
—
33
Asset impairments —
—
—
—
—
—
—
—
Total restructuring and related expenses 12
—
17
4
33
—
—
33

Cost reduction initiatives ⁽²⁾
—
—
10
—
10
—
10
Warranty charge ⁽³⁾
—
—
5
—
5
5
Environmental charge ⁽⁶⁾
—
—
—
—
—
4
—
4
Acquisition and expected spin costs ⁽³⁾
—
—
—
—
—
31
—
31
Total adjustments $ 18
$ —
$ 32
$ 5
$ 55
$ 37
$ —
$ 92

(1) Cost to achieve synergies related to the Acquisitions.

(2) Costs related to cost reduction initiatives.

(3) Costs related to ~~the Acquisitions~~acquisitions and costs related to expected ~~spin.~~separation.

(4) ~~Change~~Charge due to process harmonization.

(5) This primarily relates to a non-cash charge to cost of goods sold for the amortization of the inventory fair value step-up recorded as part of the Acquisitions.

(6) Post segment reorganization impairment of goodwill.

(7) Charge related to warranty. Although we regularly incur warranty costs, this specific charge is of an unusual nature in the period incurred.

~~(8) Environmental charge related to an acquired site whereby an indemnification reverted back to the Company resulting from a 2009 bankruptcy filing of Mark IV Industries.~~

Liquidity and Capital Resources

Liquidity and Financing Arrangements

The COVID-19 global pandemic has negatively affected the global economy, disrupted global supply chains, and created extreme volatility and disruptions to capital and credit markets in the global financial markets. We believe our liquidity position continues to be adequate. However, with the recent economic downturn related to COVID-19, we expect to see lower revenue and lower earnings, putting pressure on our liquidity position. As customer demand increases, we expect to face periods where payments will become due to our suppliers for our existing and additional inventories needed to support renewed production before we have generated new receivables from customers from that renewed production. It is our intent to maintain a consistent balance between our payables and receivables during this time.

We have implemented a range of actions aimed at temporarily reducing costs and preserving liquidity in response to the effects and anticipated effects to our business resulting from COVID-19. These measures include:

Temporarily suspending or reducing operations;

As discussed in more detail in Note 10, Debt and Other Financing Arrangements and below, we entered into an amendment to our senior credit facility to increase the maximum leverage ratio and decrease the minimum interest coverage ratio;

At June 30, 2020, we had liquidity of $1.4 billion comprised entirely of cash and we have fully utilized our $1.5 billion revolving credit facility;

For the second quarter of 2020, overall salary costs were reduced at least 25% through a combination of unpaid furloughs, net pay decreases, and available temporary support programs in all regions Tenneco does business. Additionally, the executive leadership team (the CEO and direct staff) had reduced their salaries by 50%-100%;

For the third quarter, overall salary costs will be reduced 10-20% through a combination of unpaid furloughs, net pay decreases, and temporary support programs in all regions we do business, subject to potential restorations or further reductions based on business conditions;

We reduced our headcount globally, and plan further reductions subject to negotiation with works councils in certain jurisdictions, beginning in the second quarter of 2020 and expect these actions to be completed during 2020. We recorded a charge of $92 million for the second quarter of 2020 in connection with cash severance costs expected to be paid;

Capital expenditures in 2020 are expected to approximate $380 million. This is a reduction from previous guidance of 2020 expenditures between $610 to $650 million and 2019 expenditures of more than $700 million;

Utilizing applicable and appropriate provisions under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) including deferral of our portion of the 2020 FICA payroll taxes which will be repaid in 2021 and 2022, payroll tax credits, and deferral of our U.S. qualified pension plan contributions;

The Tenneco Board of Directors annual retainer fees were reduced by 25% effective for the third quarter of 2020 and will be reduced for the remainder of year; and

In the second quarter of 2020, we deferred payments and extended payment terms with certain suppliers and other business partners to address the working capital issues described above, including delayed collections from customers of $150 million to $200 million, and accordingly deferred or delayed cash outlays as necessary and practical. These deferred payments approximated $235 million at the end of the second quarter of 2020.

On May 5, 2020, we entered into a third amendment to our credit agreement to increase the maximum leverage ratio and decrease the minimum interest coverage ratio. At June 30, 2020, we are in compliance with all financial covenants under the credit agreement. There are many uncertainties related to COVID-19 that could negatively affect our results of operations, financial position, and cash flows. After considering the effect of COVID-19 on our 2020 forecast, we believe we will comply with these financial covenants, as required by our amended credit agreement. The amendment is discussed in more detail below.

We believe cash flows from operations, combined with our cash on hand, will be sufficient to meet our future capital requirements, including debt amortization, capital expenditures, pension contributions, and other operational requirements, for the following year based on our current estimates and forecasts. We believe we will maintain compliance with the new financial ratios set forth in the amended credit agreement. However, our ability to meet the financial covenants depends upon a number of operational and economic factors, including the effects of COVID-19, many of which are beyond our control. In the event we are unable to meet these financial covenants, we would consider several options to meet our cash flow needs. Such actions include additional restructuring initiatives and other cost reductions, sales of assets, reductions to working capital and capital spending, issuance of equity, and other alternatives to enhance our financial and operating position. We also continue to actively monitor credit market conditions to identify opportunities from both a shareholder and company perspective.

Credit Facilities

The table below shows our borrowing capacity on committed credit facilities ~~as of~~at June 30, ~~2019~~2020 (amounts in billions):

Credit Facilities as of June 30, 2019
Term
Available^(b)
Tenneco Inc. revolving credit facility ^(a)
2023 $ 1.2
Tenneco Inc. Term Loan A 2023 —
Tenneco Inc. Term Loan B 2025 —
Subsidiaries’ credit agreements 2020 0.2
$ 1.4



	Committed Credit Facilities at June 30, 2020
	Term	Available^(b)
Tenneco Inc. revolving credit facility ^(a)	2023	$	—
Tenneco Inc. Term Loan A	2023	—
Tenneco Inc. Term Loan B	2025	—
Subsidiaries’ credit agreements	2020 - 2028	—
		$	—


^(a)	We are 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 June 30, 2019, the revolving credit facility had $20 million in letters of credit outstanding.~~

~~In addition,~~We also have $65 million of outstanding letters of credit under our uncommitted facilities at June 30, 2020.

At June 30, 2020, we had ~~cash and cash equivalents~~liquidity of ~~$384 million and $697 million as~~$1.4 billion comprised entirely of cash. At June 30, ~~2019 and December 31, 2018.~~2020, we have fully utilized our $1.5 billion revolving credit facility.

Term Loans

We 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.~~Acquisition, which has been amended by the first amendment, dated February 14, 2020 (the “First Amendment”), by the second amendment, dated February 14, 2020 (the “Second Amendment”), and by the third amendment, dated May 5, 2020 (the "Third Amendment"). The New Credit Facility consists of $4.9 billion of total debt financing, consisting of a five-year $1.5 billion revolving credit facility, a five-year $1.7 billion term loan A facility ("Term Loan A") and a seven-year $1.7 billion term loan B facility ("Term Loan B"). We paid $8 million in one-time fees in connection with the First Amendment and Second Amendment, and $10 million in one-time fees in connection with the Third Amendment.

New Credit Facility — Interest Rates and Fees

The Third Amendment provides for an increase to the margin applicable to borrowings under the revolving credit facility and the Term Loan A facility at certain leverage levels as set forth below as one of several conditions for obtaining less restrictive financial maintenance covenants described below under New Credit Facility — Other Terms and Conditions:



Consolidated net leverage ratio	Interest rate
greater than 6.0 to 1	LIBOR plus 2.50%
less than 6.0 to 1 and greater than 4.5 to 1	LIBOR plus 2.25%

Initially, and so long as our corporate family rating is Ba3 (with a stable outlook) or higher from Moody’s Investors Service, Inc. (“Moody’s”) and BB- (with a stable outlook) or higher from Standard & Poor’s Financial Services LLC (“S&P”), the interest rate on borrowings under the Term Loan B facility will be LIBOR plus 2.75%; at any time the foregoing conditions are not satisfied, the interest rate on the Term Loan B facility will be LIBOR plus 3.00%. When the Term Loan B facility is no longer outstanding and we, and our subsidiaries, have no other secured indebtedness (with certain exceptions set forth in the New Credit Facility), and upon us achieving and maintaining two or more corporate credit and/or corporate family ratings higher than or equal to BBB- from S&P, BBB- from Fitch Ratings Inc. (“Fitch”) and/or Baa3 from Moody’s (in each case, with a stable or positive outlook), the collateral under the New Credit Facility may be released. On June 3, 2019, Moody’s lowered our corporate family rating to B1 and the interest rate on borrowings under the term loan B was raised to LIBOR plus 3.00%.

New Credit Facility — Other Terms and Conditions— After giving effect to the Third Amendment, we must comply with certain less restrictive financial maintenance covenants for the revolving credit facility and the Term Loan A facility. The financial maintenance covenants are subject to several covenant reset triggers (“Covenant Reset Triggers”) that limit certain activities of ours by implementing more restrictive affirmative and negative covenants. If a Covenant Reset Trigger occurs, the financial maintenance covenants revert back to the financial maintenance covenants in effect immediately prior to the Third Amendment (and described above) (the “Prior Financial Covenants”). The financial maintenance covenants include (i) a requirement to have a senior secured leverage ratio (as defined in the New Credit Facility), with step-downs, as detailed in the table below; (ii) a requirement to have a consolidated net leverage ratio (as defined in the New Credit Facility), with step-downs, as follows:



(i) Senior secured net leverage ratio		(ii) Consolidated net leverage ratio
not greater than 6.75 to 1	at June 30, 2020	not greater than 4.50 to 1	at March 31, 2020
not greater than 9.50 to 1	at September 30, 2020	not greater than 5.25 to 1	at March 31, 2022
not greater than 8.75 to 1	at December 31, 2020	not greater than 4.75 to 1	at June 30, 2022
not greater than 8.25 to 1	at March 31, 2021	not greater than 4.25 to 1	at September 30, 2022
not greater than 4.50 to 1	at June 30, 2021	not greater than 3.75 to 1	thereafter
not greater than 4.25 to 1	at September 30, 2021
not greater than 4.00 to 1	at December 31, 2021

and (iii) 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 2.00 to 1 as of June 30, 2020, 1.50 to 1 through March 31, 2021, and 2.75 to 1 thereafter.

We may make a one-time election to revert back to the Prior Financial Covenants and terminate the Covenant Reset Triggers upon delivery of a covenant reset certificate that attests to compliance with the Prior Financial Covenants as of the end of the relevant fiscal period (“Covenant Reset Certificate”). Refer to Note 10, Debt and Other Financing Arrangements included in Part I, Item I for additional details.

After giving effect to the Third Amendment, so long as no default exists under its New Credit Facility, we would be permitted to (i) make regularly scheduled interest and principal payments as and when due in respect of the Senior Unsecured Notes, (ii) refinance the Senior Unsecured Notes with the net cash proceeds of permitted refinancing indebtedness (as defined in the New Credit Facility); (iii) make payments in respect of the Senior Unsecured Notes in an amount equal to the net cash proceeds of qualified capital stock (as defined in the New Credit Facility) issued after May 5, 2020; (iv) convert any Senior Unsecured Notes into qualified capital stock issued after May 5, 2020; and (v) make additional payments of the Senior Unsecured Notes provided that after giving effect to such additional payments the consolidated leverage ratio would be equal to or less than 2.00 to 1 after giving effect to such additional payments. The foregoing limitations regarding repayment and refinancing of the Senior Unsecured Notes and such incremental equivalent debt apply from the effectiveness of the Third Amendment until delivery of a Covenant Reset Certificate.

The covenants in the New Credit Facility generally prohibit us from repaying certain subordinated indebtedness. So long as no default exists, we would, under our New Credit Facility, be permitted to repay or refinance our subordinated indebtedness (i) with the net cash proceeds of permitted refinancing indebtedness (as defined in the New Credit Facility); (ii) in an amount equal to the net cash proceeds of qualified capital stock (as defined in the New Credit Facility) issued after October 1, 2018; (iii) in exchange for qualified capital stock issued after October 1, 2018; and (iv) with additional payments provided that such additional payments are capped based on a pro forma consolidated leverage ratio after giving effect to such additional payments.

The financial ratios required under the New Credit Facility and the actual ratios we calculated as of June 30, 2020 for the second quarter of 2020, are as follows: leverage ratio of 4.57 actual versus 6.75 (maximum) required; and interest coverage ratio of 4.23 actual versus 2.00 (minimum) required.

Senior Notes

We have 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"). We ~~also~~ have 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").

~~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.

The financial ratios required under the New Credit Facility and the actual ratios we calculated as of June 30, 2019 for the second quarter of 2019, are as follows: leverage ratio of 3.39 actual versus 4.00 (maximum) required; and interest coverage ratio of 5.77 actual versus 2.75 (minimum) required.

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 our 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, our consolidated fixed charge coverage ratio, as calculated on a pro forma basis, be greater than 2.00, as well as containing restrictions on ~~its~~our 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 our existing and future material domestic wholly owned subsidiaries fully and unconditionally guarantee ~~its~~our Senior Unsecured Notes and Senior Secured Notes on a joint and several basis. There are no significant restrictions on the ability of the subsidiaries that have guaranteed our Senior Notes to make distributions to us.

~~As of June 30, 2019, we were in compliance with all of our financial covenants.~~

Accounts Receivable Securitization and Factoring

On-Balance Sheet Arrangements —

We have securitization programs for some of our accounts receivable, with limited recourse provisions. Borrowings on these securitization programs, which are recorded in short-term debt, at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 are as follows (amounts in millions):

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



	June 30, 2020		December 31, 2019
Borrowings on securitization programs	$	3	$	4

Off-Balance Sheet Arrangements —

We have an accounts receivable factoring program in the U.S. with a commercial bank. Under this program we sell receivables from certain of our U.S. OE customers at a rate that is favorable versus our senior credit facility. This arrangement is uncommitted and provides for cancellation by the commercial bank with no less than 30 days prior written notice. In addition, we have two other receivable factoring programs in the U.S. with commercial banks under which we sell receivables from certain of our aftermarket customers to whom we have extended payment terms. Both arrangements are uncommitted and may be terminated with 10 days prior notice for one program and 30 days prior notice for the other program.

We also have subsidiaries in several countries in Europe that are parties to accounts receivable factoring facilities. The commitments for these arrangements are generally for one year, but some may be canceled with notice 90 days prior to renewal. In some instances, the arrangement provides for cancellation by the applicable financial institution at any time upon notification.

Certain of these programs ~~in Europe include~~have deferred purchase price ~~arrangements.~~

arrangements with the banks. These programs provide us with access to cash at costs that are generally favorable to alternative sources of financing, and allow us to reduce borrowings under our revolving credit agreement. If we were not able to factor receivables under these programs, our borrowings under our revolving credit agreement might increase, although this could be partially mitigated by exercising our right to shorten payment terms with certain of the aftermarket customers whose receivables we sell under the U.S. factoring programs in the event that those factoring programs are terminated.financing.

In the U.S and Canada, we participate in supply chain financing programs with certain of our aftermarket customers to whom we have extended payment terms whereby the accounts receivable are satisfied through the early receipt of negotiable financial instruments that are payable at a later date when payments from our customers are due. We sell these financial instruments before their maturity date to various financial institutions at a discount.

If these supply chain financing programs were terminated or the financial institutions that currently participate in these programs were to reduce their purchases of drafts, our borrowings under our revolving credit agreement might increase, although this could be partially mitigated by exercising our right to shorten payment terms with certain of the aftermarket customers whose drafts we sell under the U.S. and Canadian programs in the event that those programs are terminated or otherwise reduced.

The accounts receivables under the programs described above 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. We are the servicer of the receivables under some of these arrangements and are responsible for performing all accounts receivable administration functions. Where we receive 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.

June 30, 2019 December 31, 2018
Accounts receivable outstanding and derecognized $ 1.1
$ 1.0

~~The~~2019. In addition, the deferred purchase price receivable ~~as of~~was $38 million and $33 million at June 30, ~~2019~~2020 and December 31, ~~2018 is as follows (amounts in millions):~~

June 30, 2019 December 31, 2018
Deferred purchase price receivable $ 52
$ 154
2019.

Proceeds from the factoring of accounts receivable qualifying as sales ~~are as follows (amounts in billions):~~

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Proceeds from factoring qualifying as sales $ 1.3
$ 0.7
$ 2.5
$ 1.5
and drafting programs was $0.7 billion and $1.3 billion for the three months ended June 30, 2020 and 2019 and was $1.9 billion and $2.5 billion for the six months ended June 30, 2020 and 2019.

Financing charges associated with the factoring of receivables are as follows (amounts in millions):

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).



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Loss on sale of receivables^(a)	$	4	$	6	$	10	$	14

^(a)Amount is included in "Interest expense" in the condensed consolidated statements of income (loss).

Supply Chain Financing

Certain of our suppliers participate in supply chain financing programs under which they securitize their accounts receivables from us. Financial institutions participate in the supply chain financing program on an uncommitted basis and can cease purchasing receivables or drafts from our suppliers at any time. IfWe are in the ~~financial institutions did not continue to purchase receivables or drafts from our suppliers under~~process of winding down these programs and expect to end them by the ~~participating vendors may have a need to renegotiate their payment terms with us which in turn could cause our borrowings under our revolving credit facility to increase.~~end of 2020.

~~Capital Requirements~~

We believe cash flows from operations, combined with our cash on hand (subject to our proportionate share and any applicable withholding taxes upon repatriation of cash balances from our foreign operations) and available borrowing capacity described above (assuming we maintain compliance with the financial covenants and other requirements of our senior credit facility agreement) will be sufficient to meet our future capital requirements, including debt amortization, capital expenditures, pension contributions, and other operational requirements, for the following year. Our ability to meet the financial covenants depends upon a number of operational and economic factors, many of which are beyond our control. In the event we are unable to meet these financial covenants, we would consider several options to meet our cash flow needs. Such actions include additional restructuring initiatives and other cost reductions, sales of assets, reductions to working capital and capital spending, issuance of equity and other alternatives to enhance our financial and operating position. Should we be required to implement any of these actions to meet our cash flow needs, we believe we can do so in a reasonable time frame.

Cash Flows

Operating Activities

Operating activities for the six months ended June 30, ~~2019~~2020 and ~~2018~~2019 were as follows (amounts in millions):


	Six Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2020			2019
Operational cash flow before changes in operating assets and liabilities	$	312		$	267		$	(172	)	$	312

Changes in operating assets and liabilities:
Receivables	(401		)	(233		)	174			(401		)
Inventories	101			(51		)	292			101
Payables and accrued expenses	48			206			(540		)	48
Accrued interest and income taxes	(66		)	(2		)
Accrued interest and accrued income taxes							(17		)	(66		)
Other assets and liabilities	(94		)	(109		)	(68		)	(94		)
Total change in operating assets and liabilities	(412		)	(189		)	(159		)	(412		)
Net cash provided (used) by operating activities	$	(100	)	$	78
Net cash (used) provided by operating activities							$	(331	)	$	(100	)

~~Cash~~Net cash used by operations for the six months ended June 30, ~~2019~~2020 was ~~$100~~$331 million, ~~a decrease~~an increase of ~~$178~~$231 million compared to the six months ended June 30, ~~2018.~~2019. The ~~net decrease~~activity was ~~primarily~~ the result of:

an increase in net cash ~~flows~~ used by ~~the operations~~operating activities before operating assets and liabilities of ~~the Federal-Mogul Acquisition, of approximately $75~~$484 million; and

a net decrease of ~~$103~~$253 million in net cash used by operating activities due to ~~unfavorable~~favorable changes in working capital items, ~~and performance (excluding~~benefited by the ~~Federal-Mogul Acquisition).~~deferral of approximately $235 million in accounts payable at June 30, 2020.

Furthermore, as a result of lower demand, the Company benefited by selling existing inventory without replenishing inventory levels. Net cash used by operating activities was negatively affected by a reduction in proceeds generated from factoring receivables due to the decline in sales.

Investing Activities

Investing activities for the six months ended June 30, ~~2019~~2020 and ~~2018~~2019 were as follows (amounts in millions):


	Six Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2020			2019
Proceeds from sale of assets	$	5		$	5		$	5		$	5
Net proceeds from sale of business	22			—			—			22
Cash payments for property, plant, and equipment	(379		)	(174		)	(212		)	(379		)
Acquisition of business, net of cash acquired	(158		)	—
Acquisitions, net of cash acquired							—			(158		)
Proceeds from deferred purchase price of factored receivables	147			66			91			147
Other	(1		)	2			1			(1		)
Net cash used by investing activities	$	(364	)	$	(101	)
Net cash (used) provided by investing activities							$	(115	)	$	(364	)

~~Cash~~Net cash used by investing activities for the six months ended June 30, ~~2019 included~~2020 decreased primarily due to a decrease in cash ~~paid~~payments for ~~the Ohlins Acquisition~~property, plant, and equipment of ~~$158~~$167 million and no cash payments for acquisitions, offset by a decrease in net proceeds from ~~the~~ sale of ~~the wipers~~a business of $22 million ~~included in our Motorparts segment. See Note 3, Acquisitions~~ and ~~Divestitures for additional details. In addition, there was an increase in~~ proceeds from deferred purchase price of factored receivables of ~~$81 million, primarily attributable to the Federal-Mogul Acquisition.~~$56 million.

Cash payments for property, plant, and equipment were ~~$379~~$212 million and ~~$174~~$379 million for the six months ended June 30, ~~2019~~2020 and 2018. The increase is primarily attributable to the Federal-Mogul Acquisition. These cash payments were primarily related to capital expenditures to invest in new facilities, upgrade existing products, continue new product launches, and infrastructure and equipment at our facilities to support our manufacturing, distribution, and cost reduction efforts, as well as software-related expenditures.2019.

Financing Activities

Financing activities for the six months ended June 30, ~~2019~~2020 and ~~2018~~2019 were as follows (amounts in millions):


	Six Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2020			2019
Proceeds from term loans and notes	$	111		$	9		$	96		$	111
Repayments of term loans and notes	(190		)	(28		)	(133		)	(190		)
Debt issuance costs of long-term debt							(16		)	—
Borrowings on revolving lines of credit	4,525			2,669			4,821			4,525
Payments on revolving lines of credit	(4,254		)	(2,614		)	(3,536		)	(4,254		)
Issuance (repurchase) of common shares	(2		)	(1		)	(1		)	(2		)
Cash dividends	(20		)	(25		)	—			(20		)
Net increase (decrease) in bank overdrafts	(8		)	(7		)	59			(8		)
Other	(1		)	(22		)	(1		)	(1		)
Distributions to noncontrolling interest partners	(20		)	(28		)	(2		)	(20		)
Net cash provided (used) by financing activities	$	141		$	(47	)
Net cash (used) provided by financing activities							$	1,287		$	141

~~Cash flow~~Net cash provided by financing activities was $1,287 million for the six months ended June 30, 2020. This included net repayments on term loans of $37 million and net borrowings on revolving lines of credit of $1,285 million.

Net cash provided by financing activities was $141 million for the six months ended June 30, 2019. This included net repayments on term loans of $79 million and net borrowings on revolving lines of credit of $271 ~~million, and $1 million in borrowings on accounts receivable securitization programs.~~million.

Cash flow used by financing activities was $47 million for the six months ended June 30, 2018. This included net repayments on term loans of $19 million, net borrowings on revolving lines of credit of $55 million, and $22 million in borrowings on accounts receivable securitization programs.

Dividends on Common Stock

We ~~suspended the quarterly dividend in the second quarter of 2019. For~~did not pay dividends during the six months ended June 30, ~~2019, a dividend of $0.25 per share was paid, or $20 million in the aggregate. The first quarter dividend~~2020. This was a decrease of $5$20 million as compared to the six months ended June 30, ~~2018,~~2019, due to the suspension of the dividend program in the second quarter 2019.

Supplemental Guarantor Financial Information

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.

Summarized Financial Information

The following tables present summarized financial information for the Parent and the Guarantors on a combined basis after the elimination of (a) intercompany transactions and balances among the Parent and the Guarantors and (b) the equity in earnings from and investments in any subsidiary that is a Nonguarantor:

Income Statements



	Six Months Ended June 30,			Year Ended December 31,
	2020			2019
Net sales and operating revenues	$	2,654		$	6,390
Operating expenses	$	3,461		$	6,885
Net income (loss)	$	(762	)	$	(498	)
Net income (loss) attributable to Tenneco Inc.	$	(762	)	$	(498	)

Balance Sheets



	June 30, 2020			December 31, 2019
ASSETS
Current assets	$	1,896		$	1,947
Non-current assets	$	2,666		$	3,089

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities	$	1,143		$	1,347
Non-current liabilities	$	7,354		$	6,102
Intercompany due to (due from)	$	(368	)	$	107

Environmental Matters, Legal Proceedings and Product Warranties

Note 13, Commitments and Contingencies in our condensed consolidated financial statements located in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain global market risks, including foreign currency exchange rate risk, commodity price risk, interest rate risk associated with our debt, and equity price risk associated with our share-based compensation awards.

Foreign Currency Exchange Rate Risk

We manufacture and sell our products in North America, South America, Asia, Europe, and Africa. As a result, our 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 we manufacture and sell our products. We generally try to use natural hedges within our foreign currency activities, including the matching of revenues and costs, to minimize foreign currency exchange rate risk. Where natural hedges are not in place, we consider managing certain aspects of our 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, Singapore dollar, Thailand bhat, South African rand, Mexican peso, and Canadian dollar.

Foreign Currency Forward Contracts—

We enter into foreign currency forward purchase and sale contracts to mitigate our exposure to changes in exchange rates on certain intercompany and third-party trade receivables and payables. In managing our foreign currency exposures, we identify and ~~aggregates~~aggregate existing offsetting positions and then hedge residual exposures through third-party derivative contracts. The ~~gain~~gains or ~~loss~~losses on these contracts ~~is recorded~~are recognized as foreign currency gains (losses) within cost of sales in the condensed consolidated statements of income (loss). The fair value of foreign currency forward contracts ~~are~~is recorded in ~~"Prepayments~~prepayments and other current ~~assets"~~assets or ~~"Accrued~~accrued expenses and other current ~~liabilities"~~liabilities in the condensed consolidated balance sheets. The fair value of these derivative instruments is not considered material to the ~~Company's foreign currency forward contracts was a net asset position of less than $1 million at June 30, 2019 and December 31, 2018.~~condensed consolidated financial statements.

The following table summarizes by position the notional amounts for foreign currency forward contracts ~~as of~~at June 30, ~~2019~~2020 (all of which mature in ~~2019)~~2020):

Notional Amount
Long position $ (26 )
Short position $ 26



	Notional Amount
Long positions	$	54
Short positions	$	(54	)

Interest Rate Risk

Our financial instruments that are sensitive to market risk for changes in interest rates are primarily our debt securities. We use our revolving credit facility to finance our short-term and long-term capital requirements. We pay a current market rate of interest on these borrowings. Our long-term capital requirements have been financed with long-term debt with original maturity dates ranging from five to ten years. OnAt June 30, ~~2019,~~2020, we had $1.6 billion par value of fixed rate debt and ~~$4.0~~$3.6 billion par value of floating rate debt. In addition, borrowings on our revolving credit facility of $1.5 billion are subject to variable rates. Of the fixed rate debt, ~~$472~~$466 million is fixed through 2022, ~~$623~~$618 million is fixed through 2024, and $500 million is fixed through 2026. ~~We also had $4.0 billion of principal amounts in long-term debt obligations that are subject to variable interest rates.~~ For more detailed explanations on our debt structure and senior credit facility, refer to “Liquidity and Capital Resources” earlier in this Management’s Discussion and Analysis and Note 10, Debt and Other Financing Arrangements in our condensed consolidated financial statements located in Part I, Item I1 of this Form 10-Q.

We estimate ~~that~~ the fair value of our long-term debt at June 30, ~~2019~~2020 was ~~about 96%~~approximately 91% percent of its book value. A one percentage point increase or decrease in interest rates related to our variable interest rate debt would increase or decrease the annual interest expense we recognize in the condensed consolidated statements of income ~~statement~~(loss) and the cash we pay for interest expense by ~~about $40~~approximately $50 million.

Equity Prices

We also utilize an equity swap arrangement to offset changes in liabilities related to the equity market risks of our arrangements for deferred compensation and restricted stock unit awards. Gain or losses from changes in fair value of these equity swaps are generally offset by the losses or gains on the related liabilities. In May 2019, we entered into an amended and restated equity swap agreement with a financial institution. We selectively use ~~cash-settled share~~ swaps to reduce market risk associated with our deferred ~~liabilities. These equity~~ compensation liabilities, which increase as our stock price increases and decrease as our stock price decreases. ~~In contrast, the value of the~~We have entered into a cash-settled share swap agreement that moves in the opposite direction of these liabilities, allowing us to fix a portion of the liabilities at a stated amount. ~~As of~~At June 30, ~~2019,~~2020, we ~~had~~ hedged ~~the~~our deferred compensation liability related to approximately ~~250,000~~1,350,000 common share equivalents. We also have an S&P 500 index fund ETF swap agreement to further reduce our market risk, which will act as a natural hedge offsetting an equivalent amount of indexed investments in our deferred compensation plans. The fair value of these swap agreements is recorded in prepayments and other current assets or accrued expenses and other current liabilities in the condensed consolidated balance sheets. The fair value of these derivative instruments is not considered material to the condensed consolidated financial statements.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including our ~~Co-Chief~~Chief Executive Officers and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), as the end of the quarter covered by this report. Based on ~~their~~that evaluation, our ~~Co-Chief~~Chief Executive ~~Officers~~Officer and Chief Financial Officer ~~have~~ concluded that, due to the material weakness in our internal control over financial reporting previously identified and described more fully under Item 9A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the Company’s disclosure controls and procedures were not effective as of June 30, 2020 to ensure information required to be disclosed by our Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.

Internal Controls Surrounding the North America Motorparts business

A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement in our annual or interim financial statements will not be prevented or detected on a timely basis.

As previously identified and described more fully under Item 9A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the Company identified a deficiency within its North America Motorparts business that constitutes a material weakness, as it did not maintain a sufficient complement of resources in the North America Motorparts business to ensure that appropriate controls were designed, maintained and executed, including controls over account reconciliations and manual journal entries, related to the integration of a previously acquired entity within the North America Motorparts business. The material weakness continued to exist as of the end of the period covered by this Quarterly Report.

The material weakness did not result in any material misstatements of the Company’s financial statements or disclosures but did result in out-of-period adjustments during the quarter ended December 31, 2019. Additionally, this material weakness could result in the misstatement of relevant account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Remediation Plan for Material Weakness in Internal Control over Financial Reporting

The Company continues to take action on the remediation plan more fully described under Item 9A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. While the Company is moving forward with these remediation activities, additional work needs to be done in this area. Accordingly, we concluded that this material weakness had not yet been remediated as of June 30, 2020.

We will continue to monitor the effectiveness of these and other processes, procedures and controls and make any further changes management determines appropriate.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended June 30, ~~2019,~~2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

– OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

Note 13, Commitments and Contingencies, in our condensed consolidated financial statements located in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.

ITEM 1A.RISK FACTORS

We are exposed to certain risks and uncertainties that could have a material adverse effect on our business, financial condition and operating results. ~~There~~Except as set forth below, there have been no material changes to the Risk Factors described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019. The risks described herein or in our Annual Report on Form 10-K are not the only risks facing us. 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, financial condition and operating results, or the extent to which any such risk factor or combination of risk factors may affect our business, financial condition and operating results.

The novel coronavirus (COVID-19) global pandemic has had and is expected to continue to have an adverse effect on our business and results of operations.

In late 2019, a novel strain of coronavirus, COVID-19, was first detected in Wuhan, China. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce the spread of COVID-19. These measures have adversely affected workforces, customers, consumer sentiment, economies, and financial markets, and, along with decreased consumer spending, reductions in revenue, and delays in payments from customers and partners, have led to an economic downturn in many of our markets. As a result of COVID-19, and in response to government mandates or recommendations, as well as decisions made to protect the health and safety of employees, consumers and communities, we and our customers have experienced significant closures and instances of reduced operations. Additionally, we have closed many of our corporate office and other facilities and have implemented a work from home policy for many corporate employees which may negatively impact productivity and cause other disruptions to our business.

The uncertainties created by the COVID-19 global pandemic, including the severity and duration of the outbreak and additional actions that may be taken by governmental authorities make it is difficult to forecast the effects of the virus on the Company’s future results, including our ability to execute our near-term and long-term business strategies and initiatives in the expected time frame. Additionally, it is possible that we may experience supply chain disruptions as well as labor shortages as a result of COVID-19, further disrupting operations and impacting revenues negatively.

To the extent the COVID-19 global pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this ‘‘Risk Factors’’ section or to the “Risk Factors” described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, such as those relating to our high level of indebtedness, our need to generate sufficient cash flows to service our indebtedness, our ability to comply with the covenants contained in the agreements that govern our indebtedness and to have access to sufficient liquidity through the COVID-19 pandemic, decreased revenue from loss of customer market share, and working capital requirements.

We may not be able to fully utilize our net operating loss and other tax carryforwards.

Under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. A corporation generally experiences an “ownership change” if the percentage of its shares of stock owned by its “5-percent shareholders,” as such term is defined in Section 382 of the Code, increases by more than 50 percentage points over a rolling three-year period. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our tax attributes is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

In April 2020, our Board of Directors approved a Section 382 Rights Agreement (the “Section 382 Rights Plan”), which may cause substantial dilution to a person or group that attempts to acquire 4.9% or more of the Company’s Class A Voting Common Stock on terms not approved by our Board of Directors. The purpose of the Rights Plan is to protect value by preserving the Company’s ability to use certain of its tax attributes to offset potential future income taxes. Although the Section 382 Rights Plan is intended to reduce the likelihood of an “ownership change” that could adversely affect utilization of our tax assets, there is no assurance that the Section 382 Rights Plan will prevent all transfers that could result in such an “ownership change.” The Section 382 Rights Plan could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, a large block of our Class A Voting Common Stock. A third party that acquires in excess of 4.9% or more of our Class A Voting Common Stock could suffer substantial dilution of its ownership interest under the terms of the Section 382 Rights Plan. This may adversely affect the marketability of our Class A Voting Common Stock by discouraging existing or potential investors from acquiring our stock or additional shares of our stock.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) None.

(b) Not applicable.

(c) Purchase of equity securities by the issuer and affiliated purchasers. The following table provides information relating to our purchase of shares of our common stock in the second quarter of ~~2019.~~2020. These purchases reflect shares withheld upon vesting of restricted stock for tax withholding obligations. We generally intend to continue to satisfy tax withholding obligations in connection with the vesting of outstanding restricted stock through the withholding of shares.

In February 2017, our Board of Directors authorized the repurchase of up to $400 million of our then outstanding common stock over the next three years, including $112 million that remained authorized under earlier repurchase programs. We generally acquire the shares through open market or privately negotiated transactions and have historically used cash from operations. The repurchase program does not obligate us to repurchase shares within any specific time. We did not repurchase any shares through this program in the six months ended June 30, 2019.

Period Total Number of
Shares Purchased (1) Average
Price Paid Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs Maximum Value of
Shares That
May Yet be
Purchased
Under
These Plans
or Programs
(Millions)
April 2019 —
$ —
—
$ 231
May 2019 2,183
11.61
—
231
June 2019 —
—
—
231
Total 2,183
$ 11.61
—
$ 231



Period	Total Number of Shares Purchased (1)	Average Price Paid		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Value of Shares That May Yet be Purchased Under These Plans or Programs (Millions)
April 2020	999	$	7.43	—	$	—
May 2020	3,043	4.56		—	—
June 2020	754	7.60		—	—
Total	4,796	$	5.64	—	$	—


(1)	Shares withheld upon vesting of ~~restricted stock and~~ share settled restricted stock units in the second quarter of ~~2019.~~2020.

ITEM 6.EXHIBITS

INDEX TO EXHIBITS

QUARTERLY REPORT ON FORM 10-Q

FOR QUARTER ENDED JUNE 30, ~~2019~~2020



Exhibit Number		Description

3.1	—	Certificate of Designations of Series A Preferred Stock of Tenneco Inc. (incorporated herein by reference to Exhibit 3.1 of the registrant’s Current Report on Form 8-K dated April 16, 2020, File No 1-12387).

4.1	—	Section 382 Rights Agreement, dated as of April 15, 2020, between Tenneco Inc. and Equiniti Trust Company, as rights agent (incorporated herein by reference to Exhibit 4.1 of the registrant’s Current Report on Form 8-K dated April 16, 2020, File No 1-12387).

+10.5	—	Tenneco Inc. 2006 Long-Term Incentive Plan, as amended and restated effective March 10, 2020 (incorporated by reference to Appendix A of Tenneco’s Definitive Proxy Statement filed on April 1, 2020).

*31.1	—	Certification of Brian J. Kesseler under Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2	—	Certification of ~~Roger J. Wood~~Kenneth R. Trammell under Section 302 of the Sarbanes-Oxley Act of 2002.

*~~31.3~~	—	~~Certification of Jason M. Hollar under Section 302 of the Sarbanes-Oxley Act of 2002.~~

*32.1	—	Certification of Brian J. Kesseler ~~Roger J. Wood~~ and ~~Jason M. Hollar~~Kenneth R. Trammell under Section 906 of the Sarbanes-Oxley Act of 2002.

*101.INS	—	Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

*101.SCH	—	Inline XBRL Taxonomy Extension Schema Document.

*101.CAL	—	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

*101.DEF	—	Inline XBRL Taxonomy Extension Definition Linkbase Document.

*101.LAB	—	Inline XBRL Taxonomy Extension Label Linkbase Document.

*101.PRE	—	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104	—	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



*	Filed herewith.
+	Indicates a management contract or compensatory plan or arrangement

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, Tenneco Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



TENNECO INC.

By:		/S~~/ JASON M. HOLLAR~~ s/ KENNETH R. TRAMMELL
		~~Jason M. Hollar~~Kenneth R. Trammell
		Interim Executive Vice President and Chief Financial Officer (on behalf of the Registrant)



TENNECO INC.

By:		/s/ JOHN S. PATOUHAS
		John S. Patouhas
		Vice President and Chief Accounting Officer (principal accounting officer)

Dated: August 6, ~~2019~~2020

8376



	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



	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



	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



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



	June 30, 2019		December 31, 2018
Deferred purchase price receivable	$	52	$	154



	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 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



	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



	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.



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



	Three Months Ended June 30, 2019
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
Revenues
Net sales and operating revenues:
External	$	1,690		$	2,814		$	—		$	—		$	4,504
Affiliated companies	235			283			—			(518		)	—
	1,925			3,097			—			(518		)	4,504
Costs and expenses
Cost of sales	1,618			2,692			1			(518		)	3,793
Restructuring charges and asset impairments	43			18			—			—			61
Engineering, research, and development	30			48			—			—			78
Selling, general, and administrative	148			143			(3		)	—			288
Depreciation and amortization	81			88			—			—			169
	1,920			2,989			(2		)	(518		)	4,389
Other expense (income)
Non-service postretirement benefit costs	(1		)	5			—			—			4
Equity in (income) losses of nonconsolidated affiliates, net of tax	(1		)	(16		)	—			—			(17		)
Other (income) expense, net	30			(43		)	—			—			(13		)
	28			(54		)	—			—			(26		)
Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies	(23		)	162			2			—			141
Interest expense:
External, net of interest capitalized	(6		)	12			76			—			82
Affiliated companies, net of interest income	(6		)	11			(5		)	—			—
Earnings (loss) before income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies	(11		)	139			(69		)	—			59
Income tax expense (benefit)	—			27			(13		)	—			14
Equity in net income (loss) from affiliated companies	93			—			82			(175		)	—
Net income (loss)	82			112			26			(175		)	45
Less: Net income (loss) attributable to noncontrolling interests	—			19			—			—			19
Net income (loss) attributable to Tenneco Inc.	$	82		$	93		$	26		$	(175	)	$	26
Comprehensive income (loss) attributable to Tenneco Inc.	$	51		$	67		$	(86	)	$	(28	)	$	4



	Segment Revenue
	New Tenneco									DRiV
	Clean Air					Powertrain				Ride Performance					Motorparts					Total Revenues
Three months ended June 30,	2019			2018		2019		2018		2019			2018		2019			2018		2019			2018
Revenues	$	1,827		$	1,694	$	1,133	$	—	$	709		$	506	$	835		$	333	$	4,504		$	2,533
	—
Value-add revenues	1,050			1,073		1,133		—		709			506		835			333		3,727			1,912
Currency effect on value-add revenue	(31		)	—		—		—		(20		)	—		(8		)	—		(59		)	—
Value-add revenue excluding currency	$	1,081		$	1,073	$	1,133	$	—	$	729		$	506	$	843		$	333	$	3,786		$	1,912

Substrate sales	$	777		$	621	$	—	$	—	$	—		$	—	$	—		$	—	$	777		$	621
Effect of Acquisitions	$	—		$	—	$	1,133	$	—	$	221		$	—	$	527		$	—	$	1,881		$	—



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



	June 30, 2019		December 31, 2018
Accounts receivable outstanding and derecognized	$	1.1	$	1.0