TENNECO INC - Quarter Report: 2019 September (Form 10-Q)

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 September 30, 2019



☐	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

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,” “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: 57,134,173 shares outstanding as of November 1, 2019. The number of shares of Class B Non-Voting Common Stock, par value $0.01 per share: 23,793,669 shares outstanding as of November 1, 2019.

TABLE OF CONTENTS



		Page
Part I — Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	6
	Condensed Consolidated Statements of Income (Loss)	6
	Condensed Consolidated Statements of Comprehensive Income (Loss)	7
	Condensed Consolidated Balance Sheets	8
	Condensed Consolidated Statements of Cash Flows	9
	Condensed Consolidated Statements of Changes in Shareholders’ Equity	10
	Notes to Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	60
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	81
Item 4.	Controls and Procedures	82

Part II — Other Information
Item 1.	Legal Proceedings	83
Item 1A.	Risk Factors	83
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	84
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Mine Safety Disclosures	*
Item 5.	Other Information	*
Item 6.	Exhibits	85



*	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;


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


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

•

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


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

•

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


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


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


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


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


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


•	our working capital requirements;


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


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


•	increasing competition from lower cost, private-label products;


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


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


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


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


•	costs related to product warranties and other customer satisfaction actions;


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


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


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


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


•	customer acceptance of new products;


•	our ability to successfully integrate, and benefit from, any acquisitions 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 intangible assets or our inability to realize our deferred tax assets;


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


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


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


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


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


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


•	potential volatility in our effective tax rate;


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


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


•	pension obligations and other postretirement benefits;


•	our hedging activities to address commodity price fluctuations; and


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

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


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


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


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


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


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


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


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


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

The risks included here are not exhaustive. Refer to “Part II, Item 1A — Risk Factors” herein and “Part I, Item 1A — Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018 for further discussion regarding our exposure to risks. Additionally, new risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor to assess the effect such risk factors might have on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Unless otherwise indicated in this report, the forward-looking statements in this report are made as of the date of this report, and, except as required by law, the Company does not undertake any obligation, and disclaims any obligation, to publicly disclose revisions or updates to any forward-looking statements.

PART I – FINANCIAL INFORMATION

ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TENNECO INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited)

(in millions, except share and per share amounts)



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
Revenues
Net sales and operating revenues	$	4,319		$	2,371	$	13,307		$	7,485

Costs and expenses
Cost of sales	3,653			2,002		11,310			6,329
Selling, general, and administrative	249			138		853			443
Depreciation and amortization	165			60		503			180
Engineering, research, and development	78			39		248			118
Restructuring charges, asset impairments, and other	43			16		128			57
Goodwill impairment charge	9			—		69			—
	4,197			2,255		13,111			7,127
Other expense (income)
Non-service pension and other postretirement benefit costs (credits)	2			4		8			10
Equity in (earnings) losses of nonconsolidated affiliates, net of tax	(1		)	—		(34		)	—
Other expense (income), net	(27		)	—		(43		)	3
	(26		)	4		(69		)	13
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	148			112		265			345
Interest expense	79			24		242			69
Earnings (loss) before income taxes and noncontrolling interests	69			88		23			276
Income tax expense (benefit)	(9		)	22		5			73
Net income (loss)	78			66		18			203
Less: Net income (loss) attributable to noncontrolling interests	8			9		39			39
Net income (loss) attributable to Tenneco Inc.	$	70		$	57	$	(21	)	$	164
Earnings (loss) per share
Basic earnings (loss) per share:
Earnings (loss) per share	$	0.87		$	1.11	$	(0.25	)	$	3.20
Weighted average shares outstanding	80,916,676			51,272,618		80,903,967			51,247,664
Diluted earnings (loss) per share:
Earnings (loss) per share	$	0.87		$	1.11	$	(0.25	)	$	3.20
Weighted average shares outstanding	80,916,676			51,401,829		80,903,967			51,395,927

See accompanying notes to the condensed consolidated financial statements.

TENNECO INC.

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

(in millions)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net income (loss)	$	78		$	66		$	18		$	203
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment	(97		)	(31		)	(80		)	(103		)
Cash flow hedges	—			—			1			—
Defined benefit plans	3			4			2			11
	(94		)	(27		)	(77		)	(92		)
Comprehensive income (loss)	(16		)	39			(59		)	111
Less: Comprehensive income (loss) attributable to noncontrolling interests	(14		)	6			22			37
Comprehensive income (loss) attributable to common shareholders	$	(2	)	$	33		$	(81	)	$	74

See accompanying notes to the condensed consolidated financial statements.

TENNECO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in millions, except shares)



	September 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	389		$	697
Restricted cash	6			5
Receivables:
Customer notes and accounts, net	2,645			2,487
Other	108			85
Inventories	2,137			2,245
Prepayments and other current assets	603			590
Total current assets	5,888			6,109
Property, plant and equipment, net	3,491			3,501
Long-term receivables, net	10			10
Goodwill	802			869
Intangibles, net	1,578			1,519
Investments in nonconsolidated affiliates	505			544
Deferred income taxes	570			467
Other assets	539			213
Total assets	$	13,383		$	13,232
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt, including current maturities of long-term debt	$	161		$	153
Accounts payable	2,651			2,759
Accrued compensation and employee benefits	378			343
Accrued income taxes	57			64
Accrued expenses and other current liabilities	1,042			1,001
Total current liabilities	4,289			4,320
Long-term debt	5,408			5,340
Deferred income taxes	104			88
Pension and postretirement benefits	1,088			1,167
Deferred credits and other liabilities	518			263
Commitments and contingencies (Note 13)
Total liabilities	11,407			11,178
Redeemable noncontrolling interests	139			138
Tenneco Inc. shareholders’ equity:
Preferred stock — $0.01 par value; none issued	—			—
Class A voting stock — $0.01 par value; shares issued: September 30, 2019 — 71,719,614 and December 31, 2018 — 71,675,379	1			1
Class B non-voting convertible stock — $0.01 par value; shares issued: September 30, 2019 — 23,793,669 and December 31, 2018 — 23,793,669	—			—
Additional paid-in capital	4,377			4,360
Accumulated other comprehensive loss	(752		)	(692		)
Accumulated deficit	(1,054		)	(1,013		)
	2,572			2,656
Shares held as treasury stock — at cost: September 30, 2019 and December 31, 2018 — 14,592,888 shares	(930		)	(930		)
Total Tenneco Inc. shareholders’ equity	1,642			1,726
Noncontrolling interests	195			190
Total equity	1,837			1,916
Total liabilities, redeemable noncontrolling interests and equity	$	13,383		$	13,232

See accompanying notes to the condensed consolidated financial statements.

TENNECO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in millions)



	Nine Months Ended September 30,
	2019			2018
Operating Activities
Net income (loss)	$	18		$	203
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
Goodwill impairment charge	69			—
Depreciation and amortization	503			180
Deferred income taxes	(115		)	(21		)
Stock-based compensation	20			12
Restructuring charges, asset impairments, and other, net of cash paid	12			8
Change in pension and other postretirement benefit plans	(49		)	3
Equity in earnings of nonconsolidated affiliates	(34		)	—
Cash dividends received from nonconsolidated affiliates	45			—
Changes in operating assets and liabilities:
Receivables	(457		)	(260		)
Inventories	112			(115		)
Payables and accrued expenses	99			154
Accrued interest and accrued income taxes	(12		)	(5		)
Other assets and liabilities	(147		)	(122		)
Net cash provided (used) by operating activities	64			37
Investing Activities
Proceeds from sale of assets	8			6
Net proceeds from sale of business	22			—
Cash payments for property, plant, and equipment	(541		)	(255		)
Acquisition of business, net of cash acquired	(158		)	—
Proceeds from deferred purchase price of factored receivables	203			102
Other	—			(2		)
Net cash used by investing activities	(466		)	(149		)
Financing Activities
Proceeds from term loans and notes	171			12
Repayments of term loans and notes	(278		)	(35		)
Borrowings on revolving lines of credit	6,804			4,051
Payments on revolving lines of credit	(6,548		)	(4,074		)
Issuance (repurchase) of common shares	(2		)	(2		)
Cash dividends	(20		)	(39		)
Net increase (decrease) in bank overdrafts	(12		)	(5		)
Net increase (decrease) in short-term borrowings secured by accounts receivable	(3		)	150
Other	1			(2		)
Distributions to noncontrolling interest partners	(20		)	(44		)
Net cash provided (used) by financing activities	93			12
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	2			(15		)
Decrease in cash, cash equivalents and restricted cash	(307		)	(115		)
Cash, cash equivalents and restricted cash, beginning of period	702			318
Cash, cash equivalents and restricted cash, end of period	$	395		$	203
Supplemental Cash Flow Information
Cash paid during the period for interest	$	230		$	65
Cash paid during the period for income taxes, net of refunds	$	139		$	79
Non-cash Investing Activities
Period end balance of accounts payable for property, plant, and equipment	$	118		$	52
Deferred purchase price of receivables factored in the period	$	208		$	105

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
	$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
Net income (loss)								(117		)				(117		)	7			(110		)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments											29			29			4			33
Derivatives											4			4			—			4
Defined benefit plans											1			1			—			1
Comprehensive income (loss)														(83		)	11			(72		)
Stock-based compensation, net	—		—			5		—			—			5			—			5
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
Net income (loss)								26						26			9			35
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments											(17		)	(17		)	—			(17		)
Derivatives											(3		)	(3		)	—			(3		)
Defined benefit plans											(2		)	(2		)	—			(2		)
Comprehensive income (loss)														4			9			13
Stock-based compensation, net	—		—			6		—			—			6			—			6
Distributions declared to noncontrolling interests	—		—			—		—			—			—			(2		)	(2		)
Balance as of June 30, 2019	1		(930		)	4,371		(1,124		)	(680		)	1,638			206			1,844
Net income (loss)								70						70			4			74
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments											(75		)	(75		)	(11		)	(86		)
Derivatives											—			—			—			—
Defined benefit plans											3			3			—			3
Comprehensive income (loss)														(2		)	(7		)	(9		)
Acquisition and other	—		—			—		—			—			—			(3		)	(3		)
Stock-based compensation, net	—		—			6		—			—			6			—			6
Purchase accounting measurement period adjustment	—		—			—		—			—			—			(1		)	(1		)
Balance as of September 30, 2019	$	1	$	(930	)	$	4,377	$	(1,054	)	$	(752	)	$	1,642		$	195		$	1,837



	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
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
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments											(92		)	(92		)	(5		)	(97		)
Defined benefit plans											4			4			—			4
Comprehensive income (loss)														(41		)	2			(39		)
Stock-based compensation, net	—		—			3		—			—			3			—			3
Cash dividends ($0.25 per share)	—		—			—		(12		)	—			(12		)	—			(12		)
Distributions declared to noncontrolling interests	—		—			—		—			—			—			(18		)	(18		)
Balance as of June 30, 2018	1		(930		)	3,118		(928		)	(604		)	657			44			701
Net Income (loss)								57						57			3			60
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments											(28		)	(28		)	(1		)	(29		)
Defined benefit plans											4			4			—			4
Comprehensive income (loss)														33			2			35
Adjustments to adopt new accounting standards								1			—			1			—			1
Stock-based compensation, net	—		—			3		—			—			3			—			3
Cash dividends ($0.25 per share)	—		—			—		(14		)	—			(14		)	—			(14		)
Distributions declared to noncontrolling interests	—		—			—		—			—			—			(8		)	(8		)
Balance as of September 30, 2018	$	1	$	(930	)	$	3,121	$	(884	)	$	(628	)	$	680		$	38		$	718

See accompanying notes to the condensed consolidated financial statements.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

1. Description of Business

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

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

2. Summary of Significant Accounting Policies

Basis of Presentation — Interim Financial Statements

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

The Company has previously announced its intentions to separate its businesses through a spinoff transaction in mid-2020 to form two new, independent publicly traded companies, an Aftermarket and Ride Performance company ("DRiV") and a new Powertrain Technology company ("New Tenneco"). Tenneco remains committed to the separation of the businesses and continues to execute its plan for the spinoff. Additionally, the company is evaluating multiple strategic options to deleverage and facilitate the separation. Certain of these options could help mitigate the effect of challenging market conditions, which, if current trends were to continue, would likely affect the company’s ability to complete a separation in the mid-year 2020 time range. In preparation for the separation, the Company began to manage and report its DRiV businesses through two new operating segments, in the first quarter of 2019, as compared to the three operating segments it had previously reported. The DRiV operating segments consist of Motorparts and Ride Performance. The new Motorparts operating segment consists of the previously reported Aftermarket operating segment as well as the aftermarket portion of the previously reported Motorparts operating segment. The Ride Performance operating segment consists of the previously reported Ride Performance operating segment as well as the OE Braking business that was included in the previously reported Motorparts operating segment. As such, prior period operating segment results and related disclosures have been conformed to reflect the Company's current operating segments. The future New Tenneco consists of two existing operating segments, Powertrain and Clean Air. See Note 17, Segment Information.

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

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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



	Nine Months Ended September 30,
	2019			2018
Balance at beginning of period	$	138		$	42
Net income (loss) attributable to redeemable noncontrolling interests	19			22
Other comprehensive income (loss)	(10		)	(3		)
Acquisition and other	17			—
Purchase accounting measurement period adjustment	(8		)	—
Dividends declared	(17		)	(33		)
Balance at end of period	$	139		$	28

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

Earnings (loss) per share — 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:



	Three Months Ended September 30,		Nine Months Ended September 30,
	2019	2018	2019	2018
Weighted average shares of common stock outstanding	80,916,676	51,272,618	80,903,967	51,247,664
Effect of dilutive securities:
Restricted stock, PSUs and RSUs	—	93,956	—	95,022
Stock options	—	35,255	—	53,241
Dilutive shares outstanding	80,916,676	51,401,829	80,903,967	51,395,927

For the three and nine months ended September 30, 2019, the calculation of diluted earnings (loss) per share excluded 1,895,180 and 1,865,345 of share-based awards, as the effect on the calculation would have been anti-dilutive. For the three and nine months ended September 30, 2018, the calculation of diluted earnings (loss) per share excluded 124,865 and 124,606 of share-based awards, as the 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 a result, certain amounts in the condensed consolidated financial statements have been revised for the three and nine month periods ended September 30, 2018. These revisions were not material to the previously issued financial statements and are presented in the tables below. In addition, during the three and nine months ended September 30, 2019, the Company recorded an immaterial $5 million charge in its Ride Performance segment related to prior periods.

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

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

The following tables present the 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 September 30, 2018
	As Reported		Reclasses			As Reclassified		Revisions			As Revised
Condensed consolidated statement of income (loss)
Revenues
Net sales and operating revenues	$	2,372	$	—		$	2,372	$	(1	)	$	2,371
Costs and expenses
Cost of sales	2,014		(12		)	2,002		—			2,002
Selling, general, and administrative	141		(4		)	137		1			138
Depreciation and amortization	65		—			65		(5		)	60
Engineering, research, and development	39		—			39		—			39
Restructuring charges, asset impairments, and other	—		16			16		—			16
	2,259		—			2,259		(4		)	2,255
Other expense (income)
Loss on sale of receivables	3		(3		)	—		—			—
Non-service pension and other postretirement benefit costs (credits)	—		4			4		—			4
Other expense (income), net	6		(4		)	2		(2		)	—
	9		(3		)	6		(2		)	4
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	104		3			107		5			112
Interest expense	21		3			24		—			24
Earnings (loss) before income taxes and noncontrolling interests	83		—			83		5			88
Income tax expense (benefit)	20		—			20		2			22
Net income (loss)	63		—			63		3			66
Less: Net income (loss) attributable to noncontrolling interests	9		—			9		—			9
Net income (loss) attributable to Tenneco Inc.	$	54	$	—		$	54	$	3		$	57
Earnings (loss) per share
Basic earnings (loss) per share of common stock	$	1.05	$	—		$	1.05	$	0.06		$	1.11
Diluted earnings (loss) per share of common stock	$	1.05	$	—		$	1.05	$	0.06		$	1.11



	Three Months Ended September 30, 2018
	As Reported			Reclasses		As Reclassified			Revisions		As Revised
Condensed consolidated statement of comprehensive income (loss)
Net income (loss)	$	63		$	—	$	63		$	3	$	66
Other comprehensive income (loss)—net of tax
Foreign currency translation adjustment	(31		)	—		(31		)	—		(31		)
Defined benefit plans	4			—		4			—		4
	(27		)	—		(27		)	—		(27		)
Comprehensive income (loss)	36			—		36			3		39
Less: Comprehensive income (loss) attributable to noncontrolling interests	6			—		6			—		6
Comprehensive income (loss) attributable to common shareholders	$	30		$	—	$	30		$	3	$	33

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Nine Months Ended September 30, 2018
	As Reported		Reclasses			As Reclassified		Revisions			As Revised
Condensed consolidated statement of income (loss)
Revenues
Net sales and operating revenues	$	7,483	$	—		$	7,483	$	2		$	7,485
Costs and expenses
Cost of sales	6,371		(44		)	6,327		2			6,329
Selling, general, and administrative	450		(8		)	442		1			443
Depreciation and amortization	183		—			183		(3		)	180
Engineering, research, and development	122		(5		)	117		1			118
Restructuring charges, asset impairments, and other	—		57			57		—			57
	7,126		—			7,126		1			7,127
Other expense (income)
Loss on sale of receivables	8		(8		)	—		—			—
Non-service pension and other postretirement benefit costs (credits)	—		10			10		—			10
Other expense (income), net	15		(10		)	5		(2		)	3
	23		(8		)	15		(2		)	13
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	334		8			342		3			345
Interest expense	61		8			69		—			69
Earnings (loss) before income taxes and noncontrolling interests	273		—			273		3			276
Income tax expense (benefit)	72		—			72		1			73
Net income (loss)	201		—			201		2			203
Less: Net income (loss) attributable to noncontrolling interests	39		—			39		—			39
Net income (loss) attributable to Tenneco Inc.	$	162	$	—		$	162	$	2		$	164
Earnings (loss) per share
Basic earnings (loss) per share of common stock	$	3.17	$	—		$	3.17	$	0.03		$	3.20
Diluted earnings (loss) per share of common stock	$	3.16	$	—		$	3.16	$	0.04		$	3.20



	Nine Months Ended September 30, 2018
	As Reported			Reclasses		As Reclassified			Revisions		As Revised
Condensed consolidated statement of comprehensive income (loss)
Net income (loss)	$	201		$	—	$	201		$	2	$	203
Other comprehensive income (loss)—net of tax
Foreign currency translation adjustment	(104		)	—		(104		)	1		(103		)
Defined benefit plans	11			—		11			—		11
	(93		)	—		(93		)	1		(92		)
Comprehensive income (loss)	108			—		108			3		111
Less: Comprehensive income (loss) attributable to noncontrolling interests	37			—		37			—		37
Comprehensive income (loss) attributable to common shareholders	$	71		$	—	$	71		$	3	$	74

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Nine Months Ended September 30, 2018
	As Reported			Reclasses			As Reclassified			Revisions			As Revised
Condensed consolidated statements of cash flow
Operating Activities
Net income (loss)	$	201		$	—		$	201		$	2		$	203
Net cash provided by (used by) operating activities	37			—			37			—			37

Investing Activities
Net cash used by investing activities	(149		)	—			(149		)	—			(149		)

Financing Activities
Proceeds from term loans and notes	—			—			—			12			12
Repayments of term loans and notes	—			(17		)	(17		)	(18		)	(35		)
Retirement of long-term debt	(17		)	17			—			—			—
Borrowings on revolving lines of credit	—			—			—			4,051			4,051
Payments on revolving lines of credit	—			—			—			(4,074		)	(4,074		)
Net increase (decrease) in revolver borrowings	(29		)	—			(29		)	29			—
Issuance (repurchase) of common shares	(2		)	—			(2		)	—			(2		)
Cash dividends	(39		)	—			(39		)	—			(39		)
Debt issuance cost of long-term debt	(2		)	2			—			—			—
Purchase of common stock under the share repurchase program	—			—			—			—			—
Net increase (decrease) in bank overdrafts	(5		)	—			(5		)	—			(5		)
Net increase (decrease) in short-term borrowings secured by accounts receivable	150			—			150			—			150
Other	—			(2		)	(2		)	—			(2		)
Distributions to noncontrolling interest partners	(44		)	—			(44		)	—			(44		)
Net cash provided by (used by) financing activities	12			—			12			—			12
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(15		)	—			(15		)	—			(15		)
Increase (decrease) in cash, cash equivalents and restricted cash	(115		)	—			(115		)	—			(115		)
Cash, cash equivalents and restricted cash, beginning of period	318			—			318			—			318
Cash, cash equivalents and restricted cash, end of period	$	203		$	—		$	203		$	—		$	203

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Three Months Ended September 30, 2018
	As Reported			Revisions			As Revised
Condensed consolidated statements of changes in shareholders' equity
Accumulated Deficit
Balance June 30	$	(864	)	$	(64	)	$	(928	)
Net income (loss) attributable to Tenneco Inc.	54			3			57
Cash dividends declared	(14		)	—			(14		)
Adjustments to adopt new accounting standards	—			1			1
Balance September 30	$	(824	)	$	(60	)	$	(884	)
Accumulated Other Comprehensive Income (loss)
Balance June 30	$	(608	)	$	4		$	(604	)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment	(27		)	(1		)	(28		)
Defined benefit plans	4			—			4
Balance September 30	$	(631	)	$	3		$	(628	)
Total Tenneco Inc. Shareholders' Equity
Balance June 30	$	717		$	(60	)	$	657
Net income (loss) attributable to Tenneco Inc.	54			3			57
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment	(27		)	(1		)	(28		)
Defined benefit plans	4			—			4
Comprehensive income (loss)	31			2			33
Adjustments to adopt new accounting standards	—			1			1
Cash dividends declared	(14		)	—			(14		)
Stock-based compensation, net	3			—			3
Balance September 30	$	737		$	(57	)	$	680
Total Equity
Balance June 30	$	761		$	(60	)	$	701
Net income (loss)	57			3			60
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment	(28		)	(1		)	(29		)
Defined benefit plans	4			—			4
Comprehensive income (loss)	33			2			35
Adjustments to adopt new accounting standards	—			1			1
Cash dividends declared	(14		)	—			(14		)
Distributions declared to noncontrolling interests	(8		)	—			(8		)
Stock-based compensation, net	3			—			3
Balance September 30	$	775		$	(57	)	$	718

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Nine Months Ended September 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.	162			2			164
Cash dividends declared	(39		)	—			(39		)
Adjustments to adopt new accounting standards	(1		)	1			—
Balance September 30	$	(824	)	$	(60	)	$	(884	)
Accumulated Other Comprehensive Income (loss)
Balance January 1	$	(541	)	$	3		$	(538	)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment	(101		)	—			(101		)
Defined benefit plans	11			—			11
Balance September 30	$	(631	)	$	3		$	(628	)
Total Tenneco Inc. Shareholders' Equity
Balance January 1	$	696		$	(60	)	$	636
Net income (loss) attributable to Tenneco Inc.	162			2			164
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment	(101		)	—			(101		)
Defined benefit plans	11			—			11
Comprehensive income (loss)	72			2			74
Adjustments to adopt new accounting standards	(1		)	1			—
Cash dividends declared	(39		)	—			(39		)
Stock-based compensation, net	9			—			9
Balance September 30	$	737		$	(57	)	$	680
Total Equity
Balance January 1	$	742		$	(60	)	$	682
Net income (loss)	179			2			181
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustment	(100		)	—			(100		)
Defined benefit plans	11			—			11
Comprehensive income (loss)	90			2			92
Adjustments to adopt new accounting standards	(1		)	1			—
Cash dividends declared	(39		)	—			(39		)
Distributions declared to noncontrolling interests	(26		)	—			(26		)
Stock-based compensation, net	9			—			9
Balance September 30	$	775		$	(57	)	$	718

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

Retirement benefits — In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20). The amendments in this update remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The new standard (i) requires the removal of disclosures that are no longer considered cost beneficial; (ii) clarifies specific requirements of certain disclosures; and (iii) adds new disclosure requirements, 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. The Company is currently evaluating the potential effect of this new guidance on its financial statements and will include the enhanced disclosures in the consolidated financial statements upon adoption.

Fair value measurements — In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). The new guidance modifies disclosure requirements related to fair value measurement. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. The Company is currently evaluating the potential effect of this new guidance on its financial statements but does not expect this guidance to have a material effect on its consolidated financial statements.

3. Acquisitions and Divestitures

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

The fair values of the assets acquired and liabilities assumed are based on preliminary estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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.

Öhlins Intressenter AB Acquisition

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

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 nine months ended September 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 intangible assets, deferred income tax assets and liabilities, and redeemable noncontrolling interest.

Goodwill of $30 million was recognized as part of the acquisition and is reflected in the Ride Performance segment. During the nine months ended September 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 $5 million as a non-cash charge to cost of goods sold during the nine months ended September 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

The Company finalized the valuation of the assets and liabilities of the Federal-Mogul Acquisition during the third quarter of 2019. During the nine months ended September 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)

The following table summarizes the final fair values of assets acquired and liabilities assumed as of the acquisition date and the measurement period adjustments made during the nine months ended September 30, 2019:



	Initial Allocation		Adjustments			Final Allocation
Cash, cash equivalents and restricted cash	$	277	$	—		$	277
Customer notes and accounts receivable	1,258		(4		)	1,254
Other receivables	62		—			62
Inventories	1,551		(8		)	1,543
Prepayments and other current assets	198		—			198
Property, plant and equipment	1,711		(28		)	1,683
Long-term receivables	48		—			48
Goodwill	825		(22		)	803
Intangibles	1,530		47			1,577
Investments in nonconsolidated affiliates	528		(4		)	524
Deferred income taxes	166		30			196
Other assets	55		(5		)	50
Total assets acquired	8,209		6			8,215

Short-term debt, including current maturities of long-term debt	130		—			130
Accounts payable	957		4			961
Accrued compensation and employee benefits	231		—			231
Accrued income taxes	49		—			49
Accrued expenses and other current liabilities	522		(7		)	515
Long-term debt	1,315		—			1,315
Deferred income taxes	56		24			80
Pension and postretirement benefits	879		—			879
Deferred credits and other liabilities	124		(5		)	119
Total liabilities assumed	4,263		16			4,279
Redeemable noncontrolling interests	96		(8		)	88
Noncontrolling interests	143		(2		)	141
Net assets and noncontrolling interests acquired	$	3,707	$	—		$	3,707

Goodwill of $343 million was allocated to the Powertrain segment, $395 million was allocated to the Motorparts segment, and $65 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	$	953	10 years
Technology rights	66		10 years
Packaged kits know-how	54		10 years
Catalogs	47		10 years
Licensing agreements	64		4.5 years
Land use rights	30		42.8 years
Total definite-lived intangible assets	1,214		10.5 years

Indefinite-lived intangible assets:
Trade names and trademarks	363
Total	$	1,577

The Company recorded a $149 million step-up of inventory to its fair value as of the acquisition date. The Company recognized $44 million as a non-cash charge to cost of goods sold during the nine months ended September 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. As of September 30, 2019, there is no remaining inventory step-up to be amortized.

In addition, the Company acquired $81 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 within the next year 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 September 30, 2019.

The Company's condensed consolidated statements of income (loss) for the nine months ended September 30, 2019 included net sales and operating revenues of $5,537 million and net loss of $34 million associated with the operating results of Federal-Mogul.

Pro Forma Results

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Net sales and operating revenues	$	4,319	$	4,283	$	13,307	$	13,581
Earnings (loss) before income taxes and noncontrolling interests	$	168	$	287	$	369	$	745
Net income (loss) attributable to Tenneco Inc.	$	84	$	142	$	57	$	313
Basic earnings (loss) per share of common stock	$	1.03	$	1.75	$	0.70	$	3.88
Diluted earnings (loss) per share of common stock	$	1.03	$	1.75	$	0.70	$	3.87

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

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

indebtedness, the new credit facility, debt issuance costs, and fair value adjustments to debt; and (iv) cost of goods sold adjustments relating to fair value adjustments to inventory. Pro forma adjustments described above have been tax affected using the Company's effective rate during the respective periods.

Assets Held for Sale

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

In August 2019, the Company executed a letter of intent to sell a non-core business in the Motorparts segment for a sale price of $24 million, subject to adjustment, as the Company continues to rationalize its product portfolio and focus on core product lines. As of September 30, 2019, proceeds from the sale would have been $24 million. The related assets and liabilities were classified as held for sale as of September 30, 2019. The transaction is expected to close within the next year.

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



	September 30, 2019			December 31, 2018
Assets
Receivables	$	8		$	—
Inventories	7			33
Other current assets	3			5
Long-lived assets	16			23
Goodwill	4			—
Impairment on carrying value	(8		)	—
Total assets held for sale	$	30		$	61
Liabilities
Accounts payable	$	4		$	21
Accrued liabilities	—			7
Other liabilities	1			11
Total liabilities held for sale	$	5		$	39

The assets and liabilities held for sale are recorded in “Prepayments and other current assets” and “Accrued expenses and other current liabilities” in the consolidated balance sheets as of September 30, 2019 and December 31, 2018.

4. Restructuring Charges, Asset Impairments, and Other, 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), facility closure and exit costs, and other.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

For the three and nine months ended September 30, 2019 and 2018, restructuring charges, asset impairments, and other by segment are as follows:



	Three Months Ended September 30, 2019
	Clean Air		Powertrain		Ride Performance⁽¹⁾		Motorparts		Corporate		Total
Severance and other charges, net	$	6	$	11	$	15	$	2	$	1	$	35
Impairment of assets held for sale	—		—		—		8		—		8
Total restructuring charges, asset impairments, and other	$	6	$	11	$	15	$	10	$	1	$	43
⁽¹⁾ The Ride Performance segment includes $10 million of other charges for the three months ended September 30, 2019.



	Three Months Ended September 30, 2018
	Clean Air		Powertrain		Ride Performance		Motorparts		Corporate		Total
Severance and other charges, net	$	1	$	—	$	10	$	2	$	1	$	14
Other non-restructuring asset impairments	—		—		—		—		2		2
Total restructuring charges, asset impairments, and other	$	1	$	—	$	10	$	2	$	3	$	16



	Nine Months Ended September 30, 2019
	Clean Air		Powertrain		Ride Performance⁽²⁾		Motorparts		Corporate		Total
Severance and other charges, net	$	25	$	29	$	50	$	12	$	2	$	118

Other non-restructuring asset impairments	1		—		—		1		—		2
Impairment of assets held for sale	—		—		—		8		—		8
Total asset impairment charges	1		—		—		9		—		10
Total restructuring charges, asset impairments, and other	$	26	$	29	$	50	$	21	$	2	$	128
⁽¹⁾ The Ride Performance segment includes $8 million, $20 million, and $30 million of other charges for the three months ended March 31, 2019, six months ended June 30, and for the nine months ended September 30, 2019.



	Nine Months Ended September 30, 2018
	Clean Air		Powertrain		Ride Performance		Motorparts		Corporate		Total
Severance and other charges, net	$	19	$	—	$	27	$	6	$	3	$	55

Other non-restructuring asset impairments	—		—		—		—		2		2
Total restructuring charges, asset impairments, and other	$	19	$	—	$	27	$	6	$	5	$	57

During the three and nine months ended September 30, 2019, the Company incurred $3 million and $12 million in restructuring and related costs and reduced previously recorded estimates by $1 million and $3 million related to a restructuring plan designed to achieve a portion of the synergies the Company anticipates achieving in connection with the Federal-Mogul Acquisition. Pursuant to the plan, the Company will reduce its headcount globally across all segments. The Company began implementing headcount reductions in January 2019 and these actions will continue throughout 2019. The Federal-Mogul Acquisition is discussed further in Note 3, Acquisitions and Divestitures. During the three and nine months ended September 30, 2019, the Company also incurred $15 million and $43 million in restructuring and other costs related to plant relocation and closures within its Ride Performance segment. The Company expects the actions to be completed by the second quarter of 2020.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

During the three and nine months September 30, 2018, the Company incurred $8 million and $22 million in restructuring and other costs related to the accelerated move of the Beijing Ride Performance plant.

Restructuring Reserve Rollforward

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



	Reportable Segments
	Clean Air			Powertrain			Ride Performance⁽¹⁾			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
Provisions	6			11			15			4			36			1			37
Revisions to estimates	—			—			—			(2		)	(2		)	—			(2		)
Payments	(7		)	(4		)	(19		)	(13		)	(43		)	(2		)	(45		)
Foreign currency	(1		)	—			—			—			(1		)	—			(1		)
Balance as of September 30, 2019	$	26		$	33		$	24		$	21		$	104		$	—		$	104
⁽¹⁾The Ride Performance segment includes $8 million, $12 million, and $10 million of other charges and payments in each of the three months ended March 31, 2019, June 30, 2019, and September 30, 2019.



	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
Provisions	1			—		10			2			13			1			14
Payments	(2		)	—		(7		)	(5		)	(14		)	(2		)	(16		)
Foreign currency	(1		)	—		—			—			(1		)	—			(1		)
Balance as of September 30, 2018	$	22		$	—	$	8		$	1		$	31		$	1		$	32

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⁽¹⁾			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
Provisions	22			15			37
Revisions to estimates	(2		)	—			(2		)
Payments	(29		)	(16		)	(45		)
Foreign currency	(1		)	—			(1		)
Balance as of September 30, 2019	$	100		$	4		$	104
⁽¹⁾Facility closure and other costs includes $8 million, $12 million, and $10 million of other charges and payments in each of the three months ended March 31, 2019, June 30, 2019, and September 30, 2019 related to the Ride Performance segment.



	Employee Costs			Facility Closure and Other Costs			Total
Balance as of December 31, 2017	$	19		$	6		$	25
Provisions	10			2			12
Payments	(13		)	(3		)	(16		)
Balance as of March 31, 2018	16			5			21
Provisions	26			3			29
Payments	(12		)	(3		)	(15		)
Balance as of June 30, 2018	30			5			35
Provisions	2			12			14
Payments	(4		)	(12		)	(16		)
Foreign currency	(1		)	—			(1		)
Balance as of September 30, 2018	$	27		$	5		$	32

5. Inventories

At September 30, 2019 and December 31, 2018, inventory consists of the following:



	September 30, 2019		December 31, 2018
Finished goods	$	1,078	$	1,116
Work in process	519		562
Raw materials	440		457
Materials and supplies	100		110
	$	2,137	$	2,245

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

6. Goodwill and Other Intangible Assets

At September 30, 2019 and December 31, 2018, goodwill consists of the following:



	Nine Months Ended September 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
Gross carrying amount at June 30, 2019	22			412			240			547			1,221
Measurement period adjustments	—			(69		)	10			77			18
Reclassification to assets held for sale	—			—			—			(4		)	(4		)
Foreign exchange	(1		)	—			(1		)	(1		)	(3		)
Gross carrying amount at September 30, 2019	21			343			249			619			1,232

Accumulated impairment loss at December 31, 2018	—			—			(143		)	(219		)	(362		)
Impairment	—			—			(60		)	—			(60		)
Accumulated impairment loss at March 31, 2019	—			—			(203		)	(219		)	(422		)
Impairment	—			—			—			—			—
Accumulated impairment loss at June 30, 2019	—			—			(203		)	(219		)	(422		)
Impairment	—			—			(9		)	—			(9		)
Foreign Exchange	—			—			1			—			1
Accumulated impairment loss at September 30, 2019	—			—			(211		)	(219		)	(430		)

Net carrying value at end of period	$	21		$	343		$	38		$	400		$	802

The Öhlins Acquisition resulted in $30 million of goodwill which was included in the Ride Performance segment. During the nine months ended September 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 $22 million for the Federal-Mogul Acquisition.

The purchase price allocation for the Öhlins Acquisition is 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 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 first quarter of 2019. Goodwill allocated to other reporting units was supported by the valuation performed at that time.

During the third quarter of 2019, the Company completed purchase accounting for the Federal-Mogul Acquisition. As a result, the final goodwill allocation was reassigned to the reorganized segments and reporting unit structure that occurred in the first quarter of 2019 using a relative fair value approach and the Company determined an incremental $9 million of goodwill was

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

impaired for one reporting unit in its Ride Performance segment. This non-cash charge was recorded in the three months ended September 30, 2019 and the total impairment charge recognized in the nine months ended September 30, 2019 for the reorganization of the reporting units that occurred in the first quarter of 2019 was $69 million.

During the three months ended September 30, 2019, the Company performed a review of potential triggering events, and concluded no events indicated it was more likely than not that the fair values of its reporting units had declined to below their carrying values at September 30, 2019. The Company considered the results of the post-reorganized reporting unit changes that occurred in the first quarter of 2019, which indicated nine reporting units with goodwill. Management compared its future projected cash flows as of September 30, 2019 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.

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 September 30, 2019 and December 31, 2018, the Company's intangible assets consist of the following:



		September 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	$	985	$	(98	)	$	887	$	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	131		(34		)	97		98		(27		)	71
Packaged kits know-how	10 years	54		(5		)	49		36		(1		)	35
Catalogs	10 years	47		(5		)	42		—		—			—
Licensing agreements	3 to 5 years	62		(14		)	48		66		(3		)	63
Land use rights	28 to 46 years	45		(3		)	42		44		(2		)	42
		1,333		(166		)	1,167		1,217		(63		)	1,154
Indefinite-lived intangible assets:
Trade names and trademarks		411		—			411		365		—			365
Total		$	1,744	$	(166	)	$	1,578	$	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 nine months ended September 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 $47 million was recognized for the Federal-Mogul Acquisition.

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Amortization expense	$	33	$	—	$	101	$	1

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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	$	33	$	131	$	130	$	126	$	126	$	621	$	1,167

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.

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



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

The Company's investments in its nonconsolidated affiliates at September 30, 2019 and December 31, 2018 was:



	September 30, 2019		December 31, 2018
Investments in nonconsolidated affiliates	$	505	$	544

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Equity in earnings (losses) of nonconsolidated affiliates, net of tax	$	1	$	—	$	34	$	—
Cash dividends received from nonconsolidated affiliates	$	18	$	—	$	45	$	—

During the three and nine months ended September 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 $4 million. As a result of finalizing purchase accounting and completing a purchase price allocation for certain equity method investments, a $10 million reduction to equity in earnings was recognized in the three and nine months ended September 30, 2019. The non-cash reduction in equity earnings was to recognize the basis difference between the fair value and book value of certain assets, including inventory, property, plant and equipment, and intangible assets. The purchase price allocation for the Federal-Mogul Acquisition has been finalized. 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 nine months ended September 30, 2019. The amounts represent 100% of the interest in the nonconsolidated affiliates and not the Company's proportionate share:



	Three Months Ended September 30, 2019
Statements of Income	Otomotiv A.S.		Anqing TP Goetze		Other		Total
Sales	$	85	$	33	$	115	$	233
Gross profit	$	18	$	8	$	20	$	46
Income from continuing operations	$	13	$	8	$	11	$	32
Net income	$	12	$	7	$	9	$	28



	Nine Months Ended September 30, 2019
Statements of Income	Otomotiv A.S.		Anqing TP Goetze		Other		Total
Sales	$	261	$	111	$	360	$	732
Gross profit	$	61	$	34	$	66	$	161
Income from continuing operations	$	49	$	28	$	35	$	112
Net income	$	51	$	25	$	31	$	107

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

8. Derivatives and Hedging Activities

The Company is exposed to market risk, such as fluctuations in foreign currency exchange rates, commodity prices, equity compensation liabilities, and changes in interest rates, which may result in cash flow risks. For exposures not offset within its operations, the Company 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.

Market Risks

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

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

Other — The Company presents its derivative positions and any related material collateral under master netting agreements on a net basis. For derivatives designated as cash flow hedges, changes in the time value are excluded from the assessment of hedge

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

effectiveness. Unrealized gains and losses associated with ineffective hedges, determined using the hypothetical derivative method, are recognized in "Cost of sales" in the condensed consolidated statements of income (loss). Derivative gains and losses included in accumulated other comprehensive income (loss) for effective hedges are reclassified into operations upon recognition of the hedged transaction. Derivative gains and losses associated with undesignated hedges are recognized in "Cost of sales" in the condensed consolidated statements of income (loss).

Derivative Instruments

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

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



	Notional Amount
Long positions	$	(47	)
Short positions	$	47

Cash-Settled Share Swap Transactions — During 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 decrease as the Company's stock price decreases. In contrast, the value of the swap agreement moves in the opposite direction of these liabilities, allowing the Company to fix a portion of the liabilities at a stated amount. As of September 30, 2019, the Company hedged its deferred compensation liability related to approximately 600,000 common share equivalents, an increase from 250,000 common share equivalents as of December 31, 2018. The fair value of the equity swap agreement 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 the Company's equity swap agreement was a net liability position of $1 million at September 30, 2019 and net asset position of $4 million at December 31, 2018.

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 and tin. In certain instances within this program, foreign currency forwards may be used in order to match critical terms for commodity exposure.

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

Net Investment Hedge — Foreign Currency Borrowings — The Company has foreign currency denominated debt, €770 million of which was designated as a net investment hedge in certain foreign subsidiaries and affiliates of the Company. Changes to its carrying value are included in shareholders' equity in the foreign currency translation component of OCL and offset against the translation adjustment on the underlying net assets of those foreign subsidiaries and affiliates, which are also recorded in OCL. The Company’s debt instruments are discussed further in Note 10, Debt and Other Financing Arrangements.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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



		Carrying Value
	Balance sheet classification	September 30, 2019		December 31, 2018
Commodity price hedge contracts designated as cash flow hedges	Accrued expenses and other current liabilities	$	1	$	2
Foreign currency borrowings designated as net investment hedges	Long-term debt	$	839	$	863

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



	Amount of gain (loss) recognized in accumulated OCI or OCL (effective portion):
	Three Months Ended September 30,			Nine Months Ended September 30,
	2019			2019
Commodity price hedge contracts designated as cash flow hedges	$	(1	)	$	—
Foreign currency borrowings designated as net investment hedges	$	38		$	45

The Company estimates less than $1 million included in accumulated OCI or OCL as of September 30, 2019 will be reclassified into earnings within the following 12 months.

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 own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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



		September 30, 2019						December 31, 2018
	Fair value hierarchy	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Derivative instruments:
Equity swap agreement	Level 2	$	(1	)	$	(1	)	$	4		$	4
Commodity contracts	Level 2	$	(1	)	$	(1	)	$	(2	)	$	(2	)

Cash-Settled Share Swap Transactions — The Company's stock price is used as an observable input in determining the fair value of the equity swap.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Commodity and Foreign Currency Contracts — The Company calculates the fair value of its commodity contracts and foreign currency contracts using commodity forward rates and currency forward rates, to calculate forward values, and then discounts the forward values. The discount rates for all derivative contracts are based on 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 September 30, 2019 and December 31, 2018.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

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

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

During the first quarter, the Company reorganized the reporting structure of its Aftermarket, Ride Performance, and Motorparts segments and the underlying reporting units within those segments. See Note 6, Goodwill and Other Intangible Assets, for additional information on the goodwill impairment recognized in the three and nine months ended September 30, 2019.

Financial Instruments Not Carried at Fair Value

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



		September 30, 2019				December 31, 2018
	Fair value hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt (including current maturities):
Term loans and senior notes	Level 2	$	5,169	$	4,963	$	5,307	$	5,218

The fair value of the Company's public senior notes and private borrowings under its senior credit facility is based on observable inputs, and its borrowings on the revolving credit facility approximate fair value. The Company also had $78 million and $106 million at September 30, 2019 and December 31, 2018 in other debt whose carrying value approximates fair value, which consists primarily of foreign debt with maturities of one year or less.

Assets and Liabilities Not Carried at Fair Value

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

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

10. Debt and Other Financing Arrangements

Long-Term Debt

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



	September 30, 2019				December 31, 2018
	Principal		Carrying Amount ⁽¹⁾		Principal		Carrying Amount ⁽¹⁾
Credit Facilities
Revolver Borrowings
Due 2023	$	229	$	229	$	—	$	—
Term Loans
LIBOR plus 1.75% Term Loan A due 2019 through 2023	1,636		1,628		1,700		1,691
LIBOR plus 3.00% Term Loan B due 2019 through 2025⁽²⁾	1,687		1,624		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	452		467		476		496
€300 million of Euribor plus 4.875% Euro Floating Rate Notes due 2024	327		331		344		349
€350 million of 5.000% Euro Fixed Rate Notes due 2024	381		403		401		427
Other debt, primarily foreign instruments	81		78		108		106
			5,476				5,413
Less - maturities classified as current			68				73
Total long-term debt			$	5,408			$	5,340


⁽¹⁾	Carrying amount is net of unamortized debt issuance costs and debt discounts or premiums. Total unamortized debt issuance costs were $80 million and $90 million as of September 30, 2019 and December 31, 2018. Total unamortized debt (premium) discount, net was $(38) million and $(49) million as of September 30, 2019 and December 31, 2018.


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

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 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").

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").

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Credit Facilities

The Company had availability on its credit facilities as of September 30, 2019 as follows:



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


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


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

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Amortization of debt issuance fees	$	5	$	1	$	14	$	3

Included in the table above, is the amortization of debt issuance costs on the revolver, which are $19 million at September 30, 2019 and are recorded in "Other assets" in the condensed consolidated balance sheets. In addition, there was a $3 million and $9 million reduction to interest expense during the three and nine months ended September 30, 2019 related to the accretion of the debt premium on the Senior Secured Notes.

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

Senior Unsecured Notes and Senior Secured Notes — Other Terms and Conditions — The Senior Unsecured Notes and Senior Secured Notes contain covenants that will, among other things, limit the Company's ability to create liens and enter into sale and leaseback transactions. In addition, the Senior Secured Notes and 2024 Senior Unsecured Notes also require that, as a condition precedent to incurring certain types of indebtedness not otherwise permitted, the Company's consolidated fixed 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 September 30, 2019, the Company was in compliance with all of its financial covenants.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Accounts Receivable Securitization and Factoring

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



	September 30, 2019		December 31, 2018
Borrowings on securitization programs	$	3	$	6

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

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

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

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



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

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



	September 30, 2019		December 31, 2018
Deferred purchase price receivable	$	47	$	154

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



	Three months ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(in billions)
Proceeds from factoring qualifying as sales	$	1.1	$	0.6	$	3.6	$	2.1

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



	Three months ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Financing charges on sale of receivables^(a)	$	9	$	3	$	23	$	8
^(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.

11. Pension Plans, Postretirement and Other Employee Benefits

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

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



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

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



	Nine Months Ended September 30
	Pension												Other Postretirement Benefits
	2019						2018						Other Postretirement Benefits
	US			Non-U.S.			US			Non-U.S.			2019			2018
Service cost	$	2		$	18		$	1		$	8		$	—		$	—
Interest cost	40			18			8			9			10			5
Expected return on plan assets	(51		)	(14		)	(11		)	(15		)	—			—
Net amortization:
Actuarial loss	3			4			3			6			3			6
Prior service cost (credit)	—			1			—			—			(6		)	(1		)
Net pension and postretirement costs (credits)	$	(6	)	$	27		$	1		$	8		$	7		$	10

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 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.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

For the three months ended September 30, 2019, the Company recorded income tax benefit of $9 million on income from continuing operations before income taxes of $69 million. This compares to income tax expense of $22 million on income from continuing operations before income taxes of $88 million in the three months ended September 30, 2018.

For the nine months ended September 30, 2019, the Company recorded income tax expense of $5 million on income from continuing operations before income taxes of $23 million. This compares to income tax expense of $73 million on income from continuing operations before income taxes of $276 million in the nine months ended September 30, 2018.

Income tax expense for the three and nine months ended September 30, 2019 differs from the U.S. statutory rate due primarily to $33 million of net tax benefit recognized relating to a valuation allowance release for an entity in Spain, 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 nine months ended September 30, 2018 differs from the U.S. statutory rate due primarily to $5 million and $12 million of tax benefit recognized relating to acquisition and restructuring charges, $10 million of tax benefit recognized for valuation allowance release at our Australia entities, 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 nine months ended September 30, 2018, $9 million and $11 million of tax expense was recognized for changes in the toll tax discussed below.

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 tax benefit was recognized for the nine months ended September 30, 2019.

The Company evaluates its deferred tax assets quarterly to determine if valuation allowances are required or should be adjusted. This assessment considers, among other matters, the nature, frequency and amount of recent losses, the duration of statutory carryforward periods, and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified. If recent operational improvements continue in our foreign subsidiaries, the Company believes it is reasonably possible sufficient positive evidence may be available to release all, or a portion, of its valuation allowance in the next twelve months in certain jurisdictions. This may result in a one-time tax benefit of up to $4 million, primarily related to China and France.

The Company believes it is reasonably possible up to $9 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.

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 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.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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

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



	September 30, 2019		December 31, 2018
Accrued expenses and other current liabilities	$	8	$	12
Deferred credits and other liabilities	29		28
	$	37	$	40

For those locations where the liability was discounted, the weighted average discount rate used was 1.3% and 2.9% at September 30, 2019 and December 31, 2018.

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



	2019		2020		2021		2022		2023		2024 and thereafter
Expected payments	$	5	$	5	$	3	$	3	$	2	$	17

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

Asset Retirement Obligations

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



	September 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

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

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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

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

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

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

Following the EC's 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 million was paid through September 30, 2019. In connection with the resolution of certain claims, $9 million was released from the reserve in the third quarter of 2019 and the Company expects to pay $30 million in the first quarter of 2020 from amounts that were included in the reserve. The reserve of $44 million as of September 30, 2019 is recorded in accrued expenses and other current liabilities in the Company's condensed consolidated balance sheets. While the Company, including its Federal-Mogul subsidiaries, continues to cooperate with certain competition agencies investigating possible violations of antitrust laws relating to products supplied by the Company, and the Company may be subject to other civil lawsuits and/or related claims, no amount of this reserve is attributable to matters with the DOJ or the EC, and no such amount is expected based on current information.

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

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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. Additionally, in many cases the plaintiffs either do not specify any, or specify the jurisdictional minimum, dollar amount for damages.

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

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

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

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 and Litigation", the Company does 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.

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 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.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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
Accruals related to product warranties	2			5
Reductions for payments made	(2		)	(6		)
Foreign currency	(1		)	—
Balance as of September 30	$	52		$	28

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.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

The components of lease expense were as follows:



	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Operating lease expense	$	33		$	97
Finance lease expense
Amortization of right-of-use assets	1			1
Short-term lease expense	3			7
Variable lease expense	5			25
Sublease income	(1		)	(1		)
Total lease expense	$	41		$	129

Other information related to leases was as follows:



	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	43	$	125

Supplemental balance sheet information related to leases was as follows:



	September 30, 2019
Operating leases
Operating lease right-of-use assets ^(a)	$	342

Other current liabilities ^(b)	$	101
Other long-term liabilities ^(c)	237
Total operating lease liabilities	$	338

Finance leases
Property, plant and equipment, gross	$	2
Accumulated depreciation	1
Total finance lease right-of-use assets	$	1

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.



	September 30, 2019
	Weighted average remaining lease term	Weighted average discount rate
Operating leases	4.78 years	4.26	%
Finance leases	2.82 years	4.33	%

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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



Year ending December 31	Operating leases			Finance leases
2019 (excluding the nine months ended September 30, 2019)	$	33		$	1
2020	104			1
2021	80			—
2022	56			—
2023	39			—
Thereafter	60			—
Total future undiscounted lease payments	372			2
Less imputed interest	(34		)	—
Total reported lease liability	$	338		$	2

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



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

15. Share-Based Compensation

Share-Based Compensation Expense

The total share-based compensation expense was as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Cash-settled share-based compensation expense (benefit)	$	—	$	—	$	—	$	(3	)
Share-settled share-based compensation expense (benefit)	7		4		20		11
	$	7	$	4	$	20	$	8

Cash-Settled Awards

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

Share-Settled Awards

The Company has granted restricted stock 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. These awards are settled in shares upon vesting and recognized in equity based on their fair value.

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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



	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
Nonvested balance at beginning of period	178,550		$	55.46	440,403		$	47.99	227,049		$	49.18
Granted	36,603		34.06		867,137		34.21		634,511		24.77
Vested	(172,667	)	50.18		(90,040	)	54.60		—		—
Forfeited	(6,619	)	55.64		(71,705	)	40.71		(54,455	)	43.02
Nonvested balance at end of period	35,867		$	63.27	1,145,795		$	37.99	807,105		$	34.15

As of September 30, 2019, approximately $47 million of total unrecognized compensation costs is expected to be recognized on the share-settled awards over a weighted-average period of approximately 2 years.

16. Shareholders' Equity

Common Stock Outstanding

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

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



	Class A Common Stock				Class B Common Stock
	Nine Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019
Shares issued at beginning of period	71,675,379		66,033,509		23,793,669
Issuance (repurchased) pursuant to benefit plans	98,716		(18,553	)	—
Restricted stock forfeited and withheld for taxes	(62,919	)	(8,062	)	—
Stock options exercised	8,438		16,199		—
Shares issued at end of period	71,719,614		66,023,093		23,793,669

Treasury stock	14,592,888		14,592,888		—
Total shares outstanding	57,126,726		51,430,205		23,793,669

Preferred Stock

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

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Accumulated Other Comprehensive Income (Loss)

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Foreign currency translation adjustments and other
Balance at beginning of period	$	(383	)	$	(336	)	$	(395	)	$	(263	)
Other comprehensive income (loss) before reclassifications adjustments	(77		)	(28		)	(66		)	(103		)
Reclassification from other comprehensive income (loss)	—			—			—			—
Other comprehensive income (loss)	(77		)	(28		)	(66		)	(103		)
Income tax provision (benefit)	2			—			3			2
Balance at end of period	$	(458	)	$	(364	)	$	(458	)	$	(364	)

Pensions and other postretirement benefits
Balance at beginning of period	$	(298	)	$	(268	)	$	(297	)	$	(275	)
Other comprehensive income (loss) before reclassifications	—			—			—			—
Reclassification from other comprehensive income (loss)	2			5			5			14
Other comprehensive income (loss)	2			5			5			14
Income tax provision (benefit)	1			(1		)	(3		)	(3		)
Balance at end of period	$	(295	)	$	(264	)	$	(295	)	$	(264	)

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

Other comprehensive income (loss) attributable to noncontrolling interests	$	(22	)	$	(3	)	$	(17	)	$	(2	)

17. Segment Information

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

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

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

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

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



	Reportable Segments
	Clean Air		Powertrain		Ride Performance		Motorparts		Total		Corporate		Reclass & Elims			Total
For the Three Months Ended September 30, 2019
Revenues from external customers	$	1,772	$	1,082	$	671	$	794	$	4,319	$	—	$	—		$	4,319
Intersegment revenues	$	—	$	38	$	42	$	9	$	89	$	—	$	(89	)	$	—
For the Nine Months Ended September 30, 2019
Revenues from external customers	$	5,378	$	3,390	$	2,113	$	2,426	$	13,307	$	—	$	—		13,307
Intersegment revenues	$	—	$	124	$	126	$	31	$	281	$	—	$	(281	)	$	—



	Reportable Segments
	Clean Air		Powertrain		Ride Performance		Motorparts		Total		Corporate		Reclass & Elims			Total
For the Three Months Ended September 30, 2018
Revenues from external customers	$	1,602	$	—	$	461	$	308	$	2,371	$	—	$	—		$	2,371
Intersegment revenues	$	—	$	—	$	5	$	—	$	5	$	—	$	(5	)	$	—
For the Nine Months Ended September 30, 2018
Revenues from external customers	$	5,052	$	—	$	1,480	$	953	$	7,485	$	—	$	—		$	7,485
Intersegment revenues	$	—	$	—	$	16	$	—	$	16	$	—	$	(16	)	$	—

Segment EBITDA including noncontrolling interests and the reconciliation to net income (loss) is as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
EBITDA including noncontrolling interests by Segments:
Clean Air	$	169		$	144		$	452		$	443
Powertrain	90			—			303			—
Ride Performance	20			14			1			58
Motorparts	113			53			268			153
Corporate	(79		)	(39		)	(256		)	(129		)
Total EBITDA including noncontrolling interests	313			172			768			525
Depreciation and amortization	(165		)	(60		)	(503		)	(180		)
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	148			112			265			345
Interest expense	(79		)	(24		)	(242		)	(69		)
Income tax (expense) benefit	9			(22		)	(5		)	(73		)
Net income (loss)	$	78		$	66		$	18		$	203

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

Disaggregated Revenue

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



	Reportable Segments
By Customer Type	Clean Air		Powertrain		Ride Performance		Motorparts		Total
Three Months Ended September 30, 2019
OE - Substrate	$	775	$	—	$	—	$	—	$	775
OE - Value add	997		1,082		671		—		2,750
Aftermarket	—		—		—		794		794
Total	$	1,772	$	1,082	$	671	$	794	$	4,319
Nine Months Ended September 30, 2019
OE - Substrate	$	2,258	$	—	$	—	$	—	$	2,258
OE - Value add	3,120		3,390		2,113		—		8,623
Aftermarket	—		—		—		2,426		2,426
Total	$	5,378	$	3,390	$	2,113	$	2,426	$	13,307



	Reportable Segments
By Customer Type	Clean Air		Powertrain		Ride Performance		Motorparts		Total
Three Months Ended September 30, 2018
OE - Substrate	$	596	$	—	$	—	$	—	$	596
OE - Value add	1,006		—		461		—		1,467
Aftermarket	—		—		—		308		308
Total	$	1,602	$	—	$	461	$	308	$	2,371
Nine Months Ended September 30, 2018
OE - Substrate	$	1,869	$	—	$	—	$	—	$	1,869
OE - Value add	3,183		—		1,480		—		4,663
Aftermarket	—		—		—		953		$	953
Total	$	5,052	$	—	$	1,480	$	953	$	7,485



	Reportable Segments
By Geography	Clean Air		Powertrain		Ride Performance		Motorparts		Total
Three Months Ended September 30, 2019
North America	$	759	$	386	$	225	$	513	$	1,883
Europe, Middle East and Africa	581		502		311		229		1,623
Rest of world	432		194		135		52		813
Total	$	1,772	$	1,082	$	671	$	794	$	4,319
Nine Months Ended September 30, 2019
North America	$	2,352	$	1,189	$	685	$	1,556	$	5,782
Europe, Middle East and Africa	1,831		1,617		1,038		707		5,193
Rest of world	1,195		584		390		163		2,332
Total	$	5,378	$	3,390	$	2,113	$	2,426	$	13,307

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Reportable Segments
By Geography	Clean Air		Powertrain		Ride Performance		Motorparts		Total
Three Months Ended September 30, 2018
North America	$	735	$	—	$	180	$	196	$	1,111
Europe, Middle East and Africa	559		—		177		97		833
Rest of world	308		—		104		15		427
Total	$	1,602	$	—	$	461	$	308	$	2,371
Nine Months Ended September 30, 2018
North America	$	2,248	$	—	$	545	$	594	$	3,387
Europe, Middle East and Africa	1,839		—		614		310		2,763
Rest of world	965		—		321		49		1,335
Total	$	5,052	$	—	$	1,480	$	953	$	7,485

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 nine months ended September 30, 2019:



	Three Months Ended September 30, 2019
	Net Sales		Purchases		Royalty and Other Income
Icahn Automotive Group LLC	$	48	$	—	$	1
PSC Metals, Inc.	$	—	$	—	$	—
Anqing TP Goetze Piston Ring Company Limited	$	1	$	14	$	—
Anqing TP Powder Metallurgy Company Limited	$	1	$	2	$	—
Dongsuh Federal-Mogul Industrial Co., Ltd.	$	1	$	3	$	—
Federal-Mogul Powertrain Otomotiv A.S.	$	10	$	51	$	1
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti.	$	—	$	1	$	—
Federal-Mogul Izmit Piston ve Pim Uretim Tesisleri A.S.	$	1	$	5	$	—
Federal-Mogul TP Liners, Inc.	$	4	$	—	$	—
Frenos Hidraulicos Autos	$	—	$	—	$	—
Montagewerk Abgastechnik Emden GmbH	$	2	$	—	$	—

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Nine Months Ended September 30, 2019
	Net Sales		Purchases		Royalty and Other Income
Icahn Automotive Group LLC	$	138	$	—	$	3
PSC Metals, Inc.	$	1	$	—	$	—
Anqing TP Goetze Piston Ring Company Limited	$	1	$	43	$	1
Anqing TP Powder Metallurgy Company Limited	$	2	$	5	$	—
Dongsuh Federal-Mogul Industrial Co., Ltd.	$	4	$	10	$	—
Federal-Mogul Powertrain Otomotiv A.S.	$	52	$	155	$	3
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti.	$	—	$	6	$	—
Federal-Mogul Izmit Piston ve Pim Uretim Tesisleri A.S.	$	3	$	13	$	—
Federal-Mogul TP Liners, Inc.	$	12	$	—	$	1
Frenos Hidraulicos Autos	$	1	$	—	$	—
Montagewerk Abgastechnik Emden GmbH	$	4	$	—	$	—

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



	September 30, 2019				December 31, 2018
	Receivables		Payables and accruals		Receivables		Payables and accruals
Icahn Automotive Group LLC	$	63	$	1	$	60	$	12
Anqing TP Goetze Piston Ring Company Limited	$	2	$	21	$	1	$	22
Anqing TP Powder Metallurgy Company Limited	$	—	$	1	$	1	$	1
Dongsuh Federal-Mogul Industrial Co., Ltd.	$	1	$	2	$	1	$	2
Federal-Mogul Powertrain Otomotiv A.S.	$	3	$	29	$	9	$	16
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti.	$	—	$	1	$	—	$	1
Federal-Mogul Izmit Piston ve Pim Uretim Tesisleri A.S.	$	—	$	2	$	—	$	—
Federal-Mogul TP Liners, Inc.	$	2	$	7	$	2	$	7
Farloc Argentina SAIC	$	1	$	—	$	—	$	—
Montagewerk Abgastechnik Emden GmbH	$	1	$	—	$	—	$	—

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

19. Supplemental Guarantor Condensed Consolidating Financial Statements

Basis of Presentation

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

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

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

Distributions

There are no significant restrictions 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 September 30, 2019
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
Revenues
Net sales and operating revenues:
External	$	1,603		$	2,716		$	—		$	—		$	4,319
Affiliated companies	241			279			—			(520		)	—
	1,844			2,995			—			(520		)	4,319
Costs and expenses
Cost of sales	1,558			2,615			—			(520		)	3,653
Selling, general, and administrative	172			76			1			—			249
Depreciation and amortization	54			110			1			—			165
Engineering, research, and development	33			45			—			—			78
Restructuring charges, asset impairments, and other	13			30			—			—			43
Goodwill impairment charge	9			—			—			—			9
	1,839			2,876			2			(520		)	4,197
Other expense (income)
Non-service postretirement benefit costs	—			2			—			—			2
Equity in (income) losses of nonconsolidated affiliates, net of tax	(1		)	—			—			—			(1		)
Other (income) expense, net	(33		)	6			—			—			(27		)
	(34		)	8			—			—			(26		)
Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies	39			111			(2		)	—			148
Interest expense:
External, net of interest capitalized	25			—			54			—			79
Affiliated companies, net of interest income	(6		)	(13		)	19			—			—
Earnings (loss) before income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies	20			124			(75		)	—			69
Income tax expense (benefit)	5			(3		)	(11		)	—			(9		)
Equity in net income (loss) from affiliated companies	124			—			134			(258		)	—
Net income (loss)	139			127			70			(258		)	78
Less: Net income (loss) attributable to noncontrolling interests	—			8			—			—			8
Net income (loss) attributable to Tenneco Inc.	$	139		$	119		$	70		$	(258	)	$	70
Comprehensive income (loss) attributable to Tenneco Inc.	$	135		$	5		$	(2	)	$	(140	)	$	(2	)

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

STATEMENT OF COMPREHENSIVE INCOME (LOSS)



	Three Months Ended September 30, 2018
	Guarantor Subsidiaries			Nonguarantor Subsidiaries		Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
Revenues
Net sales and operating revenues:
External	$	990		$	1,381	$	—		$	—		$	2,371
Affiliated companies	145			152		—			(297		)	—
	1,135			1,533		—			(297		)	2,371
Costs and expenses
Cost of sales	960			1,339		—			(297		)	2,002
Selling, general, and administrative	113			25		—			—			138
Depreciation and amortization	24			36		—			—			60
Engineering, research, and development	20			19		—			—			39
Restructuring charges, asset impairments, and other	2			14		—			—			16
	1,119			1,433		—			(297		)	2,255
Other expense (income)
Non-service postretirement benefit costs	3			1		—			—			4
Other (income) expense, net	(35		)	29		—			6			—
	(32		)	30		—			6			4
Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies	48			70		—			(6		)	112
Interest expense:
External, net of interest capitalized	10			4		10			—			24
Affiliated companies, net of interest income	(5		)	—		5			—			—
Earnings (loss) before income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies	43			66		(15		)	(6		)	88
Income tax (benefit) expense	12			10		—			—			22
Equity in net income (loss) from affiliated companies	37			—		72			(109		)	—
Net income (loss)	68			56		57			(115		)	66
Less: Net income (loss) attributable to noncontrolling interests	—			9		—			—			9
Net income (loss) attributable to Tenneco Inc.	$	68		$	47	$	57		$	(115	)	$	57
Comprehensive income (loss) attributable to Tenneco Inc.	$	68		$	47	$	33		$	(115	)	$	33

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Nine Months Ended September 30, 2019
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
Revenues
Net sales and operating revenues:
External	$	4,984		$	8,323		$	—		$	—		$	13,307
Affiliated companies	694			843			—			(1,537		)	—
	5,678			9,166			—			(1,537		)	13,307
Costs and expenses
Cost of sales	4,852			7,995			—			(1,537		)	11,310
Selling, general, and administrative	498			354			1			—			853
Depreciation and amortization	218			284			1			—			503
Engineering, research, and development	102			146			—			—			248
Restructuring charges, asset impairments, and other	64			64			—			—			128
Goodwill impairment charge	42			27			—			—			69
	5,776			8,870			2			(1,537		)	13,111
Other expense (income)
Non-service postretirement benefit costs	(1		)	9			—			—			8
Equity in losses of nonconsolidated affiliates, net of tax	(3		)	(31		)	—			—			(34		)
Other (income) expense, net	(10		)	(33		)	—			—			(43		)
	(14		)	(55		)	—			—			(69		)
Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies	(84		)	351			(2		)	—			265
Interest expense:
External, net of interest capitalized	30			17			195			—			242
Affiliated companies, net of interest income	(20		)	6			14			—			—
Earnings (loss) before income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies	(94		)	328			(211		)	—			23
Income tax expense (benefit)	(13		)	54			(36		)	—			5
Equity in net income (loss) from affiliated companies	196			—			154			(350		)	—
Net income (loss)	115			274			(21		)	(350		)	18
Less: Net income (loss) attributable to noncontrolling interests	—			39			—			—			39
Net income (loss) attributable to Tenneco Inc.	$	115		$	235		$	(21	)	$	(350	)	$	(21	)
Comprehensive income (loss) attributable to Tenneco Inc.	$	118		$	133		$	(81	)	$	(251	)	$	(81	)

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)



	Nine Months Ended September 30, 2018
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
Revenues
Net sales and operating revenues:
External	$	3,050		$	4,435		$	—		$	—		$	7,485
Affiliated companies	402			464			—			(866		)	—
	3,452			4,899			—			(866		)	7,485
Costs and expenses
Cost of sales	2,951			4,244			—			(866		)	6,329
Selling, general, and administrative	268			175			—			—			443
Depreciation and amortization	71			109			—			—			180
Engineering, research, and development	57			61			—			—			118
Restructuring charges, asset impairments, and other	5			52			—			—			57
	3,352			4,641			—			(866		)	7,127
Other expense (income)
Non-service postretirement benefit costs	9			1			—			—			10
Other (income) expense, net	(11		)	(2		)	—			16			3
	(2		)	(1		)	—			16			13
Earnings (loss) before interest expense, income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies	102			259			—			(16		)	345
Interest expense:
External, net of interest capitalized	30			10			29			—			69
Affiliated companies, net of interest income	(12		)	—			12			—			—
Earnings (loss) before income taxes, noncontrolling interests and equity in net income (loss) from affiliated companies	84			249			(41		)	(16		)	276
Income tax (benefit) expense	11			62			—			—			73
Equity in net income (loss) from affiliated companies	122			—			205			(327		)	—
Net income (loss)	195			187			164			(343		)	203
Less: Net income (loss) attributable to noncontrolling interests	—			39			—			—			39
Net income (loss) attributable to Tenneco Inc.	$	195		$	148		$	164		$	(343	)	$	164
Comprehensive income (loss) attributable to Tenneco Inc.	$	195		$	148		$	74		$	(343	)	$	74

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

BALANCE SHEETS



	September 30, 2019
	Guarantor Subsidiaries		Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	201	$	188		$	—		$	—		$	389
Restricted cash	—		6			—			—			6
Receivables, net	893		1,860			—			—			2,753
Inventories, net	940		1,197			—			—			2,137
Prepayments and other current assets	156		417			30			—			603
Total current assets	2,190		3,668			30			—			5,888
Property, plant and equipment, net	1,148		2,335			8			—			3,491
Investment in affiliated companies	1,615		—			5,203			(6,818		)	—
Long-term receivables, net	9		1			—			—			10
Goodwill	497		305			—			—			802
Intangibles, net	1,033		545			—			—			1,578
Investments in nonconsolidated affiliates	43		462			—			—			505
Deferred income taxes	321		236			13			—			570
Other assets	150		375			14			—			539
Total assets	$	7,006	$	7,927		$	5,268		$	(6,818	)	$	13,383
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt, including current maturities of long-term debt	$	1	$	160		$	—		$	—		$	161
Accounts payable	882		1,765			4			—			2,651
Accrued compensation and employee benefits	93		285			—			—			378
Accrued income taxes	—		57			—			—			57
Accrued expenses and other current liabilities	436		556			50			—			1,042
Total current liabilities	1,412		2,823			54			—			4,289
Long-term debt	229		9			5,170			—			5,408
Intercompany due to (due from)	1,830		(200		)	(1,630		)	—			—
Deferred income taxes	—		104			—			—			104
Pension, postretirement benefits and other liabilities	768		806			32			—			1,606
Commitments and contingencies
Total liabilities	4,239		3,542			3,626			—			11,407
Redeemable noncontrolling interests	—		139			—			—			139
Tenneco Inc. shareholders’ equity	2,767		4,051			1,642			(6,818		)	1,642
Noncontrolling interests	—		195			—			—			195
Total equity	2,767		4,246			1,642			(6,818		)	1,837
Total liabilities, redeemable noncontrolling interests and equity	$	7,006	$	7,927		$	5,268		$	(6,818	)	$	13,383

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



	Nine Months Ended September 30, 2019
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims				Consolidated
Operating Activities
Net cash provided (used) by operating activities	$	137		$	45		$	(115	)	$	(3	)		$	64
Investing Activities
Proceeds from sale of assets	2			6			—			—				8
Net proceeds from sale of business	6			16			—			—				22
Cash payments for property, plant and equipment	(166		)	(375		)	—			—				(541		)
Acquisition of business, net of cash acquired	—			(158		)	—			—			—	(158		)
Proceeds from deferred purchase price of factored receivables	—			203			—			—				203
Other	3			(4		)	1			—				—
Net cash provided (used) by investing activities	(155		)	(312		)	1			—				(466		)
Financing Activities
Proceeds from term loans and notes	—			171			—			—				171
Repayment of term loans and notes	—			(201		)	(77		)	—				(278		)
Borrowings on revolving lines of credit	6,119			171			514			—				6,804
Payments on revolving lines of credit	(5,890		)	(144		)	(514		)	—				(6,548		)
Issuance (repurchase) of common shares	—			—			(2		)	—				(2		)
Cash dividends	—			—			(20		)	—				(20		)
Decrease in bank overdrafts	—			(12		)	—			—				(12		)
Net increase (decrease) in short-term borrowings secured by accounts receivable	—			(3		)	—			—				(3		)
Other	1			—			—			—				1
Distribution to noncontrolling interests partners	—			(20		)	—			—				(20		)
Intercompany dividends and net (decrease) increase in intercompany obligations	(340		)	128			209			3				—
Net cash provided (used) by financing activities	(110		)	90			110			3				93
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	—			2			—			—				2
Increase (decrease) in cash, cash equivalents and restricted cash	(128		)	(175		)	(4		)	—				(307		)
Cash, cash equivalents and restricted cash, January 1	329			369			4			—				702
Cash, cash equivalents and restricted cash, September 30	$	201		$	194		$	—		$	—			$	395

TENNECO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Unaudited)

STATEMENT OF CASH FLOWS



	Nine Months Ended September 30, 2018
	Guarantor Subsidiaries			Nonguarantor Subsidiaries			Tenneco Inc. (Parent Company)			Reclass & Elims			Consolidated
Operating Activities
Net cash provided by (used in) operating activities	$	179		$	(122	)	$	(8	)	$	(12	)	$	37
Investing Activities
Proceeds from sale of assets	1			5			—			—			6
Cash payments for property, plant and equipment	(98		)	(157		)	—			—			(255		)
Proceeds from deferred purchase price of factored receivables	—			102			—			—			102
Other	(2		)	—			—			—			(2		)
Net cash used in investing activities	(99		)	(50		)	—			—			(149		)
Financing Activities
Proceeds from term loans and notes	—			12			—			—			12
Repayments of term loans and notes	(14		)	(21		)	—			—			(35		)
Borrowings on revolving lines of credit	3,537			56			458			—			4,051
Payments on revolving lines of credit	(3,575		)	(56		)	(443		)	—			(4,074		)
Issuance (repurchase) of common shares	—			—			(2		)	—			(2		)
Cash dividends	—			—			(39		)	—			(39		)
Net increase (decrease) in bank overdrafts	—			(5		)	—			—			(5		)
Net increase (decrease) in short-term borrowings secured by accounts receivable	—			150			—			—			150
Other	(2		)	—			—			—			(2		)
Distribution to noncontrolling interests partners	—			(44		)	—			—			(44		)
Intercompany dividends and net (decrease) increase in intercompany obligations	(28		)	(18		)	34			12			—
Net cash (used in) provided by financing activities	(82		)	74			8			12			12
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	—			(15		)	—			—			(15		)
Increase (decrease) in cash, cash equivalents and restricted cash	(2		)	(113		)	—			—			(115		)
Cash, cash equivalents and restricted cash, January 1	7			311			—			—			318
Cash, cash equivalents and restricted cash, September 30	$	5		$	198		$	—		$	—		$	203

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 September 30, 2019 financial results are to September 30, 2018 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, which was filed with the Securities and Exchange Commission ("SEC") on March 18, 2019 (the "2018 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) vehicle designers and manufacturers and the repair and replacement markets, or aftermarket, are served globally through leading brands, including Monroe^®, Champion^®, Öhlins^®, MOOG^®, Walker^®, Fel-Pro^®, Wagner^®, Ferodo^®, Rancho^®, Thrush^®, National^®, and Sealed Power^®, among others.

Factors that continue to be critical to our success include winning new business awards, managing our overall global manufacturing footprint to ensure proper placement and workforce levels in line with business needs, maintaining competitive wages and benefits, maximizing efficiencies in manufacturing processes, and reducing overall costs. In addition, our ability to adapt to key industry trends, such as a shift in consumer preferences to other vehicles in response to higher fuel costs and other economic and social factors, increasing technologically sophisticated content, changing aftermarket distribution channels, increasing environmental standards, and extended product life of automotive parts, also play a critical role in our success. Other factors critical to our success include adjusting to economic challenges such as increases in the cost of raw materials and our ability to successfully reduce the effect of any such cost increases through material substitutions, cost reduction initiatives, and other methods.

Öhlins Intressenter AB Acquisition

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

Federal-Mogul Acquisition

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

Separation Transaction and Change in Reportable Segments

Following the closing of the Federal-Mogul Acquisition, we agreed to use our reasonable best efforts to pursue the separation of the combined company. As such, we previously announced our intention to separate our businesses through a spinoff transaction in mid-year 2020 to form two new, independent publicly traded companies, an Aftermarket and Ride Performance company ("DRiV") and a new Powertrain Technology company ("New Tenneco"). We remain committed to the separation of the businesses and continue to execute our plan for the spinoff. Additionally, we are evaluating multiple strategic options to deleverage and facilitate the separation. Certain of these options could help mitigate the effect of challenging market conditions, which, if current trends were to continue, would likely affect our ability to complete a separation in the mid-year 2020 time range. In the first quarter of 2019, we began to manage and report our DRiV businesses through two new operating segments as compared to the three operating segments we had previously reported. The DRiV operating segments consist of Motorparts and Ride Performance. The new Motorparts operating segment consists of the previously reported Aftermarket operating segment as well as the aftermarket portion of the previously reported Motorparts operating segment. The Ride Performance operating segment consists of the previously reported Ride Performance operating segment as well as the OE Braking business that was included in the previously reported Motorparts operating segment. As such, prior period operating segment results and related disclosures have been conformed to reflect our current operating segments. The future New Tenneco consists of two existing operating segments, Powertrain and Clean Air. Costs related to other business activities, primarily corporate headquarter functions, are disclosed separately from the four operating segments as "Corporate."

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

Financial Results for the Nine Months Ended September 30, 2019

Consolidated revenues were $13,307 million, an increase of $5,822 million, or 78%, for the nine months ended September 30, 2019. The Acquisitions increased revenues by $5,616 million, or 75%. The remaining increase in revenues was primarily driven by the net favorable effects of organic growth from higher sales volume and mix of $454 million and the favorable effect of other of $8 million, partially offset by the unfavorable effects of foreign currency exchange of $256 million.

Cost of sales was $11,310 million, an increase of $4,981 million, or 79%, for the nine months ended September 30, 2019. The Acquisitions increased cost of sales by $4,690 million, or 74%. The remaining increase in cost of sales was primarily driven by incremental costs related to higher sales volume and mix of $470 million, the unfavorable effects of materials sourcing of $1 million, and an increase in other costs of $31 million, which was partially offset by a favorable effect of foreign currency exchange of $209 million.

Net income decreased by $185 million to $18 million for the nine months ended September 30, 2019 as compared to $203 million for the nine months ended September 30, 2018. The decrease was primarily driven by:


•	an increase in selling, general, and administrative costs primarily due to the effect of the Acquisitions of $410 million;


•	an increase in depreciation and amortization of $323 million primarily due to the Acquisitions;


•	an increase in engineering, research and development of $130 million primarily due to the Acquisitions;


•	an increase in restructuring charges and other of $71 million related to higher costs for facility closure and other costs;


•	a goodwill impairment charge of $69 million as a result of our change in operating segments; and


•	an increase in interest expense and other financing charges of $173 million.

These unfavorable effects were partially offset by:


•	an increase in equity earnings in nonconsolidated affiliates of $34 million, which was the result of the Federal-Mogul Acquisition; and


•	a reduction in income tax expense of $68 million.

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).

Global vehicle production levels (According to IHS Markit, October, 2019)

Global light vehicle production decreased by 3% for the three months ended September 30, 2019 compared to the same period in the prior year. Production levels in North America remained flat year over year while production in Europe increased 1%. Global light vehicle production was down in the other major markets in which we operate. South America and China light vehicle production decreased by 5% in each region and India decreased by 20%.

Global light vehicle production decreased by 6% for the first nine months of 2019 compared to the same period in the prior year. Both South American and European light vehicle production decreased by 4%. North American light vehicle production decreased 2%, with negative growth in the U.S., Canada, and Mexico. Light vehicle production in India and China decreased by 12% in each region.

Global commercial vehicle production decreased by 4% for the three months and nine months ended September 30, 2019 compared to the same periods in the prior year. For both the three and nine month comparative periods, commercial vehicle production increased in North America by 5%, increased in Brazil by 4% and remained flat in Europe. China posted a decrease for the third quarter and first nine months of 2019 of 5% and India experienced a decrease of 22% over the same comparable periods.

Part replacement trends

The strength of our aftermarket business is influenced by several key drivers. These include the vehicle population (or "parc"), average vehicle age, fuel prices, and vehicle distance traveled. The vehicle parc is estimated to have expanded in most major markets, including the U.S., China, and Germany. 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 rates and there has been significant volatility in foreign currency rates.

Strategy

The key components of our strategy are as follows:

Continue to optimize our operations by aggressively pursuing cost competitiveness in all business segments and continuing to drive productivity in existing operations

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

We seek to continue optimizing our performance through enhanced efficiencies to meet the world-class delivery performance our customers increasingly require. We have made investments in our global distribution network, through our new multi-product distribution centers, the implementation of automated picking technology, and a more efficient replenishment system with the objective of improving inventory visibility and availability, and lowering costs.

Execute a Separation Transaction

We completed the Federal-Mogul Acquisition on October 1, 2018. We will continue to seek synergies 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.

Assess focused acquisition and investment opportunities that provide product line expansion, technological advancements, geographic positioning, penetration of emerging markets and market share growth

We completed the Öhlins Acquisition, a Swedish technology company that develops premium suspension systems and components for the automotive and motorsport industries. We intend to continue to explore strategic alliances, joint ventures, acquisitions and other transactions that complement, expand or enhance our existing products, technology, systems development efforts, customer base and/or global presence.

Adapt cost structure to economic realities

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

Original Equipment Specific Strategies

We strive to strengthen our global position by designing, manufacturing, delivering and marketing technologically innovative products and systems for OE manufacturers. The key components of our OE strategy are as follows:

Maintain technological leadership to drive further growth from secular market trends

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 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 to maintain our strong market positions, we are focused on meeting these changing requirements 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.

Penetrate adjacent market segments

We seek to penetrate a variety of adjacent sales opportunities and achieve growth in higher-margin businesses by leveraging 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.

Aftermarket Specific Strategies

The 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 our key competitive strengths: a leading portfolio of products and brands; extensive global manufacturing, distribution and service capabilities; and proprietary insights based on market intelligence gathered from our distributors, installers and consumers. We intend to leverage these proprietary insights to drive business processes including engineering, innovation, manufacturing, product and brand management, distribution, and services management, all of which enable us to bring innovative products and services to market quickly and efficiently.

We expect the demand for replacement parts to increase steadily as a result of the anticipated significant increase in vehicles in operation (“VIO”), 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

The aftermarket business includes multiple leading brands with strong product offerings. Our portfolio of the industry’s most well-respected and enduring brands includes Monroe®, Champion®, Öhlins®, MOOG®, Walker®, Fel-Pro®, Wagner®, Ferodo®, Rancho®, Thrush®, National®, Sealed Power® and others. While we have many leading brands, we are continually focused on investing in our brands to maintain our position.

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 are in an outstanding position to capitalize on aftermarket trends and expand in mature markets (North America, Europe, Australia) as well as high-growth regions (China, South America, India, 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, electronic 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 are continually improving 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 an extensive catalogue of products to provide the ability to address customer requirements quickly and easily. Managing large and complex catalogues 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. These compositions differ significantly by 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, 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” initiatives to provide online, on demand, and on-site technical training and support to vehicle repair technicians who use and install our products in North America and Europe and plan to expand into South America in 2020. This initiative included Garage Gurus™, a network of technical support centers that provide some of the most comprehensive training programs in the industry that 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 North America and Europe.

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 our distribution and sales force in both China and the rest of Asia to help drive growth in this increasingly important 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 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” timelines 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, which was filed with the Securities and Exchange Commission on March 18, 2019. Also refer to Note 6, Goodwill and Other Intangible Assets, for additional discussion on our goodwill.

Non-GAAP Measures

As a result of the Federal-Mogul Acquisition, we changed our key performance measure. We now utilize EBITDA including noncontrolling interests as the key performance measure in our financial and operational decision making processes, for internal reporting, and for planning and forecasting purposes to effectively allocate resources. EBITDA including noncontrolling interests is defined as earnings before interest expense, income taxes, noncontrolling interests, and depreciation and amortization. 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 Nine Months Ended September 30, 2019 compared to the Three and Nine Months Ended September 30, 2018

Consolidated Results of Operations

The following table presents our condensed consolidated results of operations and reflects the revisions discussed in Item 1 — Condensed Consolidated Financial Statements (Unaudited).



	Three Months Ended September 30,					Increase / (Decrease)					Nine Months Ended September 30,					Increase / (Decrease)
	2019			2018		$ Change			% Change ⁽¹⁾		2019			2018		$ Change			% Change ⁽¹⁾
	(millions, except percent, share, and per share amounts)
Revenues
Net sales and operating revenues	$	4,319		$	2,371	$	1,948		82	%	$	13,307		$	7,485	$	5,822		78	%
Costs and expenses
Cost of sales	3,653			2,002		1,651			82	%	11,310			6,329		4,981			79	%
Selling, general, and administrative	249			138		111			80	%	853			443		410			93	%
Depreciation and amortization	165			60		105			175	%	503			180		323			179	%
Engineering, research, and development	78			39		39			100	%	248			118		130			110	%
Restructuring charges, asset impairments, and other	43			16		27			169	%	128			57		71			125	%
Goodwill impairment charge	9			—		9			n/m		69			—		69			n/m
	4,197			2,255		1,942			86	%	13,111			7,127		5,984			84	%
Other expense (income)
Non-service pension and other postretirement benefit costs (credits)	2			4		(2		)	(50	)%	8			10		(2		)	(20	)%
Equity in (earnings) losses of nonconsolidated affiliates, net of tax	(1		)	—		(1		)	n/m		(34		)	—		(34		)	n/m
Other expense (income), net	(27		)	—		(27		)	n/m		(43		)	3		(46		)	n/m
	(26		)	4		(30		)	n/m		(69		)	13		(82		)	n/m
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	148			112		36			32	%	265			345		(80		)	(23	)%
Interest expense	79			24		55			229	%	242			69		173			251	%
Earnings (loss) before income taxes and noncontrolling interests	69			88		(19		)	(22	)%	23			276		(253		)	(92	)%
Income tax expense (benefit)	(9		)	22		(31		)	(141	)%	5			73		(68		)	(93	)%
Net income (loss)	78			66		12			18	%	18			203		(185		)	(91	)%
Less: Net income (loss) attributable to noncontrolling interests	8			9		(1		)	(11	)%	39			39		—			—	%
Net income (loss) attributable to Tenneco Inc.	$	70		$	57	$	13		23	%	$	(21	)	$	164	$	(185	)	(113	)%
Earnings (loss) per share
Basic earnings (loss) per share:
Earnings (loss) per share	$	0.87		$	1.11						$	(0.25	)	$	3.20
Weighted average shares outstanding	80,916,676			51,272,618							80,903,967			51,247,664
Diluted earnings (loss) per share:
Earnings (loss) per share	$	0.87		$	1.11						$	(0.25	)	$	3.20
Weighted average shares outstanding	80,916,676			51,401,829							80,903,967			51,395,927

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

Revenues

Three-months ended: Revenues increased by $1,948 million, or 82%, as compared to the three months ended September 30, 2018. The Acquisitions increased revenues by $1,800 million, or 76%. The remaining increase in revenues was primarily driven by the net favorable effects of organic growth from higher sales volume and mix of $203 million, partially offset by the unfavorable effects of foreign currency exchange of $55 million.

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



Three months ended September 30, 2018	$	2,371
Acquisitions	1,800
Drivers in the change of organic revenues:
Volume and mix	203
Currency exchange rates	(55		)
Others	—
Three months ended September 30, 2019	$	4,319

Nine-months ended: Revenues increased by $5,822 million, or 78%, as compared to the nine months ended September 30, 2018. The Acquisitions increased revenues by $5,616 million, or 75%. The remaining increase in revenues was primarily driven by the net favorable effects of organic growth from higher sales volume and mix of $454 million and the net favorable effects of other of $8 million, partially offset by the unfavorable effects of foreign currency exchange of $256 million.

The table below reflects our consolidated revenues for the nine months ended September 30, 2019 and 2018 (amounts in millions):



Nine months ended September 30, 2018	$	7,485
Acquisitions	5,616
Drivers in the change of organic revenues:
Volume and mix	454
Currency exchange rates	(256		)
Others	8
Nine months ended September 30, 2019	$	13,307

Cost of Sales

Three-months ended: Cost of sales increased by $1,651 million, or 82%, as compared to the three months ended September 30, 2018. The Acquisitions increased cost of sales by $1,488 million, or 74%. The remaining increase in cost of sales was primarily driven by incremental costs related to higher sales volume and mix of $214 million and an increase in other costs of $6 million, partially offset by the favorable effects of materials sourcing of $10 million and favorable effect of foreign currency exchange of $47 million.

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



Three months ended September 30, 2018	$	2,002
Acquisitions	1,488
Drivers in the change of organic revenues:
Volume and mix	214
Material	(10		)
Currency exchange rates	(47		)
Others	6
Three months ended September 30, 2019	$	3,653

Nine-months ended: Cost of sales increased by $4,981 million, or 79%, as compared to the nine months ended September 30, 2018. The Acquisitions increased cost of sales by $4,690 million, or 74%. The remaining increase in cost of sales was primarily driven by incremental costs related to higher sales volume and mix of $470 million and an increase in other costs of $31 million, partially offset by a favorable effect of foreign currency exchange of $209 million and the favorable effects of materials sourcing of $1 million.

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



Nine months ended September 30, 2018	$	6,329
Acquisitions	4,690
Drivers in the change of organic revenues:
Volume and mix	470
Material	(1		)
Currency exchange rates	(209		)
Others	31
Nine months ended September 30, 2019	$	11,310

Selling, general, and administrative (SG&A)

Three-months ended: SG&A increased by $111 million as compared to the three months ended September 30, 2018. The increase was primarily due to the effect of the Acquisitions of $121 million. There was also an increase in acquisition and separation related costs of $18 million and an increase in cost reduction initiatives of $6 million, these were partially offset by a decrease of $19 million in litigation reserves.

Nine-months ended: SG&A increased by $410 million as compared to the nine months ended September 30, 2018. The increase was primarily due to the effect of the Acquisitions of $410 million. There was also an increase in acquisition and separation related costs of $54 million, which was partially offset by a decrease of $19 million in litigation reserves.

Depreciation and amortization

Three-months ended: Depreciation and amortization increased by $105 million as compared to the three months ended September 30, 2018. The increase was due primarily to the effect of the Acquisitions.

Nine-months ended: Depreciation and amortization increased by $323 million as compared to the nine months ended September 30, 2018. The increase was due primarily to the effect of the Acquisitions.

Engineering, research, and development

Three-months ended: Engineering, research, and development increased by $39 million as compared to the three months ended September 30, 2018. The increase was due primarily to the effect of the Acquisitions.

Nine-months ended: Engineering, research, and development increased by $130 million as compared to the nine months ended September 30, 2018. The increase was due primarily to the effect of the Acquisitions.

Restructuring charges, asset impairments, and other

Three-months ended: Restructuring charges, asset impairments, and other increased by $27 million as compared to the three months ended September 30, 2018. The increase is primarily attributable to higher costs related to facility closure and other costs, and an $8 million impairment charge incurred on assets held for sale during the three months ended September 30, 2019.

Nine-months ended: Restructuring charges, asset impairments, and other increased by $71 million as compared to the nine months ended September 30, 2018. The increase is primarily attributable to higher costs related to facility closure and other costs, and an $8 million impairment charge incurred on assets held for sale during the nine months ended September 30, 2019.

Goodwill impairment charge

Three-months ended: There was a $9 million goodwill impairment charge recorded in the three months ended September 30, 2019 as compared to no impairment charge in the three months ended September 30, 2018. Purchase accounting was completed for the Federal-Mogul Acquisition and the allocation of goodwill was finalized. As a result, the final goodwill allocation was reassigned to the reorganized segments and reporting unit structure that occurred in the first quarter of 2019 and an incremental $9 million of goodwill was impaired for one reporting unit in our Ride Performance segment.

Nine-months ended: There was a reorganization of segments and reporting units in the first quarter of 2019 within the Aftermarket, Ride Performance, and Motorparts segments. The total impairment charge recognized in the nine months ended September 30, 2019 for the reorganization of the reporting units that occurred in the first quarter of 2019 was $69 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) decreased $2 million for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018. The Federal-Mogul Acquisition increased non-service costs by $3 million, which was partially offset by the recognition of $2 million in prior service credits during the three months ended September 30, 2019, as a result of the plan amendment recognized at December 31, 2018 for one of our postretirement medical benefits plan.

Nine-months ended: Non-service pension and postretirement benefit costs (credits) decreased $2 million for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018. The Federal-Mogul Acquisition increased non-service pension and postretirement benefit costs by $7 million, which was partially offset by the recognition of $5 million in prior service credits during the nine months ended September 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 $1 million as compared to the three months ended September 30, 2018. The increase was due to the Federal-Mogul Acquisition.

Nine-months ended: Equity in (earnings) losses of nonconsolidated affiliates, net of tax increased by $34 million as compared to the nine months ended September 30, 2018. The increase was due to the Federal-Mogul Acquisition.

Other expense (income), net

Three-months ended: Other income, net increased by $27 million as compared to the three months ended September 30, 2018. The Acquisitions increased other income, net by $3 million. The remaining increase was primarily attributable to a recovery of value-added tax in a foreign jurisdiction and income from an EPA mandate to which we were the beneficiary.

Nine-months ended: Other income, net increased by $46 million as compared to the nine months ended September 30, 2018. The Acquisitions increased other income, net by $15 million. The remaining increase was primarily attributable to a recovery of value-added tax in a foreign jurisdiction and income from an EPA mandate to which we were the beneficiary.

Interest expense

Three-months ended: Interest expense increased by $55 million as compared to the three months ended September 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 $6 million as compared to the three months ended September 30, 2018. The increase is primarily attributable to the Federal-Mogul Acquisition.

Nine-months ended: Interest expense increased by $173 million as compared to the nine months ended September 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 $15 million as compared to the nine months ended September 30, 2018. The increase is primarily attributable to the Federal-Mogul Acquisition.

Income tax expense (benefit)

Three-months ended: Income tax expense decreased by $31 million to an income tax benefit of $9 million as compared to income tax expense of $22 million in the three months ended September 30, 2018. The decrease was primarily attributable to a $33 million net tax benefit recognized for a valuation allowance release for an entity in Spain.

Nine-months ended: Income tax expense decreased by $68 million as compared to the nine months ended September 30, 2018. The reduction was primarily attributable to a $33 million net tax benefit recognized for a valuation allowance release for an entity in Spain and a decrease in pretax earnings.

Net income (loss)

Three-months ended: Net income increased by $12 million to $78 million for the three months ended September 30, 2019 as compared to $66 million of net income for the three months ended September 30, 2018, as result of the aforementioned items.

Nine-months ended: Net income decreased by $185 million to net income of $18 million for the nine months ended September 30, 2019 as compared to $203 million of net income for the nine months ended September 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 EBITDA including noncontrolling interests to net income (loss) attributable to Tenneco Inc. for the three and nine months ended September 30, 2019 and 2018 (amounts in millions):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Total EBITDA including noncontrolling interests	313			172			768			525
Depreciation and amortization	(165		)	(60		)	(503		)	(180		)
Earnings (loss) before interest expense, income taxes, and noncontrolling interests	148			112			265			345
Interest expense	(79		)	(24		)	(242		)	(69		)
Income tax (expense) benefit	9			(22		)	(5		)	(73		)
Net income (loss)	78			66			18			203
Less: Net income (loss) attributable to noncontrolling interests	8			9			39			39
Net income (loss) attributable to Tenneco Inc.	$	70		$	57		$	(21	)	$	164

Three-months ended: EBITDA including noncontrolling interests increased by $141 million as compared to the three months ended September 30, 2018, as a result of the aforementioned items. See "Non-GAAP Measures" for further discussion on the use of non-GAAP measures.

Nine-months ended: EBITDA including noncontrolling interests increased by $243 million as compared to the nine months ended September 30, 2018, as a result of the aforementioned items. See "Non-GAAP Measures" for further discussion on the use of non-GAAP measures.

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 September 30, 2019 and 2018 (amounts in millions):



	Segment Revenue
	New Tenneco									DRiV
	Clean Air					Powertrain				Ride Performance					Motorparts					Total Revenues
Three months ended September 30,	2019			2018		2019		2018		2019			2018		2019			2018		2019			2018
Revenues	$	1,772		$	1,602	$	1,082	$	—	$	671		$	461	$	794		$	308	$	4,319		$	2,371

Value-add revenues	997			1,006		1,082		—		671			461		794			308		3,544			1,775
Currency effect on value-add revenue	(20		)	—		—		—		(14		)	—		(7		)	—		(41		)	—
Value-add revenue excluding currency	$	1,017		$	1,006	$	1,082	$	—	$	685		$	461	$	801		$	308	$	3,585		$	1,775

Substrate sales	$	775		$	596	$	—	$	—	$	—		$	—	$	—		$	—	$	775		$	596
Effect of Acquisitions	$	—		$	—	$	1,082	$	—	$	219		$	—	$	499		$	—	$	1,800		$	—

The table below reflects our segment revenues for the nine months ended September 30, 2019 and 2018 (amounts in millions):



	Segment Revenue
	New Tenneco									DRiV
	Clean Air					Powertrain				Ride Performance					Motorparts					Total Revenues
Nine months ended September 30,	2019			2018		2019		2018		2019			2018		2019			2018		2019			2018
Revenues	$	5,378		$	5,052	$	3,390	$	—	$	2,113		$	1,480	$	2,426		$	953	$	13,307		$	7,485

Value-add revenues	3,120			3,183		3,390		—		2,113			1,480		2,426			953		11,049			5,616
Currency effect on value-add revenue	(102		)	—		—		—		(65		)	—		(33		)	—		(200		)	—
Value-add revenue excluding currency	$	3,222		$	3,183	$	3,390	$	—	$	2,178		$	1,480	$	2,459		$	953	$	11,249		$	5,616

Substrate sales	$	2,258		$	1,869	$	—	$	—	$	—		$	—	$	—		$	—	$	2,258		$	1,869
Effect of Acquisitions	$	—		$	—	$	3,390	$	—	$	684		$	—	$	1,542		$	—	$	5,616		$	—

Segment Revenue

Clean Air

Three-months ended: Clean Air revenue increased $170 million, or 11%, as compared to the three months ended September 30, 2018. Higher light vehicle sales and commercial truck revenues contributed $209 million to the increase, while foreign currency exchange had a $34 million unfavorable effect on Clean Air revenues, leaving $5 million unfavorable other.

Nine-Months ended: Clean Air revenue increased $326 million, or 6%, as compared to the nine months ended September 30, 2018. Higher light vehicle and commercial truck sales contributed $496 million to the increase, while foreign currency exchange had a $158 million unfavorable effect on Clean Air revenues, leaving $12 million unfavorable other.

Powertrain

Three and Nine-months ended: As a result of the Federal-Mogul Acquisition, Powertrain revenue was $1,082 million and $3,390 million for the three and nine months ended September 30, 2019, respectively.

Ride Performance

Three-months ended: Ride Performance revenue increased $210 million, or 46%, as compared to the three months ended September 30, 2018. The Acquisitions increased revenue by $219 million. Excluding the Acquisitions, revenue decreased by $9 million due to the unfavorable effects of foreign currency exchange of $14 million, partially offset by net favorable volume and mix of $4 million and net favorable other of $1 million.

Nine-months ended: Ride Performance revenue increased $633 million, or 43%, as compared to the nine months ended September 30, 2018. The Acquisitions increased revenue by $684 million. Excluding the Acquisitions, revenue decreased by $51 million due to the unfavorable effects of foreign currency exchange of $65 million, partially offset by net favorable volume and mix of $9 million and $5 million favorable other.

Motorparts

Three-months ended: Motorparts revenue increased $486 million, or 158%, as compared to the three months ended September 30, 2018. The Federal-Mogul Acquisition increased revenue by $499 million. Excluding the Federal-Mogul Acquisition, revenue decreased by $13 million due to the net unfavorable effects of $10 million from lower volume and the unfavorable effects of foreign currency exchange of $7 million, partially offset by $4 million favorable other.

Nine-months ended: Motorparts revenue increased $1,473 million, or 155%, as compared to the nine months ended September 30, 2018. The Federal-Mogul Acquisition increased revenue by $1,542 million. Excluding the Federal-Mogul Acquisition, revenue decreased by $69 million which was due to unfavorable volume and mix of $51 million and the unfavorable effects of foreign currency exchange of $33 million, partially offset by $15 million of other.

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

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



	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months			Nine Months
	2019			2018			2019			2018			2019 vs 2018			2019 vs 2018
	(Millions)
EBITDA including noncontrolling interests by Segments:
Clean Air	$	169		$	144		$	452		$	443		$	25		$	9
Powertrain	90			—			303			—			90			303
Ride Performance	20			14			1			58			6			(57		)
Motorparts	113			53			268			153			60			115
Corporate	(79		)	(39		)	(256		)	(129		)	(40		)	(127		)
Total EBITDA including noncontrolling interests	$	313		$	172		$	768		$	525		$	141		$	243

Clean Air

Three-months ended: Clean Air EBITDA including noncontrolling interests increased $25 million as compared to the three months ended September 30, 2018. The increase is primarily attributable to lower selling, general, and administrative costs and improved operating efficiencies.

Nine-months ended: Clean Air EBITDA including noncontrolling interests increased $9 million as compared to the nine months ended September 30, 2018. The increase is primarily attributable to lower selling, general, and administrative costs, partially offset by net unfavorable operating performance, incremental costs for process harmonization, higher restructuring costs, and unfavorable effects of foreign currency exchange.

Powertrain

Three and Nine-months ended: As a result of the Federal-Mogul Acquisition, Powertrain EBITDA including noncontrolling interests was $90 million and $303 million for the three and nine months ended September 30, 2019, respectively.

Ride Performance

Three-Months ended: Ride Performance EBITDA including noncontrolling interests increased $6 million as compared to the three months ended September 30, 2018. The Acquisitions resulted in a $2 million unfavorable effect on EBITDA including noncontrolling interests, thus resulting in an increase of $7 million without Acquisitions. The increase is primarily attributable to lower one-time selling, general and administrative costs and improved operating performance, partially offset by net unfavorable volume and mix and unfavorable effects of foreign currency. The amounts discussed above include an immaterial $5 million charge related to prior periods recorded in the three months ended September 30, 2019.

Nine-Months ended: Ride Performance EBITDA including noncontrolling interests decreased $57 million as compared to the nine months ended September 30, 2018. While the Acquisitions contributed $15 million of additional EBITDA including non controlling interests, this increase is more than offset by a goodwill impairment charge of $69 million taken in the nine months ended September 30, 2019 as a result of an operating segment reorganization. Also contributing to the decrease in EBITDA including non controlling interests was unfavorable operating performance and the unfavorable effects of foreign currency, which were partially offset by net favorable volume and mix and lower selling, general and administrative costs. The amounts discussed above include an immaterial $5 million charge related to prior periods recorded in the nine months ended September 30, 2019.

Motorparts

Three-months ended: Motorparts EBITDA including noncontrolling interests increased $60 million compared to the three months ended September 30, 2018. The Federal-Mogul Acquisition contributed $71 million of EBITDA including non controlling interests to the third quarter 2019 results. The increase in EBITDA including non controlling interestes attributable to the acquisition was offset primarily by a charge to impair the carrying value of assets held for sale, an unfavorable warranty charge, incremental purchase accounting charges, unfavorable operating performance, and net unfavorable volume and mix.

Nine-months ended: Motorparts EBITDA including noncontrolling interests increased $115 million as compared to the nine months ended September 30, 2018. The Federal-Mogul Acquisition contributed $213 million of EBITDA including non controlling interests to the results for the nine months ended September 30, 2019. The increase in EBITDA including non controlling interests 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 negative EBITDA including noncontrolling interests increased $40 million as compared to the three months ended September 30, 2018. The increase is primarily attributable to higher acquisition and separation costs and higher corporate costs post Federal-Mogul Acquisition, offset by lower selling, general, and administrative costs.

Nine-months ended: Corporate negative EBITDA including noncontrolling interests increased $127 million as compared to the nine months ended September 30, 2018. The increase is primarily attributable to higher acquisition and separation costs and higher corporate costs post Federal-Mogul Acquisition, offset by 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 September 30, 2019
Costs to achieve synergies ⁽¹⁾
Restructuring related to synergy initiatives	$	4		$	—	$	—		$	2		$	6		$	1	$	—	$	7
Other cost to achieve synergies	—			—		—			—			—			—		—		—
Total costs to achieve synergies	4			—		—			2			6			1		—		7

Restructuring and related expenses
Other restructuring charges and costs ⁽²⁾	2			11		15			—			28			—		—		28
Impairment of assets held for sale	—			—		—			8			8			—		—		8
Total restructuring and related expenses	2			11		15			8			36			—		—		36

Cost reduction initiatives ⁽³⁾	—			—		—			—			—			6		—		6
Acquisition and expected separation costs⁽⁴⁾	—			—		—			—			—			30		—		30
Purchase accounting adjustments ⁽⁵⁾	—			8		(1		)	4			11			—		—		11
Brazil tax credit ⁽⁶⁾	(9		)	—		(6		)	(7		)	(22		)	—		—		(22		)
Antitrust reserve change in estimate ⁽⁷⁾	(9		)	—		—			—			(9		)	—		—		(9		)
Out of period adjustment ⁽⁸⁾	—			—		5			—			5			—		—		5
Warranty charge ⁽⁹⁾	—			—		—			1			1			—		—		1
Goodwill impairment charge ⁽¹⁰⁾	—			—		9			—			9			—		—		9
Total adjustments	$	(12	)	$	19	$	22		$	8		$	37		$	37	$	—	$	74



	Reportable Segments
	Clean Air		Powertrain		Ride Performance		Motorparts		Total		Corporate		Reclass & Elims		Total
Three Months Ended September 30, 2018
Costs to achieve synergies ⁽¹⁾
Restructuring related to synergy initiatives	$	—	$	—	$	—	$	—	$	—	$	1	$	—	$	1
Other cost to achieve synergies	—		—		1		—		1		—		—		1
Total costs to achieve synergies	—		—		1		—		1		1		—		2
Restructuring and related expenses
Other restructuring charges and costs	1		—		10		2		13		—		—		13
Asset impairments	—		—		—		—		—		2		—		2
Total restructuring and related expenses	1		—		10		2		13		2		—		15

Acquisition and expected separation costs⁽⁴⁾			—		—		—		—		12		—		12
Litigation settlement accrual	—		—		9		—		9		1		—		10
Total adjustments	$	1	$	—	$	20	$	2	$	23	$	16	$	—	$	39

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

(2) The Ride Performance segment includes other charges of $10 million for the three months ended September 30, 2019.

(3) Costs related to cost reduction initiatives.

(4) Costs related to the Acquisitions and expected separation.

(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) Recovery of value-added tax in a foreign jurisdiction.

(7) Reduction in estimated antitrust accrual.

(8) Inventory losses attributable to prior periods.

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

(10) Post segment reorganization impairment of goodwill.



	Reportable Segments
	Clean Air			Powertrain		Ride Performance			Motorparts			Total			Corporate		Reclass & Elims		Total
Nine Months Ended September 30, 2019
Costs to achieve synergies ⁽¹⁾
Restructuring related to synergy initiatives	$	5		$	1	$	2		$	9		$	17		$	1	$	—	$	18
Other cost to achieve synergies	—			1		—			—			1			2		—		3
Total costs to achieve synergies	5			2		2			9			18			3		—		21

Restructuring and related expenses
Other restructuring charges and costs ⁽²⁾	20			28		48			3			99			1		—		100
Asset impairments	1			—		—			1			2			—		—		2
Impairment of assets held for sale	—			—		—			8			8			—		—		8
Total restructuring and related expenses	21			28		48			12			109			1		—		110

Cost reduction initiatives ⁽³⁾	—			—		—			—			—			16		—		16
Acquisition and expected separation costs⁽⁴⁾	—			—		—			1			1			96		—		97
Purchase accounting adjustments ⁽⁵⁾	—			10		4			41			55			—		—		55
Brazil tax credit ⁽⁶⁾	(9		)	—		(6		)	(7		)	(22		)	—		—		(22		)
Antitrust reserve change in estimate ⁽⁷⁾	(9		)	—		—			—			(9		)	—		—		(9		)
Out of period adjustment ⁽⁸⁾	—			—		5			—			5			—		—		5
Process harmonization⁽⁹⁾	5			—		—			5			10			—		—		10
Warranty charge ⁽¹⁰⁾	—			—		—			8			8			—		—		8
Goodwill impairment charge ⁽¹¹⁾	—			—		69			—			69			—		—		69
Total adjustments	$	13		$	40	$	122		$	69		$	244		$	116	$	—	$	360



	Reportable Segments
	Clean Air		Powertrain		Ride Performance		Motorparts		Total		Corporate		Reclass & Elims		Total
Nine months ended September 30, 2018
Costs to achieve synergies ⁽¹⁾
Restructuring related to synergy initiatives	$	6	$	—	$	—	$	—	$	6	$	3	$	—	$	9
Other cost to achieve synergies	—		—		1		1		2		—		—		2
Total costs to achieve synergies	6		—		1		1		8		3		—		11
Restructuring and related expenses
Other restructuring charges and costs	13		—		27		6		46		—		—		46
Asset impairments	—		—		—		—		—		2		—		2
Total restructuring and related expenses	13		—		27		6		46		2		—		48

Cost reduction initiatives ⁽³⁾	—		—		10		—		10		—		—		10
Acquisition and expected separation costs⁽⁴⁾	—		—		—		—		—		43		—		43
Litigation settlement accrual	—		—		9		—		9		1		—		10
Warranty charge ⁽¹⁰⁾	—		—		5		.		5		—		—		5
Environmental charge ⁽¹²⁾	—		—		—		—		—		4		—		4
Total adjustments	$	19	$	—	$	52	$	7	$	78	$	53	$	—	$	131

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

(2) The Ride Performance segment includes $30 million of other charges for the nine months ended September 30, 2019.

(3) Costs related to cost reduction initiatives.

(4) Costs related to the Acquisitions and expected separation.

(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) Recovery of value-added tax in a foreign jurisdiction.

(7) Reduction in estimated antitrust accrual.

(8) Inventory losses attributable to prior periods.

(9) Change due to process harmonization.

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

(11) Post segment reorganization impairment of goodwill.

(12) 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 table below shows our borrowing capacity on credit facilities as of September 30, 2019 (amounts in billions):



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


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

In addition, we had cash and cash equivalents of $389 million and $697 million as of September 30, 2019 and December 31, 2018.

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. 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").

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").

The financial ratios required under the New Credit Facility and the actual ratios we calculated as of September 30, 2019 for the third quarter of 2019, are as follows: leverage ratio of 3.27 actual versus 4.00 (maximum) required; and interest coverage ratio of 6.00 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, 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 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 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 September 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 September 30, 2019 and December 31, 2018 are as follows (amounts in millions):



	September 30, 2019		December 31, 2018
Borrowings on securitization programs	$	3	$	6

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 deferred purchase price arrangements.

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.

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.

The amounts outstanding for these factoring and drafting arrangements as of September 30, 2019 and December 31, 2018 are as follows (amounts in billions):



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

The deferred purchase price receivable as of September 30, 2019 and December 31, 2018 is as follows (amounts in millions):



	September 30, 2019		December 31, 2018
Deferred purchase price receivable	$	47	$	154

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Proceeds from factoring qualifying as sales	$	1.1	$	0.6	$	3.6	$	2.1

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Financing charges on sale of receivables^(a)	$	9	$	3	$	23	$	8
^(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. If the financial institutions did not continue to purchase receivables or drafts from our suppliers under these programs, 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.

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 nine months ended September 30, 2019 and 2018 were as follows (amounts in millions):



	Nine Months Ended September 30,
	2019			2018
Operational cash flow before changes in operating assets and liabilities	$	469		$	385

Changes in operating assets and liabilities:
Receivables	(457		)	(260		)
Inventories	112			(115		)
Payables and accrued expenses	99			154
Accrued interest and income taxes	(12		)	(5		)
Other assets and liabilities	(147		)	(122		)
Total change in operating assets and liabilities	(405		)	(348		)
Net cash provided (used) by operating activities	$	64		$	37

Cash provided by operations for the nine months ended September 30, 2019 was $64 million, an increase of $27 million compared to the nine months ended September 30, 2018. The net increase was primarily the result of:


•	cash flows provided by the operations of the Federal-Mogul Acquisition, of approximately $32 million; and


•	a net decrease of $5 million due to unfavorable changes in working capital items and performance (excluding the Federal-Mogul Acquisition).

Investing Activities

Investing activities for the nine months ended September 30, 2019 and 2018 were as follows (amounts in millions):



	Nine Months Ended September 30,
	2019			2018
Proceeds from sale of assets	$	8		$	6
Net proceeds from sale of business	22			—
Cash payments for property, plant, and equipment	(541		)	(255		)
Acquisition of business, net of cash acquired	(158		)	—
Proceeds from deferred purchase price of factored receivables	203			102
Other	—			(2		)
Net cash used by investing activities	$	(466	)	$	(149	)

Cash used by investing activities for the nine months ended September 30, 2019 included cash paid for the Öhlins Acquisition of $158 million and proceeds from the sale of the wipers 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 $101 million, primarily attributable to the Federal-Mogul Acquisition.

Cash payments for property, plant, and equipment were $541 million and $255 million for the nine months ended September 30, 2019 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.

Financing Activities

Financing activities for the nine months ended September 30, 2019 and 2018 were as follows (amounts in millions):



	Nine Months Ended September 30,
	2019			2018
Proceeds from term loans and notes	$	171		$	12
Repayments of term loans and notes	(278		)	(35		)
Borrowings on revolving lines of credit	6,804			4,051
Payments on revolving lines of credit	(6,548		)	(4,074		)
Issuance (repurchase) of common shares	(2		)	(2		)
Cash dividends	(20		)	(39		)
Purchase of common stock under the share repurchase program	—			—
Net increase (decrease) in bank overdrafts	(12		)	(5		)
Net increase (decrease) in short-term borrowings secured by accounts receivable	(3		)	150
Other	1			(2		)
Distributions to noncontrolling interest partners	(20		)	(44		)
Net cash provided (used) by financing activities	$	93		$	12

Cash flow provided by financing activities was $93 million for the nine months ended September 30, 2019. This included net repayments on term loans of $107 million and net borrowings on revolving lines of credit of $256 million.

Cash flow provided by financing activities was $12 million for the nine months ended September 30, 2018. This included net repayments on term loans of $23 million, net repayments on revolving lines of credit of $23 million, and $150 million in borrowings on accounts receivable securitization programs.

Dividends on Common Stock

We suspended the quarterly dividend in the second quarter of 2019. For the nine months ended September 30, 2019, a dividend of $0.25 per share was paid, or $20 million in the aggregate. This was a decrease of $19 million as compared to the nine months ended September 30, 2018, due to the suspension of the dividend program in the second quarter 2019.

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

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 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, 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 existing offsetting positions and then hedge residual exposures through third-party derivative contracts. The gain or loss on these contracts is recorded 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 recorded in "Prepayments and other current assets" or "Accrued expenses and other current liabilities" in the condensed consolidated balance sheets. The fair value of the Company's foreign currency forward contracts was a net asset position of less than $1 million at September 30, 2019 and December 31, 2018.

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



	Notional Amount
Long position	$	(47	)
Short position	$	47

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. On September 30, 2019, we had $1.6 billion par value of fixed rate debt and $3.9 billion par value of floating rate debt. Of the fixed rate debt, $452 million is fixed through 2022, $606 million is fixed through 2024, and $500 million is fixed through 2026. We also had $3.9 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 I of this Form 10-Q.

We estimate that the fair value of our long-term debt at September 30, 2019 was about 96% 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 income statement and the cash we pay for interest expense by about $40 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 increase as our stock price increases and decrease as our stock price decreases. In contrast, the value of the swap agreement moves in the opposite direction of these liabilities, allowing us to fix a portion of the liabilities at a stated amount. As of September 30, 2019, we had hedged the deferred liability related to approximately 600,000 common share equivalents.

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 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 evaluation, our Co-Chief Executive Officers and Chief Financial Officer have concluded the Company’s disclosure controls and procedures were effective 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.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2019, 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. 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. 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.

Our business could be adversely affected by labor disruptions in the United States or internationally .

In addition to the risk of a work stoppage at one of our facilities, labor disruptions at other domestic or international companies may have an adverse effect on us. In the United States, substantially all of the hourly employees of General Motors, Ford and Fiat Chrysler Automobiles in North America and many of their other suppliers are represented by The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) under collective bargaining agreements. Internationally, certain vehicle manufacturers, their suppliers and their respective employees are also subject to labor agreements. In September 2019, General Motors hourly workers represented by the UAW went on strike, which has affected the volumes at certain of our North American plants in the third quarter. Although the strike was resolved on October 25, 2019, the strike will affect volumes in the fourth quarter as well. A work stoppage or strike at one of our production facilities, at those of a customer, or affecting a supplier of ours or any of our customers, either domestically or internationally, could have an adverse effect on us by disrupting demand for our products or our ability to manufacture our products.

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 third quarter of 2019. 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 nine months ended September 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)
July 2019	—	$	—	—	$	231
August 2019	—	—		—	231
September 2019	—	—		—	231
Total	—	$	—	—	$	231


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

ITEM 6.EXHIBITS

INDEX TO EXHIBITS

QUARTERLY REPORT ON FORM 10-Q

FOR QUARTER ENDED SEPTEMBER 30, 2019



Exhibit Number		Description

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

*31.2	—	Certification of Roger J. Wood 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 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.

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
		Jason M. Hollar
		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: November 5, 2019