Revision of Previously Issued Financial Statements

For the periods from April 1, 2013 through March 31, 2017, we identified approximately $34 million in lump sum payments from our suppliers that were incorrectly recorded upon receipt as a reduction to cost of sales. These payments should have been deferred and amortized over the life of the underlying supplier agreements. The deferred credit balance related to these payments was $27 million at June 30, 2017.

In addition, we identified approximately $7 million in cost of sales that should have been accrued in prior periods for substrate liabilities, impacting the periods from January 1, 2016 through March 31, 2017.

We evaluated the impact of these items on prior periods under the guidance of SEC Staff Accounting Bulletin (SAB) No. 99, “Materiality” and determined that the amounts were not material to previously issued financial statements.

We also evaluated the impact of correcting these items through a cumulative adjustment to our financial statements and concluded that based on the guidance within SEC SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” it was appropriate to revise our previously issued financial statements to reflect this correction. As a result, we have revised and will revise for annual and interim periods in future filings, for certain amounts in the consolidated financial statements and related notes in order to correct these errors, which are described further below.

The following tables present the impact of this revision on our condensed consolidated balance sheets as of December 31, 2016, our condensed consolidated statements of income, comprehensive income and cash flows for the three months and six months ended June 30, 2016, and changes in shareholders' equity for the six months ended June 30, 2016.



	Three Months Ended June 30, 2016
	As Reported		Adjustment			As Revised
	(Millions Except Per Share Amounts)
Condensed Consolidated Income Statement Data:
Cost of sales (exclusive of depreciation and amortization)	$	1,810	$	6		$	1,816
Earnings before interest expense, income taxes, and noncontrolling interests	177		(6		)	171
Earnings before income taxes and noncontrolling interests	143		(6		)	137
Income tax expense (benefit)	40		(1		)	39
Net income	103		(5		)	98
Less: Net income attributable to noncontrolling interests	17		(1		)	16
Net income attributable to Tenneco Inc.	$	86	$	(4	)	$	82
Earnings per share
Basic earnings per share of common stock	$	1.51	$	(0.07	)	$	1.44
Diluted earnings per share of common stock	$	1.49	$	(0.06	)	$	1.43



	Six Months Ended June 30, 2016
	As Reported		Adjustment			As Revised
	(Millions Except Per Share Amounts)
Condensed Consolidated Income Statement Data:
Cost of sales (exclusive of depreciation and amortization)	$	3,580	$	6		$	3,586
Earnings before interest expense, income taxes, and noncontrolling interests	301		(6		)	295
Earnings before income taxes and noncontrolling interests	249		(6		)	243
Income tax expense (benefit)	74		(1		)	73
Net income	175		(5		)	170
Less: Net income attributable to noncontrolling interests	32		(1		)	31
Net income attributable to Tenneco Inc.	$	143	$	(4	)	$	139
Earnings per share
Basic earnings per share of common stock	$	2.50	$	(0.06	)	$	2.44
Diluted earnings per share of common stock	$	2.49	$	(0.07	)	$	2.42




	Three Months Ended June 30, 2016
	As Reported			Adjustment			As Revised
	(Millions)
Condensed Consolidated Statement of Comprehensive Income Data:
Tenneco Inc.
Net Income	$	86		$	(4	)	$	82
Other Comprehensive Loss	(17		)	—			(17		)
Comprehensive Income	$	69		$	(4	)	$	65

Noncontrolling Interests
Net Income	$	17		$	(1	)	$	16
Other Comprehensive Loss	(2		)	—			(2		)
Comprehensive Income	$	15		$	(1	)	$	14

Total
Net Income	$	103		$	(5	)	$	98
Other Comprehensive Loss	(19		)	—			(19		)
Comprehensive Income	$	84		$	(5	)	$	79



	Six Months Ended June 30, 2016
	As Reported			Adjustment			As Revised
	(Millions)
Condensed Consolidated Statement of Comprehensive Income Data:
Tenneco Inc.
Net Income	$	143		$	(4	)	$	139
Other Comprehensive Income	10			—			10
Comprehensive Income	$	153		$	(4	)	$	149

Noncontrolling Interests
Net Income	$	32		$	(1	)	$	31
Other Comprehensive Loss	(1		)	—			(1		)
Comprehensive Income	$	31		$	(1	)	$	30

Total
Net Income	$	175		$	(5	)	$	170
Other Comprehensive Income	9			—			9
Comprehensive Income	$	184		$	(5	)	$	179



	December 31, 2016
	As Reported			Adjustment			As Revised
	(Millions)
Condensed Consolidated Balance Sheet Data:
Deferred income taxes	$	195		$	4		$	199
Total Assets	4,342			4			4,346
Trade payables	1,496			5			1,501
Accrued taxes	41			(2		)	39
Deferred credits and other liabilities	116			23			139
Redeemable noncontrolling interests	43			(3		)	40
Retained earnings (accumulated deficit)	(1,085		)	(15		)	(1,100		)
Total Tenneco Inc. shareholders’ equity	588			(15		)	573
Noncontrolling interests	51			(4		)	47
Total equity	639			(19		)	620
Total liabilities, redeemable noncontrolling interests and equity	4,342			4			4,346



	Three Months Ended June 30, 2016
	As Reported			Adjustment			As Revised
	(Millions)
Condensed Consolidated Statement of Cash Flow Data:
Net income	$	103		$	(5	)	$	98
Deferred income taxes	10			(1		)	9
Increase (decrease) in payables	6			1			7
Changes in long-term liabilities	3			5			8


	Six Months Ended June 30, 2016
	As Reported			Adjustment			As Revised
	(Millions)
Condensed Consolidated Statement of Cash Flow Data:
Net income	$	175		$	(5	)	$	170
Deferred income taxes	13			(1		)	12
Increase (decrease) in payables	62			2			64
Changes in long-term liabilities	(2		)	4			2




	Six Months Ended June 30, 2016
	As Reported			Adjustment			As Revised
	(Millions)
Condensed Consolidated Statements of Changes in Shareholders' Equity Data:
Retained earnings (accumulated deficit)
Balance January 1	$	(1,448	)	$	(8	)	$	(1,456	)
Net income attributable to Tenneco Inc.	143			(4		)	139
Balance June 30	$	(1,305	)	$	(12	)	$	(1,317	)

Total Tenneco Inc. shareholders' equity	$	541		$	(12	)	$	529

Noncontrolling interests:
Balance January 1	$	42		$	(3	)	$	39
Net income	14			(1		)	13
Other comprehensive loss	(1		)	—			(1		)
Balance June 30	$	55		$	(4	)	$	51

Total Equity	$	596		$	(16	)	$	580