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.



	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.

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.



	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



	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



	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



	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



	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

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.

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.

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.