Restructuring and Other Charges

Over the past several years, we have adopted plans to restructure portions of our operations. These plans were approved by our Board of Directors and were designed to reduce operational and administrative overhead costs throughout the business. For the full year 2015, we incurred $63 million in restructuring and related costs including asset write-downs of $10 million, primarily related to European cost reduction efforts, exiting the Marzocchi suspension business, headcount reductions in Australia and South America, and the closure of a JIT plant in Australia, of which $46 million was recorded in cost of sales, $11 million in SG&A, $1 million in engineering expense, $1 million in other expense and $4 million in depreciation and amortization expense. In the second quarter of 2016, we incurred $5 million in restructuring and related costs, primarily related to European cost reduction efforts and headcount reductions in South America, of which $3 million was recorded in cost of sales and $2 million in SG&A. In the second quarter of 2015, we incurred $7 million in restructuring and related costs, primarily related to European cost reduction efforts and headcount reductions in South America, of which $6 million was recorded in cost of sales and $1 million in SG&A. In the first six months of 2016, we incurred $19 million in restructuring and related costs including asset write-downs of $5 million, primarily related to European cost reduction efforts and headcount reductions in South America, of which $6 million was recorded in cost of sales, $8 million in SG&A, $2 million in other expense and $3 million in depreciation and amortization expense. In the first six months of 2015, we incurred $12 million in restructuring and related costs, primarily related to European cost reduction efforts, headcount reductions in South America and the closure of a JIT plant in Australia, of which $10 million was recorded in cost of sales and $2 million in SG&A.

Amounts related to activities that are part of our restructuring reserves are as follows:



	December 31, 2015 Restructuring Reserve		2016 Expenses	2016 Cash Payments		Impact of Exchange Rates	June 30, 2016 Restructuring Reserve
	(Millions)
Employee Severance, Termination Benefits and Other Related Costs		$30	13	(32	)	1		$12

On January 31, 2013, we announced our intent to reduce structural costs in Europe by approximately $60 million annually. During the first quarter of 2016, we reached an annualized run rate on this cost reduction initiative of $49 million. With the disposition of the Gijon plant, which was completed at the end of the first quarter, the annualized rate will essentially reach our target of $55 million, at the current exchange rates. In the second quarter of 2016, we incurred $5 million in restructuring and related costs, of which $3 million was related to this initiative. In the first six months of 2016, we incurred $19 million in restructuring and related costs, of which $15 million was related to this initiative. While we are nearing the completion of this initiative, we expect to incur additional restructuring and related costs in 2016 due to certain ongoing matters. For example, we closed a plant in Gijon, Spain in 2013, but subsequently re-opened it in July 2014 with about half of its prior workforce after the employees' works council successfully filed suit challenging the closure decision. Pursuant to an agreement we entered into with employee representatives, we engaged in a sales process for the facility. In March of 2016, we signed an agreement to transfer ownership of the aftermarket shock absorber manufacturing facility in Gijon, Spain to German private equity fund Quantum Capital Partners A.G. (QCP). The transfer to QCP was effective March 31, 2016 and under a three year manufacturing agreement, QCP will also continue as a supplier to Tenneco.

On July 22, 2015, we announced our intention to discontinue our Marzocchi motorcycle fork suspension product line and our mountain bike suspension product line, and liquidate our Marzocchi operations. These actions were subject to a consultation process with the employee representatives and in total eliminated approximately 138 jobs. We employed 127 people at the Marzocchi plant in Bologna, Italy and an additional 11 people in our operations in North America and Taiwan. In November 2015, we closed on the sale of certain assets related to our Marzocchi mountain bike suspension product line to the affiliates of Fox Factory Holding Corp.; and in December 2015, we closed on the sale of the Marzocchi motorcycle fork product line to an Italian company, VRM S.p.A. These actions were a part of our ongoing efforts to optimize our Ride Performance product line globally while continuously improving our operations and increasing profitability. We recorded charges of $29 million in 2015 related to severance and other employee related costs, asset write-downs and other expenses related to these sales.

Under the terms of our amended and restated senior credit agreement that took effect on December 8, 2014, we are allowed to exclude up to $150 million in the aggregate of all costs, expenses, fees, fines, penalties, judgments, legal settlements and other amounts associated with any restructuring, litigation, claim, proceeding or investigation related to or undertaken by us or any of our subsidiaries, together with any related provision for taxes, incurred after December 8, 2014 in the calculation of the financial covenant ratios required under our senior credit facility. As of June 30, 2016, we had excluded $67 million of allowable charges relating to restructuring initiatives against the $150 million available under the terms of the senior credit facility.