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 $29 million and $23 million at March 31, 2017 and December 31, 2016, respectively.

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 and March 31, 2017, our condensed consolidated statements of income, comprehensive income, cash flows and changes in shareholders' equity for the three months ended March 31, 2017 and 2016:



	Three Months Ended March 31, 2017
	As Previously Reported		Adjustment			As Revised
	(Millions Except Per Share Amounts)
Condensed Consolidated Income Statement
Cost of sales (exclusive of depreciation and amortization)	$	1,925	$	6		$	1,931
Earnings before interest expense, income taxes, and noncontrolling interests	127		(6		)	121
Earnings before income taxes and noncontrolling interests	112		(6		)	106
Income tax expense	34		(1		)	33
Net income	78		(5		)	73
Less: Net income attributable to noncontrolling interests	15		(1		)	14
Net income attributable to Tenneco Inc.	$	63	$	(4	)	$	59
Earnings per share
Basic earnings per share of common stock	$	1.17	$	(0.07	)	$	1.10
Diluted earnings per share of common stock	1.16		(0.07		)	1.09




	Three Months Ended March 31, 2017
	As Previously Reported		Adjustment			As Revised
	(Millions)
Condensed Consolidated Statement of Comprehensive Income
Tenneco Inc.
Net Income	$	63	$	(4	)	$	59
Comprehensive Income	$	91	$	(4	)	$	87

Noncontrolling Interests
Net Income	$	15	$	(1	)	$	14
Comprehensive Income	$	16	$	(1	)	$	15

Total
Net Income	$	78	$	(5	)	$	73
Comprehensive Income	$	107	$	(5	)	$	102



	March 31, 2017
	As Previously Reported			Adjustment			As Revised
	(Millions)
Condensed Consolidated Balance Sheet
Deferred income taxes	$	184		$	5		$	189
Total assets	4,637			5			4,642
Trade payables	1,587			7			1,594
Accrued taxes	44			(3		)	41
Total current liabilities	2,077			4			2,081
Deferred credits and other liabilities	121			29			150
Total liabilities	3,870			33			3,903
Redeemable noncontrolling interests	52			(4		)	48
Retained earnings (accumulated deficit)	(1,035		)	(19		)	(1,054		)
Total Tenneco Inc. shareholders’ equity	656			(19		)	637
Noncontrolling interests	59			(5		)	54
Total equity	715			(24		)	691
Total liabilities, redeemable noncontrolling interests and equity	4,637			5			4,642



	December 31, 2016
	As Previously Reported			Adjustment			As Revised
	(Millions)
Condensed Consolidated Balance Sheet
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
Total current liabilities	1,970			3			1,973
Deferred credits and other liabilities	116			23			139
Total liabilities	3,660			26			3,686
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 March 31, 2017
	As Previously Reported			Adjustment			As Revised
	(Millions)
Condensed Consolidated Statement of Cash Flow *
Net income	$	78		$	(5	)	$	73
Deferred income taxes	8			(1		)	7
Increase (decrease) in accounts payable	91			2			93
Changes in long-term liabilities	1			4			5


	Three Months Ended March 31, 2016
	As Previously Reported			Adjustment			As Revised
	(Millions)
Condensed Consolidated Statement of Cash Flow *
Increase (decrease) in accounts payable	56			1			57
Changes in long-term liabilities	(5		)	(1		)	(6		)

* No change to net cash used by operating activities.




	Three Months Ended March 31, 2017
	As Previously Reported			Adjustment			As Revised
	(Millions)
Condensed Consolidated Statements of Changes in Shareholders' Equity
Retained earnings (accumulated deficit)
Balance January 1	$	(1,085	)	$	(15	)	$	(1,100	)
Net income attributable to Tenneco Inc.	63			(4		)	59
Cash dividends declared	(13		)	—			(13		)
Balance March 31	$	(1,035	)	$	(19	)	$	(1,054	)

Total Tenneco Inc. shareholders' equity	$	656		$	(19	)	$	637

Noncontrolling interests:
Balance January 1	$	51		$	(4	)	$	47
Net income	8			(1		)	7
Balance March 31	$	59		$	(5	)	$	54

Total Equity	$	715		$	(24	)	$	691




	Three Months Ended March 31, 2016
	As Previously Reported			Adjustment			As Revised
	(Millions)
Condensed Consolidated Statements of Changes in Shareholders' Equity
Retained earnings (accumulated deficit)
Balance January 1	$	(1,448	)	$	(8	)	$	(1,456	)
Net income attributable to Tenneco Inc.	57			—			57
Balance March 31	$	(1,391	)	$	(8	)	$	(1,399	)

Total Tenneco Inc. shareholders' equity	$	505		$	(8	)	$	497

Noncontrolling interests:
Balance January 1	$	42		$	(3	)	$	39
Net income	7			1			8
Balance March 31	$	49		$	(2	)	$	47

Total Equity	$	554		$	(10	)	$	544