TEN Tenneco Inc

Notes to Financial Statements

December 31, 2020

Prior to January 1, 2020, the sponsorship of the Plan was with Federal-Mogul Powertrain LLC. On October 1, 2018, Tenneco Inc. (“Tenneco”), the parent of Tenneco Automotive Operating Company Inc. (the “Company”), completed its acquisition of Federal-Mogul LLC. As a result of the acquisition, effective January 1, 2020, the Company became the sponsor of the Tenneco Employee Investment Plan (the “Plan”), formerly known as the Federal-Mogul Employee Investment Plan. The following description of the Plan provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

General

The Plan is a defined contribution plan subject to the Employee Retirement Income Security Act, as amended (“ERISA”). All union hourly employees of the Company and its subsidiaries who are paid in the United States are eligible to participate in the Plan. This provides eligible participants the opportunity to make voluntary pre-tax and Roth contributions to the Plan.

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Tenneco Employee Investment Plan

Notes to Financial Statements

December 31, 2020

1.    Description of the Plan (continued)

“A.S.A.P.” indicates as soon as administratively possible.

“N/A” indicates not applicable.

Participants may contribute up to 75 percent of pretax annual compensation, as defined in the Plan. Participants who have attained the age of 50 before the close of the Plan year are eligible to make catch-up contributions. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans (Rollovers). Participants direct the investment of the contributions into various investment options offered by the Plan.

Full vesting also occurs upon death, total and permanent disability, or attainment of age 65 with five years of service. In addition, special vesting provisions will become effective if the Plan is determined to be “top-heavy” pursuant to the Internal Revenue Code.

Participants are immediately vested in their contributions plus earnings thereon.

Forfeitures

Company contributions which are not vested at the time of a participant’s withdrawal from the Plan are forfeited and are applied as a reduction of future Company contributions. A total of $38,861 and $2,008 was available to apply as a reduction of future Company contributions as of December 31, 2020 and 2019, respectively. During the year ended December 31, 2020, $70,774 was applied to reduce Company contributions.

If the individual is re-employed within 60 months of his/her severance of employment and repays the full amount previously distributed to him/her from the Company contribution account and otherwise qualifies for reinstatement in the Plan, the amount of the forfeiture is re-credited to his/her account in the reinstatement year.

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Tenneco Employee Investment Plan

Notes to Financial Statements

December 31, 2020

1.    Description of the Plan (continued)

Participant Accounts

Each participant’s account is credited with the participant’s contribution, Company’s contribution, if applicable, and Plan earnings. The benefit a participant is entitled to is their vested account balance. Administrative expenses related to loan administration, disbursements, or participation in the Brokerage account are paid directly from the corresponding participant’s Plan account.

The self-directed Brokerage account provides participants with the opportunity to invest in stocks and mutual funds not available through the Plan’s core investment options.

In connection with the change in sponsorship discussed above, shares of Tenneco Inc stock were registered and became a new investment option in January 2020.

Notes Receivable from Participants

The Plan allows participants to borrow from their account under certain plan conditions. Participants may have one loan outstanding at any time. The maximum amount of a participant’s borrowings shall not exceed $50,000 over a 12 month period and is limited to 50% of the participant’s vested account balance. No borrowings shall be permitted for amounts under $1,000. Loans for the purchase of a primary residence can be for 15-year duration. All other borrowings shall be paid back in equal payments, primarily through payroll deductions, not to exceed four-and-one-half years. The loans are secured by the balance in the participant’s account. The rate of interest for the loans is equal to the prime rate as published in The Wall Street Journal on the last business day of each month. The rate in effect at the time the loan is taken will be fixed for the duration of the loan. In response to COVID-19 and as permitted by the Coronavirus Aid, Relief, and Economic Security Act, qualified participants are permitted to temporarily defer loan repayments until January 1, 2021 on both new and existing loans.

Payment of Benefits / Withdrawals

In the event of retirement (as defined by the Plan agreement), death, total and permanent disability, termination of employment (as defined by the Plan agreement), or attainment of age 59 1/2, the vested balance in the participant’s account may be distributed to the participant or the participant’s beneficiary in either a lump-sum distribution or periodic installments.

Voting Rights

Each participant who has an interest in the Tenneco Inc stock fund is entitled to exercise voting rights attributable to the shares held in his or her stock fund account and is notified by the Trustee, T. Rowe Price, as defined by the Plan, prior to the time that such rights are to be exercised. If the Trustee does not receive timely instructions, the Trustee itself or by proxy shall vote all such shares in the same ratio as the shares with respect to which instructions were received from participants.

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Tenneco Employee Investment Plan

Notes to Financial Statements

December 31, 2020

Basis of Accounting

The financial statements of the Plan are prepared under the accrual method of accounting.

Recently Adopted Accounting Standard

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The ASU modifies the disclosure requirements for the fair value measurements in Topic 820, including the elimination, modification to, and addition of certain disclosures. The ASU is effective for fiscal years beginning after December 15, 2019. The provisions of the ASU did not have a material impact on the Plan’s financial statement disclosures.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires the Plan’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Investment Transactions and Income Recognition

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation includes the Plan’s gains and losses on investments bought and sold as well as held during the year.

Payment of Benefits

Benefits are recorded when paid.

Notes Receivable from Participants

Notes receivable from participants represent participant loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from participants is recorded when it is earned. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2020 or 2019. If a participant ceases to make loan payments and the plan administrator deems the participant loan to be a distribution, the participant loan balance is reduced and a benefit payment is recorded.

Administrative Expenses

Expenses incurred in the operation of the Plan are paid by the Plan unless paid by the Company or the participants. No expenses are paid from the Plan unless such payment is permitted by law. Participants may incur administrative expenses related to loan administration, disbursements, or participation in the Brokerage account. Administrative expenses related to these transactions are paid directly from the corresponding participant’s Plan account.

Investment Valuation

FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1    Observable inputs such as quoted prices in active markets.

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Tenneco Employee Investment Plan

Notes to Financial Statements

December 31, 2020

Investment Valuation (continued)

Level 2     Inputs, other than quoted prices in active markets, that are observable either directly or indirectly for substantially the full term of the asset. Inputs include:

Level 3     Unobservable inputs in which there is little or no market data, which require the Company to develop its own assumptions that market participants would use in pricing the asset, including assumption about risk.

The asset’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following describes the methods and significant assumptions used to estimate fair value of the Plan’s investments:

The Plan’s interest in the Tenneco 401(k) Master Trust (“Master Trust”) is presented at fair value, which has been determined based on the fair value of the underlying investments of the Master Trust.

The investments held by the Master Trust in 2020, and the Plan in 2019, are valued as follows:

Registered investment companies and Tenneco stock – Valued at the closing price reported on the active market on which the individual securities are traded.

Brokerage account – Consists of common stock and registered investment companies, which are valued at the closing price reported on the active market on which the individual securities are traded. Cash and cash equivalents are also included in the balance, and are valued by the issuer at amortized cost, which approximates market value.

Collective trust funds—Valued at the NAV per share (or its equivalent) based on information reported by the investment advisor using audited financial statements of the collective trust at year-end. The NAV is used as a practical expedient to estimate fair value. NAV is based on the fair value of the underlying investments held by the trust funds. Plan management believes that the value of the collective trust funds are reasonably stated and that no adjustment to NAV as of December 31, 2020 and 2019 is required. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment in the collective trust funds on a daily basis. There are no unfunded commitments or other restrictions associated with these funds.

Collective trust fund (stable value fund) – The T. Rowe Price Stable Value Fund is valued at the NAV per share (or its equivalent) based on information reported by the investment advisor using audited financial statements of the collective trust at year-end. The NAV is used as a practical expedient to estimate fair value. NAV for fully benefit investment contract held by the trust is based on the contract value, less liabilities. Contract value represents contributions made to a fund, plus earnings, less participant withdrawals. The collective trust’s NAV represents fair value since this is the amount at which the Plan transacts with the trust. Plan management believes that the value of the collective trust is reasonably stated and that no adjustment to NAV as of December 31, 2020 and 2019 is required. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment in the collective trust at contract value on a daily basis. Were the Plan to initiate a full redemption of the collective trust, the investment advisor reserves the right to temporarily delay withdrawal from the trust for up to twelve months in order to ensure that securities liquidations will be carried out in an orderly manner.

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Tenneco Employee Investment Plan

Notes to Financial Statements

December 31, 2020

Investment Valuation (continued)

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

See Note 4 for the Master Trust’s investments by level within the fair value hierarchy as of December 31, 2020.

Prior to January 1, 2020, the Plan’s assets were held in a single trust. Effective January 1, 2020, all of the Plan’s investment assets are held in a trust account at the Trustee and consist of a divided interest in an investment account of the Master Trust, a master trust established by the Company and administered by the Trustee. Use of the Master Trust permits the commingling of Plan assets with the assets of the Tenneco 401(k) Investment Plan, another defined contribution plan sponsored by the Company, for investment and administrative purposes. Although assets of the plans are commingled in the Master Trust, the Trustee maintains supporting records for the purpose of allocating the net gain or loss of the investment account to the participating plans. The net investment income or loss of the investment assets is allocated by the Trustee to each participating plan based on the relationship of the interest of each plan to the total of the interests of the participating plans.

The following table presents the Master Trust’s net assets and the Plan’s interest in the Master Trust’s net assets as of December 31, 2020:

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Tenneco Employee Investment Plan

Notes to Financial Statements

December 31, 2020

The net investment earnings of the Master Trust for the year ended December 31, 2020, are summarized below:

The following table presents the Master Trust’s investments by level within the fair value hierarchy as of December 31, 2020:

The Plan holds investments managed by the Trustee of the Plan. Fees incurred by the Plan for these investment management services are included in net appreciation in fair value of investments, as they are paid through revenue sharing, rather than a direct payment. Also qualifying as party-in-interest transactions are transactions relating to notes receivable from participants and Tenneco common stock. As of December 31, 2020, the Master Trust held 1,864,429 shares of Tenneco common stock, valued at $19,762,952. These transactions qualify as party-in-interest transactions; however, they are exempt from the prohibited transaction rules under ERISA.

Although it has not expressed any intent to do so, the Company has the right, under the Plan document, to terminate the Plan, subject to the provisions of ERISA. In the event the Plan is terminated or partially terminated, the Company shall determine the share of each participant affected thereby and all accounts shall fully vest. The funds shall then be distributed to the participants and no portion of the funds shall be returned to the Company.

The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities could occur in the future and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.

The COVID-19 outbreak continues as of the date of this report. There are many uncertainties related to the COVID-19 global pandemic that could negatively affect the Plan’s statement of net assets available for benefits and statement of changes in net assets available for benefits. The Plan’s individual investments fluctuate in response to changing market conditions, therefore the effect of the COVID-19 pandemic on its investment values in subsequent periods, if any, cannot be determined.

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Tenneco Employee Investment Plan

Notes to Financial Statements

December 31, 2020

The Plan has received a determination letter from the Internal Revenue Service (“IRS”) dated May 30, 2017, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualified status. We believe that the Plan has been designed to comply with the requirements of the Code and we will take the necessary steps, if any, to bring the Plan’s operations and/or document into compliance with the Code.

U.S. GAAP requires Plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS. The plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2020 and 2019, there are no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

Subsequent events were evaluated through June 25, 2021, the date the financial statements were issued. No material transactions occurred after the balance sheet date that would impact the financial statements.

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Tenneco Employee Investment Plan

EIN: 74-1933558 Plan Number 104

Supplemental Schedule

Schedule H, Line 4i

Schedule of Assets (Held at End of Year)

December 31, 2020