The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
Notes to Consolidated Financial Statements (Unaudited)
(In millions, except share and per share amounts)
Note 1. Organization and Summary of Significant Accounting Policies
General
Dana Incorporated (Dana) is headquartered in Maumee, Ohio and was incorporated in Delaware in 2007. As a global provider of high technology driveline (axles, driveshafts and transmissions); sealing and thermal-management products; and motors, power inverters, and control systems for electric vehicles our customer base includes virtually every major vehicle manufacturer in the global light vehicle, medium/heavy vehicle and off-highway markets.
The terms "Dana," "we," "our" and "us," when used in this report, are references to Dana. These references include the subsidiaries of Dana unless otherwise indicated or the context requires otherwise.
Summary of significant accounting policies
Basis of presentation — Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. These statements are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods. The results reported in these consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2019 (the 2019 Form 10-K).
During the second quarter of 2020, we identified an error in the loss attributable to redeemable noncontrolling interests due to incorrectly excluding the share of the goodwill impairment charge related to the redeemable noncontrolling interests. Of the $48 million impairment charge recorded for the Commercial Vehicle reporting unit during the quarter ended March 31, 2020, $20 million should have been attributable to the redeemable noncontrolling interests.
We concluded that the error was not material to the financial statements for the quarter ended March 31, 2020 and therefore, amendment of the previously filed Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 is not required. In accordance with ASC Topic 250, "Accounting Changes and Error Corrections," we have corrected the error in the prior period by revising the year-to-date consolidated financial statements appearing herein. The first quarter of 2020 not presented herein will be revised, as applicable, in future filings. The following historical consolidated financial information includes both the consolidated financial information “as previously reported” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as well as the consolidated financial information “as revised” to reflect the correction of the error.
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2020
|
|
|
|
|
As Previously Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
|
|
(unaudited)
|
|
|
Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
38
|
|
|
$
|
—
|
|
|
$
|
38
|
|
|
Less: Noncontrolling interests net income
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
Less: Redeemable noncontrolling interests net loss
|
|
|
(2
|
)
|
|
|
(20
|
)
|
|
|
(22
|
)
|
|
Net income attributable to the parent company
|
|
$
|
38
|
|
|
$
|
20
|
|
|
$
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share available to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.26
|
|
|
$
|
0.14
|
|
|
$
|
0.40
|
|
|
Diluted
|
|
$
|
0.26
|
|
|
$
|
0.14
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
$
|
(84
|
)
|
|
$
|
—
|
|
|
$
|
(84
|
)
|
|
Less: Comprehensive loss attributable to noncontrolling interests
|
|
|
17
|
|
|
|
|
|
|
|
17
|
|
|
Less: Comprehensive (income) loss attributable to redeemable noncontrolling interests
|
|
|
(6
|
)
|
|
|
20
|
|
|
|
14
|
|
|
Comprehensive income (loss) attributable to the parent company
|
|
$
|
(73
|
)
|
|
$
|
20
|
|
|
$
|
(53
|
)
|
|
|
|
Period Ended March 31,
|
|
|
|
|
2020
|
|
|
|
|
As Previously Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
|
|
(unaudited)
|
|
|
Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests
|
|
$
|
175
|
|
|
$
|
(20
|
)
|
|
$
|
155
|
|
|
Retained earnings
|
|
$
|
644
|
|
|
$
|
20
|
|
|
$
|
664
|
|
Recently adopted accounting pronouncements
On January 1, 2020, we adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, using the modified retrospective approach and an application date of January 1, 2020. This guidance introduces a new approach to estimating credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The adoption resulted in a noncash cumulative effect adjustment to retained earnings on our opening consolidated balance sheet as of January 1, 2020.
We also adopted the following standard during the first nine months of 2020, which did not have a material impact on our financial statements or financial statement disclosures:
|
Standard
|
|
Effective Date
|
|
2018-15
|
|
Intangibles – Goodwill and Other – Internal-Use Software, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
|
|
January 1, 2020
|
|
2018-14
|
|
Compensation – Retirement Benefits – Defined Benefit Plans – General, Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans
|
|
January 1, 2020
|
|
2018-13
|
|
Fair Value Measurement, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement
|
|
January 1, 2020
|
Recently issued accounting pronouncements
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance is intended to provide temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The amendments in this ASU are elective and are effective upon issuance for all entities through December 31, 2022. We are currently assessing the impact of this guidance on our consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. This guidance is intended to simplify various aspects of income tax accounting including the elimination of certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. This guidance becomes effective January 1, 2021 and early adoption is permitted. Adoption of this guidance requires certain changes to primarily be made prospectively, with some changes to be made retrospectively. We are currently assessing the impact of this guidance on our consolidated financial statements.
Note 2. Acquisitions
Ashwoods Innovations Limited — On February 5, 2020, we acquired Curtis Instruments, Inc.'s (Curtis) 35.4% ownership interest in Ashwoods Innovations Limited (Ashwoods). Ashwoods designs and manufactures permanent magnet electric motors for the automotive, material handling and off-highway vehicle markets. The acquisition of Curtis' interest in Ashwoods, along with our existing ownership interest in Ashwoods, provided us with a 97.8% ownership interest and a controlling financial interest in Ashwoods. We recognized a $3 gain to other income (expense), net on the required remeasurement of our previously held equity method investment in Ashwoods to fair value. The total purchase consideration of $22 is comprised of $8 of cash paid to Curtis at closing, the $10 fair value of our previously held equity method investment in Ashwoods and $4 related to the effective settlement of a pre-existing loan payable due from Ashwoods. During March 2020, we acquired the remaining noncontrolling interests in Ashwoods held by employee shareholders. See Hydro-Québec relationship discussion below for details of subsequent changes in our ownership interest in Ashwoods. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial information is presented.
Nordresa — On August 26, 2019, we acquired a 100% ownership interest in Nordresa Motors, Inc. (Nordresa) for consideration of $12, using cash on hand. Nordresa is a prominent integration and application engineering expert for the development and commercialization of electric powertrains for commercial vehicles. The investment further enhances Dana's electrification capabilities by combining its complete portfolio of motors, inverters, chargers, gearboxes, and thermal-management products with Nordresa's proprietary battery-management system, electric powertrain controls and integration expertise to deliver complete electric powertrain systems. The results of operations of the business are reported within our Commercial Vehicle operating segment. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial information is presented.
Hydro-Québec Relationship — On July 29, 2019, we broadened our relationship with Hydro-Québec, with Hydro-Québec acquiring an indirect 45% redeemable noncontrolling interest in S.M.E. S.p.A. (SME) and increasing its existing indirect 22.5% noncontrolling interest in Prestolite E-Propulsion Systems (Beijing) Limited (PEPS) to 45%. We received $65 at closing, consisting of $53 of cash and a note receivable of $12. The note is payable in five years and bears annual interest of 5%. Dana will continue to consolidate SME and PEPS as the governing documents continue to provide Dana with a controlling financial interest in these subsidiaries. See Note 7 for additional information. See below for a discussion of Dana's acquisitions of PEPS and SME. On April 14, 2020, Hydro-Québec acquired an indirect 45% redeemable noncontrolling interest in Ashwoods. We received $9 in cash at closing, inclusive of $2 in proceeds on a loan from Hydro-Québec. Dana will continue to consolidate Ashwoods as the governing documents continue to provide Dana with a controlling financial interest in this subsidiary.
Prestolite E-Propulsion Systems (Beijing) Limited — On June 6, 2019, we acquired Prestolite Electric Beijing Limited's (PEBL) 50% ownership interest in PEPS. PEPS manufactures and distributes electric mobility solutions, including electric motors, inverters, and generators for commercial vehicles and heavy machinery. PEPS has a state-of-the-art facility in China, enabling us to expand motor and inverter manufacturing capabilities in the world's largest electric-mobility market. The acquisition of PEBL's interest in PEPS, along with our existing ownership interest in PEPS through our TM4 subsidiary, provides us with a 100% ownership interest and a controlling financial interest in PEPS. We recognized a $2 gain to other income (expense), net on the required remeasurement of our previously held equity method investment in PEPS to fair value. See Hydro-Québec relationship discussion above for details of subsequent changes in our ownership interest in PEPS.
We paid $50 at closing using cash on hand. The purchase consideration and related allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:
|
Purchase consideration paid at closing
|
|
$
|
50
|
|
|
Fair value of previously held equity method investment
|
|
|
45
|
|
|
Total purchase consideration
|
|
$
|
95
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2
|
|
|
Accounts receivable - Trade
|
|
|
17
|
|
|
Inventories
|
|
|
9
|
|
|
Goodwill
|
|
|
63
|
|
|
Intangibles
|
|
|
10
|
|
|
Property, plant and equipment
|
|
|
2
|
|
|
Accounts payable
|
|
|
(4
|
)
|
|
Other accrued liabilities
|
|
|
(3
|
)
|
|
Other noncurrent liabilities
|
|
|
(1
|
)
|
|
Total purchase consideration allocation
|
|
$
|
95
|
|
Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is not deductible for tax purposes. We used a combination of the discounted cash flow method, an income approach, and the guideline public company method, a market approach, to value our previously held equity method investment in PEPS. The fair value assigned to intangibles includes $10 allocated to customer relationships. We used the multi-period excess earnings method, an income approach, to value customer relationships. The customer relationships intangible asset is being amortized on a straight-line basis over seven years.
The results of operations of the business are reported in our Commercial Vehicle operating segment from the date of acquisition. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial information is presented. PEPS had an insignificant impact on our consolidated results of operations during 2019.
Oerlikon Drive Systems — On February 28, 2019, we acquired a 100% ownership interest in the Oerlikon Drive Systems (ODS) segment of the Oerlikon Group. ODS is a global manufacturer of high-precision gears, planetary hub drives for wheeled and tracked vehicles, and products, controls, and software that support vehicle electrification across the mobility industry. The acquisition of ODS is expected to deliver significant long-term value by accelerating our commitment to vehicle electrification and strengthening the technology portfolio for each of our end markets while further expanding and balancing the manufacturing presence of our off-highway business in key geographical markets.
We paid $626 at closing which was funded primarily through debt proceeds. See Note 11 for additional information. The purchase consideration and related allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:
|
Purchase consideration paid at closing
|
|
$
|
626
|
|
|
Less purchase consideration to be recovered for indemnified matters
|
|
|
(11
|
)
|
|
Total purchase consideration
|
|
$
|
615
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
76
|
|
|
Accounts receivable - Trade
|
|
|
150
|
|
|
Accounts receivable - Other
|
|
|
15
|
|
|
Inventories
|
|
|
190
|
|
|
Other current assets
|
|
|
16
|
|
|
Goodwill
|
|
|
94
|
|
|
Intangibles
|
|
|
58
|
|
|
Deferred tax assets
|
|
|
24
|
|
|
Other noncurrent assets
|
|
|
2
|
|
|
Investments in affiliates
|
|
|
7
|
|
|
Operating lease assets
|
|
|
4
|
|
|
Property, plant and equipment
|
|
|
333
|
|
|
Current portion of long-term debt
|
|
|
(2
|
)
|
|
Accounts payable
|
|
|
(151
|
)
|
|
Accrued payroll and employee benefits
|
|
|
(37
|
)
|
|
Current portion of operating lease liabilities
|
|
|
(1
|
)
|
|
Taxes on income
|
|
|
(5
|
)
|
|
Other accrued liabilities
|
|
|
(61
|
)
|
|
Long-term debt
|
|
|
(8
|
)
|
|
Pension and postretirement obligations
|
|
|
(49
|
)
|
|
Noncurrent operating lease liabilities
|
|
|
(2
|
)
|
|
Other noncurrent liabilities
|
|
|
(30
|
)
|
|
Noncontrolling interests
|
|
|
(8
|
)
|
|
Total purchase consideration allocation
|
|
$
|
615
|
|
Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is not deductible for tax purposes. The fair values assigned to intangibles includes $11 allocated to developed technology, $13 allocated to trademarks and trade names and $34 allocated to customer relationships. Various valuation techniques were used to determine the fair value of the intangible assets, with the primary techniques being forms of the income approach, specifically, the relief from-royalty and excess earnings valuation methods, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Under these valuation approaches, we are required to make estimates and assumptions about sales, operating margins, growth rates, customer attrition rates, royalty rates and discount rates based on anticipated future cash flows and marketplace data. We used a replacement cost method to value fixed assets. The developed technology, trademarks and trade names and customer relationship intangible assets are being amortized on a straight-line basis over seven, ten and twelve years, respectively. Property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from three to twenty-five years.
The results of operations of the business are primarily reported in our Off-Highway and Commercial Vehicle operating segments. Transaction related expenses associated with completion of the acquisition totaling $13 in 2019 were charged to other income (expense), net. During 2019, the business contributed sales of $630.
The following unaudited pro forma information has been prepared as if the ODS acquisition and the related debt financing had occurred on January 1, 2018.
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30, 2019
|
|
|
September 30, 2019
|
|
|
Net sales
|
|
$
|
2,164
|
|
|
$
|
6,778
|
|
|
Net income
|
|
$
|
115
|
|
|
$
|
182
|
|
The unaudited pro forma results include adjustments primarily related to purchase accounting, interest expense related to the debt proceeds used in connection with the acquisition of ODS, and non-recurring strategic transaction expenses. The unaudited pro forma financial information is not indicative of the operational results that would have been obtained had the transactions actually occurred as of that date, nor is it necessarily indicative of Dana’s future operational results.
SME — On January 11, 2019, we acquired a 100% ownership interest in SME. SME designs, engineers, and manufactures low-voltage AC induction and synchronous reluctance motors, inverters, and controls for a wide range of off-highway electric vehicle applications, including material handling, agriculture, construction, and automated-guided vehicles. The addition of SME's low-voltage motors and inverters, which are primarily designed to meet the evolution of electrification in off-highway equipment, significantly expands Dana's electrified product portfolio. See Hydro-Québec relationship discussion above for details of subsequent changes in our ownership interest in SME.
We paid $88 at closing, consisting of $62 in cash on hand and a note payable of $26 which allows for net settlement of potential contingencies as defined in the purchase agreement. The note is payable in five years and bears annual interest of 5%. The purchase consideration and the related allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:
|
Total purchase consideration
|
|
$
|
88
|
|
|
|
|
|
|
|
|
Accounts receivable - Trade
|
|
$
|
4
|
|
|
Accounts receivable - Other
|
|
|
1
|
|
|
Inventories
|
|
|
8
|
|
|
Goodwill
|
|
|
68
|
|
|
Intangibles
|
|
|
24
|
|
|
Property, plant and equipment
|
|
|
5
|
|
|
Short-term debt
|
|
|
(8
|
)
|
|
Accounts payable
|
|
|
(6
|
)
|
|
Accrued payroll and employee benefits
|
|
|
(1
|
)
|
|
Other accrued liabilities
|
|
|
(1
|
)
|
|
Other noncurrent liabilities
|
|
|
(6
|
)
|
|
Total purchase consideration allocation
|
|
$
|
88
|
|
Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is not deductible for tax purposes. The fair values assigned to intangibles include $15 allocated to developed technology and $9 allocated to customer relationships. We used the relief from royalty method, an income approach, to value developed technology. We used the multi-period excess earnings method, an income approach, to value customer relationships. We used a replacement cost method to value fixed assets. The developed technology and customer relationship intangible assets are being amortized on a straight-line basis over twelve and ten years, respectively, and property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from one to twenty years.
The results of operations of the business are reported in our Off-Highway operating segment from the date of acquisition. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial information is presented. During 2019, the business contributed sales of $21.
Note 3. Goodwill and Other Intangible Assets
Goodwill — Our goodwill is tested for impairment annually as of October 31 for all of our reporting units, and more frequent if events or circumstances warrant such a review. We completed numerous acquisitions in 2018 and 2019 that are included in our Commercial Vehicle and Off-Highway reporting units. These acquisitions were recorded on the balance sheet at their estimated acquisition date fair values and therefore had no cushion of fair value over their carrying value. As a result of the effect of the COVID-19 pandemic on our expected future operating cash flows, a decrease in our share price which reduced our market capitalization below the book value of net assets and lower cushion in our expected reporting unit fair values as a result of the recent acquisitions, we determined certain impairment triggers had occurred in the first quarter of 2020. Accordingly, we performed interim impairment analyses at each of our reporting units as of March 31, 2020.
As discussed in our 2019 Form 10-K, we estimate the fair value of the reporting units using various valuation methodologies, including discounted cash flow projections and multiples of current earnings. In determining fair value using discounted cash flow projections, we make significant assumptions and estimates about the extent and timing of future cash flows, including revenue growth rates, projected gross margins, discount rates, terminal growth rates, and exit earnings multiples. If the estimated fair value of the reporting unit exceeds its carrying value, the goodwill is considered not impaired. If the carrying value of the reporting unit exceeds its estimated fair value, a goodwill impairment charge is recorded for the difference, with the impairment loss limited to the total amount of goodwill allocated to that reporting unit.
Based on the results of our interim impairment tests, we concluded that carrying value exceeded fair value in our Commercial Vehicle and Light Vehicle reporting units and we recorded a goodwill impairment charge of $51 in the first quarter of 2020. Our testing for the Off-Highway reporting unit indicated that fair value slightly exceeded carrying value and, accordingly, no impairment charge was required. The reduction in fair values, and the corresponding impairment charges, were primarily driven by the negative effect of the COVID-19 pandemic on each reporting unit’s near-term cash flows. The remaining balance of goodwill for the Commercial Vehicle and Off-Highway reporting units continues to be at risk for impairment. New shutdowns due to the COVID-19 pandemic or a significant reduction in demand caused by decreased consumer confidence and spending following the pandemic may result in the need to recognize an additional impairment charge in the Commercial Vehicle or Off-Highway reporting units.
The remaining change in the carrying amount of goodwill in 2020 is primarily due to the acquisition of Ashwoods, measurement period adjustments for the Nordresa acquisition and currency fluctuation. See Note 2 for additional information on recent acquisitions.
Changes in the carrying amount of goodwill by segment —
|
|
|
Light Vehicle
|
|
|
Commercial Vehicle
|
|
|
Off-Highway
|
|
|
Power Technologies
|
|
|
Total
|
|
|
Balance, December 31, 2019
|
|
$
|
3
|
|
|
$
|
228
|
|
|
$
|
262
|
|
|
$
|
—
|
|
|
$
|
493
|
|
|
Acquisitions
|
|
|
|
|
|
|
(5
|
)
|
|
|
23
|
|
|
|
|
|
|
|
18
|
|
|
Impairment
|
|
|
(3
|
)
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
|
(51
|
)
|
|
Currency impact
|
|
|
|
|
|
|
(6
|
)
|
|
|
4
|
|
|
|
|
|
|
|
(2
|
)
|
|
Balance, September 30, 2020
|
|
$
|
—
|
|
|
$
|
169
|
|
|
$
|
289
|
|
|
$
|
—
|
|
|
$
|
458
|
|
Components of other intangible assets —
|
|
|
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
Weighted Average Useful Life (years)
|
|
|
Gross Carrying Amount
|
|
|
Accumulated Impairment and Amortization
|
|
|
Net Carrying Amount
|
|
|
Gross Carrying Amount
|
|
|
Accumulated Impairment and Amortization
|
|
|
Net Carrying Amount
|
|
|
Amortizable intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core technology
|
|
8
|
|
|
$
|
143
|
|
|
$
|
(99
|
)
|
|
$
|
44
|
|
|
$
|
133
|
|
|
$
|
(94
|
)
|
|
$
|
39
|
|
|
Trademarks and trade names
|
|
13
|
|
|
|
30
|
|
|
|
(8
|
)
|
|
|
22
|
|
|
|
30
|
|
|
|
(6
|
)
|
|
|
24
|
|
|
Customer relationships
|
|
8
|
|
|
|
515
|
|
|
|
(421
|
)
|
|
|
94
|
|
|
|
509
|
|
|
|
(407
|
)
|
|
|
102
|
|
|
Non-amortizable intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and trade names
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
75
|
|
|
|
75
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
$
|
763
|
|
|
$
|
(528
|
)
|
|
$
|
235
|
|
|
$
|
747
|
|
|
$
|
(507
|
)
|
|
$
|
240
|
|
The net carrying amounts of intangible assets, other than goodwill, attributable to each of our operating segments at September 30, 2020 were as follows: Light Vehicle — $23, Commercial Vehicle — $67, Off-Highway — $138 and Power Technologies — $7.
Amortization expense related to amortizable intangible assets —
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Charged to cost of sales
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
5
|
|
|
$
|
4
|
|
|
Charged to amortization of intangibles
|
|
|
4
|
|
|
|
2
|
|
|
|
10
|
|
|
|
8
|
|
|
Total amortization
|
|
$
|
6
|
|
|
$
|
4
|
|
|
$
|
15
|
|
|
$
|
12
|
|
The following table provides the estimated aggregate pre-tax amortization expense related to intangible assets for each of the next five years based on September 30, 2020 exchange rates. Actual amounts may differ from these estimates due to such factors as currency translation, customer turnover, impairments, additional intangible asset acquisitions and other events.
|
|
|
Remainder of 2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
Amortization expense
|
|
$
|
5
|
|
|
$
|
19
|
|
|
$
|
19
|
|
|
$
|
19
|
|
|
$
|
18
|
|
Note 4. Restructuring of Operations
Our restructuring activities have historically included rationalizing our operating footprint by consolidating facilities, positioning operations in lower cost locations and reducing overhead costs. In recent years our focus has been primarily headcount reduction initiatives to reduce operating costs, including actions taken at acquired businesses to rationalize cost structures and achieve operating synergies. Restructuring expense includes costs associated with current and previously announced actions and is comprised of contractual and noncontractual separation costs and exit costs, including certain operating costs of facilities that we are in the process of closing.
Net restructuring charges of $2 and $5 in the third quarters of 2020 and 2019 and $21 and $23 in the nine months ended September 30 of 2020 and 2019 were comprised of severance and benefit costs related to integration of recent acquisitions, headcount reductions across our operations and exit costs related to previously announced actions.
Accrued restructuring costs and activity —
|
|
|
Employee Termination Benefits
|
|
|
Exit Costs
|
|
|
Total
|
|
|
Balance, June 30, 2020
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
Charges to restructuring
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
Adjustments of accruals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
(4
|
)
|
|
Balance, September 30, 2020
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
$
|
13
|
|
|
$
|
1
|
|
|
$
|
14
|
|
|
Charges to restructuring
|
|
|
19
|
|
|
|
3
|
|
|
|
22
|
|
|
Adjustments of accruals
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
Cash payments
|
|
|
(10
|
)
|
|
|
(4
|
)
|
|
|
(14
|
)
|
|
Balance, September 30, 2020
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
21
|
|
At September 30, 2020, the accrued employee termination benefits include costs to reduce approximately 400 employees to be completed over the next year.
Cost to complete — The following table provides project-to-date and estimated future restructuring expenses for completion of our approved restructuring initiatives for our business segments at September 30, 2020.
|
|
|
Expense Recognized
|
|
|
|
|
|
|
|
|
Prior to 2020
|
|
|
2020
|
|
|
Total to Date
|
|
|
Future Cost to Complete
|
|
|
Commercial Vehicle
|
|
$
|
39
|
|
|
$
|
1
|
|
|
$
|
40
|
|
|
$
|
3
|
|
|
Power Technologies
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
The future cost to complete includes estimated separation costs, primarily those associated with one-time benefit programs, and exit costs through 2021, equipment transfers and other costs which are required to be recognized as closures are finalized or as incurred during the closure.
Note 5. Supplemental Balance Sheet and Cash Flow Information
Inventory components at —
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
Raw materials
|
|
$
|
471
|
|
|
$
|
470
|
|
|
Work in process and finished goods
|
|
|
693
|
|
|
|
787
|
|
|
Inventory reserves
|
|
|
(77
|
)
|
|
|
(64
|
)
|
|
Total
|
|
$
|
1,087
|
|
|
$
|
1,193
|
|
Cash, cash equivalents and restricted cash at —
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
|
Cash and cash equivalents
|
|
$
|
956
|
|
|
$
|
508
|
|
|
$
|
402
|
|
|
$
|
510
|
|
|
Restricted cash included in other current assets
|
|
|
7
|
|
|
|
6
|
|
|
|
7
|
|
|
|
7
|
|
|
Restricted cash included in other noncurrent assets
|
|
|
3
|
|
|
|
4
|
|
|
|
3
|
|
|
|
3
|
|
|
Total cash, cash equivalents and restricted cash
|
|
$
|
966
|
|
|
$
|
518
|
|
|
$
|
412
|
|
|
$
|
520
|
|
Note 6. Stockholders’ Equity
Common stock — Our Board of Directors declared a cash dividend of ten cents per share of common stock in the first quarter of 2020. Dividends accrue on restricted stock units (RSUs) granted under our stock compensation program and will be paid in cash or additional units when the underlying units vest.
Share repurchase program — On December 11, 2019 our Board of Directors approved an extension of our existing common stock share repurchase program through December 31, 2021. Approximately $150 remained available for future share repurchases as of September 30, 2020.
Changes in equity —
|
|
|
Three Months Ended September 30,
|
|
|
2020
|
|
Common Stock
|
|
|
Additional Paid-In Capital
|
|
|
Retained Earnings
|
|
|
Treasury Stock
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
Non-controlling Interests
|
|
|
Total Equity
|
|
|
Balance, June 30, 2020
|
|
$
|
2
|
|
|
$
|
2,390
|
|
|
$
|
490
|
|
|
$
|
(156
|
)
|
|
$
|
(1,082
|
)
|
|
$
|
76
|
|
|
$
|
1,720
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
49
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
11
|
|
|
|
23
|
|
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
Purchase of noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
Stock compensation
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
Balance, September 30, 2020
|
|
$
|
2
|
|
|
$
|
2,392
|
|
|
$
|
535
|
|
|
$
|
(156
|
)
|
|
$
|
(1,070
|
)
|
|
$
|
90
|
|
|
$
|
1,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019
|
|
$
|
2
|
|
|
$
|
2,376
|
|
|
$
|
456
|
|
|
$
|
(150
|
)
|
|
$
|
(968
|
)
|
|
$
|
98
|
|
|
$
|
1,814
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
114
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
|
|
(12
|
)
|
|
|
(38
|
)
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
Stock compensation
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
Balance, September 30, 2019
|
|
$
|
2
|
|
|
$
|
2,381
|
|
|
$
|
552
|
|
|
$
|
(150
|
)
|
|
$
|
(994
|
)
|
|
$
|
87
|
|
|
$
|
1,878
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2020
|
|
Common Stock
|
|
|
Additional Paid-In Capital
|
|
|
Retained Earnings
|
|
|
Treasury Stock
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
Non-controlling Interests
|
|
|
Total Equity
|
|
|
Balance, December 31, 2019
|
|
$
|
2
|
|
|
$
|
2,386
|
|
|
$
|
622
|
|
|
$
|
(150
|
)
|
|
$
|
(987
|
)
|
|
$
|
95
|
|
|
$
|
1,968
|
|
|
Adoption of ASU 2016-13 credit losses, January 1, 2020
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
(65
|
)
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(83
|
)
|
|
|
1
|
|
|
|
(82
|
)
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
(10
|
)
|
|
Purchase of noncontrolling interests
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
Stock compensation
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
Stock withheld for employee taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
Balance, September 30, 2020
|
|
$
|
2
|
|
|
$
|
2,392
|
|
|
$
|
535
|
|
|
$
|
(156
|
)
|
|
$
|
(1,070
|
)
|
|
$
|
90
|
|
|
$
|
1,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
$
|
2
|
|
|
$
|
2,368
|
|
|
$
|
456
|
|
|
$
|
(119
|
)
|
|
$
|
(1,362
|
)
|
|
$
|
97
|
|
|
$
|
1,442
|
|
|
Adoption of ASU 2016-02 leases, January 1, 2019
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
150
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
368
|
|
|
|
(13
|
)
|
|
|
355
|
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44
|
)
|
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
(14
|
)
|
|
Increase from business combination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
8
|
|
|
Common stock share repurchases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
Stock compensation
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
Stock withheld for employee taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
Balance, September 30, 2019
|
|
$
|
2
|
|
|
$
|
2,381
|
|
|
$
|
552
|
|
|
$
|
(150
|
)
|
|
$
|
(994
|
)
|
|
$
|
87
|
|
|
$
|
1,878
|
|
Changes in each component of accumulated other comprehensive income (AOCI) of the parent —
|
|
|
Parent Company Stockholders
|
|
|
|
|
Foreign Currency Translation
|
|
|
Hedging
|
|
|
Defined Benefit Plans
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
Balance, June 30, 2020
|
|
$
|
(855
|
)
|
|
$
|
9
|
|
|
$
|
(236
|
)
|
|
$
|
(1,082
|
)
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
Holding gains and losses
|
|
|
|
|
|
|
(51
|
)
|
|
|
|
|
|
|
(51
|
)
|
|
Reclassification of amount to net income (a)
|
|
|
|
|
|
|
52
|
|
|
|
|
|
|
|
52
|
|
|
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
5
|
|
|
Tax expense
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
Other comprehensive income
|
|
|
7
|
|
|
|
1
|
|
|
|
4
|
|
|
|
12
|
|
|
Balance, September 30, 2020
|
|
$
|
(848
|
)
|
|
$
|
10
|
|
|
$
|
(232
|
)
|
|
$
|
(1,070
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019
|
|
$
|
(694
|
)
|
|
$
|
(47
|
)
|
|
$
|
(227
|
)
|
|
$
|
(968
|
)
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
Holding gains and losses
|
|
|
|
|
|
|
57
|
|
|
|
|
|
|
|
57
|
|
|
Reclassification of amount to net income (a)
|
|
|
|
|
|
|
(49
|
)
|
|
|
|
|
|
|
(49
|
)
|
|
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
6
|
|
|
Tax expense
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
Other comprehensive income (loss)
|
|
|
(39
|
)
|
|
|
8
|
|
|
|
5
|
|
|
|
(26
|
)
|
|
Balance, September 30, 2019
|
|
$
|
(733
|
)
|
|
$
|
(39
|
)
|
|
$
|
(222
|
)
|
|
$
|
(994
|
)
|
|
|
|
Parent Company Stockholders
|
|
|
|
|
Foreign Currency Translation
|
|
|
Hedging
|
|
|
Defined Benefit Plans
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
Balance, December 31, 2019
|
|
$
|
(714
|
)
|
|
$
|
(30
|
)
|
|
$
|
(243
|
)
|
|
$
|
(987
|
)
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments
|
|
|
(134
|
)
|
|
|
|
|
|
|
|
|
|
|
(134
|
)
|
|
Holding gains and losses
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
(29
|
)
|
|
Reclassification of amount to net income (a)
|
|
|
|
|
|
|
68
|
|
|
|
|
|
|
|
68
|
|
|
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
15
|
|
|
Tax (expense) benefit
|
|
|
|
|
|
|
1
|
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
Other comprehensive income (loss)
|
|
|
(134
|
)
|
|
|
40
|
|
|
|
11
|
|
|
|
(83
|
)
|
|
Balance, September 30, 2020
|
|
$
|
(848
|
)
|
|
$
|
10
|
|
|
$
|
(232
|
)
|
|
$
|
(1,070
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
$
|
(721
|
)
|
|
$
|
(54
|
)
|
|
$
|
(587
|
)
|
|
$
|
(1,362
|
)
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
(12
|
)
|
|
Holding gains and losses
|
|
|
|
|
|
|
77
|
|
|
|
|
|
|
|
77
|
|
|
Reclassification of amount to net income (a)
|
|
|
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
(62
|
)
|
|
Net actuarial gains
|
|
|
|
|
|
|
|
|
|
|
104
|
|
|
|
104
|
|
|
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)
|
|
|
|
|
|
|
|
|
|
|
282
|
|
|
|
282
|
|
|
Tax expense
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
|
(21
|
)
|
|
Other comprehensive income (loss)
|
|
|
(12
|
)
|
|
|
15
|
|
|
|
365
|
|
|
|
368
|
|
|
Balance, September 30, 2019
|
|
$
|
(733
|
)
|
|
$
|
(39
|
)
|
|
$
|
(222
|
)
|
|
$
|
(994
|
)
|
(a) Realized gains and losses from currency-related forward contracts associated with forecasted transactions or from other derivative instruments treated as cash flow hedges are reclassified from AOCI into the same line item in the consolidated statement of operations in which the underlying forecasted transaction or other hedged item is recorded. See Note 12 for additional details.
(b) See Note 10 for additional details.
Note 7. Redeemable Noncontrolling Interests
In connection with the acquisition of a controlling financial interest in TM4 from Hydro-Québec on June 22, 2018, we recognized $102 for Hydro-Québec's 45% redeemable noncontrolling interest in TM4. On July 29, 2019, we broadened our relationship with Hydro-Québec, with Hydro-Québec acquiring an indirect 45% redeemable noncontrolling interest in SME and an additional indirect 22.5% redeemable noncontrolling interest in PEPS which resulted in recognition of additional redeemable noncontrolling interest of $64. On April 14, 2020, Hydro-Québec acquired an indirect 45% redeemable noncontrolling interest in Ashwoods which resulted in recognition of additional redeemable noncontrolling interest of $7. The terms of the agreement provide Hydro-Québec with the right to put all, and not less than all, of its ownership interests in TM4, SME, PEPS and Ashwoods to Dana at fair value any time after June 22, 2021. See Note 2 for additional information.
Redeemable noncontrolling interests reflected as of the balance sheet date are the greater of the redeemable noncontrolling interest balances adjusted for comprehensive income items and distributions or the redemption values. Redeemable noncontrolling interest adjustments of redemption value are recorded in retained earnings. See Note 1 for additional information on the correction of the error in net loss attributable to redeemable noncontrolling interests.
Reconciliation of changes in redeemable noncontrolling interests —
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Balance, beginning of period
|
|
$
|
159
|
|
|
$
|
105
|
|
|
$
|
167
|
|
|
$
|
100
|
|
|
Capital contribution from redeemable noncontrolling interest
|
|
|
1
|
|
|
|
2
|
|
|
|
10
|
|
|
|
4
|
|
|
Sale of redeemable noncontrolling interest
|
|
|
|
|
|
|
64
|
|
|
|
|
|
|
|
64
|
|
|
Comprehensive income (loss) adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to redeemable noncontrolling interests
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
(25
|
)
|
|
|
(3
|
)
|
|
Other comprehensive income (loss) attributable to redeemable noncontrolling interests
|
|
|
(4
|
)
|
|
|
5
|
|
|
|
|
|
|
|
9
|
|
|
Balance, end of period
|
|
$
|
152
|
|
|
$
|
174
|
|
|
$
|
152
|
|
|
$
|
174
|
|
Note 8. Earnings per Share
Reconciliation of the numerators and denominators of the earnings per share calculations —
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Net income (loss) available to common stockholders - Numerator basic and diluted
|
|
$
|
45
|
|
|
$
|
111
|
|
|
$
|
(71
|
)
|
|
$
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - Basic
|
|
|
144.5
|
|
|
|
144.0
|
|
|
|
144.4
|
|
|
|
144.0
|
|
|
Employee compensation-related shares, including stock options
|
|
|
0.7
|
|
|
|
0.8
|
|
|
|
—
|
|
|
|
0.8
|
|
|
Weighted-average common shares outstanding - Diluted
|
|
|
145.2
|
|
|
|
144.8
|
|
|
|
144.4
|
|
|
|
144.8
|
|
The share count for diluted earnings per share is computed on the basis of the weighted-average number of common shares outstanding plus the effects of dilutive common stock equivalents (CSEs) outstanding during the period. We excluded 1.6 million and 0.6 million CSEs from the calculation of diluted earnings per share for the third quarters of 2020 and 2019 and excluded 1.3 million and 0.2 million of CSEs for the respective year-to-date periods as the effect of including them would have been anti-dilutive. In addition, we excluded CSEs that satisfied the definition of potentially dilutive shares of 0.5 million for the year-to-date 2020 period since there was no net income available to common stockholders for these periods.
Note 9. Stock Compensation
The Compensation Committee of our Board of Directors approved the grant of RSUs and performance share units (PSUs) shown in the table below during 2020.
|
|
|
Granted
|
|
|
Grant Date
|
|
|
|
|
(In millions)
|
|
|
Fair Value*
|
|
|
RSUs
|
|
|
1.2
|
|
|
$
|
15.50
|
|
|
PSUs
|
|
|
0.5
|
|
|
$
|
14.42
|
|
* Weighted-average per share
We calculated the fair value of the RSUs at grant date based on the closing market price of our common stock at the date of grant. The number of PSUs that ultimately vest is contingent on achieving specified margin targets and specified free cash flow targets, with an even distribution between the two targets. We estimated the fair value of the PSUs at grant date based on the closing market price of our common stock at the date of grant adjusted for the value of assumed dividends over the period because the awards are not dividend protected.
We paid $1 of cash to settle RSUs. We issued 0.5 million and 0.3 million shares of common stock based on the vesting of RSUs and PSUs during 2020. We recognized stock compensation expense of $2 and $5 during the third quarters of 2020 and 2019 and expense of $5 and $15 during the respective year-to-date periods. At September 30, 2020, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $20. This cost is expected to be recognized over a weighted-average period of 1.9 years.
Note 10. Pension and Postretirement Benefit Plans
We have a number of defined contribution and defined benefit, qualified and nonqualified, pension plans covering eligible employees. Other postretirement benefits (OPEB), including medical and life insurance, are provided for certain employees upon retirement.
Components of net periodic benefit cost —
|
|
|
Pension
|
|
|
OPEB
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Three Months Ended September 30,
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
Non-U.S.
|
|
|
Interest cost
|
|
$
|
6
|
|
|
$
|
1
|
|
|
$
|
7
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
Expected return on plan assets
|
|
|
(9
|
)
|
|
|
(1
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net actuarial loss
|
|
|
2
|
|
|
|
3
|
|
|
|
3
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
(1
|
)
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
$
|
16
|
|
|
$
|
4
|
|
|
$
|
33
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
Expected return on plan assets
|
|
|
(26
|
)
|
|
|
(3
|
)
|
|
|
(42
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement charge
|
|
|
|
|
|
|
|
|
|
|
258
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net actuarial loss
|
|
|
8
|
|
|
|
7
|
|
|
|
18
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (credit)
|
|
$
|
(2
|
)
|
|
$
|
14
|
|
|
$
|
267
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
2
|
|
The service cost components of net periodic pension and OPEB costs are included in cost of sales and selling, general and administrative expenses as part of compensation cost and are eligible for capitalization in inventory and other assets. The non-service components are reported in other income (expense), net and are not eligible for capitalization.
Plan termination — In October 2017, upon authorization by the Dana Board of Directors, we commenced the process of terminating one of our U.S. defined benefit pension plans. During the second quarter of 2019, payments were made from plan assets to those plan participants that elected to take the lump-sum payout option. In June 2019, we entered into (a) a definitive commitment agreement by and among Dana, Athene Annuity and Life Company (Athene) and State Street Global Advisors, as independent fiduciary to the plan, and (b) a definitive commitment agreement by and among Dana, Companion Life Insurance Company (Companion) and State Street Global Advisors, as independent fiduciary to the plan. Pursuant to the definitive commitment agreements, the plan purchased group annuity contracts that irrevocably transferred to the insurance companies the remaining future pension benefit obligations of the plan. Plan participant’s benefits are unchanged as a result of the termination. We contributed $59 to the plan prior to the purchase of the group annuity contracts. The purchase of group annuity contracts was then funded directly by the assets of the plan in June 2019. By irrevocably transferring the obligations to Athene and Companion, we reduced our unfunded pension obligation by approximately $165 and recognized a pre-tax pension settlement charge of $256 in 2019.
Note 11. Financing Agreements
Long-term debt at —
|
|
Interest Rate
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
Senior Notes due December 15, 2024
|
5.500%
|
|
|
$
|
425
|
|
|
$
|
425
|
|
|
Senior Notes due April 15, 2025
|
5.750%
|
*
|
|
|
400
|
|
|
|
400
|
|
|
Senior Notes due June 1, 2026
|
6.500%
|
*
|
|
|
375
|
|
|
|
375
|
|
|
Senior Notes due November 15, 2027
|
5.375%
|
|
|
|
400
|
|
|
|
300
|
|
|
Senior Notes due June 15, 2028
|
5.625%
|
|
|
|
400
|
|
|
|
|
|
|
Term Facility A
|
|
|
|
|
467
|
|
|
|
474
|
|
|
Term Facility B
|
|
|
|
|
349
|
|
|
|
349
|
|
|
Other indebtedness
|
|
|
|
|
89
|
|
|
|
61
|
|
|
Debt issuance costs
|
|
|
|
|
(31
|
)
|
|
|
(28
|
)
|
|
|
|
|
|
|
2,874
|
|
|
|
2,356
|
|
|
Less: Current portion of long-term debt
|
|
|
|
|
35
|
|
|
|
20
|
|
|
Long-term debt, less debt issuance costs
|
|
|
|
$
|
2,839
|
|
|
$
|
2,336
|
|
|
*
|
In conjunction with the issuance of the April 2025 Notes we entered into 8-year fixed-to-fixed cross-currency swaps which have the effect of economically converting the April 2025 Notes to euro-denominated debt at a fixed rate of 3.850%. In conjunction with the issuance of the June 2026 Notes we entered into 10-year fixed-to-fixed cross-currency swaps which have the effect of economically converting the June 2026 Notes to euro-denominated debt at a fixed rate of 5.140%. See Note 12 for additional information.
|
Interest on the senior notes is payable semi-annually and interest on the Term Facilities is payable quarterly. Other indebtedness includes the note payable to SME, borrowings from various financial institutions, finance lease obligations and the unamortized fair value adjustment related to a terminated interest rate swap. See Note 2 for additional information on the note payable to SME and Note 12 for additional information on the terminated interest rate swap.
Senior notes activity — In June 2020, we completed the sale of $400 in senior unsecured notes ( June 2028 Notes) at 5.625%. The June 2028 Notes rank equally with Dana's other unsecured senior notes. Interest on the notes is payable on December 15 and June 15 of each year, beginning on December 15, 2020. The June 2028 Notes will mature on June 15, 2028. Net proceeds of the offering totaled $395. Financing costs of $5 were recorded as deferred costs and are being amortized to interest expense over the life of the notes. The proceeds from the offering were used to pay down outstanding borrowings under our Revolving Facility and for general corporate purposes. Also, we completed the sale of an additional $100 of November 2027 Notes at 5.375%. The November 2027 Notes rank equally with Dana’s other unsecured senior notes. Interest on the notes is payable on May 15 and November 15 of each year, beginning on November 15, 2020. The November 2027 Notes will mature on November 15, 2027. Net proceeds of the offering totaled $99. Financing costs of $1 were recorded as deferred costs and are being amortized to interest expense over the life of the notes. The proceeds from the offering were used for general corporate purposes.
We may redeem some or all of the senior notes at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest to the redemption date, if redeemed during the 12-month period commencing on the anniversary date of the senior notes in the year set forth below:
|
|
|
Redemption Price
|
|
|
|
|
December
|
|
|
April
|
|
|
June
|
|
|
November
|
|
|
June
|
|
|
Year
|
|
2024 Notes
|
|
|
2025 Notes
|
|
|
2026 Notes
|
|
|
2027 Notes
|
|
|
2028 Notes
|
|
|
2020
|
|
|
101.833
|
%
|
|
|
104.313
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
100.917
|
%
|
|
|
102.875
|
%
|
|
|
103.250
|
%
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
100.000
|
%
|
|
|
101.438
|
%
|
|
|
102.167
|
%
|
|
|
102.688
|
%
|
|
|
|
|
|
2023
|
|
|
100.000
|
%
|
|
|
100.000
|
%
|
|
|
101.083
|
%
|
|
|
101.344
|
%
|
|
|
102.813
|
%
|
|
2024
|
|
|
|
|
|
|
100.000
|
%
|
|
|
100.000
|
%
|
|
|
100.000
|
%
|
|
|
101.406
|
%
|
|
2025
|
|
|
|
|
|
|
|
|
|
|
100.000
|
%
|
|
|
100.000
|
%
|
|
|
100.000
|
%
|
|
2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.000
|
%
|
|
|
100.000
|
%
|
|
2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.000
|
%
|
At any time prior to November 15, 2022, we may redeem up to 35% of the aggregate principal amount of the November 2027 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 105.375% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that at least 50% of the original aggregate principal amount of the November 2027 Notes remains outstanding after the redemption. Prior to November 15, 2022, we may redeem some or all of the November 2027 Notes at a redemption price of 100.000% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.
At any time prior to June 15, 2023, we may redeem up to 35% of the aggregate principal amount of the June 2028 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 105.625% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that at least 50% of the original aggregate principal amount of the June 2028 Notes remains outstanding after the redemption. Prior to June 15, 2023, we may redeem some or all of the June 2028 Notes at a redemption price of 100.000% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.
Credit agreement — On February 28, 2019, we entered into an amended credit and guaranty agreement comprised of a $500 term facility (the Term A Facility), a $450 term facility (the Term B Facility and, together with the Term A Facility, the Term Facilities) and a $750 revolving credit facility (the Revolving Facility). The Term A Facility and the Revolving Facility were expansions of our existing facilities. On February 28, 2019, we drew the $225 available under the Term A Facility and the $450 available under the Term B Facility. The proceeds from the Term Facilities were used to acquire the Oerlikon Drive Systems segment of the Oerlikon Group and pay for related integration activities. We were required to make equal quarterly installments on the Term A Facility on the last day of each fiscal quarter of $8 beginning March 31, 2019 and 0.25% of the aggregate principal advances of the Term B Facility quarterly commencing on June 30, 2019. On August 30, 2019, we amended our credit and guaranty agreement, increasing the Revolving Facility to $1,000 and extending the maturities and reducing the interest rates of both the Revolving Facility and the Term A Facility. On August 30, 2019, we borrowed $100 on the Revolving Facility and paid down a similar amount of the Term B Facility. We are now required to make quarterly installments on the Term A Facility on the last day of each fiscal quarter of $7 beginning on September 30, 2020 and are no longer required to make quarterly installments on the Term B Facility. We may prepay some or all of the amounts under the Term Facilities without penalty. We recorded deferred fees of $13 and $4 related to the amendments to the Term Facilities and the Revolving Facility, respectively. The deferred fees are being amortized over the life of the applicable facilities. Deferred financing costs on our Revolving Facility are included in other noncurrent assets. The Revolving Facility and the Term A Facility mature on August 17, 2024. The Term B Facility matures on February 28, 2026.
On April 16, 2020, we amended certain provisions of our credit and guaranty agreement including gradually increasing the first lien net leverage ratio from a maximum of 2.00 to 1.00 to a maximum of 4.00 to 1.00 for the quarter ending December 31, 2020 and then, starting with the quarter ending December 31, 2021, decrease the ratio quarterly until it returns to its prior level of 2.00 to 1.00 for and after the quarter ending September 30, 2022, unless Dana, in its sole discretion, elects to return the first lien net leverage ratio to its prior level earlier than such date. We also amended certain restrictive covenants to provide additional limitations until December 31, 2021, unless Dana, in its sole discretion, elects to return the first lien net leverage ratio to its prior level prior to December 31, 2021.
The Term Facilities and the Revolving Facility are guaranteed by all of our wholly-owned domestic subsidiaries subject to certain exceptions (the guarantors) and are secured by a first-priority lien on substantially all of the assets of Dana and the guarantors, subject to certain exceptions.
Advances under the Term A Facility and the Revolving Facility bear interest at a floating rate based on, at our option, the base rate or Eurodollar rate (each as described in the credit agreement) plus a margin as set forth below:
|
|
|
Margin
|
|
|
Total Net Leverage Ratio
|
|
Base Rate
|
|
|
Eurodollar Rate
|
|
|
Less than or equal to 1.00:1.00
|
|
|
0.25
|
%
|
|
|
1.25
|
%
|
|
Greater than 1.00:1.00 but less than or equal to 2.00:1.00
|
|
|
0.50
|
%
|
|
|
1.50
|
%
|
|
Greater than 2.00:1.00
|
|
|
0.75
|
%
|
|
|
1.75
|
%
|
The Term B Facility bears interest based on, at our option, the Base Rate plus 1.25% or the Eurodollar rate plus 2.25%. We have elected to pay interest on our advances under the Term Facilities at the Eurodollar Rate. The interest rate on the Term A Facility was 2.750% and the Term B Facility was 2.400%, inclusive of the applicable margins, as of September 30, 2020.
Commitment fees are applied based on the average daily unused portion of the available amounts under the Revolving Facility as set forth below:
|
Total Net Leverage Ratio
|
|
Commitment Fee
|
|
|
Less than or equal to 1.00:1.00
|
|
|
0.250
|
%
|
|
Greater than 1.00:1.00 but less than or equal to 2.00:1.00
|
|
|
0.375
|
%
|
|
Greater than 2.00:1.00
|
|
|
0.500
|
%
|
Up to $275 of the Revolving Facility may be applied to letters of credit, which reduces availability. We pay a fee for issued and undrawn letters of credit in an amount per annum equal to the applicable margin for Eurodollar rate advances based on a quarterly average availability under issued and undrawn letters of credit under the Revolving Facility and a per annum fronting fee of 0.125%, payable quarterly.
At September 30, 2020, we had no outstanding borrowings under the Revolving Facility and had utilized $21 for letters of credit. We had availability at September 30, 2020 under the Revolving Facility of $979 after deducting the letters of credit.
Bridge facility — On April 16, 2020, we entered into a $500 bridge facility (the Bridge Facility). We recorded deferred fees of $5 related to the Bridge Facility. The deferred fees were being amortized over the life of the Bridge Facility. The Bridge Facility was to mature on April 15, 2021. On June 19, 2020, in connection with the issuance of our June 2028 Notes, we terminated the Bridge Facility and wrote off the $5 of deferred fees associated with the Bridge Facility.
Debt covenants — At September 30, 2020, we were in compliance with the covenants of our financing agreements. Under the Term Facilities, Revolving Facility and the senior notes, we are required to comply with certain incurrence-based covenants customary for facilities of these types and, in the case of the Term A Facility and Revolving Facility, a maintenance covenant tested on the last day of each fiscal quarter requiring us to maintain a first lien net leverage ratio not to exceed 3.00 to 1.00 for the quarter ending September 30, 2020.
Note 12. Fair Value Measurements and Derivatives
In measuring the fair value of our assets and liabilities, we use market data or assumptions that we believe market participants would use in pricing an asset or liability including assumptions about risk when appropriate. Our valuation techniques include a combination of observable and unobservable inputs.
Fair value measurements on a recurring basis — Assets and liabilities that are carried in our balance sheet at fair value are as follows:
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Category
|
|
Balance Sheet Location
|
|
Fair Value Level
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
Certificates of deposit
|
|
Marketable securities
|
|
2
|
|
|
$
|
22
|
|
|
$
|
19
|
|
|
Currency forward contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
|
Accounts receivable - Other
|
|
2
|
|
|
|
3
|
|
|
|
14
|
|
|
Cash flow hedges
|
|
Other accrued liabilities
|
|
2
|
|
|
|
8
|
|
|
|
2
|
|
|
Undesignated
|
|
Accounts receivable - Other
|
|
2
|
|
|
|
5
|
|
|
|
1
|
|
|
Undesignated
|
|
Other accrued liabilities
|
|
2
|
|
|
|
5
|
|
|
|
1
|
|
|
Interest rate collars
|
|
Other accrued liabilities
|
|
2
|
|
|
|
9
|
|
|
|
3
|
|
|
Currency swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
|
Other noncurrent liabilities
|
|
2
|
|
|
|
62
|
|
|
|
71
|
|
Fair Value Level 1 assets and liabilities reflect quoted prices in active markets. Fair Value Level 2 assets and liabilities reflect the use of significant other observable inputs.
Fair value of financial instruments — The financial instruments that are not carried in our balance sheet at fair value are as follows:
|
|
|
|
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
Fair Value Level
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Long term debt
|
|
|
2
|
|
|
$
|
2,832
|
|
|
$
|
2,884
|
|
|
$
|
2,384
|
|
|
$
|
2,450
|
|
Interest rate derivatives — Our portfolio of derivative financial instruments periodically includes interest rate swaps and interest rate collars designed to mitigate our interest rate risk. As of September 30, 2020, no fixed-to-floating interest rate swaps remain outstanding. However, a $4 fair value adjustment to the carrying amount of our December 2024 Notes, associated with a fixed-to-floating interest rate swap that had been executed but was subsequently terminated during 2015, remains deferred at September 30, 2020. This amount is being amortized as a reduction of interest expense through the period ending December 2024, the scheduled maturity date of the December 2024 Notes. The amount amortized as a reduction of interest expense was not material during the three months and nine months ended September 30, 2020. We have outstanding interest rate collars with a notional value of $425 that will mature in December 2021. For interest rate collars, no payments or receipts are exchanged unless interest rates rise or fall in excess of a predetermined ceiling or floor rate.
Foreign currency derivatives — Our foreign currency derivatives include forward contracts associated with forecasted transactions, primarily involving the purchases and sales of inventory through the next fifteen months, as well as currency swaps associated with certain recorded external notes payable and intercompany loans receivable and payable. Periodically, our foreign currency derivatives also include net investment hedges of certain of our investments in foreign operations.
We have executed fixed-to-fixed cross-currency swaps in conjunction with the issuance of certain notes to eliminate the variability in the functional-currency-equivalent cash flows due to changes in exchange rates associated with the forecasted principal and interest payments. All of the underlying designated financial instruments, and any subsequent replacement debt, have been designated as the hedged items in each respective cash flow hedge relationship, as shown in the table below. Designated as cash flow hedges of the forecasted principal and interest payments of the underlying designated financial instruments, or subsequent replacement debt, all of the swaps economically convert the underlying designated financial instruments into the functional currency of each respective holder. The impact of the interest rate differential between the inflow and outflow rates on all fixed-to-fixed cross-currency swaps is recognized during each period as a component of interest expense.
The following fixed-to-fixed cross-currency swaps were outstanding at September 30, 2020:
|
Underlying Financial Instrument
|
|
|
Derivative Financial Instrument
|
|
|
Description
|
|
Type
|
|
Face Amount
|
|
|
Rate
|
|
|
Designated Notional Amount
|
|
|
Traded Amount
|
|
|
Inflow Rate
|
|
|
Outflow Rate
|
|
|
June 2026 Notes
|
|
Payable
|
|
$
|
375
|
|
|
|
6.50
|
%
|
|
$
|
375
|
|
|
€
|
338
|
|
|
|
6.50
|
%
|
|
|
5.14
|
%
|
|
April 2025 Notes
|
|
Payable
|
|
$
|
400
|
|
|
|
5.75
|
%
|
|
$
|
400
|
|
|
€
|
371
|
|
|
|
5.75
|
%
|
|
|
3.85
|
%
|
|
Luxembourg Intercompany Notes
|
|
Receivable
|
|
€
|
278
|
|
|
|
3.70
|
%
|
|
€
|
278
|
|
|
$
|
300
|
|
|
|
5.38
|
%
|
|
|
3.70
|
%
|
All of the swaps are expected to be highly effective in offsetting the corresponding currency-based changes in cash outflows related to the underlying designated financial instruments. Based on our qualitative assessment that the critical terms of all of the underlying designated financial instruments and all of the associated swaps match and that all other required criteria have been met, we do not expect to incur any ineffectiveness. As effective cash flow hedges, changes in the fair value of the swaps will be recorded in OCI during each period. Additionally, to the extent the swaps remain effective, the appropriate portion of AOCI will be reclassified to earnings each period as an offset to the foreign exchange gain or loss resulting from the remeasurement of the underlying designated financial instruments. See Note 11 for additional information about the June 2026 Notes and the April 2025 Notes. To the extent the swaps are no longer effective, changes in their fair values will be recorded in earnings.
The total notional amount of outstanding foreign currency forward contracts, involving the exchange of various currencies, was $263 at September 30, 2020 and $508 at December 31, 2019. The total notional amount of outstanding foreign currency swaps, including the fixed-to-fixed cross-currency swaps, was $1,105 at September 30, 2020 and $1,090 at December 31, 2019.
The following currency derivatives were outstanding at September 30, 2020:
|
|
|
|
|
Notional Amount (U.S. Dollar Equivalent)
|
|
|
|
|
Functional Currency
|
|
Traded Currency
|
|
Designated
|
|
|
Undesignated
|
|
|
Total
|
|
|
Maturity
|
|
U.S. dollar
|
|
Mexican peso, euro
|
|
$
|
54
|
|
|
$
|
43
|
|
|
$
|
97
|
|
|
Jun-2021
|
|
Euro
|
|
U.S. dollar, Canadian dollar, Hungarian forint, British pound, Swiss franc, Indian rupee, Russian ruble, Mexican peso, Australian dollar, Singapore dollar, Japanese yen, Chinese renminbi
|
|
|
55
|
|
|
|
29
|
|
|
|
84
|
|
|
Jan-2024
|
|
British pound
|
|
U.S. dollar, euro
|
|
|
|
|
|
|
6
|
|
|
|
6
|
|
|
Nov-2020
|
|
South African rand
|
|
U.S. dollar, Thai baht
|
|
|
1
|
|
|
|
5
|
|
|
|
6
|
|
|
Dec-2020
|
|
Canadian dollar
|
|
U.S. dollar
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
Feb-2021
|
|
Brazilian real
|
|
U.S. dollar, euro
|
|
|
32
|
|
|
|
11
|
|
|
|
43
|
|
|
Jun-2021
|
|
Indian rupee
|
|
U.S. dollar, British pound, euro
|
|
|
|
|
|
|
21
|
|
|
|
21
|
|
|
Jun-2021
|
|
Chinese renminbi
|
|
Canadian dollar, euro
|
|
|
|
|
|
|
5
|
|
|
|
5
|
|
|
Oct-2020
|
|
Total forward contracts
|
|
|
|
|
143
|
|
|
|
120
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar
|
|
euro
|
|
|
330
|
|
|
|
|
|
|
|
330
|
|
|
Nov-2027
|
|
Euro
|
|
U.S. dollar
|
|
|
775
|
|
|
|
|
|
|
|
775
|
|
|
Jun-2026
|
|
Total currency swaps
|
|
|
|
|
1,105
|
|
|
|
—
|
|
|
|
1,105
|
|
|
|
|
Total currency derivatives
|
|
|
|
$
|
1,248
|
|
|
$
|
120
|
|
|
$
|
1,368
|
|
|
|
Designated cash flow hedges — With respect to contracts designated as cash flow hedges, changes in fair value during the period in which the contracts remain outstanding are reported in OCI to the extent such contracts remain effective. Effectiveness is measured by using regression analysis to determine the degree of correlation between the change in the fair value of the derivative instrument and the change in the associated foreign currency exchange rates. Changes in fair value of contracts not designated as cash flow hedges or as net investment hedges are recognized in other income (expense), net in the period in which the changes occur. Realized gains and losses from currency-related forward contracts associated with forecasted transactions or from other derivative instruments, including those that have been designated as cash flow hedges and those that have not been designated, are recognized in the same line item in the consolidated statement of operations in which the underlying forecasted transaction or other hedged item is recorded. Accordingly, amounts are potentially recorded in sales, cost of sales or, in certain circumstances, other income (expense), net.
The following table provides a summary of deferred gains (losses) reported in AOCI as well as the amount expected to be reclassified to income in one year or less:
|
|
|
Deferred Gain (Loss) in AOCI
|
|
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
Gain (loss) expected to be reclassified into income in one year or less
|
|
|
Forward Contracts
|
|
$
|
(5
|
)
|
|
$
|
6
|
|
|
$
|
(5
|
)
|
|
Collar
|
|
|
(9
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
Cross-Currency Swaps
|
|
|
20
|
|
|
|
(36
|
)
|
|
|
|
|
|
Total
|
|
$
|
6
|
|
|
$
|
(33
|
)
|
|
$
|
(5
|
)
|
The following table provides a summary of the location and amount of gains or losses recognized in the consolidated statement of operations associated with cash flow hedging relationships:
|
|
|
Three Months Ended September 30, 2020
|
|
|
Derivatives Designated as Cash Flow Hedges
|
|
Net sales
|
|
|
Cost of sales
|
|
|
Other income (expense), net
|
|
|
Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded
|
|
$
|
1,994
|
|
|
$
|
1,780
|
|
|
$
|
(8
|
)
|
|
(Gain) or loss on cash flow hedging relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
Cross-currency swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
|
|
|
|
|
|
|
|
49
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
|
Derivatives Designated as Cash Flow Hedges
|
|
Net sales
|
|
|
Cost of sales
|
|
|
Other income (expense), net
|
|
|
Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded
|
|
$
|
4,998
|
|
|
$
|
4,588
|
|
|
$
|
(5
|
)
|
|
(Gain) or loss on cash flow hedging relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
1
|
|
|
|
15
|
|
|
|
1
|
|
|
Cross-currency swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
|
Three Months Ended September 30, 2019
|
|
|
Derivatives Designated as Cash Flow Hedges
|
|
Net sales
|
|
|
Cost of sales
|
|
|
Other income (expense), net
|
|
|
Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded
|
|
$
|
2,164
|
|
|
$
|
1,882
|
|
|
$
|
(8
|
)
|
|
(Gain) or loss on cash flow hedging relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
Cross-currency swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
|
|
|
|
|
|
|
|
(47
|
)
|
|
|
|
Nine Months Ended September 30, 2019
|
|
|
Derivatives Designated as Cash Flow Hedges
|
|
Net sales
|
|
|
Cost of sales
|
|
|
Other income (expense), net
|
|
|
Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded
|
|
$
|
6,633
|
|
|
$
|
5,725
|
|
|
$
|
(31
|
)
|
|
(Gain) or loss on cash flow hedging relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
Cross-currency swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
The amounts reclassified from AOCI into income for the cross-currency swaps represent an offset to a foreign exchange loss on our foreign currency-denominated intercompany and external debt instruments.
Certain of our hedges of forecasted transactions have not formally been designated as cash flow hedges. As undesignated forward contracts, the changes in the fair value of such contracts are included in earnings for the duration of the outstanding forward contract. Any realized gain or loss on the settlement of such contracts is recognized in the same period and in the same line item in the consolidated statement of operations as the underlying transaction. The following table provides a summary of the location and amount of gains or losses recognized in the consolidated statement of operations associated with undesignated hedging relationships.
|
|
|
Amount of Gain (Loss) Recognized in Income
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments
|
|
Three Months Ended September 30, 2020
|
|
|
Three Months Ended September 30, 2019
|
|
|
Location of Gain or (Loss) Recognized in Income
|
|
Foreign currency forward contracts
|
|
$
|
(2)
|
|
|
$
|
(3)
|
|
|
Other income (expense), net
|
|
|
|
Amount of Gain (Loss) Recognized in Income
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments
|
|
Nine Months Ended September 30, 2020
|
|
|
Nine Months Ended September 30, 2019
|
|
|
Location of Gain or (Loss) Recognized in Income
|
|
Foreign currency forward contracts
|
|
$
|
(8
|
)
|
|
$
|
(15
|
)
|
|
Other income (expense), net
|
During the first quarter of 2019 we settled the outstanding undesignated Swiss franc notional deal contingent forward related to the ODS acquisition for $21, resulting in a realized loss of $13 included in other income (expense), net in the first quarter of 2019.
Net investment hedges — We periodically designate derivative contracts or underlying non-derivative financial instruments as net investment hedges. With respect to contracts designated as net investment hedges, we apply the forward method, but for non-derivative financial instruments designated as net investment hedges, we apply the spot method. Under both methods, we report changes in fair value in the cumulative translation adjustment (CTA) component of OCI during the period in which the contracts remain outstanding to the extent such contracts and non-derivative financial instruments remain effective.
Note 13. Commitments and Contingencies
Product liabilities — Accrued product liability costs were $1 at September 30, 2020 and $10 at December 31, 2019. We had also recognized amounts recoverable from third parties of $14 at September 30, 2020 and $13 at December 31, 2019. Payments made to claimants precede recovery of amounts from third parties, and may result in recoverable amounts in excess of the total liability. We estimate these liabilities based on current information and assumptions about the value and likelihood of the claims against us.
Environmental liabilities — Accrued environmental liabilities were $10 at September 30, 2020 and $13 at December 31, 2019. We consider the most probable method of remediation, current laws and regulations and existing technology in estimating our environmental liabilities.
Guarantee of lease obligations — In connection with the divestiture of our Structural Products business in 2010, leases covering three U.S. facilities were assigned to a U.S. affiliate of Metalsa. Under the terms of the sale agreement, we will guarantee the affiliate’s performance under the leases, which run through June 2025, including approximately $6 of annual payments. In the event of a required payment by Dana as guarantor, we are entitled to pursue full recovery from Metalsa of the amounts paid under the guarantee and to take possession of the leased property.
Other legal matters — We are subject to various pending or threatened legal proceedings arising out of the normal course of business or operations. In view of the inherent difficulty of predicting the outcome of such matters, we cannot state what the eventual outcome of these matters will be. However, based on current knowledge and after consultation with legal counsel, we believe that any liabilities that may result from these proceedings will not have a material adverse effect on our liquidity, financial condition or results of operations.
Note 14. Warranty Obligations
We record a liability for estimated warranty obligations at the dates our products are sold. We record the liability based on our estimate of costs to settle future claims. Adjustments to our estimated costs at time of sale are made as claim experience and other new information becomes available. Obligations for service campaigns and other occurrences are recognized as adjustments to prior estimates when the obligation is probable and can be reasonably estimated.
Changes in warranty liabilities —
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Balance, beginning of period
|
|
$
|
96
|
|
|
$
|
95
|
|
|
$
|
101
|
|
|
$
|
75
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
Amounts accrued for current period sales
|
|
|
12
|
|
|
|
9
|
|
|
|
26
|
|
|
|
26
|
|
|
Adjustments of prior estimates
|
|
|
(4
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
2
|
|
|
Settlements of warranty claims
|
|
|
(11
|
)
|
|
|
(11
|
)
|
|
|
(32
|
)
|
|
|
(27
|
)
|
|
Currency impact
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
1
|
|
|
|
(2
|
)
|
|
Balance, end of period
|
|
$
|
95
|
|
|
$
|
91
|
|
|
$
|
95
|
|
|
$
|
91
|
|
Note 15. Income Taxes
We estimate the effective tax rate expected to be applicable for the full fiscal year and use that rate to provide for income taxes in interim reporting periods. We also recognize the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur.
We have generally not recognized tax benefits on losses generated in several entities where the recent history of operating losses does not allow us to satisfy the “more likely than not” criterion for the recognition of deferred tax assets. Consequently, there is no income tax expense or benefit recognized on the pre-tax income or losses in these jurisdictions as valuation allowances are adjusted to offset the associated tax expense or benefit. We believe it is reasonably possible that valuation allowances up to $25 related to a subsidiary in Australia will be released in the next twelve months.
We record interest and penalties related to uncertain tax positions as a component of income tax expense. Net interest expense for the periods presented herein is not significant.
We reported an income tax expense of $16 and $5 for the third quarters of 2020 and 2019 and income tax expense of $34 and income tax benefit of $27 for the respective year-to-date periods. Our effective tax rates were (46)% and (28)% for the first nine months of 2020 and 2019. In the second quarter of 2020 we recorded an income tax expense of $56 for valuation allowances in foreign jurisdictions due to reduced income projections. During the first quarter of 2020, a pre-tax goodwill impairment charge of $51 with an associated income tax benefit of $1 was recorded. Also, during the first quarter of 2020, we recorded tax benefits of $37 related to tax actions that adjusted federal tax credits, tax expense of $2 to record additional valuation allowance in the U.S. based on reduced income projections, and tax expense of $4 to record valuation allowances in foreign jurisdictions due to reduced income projections. During the third quarter of 2019, we recognized a benefit of $22 for the release of a valuation allowance in a subsidiary in Brazil based on the recent history of profitability and increased income projections. In the second quarter of 2019, a pre-tax pension settlement charge of $258 with an associated income tax benefit of $9 was recorded. Also, during the second quarter of 2019, we recorded tax benefits of $48 related to tax actions that adjusted federal tax credits and $30 related to the development of a tax planning strategy which reduced valuation allowances on existing federal tax credits. During the first quarter of 2019, we recognized a benefit of $22 related to the release of valuation allowances in the U.S. based on increased income projections. Partially offsetting this benefit was $6 of expense related to a U.S. state law change. Excluding these items, the effective tax rate would be (45)% and 28% for the 2020 and 2019 nine-month periods, respectively. Our effective income tax rates vary from the U.S. federal statutory rate of 21% due to establishment, release and adjustment of valuation allowances in several countries, nondeductible expenses and deemed income, local tax incentives in several countries outside the U.S., different statutory tax rates outside the U.S. and withholding taxes related to repatriations of international earnings. The effective income tax rate may vary significantly due to fluctuations in the amounts and sources, both foreign and domestic, of pretax income and changes in the amounts of non-deductible expenses.
Dividends of earnings from non-U.S. operations are generally no longer subjected to U.S. income tax. We continue to analyze and adjust the estimated tax impact of the income and non-U.S. withholding tax liabilities based on the amounts and sources of these earnings.
Note 16. Other Income (Expense), Net
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Non-service cost components of pension and OPEB costs
|
|
$
|
(3
|
)
|
|
$
|
(4
|
)
|
|
$
|
(8
|
)
|
|
$
|
(19
|
)
|
|
Government grants and incentives
|
|
|
3
|
|
|
|
3
|
|
|
|
9
|
|
|
|
11
|
|
|
Foreign exchange gain (loss)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
5
|
|
|
|
(11
|
)
|
|
Strategic transaction expenses
|
|
|
(4
|
)
|
|
|
(8
|
)
|
|
|
(15
|
)
|
|
|
(32
|
)
|
|
Non-income tax legal judgment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
Other, net
|
|
|
(2
|
)
|
|
|
2
|
|
|
|
4
|
|
|
|
14
|
|
|
Other income (expense), net
|
|
$
|
(8
|
)
|
|
$
|
(8
|
)
|
|
$
|
(5
|
)
|
|
$
|
(31
|
)
|
Foreign exchange gains and losses on cross-currency intercompany loan balances that are not of a long-term investment nature are included above. Foreign exchange gains and losses on intercompany loans that are permanently invested are reported in OCI. Foreign exchange loss in 2019 included a loss on the undesignated Swiss franc notional deal contingent forward related to the ODS acquisition. See Note 12 for additional information.
Strategic transaction expenses relate primarily to costs incurred in connection with acquisition and divestiture related activities, including costs to complete the transaction and post-closing integration costs. Strategic transaction expenses in 2020 were primarily attributable to the acquisitions of ODS and Nordresa and certain other strategic initiatives. Strategic transaction expenses in 2019 were primarily attributable to the acquisition of ODS. See Note 2 for additional information.
During the first quarter of 2019, we won a legal judgment regarding the methodology used to calculate PIS/COFINS tax in Brazil.
Included in other noncurrent assets in our September 30, 2020 balance sheet are $16 of convertible notes receivable from our investment in Hyliion Inc. On October 1, 2020, Hyliion completed its merger with Tortoise Acquisition Corp. The business combination will result in the combined company being renamed Hyliion Holdings Corp., with its common stock being listed on the New York Stock Exchange under the ticker symbol HYLN. Effective with the completed merger, our notes receivable were converted into 2,988,229 common shares of HYLN. Our investment in Hyliion will be included in noncurrent marketable securities and carried at fair value with changes in fair value included in net income in future periods. The strategic partnership with Hyliion establishes Dana as the preferred supplier for e-propulsion systems to Hyliion as long as Dana maintains a minimum equity investment in Hyliion.
Note 17. Revenue from Contracts with Customers
We generate revenue from selling production parts to original equipment manufacturers (OEMs) and service parts to OEMs and aftermarket customers. While we provide production and service parts to certain OEMs under awarded multi-year programs, these multi-year programs do not contain any commitment to volume by the customer. As such, individual customer releases or purchase orders represent the contract with the customer. Our customer contracts do not provide us with an enforceable right to payment for performance completed to date throughout the contract term. As such, we recognize part sales revenue at the point in time when the parts are shipped, and risk of loss has transferred to the customer. We have elected to continue to include shipping and handling fees billed to customers in revenue, while including costs of shipping and handling in costs of sales. Taxes collected from customers are excluded from revenues and credited directly to obligations to the appropriate government agencies. Payment terms with our customers are established based on industry and regional practices and generally do not exceed 180 days.
Certain of our customer contracts include rebate incentives. We estimate expected rebates and accrue the corresponding refund liability, as a reduction of revenue, at the time covered product is sold to the customer based on anticipated customer purchases during the rebate period and contractual rebate percentages. Refund liabilities are included in other accrued liabilities on our consolidated balance sheet. We provide standard fitness for use warranties on the products we sell, accruing for estimated costs related to product warranty obligations at time of sale. See Note 14 for additional information.
Contract liabilities are primarily comprised of cash deposits made by customers with cash in advance payment terms. Generally, our contract liabilities turn over frequently given our relatively short production cycles. Contract liabilities were $27 and $23 at September 30, 2020 and December 31, 2019. Contract liabilities are included in other accrued liabilities on our consolidated balance sheet.
Disaggregation of revenue —
The following table disaggregates revenue for each of our operating segments by geographical market:
|
Three Months Ended September 30, 2020
|
|
Light Vehicle
|
|
|
Commercial Vehicle
|
|
|
Off-Highway
|
|
|
Power Technologies
|
|
|
Total
|
|
|
North America
|
|
$
|
694
|
|
|
$
|
190
|
|
|
$
|
60
|
|
|
$
|
125
|
|
|
$
|
1,069
|
|
|
Europe
|
|
|
94
|
|
|
|
50
|
|
|
|
321
|
|
|
|
112
|
|
|
|
577
|
|
|
South America
|
|
|
32
|
|
|
|
50
|
|
|
|
9
|
|
|
|
5
|
|
|
|
96
|
|
|
Asia Pacific
|
|
|
93
|
|
|
|
24
|
|
|
|
117
|
|
|
|
18
|
|
|
|
252
|
|
|
Total
|
|
$
|
913
|
|
|
$
|
314
|
|
|
$
|
507
|
|
|
$
|
260
|
|
|
$
|
1,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
1,518
|
|
|
$
|
510
|
|
|
$
|
192
|
|
|
$
|
310
|
|
|
$
|
2,530
|
|
|
Europe
|
|
|
233
|
|
|
|
136
|
|
|
|
929
|
|
|
|
290
|
|
|
|
1,588
|
|
|
South America
|
|
|
72
|
|
|
|
138
|
|
|
|
22
|
|
|
|
12
|
|
|
|
244
|
|
|
Asia Pacific
|
|
|
235
|
|
|
|
63
|
|
|
|
297
|
|
|
|
41
|
|
|
|
636
|
|
|
Total
|
|
$
|
2,058
|
|
|
$
|
847
|
|
|
$
|
1,440
|
|
|
$
|
653
|
|
|
$
|
4,998
|
|
|
Three Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
699
|
|
|
$
|
238
|
|
|
$
|
89
|
|
|
$
|
132
|
|
|
$
|
1,158
|
|
|
Europe
|
|
|
80
|
|
|
|
49
|
|
|
|
381
|
|
|
|
104
|
|
|
|
614
|
|
|
South America
|
|
|
34
|
|
|
|
85
|
|
|
|
11
|
|
|
|
4
|
|
|
|
134
|
|
|
Asia Pacific
|
|
|
117
|
|
|
|
26
|
|
|
|
101
|
|
|
|
14
|
|
|
|
258
|
|
|
Total
|
|
$
|
930
|
|
|
$
|
398
|
|
|
$
|
582
|
|
|
$
|
254
|
|
|
$
|
2,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
2,042
|
|
|
$
|
745
|
|
|
$
|
245
|
|
|
$
|
412
|
|
|
$
|
3,444
|
|
|
Europe
|
|
|
256
|
|
|
|
181
|
|
|
|
1,243
|
|
|
|
325
|
|
|
|
2,005
|
|
|
South America
|
|
|
105
|
|
|
|
245
|
|
|
|
31
|
|
|
|
15
|
|
|
|
396
|
|
|
Asia Pacific
|
|
|
360
|
|
|
|
95
|
|
|
|
289
|
|
|
|
44
|
|
|
|
788
|
|
|
Total
|
|
$
|
2,763
|
|
|
$
|
1,266
|
|
|
$
|
1,808
|
|
|
$
|
796
|
|
|
$
|
6,633
|
|
Note 18. Segments
We are a global provider of high-technology products to virtually every major vehicle manufacturer in the world. We also serve the stationary industrial market. Our technologies include drive systems (axles, driveshafts, transmissions, and wheel and track drives); motion systems (winches, slew drives, and hub drives); electrodynamic technologies (motors, inverters, software and control systems, battery-management systems, and fuel cell plates); sealing solutions (gaskets, seals, cam covers, and oil pan modules); thermal-management technologies (transmission and engine oil cooling, battery and electronics cooling, charge air cooling, and thermal-acoustical protective shielding); and digital solutions (active and passive system controls and descriptive and predictive analytics). We serve our global light vehicle, medium/heavy vehicle and off-highway markets through four operating segments – Light Vehicle Drive Systems (Light Vehicle), Commercial Vehicle Drive and Motion Systems (Commercial Vehicle), Off-Highway Drive and Motion Systems (Off-Highway) and Power Technologies, which is the center of excellence for sealing and thermal-management technologies that span all customers in our on-highway and off-highway markets. These operating segments have global responsibility and accountability for business commercial activities and financial performance.
Dana evaluates the performance of its operating segments based on external sales and segment EBITDA. Segment EBITDA is a primary driver of cash flows from operations and a measure of our ability to maintain and continue to invest in our operations and provide shareholder returns. Our segments are charged for corporate and other shared administrative costs. Segment EBITDA may not be comparable to similarly titled measures reported by other companies.
Segment information —
|
|
|
2020
|
|
|
2019
|
|
|
Three Months Ended September 30,
|
|
External Sales
|
|
|
Inter-Segment Sales
|
|
|
Segment EBITDA
|
|
|
External Sales
|
|
|
Inter-Segment Sales
|
|
|
Segment EBITDA
|
|
|
Light Vehicle
|
|
$
|
913
|
|
|
$
|
27
|
|
|
$
|
89
|
|
|
$
|
930
|
|
|
$
|
30
|
|
|
$
|
113
|
|
|
Commercial Vehicle
|
|
|
314
|
|
|
|
20
|
|
|
|
16
|
|
|
|
398
|
|
|
|
27
|
|
|
|
33
|
|
|
Off-Highway
|
|
|
507
|
|
|
|
12
|
|
|
|
65
|
|
|
|
582
|
|
|
|
3
|
|
|
|
79
|
|
|
Power Technologies
|
|
|
260
|
|
|
|
6
|
|
|
|
34
|
|
|
|
254
|
|
|
|
7
|
|
|
|
28
|
|
|
Eliminations and other
|
|
|
|
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
Total
|
|
$
|
1,994
|
|
|
$
|
—
|
|
|
$
|
204
|
|
|
$
|
2,164
|
|
|
$
|
—
|
|
|
$
|
253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Light Vehicle
|
|
$
|
2,058
|
|
|
$
|
76
|
|
|
$
|
140
|
|
|
$
|
2,763
|
|
|
$
|
99
|
|
|
$
|
333
|
|
|
Commercial Vehicle
|
|
|
847
|
|
|
|
49
|
|
|
|
29
|
|
|
|
1,266
|
|
|
|
80
|
|
|
|
115
|
|
|
Off-Highway
|
|
|
1,440
|
|
|
|
30
|
|
|
|
175
|
|
|
|
1,808
|
|
|
|
13
|
|
|
|
264
|
|
|
Power Technologies
|
|
|
653
|
|
|
|
13
|
|
|
|
63
|
|
|
|
796
|
|
|
|
17
|
|
|
|
90
|
|
|
Eliminations and other
|
|
|
|
|
|
|
(168
|
)
|
|
|
|
|
|
|
|
|
|
|
(209
|
)
|
|
|
|
|
|
Total
|
|
$
|
4,998
|
|
|
$
|
—
|
|
|
$
|
407
|
|
|
$
|
6,633
|
|
|
$
|
—
|
|
|
$
|
802
|
|
Reconciliation of segment EBITDA to consolidated net income —
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Segment EBITDA
|
|
$
|
204
|
|
|
$
|
253
|
|
|
$
|
407
|
|
|
$
|
802
|
|
|
Corporate expense and other items, net
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(6
|
)
|
|
|
(9
|
)
|
|
Depreciation
|
|
|
(88
|
)
|
|
|
(82
|
)
|
|
|
(257
|
)
|
|
|
(235
|
)
|
|
Amortization
|
|
|
(6
|
)
|
|
|
(4
|
)
|
|
|
(15
|
)
|
|
|
(12
|
)
|
|
Non-service cost components of pension and OPEB costs
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
(8
|
)
|
|
|
(19
|
)
|
|
Restructuring charges, net
|
|
|
(2
|
)
|
|
|
(5
|
)
|
|
|
(21
|
)
|
|
|
(23
|
)
|
|
Stock compensation expense
|
|
|
(2
|
)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
(15
|
)
|
|
Strategic transaction expenses
|
|
|
(4
|
)
|
|
|
(8
|
)
|
|
|
(15
|
)
|
|
|
(32
|
)
|
|
Impairment of goodwill
|
|
|
|
|
|
|
|
|
|
|
(51
|
)
|
|
|
|
|
|
Acquisition related inventory adjustments
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(12
|
)
|
|
Non-income tax legal judgment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
Other items
|
|
|
(7
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
(9
|
)
|
|
Pension settlement charges, net
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(260
|
)
|
|
Earnings before interest and income taxes
|
|
|
89
|
|
|
|
137
|
|
|
|
24
|
|
|
|
182
|
|
|
Write-off deferred financing costs
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
Interest income
|
|
|
3
|
|
|
|
3
|
|
|
|
7
|
|
|
|
8
|
|
|
Interest expense
|
|
|
38
|
|
|
|
31
|
|
|
|
99
|
|
|
|
92
|
|
|
Earnings (loss) before income taxes
|
|
|
54
|
|
|
|
109
|
|
|
|
(73
|
)
|
|
|
98
|
|
|
Income tax expense (benefit)
|
|
|
16
|
|
|
|
5
|
|
|
|
34
|
|
|
|
(27
|
)
|
|
Equity in earnings of affiliates
|
|
|
7
|
|
|
|
8
|
|
|
|
17
|
|
|
|
22
|
|
|
Net income (loss)
|
|
$
|
45
|
|
|
$
|
112
|
|
|
$
|
(90
|
)
|
|
$
|
147
|
|
Note 19. Equity Affiliates
We have a number of investments in entities that engage in the manufacture and supply of vehicular parts (primarily axles, axle housings, driveshafts and wheel-end braking systems) and motors for electric vehicles and industrial applications.
Equity method investments exceeding $5 at September 30, 2020 —
|
|
|
Ownership Percentage
|
|
Investment
|
|
|
Dongfeng Dana Axle Co., Ltd. (DDAC)
|
|
50%
|
|
$
|
94
|
|
|
Bendix Spicer Foundation Brake, LLC
|
|
20%
|
|
|
56
|
|
|
Axles India Limited
|
|
48%
|
|
|
8
|
|
|
All others as a group
|
|
|
|
|
14
|
|
|
Investments in equity affiliates
|
|
|
|
|
172
|
|
|
Investments in affiliates carried at cost
|
|
|
|
|
2
|
|
|
Investments in affiliates
|
|
|
|
$
|
174
|
|
Summarized financial information for DDAC —
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Sales
|
|
$
|
236
|
|
|
$
|
178
|
|
|
$
|
691
|
|
|
$
|
616
|
|
|
Gross profit
|
|
$
|
27
|
|
|
$
|
22
|
|
|
$
|
91
|
|
|
$
|
66
|
|
|
Earnings before income taxes
|
|
$
|
13
|
|
|
$
|
9
|
|
|
$
|
35
|
|
|
$
|
29
|
|
|
Net income
|
|
$
|
11
|
|
|
$
|
9
|
|
|
$
|
29
|
|
|
$
|
30
|
|
|
Dana's equity in earnings of affiliate
|
|
$
|
6
|
|
|
$
|
4
|
|
|
$
|
14
|
|
|
$
|
14
|
|
On October 1, 2020, we received a $4 cash dividend from Bendix Spicer Foundation Brake, LLC (BSFB). Immediately following the receipt of the cash dividend, we sold our 20% ownership interest in BSFB to Bendix Commercial Vehicle Systems LLC. We received $51 at closing, consisting of $21 in cash, a note receivable of $25 and deferred proceeds of $5. The proceeds received approximated the carrying value of our investment in BSFB. The note receivable and deferred proceeds are due in one year and bear interest at 1.65%. The deferred proceeds are subject to adjustment based on BSFB’s cash, working capital and indebtedness balances as of the closing date.
On October 20, 2020, we acquired a 49% ownership interest in Pi Innovo Holdings Limited (Pi Innovo) for consideration of $17, using cash on hand. The consideration paid is subject to adjustment based on cash and working capital balances as of the closing date. Pi Innovo designs, develops and manufactures electronic control units spanning a range of applications and industries. We will account for our investment in Pi Innovo by applying the equity method.