Note 11. Stock Compensation
2017 Omnibus Incentive Plan
The 2017 Omnibus Incentive Plan (the Plan) authorizes the grant of stock options, stock appreciation rights (SARs), RSUs and performance share units (PSUs) through April 2027. Cash-settled awards do not count against the maximum aggregate number. At December 31, 2020, there were 3.1 million shares available for future grants. Shares of common stock to be issued under the Plan are made available from authorized and unissued Dana common stock.
Award activity — (shares in millions)
|
|
Options
|
|
|
SARs
|
|
|
RSUs
|
|
|
PSUs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Exercise Price*
|
|
|
Shares
|
|
|
Exercise Price*
|
|
|
Shares
|
|
|
Fair Value*
|
|
|
Shares
|
|
|
Fair Value*
|
|
December 31, 2019
|
|
|
0.6
|
|
|
$
|
16.13
|
|
|
|
0.1
|
|
|
$
|
16.27
|
|
|
|
2.0
|
|
|
$
|
20.56
|
|
|
|
0.7
|
|
|
$
|
19.99
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.3
|
|
|
|
15.53
|
|
|
|
0.5
|
|
|
|
14.42
|
|
Exercised or vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.6
|
)
|
|
|
19.58
|
|
|
|
(0.2
|
)
|
|
|
19.15
|
|
Forfeited or expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
18.86
|
|
|
|
(0.2
|
)
|
|
|
18.14
|
|
December 31, 2020
|
|
|
0.6
|
|
|
|
16.27
|
|
|
|
0.1
|
|
|
|
16.50
|
|
|
|
2.5
|
|
|
|
18.27
|
|
|
|
0.8
|
|
|
|
15.18
|
|
* Weighted-average per share
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Total stock compensation expense
|
|
$
|
14
|
|
|
$
|
19
|
|
|
$
|
16
|
|
Total grant-date fair value of awards vested
|
|
|
16
|
|
|
|
16
|
|
|
|
16
|
|
Cash received from exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Cash paid to settle SARs and RSUs
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
Intrinsic value of stock options and SARs exercised
|
|
|
|
|
|
|
1
|
|
|
|
3
|
|
Intrinsic value of RSUs and PSUs vested
|
|
|
14
|
|
|
|
17
|
|
|
|
18
|
|
Compensation expense is generally measured based on the fair value at the date of grant and is recognized on a straight-line basis over the vesting period. For options and SARs, we use an option-pricing model to estimate fair value. For RSUs and PSUs, the fair value is based on the closing market price of our common stock at the date of grant. Awards that are settled in cash are subject to liability accounting. Accordingly, the fair value of such awards is remeasured at the end of each reporting period until settled or expired. We had accrued $4 and $3 for cash-settled awards at December 31, 2020 and 2019. During 2020 we issued 0.6 million and 0.3 million shares of common stock based on vesting of RSUs and PSUs. At December 31, 2020, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $19. This cost is expected to be recognized over a weighted-average period of 1.8 years.
Stock options and stock appreciation rights — The exercise price of each option or SAR equals the closing market price of our common stock on the date of grant. Options and SARs generally vest over three years and their maximum term is ten years. Shares issued upon the exercise of options are recorded as common stock and additional paid-in capital at the option price. SARs are settled in cash for the difference between the market price on the date of exercise and the exercise price. We have not granted stock options or SARs since 2013. All outstanding awards are fully vested and exercisable. At December 31, 2020, the outstanding awards have an aggregate intrinsic value of $2 and a weighted-average remaining contractual life of 1.3 years.
Restricted stock units and performance shares units — Each RSU or PSU granted represents the right to receive one share of Dana common stock or, at the election of Dana (for units awarded to board members) or for employees located outside the U.S. (for employee awarded units), cash equal to the market value per share. All RSUs contain dividend equivalent rights. RSUs granted to non-employee directors vest on the first anniversary date of the grant and those granted to employees generally cliff vest fully after three years. PSUs granted to employees vest if specified performance goals are achieved during the respective performance period, generally three years.
Under the 2020 stock compensation award program, the number of PSUs that ultimately vest is contingent on achieving a specified free cash flow target and a specified margin target, with an even distribution between the two targets. Our 2019 and 2018 programs had specified return on invested capital targets and specified margin targets, with an even distribution between the two targets. We estimated the fair value 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. The estimated grant date value is accrued over the performance period and adjusted as appropriate based on performance relative to the target.
Cash incentive awards — Our 2017 Omnibus Incentive Plan provides for cash incentive awards. We make awards annually to certain eligible employees designated by Dana, including certain executive officers. Awards under the plan are based on achieving certain financial performance goals. The performance goals of the plan are established annually by the Board of Directors.
Under the 2020 annual incentive program, participants were eligible to receive cash awards based on achieving a cash flow performance goal. Under the 2019 and 2018 annual incentive programs, participants were eligible to receive cash awards based on achieving earnings and cash flow performance goals. We accrued $23, $27 and $33 of expense in 2020, 2019 and 2018 for the expected cash payments under these programs.
Note 12. Pension and Postretirement Benefit Plans
We sponsor various 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.
We also sponsor various defined contribution plans that cover the majority of our employees. Under the terms of the qualified defined contribution retirement plans, employee and employer contributions may be directed into a number of diverse investments. None of these qualified defined contribution plans allow direct investment in our stock.
Components of net periodic benefit cost (credit) and other amounts recognized in OCI —
|
|
Pension Benefits
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Interest cost
|
|
$
|
21
|
|
|
$
|
5
|
|
|
$
|
40
|
|
|
$
|
8
|
|
|
$
|
43
|
|
|
$
|
7
|
|
Expected return on plan assets
|
|
|
(35
|
)
|
|
|
(3
|
)
|
|
|
(51
|
)
|
|
|
(3
|
)
|
|
|
(71
|
)
|
|
|
(3
|
)
|
Service cost
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
7
|
|
Amortization of net actuarial loss
|
|
|
11
|
|
|
|
9
|
|
|
|
22
|
|
|
|
6
|
|
|
|
28
|
|
|
|
6
|
|
Settlement charge
|
|
|
|
|
|
|
|
|
|
|
256
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Curtailment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Net periodic benefit cost (credit)
|
|
|
(3
|
)
|
|
|
20
|
|
|
|
267
|
|
|
|
21
|
|
|
|
—
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in OCI:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount due to net actuarial (gains) losses
|
|
|
(4
|
)
|
|
|
10
|
|
|
|
(107
|
)
|
|
|
33
|
|
|
|
11
|
|
|
|
4
|
|
Reclassification adjustment for net actuarial losses in net periodic benefit cost
|
|
|
(11
|
)
|
|
|
(9
|
)
|
|
|
(278
|
)
|
|
|
(9
|
)
|
|
|
(28
|
)
|
|
|
(6
|
)
|
Curtailment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
Total recognized in OCI
|
|
|
(15
|
)
|
|
|
1
|
|
|
|
(385
|
)
|
|
|
24
|
|
|
|
(17
|
)
|
|
|
(4
|
)
|
Net recognized in benefit cost (credit) and OCI
|
|
$
|
(18
|
)
|
|
$
|
21
|
|
|
$
|
(118
|
)
|
|
$
|
45
|
|
|
$
|
(17
|
)
|
|
$
|
15
|
|
|
|
OPEB
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
Non-U.S.
|
|
Interest cost
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Service cost
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Amortization of net actuarial gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
Net periodic benefit cost
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in OCI:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount due to net actuarial (gains) losses
|
|
|
1
|
|
|
|
4
|
|
|
|
1
|
|
|
|
2
|
|
|
|
(7
|
)
|
Reclassification adjustment for net actuarial gain in net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Total recognized in OCI
|
|
|
1
|
|
|
|
4
|
|
|
|
1
|
|
|
|
3
|
|
|
|
(7
|
)
|
Net recognized in benefit cost (credit) and OCI
|
|
$
|
1
|
|
|
$
|
7
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
(3
|
)
|
Our U.S. defined benefit pension plans are frozen and no additional service cost is being accrued. The estimated net actuarial loss for the defined benefit pension plans that will be amortized from AOCI into benefit cost in 2021 is $9 for our U.S. plans and $9 for our non-U.S. plans. We use the corridor approach for purposes of systematically amortizing deferred gains or losses as a component of net periodic benefit cost into the income statement in future reporting periods. The amortization period used is generally the average remaining service period of active participants in the plan unless almost all of the plan’s participants are inactive, in which case we use the average remaining life expectancy of the inactive participants. No portion of the estimated net actuarial gain related to OPEB plans will be amortized from AOCI into benefit cost in 2021.
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.
Funded status — The following tables provide reconciliations of the changes in benefit obligations, plan assets and funded status.
|
|
Pension Benefits
|
|
|
OPEB
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Reconciliation of benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligation at beginning of period
|
|
$
|
772
|
|
|
$
|
412
|
|
|
$
|
1,501
|
|
|
$
|
364
|
|
|
$
|
3
|
|
|
$
|
88
|
|
|
$
|
—
|
|
|
$
|
83
|
|
Interest cost
|
|
|
21
|
|
|
|
5
|
|
|
|
40
|
|
|
|
8
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
3
|
|
Service cost
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Actuarial loss
|
|
|
68
|
|
|
|
10
|
|
|
|
13
|
|
|
|
41
|
|
|
|
1
|
|
|
|
4
|
|
|
|
1
|
|
|
|
2
|
|
Benefit payments
|
|
|
(51
|
)
|
|
|
(13
|
)
|
|
|
(90
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
(4
|
)
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
161
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
(4
|
)
|
|
|
(853
|
)
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deconsolidation of subsidiary
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
4
|
|
Obligation at end of period
|
|
$
|
810
|
|
|
$
|
438
|
|
|
$
|
772
|
|
|
$
|
412
|
|
|
$
|
4
|
|
|
$
|
93
|
|
|
$
|
3
|
|
|
$
|
88
|
|
|
|
Pension Benefits
|
|
|
OPEB
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Reconciliation of fair value of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at beginning of period
|
|
$
|
724
|
|
|
$
|
78
|
|
|
$
|
1,301
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Actual return on plan assets
|
|
|
107
|
|
|
|
3
|
|
|
|
171
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
1
|
|
|
|
14
|
|
|
|
59
|
|
|
|
17
|
|
|
|
|
|
|
|
4
|
|
|
|
1
|
|
|
|
4
|
|
Benefit payments
|
|
|
(51
|
)
|
|
|
(13
|
)
|
|
|
(90
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
(4
|
)
|
Settlements
|
|
|
|
|
|
|
(4
|
)
|
|
|
(853
|
)
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
136
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deconsolidation of subsidiary
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at end of period
|
|
$
|
781
|
|
|
$
|
69
|
|
|
$
|
724
|
|
|
$
|
78
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of period
|
|
$
|
(29
|
)
|
|
$
|
(369
|
)
|
|
$
|
(48
|
)
|
|
$
|
(334
|
)
|
|
$
|
(4
|
)
|
|
$
|
(93
|
)
|
|
$
|
(3
|
)
|
|
$
|
(88
|
)
|
Amounts recognized in the balance sheet —
|
|
Pension Benefits
|
|
|
OPEB
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Amounts recognized in the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Current liabilities
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
(5
|
)
|
Noncurrent liabilities
|
|
|
(31
|
)
|
|
|
(356
|
)
|
|
|
(48
|
)
|
|
|
(325
|
)
|
|
|
(4
|
)
|
|
|
(88
|
)
|
|
|
(3
|
)
|
|
|
(83
|
)
|
Net amount recognized
|
|
$
|
(29
|
)
|
|
$
|
(369
|
)
|
|
$
|
(48
|
)
|
|
$
|
(334
|
)
|
|
$
|
(4
|
)
|
|
$
|
(93
|
)
|
|
$
|
(3
|
)
|
|
$
|
(88
|
)
|
Amounts recognized in AOCI —
|
|
Pension Benefits
|
|
|
OPEB
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Amounts recognized in AOCI:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss (gain)
|
|
$
|
142
|
|
|
$
|
108
|
|
|
$
|
157
|
|
|
$
|
108
|
|
|
$
|
2
|
|
|
$
|
(8
|
)
|
|
$
|
1
|
|
|
$
|
(12
|
)
|
AOCI before tax
|
|
|
142
|
|
|
|
108
|
|
|
|
157
|
|
|
|
108
|
|
|
|
2
|
|
|
|
(8
|
)
|
|
|
1
|
|
|
|
(12
|
)
|
Deferred taxes
|
|
|
16
|
|
|
|
(30
|
)
|
|
|
13
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
4
|
|
Net
|
|
$
|
158
|
|
|
$
|
78
|
|
|
$
|
170
|
|
|
$
|
80
|
|
|
$
|
2
|
|
|
$
|
(5
|
)
|
|
$
|
1
|
|
|
$
|
(8
|
)
|
The 2020 actuarial gain of $4 on the U.S. plans was largely the result of the actual return on assets exceeding the expected asset return partially offset by the decrease in discount rate and result of reflecting updated mortality tables.
The 2019 actuarial gain of $107 on the U.S plans was largely the result of the actual return on assets exceeding the expected asset return.
Aggregate funding levels — The following table presents information regarding the aggregate funding levels of our defined benefit pension plans at December 31:
|
|
2020
|
|
|
2019
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Plans with fair value of plan assets in excess of obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
16
|
|
|
$
|
14
|
|
|
$
|
15
|
|
|
$
|
17
|
|
Projected benefit obligation
|
|
|
16
|
|
|
|
14
|
|
|
|
15
|
|
|
|
17
|
|
Fair value of plan assets
|
|
|
17
|
|
|
|
15
|
|
|
|
16
|
|
|
|
21
|
|
Plans with obligations in excess of fair value of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
794
|
|
|
$
|
391
|
|
|
$
|
757
|
|
|
$
|
363
|
|
Projected benefit obligation
|
|
|
794
|
|
|
|
424
|
|
|
|
757
|
|
|
|
395
|
|
Fair value of plan assets
|
|
|
764
|
|
|
|
54
|
|
|
|
708
|
|
|
|
57
|
|
Fair value of pension plan assets —
|
|
|
|
|
|
Fair Value Measurements at December 31, 2020
|
|
|
|
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Asset Category
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
NAV (a)
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. all cap (b)
|
|
$
|
40
|
|
|
$
|
40
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. large cap
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAFE composite
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerging markets
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
|
572
|
|
|
|
|
|
|
|
189
|
|
|
|
|
|
|
|
383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury strips
|
|
|
22
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. government securities
|
|
|
16
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
Emerging market debt
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance contracts (c)
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
|
|
Real estate
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
35
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
850
|
|
|
$
|
40
|
|
|
$
|
247
|
|
|
$
|
6
|
|
|
$
|
488
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
52
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2019
|
|
|
|
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Asset Category
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
NAV (a)
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. all cap (b)
|
|
$
|
39
|
|
|
$
|
39
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. large cap
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAFE composite
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerging markets
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
|
492
|
|
|
|
|
|
|
|
186
|
|
|
|
|
|
|
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury strips
|
|
|
37
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. government securities
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
Emerging market debt
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance contracts (c)
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
|
|
Real estate
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
65
|
|
|
|
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
802
|
|
|
$
|
39
|
|
|
$
|
288
|
|
|
$
|
4
|
|
|
$
|
393
|
|
|
$
|
—
|
|
|
$
|
32
|
|
|
$
|
46
|
|
________________________________
Notes:
(a)
|
Certain assets are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient and have not been classified in the fair value hierarchy.
|
|
|
(b)
|
This category comprises a combination of small-, mid- and large-cap equity stocks that are allocated at the investment manager's discretion. Investments include common and preferred securities as well as equity funds that invest in these instruments.
|
|
|
(c)
|
This category comprises contracts placed with insurance companies where the underlying assets are invested in fixed interest securities.
|
|
|
2020
|
|
|
2020
|
|
|
2019
|
|
|
2019
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
|
Insurance
|
|
|
Insurance
|
|
|
Insurance
|
|
|
Insurance
|
|
Reconciliation of Level 3 Assets
|
|
Contracts
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Contracts
|
|
Fair value at beginning of period
|
|
$
|
4
|
|
|
$
|
46
|
|
|
$
|
—
|
|
|
$
|
35
|
|
Actual gains relating to assets still held at the reporting date
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
|
7
|
|
Purchases, sales and settlements
|
|
|
|
|
|
|
(2
|
)
|
|
|
4
|
|
|
|
5
|
|
Currency impact
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
(1
|
)
|
Fair value at end of period
|
|
$
|
6
|
|
|
$
|
52
|
|
|
$
|
4
|
|
|
$
|
46
|
|
Valuation Methods
Equity securities — The fair value of equity securities held directly by the trust is based on quoted market prices. When the equity securities are held in commingled funds that are not publicly traded, the fair value of our interest in the fund is its NAV as determined by quoted market prices for the underlying holdings.
Fixed income securities — The fair value of fixed income securities held directly by the trust is based on a bid evaluation process with input from independent pricing sources. When the fixed income securities are held in commingled funds that are not publicly traded, the fair value of our interest in the fund is its NAV as determined by a similar valuation of the underlying holdings.
Insurance contracts — The values shown for insurance contracts are the amounts reported by the insurance company and approximate the fair values of the underlying investments.
Real estate — The investments in real estate represent ownership interests in commingled funds and partnerships that invest in real estate. The investment managers determine the NAV of these ownership interests using the fair value of the underlying real estate which is obtained via independent third party appraisals prepared on a periodic basis. Assumptions used to value the properties are updated quarterly. For the component of the real estate portfolio under development, the investments are carried at cost until they are completed and valued by a third party appraiser.
Cash and cash equivalents — The fair value of cash and cash equivalents is set equal to its amortized cost.
The methods described above may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
Investment policy — Target asset allocations of U.S. pension plans are established through an investment policy, which is updated periodically and reviewed by an Investment Committee, comprised of certain company officers. The investment policy allows for a flexible asset allocation mix which is intended to provide appropriate diversification to lessen market volatility while assuming a reasonable level of economic risk.
Our policy recognizes that properly managing the relationship between pension assets and pension liabilities serves to mitigate the impact of market volatility on our funding levels. The investment policy permits plan assets to be invested in a number of diverse categories, including a Growth Portfolio, an Immunizing Portfolio and a Liquidity Portfolio. These sub-portfolios are intended to balance the generation of incremental returns with the management of overall risk.
The Growth Portfolio is invested in a diversified pool of assets in order to generate an incremental return with an acceptable level of risk. The Immunizing Portfolio is a hedging portfolio that may be comprised of fixed income securities and overlay positions. This portfolio is designed to offset changes in the value of the pension liability due to changes in interest rates. The Liquidity Portfolio is a cash portfolio designed to meet short-term liquidity needs and reduce the plans’ overall risk. As a result of our diversification strategies, there are no significant concentrations of risk within the portfolio of investments.
The allocations among portfolios are adjusted as needed to meet changing objectives and constraints and to manage the risk of adverse changes in the unfunded positions of our plans. At December 31, 2020, the U.S. plans had targets of 20% for the Growth Portfolio (U.S. and non-U.S. equities, high-yield fixed income, real estate, emerging market debt and cash), 78% for the Immunizing Portfolio (long duration U.S. Treasury strips, corporate bonds and cash) and 2% for the Liquidity Portfolio (cash and short-term securities). The assets held at December 31, 2020 by the U.S. plans were invested 21% in the Growth Portfolio, 76% in the Immunizing Portfolio and 3% in the Liquidity Portfolio.
Significant assumptions — The significant weighted-average assumptions used in the measurement of pension benefit obligations at December 31 of each year and the net periodic benefit cost for each year are as follows:
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Pension benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
2.43
|
%
|
|
|
1.40
|
%
|
|
|
3.21
|
%
|
|
|
1.72
|
%
|
|
|
4.22
|
%
|
|
|
2.42
|
%
|
Net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
2.79
|
%
|
|
|
2.10
|
%
|
|
|
3.41
|
%
|
|
|
2.50
|
%
|
|
|
2.56
|
%
|
|
|
2.54
|
%
|
Rate of compensation increase
|
|
|
N/A
|
|
|
|
3.36
|
%
|
|
|
N/A
|
|
|
|
3.28
|
%
|
|
|
N/A
|
|
|
|
3.21
|
%
|
Expected return on plan assets
|
|
|
5.00
|
%
|
|
|
4.45
|
%
|
|
|
6.00
|
%
|
|
|
4.61
|
%
|
|
|
6.00
|
%
|
|
|
4.66
|
%
|
The pension plan discount rate assumptions are evaluated annually in consultation with our outside actuarial advisers. Long-term interest rates on high quality corporate debt instruments are used to determine the discount rate. For our largest plans, discount rates are developed using a discounted bond portfolio analysis, with appropriate consideration given to defined benefit payment terms and duration of the liabilities. In the above table, the discount rate used to determine U.S. pension obligations at the end of 2018 does not consider the terminated plan which had an implied discount rate of 3.46%.
For pension and other postretirement benefit plans that utilize a full yield curve approach to estimate the interest and service components of net periodic benefit cost, we apply the specific spot rates along the yield curve used in the most recent remeasurement of the benefit obligation to the relevant projected cash flows. We believe this method improves the correlation between the projected cash flows and the corresponding interest rates and provides a more precise measurement of interest and service costs. Since the remeasurement of total benefit obligations is not affected, the resulting reduction in periodic benefit cost is offset by an increase in the actuarial loss.
The expected rate of return on plan assets was selected on the basis of our long-term view of return and risk assumptions for major asset classes. We define long-term as forecasts that span at least the next ten years. Our long-term outlook is influenced by a combination of return expectations by individual asset class, actual historical experience and our diversified investment strategy. We consult with and consider the opinions of financial professionals in developing appropriate capital market assumptions. Return projections are also validated using a simulation model that incorporates yield curves, credit spreads and risk premiums to project long-term prospective returns. The appropriateness of the expected rate of return is assessed on an annual basis and revised if necessary. We have a high percentage of total assets in fixed income securities since the benefit accruals are frozen for all of our U.S. pension plans. Based on this assessment, we have selected a 3.50% expected return on asset assumption for 2021 for our U.S. plans.
The significant weighted-average assumptions used in the measurement of OPEB obligations at December 31 of each year and the net periodic benefit cost for each year are as follows:
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
Non-U.S.
|
|
OPEB benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
2.67
|
%
|
|
|
2.55
|
%
|
|
|
3.37
|
%
|
|
|
3.10
|
%
|
|
|
3.71
|
%
|
Net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
3.19
|
%
|
|
|
3.15
|
%
|
|
|
4.08
|
%
|
|
|
3.76
|
%
|
|
|
3.42
|
%
|
Initial health care cost trend rate
|
|
|
N/A
|
|
|
|
4.64
|
%
|
|
|
N/A
|
|
|
|
4.22
|
%
|
|
|
4.12
|
%
|
Ultimate health care cost trend rate
|
|
|
N/A
|
|
|
|
5.13
|
%
|
|
|
N/A
|
|
|
|
4.93
|
%
|
|
|
5.10
|
%
|
Year ultimate reached
|
|
|
N/A
|
|
|
|
2023
|
|
|
|
N/A
|
|
|
|
2023
|
|
|
|
2023
|
|
The discount rate selection process was similar to the process used for the pension plans. Assumed health care cost trend rates have a significant effect on the health care obligation. To determine the trend rates, consideration is given to the plan design, recent experience and health care economics.
Estimated future benefit payments and contributions — Expected benefit payments by our pension and OPEB plans for each of the next five years and for the following five-year period are as follows:
|
|
|
Pension Benefits
|
|
|
OPEB
|
|
Year
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
2021
|
|
|
$
|
51
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
5
|
|
2022
|
|
|
|
51
|
|
|
|
16
|
|
|
|
|
|
|
|
5
|
|
2023
|
|
|
|
50
|
|
|
|
16
|
|
|
|
|
|
|
|
5
|
|
2024
|
|
|
|
50
|
|
|
|
20
|
|
|
|
|
|
|
|
5
|
|
2025
|
|
|
|
49
|
|
|
|
17
|
|
|
|
|
|
|
|
5
|
|
2026 to 2030
|
|
|
|
229
|
|
|
|
109
|
|
|
|
1
|
|
|
|
24
|
|
Total
|
|
|
$
|
480
|
|
|
$
|
195
|
|
|
$
|
1
|
|
|
$
|
49
|
|
Pension benefits are funded through deposits with trustees that satisfy, at a minimum, the applicable funding regulations. OPEB benefits are funded as they become due. There are no projected contributions to be made during 2021 for our U.S. plans and projected contributions of $16 for our non-U.S plans.
Multi-employer pension plans — We participate in the Steelworkers Pension Trust (SPT) multi-employer pension plan which provides pension benefits to certain of our U.S. employees represented by the United Steelworkers and United Automobile Workers unions. Contributions are made in accordance with our collective bargaining agreements and rates are generally based on hours worked. The collective bargaining agreements expire August 18, 2021. The trustees of the SPT have provided us with the latest data available for the plan year ended December 31, 2020. As of that date, the plan is not fully funded. We could be held liable to the plan for our obligations as well as those of other employers as a result of our participation in the plan.
Contribution rates could increase if the plan is required to adopt a funding improvement plan or a rehabilitation plan, if the performance of plan assets does not meet expectations or as a result of future collectively bargained wage and benefit agreements. If we choose to stop participating in the plan, we may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
The Pension Protection Act (PPA) defines a zone status for each plan. Plans in the green zone are at least 80% funded, plans in the yellow zone are at least 65% funded and plans in the red zone are generally less than 65% funded. The SPT plan has utilized extended amortization provisions to amortize its losses from 2008. The plan recertified its zone status after using the extended amortization provisions as allowed by law. The SPT plan has not implemented a funding improvement or rehabilitation plan, nor are such plans pending. Our contributions to the SPT exceeded 5% of the total contributions to the plan.
|
|
Employer
|
|
PPA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identification
|
|
Zone Status
|
|
Funding Plan
|
|
Contributions by Dana
|
|
|
Pension
|
|
Number/
|
|
|
|
|
|
Pending/
|
|
|
|
|
|
|
|
|
|
|
|
|
Surcharge
|
Fund
|
|
Plan Number
|
|
2020
|
|
2019
|
|
Implemented
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Imposed
|
SPT
|
|
23-6648508 / 499
|
|
Green
|
|
Green
|
|
No
|
|
$
|
14
|
|
|
$
|
13
|
|
|
$
|
12
|
|
No
|
Note 13. Marketable Securities
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains (Losses)
|
|
|
Value
|
|
|
Cost
|
|
|
Gains (Losses)
|
|
|
Value
|
|
Certificates of deposit - Current marketable securities
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
19
|
|
Corporate securities - Noncurrent marketable securities
|
|
$
|
16
|
|
|
$
|
33
|
|
|
$
|
49
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposit maturing in one year or less total $21 at December 31, 2020.
We held $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 resulted 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 is 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 14. Financing Agreements
Long-term debt at December 31 —
|
|
Interest Rate
|
|
|
2020
|
|
|
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 A Facility
|
|
|
|
|
|
|
|
|
|
474
|
|
Term B Facility
|
|
|
|
|
|
349
|
|
|
|
349
|
|
Other indebtedness
|
|
|
|
|
|
106
|
|
|
|
61
|
|
Debt issuance costs
|
|
|
|
|
|
(27
|
)
|
|
|
(28
|
)
|
|
|
|
|
|
|
2,428
|
|
|
|
2,356
|
|
Less: Current portion of long-term debt
|
|
|
|
|
|
8
|
|
|
|
20
|
|
Long-term debt, less debt issuance costs
|
|
|
|
|
$
|
2,420
|
|
|
$
|
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 15 for additional information.
|
Interest on the senior notes is payable semi-annually and interest on the Term B Facility 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 15 for additional information on the terminated interest rate swap.
Scheduled principal payments on long-term debt, excluding finance leases at December 31, 2020 —
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
Maturities
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
5
|
|
|
$
|
453
|
|
|
$
|
404
|
|
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.
In November 2019, we completed the sale of $300 in senior unsecured notes ( 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 May 15, 2020. The November 2027 Notes will mature on November 15, 2027. Net proceeds of the offering totaled $296. Financing costs of $4 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 redeem our September 2023 Notes. On November 22, 2019, we redeemed $162 of our September 2023 Notes pursuant to a tender offer at a weighted average price equal to 102.250% plus accrued and unpaid interest. On November 26, 2019, we called the remaining $138 of our September 2023 Notes at a price equal to 102.000% plus accrued and unpaid interest. The $9 loss on extinguishment of debt recorded in November 2019 includes the redemption premiums and transaction costs associated with the tender offer and the call and the write-off of $2 of previously deferred financing costs associated with the September 2023 Notes.
Senior notes redemption provisions — 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
|
%
|
Prior to June 1, 2021, we may redeem some or all of the June 2026 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 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. 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. On August 30, 2019, we borrowed $100 on the Revolving Facility and paid down a similar amount of the Term B Facility. We are no longer required to make quarterly installments on the Term B Facility. On December 31, 2020, we fully paid down the Term A Facility. We wrote off $3 of previously deferred financing costs associated with the Term A Facility. We may prepay some or all of the amounts under the Term B Facility without penalty. Deferred financing costs on our Revolving Facility are included in other noncurrent assets. The Revolving Facility matures on August 17, 2024 and the Term B Facility matures on February 28, 2026.
The Term B Facility 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 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 and guaranty 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 B Facility at the Eurodollar Rate. The interest rate on the Term B Facility was 2.397%, inclusive of the applicable margins, as of December 31, 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 December 31, 2020, we had no outstanding borrowings under the Revolving Facility and had utilized $21 for letters of credit. We had availability at December 31, 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 December 31, 2020, we were in compliance with the covenants of our financing agreements. Under the Term B Facility, 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 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 2.00 to 1.00.
Note 15. 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
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Certificates of deposit
|
|
Marketable securities
|
|
2
|
|
|
$
|
21
|
|
|
$
|
19
|
|
Available-for-sale securities
|
|
Other noncurrent assets
|
|
1
|
|
|
|
49
|
|
|
|
—
|
|
Currency forward contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
|
Accounts receivable - Other
|
|
2
|
|
|
|
15
|
|
|
|
14
|
|
Cash flow hedges
|
|
Other accrued liabilities
|
|
2
|
|
|
|
1
|
|
|
|
2
|
|
Undesignated
|
|
Accounts receivable - Other
|
|
2
|
|
|
|
2
|
|
|
|
1
|
|
Undesignated
|
|
Other accrued liabilities
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
Interest rate collars
|
|
Other accrued liabilities
|
|
2
|
|
|
|
7
|
|
|
|
3
|
|
Currency swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
|
Other noncurrent liabilities
|
|
2
|
|
|
|
128
|
|
|
|
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:
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Fair Value Level
|
|
|
Value
|
|
|
Value
|
|
|
Value
|
|
|
Value
|
|
Long term debt
|
|
2
|
|
|
$
|
2,376
|
|
|
$
|
2,475
|
|
|
$
|
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 December 31, 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 December 31, 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 year ended December 31, 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 December 31, 2020:
Underlying Financial Instrument
|
|
|
Derivative Financial Instrument
|
|
Description
|
|
Type
|
|
Face Amount
|
|
|
Rate
|
|
|
Designated Notional Amount
|
|
|
Traded Amount
|
|
|
Inflow Rate
|
|
|
Outflow Rate
|
|
April 2025 Notes
|
|
Payable
|
|
|
$ 400
|
|
|
|
5.75%
|
|
|
|
$ 400
|
|
|
|
€ 371
|
|
|
|
5.75%
|
|
|
|
3.85%
|
|
June 2026 Notes
|
|
Payable
|
|
|
$ 375
|
|
|
|
6.50%
|
|
|
|
$ 375
|
|
|
|
€ 338
|
|
|
|
6.50%
|
|
|
|
5.14%
|
|
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 14 for additional information about the April 2025 Notes and the June 2026 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 $386 at December 31, 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 $1,118 at December 31, 2020 and $1,090 at December 31, 2019.
The following currency derivatives were outstanding at December 31, 2020:
|
|
|
|
Notional Amount (U.S. Dollar Equivalent)
|
|
|
Functional Currency
|
|
Traded Currency
|
|
Designated
|
|
|
Undesignated
|
|
|
Total
|
|
Maturity
|
U.S. dollar
|
|
Canadian dollar, Mexican peso
|
|
$
|
84
|
|
|
$
|
45
|
|
|
$
|
129
|
|
Aug-2021
|
Euro
|
|
U.S. dollar, Australian dollar, Swiss franc, Chinese renminbi, Hungarian forint, Indian rupee, Japanese yen, Mexican peso, Singapore dollar
|
|
|
72
|
|
|
|
4
|
|
|
|
76
|
|
Jan-2024
|
British pound
|
|
U.S. dollar, euro
|
|
|
1
|
|
|
|
5
|
|
|
|
6
|
|
Apr-2021
|
South African rand
|
|
U.S. dollar, euro
|
|
|
|
|
|
|
7
|
|
|
|
7
|
|
Jan-2021
|
Thai baht
|
|
U.S. dollar, euro
|
|
|
6
|
|
|
|
31
|
|
|
|
37
|
|
Dec-2021
|
Canadian dollar
|
|
U.S. dollar
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
Aug-2021
|
Brazilian real
|
|
U.S. dollar, euro
|
|
|
29
|
|
|
|
10
|
|
|
|
39
|
|
Sep-2021
|
Indian rupee
|
|
U.S. dollar, euro, British pound
|
|
|
|
|
|
|
81
|
|
|
|
81
|
|
Jan-2022
|
Chinese renminbi
|
|
Canadian dollar, euro
|
|
|
|
|
|
|
6
|
|
|
|
6
|
|
Jan-2021
|
Total forward contracts
|
|
|
|
|
197
|
|
|
|
189
|
|
|
|
386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar
|
|
euro
|
|
|
343
|
|
|
|
|
|
|
|
343
|
|
Nov-2027
|
Euro
|
|
U.S. dollar
|
|
|
775
|
|
|
|
|
|
|
|
775
|
|
Jun-2026
|
Total currency swaps
|
|
|
|
|
1,118
|
|
|
|
—
|
|
|
|
1,118
|
|
|
Total currency derivatives
|
|
|
|
$
|
1,315
|
|
|
$
|
189
|
|
|
$
|
1,504
|
|
|
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
|
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
Gain (loss) expected to be reclassified into income in one year or less
|
|
Forward Contracts
|
|
$
|
9
|
|
|
$
|
6
|
|
|
$
|
9
|
|
Collar
|
|
|
(6
|
)
|
|
|
(3
|
)
|
|
|
|
|
Cross-Currency Swaps
|
|
|
3
|
|
|
|
(36
|
)
|
|
|
|
|
Total
|
|
$
|
6
|
|
|
$
|
(33
|
)
|
|
$
|
9
|
|
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:
|
|
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
|
|
$
|
7,106
|
|
|
$
|
6,485
|
|
|
$
|
22
|
|
(Gain) or loss on cash flow hedging relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
1
|
|
|
|
18
|
|
|
|
|
|
Cross-currency swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
|
|
|
|
|
|
|
|
99
|
|
|
|
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
|
|
$
|
8,620
|
|
|
$
|
7,489
|
|
|
$
|
(25
|
)
|
(Gain) or loss on cash flow hedging relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
Cross-currency swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
|
|
2018
|
|
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
|
|
$
|
8,143
|
|
|
$
|
6,986
|
|
|
$
|
(29
|
)
|
(Gain) or loss on cash flow hedging relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) loss reclassified from AOCI into income
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
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
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
Location of Gain or (Loss) Recognized in Income
|
Foreign currency forward contracts
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
Cost of sales
|
Foreign currency forward contracts
|
|
|
(6
|
)
|
|
|
(14
|
)
|
|
|
(5
|
)
|
|
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 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 16. Commitments and Contingencies
Product liabilities — Accrued product liability costs were $1 and $10 for product liability costs at December 31, 2020 and 2019. We had also recognized amounts recoverable from third parties of $11 and $13 at the respective dates. 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 and $13 at December 31, 2020 and 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 17. 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 —
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Balance, beginning of period
|
|
$
|
101
|
|
|
$
|
75
|
|
|
$
|
76
|
|
Amounts accrued for current period sales
|
|
|
35
|
|
|
|
35
|
|
|
|
37
|
|
Adjustments of prior estimates
|
|
|
1
|
|
|
|
2
|
|
|
|
(1
|
)
|
Settlements of warranty claims
|
|
|
(42
|
)
|
|
|
(35
|
)
|
|
|
(35
|
)
|
Acquisitions
|
|
|
|
|
|
|
24
|
|
|
|
|
|
Currency impact
|
|
|
3
|
|
|
|
|
|
|
|
(2
|
)
|
Balance, end of period
|
|
$
|
98
|
|
|
$
|
101
|
|
|
$
|
75
|
|
Note 18. Income Taxes
Income tax expense (benefit) —
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal and state
|
|
$
|
14
|
|
|
$
|
13
|
|
|
$
|
14
|
|
Non-U.S.
|
|
|
79
|
|
|
|
92
|
|
|
|
128
|
|
Total current
|
|
|
93
|
|
|
|
105
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal and state
|
|
|
(23
|
)
|
|
|
(104
|
)
|
|
|
(47
|
)
|
Non-U.S.
|
|
|
(12
|
)
|
|
|
(33
|
)
|
|
|
(17
|
)
|
Total deferred
|
|
|
(35
|
)
|
|
|
(137
|
)
|
|
|
(64
|
)
|
Total expense (benefit)
|
|
$
|
58
|
|
|
$
|
(32
|
)
|
|
$
|
78
|
|
We record interest and penalties related to uncertain tax positions as a component of income tax expense or benefit. Net interest expense for the periods presented herein is not significant.
Income before income taxes —
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
U.S. operations
|
|
$
|
(128
|
)
|
|
$
|
(166
|
)
|
|
$
|
26
|
|
Non-U.S. operations
|
|
|
115
|
|
|
|
337
|
|
|
|
468
|
|
Earnings before income taxes
|
|
$
|
(13
|
)
|
|
$
|
171
|
|
|
$
|
494
|
|
Income tax audits — We conduct business globally and, as a result, file income tax returns in multiple jurisdictions that are subject to examination by taxing authorities throughout the world. With few exceptions, we are no longer subject to U.S. federal, state and local or foreign income tax examinations for years before 2010.
We are currently under audit by U.S. and foreign authorities for certain taxation years. When the issues related to these periods are settled, the total amounts of unrecognized tax benefits for all open tax years may be modified. Audit outcomes and the timing of the audit settlements are subject to uncertainty and we cannot make an estimate of the impact on our financial position at this time.
U.S. tax reform legislation —Beginning in 2018, the Tax Cuts and Jobs Act ("Act") may trigger a taxable deemed dividend to the extent that the annual earnings of our foreign subsidiaries exceed a specified threshold, based on the value of tangible foreign operating assets. The deemed dividend, if any, from this global intangible low-taxed income (GILTI) may be offset by the use of other tax attributes in that year, and specifically, the GILTI rules may impact the amount of cash tax savings that net operating losses provide. The SEC staff has indicated that a company should make and disclose certain policy elections related to accounting for GILTI. As to whether we will recognize deferred taxes for basis differences expected to reverse as GILTI or account for the effect of GILTI as a period cost when incurred, we intend to account for the tax effect of GILTI as a period cost. As to the realizability of the tax benefit provided by net operating losses, we are electing to utilize the tax law ordering approach.
Effective tax rate reconciliation —
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
U.S. federal income tax rate
|
|
|
(3
|
)
|
|
|
21
|
|
|
|
36
|
|
|
|
21
|
|
|
|
103
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State & local income taxes, net of federal benefit
|
|
|
6
|
|
|
|
(46
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
6
|
|
|
|
1
|
|
Non-US income / expense
|
|
|
(5
|
)
|
|
|
39
|
|
|
|
25
|
|
|
|
15
|
|
|
|
23
|
|
|
|
5
|
|
Credits & tax incentives
|
|
|
(55
|
)
|
|
|
423
|
|
|
|
(62
|
)
|
|
|
(37
|
)
|
|
|
(87
|
)
|
|
|
(18
|
)
|
US foreign derived intangible income
|
|
|
(24
|
)
|
|
|
185
|
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
US tax & withholding tax on non-US earnings
|
|
|
20
|
|
|
|
(154
|
)
|
|
|
21
|
|
|
|
12
|
|
|
|
14
|
|
|
|
3
|
|
Intercompany sale of certain operating assets
|
|
|
27
|
|
|
|
(207
|
)
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
1
|
|
Settlement and return adjustments
|
|
|
3
|
|
|
|
(23
|
)
|
|
|
(19
|
)
|
|
|
(11
|
)
|
|
|
29
|
|
|
|
6
|
|
Enacted change in tax rates
|
|
|
(2
|
)
|
|
|
15
|
|
|
|
3
|
|
|
|
2
|
|
|
|
6
|
|
|
|
1
|
|
Pension settlement
|
|
|
|
|
|
|
|
|
|
|
73
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
Mexican non-deductible cost of goods sold
|
|
|
17
|
|
|
|
(130
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment
|
|
|
8
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous items
|
|
|
6
|
|
|
|
(46
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
—
|
|
Valuation allowance adjustments
|
|
|
60
|
|
|
|
(462
|
)
|
|
|
(102
|
)
|
|
|
(60
|
)
|
|
|
(22
|
)
|
|
|
(4
|
)
|
Effective income tax rate
|
|
|
58
|
|
|
|
(446
|
)
|
|
|
(32
|
)
|
|
|
(19
|
)
|
|
|
78
|
|
|
|
16
|
|
During 2020, we recognized tax expense of $60 for additional valuation allowances in foreign jurisdictions due to reduced income projections. We also recognized a benefit of $26 for the release of valuation allowance in Australia, based on recent history of profitability and increased income projections. For the year, we also recognized tax benefits of $37 related to tax actions that adjusted federal tax credits. A pre-tax goodwill impairment charge of $51 with an associated income tax benefit of $1 was recorded. In conjunction with the completion of the intercompany sale of certain assets to a non-U.S. affiliate, tax expense of $12 was recorded, including the corresponding foreign derived intangible income benefit.
During 2019, we recognized a benefit of $22 for the release of valuation allowance in a subsidiary in Brazil based on recent history of profitability and increased income projections. A pre-tax pension settlement charge of $259 was recorded, resulting in income tax expense of $11 and a valuation allowance release of $18. For the year, we also recognized benefits for the release of valuation allowance in the US of $34 based on increased income projections and $30 based on the development of a tax planning strategy related to federal tax credits. Partially offsetting this benefit in the US was $6 of expense related to a US state law change. During the second quarter of 2019, we also recorded tax benefits of $48 related to tax actions that adjusted federal tax credits.
During 2018, we recognized a benefit of $44 related to U.S. state law changes and the development and implementation of a tax planning strategy which adjusted federal tax credits, along with federal and state net operating losses and the associated valuation allowances. We also recognized benefits of $11 relating to the reversal of a provision for an uncertain tax position, $5 relating to the release of valuation allowances in the US based on improved income projections and $7 due to permanent reinvestment assertions. Partially offsetting these benefits was $5 of expense to settle outstanding tax matters in a foreign jurisdiction.
Foreign income repatriation — We continue to analyze and adjust the estimated impact of the non-U.S. income and withholding tax liabilities based on the amount and source of these earnings, as well as the expected means through which those earnings may be taxed. We recognized net expense of $6 in 2020, $3 in 2019 and a net benefit of $7 in 2018, related to future income taxes and non-U.S. withholding taxes on repatriations from operations that are not permanently reinvested. We also paid withholding taxes of $9, $10 and $11 during 2020, 2019 and 2018 related to the actual transfer of funds to the U.S. The unrecognized tax liability associated with the operations in which we are permanently reinvested is $5 at December 31, 2020.
The earnings of our certain non-U.S. subsidiaries may be repatriated to the U.S. in the form of repayments of intercompany borrowings. Certain of our international operations had intercompany loan obligations to the U.S. totaling $1,338 at the end of 2020. Included in this amount are intercompany loans and related interest accruals with an equivalent value of $21 which are denominated in a foreign currency and considered to be permanently invested.
Valuation allowance adjustments — We have recorded valuation allowances 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.
When evaluating the need for a valuation allowance we consider all components of comprehensive income, and we weigh the positive and negative evidence, putting greater reliance on objectively verifiable evidence than on projections of future profitability that are dependent on actions that have not occurred as of the assessment date. We also consider changes to the historical financial results due to activities that were either new to the business or not expected to recur in the future, in order to identify the core earnings of the business. A sustained period of profitability, after considering changes to the historical results due to implemented actions and nonrecurring events, along with positive expectations for future profitability are necessary to reach a determination that a valuation allowance should be released. In 2020, we recognized a benefit of $26 for the release of valuation allowance in a subsidiary in Australia based on recent history of profitability and increased 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 recent history of profitability and increased income projections.
Deferred tax assets and liabilities — Temporary differences and carryforwards give rise to the following deferred tax assets and liabilities.
|
|
2020
|
|
|
2019
|
|
Net operating loss carryforwards
|
|
$
|
240
|
|
|
$
|
258
|
|
Postretirement benefits, including pensions
|
|
|
92
|
|
|
|
87
|
|
Research and development costs
|
|
|
149
|
|
|
|
124
|
|
Expense accruals
|
|
|
76
|
|
|
|
81
|
|
Other tax credits recoverable
|
|
|
234
|
|
|
|
244
|
|
Capital loss carryforwards
|
|
|
47
|
|
|
|
42
|
|
Inventory reserves
|
|
|
25
|
|
|
|
19
|
|
Postemployment and other benefits
|
|
|
5
|
|
|
|
6
|
|
Intangibles
|
|
|
17
|
|
|
|
|
|
Leasing activities
|
|
|
43
|
|
|
|
46
|
|
Total
|
|
|
928
|
|
|
|
907
|
|
Valuation allowances
|
|
|
(259
|
)
|
|
|
(190
|
)
|
Deferred tax assets
|
|
|
669
|
|
|
|
717
|
|
|
|
|
|
|
|
|
|
|
Unremitted earnings
|
|
|
(10
|
)
|
|
|
(4
|
)
|
Intangibles
|
|
|
|
|
|
|
(34
|
)
|
Depreciation
|
|
|
(87
|
)
|
|
|
(104
|
)
|
Other
|
|
|
|
|
|
|
(33
|
)
|
Deferred tax liabilities
|
|
|
(97
|
)
|
|
|
(175
|
)
|
Net deferred tax assets
|
|
$
|
572
|
|
|
$
|
542
|
|
Carryforwards — Our deferred tax assets include benefits expected from the utilization of net operating loss (NOL), capital loss and credit carryforwards in the future. The following table identifies the net operating loss deferred tax asset components and the related allowances that existed at December 31, 2020. Due to time limitations on the ability to realize the benefit of the carryforwards, additional portions of these deferred tax assets may become unrealizable in the future.
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
Earliest
|
|
|
|
Tax
|
|
|
Valuation
|
|
|
Carryforward
|
|
|
Year of
|
|
|
|
Asset
|
|
|
Allowance
|
|
|
Period
|
|
|
Expiration
|
|
Net operating losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
40
|
|
|
$
|
—
|
|
|
20
|
|
|
2030
|
|
U.S. state
|
|
|
61
|
|
|
|
(33
|
)
|
|
Various
|
|
|
2021
|
|
Brazil
|
|
|
14
|
|
|
|
(5
|
)
|
|
Unlimited
|
|
|
|
|
France
|
|
|
8
|
|
|
|
|
|
|
Unlimited
|
|
|
|
|
Australia
|
|
|
26
|
|
|
|
|
|
|
Unlimited
|
|
|
|
|
Italy
|
|
|
31
|
|
|
|
(27
|
)
|
|
Unlimited
|
|
|
|
|
Germany
|
|
|
6
|
|
|
|
(6
|
)
|
|
Unlimited
|
|
|
|
|
Lithuania
|
|
|
1
|
|
|
|
|
|
|
Unlimited
|
|
|
|
|
South Africa
|
|
|
2
|
|
|
|
|
|
|
Unlimited
|
|
|
|
|
Spain
|
|
|
1
|
|
|
|
|
|
|
Unlimited
|
|
|
|
|
U.K.
|
|
|
7
|
|
|
|
(7
|
)
|
|
Unlimited
|
|
|
|
|
Canada
|
|
|
28
|
|
|
|
(25
|
)
|
|
20
|
|
|
2022
|
|
India
|
|
|
1
|
|
|
|
|
|
|
8
|
|
|
2028
|
|
China
|
|
|
14
|
|
|
|
(14
|
)
|
|
5
|
|
|
2021
|
|
Total
|
|
$
|
240
|
|
|
$
|
(117
|
)
|
|
|
|
|
|
|
In addition to the NOL carryforwards listed in the table above, we have deferred tax assets related to capital loss carryforwards of $47 which are fully offset with valuation allowances at December 31, 2020. We also have deferred tax assets of $234 related to other credit carryforwards which are partially offset with $19 of valuation allowances at December 31, 2020. The capital losses can be carried forward indefinitely while the other credits are generally available for 10 to 20 years.
The use of our $190 U.S. federal NOL as of December 31, 2020 is subject to limitation due to the change in ownership of our stock in January 2008. Generally, the application of the relevant Internal Revenue Code (IRC) provisions will release the limitation on $84 of pre-change NOLs each year, allowing pre-change losses to offset post-change taxable income. However, there can be no assurance that trading in our shares will not affect another change in ownership under the IRC which could further limit our ability to utilize our available NOLs.
Unrecognized tax benefits — Unrecognized tax benefits are the difference between a tax position taken, or expected to be taken, in a tax return and the benefit recognized for accounting purposes. Interest income or expense, as well as penalties relating to income tax audit adjustments and settlements, are recognized as components of income tax expense or benefit. Interest of $6 and $12 was accrued on the uncertain tax positions at December 31, 2020 and 2019.
Reconciliation of gross unrecognized tax benefits —
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Balance, beginning of period
|
|
$
|
119
|
|
|
$
|
107
|
|
|
$
|
119
|
|
Decrease related to expiration of statute of limitations
|
|
|
(5
|
)
|
|
|
(10
|
)
|
|
|
(4
|
)
|
Decrease related to prior years tax positions
|
|
|
(1
|
)
|
|
|
|
|
|
|
(15
|
)
|
Increase related to prior years tax positions
|
|
|
3
|
|
|
|
13
|
|
|
|
8
|
|
Increase related to current year tax positions
|
|
|
9
|
|
|
|
9
|
|
|
|
10
|
|
Decrease related to settlements
|
|
|
(21
|
)
|
|
|
|
|
|
|
(11
|
)
|
Balance, end of period
|
|
$
|
104
|
|
|
$
|
119
|
|
|
$
|
107
|
|
We anticipate that the change in our gross unrecognized tax benefits will not be significant in the next twelve months as a result of examinations in various jurisdictions. The settlement of these matters will not impact the effective tax rate. Gross unrecognized tax benefits of $68 would impact the effective tax rate if recognized. If other open matters are settled with the IRS or other taxing jurisdictions, the total amounts of unrecognized tax benefits for open tax years may be modified.
Note 19. Other Income (Expense), Net
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Non-service cost components of pension and OPEB costs
|
|
$
|
(10
|
)
|
|
$
|
(23
|
)
|
|
$
|
(15
|
)
|
Government grants and incentives
|
|
|
14
|
|
|
|
15
|
|
|
|
12
|
|
Foreign exchange gain (loss)
|
|
|
8
|
|
|
|
(11
|
)
|
|
|
(12
|
)
|
Strategic transaction expenses, net of transaction breakup fee income
|
|
|
(20
|
)
|
|
|
(41
|
)
|
|
|
(18
|
)
|
Gain on investment in Hyliion
|
|
|
33
|
|
|
|
|
|
|
|
|
|
Non-income tax legal judgment
|
|
|
|
|
|
|
6
|
|
|
|
|
|
Gain on liquidation of foreign subsidiary
|
|
|
|
|
|
|
12
|
|
|
|
|
|
Other, net
|
|
|
(3
|
)
|
|
|
17
|
|
|
|
4
|
|
Other income (expense), net
|
|
$
|
22
|
|
|
$
|
(25
|
)
|
|
$
|
(29
|
)
|
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.
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 acquisition of ODS and Nordresa and certain other strategic initiatives. Strategic transaction expenses in 2019 were primarily attributable to the acquisition of ODS. Strategic transaction expenses in 2018 were primarily attributable to our bid to acquire the driveline business of GKN plc., our acquisition of an ownership interest in TM4, our pending acquisition of the ODS and integration costs associated with our acquisitions of BFP and BPT, and were partially offset by a $40 transaction breakup fee associated with the GKN plc. transaction. See Note 2 for additional information.
We held $16 of convertible notes receivable from our investment in Hyliion Inc. On October 1, 2020, Hyliion Inc. completed its merger with Tortoise Acquisition Corp. The business combination resulted in the combined company being renamed Hyliion Holdings Corp. (Hyliion), 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.
During the first quarter of 2019, we won a legal judgment regarding the methodology used to calculate PIS/COFINS tax on imports into Brazil.
During the fourth quarter of 2019, we liquidated a foreign subsidiary. The resulting non-cash gain is attributable to the recognition of accumulated currency translation adjustments.
Note 20. 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.
We continually seek new business opportunities and at times provide incentives to our customers for new program awards. We evaluate the underlying economics of each payment made to our customers to determine the proper accounting by understanding the nature of the payment, the rights and obligations in the contract, and other relevant facts and circumstances. Upfront payments to our customers are capitalized if we determine that the payments are incremental and incurred only if the new business is obtained and we expect to recover these amounts from the customer over the term of the new business program. We recognize a reduction to revenue as products that the upfront payments are related to are transferred to the customer, based on the total amount of products expected to be sold over the term of the program. We evaluate the amounts capitalized each period for recoverability and expense any amounts that are no longer expected to be recovered. We had $8 and $5 recorded in other current assets and $45 and $37 recorded in other noncurrent assets at December 31, 2020 and December 31, 2019.
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 17 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 December 31, 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:
2020
|
|
Light Vehicle
|
|
|
Commercial Vehicle
|
|
|
Off-Highway
|
|
|
Power Technologies
|
|
|
Total
|
|
North America
|
|
$
|
2,228
|
|
|
$
|
693
|
|
|
$
|
252
|
|
|
$
|
429
|
|
|
$
|
3,602
|
|
Europe
|
|
|
346
|
|
|
|
192
|
|
|
|
1,260
|
|
|
|
411
|
|
|
|
2,209
|
|
South America
|
|
|
108
|
|
|
|
200
|
|
|
|
32
|
|
|
|
18
|
|
|
|
358
|
|
Asia Pacific
|
|
|
356
|
|
|
|
96
|
|
|
|
426
|
|
|
|
59
|
|
|
|
937
|
|
Total
|
|
$
|
3,038
|
|
|
$
|
1,181
|
|
|
$
|
1,970
|
|
|
$
|
917
|
|
|
$
|
7,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
2,679
|
|
|
$
|
948
|
|
|
$
|
317
|
|
|
$
|
529
|
|
|
$
|
4,473
|
|
Europe
|
|
|
325
|
|
|
|
233
|
|
|
|
1,617
|
|
|
|
431
|
|
|
|
2,606
|
|
South America
|
|
|
137
|
|
|
|
312
|
|
|
|
40
|
|
|
|
20
|
|
|
|
509
|
|
Asia Pacific
|
|
|
468
|
|
|
|
118
|
|
|
|
386
|
|
|
|
60
|
|
|
|
1,032
|
|
Total
|
|
$
|
3,609
|
|
|
$
|
1,611
|
|
|
$
|
2,360
|
|
|
$
|
1,040
|
|
|
$
|
8,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
2,477
|
|
|
$
|
908
|
|
|
$
|
141
|
|
|
$
|
580
|
|
|
$
|
4,106
|
|
Europe
|
|
|
347
|
|
|
|
271
|
|
|
|
1,423
|
|
|
|
443
|
|
|
|
2,484
|
|
South America
|
|
|
186
|
|
|
|
308
|
|
|
|
34
|
|
|
|
18
|
|
|
|
546
|
|
Asia Pacific
|
|
|
565
|
|
|
|
125
|
|
|
|
246
|
|
|
|
71
|
|
|
|
1,007
|
|
Total
|
|
$
|
3,575
|
|
|
$
|
1,612
|
|
|
$
|
1,844
|
|
|
$
|
1,112
|
|
|
$
|
8,143
|
|
Note 21. Segments, Geographical Area and Major Customer Information
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 —
|
|
|
|
|
|
Inter-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
|
Segment
|
|
|
Segment
|
|
|
Capital
|
|
|
|
|
|
|
Net
|
|
2020
|
|
Sales
|
|
|
Sales
|
|
|
EBITDA
|
|
|
Spend
|
|
|
Depreciation
|
|
|
Assets
|
|
Light Vehicle
|
|
$
|
3,038
|
|
|
$
|
104
|
|
|
$
|
239
|
|
|
$
|
131
|
|
|
$
|
167
|
|
|
$
|
1,432
|
|
Commercial Vehicle
|
|
|
1,181
|
|
|
|
71
|
|
|
|
36
|
|
|
|
41
|
|
|
|
34
|
|
|
|
808
|
|
Off-Highway
|
|
|
1,970
|
|
|
|
44
|
|
|
|
234
|
|
|
|
67
|
|
|
|
91
|
|
|
|
1,348
|
|
Power Technologies
|
|
|
917
|
|
|
|
19
|
|
|
|
94
|
|
|
|
38
|
|
|
|
32
|
|
|
|
360
|
|
Eliminations and other
|
|
|
|
|
|
|
(238
|
)
|
|
|
|
|
|
|
49
|
|
|
|
21
|
|
|
|
146
|
|
Total
|
|
$
|
7,106
|
|
|
$
|
—
|
|
|
$
|
603
|
|
|
$
|
326
|
|
|
$
|
345
|
|
|
$
|
4,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Light Vehicle
|
|
$
|
3,609
|
|
|
$
|
124
|
|
|
$
|
438
|
|
|
$
|
179
|
|
|
$
|
149
|
|
|
$
|
1,369
|
|
Commercial Vehicle
|
|
|
1,611
|
|
|
|
100
|
|
|
|
138
|
|
|
|
52
|
|
|
|
37
|
|
|
|
897
|
|
Off-Highway
|
|
|
2,360
|
|
|
|
17
|
|
|
|
330
|
|
|
|
85
|
|
|
|
87
|
|
|
|
1,364
|
|
Power Technologies
|
|
|
1,040
|
|
|
|
23
|
|
|
|
117
|
|
|
|
46
|
|
|
|
30
|
|
|
|
367
|
|
Eliminations and other
|
|
|
|
|
|
|
(264
|
)
|
|
|
|
|
|
|
64
|
|
|
|
19
|
|
|
|
124
|
|
Total
|
|
$
|
8,620
|
|
|
$
|
—
|
|
|
$
|
1,023
|
|
|
$
|
426
|
|
|
$
|
322
|
|
|
$
|
4,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Light Vehicle
|
|
$
|
3,575
|
|
|
$
|
133
|
|
|
$
|
398
|
|
|
$
|
195
|
|
|
$
|
124
|
|
|
$
|
1,288
|
|
Commercial Vehicle
|
|
|
1,612
|
|
|
|
107
|
|
|
|
146
|
|
|
|
27
|
|
|
|
38
|
|
|
|
811
|
|
Off-Highway
|
|
|
1,844
|
|
|
|
12
|
|
|
|
285
|
|
|
|
36
|
|
|
|
43
|
|
|
|
707
|
|
Power Technologies
|
|
|
1,112
|
|
|
|
23
|
|
|
|
149
|
|
|
|
36
|
|
|
|
30
|
|
|
|
363
|
|
Eliminations and other
|
|
|
|
|
|
|
(275
|
)
|
|
|
|
|
|
|
31
|
|
|
|
25
|
|
|
|
29
|
|
Total
|
|
$
|
8,143
|
|
|
$
|
—
|
|
|
$
|
978
|
|
|
$
|
325
|
|
|
$
|
260
|
|
|
$
|
3,198
|
|
Net assets include accounts receivable, inventories, other current assets, goodwill, intangibles, investments in affiliates, other noncurrent assets, net property, plant and equipment, accounts payable and current accrued liabilities.
Reconciliation of segment EBITDA to consolidated net income —
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Segment EBITDA
|
|
$
|
603
|
|
|
$
|
1,023
|
|
|
$
|
978
|
|
Corporate expense and other items, net
|
|
|
(10
|
)
|
|
|
(4
|
)
|
|
|
(21
|
)
|
Depreciation
|
|
|
(345
|
)
|
|
|
(322
|
)
|
|
|
(260
|
)
|
Amortization
|
|
|
(20
|
)
|
|
|
(17
|
)
|
|
|
(10
|
)
|
Non-service cost components of pension and OPEB costs
|
|
|
(10
|
)
|
|
|
(23
|
)
|
|
|
(15
|
)
|
Restructuring charges, net
|
|
|
(34
|
)
|
|
|
(29
|
)
|
|
|
(25
|
)
|
Stock compensation expense
|
|
|
(14
|
)
|
|
|
(19
|
)
|
|
|
(16
|
)
|
Strategic transaction expenses, net of transaction breakup fee income
|
|
|
(20
|
)
|
|
|
(41
|
)
|
|
|
(18
|
)
|
Amounts attributable to previously divested/closed operations
|
|
|
(1
|
)
|
|
|
(5
|
)
|
|
|
|
|
Impairment of goodwill and indefinite-lived intangible asset
|
|
|
(51
|
)
|
|
|
(6
|
)
|
|
|
(20
|
)
|
Gain on investment in Hyliion
|
|
|
33
|
|
|
|
|
|
|
|
|
|
Acquisition related inventory adjustments
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
Non-income tax legal judgment
|
|
|
|
|
|
|
6
|
|
|
|
|
|
Pension settlement charges
|
|
|
|
|
|
|
(259
|
)
|
|
|
|
|
Gain on disposal group held for sale
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Gain on liquidation of foreign subsidiary
|
|
|
|
|
|
|
12
|
|
|
|
|
|
Other items
|
|
|
(7
|
)
|
|
|
(11
|
)
|
|
|
(17
|
)
|
Earnings before interest and income taxes
|
|
|
124
|
|
|
|
292
|
|
|
|
579
|
|
Loss on extinguishment of debt
|
|
|
(8
|
)
|
|
|
(9
|
)
|
|
|
|
|
Interest income
|
|
|
9
|
|
|
|
10
|
|
|
|
11
|
|
Interest expense
|
|
|
138
|
|
|
|
122
|
|
|
|
96
|
|
Earnings (loss) before income taxes
|
|
|
(13
|
)
|
|
|
171
|
|
|
|
494
|
|
Income tax expense (benefit)
|
|
|
58
|
|
|
|
(32
|
)
|
|
|
78
|
|
Equity in earnings of affiliates
|
|
|
20
|
|
|
|
30
|
|
|
|
24
|
|
Net income (loss)
|
|
$
|
(51
|
)
|
|
$
|
233
|
|
|
$
|
440
|
|
Reconciliation of segment net assets to consolidated total assets —
|
|
2020
|
|
|
2019
|
|
Segment net assets
|
|
$
|
4,094
|
|
|
$
|
4,121
|
|
Accounts payable and other current liabilities
|
|
|
1,863
|
|
|
|
1,769
|
|
Other current and long-term assets
|
|
|
1,419
|
|
|
|
1,330
|
|
Consolidated total assets
|
|
$
|
7,376
|
|
|
$
|
7,220
|
|
Geographic information — Of our 2020 consolidated net sales, the U.S., Italy, Germany and China account for 48%, 14%, 6% and 5%, respectively. No other country accounted for more than 5% of our consolidated net sales during 2020. Sales are attributed to the location of the product entity recording the sale. Long-lived assets represent property, plant and equipment.
|
|
Net Sales
|
|
|
Long-Lived Assets
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
3,404
|
|
|
$
|
4,069
|
|
|
$
|
3,613
|
|
|
$
|
957
|
|
|
$
|
972
|
|
|
$
|
860
|
|
Other North America
|
|
|
198
|
|
|
|
404
|
|
|
|
493
|
|
|
|
106
|
|
|
|
105
|
|
|
|
87
|
|
Total
|
|
|
3,602
|
|
|
|
4,473
|
|
|
|
4,106
|
|
|
|
1,063
|
|
|
|
1,077
|
|
|
|
947
|
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Italy
|
|
|
993
|
|
|
|
1,186
|
|
|
|
971
|
|
|
|
252
|
|
|
|
248
|
|
|
|
138
|
|
Germany
|
|
|
429
|
|
|
|
478
|
|
|
|
513
|
|
|
|
132
|
|
|
|
131
|
|
|
|
133
|
|
Other Europe
|
|
|
787
|
|
|
|
942
|
|
|
|
1,000
|
|
|
|
310
|
|
|
|
265
|
|
|
|
241
|
|
Total
|
|
|
2,209
|
|
|
|
2,606
|
|
|
|
2,484
|
|
|
|
694
|
|
|
|
644
|
|
|
|
512
|
|
South America
|
|
|
358
|
|
|
|
509
|
|
|
|
546
|
|
|
|
97
|
|
|
|
126
|
|
|
|
129
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China
|
|
|
379
|
|
|
|
321
|
|
|
|
311
|
|
|
|
111
|
|
|
|
106
|
|
|
|
91
|
|
Other Asia Pacific
|
|
|
558
|
|
|
|
711
|
|
|
|
696
|
|
|
|
286
|
|
|
|
312
|
|
|
|
171
|
|
Total
|
|
|
937
|
|
|
|
1,032
|
|
|
|
1,007
|
|
|
|
397
|
|
|
|
418
|
|
|
|
262
|
|
Total
|
|
$
|
7,106
|
|
|
$
|
8,620
|
|
|
$
|
8,143
|
|
|
$
|
2,251
|
|
|
$
|
2,265
|
|
|
$
|
1,850
|
|
Sales to major customers — Ford and FCA are the only individual customers to whom sales have exceeded 10% of our consolidated sales in each of the past three years. Sales to Ford were $1,436 (20%) in 2020, $1,753 (20%) in 2019 and $1,646 (20%) in 2018. Sales to FCA (via a directed supply relationship) exceeded the threshold in 2020 at $839 (12%), 2019 at $988 (11%) and 2018 at $911 (11%).
Note 22. Equity Affiliates
We have a number of investments in entities that engage in the manufacture and supply of vehicular parts (primarily axles, axle housing and driveshafts) and electronic control units.
Dividends received from equity affiliates were $27, $21 and $20 in 2020, 2019 and 2018.
Equity method investments exceeding $5 at December 31, 2020 —
|
|
Ownership Percentage
|
|
|
Investment
|
|
Dongfeng Dana Axle Co., Ltd. (DDAC)
|
|
50%
|
|
|
$
|
99
|
|
ROC-Spicer, Ltd.
|
|
50%
|
|
|
|
21
|
|
Pi Innovo Holdings Limited
|
|
49%
|
|
|
|
17
|
|
Axles India Limited
|
|
48%
|
|
|
|
8
|
|
All others as a group
|
|
|
|
|
|
5
|
|
Investments in equity affiliates
|
|
|
|
|
|
150
|
|
Investments in affiliates carried at cost
|
|
|
|
|
|
2
|
|
Investments in affiliates
|
|
|
|
|
$
|
152
|
|
On February 5, 2020, we acquired an additional ownership interest in Ashwoods. The additional interest, along with our existing ownership interest, provided us with a controlling financial interest in Ashwoods. As such, we ceased accounting for our investment in Ashwoods under the equity method. See Note 2 for additional information.
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 $50, consisting of $21 in cash, a note receivable of $25 and deferred proceeds of $4. 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%.
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 are accounting for our investment in Pi Innovo by applying the equity method.
On December 16, 2020, we sold a portion of our ownership interest in ROC-Spicer, Ltd. (ROC-Spicer) to China Motor Corporation (CMC), reducing our ownership interest in ROC-Spicer to 50%. In conjunction with the decrease in our ownership interest, the ROC-Spicer shareholders agreement was amended, eliminating our controlling financial interest in ROC-Spicer. Upon our loss of control, we recognized a $2 loss to other income (expense), net on the deconsolidation of ROC-Spicer. Of the $2 loss, $1 is related to the remeasurement of our retained investment in ROC-Spicer. The $21 fair value of our retained interest in ROC-Spicer was determined based on the share sale to CMC. Our retained investment in ROC-Spicer is being accounted for by applying the equity method.
Our equity method investment in ROC-Spicer is included in the net assets of our Light Vehicle operating segment. Our equity method investments in DDAC, Pi Innovo and Axles India Limited are included in the net assets of our Commercial Vehicle operating segment.
The carrying value of our equity method investments at December 31, 2020 was $17 more than our share of the affiliates’ book value, with our recent investment in Pi Innovo accounting for $16 of the basis difference. We are still in the process of completing the valuation of Pi Innovo’s assets and liabilities, but expect the $16 basis difference to be attributed to a combination of identified intangible assets and goodwill.
Dana Incorporated
Quarterly Results (Unaudited)
(In millions, except per share amounts)
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
2020
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
Net sales
|
|
$
|
1,926
|
|
|
$
|
1,078
|
|
|
$
|
1,994
|
|
|
$
|
2,108
|
|
Gross margin
|
|
$
|
206
|
|
|
$
|
(10
|
)
|
|
$
|
214
|
|
|
$
|
211
|
|
Net income (loss)
|
|
$
|
38
|
|
|
$
|
(173
|
)
|
|
$
|
45
|
|
|
$
|
39
|
|
Net income (loss) attributable to the parent company
|
|
$
|
58
|
|
|
$
|
(174
|
)
|
|
$
|
45
|
|
|
$
|
40
|
|
Net income (loss) per share available to parent company common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.40
|
|
|
$
|
(1.20
|
)
|
|
$
|
0.31
|
|
|
$
|
0.28
|
|
Diluted
|
|
$
|
0.40
|
|
|
$
|
(1.20
|
)
|
|
$
|
0.31
|
|
|
$
|
0.27
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
2019
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
Net sales
|
|
$
|
2,163
|
|
|
$
|
2,306
|
|
|
$
|
2,164
|
|
|
$
|
1,987
|
|
Gross margin
|
|
$
|
300
|
|
|
$
|
326
|
|
|
$
|
282
|
|
|
$
|
223
|
|
Net income
|
|
$
|
101
|
|
|
$
|
(66
|
)
|
|
$
|
112
|
|
|
$
|
86
|
|
Net income (loss) attributable to the parent company
|
|
$
|
98
|
|
|
$
|
(68
|
)
|
|
$
|
111
|
|
|
$
|
85
|
|
Net income (loss) per share available to parent company common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.68
|
|
|
$
|
(0.47
|
)
|
|
$
|
0.77
|
|
|
$
|
0.59
|
|
Diluted
|
|
$
|
0.68
|
|
|
$
|
(0.47
|
)
|
|
$
|
0.77
|
|
|
$
|
0.58
|
|
_________________________________________________________
Note: Gross margin is net sales less cost of sales.
During 2020, our quarterly results were significantly impacted by the global COVID-19 pandemic, with the impact being most severe during the second quarter. Net income for the first quarter of 2020 includes a $51 pre-tax goodwill impairment charge and $34 of net income tax benefits related to discrete items. Net loss for the second quarter includes a $5 pre-tax charge for the write-off of deferred financing costs and $56 of net income tax expense related to discrete items. Net income for the fourth quarter includes a $33 pre-tax gain on notes receivable conversion and subsequent adjustment of shares to fair value, a $3 pre-tax charge for the write-off of deferred financing costs and $14 of net income tax benefits related to discrete items.
Net income for the first quarter of 2019 includes $16 of net income tax benefits related to discrete items. Net loss for the second quarter of 2019 includes a $258 pre-tax pension settlement charge related to the termination of one of our U.S. defined benefit pension plans and $87 of net income tax benefits related to discrete items. Net income for the third quarter of 2019 includes $22 of income tax benefit related to a discrete item. Net income for the fourth quarter of 2019 includes a $6 pre-tax goodwill impairment charge and a $9 pre-tax loss on extinguishment of debt.