What changed in this filing

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Item 1. Financial Statements

2020-07-30 compared with 2020-04-30 · 425 added, 151 removed, 755 unchanged (43% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

$ 1,078  

$ 2,306  

$ 3,004  

$ 4,469  

Costs and expenses

4 unchanged sentences

Impairment of goodwill

Other income (expense), net

Earnings before interest and income taxes

( 51 )  

Pension settlement charge

( 258 )  

Other income (expense), net  

( 10 )  

Earnings (loss) before interest and income taxes

( 112 )  

( 95 )  

( 65 )  

Write-off deferred financing costs  

Interest income

Interest expense

Earnings before income taxes

Loss before income taxes

( 147 )  

( 126 )  

( 127 )  

Income tax expense (benefit)

( 52 )  

Equity in earnings of affiliates

Noncontrolling interests net income

Redeemable noncontrolling interests net loss

Net income attributable to the parent company

Net income per share available to common stockholders

Net income (loss)

( 173 )  

( 66 )  

( 135 )  

Noncontrolling interests net income  

Redeemable noncontrolling interests net income (loss)  

( 21 )  

Net income (loss) attributable to the parent company

$ ( 174 )  

$ ( 68 )  

$ ( 116 )  

Net income (loss) per share available to common stockholders

$ ( 1.20 )  

$ ( 0.47 )  

$ ( 0.80 )  

$ 0.21  

$ ( 1.20 )  

$ ( 0.47 )  

$ ( 0.80 )  

$ 0.21  

Weighted-average common shares outstanding

4 unchanged sentences

Three Months Ended

Six Months Ended

Net income (loss)

$ ( 173 )  

$ ( 66 )  

$ ( 135 )  

Other comprehensive income (loss), net of tax:

Currency translation adjustments

( 147 )  

Hedging gains and losses

1 unchanged sentence

Other comprehensive income (loss)

( 101 )  

Total comprehensive income (loss)

( 152 )  

( 236 )  

Comprehensive (income) loss attributable to noncontrolling interests

Comprehensive income attributable to redeemable noncontrolling interests

Comprehensive (income) loss attributable to redeemable noncontrolling interests

Comprehensive income (loss) attributable to the parent company

$ ( 158 )  

$ ( 211 )  

The accompanying notes are an integral part of the consolidated financial statements.

3 unchanged sentences

Current assets

Cash and cash equivalents

Marketable securities

Cash and cash equivalents  

Marketable securities  

Accounts receivable

Trade, less allowance for doubtful accounts of $7 in 2020 and $9 in 2019

Other current assets

Trade, less allowance for doubtful accounts of $ 7 in 2020 and $ 9 in 2019  

Inventories  

Other current assets  

Total current assets

Deferred tax assets

Other noncurrent assets

Investments in affiliates

Operating lease assets

Property, plant and equipment, net

Goodwill  

Intangibles  

Deferred tax assets  

Other noncurrent assets  

Investments in affiliates  

Operating lease assets  

Property, plant and equipment, net  

$ 6,908  

$ 7,220  

Liabilities and equity

Current liabilities

Short-term debt

Current portion of long-term debt

Accounts payable

Accrued payroll and employee benefits

Taxes on income

Current portion of operating lease liabilities

Other accrued liabilities

Short-term debt  

Current portion of long-term debt  

Accounts payable  

Accrued payroll and employee benefits  

Taxes on income  

Current portion of operating lease liabilities  

Other accrued liabilities  

Total current liabilities

Long-term debt, less debt issuance costs of $26 in 2020 and $28 in 2019

Noncurrent operating lease liabilities

Pension and postretirement obligations

Other noncurrent liabilities

Long-term debt, less debt issuance costs of $ 32 in 2020 and $ 28 in 2019  

Noncurrent operating lease liabilities  

Pension and postretirement obligations  

Other noncurrent liabilities  

Total liabilities

Commitments and contingencies (Note 13)

Redeemable noncontrolling interests

Parent company stockholders' equity

Preferred stock, 50,000,000 shares authorized, $0.01 par value, no shares outstanding

Common stock, 450,000,000 shares authorized, $0.01 par value, 144,480,975 and 143,942,539 shares outstanding

Additional paid-in capital

Retained earnings

Treasury stock, at cost ( 10,432,777 and 10,111,191 shares)

Accumulated other comprehensive loss

Preferred stock, 50,000,000 shares authorized, $ 0.01 par value, no shares outstanding  

Common stock, 450,000,000 shares authorized, $ 0.01 par value, 144,482,275 and 143,942,539 shares outstanding  

Additional paid-in capital  

Retained earnings  

Treasury stock, at cost ( 10,433,465 and 10,111,191 shares)  

( 156 )  

Accumulated other comprehensive loss  

( 1,082 )  

Total parent company stockholders' equity

Noncontrolling interests

Total liabilities and equity

$ 6,908  

$ 7,220  

The accompanying notes are an integral part of the consolidated financial statements.

2 unchanged sentences

(In millions)

Three Months Ended

Six Months Ended

Operating activities

Net income (loss)

Amortization of deferred financing charges

Write-off of deferred financing costs

Earnings of affiliates, net of dividends received

4 unchanged sentences

Change in working capital

Net cash used in operating activities

Net cash provided by (used in) operating activities

Investing activities

13 unchanged sentences

Contributions from noncontrolling interests

Payments to acquire noncontrolling interests

Repurchases of common stock

44 unchanged sentences

2019 Form 10 -K).

During the second quarter of 2020, we identified an error in the loss attributable to redeemable noncontrolling interests due to incorrectly excluding the share of the goodwill impairment charge related to the redeemable noncontrolling interests. Of the $ 48 million impairment charge recorded for the Commercial Vehicle reporting unit during the three months ended March 31, 2020 , $ 20 million should have been attributable to the redeemable noncontrolling interests.

We concluded that the error was not material to the financial statements for the quarter ended March 31, 2020 and therefore, amendment of the previously filed Quarterly Report on Form 10 -Q for the quarter ended March 31, 2020 is not required.

In accordance with ASC Topic 250, "Accounting Changes and Error Corrections," we have corrected the error in the prior period by revising the year-to-date consolidated financial statements appearing herein.

The first quarter of 2020 not presented herein will be revised, as applicable, in future filings. The following historical consolidated financial information includes both the consolidated financial information “as previously reported”

in our Quarterly Report on Form 10 -Q for the quarter ended March 31, 2020, as well as the consolidated financial information “as revised”

to reflect the correction of the error.

Three Months Ended March 31,

As Previously Reported  

(unaudited)  

Consolidated Statement of Operations  

Net income  

Noncontrolling interests net income

Redeemable noncontrolling interests net loss

( 20 )  

Net income attributable to the parent company

Net income per share available to common stockholders

$ 0.26  

$ 0.14  

$ 0.40  

$ 0.26  

$ 0.14  

$ 0.40  

Consolidated Statement of Comprehensive Income  

Total comprehensive loss  

$ ( 84 )  

Comprehensive loss attributable to noncontrolling interests  

Comprehensive (income) loss attributable to redeemable noncontrolling interests  

Comprehensive income (loss) attributable to the parent company  

$ ( 73 )  

Period Ended March 31,

As Previously Reported  

Consolidated Balance Sheet

Redeemable noncontrolling interests

$ ( 20 )  

Retained earnings

Recently adopted accounting pronouncements

3 unchanged sentences

The adoption resulted in a noncash cumulative effect adjustment to retained earnings on our opening consolidated balance sheet as of January 1, 2020. 

We also adopted the following standard during the first three months of 2020 , which did not have a material impact on our financial statements or financial statement disclosures:

We also adopted the following standard during the first six months of 2020 , which did not have a material impact on our financial statements or financial statement disclosures:

Effective Date

1 unchanged sentence

Goodwill and Other –

Internal-Use Software, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

January 1, 2020

2018 - 14  

Compensation –

2 unchanged sentences

General, Disclosure Framework –

Changes to the Disclosure Requirements for Defined Benefit Plans

January 1, 2020

2018 - 13  

Fair Value Measurement, Disclosure Framework –

Changes to the Disclosure Requirements for Fair Value Measurement

January 1, 2020

Recently issued accounting pronouncements

In March 2020, the FASB issued ASU 2020 - 04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This guidance is intended to provide temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The amendments in this ASU are elective and are effective upon issuance for all entities through December 31, 2022. 

We are currently assessing the impact of this guidance on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019 - 12, Income Taxes –

5 unchanged sentences

We are currently assessing the impact of this guidance on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020 - 04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

The amendments in this ASU are elective and are effective upon issuance for all entities through December 31, 2022. 

We are currently assessing the impact of this guidance on our consolidated financial statements.

Ashwoods Innovations Limited  —

19 unchanged sentences

See Note 7  for additional information.

See below for a discussion of Dana's acquisitions of PEPS and SME. On April 14, 2020 , Hydro-Québec acquired an indirect 45 % redeemable noncontrolling interest Ashwoods.

See below for a discussion of Dana's acquisitions of PEPS and SME. On April 14, 2020, Hydro-Québec acquired an indirect 45 % redeemable noncontrolling interest in Ashwoods.

We received $ 9 in cash at closing, inclusive of $ 2 in proceeds on a loan from Hydro-Québec.

8 unchanged sentences

We paid $ 50 at closing using cash on hand.

The purchase consideration and related provisional allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:

The purchase consideration and related allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:

Purchase consideration paid at closing

3 unchanged sentences

Accounts receivable - Trade

Intangibles  

Property, plant and equipment

1 unchanged sentence

Other accrued liabilities

Other noncurrent liabilities

Total purchase consideration allocation

The fair value of the assets acquired and liabilities assumed, as well as the fair value of our previously held equity method investment, are provisional and could be revised as a result of additional information obtained regarding indemnified matters and liabilities assumed and revisions of provisional estimates of fair values, including but not limited to, the completion of independent appraisals and valuations related to inventories, intangibles and property, plant and equipment.

Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is not deductible for tax purposes.

23 unchanged sentences

Investments in affiliates

Operating lease assets

Property, plant and equipment

2 unchanged sentences

Accrued payroll and employee benefits

Current portion of operating lease liabilities

Taxes on income

Current portion of operating lease liabilities  

Taxes on income  

Other accrued liabilities

1 unchanged sentence

Pension and postretirement obligations

Noncurrent operating lease liabilities

Other noncurrent liabilities

13 unchanged sentences

Three Months Ended

March 31, 2019

Six Months Ended

June 30, 2019

$ 2,306  

$ 4,614  

Net income (loss)

$ ( 59 )  

The unaudited pro forma results include adjustments primarily related to purchase accounting, interest expense related to the debt proceeds used in connection with the acquisition of ODS, and non-recurring strategic transaction expenses.

36 unchanged sentences

If the carrying value of the reporting unit exceeds its estimated fair value, a goodwill impairment charge is recorded for the difference, with the impairment loss limited to the total amount of goodwill allocated to that reporting unit.

Based on the results of our interim impairment tests, we concluded that carrying value exceeded fair value in our Commercial Vehicle and Light Vehicle reporting units and we recorded a goodwill impairment charge of $ 51 . Our testing for the Off-Highway reporting unit indicated that fair value slightly exceeded carrying value and, accordingly, no impairment charge was required.

 Our testing for the Off-Highway reporting unit indicated that fair value slightly exceeded carrying value and, accordingly, no impairment charge was required.

The reduction in fair values, and the corresponding impairment charges, were primarily driven by the negative effect of the COVID- 19 pandemic on each reporting unit’s near-term cash flows. The remaining balance of goodwill for the Commercial Vehicle and Off-Highway reporting units continues to be at risk for impairment.

8 unchanged sentences

Currency impact

Balance, March 31, 2020

Balance, June 30, 2020

Components of other intangible assets — 

March 31, 2020

June 30, 2020

December 31, 2019

13 unchanged sentences

The net carrying amounts of intangible assets, other than goodwill, attributable to each of our operating segments at 

March 31, 2020 were as follows:

June 30, 2020 were as follows:

Light Vehicle —

4 unchanged sentences

Three Months Ended

Six Months Ended

Charged to cost of sales

1 unchanged sentence

Total amortization

The following table provides the estimated aggregate pre-tax amortization expense related to intangible assets for each of the next five years based on March 31, 2020 exchange rates.

The following table provides the estimated aggregate pre-tax amortization expense related to intangible assets for each of the next five years based on June 30, 2020 exchange rates.

Actual amounts may differ from these estimates due to such factors as currency translation, customer turnover, impairments, additional intangible asset acquisitions and other events.

5 unchanged sentences

Restructuring expense includes costs associated with current and previously announced actions and is comprised of contractual and noncontractual separation costs and exit costs, including certain operating costs of facilities that we are in the process of closing.

Restructuring charges of $ 3  in the 

first quarter of 

2020  and $ 9 in the first quarter of 

2019 were comprised of severance and benefit costs related to integration of recent acquisitions, headcount reductions across our operations and exit costs related to previously announced actions.

Net restructuring charges of $ 16 and $ 9  in the 

second quarters of 

2020  and  

and $ 19 and $ 18 in the first half of 2020 and 2019 were comprised of severance and benefit costs related to integration of recent acquisitions, headcount reductions across our operations and exit costs related to previously announced actions.

Accrued restructuring costs and activity —

Employee Termination Benefits

Balance, March 31, 2020

Charges to restructuring

Adjustments of accruals

Cash payments

Balance, June 30, 2020

Balance, December 31, 2019

Charges to restructuring

Adjustments of accruals

Cash payments

Currency impact

Balance, March 31, 2020

At March 31, 2020 , the accrued employee termination benefits include costs to reduce approximately 200 employees to be completed over the next year.

Balance, June 30, 2020

At June 30, 2020 , the accrued employee termination benefits include costs to reduce approximately 400 employees to be completed over the next year.

Cost to complete —

The following table provides project-to-date and estimated future restructuring expenses for completion of our approved restructuring initiatives for our business segments at March 31, 2020 .

The following table provides project-to-date and estimated future restructuring expenses for completion of our approved restructuring initiatives for our business segments at June 30, 2020 .

Expense Recognized

3 unchanged sentences

Commercial Vehicle

Power Technologies  

The future cost to complete includes estimated separation costs, primarily those associated with one -time benefit programs, and exit costs through 2021, equipment transfers and other costs which are required to be recognized as closures are finalized or as incurred during the closure.

1 unchanged sentence

Inventory components at —

March 31, 2020

June 30, 2020

December 31, 2019

3 unchanged sentences

Cash, cash equivalents and restricted cash at —

March 31, 2020

June 30, 2020

December 31, 2019

March 31, 2019

June 30, 2019

December 31, 2018

9 unchanged sentences

On December 11, 2019 our Board of Directors approved an extension of our existing common stock share repurchase program through December 31, 2021.

Approximately $ 150 remained available for future share repurchases as of March 31, 2020 .

Approximately $ 150 remained available for future share repurchases as of June 30, 2020 .

Changes in equity —

Three Months Ended March 31,

Three Months Ended June 30,

Additional Paid-In Capital

3 unchanged sentences

Non-controlling Interests

Balance, March 31, 2020

Net income (loss)

Other comprehensive income

Distributions to noncontrolling interests

Purchase of noncontrolling interests

Stock compensation

Balance, June 30, 2020

Balance, March 31, 2019

Net income (loss)

Other comprehensive income

Common stock dividends

Distributions to noncontrolling interests

Increase from business combination

Stock compensation

Balance, June 30, 2019

Six Months Ended June 30,

Additional Paid-In Capital

Retained Earnings

Treasury Stock

Accumulated Other Comprehensive Loss

Non-controlling Interests

Balance, December 31, 2019

Adoption of ASU 2016-13 credit losses, January 1, 2020

Net income (loss)

Other comprehensive loss

1 unchanged sentence

Distributions to noncontrolling interests

Purchase of noncontrolling interests

Stock compensation

Stock withheld for employee taxes

Balance, March 31, 2020

Balance, June 30, 2020

Balance, December 31, 2018

7 unchanged sentences

Stock withheld for employee taxes

Balance, March 31, 2019

Balance, June 30, 2019

Changes in each component of accumulated other comprehensive income (AOCI) of the parent —

3 unchanged sentences

Accumulated Other Comprehensive Loss

Balance, March 31, 2020

Other comprehensive income (loss):

Currency translation adjustments

Holding gains and losses

Reclassification of amount to net income (a)

Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)

Other comprehensive income

Balance, June 30, 2020

Balance, March 31, 2019

Other comprehensive income (loss):

Currency translation adjustments

Holding gains and losses

Reclassification of amount to net income (a)

Net actuarial gains

Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)

Other comprehensive income

Balance, June 30, 2019

Parent Company Stockholders

Foreign Currency Translation

Defined Benefit Plans

Accumulated Other Comprehensive Loss

Balance, December 31, 2019

6 unchanged sentences

Other comprehensive income (loss)

Balance, March 31, 2020

Balance, June 30, 2020

Balance, December 31, 2018

3 unchanged sentences

Reclassification of amount to net income (a)

Net actuarial gains

Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)

Other comprehensive income

Balance, March 31, 2019

Balance, June 30, 2019

(a) Realized gains and losses from currency-related forward contracts associated with forecasted transactions or from other derivative instruments treated as cash flow hedges are reclassified from AOCI into the same line item in the consolidated statement of operations in which the underlying forecasted transaction or other hedged item is recorded.

4 unchanged sentences

On July 29, 2019, we broadened our relationship with Hydro-Québec, with Hydro-Québec acquiring an indirect 45 % redeemable noncontrolling interest in SME and an additional indirect 22.5 % redeemable noncontrolling interest in PEPS which resulted in recognition of additional redeemable noncontrolling interest of $ 64 .

The terms of the agreement provide Hydro-Québec with the right to put all, and not less than all, of its ownership interests in TM4, SME and PEPS to Dana at fair value any time after June 22, 2021.

April 14, 2020, Hydro-Québec acquired an indirect 45 % redeemable noncontrolling interest in Ashwoods which resulted in recognition of additional redeemable noncontrolling interest of $ 7 . The terms of the agreement provide Hydro-Québec with the right to put all, and not less than all, of its ownership interests in TM4, SME, PEPS and Ashwoods to Dana at fair value any time after June 22, 2021.

See Note 2 for additional information.

Redeemable noncontrolling interests reflected as of the balance sheet date are the greater of the redeemable noncontrolling interest balances adjusted for comprehensive income items and distributions or the redemption values.

Redeemable noncontrolling interest adjustments of redemption value are recorded in retained earnings.

Redeemable noncontrolling interest adjustments of redemption value are recorded in retained earnings. See Note 1 for additional information on the correction of the error in net income (loss) attributable to redeemable noncontrolling interests. 

Reconciliation of changes in redeemable noncontrolling interests —

Three Months Ended

Six Months Ended

Balance, beginning of period

Capital contribution from redeemable noncontrolling interest

Comprehensive income (loss) adjustments:

Net income (loss) attributable to redeemable noncontrolling interests

( 21 )  

Other comprehensive income (loss) attributable to redeemable noncontrolling interests

3 unchanged sentences

Three Months Ended

Net income available to common stockholders - Numerator basic and diluted

Six Months Ended

Net income (loss) available to common stockholders - Numerator basic and diluted

Weighted-average common shares outstanding - Basic

2 unchanged sentences

The share count for diluted earnings per share is computed on the basis of the weighted-average number of common shares outstanding plus the effects of dilutive common stock equivalents (CSEs) outstanding during the period.

We excluded 0.6 million and 0.4  million CSEs from the calculation of diluted earnings per share for the first quarters of 

We excluded 1.6 million and 0.3  million CSEs from the calculation of diluted earnings per share for the second quarters of 

2020 and 

2019  as the effect of including them would have been anti-dilutive.

2019  and excluded 1.2  million and 0.4 million of CSEs for the respective year-to-date periods as the effect of including them would have been anti-dilutive.

In addition, we excluded CSEs that satisfied the definition of potentially dilutive shares of 0.1 million and 0.8 million for the second quarters of 2020 and 2019 and excluded 0.4 million for the year-to-date 2020 period since there was no net income available to common stockholders for these periods.

Stock Compensation

7 unchanged sentences

We issued 0.5  million and 0.3  million shares of common stock based on the vesting of RSUs and PSUs during 2020 .

We recognized stock compensation expense of $ 4  and $ 5  during the 

first quarters of 

We recognized a stock compensation credit of $ 1  and expense of $ 5  during the 

second quarters of 

2020 and 

At March 31, 2020 , the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $ 39 .

2019  and expense of $ 3  and $ 10  during the respective year-to-date periods.

At June 30, 2020 , the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $ 24 .

This cost is expected to be recognized over a weighted-average period of 2.1  years.

3 unchanged sentences

Components of net periodic benefit cost — 

Three Months Ended March 31,

Three Months Ended June 30,

Interest cost

Expected return on plan assets

Settlement charge

Amortization of net actuarial loss

Net periodic benefit cost

Six Months Ended June 30,

Interest cost

Expected return on plan assets

Settlement charge

Amortization of net actuarial loss

Net periodic benefit cost (credit)

The service cost components of net periodic pension and OPEB costs are included in cost of sales and selling, general and administrative expenses as part of compensation cost and are eligible for capitalization in inventory and other assets.

15 unchanged sentences

Interest Rate

March 31, 2020

June 30, 2020

December 31, 2019

3 unchanged sentences

Senior Notes due November 15, 2027

Senior Notes due June 15, 2028 5.625 %  

Term Facility A

2 unchanged sentences

Debt issuance costs

( 32 )  

Current portion of long-term debt

Long-term debt, less debt issuance costs

$ 2,827  

$ 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 %.

4 unchanged sentences

See Note 2 for additional information on the note payable to SME and Note 12  for additional information on the terminated interest rate swap.

Senior notes activity —

In June 2020, we completed the sale of $ 400 in senior unsecured notes ( June 2028 Notes) at 5.625 %.

The June 2028 Notes rank equally with Dana's other unsecured senior notes.

Interest on the notes is payable on December 15 and June 15 of each year, beginning on December 15, 2020.

The June 2028 Notes will mature on June 15, 2028.

Net proceeds of the offering totaled $ 395 .

Financing costs of $ 5 were recorded as deferred costs and are being amortized to interest expense over the life of the notes.

The proceeds from the offering were used to pay down outstanding borrowings under our Revolving Facility and for general corporate purposes.

Also, we completed the sale of an additional $ 100 of November 2027 Notes at 5.375 %.

The November 2027 Notes rank equally with Dana’s other unsecured senior notes.

Interest on the notes is payable on May 15 and November 15 of each year, beginning on November 15, 2020.

The November 2027 Notes will mature on November 15, 2027.

Net proceeds of the offering totaled $ 99 .

Financing costs of $ 1 were recorded as deferred costs and are being amortized to interest expense over the life of the notes.

The proceeds from the offering were used for general corporate purposes.

We may redeem some or all of the senior notes at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest to the redemption date, if redeemed during the 12 -month period commencing on the anniversary date of the senior notes in the year set forth below:

Redemption Price

101.833 %  

104.313 %  

100.917 %  

102.875 %  

103.250 %  

100.000 %  

101.438 %  

102.167 %  

102.688 %  

100.000 %  

101.083 %  

101.344 %  

100.000 %  

At any time prior to November 15, 2022, we may redeem up to 35% of the aggregate principal amount of the November 2027 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 105.375 % of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that at least 50% of the original aggregate principal amount of the November 2027 Notes remains outstanding after the redemption.

Prior to November 15, 2022, we may redeem some or all of the November 2027 Notes at a redemption price of 100.000 % of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole”

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”

Credit agreement —

13 unchanged sentences

The Term B Facility matures on February 28, 2026.

On April 16, 2020, we amended certain provisions of our credit and guaranty agreement including gradually increasing the first lien net leverage ratio from a maximum of 2.00 to 1.00 to a maximum of 4.00 to 1.00 for the quarter ending December 31, 2020 and then, starting with the quarter ending December 31, 2021, decrease the ratio quarterly until it returns to its prior level of 2.00 to 1.00 for and after the quarter ending September 30, 2022, unless Dana, in its sole discretion, elects to return the first lien net leverage ratio to its prior level earlier than such date.

We also amended certain restrictive covenants to provide additional limitations until December 31, 2021, unless Dana, in its sole discretion, elects to return the first lien net leverage ratio to its prior level prior to December 31, 2021.

The Term Facilities and the Revolving Facility are guaranteed by all of our wholly-owned domestic subsidiaries subject to certain exceptions (the guarantors) and are secured by a first -priority lien on substantially all of the assets of Dana and the guarantors, subject to certain exceptions.

3 unchanged sentences

Less than or equal to 1.00:1.00

0.25 %  

Greater than 1.00:1.00 but less than or equal to 2.00:1.00

0.50 %  

Greater than 2.00:1.00

0.75 %  

The Term B Facility bears interest based on, at our option, the Base Rate plus 1.25 % or the Eurodollar rate plus 2.25 %.

We have elected to pay interest on our advances under the Term Facilities at the Eurodollar Rate.

The interest rate on the Term A Facility was 2.490 % and the Term B Facility w as 3.240 %, inclu sive of the applicable margins, as of March 31, 2020 .

The interest rate on the Term A Facility was 2.750 % and the Term B Facility was 2.430 %, inclusive of the applicable margins, as of June 30, 2020 .

Commitment fees are applied based on the average daily unused portion of the available amounts under the Revolving Facility as set forth below:

6 unchanged sentences

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.

March 31, 2020 , we had outstanding borrowings of $ 300 under the Revolving Facility and had utilized $ 21 for letters of credit.

Outstanding borrowings on the Revolving Facility are included in short-term debt. 

We had availability at March 31, 2020 under the Revolving Facility of $ 679 after deducting the outstanding borrowings and letters of credit.

Debt covenants —

At March 31, 2020 , we were in compliance with the covenants of our financing agreements.

Under the Term Facilities, Revolving Facility and the senior notes, we are required to comply with certain incurrence-based covenants customary for facilities of these types and, in the case of the Term A Facility and Revolving Facility, a maintenance covenant tested on the last day of each fiscal quarter requiring us to maintain a first lien net leverage ratio not to exceed 2.00 to 1.00.

Subsequent ev ent  —

On April 16, 2020, w e entered into a $ 500 bridge facility (the Bridge Facility).

June 30, 2020 , we had no outstanding borrowings under the Revolving Facility and had utilized $ 21 for letters of credit.

We had availability at June 30, 2020 under the Revolving Facility of $ 979 after deducting the letters of credit.

Bridge facility —

On April 16, 2020, we entered into a $ 500 bridge facility (the Bridge Facility).

We recorded deferred fees of $ 5 related to the Bridge Facility.

The deferred fees are included in other current assets and are being amortized over the life of the Bridge Facility.

The Bridge Facility matures on April 15, 2021.

The Bridge Facility is guaranteed by all of our wholly-owned domestic subsidiaries subject to certain exceptions (the guarantors) and is secured by a first -priority lien on substantially all of the assets of Dana and the guarantors, subject to certain exceptions.

Advances under the Bridge Facility incur a one -time funding fee when drawn and bear interest at a floating rate based on, at our option, the Eurodollar rate plus an initial margin equal to 4.50 % or a base rate plus an initial margin equal to 3.50 % (each as described in the cre dit agreement).

The initial margin increases by 0.50 % every 90 days.

A duration fee of 0.50 % is paid every 90 days on the full $ 500 commitment.

A commitment fee of 0.50 % is applied based on the average daily unused portion of the available amount under the Bridge Facility.

Under the Bridge Facility we are required to comply with certain incurrence-based covenants customary for facilities of this type and a maintenance covenant requiring us to maintain a first lien net leverage ratio not to exceed 2.50 to 1.00 for the quarter ending June 30, 2020, 3.00 to 1.00 for the quarter ending September 30, 2020 and 4.00 to 1.00 thereafter. In addition, on April 16, 2020, we amended certain provisions of our credit and guaranty agreement including increasing the first lien net leverage ratio to a maximum of 4.00 to 1.00 for the quarter ending December 31, 2020 and then, starting with the quarter ending December 31, 2021, decrease the ratio quarterly until it returns to its prior level of 2.00 to 1.00 for and aft er the quarter ending September 30, 2022, unless Dana in its sole discretion elects to return the first lien net leverage ratio to its prior level earlier than such date. We also amended certain restrictive covenants to provide additional limitations that are consistent with the Bridge Facility until such time as the earlier of ( x ) December 31, 2021 and (y) any date that we elect after the expiration of the Bridge Facility.

Additionally, the amendment provides that certain mandatory prepayments required under the credit and guaranty agreement for the incurrence of debt and asset sale proceeds will not be paid to the Term Facilities' lenders while the Bridge Facility is outstanding.

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 June 30, 2020 , we were in compliance with the covenants of our financing agreements.

Fair Value Measurements and Derivatives

5 unchanged sentences

Fair Value Level

March 31, 2020

June 30, 2020

December 31, 2019

12 unchanged sentences

Cash flow hedges

Other noncurrent assets

Cash flow hedges

Other noncurrent liabilities

3 unchanged sentences

The financial instruments that are not carried in our balance sheet at fair value are as follows:

March 31, 2020

June 30, 2020

December 31, 2019

7 unchanged sentences

Our portfolio of derivative financial instruments periodically includes interest rate swaps and interest rate collars designed to mitigate our interest rate risk.

As of March 31, 2020 , no fixed-to-floating interest rate swaps remain outstanding.

However, a $ 5 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 March 31, 2020 .

As of June 30, 2020 , no fixed-to-floating interest rate swaps remain outstanding.

However, a $ 4  fair value adjustment to the carrying amount of our December 2024 Notes, associated with a fixed-to-floating interest rate swap that had been executed but was subsequently terminated during 2015, remains deferred at June 30, 2020 .

This amount is being amortized as a reduction of interest expense through the period ending December 2024, the scheduled maturity date of the December 2024 Notes.

The amount amortized as a reduction of interest expense was not material during the 

three months ended 

March 31, 2020 .

three months and six months ended 

June 30, 2020 .

We have outstanding interest rate collars with a notional value of $ 425 that will mature in December 2021.

7 unchanged sentences

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 March 31, 2020 :

The following fixed-to-fixed cross-currency swaps were outstanding at June 30, 2020 :

Underlying Financial Instrument

11 unchanged sentences

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 $ 355  at March 31, 2020 and $ 508 at December 31,  

The total notional amount of outstanding foreign currency swaps, including the fixed-to-fixed cross-currency swaps, was $ 1,085  at March 31, 2020 and $ 1,090  at December 31,  

The following currency derivatives were outstanding at March 31, 2020 :

The total notional amount of outstanding foreign currency forward contracts, involving the exchange of various currencies, was $ 263 at June 30, 2020 and $ 508 at December 31,  

The total notional amount of outstanding foreign currency swaps, including the fixed-to-fixed cross-currency swaps, was $ 1,091 at June 30, 2020 and $ 1,090  at December 31,  

The following currency derivatives were outstanding at June 30, 2020 :

Notional Amount (U.S.

2 unchanged sentences

Traded Currency

Mexican peso, euro

dollar, Canadian dollar, Hungarian forint, British pound, Swiss franc, Indian rupee, Russian ruble, Chinese renminbi, Mexican peso, Australian dollar, Japanese yen, Singapore dollar

Mexican peso, euro, Thai baht

dollar, Canadian dollar, Hungarian forint, British pound, Swiss franc, Indian rupee, Russian ruble, Mexican peso, Australian dollar, Singapore dollar

British pound

16 unchanged sentences

Deferred Gain (Loss) in AOCI

March 31, 2020

June 30, 2020

December 31, 2019

3 unchanged sentences

The following table provides a summary of the location and amount of gains or losses recognized in the consolidated statement of operations associated with cash flow hedging relationships:

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Derivatives Designated as Cash Flow Hedges

2 unchanged sentences

Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded

$ 1,078  

$ 1,088  

(Gain) or loss on cash flow hedging relationships

Foreign currency forwards

Amount of (gain) loss reclassified from AOCI into income  

Cross-currency swaps

Amount of (gain) loss reclassified from AOCI into income  

Six Months Ended June 30, 2020

Derivatives Designated as Cash Flow Hedges  

Net sales  

Cost of sales  

Other income (expense), net  

Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded

$ 3,004  

$ 2,808  

(Gain) or loss on cash flow hedging relationships

Foreign currency forwards

Amount of (gain) loss reclassified from AOCI into income

1 unchanged sentence

Amount of (gain) loss reclassified from AOCI into income

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

Derivatives Designated as Cash Flow Hedges

2 unchanged sentences

Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded

$ 2,306  

$ 1,980  

(Gain) or loss on cash flow hedging relationships

Foreign currency forwards  

Amount of (gain) loss reclassified from AOCI into income  

Cross-currency swaps

Amount of (gain) loss reclassified from AOCI into income

Six Months Ended June 30, 2019

Derivatives Designated as Cash Flow Hedges  

Net sales  

Cost of sales  

Other income (expense), net  

Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded

$ 4,469  

$ 3,843  

(Gain) or loss on cash flow hedging relationships

Foreign currency forwards

9 unchanged sentences

Derivatives Not Designated as Hedging Instruments

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Location of Gain or (Loss) Recognized in Income

3 unchanged sentences

Other income (expense), net

Amount of Gain (Loss) Recognized in Income

Derivatives Not Designated as Hedging Instruments

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

Location of Gain or (Loss) Recognized in Income

Foreign currency forward contracts

Cost of sales

Foreign currency forward contracts

( 12 )  

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.

5 unchanged sentences

Product liabilities —

Accrued product liability costs were $ 6 at March 31, 2020 and $ 10  at December 31,  

We had also recognized amounts recoverable from third parties of $ 14 at March 31, 2020 and $ 13  at December 31,  

Accrued product liability costs were $ 2  at June 30, 2020 and $ 10  at December 31,  

We had also recognized amounts recoverable from third parties of $ 13  at June 30, 2020 and $ 13  at December 31,  

Payments made to claimants precede recovery of amounts from third parties, and may result in recoverable amounts in excess of the total liability.

1 unchanged sentence

Environmental liabilities —

Accrued environmental liabilities were $ 12  at March 31, 2020 and $ 13  at December 31,  

Accrued environmental liabilities were $ 12  at June 30, 2020 and $ 13  at December 31,  

We consider the most probable method of remediation, current laws and regulations and existing technology in estimating our environmental liabilities.

16 unchanged sentences

Three Months Ended

Six Months Ended

Balance, beginning of period

9 unchanged sentences

Consequently, there is no income tax expense or benefit recognized on the pre-tax income or losses in these jurisdictions as valuation allowances are adjusted to offset the associated tax expense or benefit.

We believe it is reasonably possible that additional valuation allowances could be recorded in the next twelve months, driven by reductions in certain subsidiaries' profits from the impact of COVID- 19.

We record interest and penalties related to uncertain tax positions as a component of income tax expense.

Net interest expense for the periods presented herein is not significant.

We reported an income tax benefit of $ 16  and income tax expense of $ 20  for the 

three months ended March 31, 

We reported an income tax expense of $ 34  and income tax benefit of $ 52  for the 

second  quarters of  

2020 and 

2019 , respectively. Our effective tax rates were ( 80 )% and 17 % for the first  

three months of 2020 and 

During the first quarter of 2020 , a pre-tax goodwill impairment charge of $ 51  with an associated income tax benefit of $ 1  was recorded.

2019  and income tax expense of $ 18  and income tax benefit of $ 32 for the respective year-to-date periods. Our effective tax rates were ( 14 )% and 291 % for the first  

six months of 2020 and 

In the second quarter of 2020 we recorded an income tax expense of $ 56 for valuation allowances in foreign jurisdictions due to reduced income projections. During the first  quarter of 2020 , a pre-tax goodwill impairment charge of $ 51  with an associated income tax benefit of $ 1  was recorded.

Also, during the first  quarter of 2020, we recorded tax benefits of $ 37  related to tax actions that adjusted federal tax credits, tax expense of $ 2 to record additional valuation allowance in the U.S.

based on reduced income projections, and tax expense of $ 4 to record valuation allowances in foreign jurisdictions due to reduced income projections.

based on reduced income projections, and tax expense of $ 4 to record valuation allowances in foreign jurisdictions due to reduced income projections. During the second quarter of 2019, a pre-tax pension settlement charge of $ 258 with an associated income tax benefit of $ 9 was recorded. Also, during the second quarter of 2019, we recorded tax benefits of $ 48 related to tax actions that adjusted federal tax credits and $ 30 related to the development of a tax planning strategy which reduced valuation allowances on existing federal tax credits.

During the first quarter of 2019, we recognized a benefit of $ 22 related to the release of valuation allowances in the U.S.

4 unchanged sentences

2020  and 2019  

three -month periods, respectively.

six -month periods, respectively.

Our effective income tax rates vary from the U.S.

8 unchanged sentences

Three Months Ended

Six Months Ended

Non-service cost components of pension and OPEB costs

29 unchanged sentences

Generally, our contract liabilities turn over frequently given our relatively short production cycles.

Contract liabilities were $ 21  and $ 23  at March 31, 2020 and December 31,  

Contract liabilities were $ 26  and $ 23  at June 30, 2020 and December 31,  

Contract liabilities are included in other accrued liabilities on our consolidated balance sheet.

1 unchanged sentence

The following table disaggregates revenue for each of our operating segments by geographical market:

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Light Vehicle

3 unchanged sentences

South America

Three Months Ended March 31, 2019

Six Months Ended June 30, 2020

North America

South America

Three Months Ended June 30, 2019

North America

South America

Six Months Ended June 30, 2019

North America

South America

We are a global provider of high-technology products to virtually every major vehicle manufacturer in the world.

13 unchanged sentences

Segment information —

Three Months Ended March 31,

Three Months Ended June 30,

External Sales

8 unchanged sentences

Eliminations and other

Six Months Ended June 30,

Light Vehicle

Commercial Vehicle

Power Technologies

Eliminations and other

Reconciliation of segment EBITDA to consolidated net income —

Three Months Ended

Six Months Ended

Segment EBITDA

$ ( 3 )  

Corporate expense and other items, net

( 84 )  

( 79 )  

( 169 )  

Non-service cost components of pension and OPEB costs

Restructuring charges, net

( 16 )  

( 19 )  

Stock compensation expense

Strategic transaction expenses

( 11 )  

Impairment of goodwill

( 51 )  

Acquisition related inventory adjustments

Non-income tax legal judgment

Earnings before interest and income taxes

Pension settlement charges, net

( 258 )  

Earnings (loss) before interest and income taxes

( 112 )  

( 95 )  

( 65 )  

Write-off deferred financing costs

Interest income

Interest expense

Earnings before income taxes

Loss before income taxes

( 147 )  

( 126 )  

( 127 )  

Income tax expense (benefit)

( 52 )  

Equity in earnings of affiliates

Net income (loss)

$ ( 173 )  

$ ( 66 )  

$ ( 135 )  

Equity Affiliates

We have a number of investments in entities that engage in the manufacture and supply of vehicular parts (primarily axles, driveshafts, wheel-end braking systems) and motors for electric vehicles and industrial applications.

The decrease in equity method investments from the prior period is due in large part to our acquisition of a controlling financial interest in Ashwoods Innovations Ltd.

(Ashwoods) on February 5, 2020.

Originally acquired as part of the ODS acquisition, the minority shareholders in this entity had substantive participating rights that allowed them to effectively participate in the decisions made in the ordinary course of business that were significant to its operations.

Upon acquiring Curtis Instruments, Inc.'s (Curtis) 35.4 % ownership interest in Ashwoods, we had a 

97.8 % ownership interest in Ashwoods.

During March 2020, we acquired the remaining noncontrolling interest in Ashwoods held by employee shareholders.

See Note 2 for additional information.

Equity method investments exceeding $5 at March 31, 2020 — 

Equity method investments exceeding $5 at June 30, 2020 — 

Ownership Percentage

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements