What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-07-30 compared with 2020-04-30 · 266 added, 139 removed, 365 unchanged (53% of the section changed)

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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. We have a diverse customer base and geographic footprint, which minimizes our exposure to individual market and segment declines.

At March 31, 2020, we employed approximately 31,700 people, operated in 34 countries and had 149 major facilities housing manufacturing and distribution operations, service and assembly operations, technical and engineering centers and administrative offices.

External sales by operating segment for the periods ended March 31, 2020 and 2019 are as follows:

Three Months Ended March 31,

At June 30, 2020, we employed approximately 33,300 people, operated in 34 countries and had 146 major facilities housing manufacturing and distribution operations, service and assembly operations, technical and engineering centers and administrative offices.

External sales by operating segment for the periods ended June 30, 2020 and 2019 are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Light Vehicle

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Our Board of Directors authorized a $200 share repurchase program effective in 2018 which expires at the end of 2021.

Through March 31, 2020 ,  we have used cash of $50 to repurchase common shares under the program.

We declared and paid quarterly common stock dividends for thirty-three consecutive quarters.

Through June 30, 2020 ,  we have used cash of $50 to repurchase common shares under the program.

Through the first quarter of 2020, we had declared and paid quarterly common stock dividends for thirty-three consecutive quarters.

In response to the global COVID-19 pandemic, we have temporarily suspended the declaration and payment of dividends to common shareholders and the repurchase of common stock under our existing common stock share repurchase progra m.

Financing actions 

We have taken advantage of the lower interest rate environment to complete refinancing transactions that resulted in lower effective interest rates while extending maturities.

In 2017, we completed a $400 2025 note offering and entered into a $275 floating rate term loan.

The proceeds of these issuances were used to repay higher cost international debt and to repay $450 of 2021 notes.

During 2019 we expanded our credit and guaranty agreement, entering into $675 of additional floating rate term loans to fund the ODS acquisition (see Acquisitions section below) and increasing our revolving credit facility to $1,000 and extending its maturity by two years.

— During 2019 we expanded our credit and guaranty agreement, entering into $675 of additional floating rate term loans to fund the ODS acquisition (see Acquisitions section below) and increasing our revolving credit facility to $1,000 and extending its maturity by two years.

We completed a $300 2027 note offering and used the proceeds to repay $300 of higher cost 2023 notes.

During 2019, we terminated one of our U.S.

defined benefit pension plans, settling approximately $165 of previously unfunded pension obligations and eliminating future funding risk associated with interest rate and other market developments. In response to the global COVID-19 pandemic, on April 16, 2020, we entered into a $500 bridge facility (the Bridge Facility).

The Bridge Facility matures on April 15, 2021.

See Note 11 to our consolidated financial statements in Item 1 of Part I for additional information on the Bridge Facility.

defined benefit pension plans, settling approximately $165 of previously unfunded pension obligations and eliminating future funding risk associated with interest rate and other market developments.

In response to the global COVID-19 pandemic, during June 2020, we completed a $400 2028 note offering and a $100 add on to our 2027 notes.

See Note 11 to our consolidated financial statements in Item 1 of Part I for additional information.

Other Initiatives

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The results of operations of Ashwoods are reported within our Off-Highway operating segment.

Ashwoods had an insignificant impact on our consolidated results of operations during the first quarter of 2020.

Ashwoods had an insignificant impact on our consolidated results of operations during 2020.

Nordresa —

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Dana will continue to consolidate SME and PEPS as the governing documents continue to provide Dana with a controlling financial interest in these subsidiaries.

See Acquisitions section above 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 Acquisitions section above 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.

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Trends in Our Markets

The global novel coronavirus disease (COVID-19) pandemic is expected to have an adverse effect on our business, results of operations, cash flows and financial condition.

The global novel coronavirus disease (COVID-19) pandemic has had and is expected to continue to have an adverse effect on our business, results of operations, cash flows and financial condition.

The global COVID-19 pandemic has negatively impacted the global economy, disrupted our operations as well as those of our customers, suppliers and the global supply chains in which we participate, and created significant volatility and disruption of financial markets.

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Cost flex activities at our operating facilities has included reduction of material orders, flexing labor costs, halting non-production spending and delaying capital spending where and when appropriate.

Cost reduction activities at our technical centers and administrative offices has included 20% reduction in salaried employee wages, 20% reduction in board of director remuneration, 50% reduction in the Chief Executive Officer's compensation, elimination of cash incentive compensation, a moratorium on travel and entertainment expenditures and delaying capital spending and investment in research and development activities where and when appropriate.

Cost reduction activities at our technical centers and administrative offices has included a temporary 20% reduction in salaried employee wages, a temporary 20% reduction in board of director remuneration, a temporary 50% reduction in the Chief Executive Officer's compensation, elimination of cash incentive compensation, a moratorium on travel and entertainment expenditures and delaying capital spending and investment in research and development activities where and when appropriate.

The company is also temporarily suspending the declaration and payment of dividends to common shareholders and temporarily suspending the repurchase of common stock under its existing common stock share repurchase program.

In addition, the company is taking advantage of various government programs and subsidies in the countries in which it operates, including certain provisions of the Coronavirus Aid, Relief and Economic Security (CARES) Act.

As of March 31, 2020, we had total liquidity of $1,325 including cash and cash equivalents (less deposits), marketable securities and availability from our Revolving Facility.

As of June 30, 2020, we had total liquidity of $1,687 including cash and cash equivalents (less deposits), marketable securities and availability from our Revolving Facility.

Also, the company has no meaningful debt maturities before 2024.

On April 16, 2020, we further enhanced our liquidity position by entering into a $500 bridge facility (the Bridge Facility).

The Bridge Facility has a 364-day term and is intended to provide access to additional liquidity should the company need it and can be terminated at the company's option at any time.

See Note 11 to our consolidated financial statements in Item 1 of Part I for additional information on the Bridge Facility.

As we continue to manage through the unprecedented disruption in our markets and associated economic uncertainty resulting from the global COVID-19 pandemic, we will continue to respond in a measured, swift and decisive manner with continued emphasis on health and safety, cash conservation and maintenance of our liquidity position.

Foreign Currency

With 53% of our 2019 sales coming from outside the U.S., international currency movements can have a significant effect on our sales and results of operations.

The euro zone countries and Brazil accounted for 49% and 9% of our 2019 non-U.S.

sales, respectively, while China and India each accounted for 7%.

With 55% of our first-half 2020 sales coming from outside the U.S., international currency movements can have a significant effect on our sales and results of operations.

The euro zone countries and Brazil accounted for 53% and 7% of our first-half 2020 non-U.S.

sales, respectively, while China, India and Thailand accounted for 10%, 6% and 5%, respectively.

Although sales in Argentina and South Africa were each less than 5% of our non-U.S.

sales in 2019, exchange rate movements of those countries have been volatile and significantly impacted sales from time to time.

sales, exchange rate movements of those countries have been volatile and significantly impacted sales from time to time.

International currencies strengthened against the U.S.

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Weaker international currencies during 2019 decreased sales by $177, with the euro, Brazilian real and South African rand accounting for $103, $30 and $15 of the decrease, respectively.

Weaker international currencies decreased sales by $34 during the first quarter of 2020 compared to the same period last year, with the Brazilian real and euro accounting for $13 and $13 of the decrease, respectively.

Weaker international currencies decreased sales by $61 during the first six months of 2020 compared to the same period last year, with the Brazilian real, euro, Chinese renminbi and South African rand accounting for $25, $17, $6 and $5 of the decrease, respectively.

During the second quarter of 2018, we determined that Argentina's economy met the GAAP definition of a highly inflationary economy.

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The United Kingdom's decision to exit the European Union ("Brexit") continues to provide some uncertainty and potential volatility around European currencies, along with uncertain effects of future trade and other cross-border activities of the United Kingdom with the European Union and other countries.

The Brazil market is an important market for our Commercial Vehicle segment, representing about 19% of this segment's first quarter 2020 sales.

Our medium/heavy truck sales in Brazil account for approximately 80% of our first-quarter 2020 sales in the country.

The Brazil market is an important market for our Commercial Vehicle segment, representing about 16% of this segment's first-half 2020 sales.

Our medium/heavy truck sales in Brazil account for approximately 77% of our first-half 2020 sales in the country.

Reduced market demand resulting from the weak economic environment in Brazil during 2015 and 2016 lead to significant production level declines in the light truck and medium/heavy markets. In response to the challenging economic conditions in this country, we implemented restructuring and other cost reduction actions and reduced costs to the extent practicable.

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Sales by our operations in Brazil were $393 in 2019, up 1% from 2018, reflective of modestly higher medium/heavy and light truck production levels in 2019.

Sales by our operations in Brazil were $80 in the first quarter of 2020, down 16% from the same period of 2019, reflective of lower medium/heavy truck production levels.

Sales by our operations in Brazil were $114 in the first half of 2020, down 44% from the same period of 2019, reflective of lower medium/heavy truck production levels.

As indicated above, Argentina has experienced significant inflationary pressures the past few years, contributing to significant devaluation of its currency among other economic challenges.

Our Argentine operation supports our Light Vehicle operating segment.

Our sales in Argentina for the first quarter of 2020 of approximately $20 are approximately 1% of our consolidated sales and our net asset exposure related to Argentina was approximately $16, including $6 of net fixed assets, at March 31, 2020.

Our sales in Argentina for the first half of 2020 of approximately $27 are approximately 1% of our consolidated sales and our net asset exposure related to Argentina was approximately $15, including $6 of net fixed assets, at June 30, 2020.

Commodity Costs

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Material recovery and other pricing actions decreased earnings in 2019 by $10, whereas pricing and recovery actions increased year-over-year earnings in 2018 by $80.

Lower commodity prices increased earnings in the first quarter of 2020 by approximately $18, as compared to an earnings reduction of $25 from higher commodity prices in the first quarter of 2019.

Material cost recovery and other pricing actions decreased earnings in the first quarter of 2020 by $27, whereas pricing and recovery actions increased earnings in the first quarter of 2019 by $8.

Lower commodity prices increased year-over-year second-quarter and six-month earnings in 2020 by $4 and $22, as compared to year-over-year earnings reductions of $19 and $44 in the same periods last year.

Material cost recovery and other pricing actions decreased year-over-year earnings in the second quarter and first six months of 2020 by $24 and $51, whereas pricing and recovery actions increased year-over-year earnings by $14 and $22 in the same periods last year.

Sales, Earnings and Cash Flow Outlook

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In addition, due to continuing disruption and economic uncertainty, the company will not be providing financial guidance at this time.

Summary Consolidated Results of Operations (First Quarter, 2020 versus 2019)

Three Months Ended March 31,

Summary Consolidated Results of Operations (Second Quarter, 2020 versus 2019)

Three Months Ended June 30,

% of Net Sales

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Restructuring charges, net

Pension settlement charge

Other expense, net

Loss before interest and income taxes

Write-off deferred financing costs

Interest income

Interest expense

Loss before income taxes

Income tax expense (benefit)

Equity in earnings of affiliates

Noncontrolling interests net income

Redeemable noncontrolling interests net income

Net loss attributable to the parent company

Sales —

The following table shows changes in our sales by geographic region.

Three Months Ended

Amount of Change Due To

Increase/ (Decrease)

Currency Effects

Acquisitions (Divestitures)

Organic Change

North America

South America

Sales in 2020 were $1,228 lower than in 2019.

Weaker international currencies decreased sales by $27, principally due to a weaker Brazilian real, euro and Chinese renminbi.

The acquisition of PEPS in last year's second quarter and Ashwoods in this year's first quarter, generated a year-over-year increase in sales of $3.

The organic sales decrease of $1,204, or 52%, resulted from the rapid dissipation in production volumes across all of our end markets as a result of the global COVID-19 pandemic, partially offset by the conversion of sales backlog.

The impact of the global COVID-19 pandemic on our operations as well as those of our customers, suppliers and the global supply chains in which we participate, was most notable during April 2020, with a measured ramp up in production beginning in May and continuing into June 2020.

Pricing actions, including material commodity price and inflationary cost adjustments, reduced sales by $24.

The North America organic sales decrease of 59% was driven principally by weaker light and medium/heavy duty truck production volumes resulting from the global COVID-19 pandemic, partially offset by the conversion of sales backlog.

Second-quarter 2020 full frame light truck production was down 71% while production of Class 8 and Classes 5-7 trucks were down 81% and 67%, respectively.

Excluding currency and acquisition effects, sales in Europe were down 43% compared with 2019. With our significant Off-Highway presence in the region, weakening construction/mining and agricultural markets due to the global COVID-19 pandemic were a major factor.

Organic sales in this operating segment were down 39% compared with the second quarter of 2019.

Excluding currency effects, second quarter sales in South America decreased 61% compared to 2019 due primarily to the global COVID-19 pandemic.

Second-quarter 2020 medium/heavy truck production was down 62% and light truck production was down 77%.

Excluding currency and acquisition effects, sales in Asia Pacific decreased about 42% primarily due to the global COVID-19 pandemic. Light truck, light vehicle engine and medium/heavy truck production were down 22%, 28% and 10%, respectively from the second quarter of 2019.

Cost of sales and gross margin —

Cost of sales for the second quarter of 2020 decreased $892, or 45% when compared to 2019.

Cost of sales as a percent of sales in 2020 was 1,500 basis points higher than in the previous year.

Cost of sales attributed to acquisitions was approximately $10.

Excluding the effects of acquisitions, cost of sales as a percent of sales was 100.3%, 1,440 basis points higher than in the previous year.

The increase in cost of sales as a percent of sales was largely attributable to actions to flex down our cost structure lagging the rapid dissipation of customer demand across all of our end markets as a result of the global COVID-19 pandemic, our inability to effectively reduce labor costs in certain countries due to government requirements, as well as our inability to reduce fixed costs including depreciation and rent expense.

Partially offsetting the impact of the rapid dissipation of customer demand were lower commodity prices which lowered material costs by $4 and continued material cost savings of approximately $11.

Gross margin of ($10) for 2020 decreased $336 from 2019.

Gross margin as a percent of sales was (0.9%) in 2020, 1,500 basis points lower than in 2019.

The decline in margin as a percent of sales was driven principally by the cost of sales factors referenced above.

Selling, general and administrative expenses (SG&A) —

SG&A expenses in 2020 were $82 (7.6% of sales) as compared to $140 (6.1% of sales) in 2019.

SG&A attributed to acquisitions was $1.

Excluding the increase associated with acquisitions, SG&A expenses were 140 basis points higher than the same period of 2019.

The year-over-year decrease of $59 exclusive of acquisitions was primarily due to lower year-over-year incentive compensation as well as lower salaried employee wages, benefits, travel expenses and professional fees resulting from the execution of cost reduction initiatives in response to the global COVID-19 pandemic.

Amortization of intangibles —

Amortization expense was $3 in 2020 and $4 in 2019.

The decrease in amortization expense of $1 in 2020 was attributable to the impact of weaker international currencies, primarily the euro.

Restructuring charges, net  —

Restructuring charges of $16 in 2020 were comprised of severance and benefit costs primarily related to headcount reductions across our operations in response to the global COVID-19 pandemic and exit costs related to previously announced actions.

Restructuring charges of $9 in 2019 were comprised of severance and benefit costs primarily related to integration of recent acquisitions, headcount reductions across our operations and exit costs related to previously announced actions.

Pension settlement charge  — See Note 10 of the consolidated financial statements in Item 1 of Part I for a discussion of the termination of one of our U.S.

defined benefit pension plans. 

Other expense, net —

The following table shows the major components of other expense, net.

Three Months Ended

Non-service cost components of pension and OPEB costs

Government grants and incentives

Foreign exchange gain

Strategic transaction expenses

Other expense, net

Strategic transaction expenses in 2020 were primarily attributable to the acquisitions of Nordresa and ODS and certain other strategic initiatives.

Strategic transaction expenses in 2019 were primarily attributable to the acquisition of ODS.

See Note 2 of our consolidated financial statements in Item 1 of Part I for additional information.

Write-off deferred financing costs  — On June 19, 2020, in connection with the issuance of our June 2028 Notes, we terminated our $500 bridge facility and wrote off $5 of deferred fees associated with the bridge facility.

See Note 11 of the consolidated financial statements in Item 1 of Part I for additional information.

Interest income and interest expense —

Interest income was $2 in 2020 and $3 in 2019.

Interest expense decreased from $34 in 2019 to $32 in 2020, as the benefit of lower average effective interest rates was partially offset by higher average debt levels.

The increase in average debt levels is primarily attributable to outstanding borrowings under the Revolving Facility during the second quarter of 2020. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 4.7% in 2020 and 5.4% in 2019.

Income tax expense (benefit)  — We reported an income tax expense of $34 and income tax benefit of $52 for the second quarter, 2020 and 2019, respectively.

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 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. Excluding these items, the effective tax rate would be 15% and 27% for the 2020 and 2019 three-month period.

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

federal statutory rate of 21% due to establishment, release and adjustment of valuation allowances in several countries, nondeductible expenses and deemed income, local tax incentives in several countries outside the U.S., different statutory tax rates outside the U.S.

and withholding taxes related to repatriations of international earnings.

The effective income tax rate may vary significantly due to fluctuations in the amounts and sources, both foreign and domestic, of pretax income and changes in the amounts of nondeductible expenses.

In countries where our history of operating losses does not allow us to satisfy the “more likely than not”

criterion for recognition of deferred tax assets, we have generally recognized no income tax on the pre-tax income or losses as valuation allowance adjustments offset the associated tax effects.

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. 

Equ ity in earnings of affiliates —

Net earnings from equity investments was $8 in both 2020 and 2019.

Equity in earnings from DDAC was $9 in 2020 and $6 in 2019.

After experiencing significant impacts resulting from the global COVID-19 pandemic during the first quarter of 2020, DDAC experienced higher demand levels during the second quarter of 2020 primarily driven by increased demand for certain medium/heavy vehicles by the Chinese government. Equity in earnings from BSFB was de minimis in 2020 and $2 in 2019.

Summary Consolidated Results of Operations (Year-to-Date, 2020 versus 2019)

Six Months Ended June 30,

% of Net Sales

Increase/ (Decrease)

Cost of sales

Selling, general and administrative expenses

Amortization of intangibles

Restructuring charges, net

Impairment of goodwill

Pension settlement charge

Other income (expense), net

Earnings before interest and income taxes

Earnings (loss) before interest and income taxes

Write-off deferred financing costs

Interest income

Interest expense

Earnings before income taxes

Loss before income taxes

Income tax expense (benefit)

Equity in earnings of affiliates

Net income (loss)

Noncontrolling interests net income

Redeemable noncontrolling interests net loss

Net income attributable to the parent company

Net income (loss) attributable to the parent company

Sales —

The following table shows changes in our sales by geographic region.

Three Months Ended

Six Months Ended

Amount of Change Due To

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Sales in 2020 were $1,465 lower than in 2019.

Weaker international currencies decreased sales by $34, principally due to a weaker Brazilian real and euro.

Weaker international currencies decreased sales by $61, principally due to a weaker Brazilian real, euro, Chinese renminbi and South African rand.

The acquisitions of ODS in last year's first quarter, PEPS in last year's second quarter and Ashwoods in this year's first quarter, generated a year-over-year increase in sales of $119.

The organic sales decrease of $319, or 15%, resulted from weaker light and medium/heavy truck markets and lower global off-highway demand in January and February 2020 and the rapid dissipation in production volumes across all of our end markets in March 2020 as a result of the global COVID-19 pandemic, partially offset by the conversion of sales backlog.

The organic sales decrease of $1,523, or 34%, resulted from weaker light and medium/heavy truck markets and lower global off-highway demand in January and February 2020 and the rapid dissipation in production volumes across all of our end markets beginning in March 2020 as a result of the global COVID-19 pandemic, partially offset by the conversion of sales backlog.

The impact of the global COVID-19 pandemic on our operations as well as those of our customers, suppliers and the global supply chains in which we participate, was most notable during April 2020, with a measured ramp up in production beginning in May and continuing into June 2020.

Pricing actions, including material commodity price and inflationary cost adjustments, reduced sales by $51.

The North America organic sales decrease of 14% was driven principally by weaker light and medium/heavy duty truck production volumes, partially offset by the conversion of sales backlog.

First-quarter 2020 full frame light truck production was down 11% while production of Class 8 and Classes 5-7 trucks were down 36% and 30%, respectively.

Excluding currency and acquisition effects, sales in Europe were down 16% compared with 2019. With our significant Off-Highway presence in the region, weakening construction/mining and agricultural markets were a major factor.

Organic sales in this operating segment were down 22% compared with the first quarter of 2019.

Excluding currency effects, first quarter sales in South America decreased 3% compared to 2019.

The region overall experienced relatively stable markets, with medium/heavy truck production down about 3% and light truck production down about 9%.

Excluding currency and acquisition effects, sales in Asia Pacific decreased about 19% as China's economy was weakening even before the onset of the COVID-19 pandemic. Light truck, light vehicle engine and medium/heavy truck production were down 28%, 32% and 30%, respectively from the first quarter of 2019.

The North America organic sales decrease of 37% was driven principally by weaker light and medium/heavy duty truck production volumes resulting from the global COVID-19 pandemic, partially offset by the conversion of sales backlog.

First-half 2020 full frame light truck production was down 40% while production of Class 8 and Classes 5-7 trucks were down 57% and 42%, respectively.

Excluding currency and acquisition effects, sales in Europe were down 30% compared with 2019. With our significant Off-Highway presence in the region, weakening construction/mining and agricultural markets due to the global COVID-19 pandemic were a major factor.

Organic sales in this operating segment were down 31% compared with the first half of 2019.

Excluding currency effects, first six months sales in South America decreased 34% compared to 2019 primarily due to the global COVID-19 pandemic.

First-half 2020 medium/heavy truck production was down 34% and light truck production was down 44%.

Excluding currency and acquisition effects, sales in Asia Pacific decreased about 31% as China's economy was weakening even before the onset of the COVID-19 pandemic. Light truck, light vehicle engine and medium/heavy truck production were down 24%, 29% and 18%, respectively from the first half of 2019.

Cost of sales and gross margin —

Cost of sales for the first quarter of 2020 decreased $143, or 8% when compared to 2019.

Cost of sales for the first half of 2020 decreased $1,035, or 27% when compared to 2019.

Cost of sales as a percent of sales in 2020 was 750 basis points higher than in the previous year.

Cost of sales attributed to acquisitions was approximately $125.

Excluding the effects of acquisitions, cost of sales as a percent of sales was 88.7%, 260 basis points higher than in the previous year.

The increased cost of sales as a percent of sales was largely attributable to actions to flex down our cost structure lagging the rapid dissipation of customer demand across all of our end markets as a result of the global COVID-19 pandemic, as well as our inability to reduce fixed costs including depreciation and rent expense.

Excluding the effects of acquisitions, cost of sales as a percent of sales was 93.0%, 700 basis points higher than in the previous year.

The increase in cost of sales as a percent of sales was largely attributable to actions to flex down our cost structure lagging the rapid dissipation of customer demand across all of our end markets as a result of the global COVID-19 pandemic, our inability to effectively reduce labor costs in certain countries due to government requirements, as well as our inability to reduce fixed costs including depreciation and rent expense.

Partially offsetting the impact of the rapid dissipation of customer demand were lower commodity prices which lowered material costs by $22 and continued material cost savings of approximately $30.

Gross margin of $206 for 2020 decreased $94 from 2019.

Gross margin of $196 for 2020 decreased $430 from 2019.

Gross margin as a percent of sales was 6.5% in 2020, 750 basis points lower than in 2019.

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SG&A expenses in 2020 were $188 (6.3% of sales) as compared to $276 (6.2% of sales) in 2019.

SG&A attributed to net acquisitions was $7.

Excluding the increase associated with acquisitions, SG&A expenses were 80 basis points lower than the same period of 2019.

The year-over-year decrease of $37 exclusive of acquisitions was primarily due to lower year-over-year incentive compensation as well as lower salaries, benefits, travel expenses and professional fees resulting from the execution of cost reduction initiatives in response to the global COVID-19 pandemic.

SG&A attributed to acquisitions was $8.

Excluding the increase associated with acquisitions, SG&A expenses as a percent of sales were comparable with the same period of 2019.

The year-over-year decrease of $96 exclusive of acquisitions was primarily due to lower year-over-year incentive compensation as well as lower salaried employee wages, benefits, travel expenses and professional fees resulting from the execution of cost reduction initiatives in response to the global COVID-19 pandemic.

Amortization of intangibles —

Amortization expense was $3 in 2020 and $2 in 2019.

The increase in amortization expense of $1 in 2020 was primarily attributable to intangible assets obtained through the ODS and PEPS acquisitions. See Note 2 of our consolidated financial statements in Item 1 of Part I for additional information.

Restructuring charges —

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.

Amortization expense was $6 in both 2020 and 2019.

Restructuring charges — Restructuring charges of $19 in 2020 were comprised of severance and benefit costs primarily related to headcount reductions across our operations in response to the global COVID-19 pandemic and exit costs related to previously announced actions.

Restructuring charges of $18 in 2019 were comprised of severance and benefit costs primarily related to integration of recent acquisitions, headcount reductions across our operations and exit costs related to previously announced actions.

Impairment of goodwill  —

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See Note 3 of our consolidated financial statements in Item 1 of Part I for additional information. 

Pension settlement charge  — See Note 10 of the consolidated financial statements in Item 1 of Part I for a discussion of the termination of one of our U.S.

defined benefit pension plans.

Other income (expense), net —

The following table shows the major components of other income (expense), net.

Three Months Ended

Six Months Ended

Non-service cost components of pension and OPEB costs

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Foreign exchange loss in 2019 included a loss on the undesignated Swiss franc notional deal contingent forward related to the ODS acquisition.

See Note 12 of our consolidated financial statements in Item 1 of Part I for additional information. Strategic transaction expenses in 2020 were primarily attributable to the acquisitions of ODS and Nordresa.

Strategic transaction expenses in 2019 were primarily attributable to the acquisition of ODS.

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During the first quarter of 2019, we won a legal judgment regarding the methodology used to calculate PIS/COFINS tax in Brazil.

See Note 11 of the consolidated financial statements in Item 1 of Part I for additional information.

Interest income and interest expense —

Interest income was $2 in both 2020 and 2019.

Interest expense increased from $27 in 2019 to $29 in 2020, as a result of higher average debt levels primarily due to increased borrowings to finance the ODS acquisition in the first quarter of 2019.

Interest income was $4 in 2020 and $5 in 2019.

Interest expense was $61 in both 2020 and 2019, as the benefit of lower average effective interest rates was offset by higher average debt levels.

The increase in average debt levels is primarily attributable to outstanding borrowings under the Revolving Facility during the first half of 2020.

Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 4.7% in 2020 and 5.2% in 2019.

Income tax expense (benefit) —

We reported an income tax benefit of $16 and income tax expense of $20 for the three months ended March 31, 2020 and 2019, respectively.

Our effective tax rates were (80)% and 17% for the first three months of 2020 and 2019.

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 benefit of $37 related to tax actions that adjusted federal tax credits, tax expense of $2 to record additional valuation allowance in the U.S.

Income tax expense (benefit)  —We reported an income tax expense of $18 and income tax benefit of $32 for the six months ended June 30, 2020 and 2019, respectively.

Our effective tax rates were (14)% and 291% for the first six months of 2020 and 2019. In the second quarter of 2020 we recorded an income tax expense of $56 for valuation allowances in foreign jurisdictions due to reduced income projections.

During the first quarter of 2020, a pre-tax goodwill impairment charge of $51 with an associated income tax benefit of $1 was recorded. Also, during the first quarter of 2020, we recorded tax benefit of $37 related to tax actions that adjusted federal tax credits, tax expense of $2 to record additional valuation allowance in the U.S.

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

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

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 release of valuation allowances in the U.S.

based on improved income projections.

Partially offsetting this benefit was $6 of expense related to a U.S.

Partially offsetting this benefit was $6 of expense related to a U.S.

state law change.

Excluding these items, the effective tax rate would be 23% and 31% for the 2020 and 2019 three-month periods, respectively. Our effective income tax rates vary from the U.S.

Excluding these items, the effective tax rate would be 8% and 29% for the 2020 and 2019 six-month periods, respectively.

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

and withholding taxes related to repatriations of international earnings.

The effective income tax rate may vary significantly due to fluctuations in the amounts and sources, both foreign and domestic, of pretax income and changes in the amounts of non-deductible expenses.

The effective income tax rate may vary significantly due to fluctuations in the amounts and sources, both foreign and domestic, of pretax income and changes in the amounts of nondeductible expenses.

In countries where our history of operating losses does not allow us to satisfy the “more likely than not”

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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.

Equ ity in earnings of affiliates —

Net earnings from equity investments was $2 in 2020 and $6 in 2019.

Equity in losses from DDAC was $1 in 2020 and equity in earnings from DDAC was $4 in 2019.

DDAC's operations located in China's Hubei province, the center of the initial COVID-19 outbreak, where shut down the entire month of February 2020.

Production was permitted to resume in March 2020.

Equity in earnings from BSFB was $3 in 2020 and $2 in 2019.

Net earnings from equity investments was $10 in 2020 and $14 in 2019.

Equity in earnings from DDAC was $8 in 2020 and $10 in 2019. 

Equity in earnings from BSFB was $3 in 2020 and $4 in 2019.

Segment Results of Operations (2020 versus 2019)

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Segment EBITDA Margin

Segment EBITDA

Segment EBITDA Margin

Volume and mix

Currency effects

Light Vehicle sales in the first quarter of 2020, exclusive of currency effects, were 10% lower than the same period of 2019.

Light Vehicle sales in the second quarter and first half of 2020, exclusive of currency effects, were 63% and 37% lower than the same period of 2019.

The rapid dissipation in customer demand resulting from the global COVID-19 pandemic was partially offset by conversion of sales backlog.

Year-over-year North America full frame light truck production decreased 11% while light truck production in Europe, South America and Asia Pacific declined 17%, 9% and 28%, respectively.

Net customer pricing and cost recovery actions further decreased year-over-year first-quarter sales by $16.

Light Vehicle segment EBITDA in this year's first quarter decreased by $19 when compared to the same period of 2019.

Lower sales volumes provide a year-over-year headwind of $19 and accounted for a 130 basis point deterioration in segment EBITDA margin, as actions to flex down our cost structure lagged the rapid dissipation of customer demand resulting from the global COVID-19 pandemic. The year-over-year performance-related earnings increase in the first quarter was driven by commodity cost decreases of $12, material cost savings of $7, lower warranty expense of $3 and lower incentive compensation of $3.

Partially offsetting these performance-related earnings increases were lower net pricing and material cost recovery of $16 and operational inefficiencies of $8.

Year-over-year North America full frame light truck production decreased 71% in this year's second quarter while light truck production in Europe, South America and Asia Pacific declined by 64%, 77% and 22%, respectively.

Year-over-year North America full frame light truck production decreased 40% in this year's first six months while light truck production in Europe, South America and Asia Pacific declined by 39%, 44% and 24%, respectively.

Net customer pricing and cost recovery actions further decreased year-over-year sales by $16 and $32 in this year's second quarter and first six months, respectively.

Light Vehicle second-quarter segment EBITDA decreased by $150 from last year, with first-half earnings lower by $169.

Lower sales volumes provided a year-over-year headwind of $146 (25.8% decremental margin) and $165 (25.7% decremental margin) in the second quarter and first six months, respectively, as actions to flex down our cost structure lagged the rapid dissipation of customer demand resulting from the global COVID-19 pandemic.

The year-over-year performance-related earnings decrease in the second quarter was driven by lower net pricing and material cost recovery of $16, operational inefficiencies of $6 and incremental safety costs of $2 directly related to the global COVID-19 pandemic, including facility sanitization and personal protective equipment.

Partially offsetting these performance-related earnings decreases were the benefit of the temporary reduction in salaried employee wages of $6, certain benefits of the CARES Act of $5, material cost savings of $3, lower incentive compensation of $2, commodity cost decreases of $2 and lower warranty expense of $1.

The year-over-year performance related-earnings decrease in the first six months was driven by lower net pricing and material cost recovery of $32, operational inefficiencies of $14 and incremental safety costs of $2 directly related to the global COVID-19 pandemic.

Partially offsetting these performance-related earnings decreases were commodity cost decreases of $14, material cost savings of $10, the benefit of the temporary reduction in salaried employee wages of $6, certain benefits of the CARES Act of $5, lower incentive compensation of $5 and lower warranty expense of $4.

Commercial Vehicle

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Segment EBITDA Margin

Segment EBITDA

Segment EBITDA Margin

Volume and mix

Acquisition / Divestiture

Currency effects

Excluding currency effects and the impact of acquisitions, Commercial Vehicle sales in the first quarter of 2020 decreased 20% compared to last year.

Commercial Vehicle sales in the second quarter and first half of 2020, exclusive of currency effects and the impact of acquisitions, were 53% and 37% lower than the same period of 2019.

Declining market conditions coming out of 2019 deteriorated further with the rapid dissipation in customer demand resulting from the global COVID-19 pandemic.

Year-over-year North America Class 8 production was down 36% and Classes 5-7 production was down 30%.

Similarly, medium/heavy truck production in Europe, South America and Asia Pacific were down 30%, 3% and 30%, respectively.

Net customer pricing and cost recovery actions further decreased year-over-year first-quarter sales by $5.

Commercial Vehicle segment EBITDA in this year's first quarter decreased by $20 when compared to same period of 2019.

Lower sales volumes provided a year-over-year headwind of $21 and accounted for a 380 basis point deterioration in segment EBITDA margin, as actions to flex down our cost structure lagged the rapid dissipation of customer demand resulting from the global COVID-19 pandemic. The year-over-year performance-related earnings increase in the first quarter was driven by material cost savings of $5, lower premium freight of $3, lower incentive compensation of $3 and commodity cost decreases of $3.

Partially offsetting these performance-related earnings increases were lower net pricing and material cost recovery of $5 and operational inefficiencies of $3.

Year-over-year North America Class 8 production was down 81% and Classes 5-7 production was down 67% in this year's second quarter.

Year-over-year medium/heavy truck production in Europe, South America and Asia Pacific were down 63%, 62% and 10%, respectively, in this year's second quarter.

Year-over-year North America Class 8 production was down 57% and Classes 5-7 production was down 42% in this year's first six months.

Year-over-year medium/heavy truck production in Europe, South America and Asia Pacific were down 46%, 34% and 18%, respectively, in this year's first six months.

Net customer pricing and cost recovery actions further decreased year-over-year sales by $4 and $9 in this year's second quarter and first six months, respectively.

Commercial Vehicle second-quarter segment EBITDA decreased by $49 from last year, with first-half earnings lower by $69.

Lower sales volumes provided a year-over-year headwind of $58 (25.6% decremental margin) and $79 (25.5% decremental margin) in the second quarter and first six months, respectively, as actions to flex down our cost structure lagged the rapid dissipation of customer demand resulting from the global COVID-19 pandemic.

The year-over-year performance-related earnings increase in the second quarter was driven by the benefit of the temporary reduction in salaried employee wages of $5, improved operational efficiencies of $3, certain benefits of the CARES Act of $2, material cost savings of $2, lower incentive compensation of $2, commodity cost decreases of $1, lower warranty expense of $1 and lower premium freight of $1.

Partially offsetting these performance-related earnings increases were lower net pricing and material recovery of $4 and incremental safety costs of $1 directly related to the global COVID-19 pandemic, including facility sanitization and personal protective equipment. The year-over-year performance-related earnings increase in the first six month was driven by material cost savings of $7, the benefit of the temporary reduction in salaried employee wages of $5, lower incentive compensation of $5, commodity cost decreases of $4, lower premium freight of $4, certain benefits of the CARES Act of $2 and lower warranty expense of $1. Partially offsetting these performance-related earnings increases were lower net pricing and material recovery actions of $9 and incremental safety costs of $1 directly related to the global COVID-19 pandemic, including facility sanitization and personal protective equipment.

Segment EBITDA

Segment EBITDA Margin

Segment EBITDA

Segment EBITDA Margin

Volume and mix

Currency effects

Excluding currency effects, primarily due to a weaker euro, and the impact of the ODS acquisition, Off-Highway segment first-quarter 2020 sales decreased 22%.

Already declining global construction/mining and agricultural equipment markets coming out of 2019 deteriorated further with the rapid dissipation of customer demand resulting from the global COVID-19 pandemic. Net customer pricing and cost reduction actions further decreased year-over-year first quarter sales by $5.

Off-Highway segment EBITDA in this year's first quarter decreased by $10 when compared to the same period of 2019.

Lower sales volumes provided a year-over-year headwind of $26 and accounted for a 210 basis point deterioration in segment EBITDA margin, as actions to flex down our cost structure lagged the rapid dissipation of customer demand resulting from the global COVID-19 pandemic.

The year-over-year performance-related earnings increase in the first quarter was driven by material cost savings of $5, commodity cost decreases of $3, lower incentive compensation of $1 and lower warranty expense of $1. Partially offsetting these performance-related earnings increases were lower net pricing and material cost recovery of $5 and operational inefficiencies of $1.

Excluding currency effects and the impact of the ODS and Ashwoods acquisitions, second-quarter and first-half 2020 sales in our Off-Highway segment decreased 39% and 31% compared to last year.

Off-Highway second-quarter segment EBITDA decreased by $65 from last year, with first-half earnings lower by $75. Lower sales volumes provided a year-over-year headwind of $66 (25.5% decremental margin) and $92 (24.5% decremental margin) in the second quarter and first six months, respectively, as actions to flex down our cost structure lagged the rapid dissipation of customer demand resulting from the global COVID-19 pandemic.

The year-over-year performance-related earnings increase in the second quarter was driven by the benefit of the temporary reduction in salaried employee wages of $9, material cost savings of $5, commodity cost decreases of $1, lower incentive compensation of $1 and certain benefits of the CARES Act of $1.

Partially offsetting these performance-related earnings increases were lower net pricing and material recovery of $4, higher warranty expense of $3, operational inefficiencies of $6 and incremental safety costs of $2 directly related to the global COVID-19 pandemic, including facility sanitization and personal protective equipment.

The year-over-year performance-related earnings increase in the first six months was driven by material cost savings of $10, the benefit of the temporary reduction in salaried employee wages of $9, commodity cost decreases of $4, lower incentive compensation of $2 and certain benefits of the CARES Act of $1.

Partially offsetting these performance-related earnings increases were lower net pricing and material recovery of $9, higher warranty expense of $2, operational inefficiencies of $7 and incremental safety costs of $2 directly related to the global COVID-19 pandemic.

Power Technologies

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Segment EBITDA Margin

Segment EBITDA

Segment EBITDA Margin

Volume and mix

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Power Technologies primarily serves the light vehicle market but also sells product to the medium/heavy truck and off-highway markets.

Net of currency effects, sales for the first quarter of 2020 were 6% lower than the same period of 2019, primarily due to lower market demand resulting from the global COVID-19 pandemic.

Light vehicle engine production declined in each region compared to last year's first quarter.

Power Technologies segment EBITDA in this year's first quarter decreased by $4 when compared to the same period of 2019.

Lower sales volumes provided a year-over-year headwind of $5 and accounted for a 120 basis point deterioration in segment EBITDA margin, as actions to flex down our cost structure lagged the dissipation of customer demand resulting from the global COVID-19 pandemic.

The year-over-year performance-related earnings increase in the first quarter was driven by material cost savings of $2 and lower incentive compensation of $1.

Partially offsetting these performance-related earnings increases were lower net pricing and material cost recovery of $1 and operational inefficiencies of $1.

Net of currency effects, sales for the second quarter and first half of 2020 were 47% and 26% lower than the same periods of 2019, primarily due to lower market demand resulting from the global COVID-19 pandemic.

Light vehicle engine production declined in North America, Europe and Asia Pacific compared to last year's second quarter and first six months.

Power Technologies second-quarter segment EBITDA decreased $29 from last year, with first-half earnings lower by $33.

Lower sales volumes provided a year-over-year headwind of $40 (31.7% decremental margin) and $45 (31.7% decremental margin) in the second quarter and first six months, respectively, as actions to flex down our cost structure lagged the dissipation of customer demand resulting from the global COVID-19 pandemic.

The year-over-year performance-related earnings increase in the second quarter was driven by the benefit of the temporary reduction in salaried employee wages of $5, operational efficiencies of $3, lower incentive compensation of $2, material cost savings of $1 and certain benefits of the CARES Act of $1.

Partially offsetting these performance-related earnings increases was incremental safety costs of $1 directly related to the global COVID-19 pandemic, including facility sanitization and personal protective equipment.

The year-over-year performance-related earnings increase in the first six months was driven by the benefit of the temporary reduction in salaried employee wages of $5, material savings of $3, lower incentive compensation of $3, operational efficiencies of $2 and certain benefits of the CARES Act of $1.

Partially offsetting these performance-related earnings increases were lower net pricing and material recovery of $1 and incremental safety costs of $1 directly related to the global COVID-19 pandemic.

Non-GAAP Financial Measures

Adjusted EBITDA

We have defined adjusted EBITDA as net income before interest, taxes, depreciation, amortization, equity grant expense, restructuring expense, non-service cost components of pension and other postretirement benefits (OPEB) costs and other adjustments not related to our core operations (gain/loss on debt extinguishment, pension settlements, divestitures, impairment, etc.).

We have defined adjusted EBITDA as net income (loss) before interest, taxes, depreciation, amortization, equity grant expense, restructuring expense, non-service cost components of pension and other postretirement benefits (OPEB) costs and other adjustments not related to our core operations (gain/loss on debt extinguishment, pension settlements, divestitures, impairment, etc.).

Adjusted EBITDA is a measure of our ability to maintain and continue to invest in our operations and provide shareholder returns.

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Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

The following table provides a reconciliation of net income to adjusted EBITDA.

The following table provides a reconciliation of net income (loss) to adjusted EBITDA.

Three Months Ended

Six Months Ended

Net income (loss)

Equity in earnings of affiliates

Income tax expense (benefit)

Earnings before income taxes

Loss before income taxes

Depreciation and amortization

Restructuring charges, net

Impairment of goodwill

Interest expense, net

Write-off deferred financing costs

Impairment of goodwill

Pension settlement charges

Adjusted EBITDA

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Three Months Ended

Net cash used in operating activities

Six Months Ended

Net cash provided by (used in) operating activities

Purchases of property, plant and equipment

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Adjusted free cash flow

The following table provides a reconciliation of cash and cash equivalents to liquidity, a non-GAAP measure, at March 31, 2020:

The following table provides a reconciliation of cash and cash equivalents to liquidity, a non-GAAP measure, at June 30, 2020:

Cash and cash equivalents

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Accordingly, these deposits are not considered to be restricted. Marketable securities are included as a component of liquidity as these investments can be readily liquidated at our discretion.

We h ad $679 of avail ability at March 31, 2020 under the Revolving Facility after deducting $300 of outstanding borrowings an d $21 of ou tstanding letters of credit.

The components of our March 31, 2020 consolidated cash balance were as follows:

We h ad avail ability of $979 at June 30, 2020 under the Revolving Facility after deducting $21 of outstanding letters of credit.

The components of our June 30, 2020 consolidated cash balance were as follows:

Cash and cash equivalents

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Beyond these restrictions, there are practical limitations on repatriation of cash from certain subsidiaries because of the resulting tax withholdings and subsidiary by-law restrictions which could limit our ability to access cash and other assets.

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

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

Under the Term Facilities, the Revolving Facility and our senior notes, we are required to comply with certain incurrence-based covenants customary for facilities of these types.

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The indentures governing the senior notes include other incurrence-based covenants that may subject us to additional specified limitations.

In response to the COVID-19 pandemic we have taken controlled and measured actions to preserve liquidity including but not limited to flexing our cost structure, reducing capital spending and investments in research and development activities where and when appropriate, taking advantage of various government programs and subsidies including certain provisions of the Coronavirus Aid, Relief and Economic Security (CARES) Act, temporarily suspending the declaration and payment of dividends to common shareholders and temporarily suspending the repurchase of common stock under our existing common stock share repurchase program.

In addition, on April 16, 2020, we entered into a $500 bridge facility (the Bridge Facility) and amended our credit and guaranty agreement.

The Bridge Facility matures on April 15, 2021. 

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 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 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. 

See Note 11  to our consolidated financial statements in Item 1 of Part I for further information on the Bridge Facility and the amendments to our credit and guaranty agreement.

The principal sources of liquidity available for our future cash requirements are expected to be (i) cash flows from operations, (ii) cash and cash equivalents on hand, (iii) borrowings from our Revolving Facility and (iv) borrowings from our Bridge Facility.

In response to the COVID-19 pandemic we have taken controlled and measured actions to preserve liquidity including but not limited to flexing our cost structure, reducing capital spending and investments in research and development activities where and when appropriate, taking advantage of various government programs and subsidies including certain provisions of the CARES Act, temporarily suspending the declaration and payment of dividends to common shareholders and temporarily suspending the repurchase of common stock under our existing common stock share repurchase program.

During June 2020, we completed the sale of $400 in senior unsecured notes due June 15, 2028 (June 2028 Notes) as well as a $100 add on to our senior unsecured notes due November 15, 2027 (November 2027 Notes).

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 of 2.00 to 1.00 earlier than such date.

We also amended certain restrictive covenants to provide additional limitations on incurring additional liens, taking on additional debt, paying dividends, entering into certain transactions with affiliates, making certain investments and disposing of certain assets 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.

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

The principal sources of liquidity available for our future cash requirements are expected to be (i) cash flows from operations, (ii) cash and cash equivalents on hand and (iii) borrowings from our Revolving Facility.

We believe that our overall liquidity and operating cash flow will be sufficient to meet our anticipated cash requirements for capital expenditures, working capital, debt obligations and other commitments during the next twelve months.

While uncertainty surrounding the current economic environment could adversely impact our business, based on our current financial position, we believe it is unlikely that any such effects would preclude us from maintaining sufficient liquidity.

Three Months Ended

The following table summarizes our consolidated statement of cash flows:

Six Months Ended

Cash used for changes in working capital

Other cash provided by operations

Net cash used in operating activities

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

The table above su mmarizes our consolidated statement of cash flows.

Net increase (decrease) in cash, cash equivalents and restricted cash

Operating activities —

Exclusive of working capital, other cash provided by operations was $132 and $159 in 2020 and 2019.

The year-over-year decrease attributable to operating earnings was partially offset by lower cash payments for strategic transaction expenses.

Exclusive of working capital, other cash provided by operations was $102 and $304 in 2020 and 2019.

The year-over-year decrease is primarily attributable to lower operating earnings as a result of the global COVID-19 pandemic, partially offset by a $62 discretionary pension contribution made to one of our U.S.

defined benefit pension plans in the second quarter of 2019.

Reference is made to Note 10 of the consolidated financial statements in Item 1 of Part I for a discussion of the settlement of this U.S.

defined benefit pension plan.

Working capital used cash of $228 and $247 in 2020 and 2019.

Cash of $43 and $203 was used to finance increased receivables in 2020 and 2019.

The lower level of cash required for receivables in 2020 was due primarily to the rapid dissipation of customer demand during March 2020 as a result of the COVID-19 pandemic.

Cash of $56 and $48 was used to fund higher inventory levels in 2020 and 2019. Cash of $84 was used to reduce accounts payable and other net liabilities in 2020, while increases in accounts payable and other net liabilities provided cash of $76 in 2019.

The reduction in accounts payable in 2020 was principally driven by lower raw material purchases in March 2020 due to the rapid dissipation of customer demand resulting from the COVID-19 pandemic.

Cash of $201 was provided by lower levels of receivables in 2020, while cash of $193 was used to finance increased receivables in 2019.

The lower level of cash required for receivables in 2020 was due primarily to the rapid dissipation of customer demand beginning in March 2020 as a result of the global COVID-19 pandemic.

Cash of $53 was provided by lower inventory levels in 2020, while cash of $47 was used to fund higher inventory levels in 2019. Cash of $482 and $7 was used to reduce accounts payable and other net liabilities in 2020 and 2019.

The reduction in accounts payable and other net liabilities in 2020 was principally driven by lower raw material purchases beginning in March 2020 due to the rapid dissipation of customer demand resulting from the COVID-19 pandemic.

Investing activities —

Expenditures for property, plant and equipment were $63 and $98 during the first quarter of 2020 and 2019.

The elevated level of capital spend during the first quarter of 2019 was primarily in support of new customer programs and information systems upgrades. During the first quarter of 2020, we paid $8 to acquire Curtis' 35.4% ownership interest in Ashwoods.

The acquisition of Curtis's interest in Ashwoods, along with our existing ownership interest in Ashwoods, provided us with a controlling financing interest in Ashwoods. During the first quarter of 2019, we paid $545, net of cash and restricted cash acquired, to purchase ODS.

Also during the first quarter of 2019 we paid $61 to acquire SME.

During the first quarter of 2019, we paid $21 to settle the undesignated Swi ss franc notional deal contingent forward related to the ODS acquisition.

During the first quarter of 2020 and 2019, purchases of marketable securities were largely funded by proceeds from sales and maturities of marketable securities.

Expenditures for property, plant and equipment were $121 and $190 during 2020 and 2019.

The elevated level of capital spend during 2019 was primarily in support of new customer programs and information systems upgrades.

During 2020, capital spending has been delayed where and when appropriate in response to the global COVID-19 pandemic.

During the first quarter of 2020, we paid $8 to acquire Curtis' 35.4% ownership interest in Ashwoods.

The acquisition of Curtis's interest in Ashwoods, along with our existing ownership interest in Ashwoods, provided us with a controlling financing interest in Ashwoods. During 2019, we paid $545, net of cash and restricted cash acquired, to purchase ODS, we paid $61 to acquire SME and we paid $48, net of cash acquired, to purchase PEPS.

During 2019, we paid $21 to settle the undesignated Swiss franc notional deal contingent forward related to the ODS acquisition. During 2020 and 2019, purchases of marketable securities were largely funded by proceeds from sales and maturities of marketable securities.

Financing activities —

During the first quarter of 2020, we drew $300 on our revolving credit facility as part of our contingency planning activities related to the COVID-19 pandemic.

During the first quarter of 2019, we entered into an amended credit and guaranty agreement comprised of a $500 Term A Facility, a $450 Term B Facility and a $750 Revolving Facility.

During 2020, we completed the issuance of $400 of our June 2028 Notes and the issuance of an additional $100 of our November 2027 Notes, paying financing cost of $6.

During 2020, we entered into a $500 bridge facility, paying financing cost of $5.

We subsequently terminated the bridge facility.

During 2019, we entered into an amended credit and guaranty agreement comprised of a $500 Term A Facility, a $450 Term B Facility and a $750 Revolving Facility.

The Term A Facility was an expansion of our existing $275 term facility.

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We paid financing costs of $12 to amend the credit and guaranty agreement.

We used $15 and $14 for dividend payments to common stockholders during the first quarter of 2020 and 2019.

We used $25 to repurchase 1,432,275 shares of our common stock during the first quarter of 2019.

During 2019, we made combined principle payments of $17 on the Term A Facility and the Term B Facility.

We used $15 and $29 for dividend payments to common stockholders during 2020 and 2019, respectively.

We used $25 to repurchase 1,432,275 shares of our common stock during 2019.

During the second quarter of 2020, we temporarily suspended the declaration and payment of dividends to common stockholders and temporarily suspended the repurchase of common stock under our existing common stock repurchase program in response to the global COVID-19 pandemic.

Off-Balance Sheet Arrangements

There have been no material changes at March 31, 2020 in our off-balance sheet arrangements from those reported or estimated in the disclosures in Item 7 of our 2019 Form 10-K.

There have been no material changes at June 30, 2020 in our off-balance sheet arrangements from those reported or estimated in the disclosures in Item 7 of our 2019 Form 10-K.

Contractual Obligations

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See Item 7 in our 2019 Form 10-K for a description of our critical accounting estimates and Note 1 to our consolidated financial statements in Item 8 of our 2019 Form 10-K for our significant accounting policies.

There were no changes to our critical accounting estimates in the three months ended March 31, 2020.

See Note 1 to our consolidated financial statements in this Form 10-Q for a discussion of new accounting guidance adopted during the first three months of 2020.

There were no changes to our critical accounting estimates in the six months ended June 30, 2020.

See Note 1 to our consolidated financial statements in this Form 10-Q for a discussion of new accounting guidance adopted during the first six months of 2020.

Quantitative and Qualitative Disclosures About Market Risk

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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 2. Management’s Discussion and Analysis