What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-10-27 compared with 2023-07-28 · 190 added, 168 removed, 399 unchanged (47% of the section changed)

38 unchanged sentences

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

At June 30, 2023, we employed approximately 42,800 people and operated in 31 countries.

External sales by operating segment for the periods ended June 30, 2023 and 2022 are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

At September 30, 2023, we employed approximately 42,000 people and operated in 31 countries.

External sales by operating segment for the periods ended September 30, 2023 and 2022 are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Light Vehicle

42 unchanged sentences

In addition, we resumed the repurchase of common shares using $25 and $23 of cash to repurchase common shares under the program in 2022 and 2021, respectively.

The share repurchase program expires on December 31, 2023, and $102 remains available for future share repurchases as of June 30, 2023.

The share repurchase program expires on December 31, 2023, and $102 remains available for future share repurchases as of September 30, 2023.

Financing actions  — We have taken advantage of competitive debt markets, eliminating our secured debt and extending and restructuring our senior note maturity schedule.

38 unchanged sentences

During 2022, light-truck markets improved across all regions and were up 6% on a global basis compared to 2021.

The outlook for the full year of 2023 reflects global light-truck production being relatively stable across all regions, as production constraints continue to ease, vehicle inventories return to more normal levels, and constrained customer demand is fulfilled.

The outlook for the full year of 2023 reflects light-truck production being relatively stable across Europe, South America and Asia Pacific.

The outlook for North America is uncertain as workers represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) have commenced labor strikes against the U.S.

operations of Ford Motor Company (Ford), Stellantis N.V.

(Stellantis) and General Motors Company (GM).

Commercial vehicle markets — Our primary business is driveline systems for medium and heavy-duty trucks and busses, including the emerging market for hybrid and electric vehicles.

2 unchanged sentences

The strong demand was muted by continued global supply chain disruptions.

The outlook for 2023 is for continued strong demand with production slightly above 2022 levels driven by solid order backlogs.

The outlook for 2023 is for continued strong demand with production moderately above 2022 levels driven by solid order backlogs.

Medium-duty truck production in North America experienced a modest 3% year-over-year increase from 2021 to 2022.

The outlook for 2023 is for a slight increase in production over the prior year.

The outlook for 2023 is for a moderate increase in production over the prior year.

Outside of North America, production of medium- and heavy-duty trucks in South America declined 3% in 2022 as demand moderated following a significant ramp up in production in 2021 with the dissipation of the COVID pandemic in the region.

The 2023 outlook for South America is for a 32% decrease in production from 2022, reflecting the impact of lower year-over-year demand resulting from higher borrowing rates and 2022 pre-buy activity in advance of transition to the Euro 6 emission standard. Production of medium- and heavy-duty trucks in Asia Pacific, driven by China and India, decreased 27% in 2022 compared to 2021 due to China experiencing COVID outbreaks in certain regions and India’s continued struggles to recover from the pandemic.

The 2023 outlook for Asia Pacific is for a modest increase in production from the prior year driven by the market recovery in India gaining traction.

The 2023 outlook for Asia Pacific is for a moderate increase in production from the prior year driven by the market recovery in India gaining traction.

Off-highway markets  — Our off-highway business has a large presence outside of North America, with 66% of its 2022 sales coming from products manufactured in Europe;

10 unchanged sentences

Foreign currency —

With 57% of our first half 2023 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 accounted for 52% of our first half 2023 non-U.S.

With 57% of our year-to-date 2023 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 accounted for 50% of our year-to-date 2023 non-U.S.

sales, while India, Brazil and China accounted for 10%, 8% and 8%, respectively. Although sales in South Africa are less than 5% of our non-U.S.

sales, the rand has been volatile and significantly impacted sales from time to time.

International currencies including the euro, Indian rupee, Chinese renminbi and South African rand, weakened against the U.S.

dollar in the first half of 2023, decreasing sales by $96.

International currencies weakened against the U.S.

dollar in the first nine months of 2023, decreasing sales by $54.

A weaker Indian rupee, South African rand and Chinese renminbi were partially offset by a stronger euro.

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 half of 2023 of approximately $83 are 2% of our consolidated sales and our net asset exposure related to Argentina was approximately $53, including $20 of net fixed assets, at June 30, 2023. During the second quarter of 2018, we determined that Argentina's economy met the GAAP definition of a highly inflationary economy.

Our sales in Argentina for the first nine months of 2023 of approximately $141 are 2% of our consolidated sales and our net asset exposure related to Argentina was approximately $56, including $20 of net fixed assets, at September 30, 2023. During the second quarter of 2018, we determined that Argentina's economy met the GAAP definition of a highly inflationary economy.

In assessing Argentina's economy as highly inflationary we considered its three-year cumulative inflation rate along with other factors.

11 unchanged sentences

Material recovery pricing actions increased year-over-year earnings by $446 in 2022.

Lower commodity prices increased earnings during the second quarter and first half of 2023 by $27 and $35, respectively.

Material cost recovery pricing actions increased earnings in the second quarter and first half of 2023 by $10 and $15, respectively.

Lower commodity prices increased earnings during the third quarter and first nine months of 2023 by $10 and $45, respectively.

Material cost recovery pricing actions decreased earnings in the third quarter of 2023 by $9 and increased earnings in the first nine months of 2023 by $6.

Sales, Earnings and Cash Flow Outlook

4 unchanged sentences

Free cash flow

$(135) - $(20)

Adjusted EBITDA and free cash flow are non-GAAP financial measures.

4 unchanged sentences

The accompanying reconciliations of these non-GAAP measures with the most comparable GAAP measures for the historical periods presented are indicative of the reconciliations that will be prepared upon completion of the periods covered by the non-GAAP guidance.

Our 2023 sales outlook is $10,450 to $10,950, reflecting a modest improvement in global market demand, continued material and inflationary cost recoveries and $300 of net new business backlog.

At our current sales outlook for 2023, we expect full year 2023 adjusted EBITDA to approximate $800 to $900.

Adjusted EBITDA Margin is expected to be 7.9% at the midpoint of our guidance range, a 100 basis-point improvement over 2022, reflecting higher margin net new business and the benefit of material cost recoveries as commodity costs begin to abate being partially offset by continued operational inefficiencies, driven by continuing global supply chain disruptions and customer order volatility, and increased investment to support our electrification strategy.

We expect to generate free cash flow of approximately $75 at the midpoint of our guidance range reflecting the benefit of higher year-over-year adjusted EBITDA being largely offset by higher capital spending to support new business and our continued investment in our electrification strategy.

Summary Consolidated Results of Operations (Second Quarter, 2023 versus 2022)

Three Months Ended June 30,

Ford, Stellantis and GM's contracts with employees represented by the UAW expired on September 14, 2023.

Beginning on September 15, 2023, the UAW commenced labor strikes at certain U.S.

operations of Ford, Stellantis and GM. We have experienced a decrease in order volumes from Ford and Stellantis resulting from the impact of the UAW’s labor strike activities which has caused us to curtail operations at certain of our U.S.

manufacturing and assembly operations.

Our 2023 outlook for sales, adjusted EBITDA and free cash flow have been updated to reflect the impact of the UAW’s labor strike activities.

The low ends of our updated outlook ranges reflect UAW labor strike activities continuing through December 31, 2023 and the upper ends reflect UAW labor strike activities continuing through October 31, 2023.

Summary Consolidated Results of Operations (Third Quarter, 2023 versus 2022)

Three Months Ended September 30,

% of Net Sales

5 unchanged sentences

Restructuring charges, net

Impairment of goodwill

Other income (expense), net

Earnings before interest and income taxes

Loss on extinguishment of debt

Earnings (loss) before interest and income taxes

Interest income

Interest expense

Earnings before income taxes

Earnings (loss) before income taxes

Income tax expense

Equity in earnings (loss) 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 —

1 unchanged sentence

Three Months Ended

September 30,

Amount of Change Due To

5 unchanged sentences

South America

Sales in the second quarter of 2023 were $162 higher than in 2022.

Weaker international currencies decreased sales by $21, principally due to a weaker South African rand, Indian rupee and Chinese renminbi, partially offset by a stronger euro.

Sales in the third quarter of 2023 were $134 higher than in 2022.

Stronger international currencies increased sales by $42, principally due to a stronger euro and Brazilian real, partially offset by a weaker Chinese renminbi and South African rand.

The organic sales increase of $92, or 4%, resulted from improved global construction/mining equipment markets, improved commercial vehicle demand primarily in North America and Europe, higher global light-truck and light-vehicle engine production and the conversion of sales backlog. Pricing actions and recoveries, including material commodity price and inflationary cost adjustments, increased sales by $81.

The North America organic sales decrease of 1% was driven principally by a full-frame light-truck customer program that ended in 2022, partially offset by stronger light- and heavy-duty truck production volumes, higher light-vehicle engine production levels and the conversion of sales backlog.

Second quarter 2023 full-frame light-truck production was up 6% while light-vehicle engine production was up 18% compared to the second quarter of 2022.

Year-over-year Class 8 truck production was up 11% while Classes 5-7 truck production was down 2%.

The North America organic sales decrease of 1% was driven principally by a full-frame light-truck customer program that ended in 2022 and lower light-truck production levels, partially offset by stronger medium/heavy-truck production volumes, higher light-vehicle engine production levels and the conversion of sales backlog.

Third quarter 2023 full-frame light-truck production was down 12% while light-vehicle engine production was up 6% compared to the third quarter of 2022.

Year-over-year Class 8 truck production was up 3% while Classes 5-7 truck production was up 9%.

Excluding currency effects, sales in Europe were up 13% compared with 2022.

With our significant Off-Highway presence in the region, a stronger construction/mining equipment market was a major factor.

Organic sales in this operating segment were up 10% compared with the second quarter of 2022.

The year-over-year organic sales increase in Europe for this operating segment was 7% compared with the third quarter of 2022.

Sales in Europe also benefited from higher year-over-year light-truck and medium/heavy-truck production of 16% and 20%, respectively.

Excluding currency effects, second quarter sales in South America were 10% lower than 2022 reflecting lower medium/heavy-truck production.

Year-over-year South America medium/heavy-truck production was 30% lower than the second quarter of 2022.

Excluding currency effects, sales in Asia Pacific increased 15% compared to 2022 due to a strong construction/mining equipment market and higher light-truck production volumes.

Excluding currency effects, third quarter sales in South America were 16% lower than 2022 reflecting lower medium/heavy-truck production.

Year-over-year South America medium/heavy-truck production was 38% lower than the third quarter of 2022.

Excluding currency effects, sales in Asia Pacific increased 13% compared to 2022 due to higher light-truck and medium/heavy-truck production volumes.

Cost of sales and gross margin —

Cost of sales for the second quarter of 2023 increased $74, or 3%, when compared to 2022.

Cost of sales for the third quarter of 2023 increased $101, or 4%, when compared to 2022.

Cost of sales as a percent of sales was 80 basis points lower than in the previous year.

Incremental margins provided by increased sales volumes, material cost savings of $32, lower commodity costs of $27, lower premium freight of $14 and lower spending on electrification initiatives of $1 were partially offset by non-material inflationary cost impacts of $84, higher warranty expense of $2, higher program launch costs of $9 and operational inefficiencies primarily attributed to continued global supply chain disruptions and frequent customer order changes made with little to no advance notification.

Incremental margins provided by increased sales volumes, material cost savings of $30, lower commodity costs of $10 and lower premium freight of $18 were partially offset by non-material inflationary cost impacts of $62, higher warranty expense of $7, higher program launch costs of $6 and higher spending on electrification initiatives of $8.

Commodity costs are primarily driven by certain grades of steel and aluminum.

Non-material inflation includes higher labor, energy and transportation rates.

Gross margin of $271 for the second quarter of 2023 increased $88 from 2022.

Gross margin as a percent of sales was 9.9% in the second quarter of 2023, 280 basis points higher than in 2022.

Gross margin of $236 for the third quarter of 2023 increased $33 from 2022.

Gross margin as a percent of sales was 8.8% in the third quarter of 2023, 80 basis points higher than in 2022.

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

Material cost recovery mechanisms with our customers lag material cost changes by our suppliers by approximately 90 days.

With commodity costs abating slightly during the second quarter of 2023, gross margin was positively impacted by net material cost recoveries on both a dollar and percentage basis. The recovery of non-material inflation is not specifically provided for in our current contracts with customers resulting in prolonged negotiations and indeterminate recoveries.

With commodity costs abating slightly during the third quarter of 2023, gross margin was positively impacted by net material cost recoveries on both a dollar and percentage basis. The recovery of non-material inflation is not specifically provided for in our current contracts with customers resulting in prolonged negotiations and indeterminate recoveries.

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

SG&A expenses in the second quarter of 2023 were $144 (5.2% of sales) as compared to $130 (5.0% of sales) in the second quarter of 2022. 

SG&A expenses were $14 higher in the second quarter of 2023 primarily due to higher salaried employee wages and incentive compensation and increased software technology investments.

SG&A expenses in the third quarter of 2023 were $126 (4.7% of sales) as compared to $114 (4.5% of sales) in the third quarter of 2022. 

SG&A expenses were $12 higher in the third quarter of 2023 primarily due to higher salaried employee wages and incentive compensation and increased software technology investments.

Amortization of intangibles —

Amortization expense was $4 in the second quarter of 2023 and $3 in the second quarter of 2022. 

See Note 2 for additional information.

Amortization expense was $3 in both the third quarter of 2023 and the third quarter of 2022. 

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

Restructuring charges, net  — 

Net restructuring charges were $3 in the second quarter of 2023 and $1 in the second quarter of 2022. See Note 3 for additional information.

Net restructuring charges were $17 in the third quarter of 2023 and ($1) in the third quarter of 2022. See Note 3 

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

Impairment of goodwill  —

During the third quarter of 2022, we 

evaluated macro-economic conditions, including the impact of the Federal Reserve further increasing the risk-free interest rate, as well as the negative impact of sustained higher commodity costs, non-material cost increases and operational inefficiencies attributable to continued global supply chain disruptions.

We believe that these conditions were factors in our market capitalization falling below the book value of net assets as of September 30, 2022. Accordingly, we concluded a triggering event had occurred and performed interim goodwill impairment analyses for our Commercial Vehicle reporting unit. Based on the results of our interim impairment analysis, we concluded that the carrying value exceeded fair value of our Commercial Vehicle reporting unit and we recorded a goodwill impairment charge of $191, representing a full impairment of goodwill assigned to the Commercial Vehicle reporting unit.

Other income (expense), net —

1 unchanged sentence

Three Months Ended

September 30,

Non-service cost components of pension and OPEB costs

Government assistance

Foreign exchange gain (loss)

Foreign exchange loss

Strategic transaction expenses

1 unchanged sentence

Strategic transaction expenses relate primarily to costs incurred in connection with acquisition and divestiture related activities, including costs to complete the transaction and post-closing integration costs, and other strategic initiatives.

Strategic transaction expenses in the second quarter of 2023 and 2022 were primarily attributable to investigating potential acquisitions and business ventures and other strategic initiatives.

Strategic transaction expenses in the third quarter of 2023 and 2022 were primarily attributable to investigating potential acquisitions and business ventures and other strategic initiatives.

Loss on extinguishment of debt 

1 unchanged sentence

The $1 loss on extinguishment of debt is comprised of the write-off of previously deferred financing costs associated with the April 2025 Notes.

See Note 10 for additional information.

See Note 10 of our consolidated financial statements in Item 1 of Part I for additional information.

Interest income and interest expense 

Interest income was $5 

in the second quarter of 2023 and $2 in 

the second quarter of 2022.

Interest expense increased from $32 in 

the second quarter of 2022 to $39 in 

the second quarter of 2023, due to higher average debt levels and higher interest rates on outstanding borrowings.

Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.5% in 

the second quarter of 2023 and 4.6% in 

the second quarter of 2022.

Income tax expense  — We reported income tax expense of $55 and $18 

the second quarter of 2023 and 2022, respectively.

Our effective tax rates were 62% and 62% for the second quarter of 2023 and 2022.

During the second quarter of 2023, we recorded tax expense of $19 for income tax reserves associated with prior tax years in foreign jurisdictions.

Excluding this item, the effective tax rate would have been 40% for the second quarter of 2023.

— Interest income increased from $2 in the third quarter of 2022 to $5 in third quarter of 2023, due to higher average cash balances and higher interest rates being paid on cash deposits. Interest expense increased from $32 in the third quarter of 2022 to $41 in the third quarter of 2023, due to higher average debt levels and higher interest rates on outstanding borrowings.

Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 6.1% in the third quarter of 2023 and 4.8% in the third quarter of 2022.

Income tax expense  — We reported income tax expense of $33 and $31 for the third quarter of 2023 and 2022, respectively.

Our effective tax rates were 60% and (24)% for the third quarter of 2023 and 2022.

During the third quarter of 2022, we recorded a pre-tax goodwill impairment charge of $191 with an associated income tax benefit of $2. In addition, we recorded tax benefit of $32 for U.S.

tax credits generated. Also, during the third quarter of 2022, we recorded tax expense of $31 for valuation allowances related to U.S.

states driven by differences between our federal and state tax profile.

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

4 unchanged sentences

Net earnings (loss) from equity investments was earnings of $3 in 

the second quarter of 2023 and a loss of $1 in 

the second quarter of 2022.

Net earnings (loss) from DDAC were de minimis in 

the second quarter of 2023 and a loss of $3 in 

the second quarter of 2022.

the third quarter of 2023 and a loss of $1 in 

the third quarter of 2022.

Net earnings (loss) from DDAC were earnings of $1 in 

the third quarter of 2023 and a loss of $3 in 

the third quarter of 2022.

Summary Consolidated Results of Operations (Year-to-Date, 2023 versus 2022)

Six Months Ended June 30,

Nine Months Ended September 30,

% of Net Sales

5 unchanged sentences

Restructuring charges, net

Impairment of goodwill

Other income (expense), net

3 unchanged sentences

Interest expense

Earnings before income taxes

Earnings (loss) before income taxes

Income tax expense

Equity in earnings of affiliates

Equity in earnings (loss) 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.

Six Months Ended

Nine Months Ended

September 30,

Amount of Change Due To

6 unchanged sentences

Sales in 2023 were $460 higher than in 2022.

Weaker international currencies decreased sales by $96, principally due to a weaker euro, Indian rupee, South African rand and Chinese renminbi.

Weaker international currencies decreased sales by $54, principally due to a weaker Indian rupee, South African rand and Chinese renminbi, partially offset by a stronger euro.

The organic sales increase of $514, or 7%, resulted from improved global construction/mining equipment markets, improved commercial vehicle demand primarily in North America and Europe, higher global light-truck and light-vehicle engine production and the conversion of sales backlog. Pricing actions and recoveries, including material commodity price and inflationary cost adjustments, increased sales by $317.

The North America organic sales increase of 1% was driven principally by stronger light-, medium- and heavy-duty truck production volumes, higher light-vehicle engine production levels and the conversion of sales backlog, largely offset by a full-frame light-truck customer program that ended in 2022.

First half 2023 full-frame light-truck production was up 5% while light-vehicle engine production was up 16% compared to the first half of 2022.

Year-over-year North America sales were flat with stronger medium/heavy-truck production volumes, higher light-vehicle engine production levels and the conversion of sales backlog, offset by a full-frame light-truck customer program that ended in 2022 and lower light-truck production volumes.

Year-over-year light-vehicle engine production was up 13% compared to the first nine months of 2022.

Year-over-year Class 8 truck production was up 10% while Classes 5-7 truck production was up 13%.

Excluding currency effects, sale in Europe were up 21% compared with 2022.

Year-over-year full-frame light-truck production volumes were down 1% compared to the first nine months of 2022.

Excluding currency effects, sales in Europe were up 18% compared with 2022.

With our significant Off-Highway presence in the region, a stronger construction/mining equipment market was a major factor.

Organic sales in this operating segment were up 14% compared with the first half of 2022.

The year-over-year organic sales increase in Europe for this operating segment was 14% compared with the first nine months of 2022.

Sales in Europe also benefited from higher year-over-year light-truck and medium/heavy-truck production of 20% and 23%, respectively.

Excluding currency effects, first half sales in South America were 6% lower than 2022 reflecting lower medium/heavy-truck production.

Year-over-year South America medium/heavy-truck production was 25% lower than the first half of 2022.

Excluding currency effects, sales in Asia Pacific increased 16% compared to 2022 due to a strong construction/mining equipment market and higher light-truck production volumes.

Excluding currency effects, first nine months sales in South America were 10% lower than 2022 reflecting lower medium/heavy-truck production.

Year-over-year South America medium/heavy-truck production was 31% lower than the first nine months of 2022.

Excluding currency effects, sales in Asia Pacific increased 15% compared to 2022 due to a strong construction/mining equipment market and higher light-truck and medium/heavy-truck production volumes.

Cost of sales and gross margin —

Cost of sales for the first six months of 2023 increased $206, or 4%, when compared to 2022.

Cost of sales for the first nine months of 2023 increased $307, or 4%, when compared to 2022.

Cost of sales as a percent of sales was 140 basis points lower than in the previous year.

Incremental margins provided by increased sales volumes, material cost savings of $61, lower commodity costs of $35, lower premium freight of $21 and lower spending on electrification initiatives of $8 were partially offset by non-material inflationary cost impacts of $180, higher warranty expense of $14, higher program launch costs of $18 and operational inefficiencies primarily attributed to continued global supply chain disruptions and frequent customer order changes made with little to no advance notification.

Incremental margins provided by increased sales volumes, material cost savings of $91, lower commodity costs of $45 and lower premium freight of $39 were partially offset by non-material inflationary cost impacts of $220, higher warranty expense of $21, higher program launch costs of $24 and operational inefficiencies primarily attributed to continued global supply chain disruptions and frequent customer order changes made with little to no advance notification.

Commodity cost are primarily driven by certain grades of steel and aluminum.

Non-material inflation includes higher labor, energy and transportation rates.

Gross margin of $500 for the first six months of 2023 increased $120 from 2022.

Gross margin as a percent of sales was 9.3% in the first six months of 2023, 180 basis points higher than in 2022.

Gross margin of $736 for the first nine months of 2023 increased $153 from 2022.

Gross margin as a percent of sales was 9.1% in the first nine months of 2023, 140 basis points higher than in 2022.

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

Material cost recovery mechanisms with our customers lag material cost changes by our suppliers by approximately 90 days.

With commodity costs abating slightly during the first half of 2023, gross margin was positively impacted by net material cost recoveries on both a dollar and percentage basis. The recovery of non-material inflation is not specifically provided for in our current contracts with customers resulting in prolonged negotiations and indeterminate recoveries.

With commodity costs abating slightly during the first nine of 2023, gross margin was positively impacted by net material cost recoveries on both a dollar and percentage basis. The recovery of non-material inflation is not specifically provided for in our current contracts with customers resulting in prolonged negotiations and indeterminate recoveries.

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

SG&A expenses in 2023 were $410 (5.1% of sales) as compared to $374 (4.9% of sales) in 2022. 

SG&A expenses were $24 higher in 2023 primarily due to higher salaried employee wages and incentive compensation, increased software technology investments and travel expenses.

SG&A expenses were $36 higher in 2023 primarily due to higher salaried employee wages and incentive compensation, increased software technology investments and marketing expenses.

Amortization of intangibles —

Amortization expense was $10 in both 2023 and 2022. 

See Note 2 for additional information.

Restruct uring charges, net  — 

Net restructuring charges were $4 in the first six months of 2023. See Note 3 for additional information.

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

Restructuring charges, net  — 

Net restructuring charges were $21 in the first nine months of 2023 and ($1) in the first nine months of 2022. See Note 3 

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

Impairment of goodwill  — During the third quarter of 2022, we evaluated macro-economic conditions, including the impact of the Federal Reserve further increasing the risk-free interest rate, as well as the negative impact of sustained higher commodity costs, non-material cost increases and operational inefficiencies attributable to continued global supply chain disruptions.

Other income (expense), net —

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

Six Months Ended

Nine Months Ended

September 30,

Non-service cost components of pension and OPEB costs

8 unchanged sentences

The $1 loss on extinguishment of debt is comprised of the write-off of previously deferred financing costs associated with the April 2025 Notes.

See Note 10 for additional information.

See Note 10 of our consolidated financial statements in Item 1 of Part I for additional information.

Interest income and interest expense 

Interest income was $9 in 2023 and $4 in 2022.

Interest expense increased from $63 in 2022 to $73 in 2023, due to higher average debt levels and higher interest rates on outstanding borrowings.

Interest income increased from $6 in 2022 to $14 in 2023, due to higher average cash balances and higher interest rates being paid on cash deposits. Interest expense increased from $95 in 2022 to $114 in 2023, due to higher average debt levels and higher interest rates on outstanding borrowings.

Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.6% in 2023 and 4.7% in 2022.

Income tax expense  — We reported income tax expense of $118 and $67 for 2023 and 2022, respectively.

Our effective tax rates were 57% and 55% for the first six months of 2023 and 2022.

Our effective tax rates were 58% and (103)% for the first nine months of 2023 and 2022.

During the second quarter of 2023, we recorded tax expense of $19 for income tax reserves associated with prior tax years in foreign jurisdictions.

Excluding this item, the effective tax rate would have been 44% for the 2023 six-month period.

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

During the third quarter of 2022, we recorded a pre-tax goodwill impairment charge of $191 with an associated income tax benefit of $2.

In addition, we recorded a tax benefit of $32 for U.S.

tax credits generated.

Also, during the third quarter of 2022, we recorded tax expense of $31 for valuation 

allowances related to U.S.

states driven by differences between our federal and state tax profile. 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 outside the U.S., different statutory tax rates outside the U.S.

2 unchanged sentences

Equity in earnings of affiliates —

Net earnings from equity investments was $3 in 2023 and de minimis in 2022.

Net earnings (loss) from DDAC was de minimis in 2023 and was a loss of $2 in 2022.

Net earnings (loss) from equity investments was earnings of $6 in 2023 and a loss of $1 in 2022.

Net earnings (loss) from DDAC was earnings of $1 in 2023 and a loss of $5 in 2022.

Segment Results of Operations (2023 versus 2022)

6 unchanged sentences

Currency effects

Light Vehicle sales in the second quarter of 2023, exclusive of currency effects, were 5% higher than 2022 reflecting stronger global markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions, partially offset by a customer program ending in 2022.

Year-over-year North America full-frame light-truck production increased 6% in this year’s second quarter while light-truck production in Europe, South America and Asia Pacific increased 17%, 15% and 20%, respectively.

Light Vehicle sales in the first half of 2023, exclusive of currency effects, were 2% higher than 2022 reflecting stronger global markets, the benefit of net customer pricing and cost recovery actions and the conversion of sales backlog, partially offset by a customer program ending in 2022.

Year-over-year North America full-frame light-truck production increased 5% in this year’s first half while light-truck production in Europe, South America and Asia Pacific increased 20%, 17% and 13%, respectively.

Net customer pricing and cost recovery actions increased year-over-year sales by $48 and $75 in this year’s second quarter and first half, respectively.

Light Vehicle second-quarter and first-half 2023 segment EBITDA increased $33 and $51, respectively, from the comparable periods of 2022.

Higher sales volumes provided a year-over-year earnings benefit of $2 (50% incremental margin) in the second quarter of 2023.

Lower sales volumes decreased year-over-year earnings by $7 (27% decremental margin) in the first half of 2023.

Year-over-year performance-related earnings increases in the second quarter were driven by net customer pricing and cost recovery actions of $48, commodity cost decreases of $21, material cost savings of $11 and lower premium freight costs of $5.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $38, operational inefficiencies of $5, higher program launch costs of $4, higher incentive compensation of $4 and higher spending on electrification initiatives of $1.

The year-over-year performance-related earnings increases in the first half were driven by net customer pricing and cost recovery actions of $75, commodity cost decreases of $44, material cost savings of $20, operational efficiencies of $13 and lower premium freight costs of $6.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $74, higher program launch costs of $8, higher warranty expense of $7 and higher incentive compensation expense of $6.

Light Vehicle sales in the third quarter of 2023, exclusive of currency effects, were 4% higher than 2022 reflecting mixed global markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions, partially offset by a customer program ending in 2022.

Year-over-year North America full-frame light-truck production decreased 12% in this year’s third quarter while light-truck production in Europe and Asia Pacific increased 16% and 2%, respectively, while light-truck production in South America decreased 4%.

Light Vehicle sales in the first nine months of 2023, exclusive of currency effects, were 3% higher than 2022 reflecting generally stronger global markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions, partially offset by a customer program ending in 2022.

Year-over-year North America full-frame light-truck production decreased 1% in this year’s first nine months while light-truck production in Europe, South America and Asia Pacific increased 20%, 8% and 10%, respectively.

Net customer pricing and cost recovery actions increased year-over-year sales by $34 and $109 in this year’s third quarter and first nine months, respectively.

Light Vehicle segment EBITDA increased $15 and $66 in the third quarter and first nine months of 2023, respectively, from the comparable periods of 2022.

Higher sales volumes provided a year-over-year benefit of $2 (67% incremental margin) in the third quarter of 2023.

Lower sales volumes decreased year-over-year earnings by $5 (22% decremental margin) in the first nine months of 2023.

Year-over-year performance-related earnings increases in the third quarter were driven by net customer pricing and cost recovery actions of $34, material cost savings of $10, lower premium freight costs of $9 and operational efficiencies of $16.

Partially offsetting these performance-related increases were inflationary cost increases of $49, higher incentive compensation of $4, higher spending on electrification initiatives of $2 and commodity cost increases of $1.

The year-over-year performance-related earnings increases in the first nine months were driven by net customer pricing and cost recovery actions of $109, commodity cost decreases of $43, material costs savings of $30, lower premium freight costs of $15 and operational efficiencies of $29.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $123, higher incentive compensation of $10, higher program launch costs of $8, higher warranty expense of $7 and higher spending on electrification initiatives of $2.

Commercial Vehicle

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Currency effects

Commercial Vehicle sales in the second quarter of 2023, exclusive of currency effects, were 5% higher than 2022 reflecting improved North America and Europe markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions, partially offset by a weaker South America market.

Year-over-year North America Class 8 production was up 11% while Classes 5-7 was down 2% in this year’s second quarter.

Commercial Vehicle sales in the third quarter of 2023, exclusive of currency effects, were 4% higher than 2022 reflecting improved North America and Europe markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions, partially offset by a weaker South America market.

Year-over-year North America Class 8 production was up 3% while Classes 5-7 was up 9% in this year’s third quarter.

Year-over-year medium/heavy-truck production in Europe was up 20% while medium/heavy-truck production in South America was down 38%.

Commercial Vehicle sales in the first half of 2023, exclusive of currency effects, were 9% higher than 2022 reflecting improved North America and Europe markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions, partially offset by a weaker South America market.

Year-over-year North America Class 8 production was up 14% while Classes 5-7 was up 7% in this year’s first half.

Commercial Vehicles sales in the first nine months of 2023, exclusive of currency effects, were 8% higher than 2022 reflecting improved North America and Europe markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions, partially offset by a weaker South America market.

Year-over-year North America Class 8 production was up 10% while Classes 5-7 was up 13% in this year’s first nine months.

Year-over-year medium/heavy-truck production in Europe was up 23% while medium/heavy-truck production in South America was down 31%.

Net customer pricing and cost recovery actions increased year-over-year sales by $28 and $51 in this year’s second quarter and first half, respectively.

Commercial Vehicle second-quarter and first-half 2023 segment EBITDA increased $18 and $25 from the comparable periods of 2022.

Year-over-year second-quarter earnings improved $3 on lower sales volumes due to improved product mix.

Higher sales volumes provided a year-over-year earnings benefit of $10 (25% incremental margin) in the first half of 2023.

Year-over-year performance-related earnings increases in the second quarter were driven by net customer pricing and cost recovery actions of $28, material cost savings of $8, lower spending on electrification initiatives of $4 and lower premium freight costs of $3.

Partially offsetting these performance-related earnings increases were operational inefficiencies of $9, inflationary cost increases of $7, higher program launch costs of $4, commodity cost increases of $3, higher incentive compensation expense of $3 and higher warranty costs of $1.

Year-over-year performance-related earnings increases in the first half were driven by net customer pricing and cost recovery of $51, material cost savings of $17, lower spending on electrification initiatives $13 and lower premium freight costs of $6.

Partially offsetting these performance-related earnings increases were operational inefficiencies of $37, inflationary cost increases of $15, higher program launch costs of $6, commodity cost increases of $5, higher incentive compensation expense of $4 and higher warranty costs of $2.

Net customer pricing and cost recovery actions increased year-over-year sales by $19 and $70 in this year’s third quarter and first nine months, respectively.

Commercial Vehicle segment EBITDA increased $11 and $36 in the third quarter and first nine months of 2023, respectively, from the comparable periods of 2022.

Year-over-year third-quarter earnings improved by $10 on $1 of higher sales volumes due to improved product mix.

Higher sales volumes and improved product mix provided a year-over-year earnings increase of $20 (49% incremental margin) in the first nine months of 2023.

Year-over-year performance-related earnings increases in the third quarter were driven by net customer pricing and cost recovery actions of $19, material cost savings of $9, lower premium freight costs of $4, lower spending on electrification initiatives of $3 and commodity cost decreases of $2.

Largely offsetting these performance-related earnings increases were operational inefficiencies of $23, inflationary cost increases of $4, higher incentive compensation of $3, higher program launch costs of $3 and higher warranty costs of $3.

Year-over-year performance-related earnings increases in the first nine months were driven by net customer pricing and cost recovery actions of $70, material cost savings of $26, lower spending on electrification initiatives of $16 and lower premium freight costs of $10.

Partially offsetting these performance-related earnings increases were operational inefficiencies of $60, inflationary cost increases of $19, higher program launch costs of $9, higher incentive compensation of $7, higher warranty costs of $5 and commodity cost increases of $3.

Segment EBITDA

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Currency effects

Off-Highway sales in the second quarter and first half of 2023, exclusive of currency effects, were 10% and 14%, respectively, higher than the same periods of 2022 reflecting strong global markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions.

Year-over-year global construction/mining equipment markets increased 11% while global agricultural equipment markets were relatively stable with production decreasing 2% in this year’s second quarter.

Year-over-year global construction/mining equipment markets increased 11% while global agricultural equipment markets were relatively stable with production decreasing 2% in this year’s first half.

Net customer pricing and cost recovery actions increased year-over-year sales by $36 and $83 in this year’s second quarter and first half, respectively.

Off-Highway second-quarter and first-half 2023 segment EBITDA increased $31 and $49, respectively, from the comparable periods of 2022.

Higher sales volumes provided a year-over-year earnings benefit of $9 (24% incremental margin) and $32 (25% incremental margin) in the second quarter and first half of 2023, respectively.

Year-over-year performance-related earnings increases in the second quarter were driven by net customer pricing and cost recovery actions of $36, material cost savings of $10, commodity cost decreases of $6 and lower premium freight costs of $4.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $24, operational inefficiencies of $4, higher incentive compensation expense of $3, higher warranty expenses of $1 and higher spending on electrification initiatives of $1.

Year-over-year performance-related earnings increases in the first half were driven by net customer pricing and cost recovery actions of $83, material cost savings of $18 and lower premium freight costs of $7.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $64, operational inefficiencies of $10, higher warranty expenses of $5, higher incentive compensation expense of $4 and higher spending on electrification initiatives of $1.

Off-Highway sales in the third quarter and first nine months of 2023, exclusive of currency effects, were 3% and 10% higher than the same period of 2022, respectively, reflecting strong global markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions.

Net customer pricing and cost recovery actions increased year-over-year sales by $14 and $97 in this year’s third quarter and first nine months, respectively.

Off-Highway segment EBITDA increased $19 and $68 in the third quarter and first nine months of 2023, respectively, from the comparable periods of 2022.

Higher sales volumes and improved product mix provided a year-over-year earnings benefit of $5 (100% incremental margin) in the third quarter of 2023.

Higher sales volumes provided a year-over-year earnings benefit of $37 (28% incremental margin) in the first nine months of 2023.

Year-over-year performance-related earnings increases in the third quarter were driven by net customer pricing and cost recovery actions of $14, material cost savings of $8, commodity cost decreases of $8 and lower premium freight costs of $3.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $11, operational inefficiencies of $4, higher warranty expenses of $3, higher incentive compensation of $3 and higher spending on electrification initiatives of $1.

Year-over-year performance-related earnings increases in the first nine months of 2023 were driven by net customer pricing and cost recovery actions of $97, material cost savings of $26, lower premium freight costs of $10 and commodity cost decreases of $8.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $75, operational inefficiencies of $14, higher warranty expenses of $8, higher incentive compensation of $7 and higher spending on electrification initiatives of $2.

Power Technologies

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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.

Power Technologies sales in the second quarter and first half of 2023, exclusive of currency effects, were 11% and 12%, respectively, higher than the same periods of 2022 reflecting improved North America and Europe markets, the conversion of sale backlog and the benefit of net customer pricing and cost recovery actions.

Year-over-year North America light-vehicle engine production was up 18% and 16% compared to the second quarter and first half of 2022, respectively.

Year-over-year Europe light-vehicle engine production was up 8% and 12% compared to the second quarter and first half of 2022, respectively.

Net customer pricing and cost recovery actions increased year-over-year sales by $14 and $27 in this year’s second quarter and first half, respectively.

Power Technologies second-quarter and first-half 2023 segment EBITDA decreased $2 and $8, respectively, from the comparable periods of 2022.

Higher sales volumes provided a year-over-year earnings benefit of $1 (6% incremental margin) and $5 (11% incremental margin) in the second quarter and first half of 2023, respectively.

Year-over-year performance-related decreases in the second quarter were driven by inflationary cost increases of $11, operational inefficiencies of $9, higher incentive compensation expense of $2, higher spending on electrification initiatives of $2 and higher program launch costs of $1.

Partially offsetting these performance-related decreases were net customer pricing and cost recovery actions of $14, commodity cost decreases of $3, material cost savings of $3 and lower premium freight costs of $2.

Year-over-year performance-related decreases in the second half were driven by inflationary cost increases of $21, operational inefficiencies of $13, commodity cost increases of $4, higher program launch costs of $4, higher incentive compensation expense of $3 and higher spending on electrification initiatives of $2.

Partially offsetting these performance-related decreases were net customer pricing and cost recovery actions of $27, material cost savings of $6 and lower premium freight costs of $2.

Power Technologies sales in the third quarter and first nine months of 2023, exclusive of currency effects, were 6% and 10% higher than the same periods of 2022, respectively, reflecting improved North America and Europe markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions.

Year-over-year North America light-vehicle engine production was up 6% and 13% compared to the third quarter and first nine months of 2022, respectively.

Year-over-year Europe light-vehicle engine production was up 6% and 12% compared to the third quarter and first nine months of 2022, respectively.

Net customer pricing and cost recovery actions increased year-over-year sales by $14 and $41 in this year’s third quarter and first nine months, respectively.

Power Technologies segment EBITDA increased $7 and decreased $1 in the third quarter and first nine months of 2023, respectively, from the comparable periods of 2022.

Unfavorable product mix resulted in decremental margins on higher year-over-year sales volumes in both the third quarter and first nine months of 2023.

Year-over-year performance-related earnings increases in the third quarter were driven by net customer pricing and cost recovery actions of $14, operational efficiencies of $8, material cost savings of $3, lower premium freight costs of $2 and commodity cost decreases of $1.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $4, higher program launch costs of $3, increased spending on electrification initiatives of $3, higher incentive compensation of $2 and higher warranty expenses of $1.

Year-over-year performance-related earnings increases in the first nine months were driven by net customer pricing and cost recovery actions of $41, material cost savings of $9 and lower premium freight costs of $4.

Partially offsetting these performance-related earnings increases were inflationary cost increases of $25, higher program launch costs of $7, higher incentive compensation of $5, increased spending on electrification initiatives of $5, operational inefficiencies of $5, commodity cost increases of $3 and higher warranty expenses of $1.

Non-GAAP Financial Measures

Adjusted EBITDA

We have defined adjusted EBITDA as net income before interest, income 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, income 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.

1 unchanged sentence

In addition to its use by management, we also believe adjusted EBITDA is a measure widely used by securities analysts, investors and others to evaluate financial performance of our company relative to other Tier 1 automotive suppliers.

Adjusted EBITDA should not be considered a substitute for earnings before income taxes, net income or other results reported in accordance with GAAP.

Adjusted EBITDA should not be considered a substitute for earnings (loss) before income taxes, net income (loss) or other results reported in accordance with GAAP.

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

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

Equity in earnings (loss) of affiliates

Income tax expense

Earnings before income taxes

Earnings (loss) before income taxes

Depreciation and amortization

2 unchanged sentences

Loss on extinguishment of debt

Distress supplier costs

Distressed supplier costs

Impairment of goodwill

Adjusted EBITDA

2 unchanged sentences

Free Cash Flow

We have defined free cash flow as cash provided by (used in) operating activities less purchases of property, plant and equipment.

We have defined free cash flow as cash provided by operating activities less purchases of property, plant and equipment.

We believe free cash flow is useful to investors in evaluating the operational cash flow of the company inclusive of the spending required to maintain the operations.

Free cash flow is not intended to represent nor be an alternative to the measure of net cash provided by (used in) operating activities reported in accordance with GAAP.

Free cash flow is not intended to represent nor be an alternative to the measure of net cash provided by operating activities reported in accordance with GAAP.

Free cash flow may not be comparable to similarly titled measures reported by other companies.

The following table reconciles net cash flows provided by (used in) operating activities to free cash flow.

The following table reconciles net cash flows provided by operating activities to free cash flow.

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net cash provided by operating activities

1 unchanged sentence

Free cash flow

The following table provides a reconciliation of cash and cash equivalents to liquidity, a non-GAAP measure, at June 30, 2023:

The following table provides a reconciliation of cash and cash equivalents to liquidity, a non-GAAP measure, at September 30, 2023:

Cash and cash equivalents

3 unchanged sentences

Total liquidity

Cash deposits are maintained to provide credit enhancement for certain agreements and are reported as part of cash and cash equiv alents.

For most of these deposits, the cash may be withdrawn if a comparable security is provided in the form of letters of credit.

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 had availability of $1,134 at June 30, 2023 under the Revolving Facility after deducting $16 of outstan ding letters of credit.

The components of our June 30, 2023 consolidated cash balance were as follows:

We had availability of $1,141 at September 30, 2023 under our Revolving Facility after deducting $9 of outstanding letters of credit.

The components of our September 30, 2023 consolidated cash balance were as follows:

Cash and cash equivalents

Cash and cash equivalents held as deposits

Cash and cash equivalents held at less than wholly-owned subsidiaries

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On March 14, 2023, we amended our credit and guaranty agreement, extending its maturity to March 14, 2028.

At June 30, 2023, we were in compliance with the covenants of our financing agreements.

At September 30, 2023, we were in compliance with the covenants of our financing agreements.

Under 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 following table summarizes our consolidated statement of cash flows:

Six Months Ended

Nine Months Ended

September 30,

Cash used for changes in working capital

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Exclusive of working capital, other cash provided by operations was $367 in 2023 and $328 in 2022.

The year-over-year increase is primarily attributable to higher operating earnings in 2023, partially offset by lower year-over-year dividends received from equity-method investments of $29.

The year-over-year increase is primarily attributable to higher operating earnings in 2023, partially offset by lower year-over-year dividends received from equity-method investments, higher year-over-year cash paid for interest and higher year-over-year cash payments made to distressed suppliers.

Working capital used cash of $169 and $21 in 2023 and 2022.

Cash of $243 and $345 was used to finance receivables in 2023 and 2022, respectively.

The use of cash to finance receivables in both periods is primarily driven by second quarter sales exceeding first quarter sales in both years.

Cash of $116 and $152 was used to fund higher inventory levels in 2023 and 2022, respectively.

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The increase in capital spending during 2023 is in support of awarded next generation programs and new business.

During 2022, purchases of marketable securities were largely funded by proceeds from sales and maturities of marketable securities.

During 2022, purchases of marketable securities were largely funded by proceeds from sales of marketable securities.

Financing activities 

2 unchanged sentences

Also during 2023, we redeemed $200 of our April 2025 Notes.

During 2023, we paid financing costs of $2 to amend our credit and guaranty agreement, extending the Revolving Facility maturity to March 14, 2028. We used cash of $29 for dividend payments to common stockholders during both 2023 and 2022.

During 2023, we paid financing costs of $2 to amend our credit and guaranty agreement, extending the Revolving Facility maturity to March 14, 2028. We used cash of $43 in both 2023 and 2022 for dividend payments to common stockholders.

We used cash of $25 to repurchase common shares under our share repurchase program during 2022.

Distributions to noncontrolling interests totaled $3 in 2023 and $2 in 2022.

Distributions to noncontrolling interests totaled $10 in 2023 and $8 in 2022.

Hydro-Québec made cash contributions to Dana TM4 of $18 in 2023 and $30 in 2022.

Off-Balance Sheet Arrangements

There have been no material changes at June 30, 2023 in our off-balance sheet arrangements from those reported or estimated in the disclosures in Item 7 of our 2022 Form 10-K.

There have been no material changes at September 30, 2023 in our off-balance sheet arrangements from those reported or estimated in the disclosures in Item 7 of our 2022 Form 10-K.

Contractual Obligations

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See Item 7 in our 2022 Form 10-K for a description of our critical accounting estimates and Note 1 to our consolidated financial statements in Item 8 of our 2022 Form 10-K for our significant accounting policies.

There were no changes to our critical accounting estimates in the six months ended June 30, 2023.

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 2023. 

There were no changes to our critical accounting estimates in the nine months ended September 30, 2023.

See Note 1 to our consolidated financial statements in this Form 10-Q for a discussion of new accounting guidance adopted during the first nine months of 2023. 

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

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