10-Q 1 dan20220331_10q.htm FORM 10-Q dan20220331_10q.htm
0000026780 Dana Inc. false --12-31 Q1 2022 7 7 25 26 50,000,000 50,000,000 0.01 0.01 0 0 450,000,000 450,000,000 0.01 0.01 143,334,271 144,238,660 13,466,902 11,661,591 0.10 3 8 325 396 320 391 5 15 7 Weighted-average per share See Note 10 for additional details. In conjunction with the issuance of the April 2025 Notes we entered into 8-year fixed-to-fixed cross-currency swaps which have the effect of economically converting the April 2025 Notes to euro-denominated debt at a fixed rate of 3.850%. See Note 13 for additional information. Realized gains and losses from currency-related forward contracts associated with forecasted transactions or from other derivative instruments treated as cash flow hedges are reclassified from AOCI into the same line item in the consolidated statement of operations in which the underlying forecasted transaction or other hedged item is recorded. 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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: March 31, 2022

OR

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From to

Commission File Number: 1-1063

 

Dana Incorporated

(Exact name of registrant as specified in its charter)

  

Delaware

 

26-1531856

(State of incorporation)

 

(IRS Employer Identification Number)

 

3939 Technology Drive, Maumee, OH

 

43537

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (419887-3000

 

Securities registered pursuant to Section 12(b) of the Act:

Common stock $0.01 par value

 

DAN

 

New York Stock Exchange

(Title of each class)

 

(Trading Symbol)

 

(Name of exchange on which registered)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  ☑    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☑    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes     No  ☑

 

There were 143,334,271 shares of the registrant’s common stock outstanding at April 15, 2022.

 

 

 
 

DANA INCORPORATED – FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

 

TABLE OF CONTENTS

 

 

 

10-Q Pages

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1

Financial Statements

3

 

Consolidated Statement of Operations (Unaudited)

3

 

Consolidated Statement of Comprehensive Income (Unaudited)

4

 

Consolidated Balance Sheet (Unaudited)

5

 

Consolidated Statement of Cash Flows (Unaudited)

6

 

Notes to Consolidated Financial Statements (Unaudited)

7

 

 

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

 

 

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

37

 

 

 

Item 4

Controls and Procedures

37

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1

Legal Proceedings

38

 

 

 

Item 1A

Risk Factors

38

 

 

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

38

 

 

 

Item 6

Exhibits

38

 

 

 

Signatures

 

39

 

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Dana Incorporated

Consolidated Statement of Operations (Unaudited)

(In millions, except per share amounts)

 

  

Three Months Ended

 
  

March 31,

 
  

2022

  

2021

 

Net sales

 $2,480  $2,263 

Costs and expenses

        

Cost of sales

  2,283   2,012 

Selling, general and administrative expenses

  130   119 

Amortization of intangibles

  4   4 

Restructuring charges, net

  (1)  1 

Other income (expense), net

  2   (19)

Earnings before interest and income taxes

  66   108 

Interest income

  2   2 

Interest expense

  31   34 

Earnings before income taxes

  37   76 

Income tax expense

  18   22 

Equity in earnings of affiliates

  1   14 

Net income

  20   68 

Less: Noncontrolling interests net income

  4   1 

Less: Redeemable noncontrolling interests net loss

  (1)  (4)

Net income attributable to the parent company

 $17  $71 
         

Net income per share available to common stockholders

        

Basic

 $0.12  $0.49 

Diluted

 $0.12  $0.48 
         

Weighted-average common shares outstanding

        

Basic

  144.2   144.9 

Diluted

  145.3   146.4 

 

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

 

 

 

Dana Incorporated

Consolidated Statement of Comprehensive Income (Unaudited)

(In millions)

 

   

Three Months Ended

 
   

March 31,

 
   

2022

   

2021

 

Net income

  $ 20     $ 68  

Other comprehensive income (loss), net of tax:

               

Currency translation adjustments

    39       (5 )

Hedging gains and losses

    (4 )     (17 )

Defined benefit plans

    1       3  

Other comprehensive income (loss)

    36       (19 )

Total comprehensive income

    56       49  

Less: Comprehensive (income) loss attributable to noncontrolling interests

    (4 )     1  

Less: Comprehensive loss attributable to redeemable noncontrolling interests

    1       3  

Comprehensive income attributable to the parent company

  $ 53     $ 53  

 

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

 

 

 

Dana Incorporated

Consolidated Balance Sheet (Unaudited)

(In millions, except share and per share amounts)

 

  

March 31,

  

December 31,

 
  

2022

  

2021

 

Assets

        

Current assets

        

Cash and cash equivalents

 $259  $268 

Marketable securities

  19   17 

Accounts receivable

        

Trade, less allowance for doubtful accounts of $7 in 2022 and $7 in 2021

  1,625   1,321 

Other

  250   220 

Inventories

  1,631   1,564 

Other current assets

  210   196 

Total current assets

  3,994   3,586 

Goodwill

  479   482 

Intangibles

  225   233 

Deferred tax assets

  603   580 

Other noncurrent assets

  128   131 

Investments in affiliates

  175   174 

Operating lease assets

  244   247 

Property, plant and equipment, net

  2,205   2,199 

Total assets

 $8,053  $7,632 
         

Liabilities and equity

        

Current liabilities

        

Short-term debt

 $301  $23 

Current portion of long-term debt

  8   8 

Accounts payable

  1,717   1,571 

Accrued payroll and employee benefits

  207   184 

Taxes on income

  55   41 

Current portion of operating lease liabilities

  39   43 

Other accrued liabilities

  293   304 

Total current liabilities

  2,620   2,174 

Long-term debt, less debt issuance costs of $25 in 2022 and $26 in 2021

  2,376   2,386 

Noncurrent operating lease liabilities

  211   209 

Pension and postretirement obligations

  390   398 

Other noncurrent liabilities

  269   292 

Total liabilities

  5,866   5,459 

Commitments and contingencies (Note 14)

          

Redeemable noncontrolling interests

  200   198 

Parent company stockholders' equity

        

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

      

Common stock, 450,000,000 shares authorized, $0.01 par value, 143,334,271 and 144,238,660 shares outstanding

  2   2 

Additional paid-in capital

  2,431   2,427 

Retained earnings

  664   662 

Treasury stock, at cost (13,466,902 and 11,661,591 shares)

  (216)  (184)

Accumulated other comprehensive loss

  (949)  (985)

Total parent company stockholders' equity

  1,932   1,922 

Noncontrolling interests

  55   53 

Total equity

  1,987   1,975 

Total liabilities, redeemable noncontrolling interests and equity

 $8,053  $7,632 

 

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

 

 

 

Dana Incorporated

Consolidated Statement of Cash Flows (Unaudited)

(In millions)

 

   

Three Months Ended

 
   

March 31,

 
   

2022

   

2021

 

Operating activities

               

Net income

  $ 20     $ 68  

Depreciation

    91       88  

Amortization

    6       7  

Amortization of deferred financing charges

    1       2  

Earnings of affiliates, net of dividends received

    (1 )     (14 )

Stock compensation expense

    4       5  

Deferred income taxes

    (25 )     (6 )

Pension expense, net

    (1 )        

Change in working capital

    (211 )     (133 )

Other, net

    (5 )     10  

Net cash provided by (used in) operating activities

    (121 )     27  

Investing activities

               

Purchases of property, plant and equipment

    (116 )     (53 )

Acquisition of businesses, net of cash acquired

            (17 )

Purchases of marketable securities

    (5 )     (11 )

Proceeds from sales and maturities of marketable securities

    2       6  

Other, net

    2       2  

Net cash used in investing activities

    (117 )     (73 )

Financing activities

               

Net change in short-term debt

    278       (1 )

Proceeds from long-term debt

    2       2  

Repayment of long-term debt

    (3 )     (1 )

Deferred financing payments

            (2 )

Dividends paid to common stockholders

    (14 )     (14 )

Repurchases of common stock

    (25 )        

Distributions to noncontrolling interests

    (1 )        

Contributions from redeemable noncontrolling interests

    2       1  

Payments to acquire noncontrolling interests

    (3 )        

Other, net

    (7 )     (1 )

Net cash provided by (used in) financing activities

    229       (16 )

Net decrease in cash, cash equivalents and restricted cash

    (9 )     (62 )

Cash, cash equivalents and restricted cash – beginning of period

    287       567  

Effect of exchange rate changes on cash balances

    2       (12 )

Cash, cash equivalents and restricted cash – end of period (Note 5)

  $ 280     $ 493  
                 

Non-cash investing activity

               

Purchases of property, plant and equipment held in accounts payable

  $ 74     $ 56  

 

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

 

 

 

Dana Incorporated

Index to Notes to Consolidated Financial Statements

 

 

1.

Organization and Summary of Significant Accounting Policies

 

 

2.

Acquisitions

 

 

3.

Goodwill and Other Intangible Assets

 

 

4.

Restructuring of Operations

 

 

5.

Supplemental Balance Sheet and Cash Flow Information

 

 

6.

Stockholders' Equity

 

 

7.

Redeemable Noncontrolling Interests

 

 

8.

Earnings per Share

 

 

9.

Stock Compensation

 

 

10.

Pension and Postretirement Benefit Plans

   
11. Marketable Securities

 

 

12.

Financing Agreements

 

 

13.

Fair Value Measurements and Derivatives

 

 

14.

Commitments and Contingencies

 

 

15.

Warranty Obligations

 

 

16.

Income Taxes

 

 

17.

Other Income (Expense), Net

 

 

18.

Revenue from Contracts with Customers

 

 

19.

Segments

 

 

20.

Equity Affiliates

 

 

Notes to Consolidated Financial Statements (Unaudited)

(In millions, except share and per share amounts)

 

 

Note 1. Organization and Summary of Significant Accounting Policies

 

General

 

Dana Incorporated (Dana) is headquartered in Maumee, Ohio and was incorporated in Delaware in 2007. As a global provider of high technology driveline (axles, driveshafts and transmissions); sealing and thermal-management products; and motors, power inverters, and control systems for electric vehicles our customer base includes virtually every major vehicle manufacturer in the global light vehicle, medium/heavy vehicle and off-highway markets.

 

The terms "Dana," "we," "our" and "us," when used in this report, are references to Dana. These references include the subsidiaries of Dana unless otherwise indicated or the context requires otherwise.

 

Summary of significant accounting policies

 

Basis of presentation — Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. These statements are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods. The results reported in these consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021 (the 2021 Form 10-K). Certain prior year amounts have been reclassified to conform to the current presentation.

 

During the first quarter of 2022, we identified an error related to certain intercompany inventory transfers that were not appropriately eliminated and recorded an adjustment of $8 to cost of sales. A portion of this adjustment relates to prior periods. We concluded that the correction of this error is not material to the financial statements for the quarter ended March 31, 2022 or any prior periods.  

 

Recently issued accounting pronouncements

 

In October 2021, the FASB issued Accounting Standards Update (ASU) 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The guidance is intended to provide clarification on how to account for contract assets acquired via business combination, which will generally be at the same value as recognized by the acquiree assuming the acquiree followed US GAAP. The guidance becomes effective January 1, 2023. We do not expect adoption of this guidance to have a material impact on our consolidated financial statements.

 

In November 2021, the FASB issued ASU 2021-10, Disclosures by Business Entities about Government Assistance. This guidance requires annual disclosures about the nature of certain government assistance received, the accounting policy used to account for the transactions, the location in the financial statements where such transactions were recorded and significant terms and conditions associated with such transactions. The guidance is effective for annual periods beginning after December 15, 2021, with early adoption permitted. We do not expect adoption of this guidance to have a material impact on our consolidated financial statements. 

 

Note 2. Acquisitions

 

Pi Innovo Holding Limited — On March 1, 2021, we acquired the remaining 51% ownership interest in Pi Innovo Holding Limited (Pi Innovo). Pi Innovo designs, develops and manufactures electronic control units spanning a range of applications and industries. The acquisition of the remaining ownership interest provided us with a 100% ownership interest in Pi Innovo. The total purchase consideration of $35 is comprised of $18 of cash paid at closing and the $17 fair value of our previously held equity method investment in Pi Innovo. The results of operations of the business are reported within our Commercial Vehicle operating segment. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial information is presented.

 

 

Note 3. Goodwill and Other Intangible Assets

 

Goodwill — Our goodwill is tested for impairment annually as of October 31 for all of our reporting units, and more frequent if events or circumstances warrant such a review. We did not identify any events or circumstances during the first quarter of 2022 that required an interim impairment test. We expect that the fair value of our reporting units will continue to exceed their carrying values in future periods.

 

8

 

The change in the carrying amount of goodwill in 2022 is due to currency fluctuation.

 

Changes in the carrying amount of goodwill by segment — 

 

  

Light Vehicle

  

Commercial Vehicle

  

Off-Highway

  

Power Technologies

  

Total

 

Balance, December 31, 2021

 $  $201  $281  $  $482 

Currency impact

      2   (5)      (3)

Balance, March 31, 2022

 $  $203  $276  $  $479 

 

Components of other intangible assets — 

 

     

March 31, 2022

  

December 31, 2021

 
  

Weighted Average Useful Life (years)

  

Gross Carrying Amount

  

Accumulated Impairment and Amortization

  

Net Carrying Amount

  

Gross Carrying Amount

  

Accumulated Impairment and Amortization

  

Net Carrying Amount

 

Amortizable intangible assets

                           

Core technology

 8  $160  $(111) $49  $161  $(110) $51 

Trademarks and trade names

 13   30   (12)  18   31   (12)  19 

Customer relationships

 8   514   (430)  84   519   (431)  88 

Non-amortizable intangible assets

                           

Trademarks and trade names

     74       74   75       75 
     $778  $(553) $225  $786  $(553) $233 

 

The net carrying amounts of intangible assets, other than goodwill, attributable to each of our operating segments at  March 31, 2022 were as follows: Light Vehicle — $19, Commercial Vehicle — $74, Off-Highway — $126 and Power Technologies — $6.

 

Amortization expense related to amortizable intangible assets — 

 

  

Three Months Ended

 
  

March 31,

 
  

2022

  

2021

 

Charged to cost of sales

 $2  $3 

Charged to amortization of intangibles

  4   4 

Total amortization

 $6  $7 

 

The following table provides the estimated aggregate pre-tax amortization expense related to intangible assets for each of the next five years based on March 31, 2022 exchange rates. Actual amounts may differ from these estimates due to such factors as currency translation, customer turnover, impairments, additional intangible asset acquisitions and other events.

 

  

Remainder of 2022

  

2023

  

2024

  

2025

  

2026

 

Amortization expense

 $17  $23  $21  $20  $18 

 

9

 
 

Note 4. Restructuring of Operations

 

Our restructuring activities have historically included rationalizing our operating footprint by consolidating facilities, positioning operations in lower cost locations and reducing overhead costs. In recent years our focus has been primarily headcount reduction initiatives to reduce operating costs, including actions taken at acquired businesses to rationalize cost structures and achieve operating synergies. Restructuring expense includes costs associated with current and previously announced actions and is comprised of contractual and noncontractual separation costs and exit costs, including certain operating costs of facilities that we are in the process of closing.

 

Accrued restructuring costs and activity

 

  

Employee Termination Benefits

  

Exit Costs

  

Total

 

Balance, December 31, 2021

 $11  $  $11 

Charges to restructuring

           

Adjustments of accruals

  (1)      (1)

Cash payments

  (1)      (1)

Balance, March 31, 2022

 $9  $  $9 

 

At March 31, 2022, the accrued employee termination benefits include costs to reduce approximately 100 employees to be completed over the next year.

 

 

Note 5. Supplemental Balance Sheet and Cash Flow Information

 

Inventory components at

 

   

March 31, 2022

   

December 31, 2021

 

Raw materials

  $ 699     $ 651  

Work in process and finished goods

    1,029       1,000  

Inventory reserves

    (97 )     (87 )

Total

  $ 1,631     $ 1,564  

 

Cash, cash equivalents and restricted cash at —

 

   

March 31, 2022

   

December 31, 2021

   

March 31, 2021

   

December 31, 2020

 

Cash and cash equivalents

  $ 259     $ 268     $ 483     $ 559  

Restricted cash included in other current assets

    9       9       7       5  

Restricted cash included in other noncurrent assets

    12       10       3       3  

Total cash, cash equivalents and restricted cash

  $ 280     $ 287     $ 493     $ 567  

 

 

10

 
 

Note 6. Stockholders’ Equity

 

Common stock — Our Board of Directors declared a cash dividend of ten cents per share of common stock in the first quarter of 2022. Dividends accrue on restricted stock units (RSUs) granted under our stock compensation program and will be paid in cash or additional units when the underlying units vest.

 

Share repurchase program — On February 16, 2021 our Board of Directors approved an extension of our existing common stock share repurchase program through December 31, 2023. Under the program, we spent $25 to repurchase 1,483,742 shares of our common stock during the first quarter of 2022 through open market transactions. Approximately $102 remained available for future share repurchases as of March 31, 2022.

 

Changes in equity

 

2022

 

Common Stock

  

Additional Paid-In Capital

  

Retained Earnings

  

Treasury Stock

  

Accumulated Other Comprehensive Loss

  

Non-controlling Interests

  

Total Equity

 

Balance, December 31, 2021

 $2  $2,427  $662  $(184) $(985) $53  $1,975 

Net income

          17           4   21 

Other comprehensive income (loss)

                  36       36 

Common stock dividends and dividend equivalents

          (14)              (14)

Common stock share repurchases

              (25)          (25)

Distributions to noncontrolling interests

                      (1)  (1)

Purchase of noncontrolling interests

                      (1)  (1)

Redeemable noncontrolling interests adjustment to redemption value

          (1)              (1)

Stock compensation

      4                   4 

Stock withheld for employees taxes

              (7)          (7)

Balance, March 31, 2022

 $2  $2,431  $664  $(216) $(949) $55  $1,987 

 

2021

 

Common Stock

  

Additional Paid-In Capital

  

Retained Earnings

  

Treasury Stock

  

Accumulated Other Comprehensive Loss

  

Non-controlling Interests

  

Total Equity

 

Balance, December 31, 2020

 $2  $2,408  $530  $(156) $(1,026) $76  $1,834 

Net income

          71           1   72 

Other comprehensive income (loss)

                  (18)  (2)  (20)

Common stock dividends and dividend equivalents

          (14)              (14)

Redeemable noncontrolling interests adjustment to redemption value

          (4)              (4)

Stock compensation

      7                   7 

Stock withheld for employees taxes

              (5)          (5)

Balance, March 31, 2021

 $2  $2,415  $583  $(161) $(1,044) $75  $1,870 

 

11

 

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

 

  

Parent Company Stockholders

 

2022

 

Foreign Currency Translation

  

Hedging

  

Defined Benefit Plans

  

Accumulated Other Comprehensive Loss

 

Balance, December 31, 2021

 $(809) $4  $(180) $(985)

Other comprehensive income (loss):

                

Currency translation adjustments

  39           39 

Holding gains and losses

      19       19 

Reclassification of amount to net income (a)

      (22)      (22)

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

          2   2 

Tax expense

      (1)  (1)  (2)

Other comprehensive income (loss)

  39   (4)  1   36 

Balance, March 31, 2022

 $(770) $  $(179) $(949)

 

  

Parent Company Stockholders

 

2021

 

Foreign Currency Translation

  

Hedging

  

Defined Benefit Plans

  

Accumulated Other Comprehensive Loss

 

Balance, December 31, 2020

 $(802) $9  $(233) $(1,026)

Other comprehensive income (loss):

                

Currency translation adjustments

  (4)          (4)

Holding gains and losses

      32       32 

Reclassification of amount to net income (a)

      (50)      (50)

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

          4   4 

Tax (expense) benefit

      1   (1)   

Other comprehensive income (loss)

  (4)  (17)  3   (18)

Balance, March 31, 2021

 $(806) $(8) $(230) $(1,044)

 

 

(a) Realized gains and losses from currency-related forward contracts associated with forecasted transactions or from other derivative instruments treated as cash flow hedges are reclassified from AOCI into the same line item in the consolidated statement of operations in which the underlying forecasted transaction or other hedged item is recorded. See Note 13 for additional details.

(b) See Note 10 for additional details.

 

12

 
 

Note 7. Redeemable Noncontrolling Interests

 

Hydro-Québec holds 45% redeemable noncontrolling interest in Dana TM4 Inc., Dana TM4 USA, LLC, Dana (Beijing) Electric Motor Co., Ltd., Dana TM4 Italia S.r.l., Ashwoods Innovations Ltd., Dana TM4 India Private Limited and Dana TM4 (Sweden) AB (together Dana TM4). Hydro-Québec may put all, and not less than all, of its ownership interests in Dana TM4 to Dana at fair value. 

 

Redeemable noncontrolling interests reflected as of the balance sheet date are the greater of the redeemable noncontrolling interest balances adjusted for comprehensive income items and distributions or the redemption values. Redeemable noncontrolling interest adjustments of redemption value are recorded in retained earnings. We estimate the fair value of the redemption value using an income based approach based on discounted cash flow projections. In determining fair value using discounted cash flow projections, we make significant assumptions and estimates about the extent and timing of future cash flows, including revenue growth rates, projected EBITDA, discount rates and terminal growth rates. 

 

Reconciliation of changes in redeemable noncontrolling interests

 

   

Three Months Ended

 
   

March 31,

 
   

2022

   

2021

 

Balance, beginning of period

  $ 198     $ 180  

Capital contribution from redeemable noncontrolling interest

    2       1  

Adjustment to redemption value

    1       4  

Comprehensive income (loss) adjustments:

               

Net loss attributable to redeemable noncontrolling interests

    (1 )     (4 )

Other comprehensive income (loss) attributable to redeemable noncontrolling interests

            1  

Balance, end of period

  $ 200     $ 182  

 

 

Note 8. Earnings per Share

 

Reconciliation of the numerators and denominators of the earnings per share calculations — 

 

   

Three Months Ended

 
   

March 31,

 
   

2022

   

2021

 

Net income available to common stockholders - Numerator basic and diluted

  $ 17     $ 71  
                 

Denominator:

               

Weighted-average common shares outstanding - Basic

    144.2       144.9  

Employee compensation-related shares, including stock options

    1.1       1.5  

Weighted-average common shares outstanding - Diluted

    145.3       146.4  

 

The share count for diluted earnings per share is computed on the basis of the weighted-average number of common shares outstanding plus the effects of dilutive common stock equivalents (CSEs) outstanding during the period. We excluded 0.4 million and 0.9 million CSEs from the calculation of diluted earnings per share for the first quarters of 2022 and 2021 as the effect of including them would have been anti-dilutive.

 

13

 
 

Note 9. Stock Compensation

 

The Compensation Committee of our Board of Directors approved the grant of RSUs and performance share units (PSUs) shown in the table below during 2022

 

   

Granted

   

Grant Date

 
   

(In millions)

   

Fair Value*

 

RSUs

    0.9     $ 22.45  

PSUs

    0.3     $ 24.69  

* Weighted-average per share

 

We calculated the fair value of the RSUs at grant date based on the closing market price of our common stock at the date of grant. The number of PSUs that ultimately vest is contingent on achieving specified financial targets and specified total shareholder return targets relative to peer companies. For the portion of the award based on financial metrics, we estimated the fair value of the PSUs at grant date based on the closing market price of our common stock at the date of grant adjusted for the value of assumed dividends over the period because the awards are not dividend protected. For the portion of the award based on shareholder returns, we estimated the fair value of the PSUs at grant date using various assumptions as part of a Monte Carlo simulation. The expected term represents the period from the grant date to the end of the three-year performance period. The risk-free interest rate of 1.78% was based on U.S. Treasury constant maturity rates at the grant date. The dividend yield of 1.67% was calculated using our historical approach calculated by dividing the expected annual dividend by the average stock price over the prior year. The estimated volatility of 63.9% was based on observed historical volatility of daily stock returns for the 3-year period preceding the grant date. 

 

During 2022, we paid $4 of cash to settle RSUs and issued 0.8 million and 0.1 million shares of common stock based on the vesting of RSUs and PSUs, respectively. We recognized stock compensation expense of $4 and $5 during the first quarters of 2022 and 2021. At March 31, 2022, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $39. This cost is expected to be recognized over a weighted-average period of 2.2 years.

 

 

Note 10. Pension and Postretirement Benefit Plans

 

We have a number of defined contribution and defined benefit, qualified and nonqualified, pension plans covering eligible employees. Other postretirement benefits (OPEB), including medical and life insurance, are provided for certain employees upon retirement.

 

Components of net periodic benefit cost (credit) — 

 

   

Pension

   

OPEB

 
   

2022

   

2021

   

2022

   

2021

 

Three Months Ended March 31,

 

U.S.

   

Non-U.S.

   

U.S.

   

Non-U.S.

   

Non-U.S.

   

Non-U.S.

 

Interest cost

  $ 4     $ 2     $ 3     $ 1     $     $ 1  

Expected return on plan assets

    (7 )     (1 )     (7 )                        

Service cost

            2               2                  

Amortization of net actuarial loss

    2       1       2       2       (1 )        

Net periodic benefit cost (credit)

  $ (1 )   $ 4     $ (2 )   $ 5     $ (1 )   $ 1  

 

The service cost components of net periodic pension and OPEB costs are included in cost of sales and selling, general and administrative expenses as part of compensation cost and are eligible for capitalization in inventory and other assets. The non-service components are reported in other income (expense), net and are not eligible for capitalization.

 

14

 
 

Note 11.  Marketable Securities

 

   

March 31, 2022

   

December 31, 2021

 
           

Unrealized

   

Fair

           

Unrealized

   

Fair

 
   

Cost

   

Gains (Losses)

   

Value

   

Cost

   

Gains (Losses)

   

Value

 

Certificates of deposit - Current marketable securities

  $ 19     $     $ 19     $ 17     $     $ 17  

 

Certificates of deposit maturing in one year or less total $19 at  March 31, 2022.

 

 

 

Note 12. Financing Agreements

 

Long-term debt at

 

 

Interest Rate

  

March 31, 2022

  

December 31, 2021

 

Senior Notes due April 15, 2025

5.750%

* $400  $400 

Senior Notes due November 15, 2027

5.375%

   400   400 

Senior Notes due June 15, 2028

5.625%

   400   400 

Senior Euro Notes due July 15, 2029

3.000%

   360   370 

Senior Notes due September 1, 2030

4.250%

   400   400 

Senior Notes due February 15, 2032

4.500%

   350   350 

Other indebtedness

    99   100 

Debt issuance costs

    (25)  (26)
     2,384   2,394 

Less: Current portion of long-term debt

    8   8 

Long-term debt, less debt issuance costs

   $2,376  $2,386 

 

*

In conjunction with the issuance of the April 2025 Notes we entered into 8-year fixed-to-fixed cross-currency swaps which have the effect of economically converting the April 2025 Notes to euro-denominated debt at a fixed rate of 3.850%. See Note 13 for additional information.

 

Interest on the senior notes is payable semi-annually. Other indebtedness includes the note payable to the former owners of SME S.p.A., borrowings from various financial institutions, and finance lease obligations.

 

Senior notes activity — On May 13, 2021, we redeemed $254 of our December 2024 Notes pursuant to a tender offer at a weighted average price equal to 102.000% plus accrued and unpaid interest. On May 17, 2021, we called the remaining $171 of our December 2024 Notes at a price equal to 101.833% plus accrued and unpaid interest. The $8 loss on extinguishment of debt recorded in May 2021 includes the redemption premium of $8 and the write-off of $3 of previously deferred financing costs associated with the December 2024 Notes. These charges were partially offset by the recognition of $3 related to an unamortized fair value adjustment associated with a fixed-to-floating interest rate swap that was terminated in 2015.

 

On May 13, 2021, we completed the sale of $400 in senior unsecured notes (the September 2030 Notes) at 4.25%. The September 2030 Notes rank equally with Dana's other unsecured senior notes. Interest on the notes is payable on March 1 and September 1 of each year, beginning on September 1, 2021. The September 2030 Notes will mature on September 1, 2030. Net proceeds of the offering totaled $395. Financing costs of $5 were recorded as deferred costs and are being amortized to interest expense over the life of the notes. Proceeds from the offering will be used to finance or refinance, in whole or in part, recently completed or future eligible green projects related to clean transportation, renewable energy, sustainable water and wastewater management, and green buildings.

 

On May 28, 2021, Dana Financing Luxembourg S.à r.l. (Dana Financing), a wholly-owned subsidiary of Dana, completed the sale of €325 ($396 as of May 28, 2021) in senior unsecured notes ( July 2029 Notes) at 3.000%. The July 2029 Notes are fully and unconditionally guaranteed by Dana. The July 2029 Notes rank equally with Dana's other unsecured senior notes. Interest on the notes is payable on January 15 and July 15 of each year, beginning on January 15, 2022. The July 2029 Notes will mature on July 15, 2029. Net proceeds of the offering totaled €320 ($391 as of May 28, 2021). Financing costs of €5 ($6 as of May 28, 2021) were recorded as deferred costs and are being amortized to interest expense over the life of the notes. The proceeds from the offering were used to redeem all of our June 2026 Notes. On June 10, 2021 we redeemed all of our June 2026 Notes at a price equal to 103.25% plus accrued and unpaid interest. The $16 loss on extinguishment of debt includes the $12 redemption premium and the $4 write-off of previously deferred financing costs associated with the June 2026 Notes.

 

On November 24, 2021, we completed the sale of $350 in senior unsecured notes (the February 2032 Notes) at 4.5%. The February 2032 Notes rank equally with Dana’s other unsecured senior notes. Interest on the notes is payable on February 15 and August 15 of each year, beginning on August 15, 2022. The February 2032 Notes will mature on February 15, 2032. Net proceeds of the offering totaled $345. Financing costs of $5 were recorded as deferred costs and are being amortized to interest expense over the life of the notes. Proceeds from the offering, along with cash on hand, were used to fully pay down the Term B Facility. See credit agreement discussion below.

 

15

 

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

 

  

Redemption Price

 
  

April

  

November

  

June

  

July

  

September

  

February

 

Year

 

2025 Notes

  

2027 Notes

  

2028 Notes

  

2029 Notes

  

2030 Notes

  

2032 Notes

 

2022

  101.438%  102.688%                

2023

  100.000%  101.344%  102.813%            

2024

  100.000%  100.000%  101.406%  101.500%        

2025

      100.000%  100.000%  100.750%        

2026

      100.000%  100.000%  100.000%  102.125%    

2027

          100.000%  100.000%  101.417%  102.250%

2028

              100.000%  100.708%  101.500%

2029

                  100.000%  100.750%

2030

                      100.000%

2031

                      100.000%

 

At any time prior to November 15, 2022, we may redeem up to 35% of the aggregate principal amount of the November 2027 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 105.375% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that at least 50% of the original aggregate principal amount of the November 2027 Notes remains outstanding after the redemption. Prior to November 15, 2022, we may redeem some or all of the November 2027 Notes at a redemption price of 100.000% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.

 

At any time prior to June 15, 2023, we may redeem up to 35% of the aggregate principal amount of the June 2028 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 105.625% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that at least 50% of the original aggregate principal amount of the June 2028 Notes remains outstanding after the redemption. Prior to June 15, 2023, we may redeem some or all of the June 2028 Notes at a redemption price of 100.000% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.

 

At any time prior to July 15, 2024, we may redeem up to 40% of the aggregate principal amount of the July 2029 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 103.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that at least 50% of the aggregate principal amount of the July 2029 Notes remain outstanding after the redemption.  Prior to July 15, 2024, we may also redeem some or all of the July 2029 Notes at a redemption price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.

 

At any time prior to May 1, 2024, we may redeem up to 40% of the aggregate principal amount of the September 2030 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 104.250% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, provided that at least 50% of the aggregate principal amount of the September 2030 Notes remains outstanding after the redemption. Prior to May 1, 2026, we may redeem some or all of the September 2030 Notes at a redemption price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.

 

At any time prior to February 15, 2025, we may redeem up to 40% of the aggregate principal amount of the February 2032 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 104.500% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, provided that at least 50% of the aggregate principal amount of the February 2032 Notes remains outstanding after the redemption. Prior to February 15, 2027, we may redeem some or all of the February 2032 Notes at a redemption price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.

 

Credit agreement — On March 25, 2021, we amended our credit and guaranty agreement, increasing the Revolving Facility to $1,150 and extending the maturity to March 25, 2026. We recorded deferred fees of $2 related to the amendment. The deferred fees are being amortized over the life of the applicable facilities. On November 30, 2021, we fully paid down the Term B Facility. Deferred financing costs on our Revolving Facility are included in other noncurrent assets. 

 

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

 

16

 

Advances under the Revolving Facility bear interest at a floating rate based on, at our option, the base rate or Eurodollar rate (each as described in the credit agreement) plus a margin as set forth below:

 

  

Margin

 

Total Net Leverage Ratio

 

Base Rate

  

Eurodollar Rate

 

Less than or equal to 1.00:1.00

  0.25%  1.25%

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

  0.50%  1.50%

Greater than 2.00:1.00

  0.75%  1.75%

 

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

 

Total Net Leverage Ratio

 

Commitment Fee

 

Less than or equal to 1.00:1.00

  0.250%

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

  0.375%

Greater than 2.00:1.00

  0.500%

 

Up to $275 of the Revolving Facility may be applied to letters of credit, which reduces availability. We pay a fee for issued and undrawn letters of credit in an amount per annum equal to the applicable margin for Eurodollar rate advances based on a quarterly average availability under issued and undrawn letters of credit under the Revolving Facility and a per annum fronting fee of 0.125%, payable quarterly.

 

At  March 31, 2022, we had $265 of outstanding borrowings under the Revolving Facility and had utilized $21 for letters of credit. We had availability at March 31, 2022 under the Revolving Facility of $864 after deducting outstanding borrowings and the letters of credit.

 

Debt covenants — At March 31, 2022, we were in compliance with the covenants of our financing agreements. Under the Revolving Facility and the senior notes, we are required to comply with certain incurrence-based covenants customary for facilities of these types and, in the case of the Revolving Facility, a maintenance covenant tested on the last day of each fiscal quarter requiring us to maintain a first lien net leverage ratio not to exceed 2.00 to 1.00.

 

 

Note 13. Fair Value Measurements and Derivatives

 

In measuring the fair value of our assets and liabilities, we use market data or assumptions that we believe market participants would use in pricing an asset or liability including assumptions about risk when appropriate. Our valuation techniques include a combination of observable and unobservable inputs.

 

Fair value measurements on a recurring basis — Assets and liabilities that are carried in our balance sheet at fair value are as follows:

 

             

Fair Value

 

Category

 

Balance Sheet Location

 

Fair Value Level

    March 31, 2022     December 31, 2021  

Certificates of deposit

 

Marketable securities