Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended: June 30, 2019
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: (419) 887-3000
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
☑
Non-accelerated filer
☐
Smaller reporting company
☐
Accelerated filer
☐
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 143,919,574 shares of the registrant’s common stock outstanding at July 19, 2019.
Adjustment in fair value of disposal group held for sale
3
3
Pension settlement charge
(258
)
(258
)
Other expense, net
(10
)
(10
)
(23
)
(10
)
Earnings (loss) before interest and income taxes
(95
)
138
45
312
Interest income
3
2
5
5
Interest expense
34
23
61
47
Earnings (loss) before income taxes
(126
)
117
(11
)
270
Income tax expense (benefit)
(52
)
(4
)
(32
)
44
Equity in earnings of affiliates
8
6
14
12
Net income (loss)
(66
)
127
35
238
Less: Noncontrolling interests net income
2
3
6
5
Less: Redeemable noncontrolling interests net income (loss)
(1
)
1
Net income (loss) attributable to the parent company
$
(68
)
$
124
$
30
$
232
Net income (loss) per share available to common stockholders
Basic
$
(0.47
)
$
0.85
$
0.21
$
1.60
Diluted
$
(0.47
)
$
0.85
$
0.21
$
1.58
Weighted-average common shares outstanding
Basic
144.0
145.1
143.9
145.3
Diluted
144.0
146.5
144.8
147.0
The accompanying notes are an integral part of the consolidated financial statements.
3
Dana Incorporated
Consolidated Statement of Comprehensive Income (Unaudited)
(In millions)
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
Net income (loss)
$
(66
)
$
127
$
35
$
238
Other comprehensive income (loss), net of tax:
Currency translation adjustments
3
(56
)
30
(46
)
Hedging gains and losses
2
(6
)
7
(14
)
Defined benefit plans
355
6
360
13
Other comprehensive income (loss)
360
(56
)
397
(47
)
Total comprehensive income
294
71
432
191
Less: Comprehensive (income) loss attributable to noncontrolling interests
(3
)
2
(5
)
Less: Comprehensive (income) loss attributable to redeemable noncontrolling interest
1
2
(3
)
Comprehensive income attributable to the parent company
$
292
$
75
$
424
$
191
The accompanying notes are an integral part of the consolidated financial statements.
4
Dana Incorporated
Consolidated Balance Sheet (Unaudited)
(In millions, except share and per share amounts)
June 30, 2019
December 31, 2018
Assets
Current assets
Cash and cash equivalents
$
289
$
510
Marketable securities
15
21
Accounts receivable
Trade, less allowance for doubtful accounts of $7 in 2019 and $9 in 2018
1,423
1,065
Other
214
178
Inventories
1,286
1,031
Other current assets
143
102
Total current assets
3,370
2,907
Goodwill
533
264
Intangibles
240
164
Deferred tax assets
534
445
Other noncurrent assets
88
80
Investments in affiliates
170
208
Operating lease assets
179
Property, plant and equipment, net
2,232
1,850
Total assets
$
7,346
$
5,918
Liabilities and equity
Current liabilities
Short-term debt
$
14
$
8
Current portion of long-term debt
42
20
Accounts payable
1,405
1,217
Accrued payroll and employee benefits
216
186
Taxes on income
64
47
Current portion of operating lease liabilities
41
Other accrued liabilities
282
269
Total current liabilities
2,064
1,747
Long-term debt, less debt issuance costs of $28 in 2019 and $18 in 2018
2,418
1,755
Noncurrent operating lease liabilities
142
Pension and postretirement obligations
438
561
Other noncurrent liabilities
365
313
Total liabilities
5,427
4,376
Commitments and contingencies (Note 16)
Redeemable noncontrolling interests
105
100
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, 143,913,832 and 144,663,403 shares outstanding
2
2
Additional paid-in capital
2,376
2,368
Retained earnings
456
456
Treasury stock, at cost (10,099,912 and 8,342,185 shares)
(150
)
(119
)
Accumulated other comprehensive loss
(968
)
(1,362
)
Total parent company stockholders' equity
1,716
1,345
Noncontrolling interests
98
97
Total equity
1,814
1,442
Total liabilities and equity
$
7,346
$
5,918
The accompanying notes are an integral part of the consolidated financial statements.
5
Dana Incorporated
Consolidated Statement of Cash Flows (Unaudited)
(In millions)
Six Months Ended June 30,
2019
2018
Operating activities
Net income
$
35
$
238
Depreciation
153
124
Amortization
8
5
Amortization of deferred financing charges
3
2
Earnings of affiliates, net of dividends received
3
5
Stock compensation expense
10
9
Deferred income taxes
(105
)
(45
)
Pension expense, net
207
1
Impairment of indefinite-lived intangible asset
20
Adjustment in fair value of disposal group held for sale
(2
)
Change in working capital
(247
)
(232
)
Other, net
(10
)
(12
)
Net cash provided by operating activities
57
113
Investing activities
Purchases of property, plant and equipment
(190
)
(145
)
Acquisition of businesses, net of cash acquired
(654
)
(151
)
Proceeds from previous acquisition
9
Purchases of marketable securities
(12
)
(29
)
Proceeds from sales of marketable securities
6
6
Proceeds from maturities of marketable securities
12
23
Settlements of undesignated derivatives
(19
)
Other, net
(6
)
Net cash used in investing activities
(863
)
(287
)
Financing activities
Net change in short-term debt
(3
)
(5
)
Proceeds from long-term debt
675
Repayment of long-term debt
(19
)
(2
)
Deferred financing payments
(12
)
Dividends paid to common stockholders
(29
)
(29
)
Distributions to noncontrolling interests
(12
)
(4
)
Contributions from noncontrolling interests
2
Repurchases of common stock
(25
)
(25
)
Other, net
(5
)
Net cash provided by (used in) financing activities
577
(70
)
Net decrease in cash, cash equivalents and restricted cash
(229
)
(244
)
Cash, cash equivalents and restricted cash – beginning of period
520
610
Effect of exchange rate changes on cash balances
7
(13
)
Less: Cash contributed to disposal group
(10
)
Cash, cash equivalents and restricted cash – end of period (Note 6)
$
298
$
343
Non-cash investing activity
Purchases of property, plant and equipment held in accounts payable
$
88
$
75
The accompanying notes are an integral part of the consolidated financial statements.
6
Dana Incorporated
Index to Notes to Consolidated Financial Statements
1.
Organization and Summary of Significant Accounting Policies
2.
Acquisitions
3.
Disposal Groups and Divestitures
4.
Goodwill and Other Intangible Assets
5.
Restructuring of Operations
6.
Supplemental Balance Sheet and Cash Flow Information
7.
Leases
8.
Stockholders' Equity
9.
Redeemable Noncontrolling Interests
10.
Earnings per Share
11.
Stock Compensation
12.
Pension and Postretirement Benefit Plans
13.
Marketable Securities
14.
Financing Agreements
15.
Fair Value Measurements and Derivatives
16.
Commitments and Contingencies
17.
Warranty Obligations
18.
Income Taxes
19.
Other Expense, Net
20.
Revenue from Contracts with Customers
21.
Segments
22.
Equity Affiliates
7
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, 2018 (the 2018 Form 10-K).
Recently adopted accounting pronouncements
On January 1, 2019, we adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), using the modified retrospective approach and an application date of January 1, 2019. Prior period amounts have not been adjusted and continue to be reflected in accordance with our historical accounting.This transition method resulted in the recognition of a right-of-use asset and a lease liability for virtually all leases at the application date with a cumulative-effect adjustment to retained earnings. Short-term leases of less than 12 months have not been recorded on the balance sheet.
We elected the package of practical expedients, which among other things, allowed us to carry forward the historical lease classification. We did not elect the practical expedient that allowed for hindsight to determine the lease term of existing leases. We separated the lease components from the non-lease components of each lease arrangement and, therefore, did not elect the practical expedient that would enable us to not separate them.
We also adopted the following standard during the first half of 2019, which did not have a material impact on our financial statements or financial statement disclosures:
Standard
Effective Date
2017-11
Earnings Per Share, Distinguishing Liabilities from Equity, Derivatives and Hedging – (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception
January 1, 2019
Recently issued accounting pronouncements
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance allows for capitalization of implementation costs associated with certain cloud computing arrangements. This guidance becomes effective January 1, 2020 and early adoption is permitted. The guidance is to be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We do not expect the adoption of this guidance to impact our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General, Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. The guidance eliminated certain
8
disclosures about defined benefit plans, added new disclosures, and clarified other requirements. This guidance becomes effective January 1, 2020 and early adoption is permitted. There were no changes to interim disclosure requirements. Adoption of this guidance will not have a material effect on our annual financial statement disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The guidance removed or modified some disclosures while others were added. The removal and amendment of certain disclosures can be adopted immediately with retrospective application. The additional disclosure guidance becomes effective January 1, 2020. Adoption of this guidance will not have a material effect on our financial statement disclosures.
In January 2017, the FASB issued ASU 2017-04, Goodwill – Simplifying the Test for Goodwill Impairment, guidance that simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 of the goodwill impairment test. The new guidance quantifies goodwill impairment as the amount by which the carrying amount of a reporting unit, including goodwill, exceeds its fair value, with the impairment loss limited to the total amount of goodwill allocated to that reporting unit. This guidance becomes effective January 1, 2020 and will be applied on a prospective basis. Early adoption is permitted for impairment tests performed after January 1, 2017. We do not expect the adoption of this guidance to impact our consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Credit Losses – Measurement of Credit Losses on Financial Instruments, new guidance for the accounting for credit losses on certain financial instruments. This guidance introduces a new approach to estimating credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. This guidance, which becomes effective January 1, 2020, is not expected to have a material impact on our consolidated financial statements.
Note 2. Acquisitions
Prestolite E-Propulsion Systems (Beijing) Limited — On June 6, 2019, we acquired Prestolite Electric Beijing Limited's (PEBL) 50% ownership interest in Prestolite E-Propulsion Systems (Beijing) Limited (PEPS). PEPS manufactures and distributes electric mobility solutions, including electric motors, inverters, and generators for commercial vehicles and heavy machinery. PEPS has a state-of-the-art facility in China, enabling us to expand motor and inverter manufacturing capabilities in the world's largest electric-mobility market. The acquisition of PEBL's interest in PEPS, along with our existing ownership interest in PEPS through our TM4 subsidiary, provides us with a 100% ownership interest and a controlling financial interest in PEPS. We recognized a $2 gain to other expense, net on the required remeasurement of our previously held equity method investment in PEPS to fair value.
We paid $50 at closing using cash on hand. The purchase consideration and related provisional allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:
Cash consideration
$
50
Fair value of previously held equity method investment
45
Total purchase consideration
$
95
Cash and cash equivalents
$
2
Accounts receivable - Trade
17
Inventories
8
Goodwill
73
Property, plant and equipment
2
Accounts payable
(4
)
Other accrued liabilities
(3
)
Total purchase consideration allocation
$
95
The fair value of the assets acquired and liabilities assumed, as well as the fair value of our previously held equity method investment, are provisional and could be revised as a result of additional information obtained regarding indemnified matters and liabilities assumed and revisions of provisional estimates of fair values, including but not limited to, the completion of independent appraisals and valuations related to inventories, intangibles and property, plant and equipment. Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled
9
workforce and is not deductible for tax purposes. We used a combination of the discounted cash flow, an income approach, and the guideline public company method, a market approach, to value our previously held equity method investment in PEPS.
The results of operations of the business are reported in our Commercial Vehicle operating segment from the date of acquisition. 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 statements are presented. PEPS had an insignificant impact on our consolidated results of operations during the second quarter of 2019.
Oerlikon Drive Systems — On February 28, 2019, we acquired a 100% ownership interest in the Oerlikon Drive Systems (ODS) segment of the Oerlikon Group. ODS is a global manufacturer of high-precision gears, planetary hub drives for wheeled and tracked vehicles, and products, controls, and software that support vehicle electrification across the mobility industry. The acquisition of ODS is expected to deliver significant long-term value by accelerating our commitment to vehicle electrification and strengthening the technology portfolio for each of our end markets while further expanding and balancing the manufacturing presence of our off-highway business in key geographical markets. The business employs approximately 5,900 people and operates 10 manufacturing and engineering facilities in China, India, Italy, the United Kingdom, and the United States, with two additional facilities under construction in China.
We paid $626 at closing which was funded primarily through debt proceeds. See Note 14 for additional information. The purchase consideration and related provisional allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:
Purchase consideration paid at closing
$
626
Less purchase consideration to be recovered for indemnified matters
(4
)
Total purchase consideration
$
622
Cash and cash equivalents
$
76
Accounts receivable - Trade
150
Accounts receivable - Other
15
Inventories
191
Other current assets
15
Goodwill
122
Intangibles
58
Deferred tax assets
51
Other noncurrent assets
5
Investments in affiliates
7
Property, plant and equipment
329
Current portion of long-term debt
(2
)
Accounts payable
(151
)
Accrued payroll and employee benefits
(35
)
Other accrued liabilities
(48
)
Long-term debt
(8
)
Pension and postretirement obligations
(48
)
Other noncurrent liabilities
(97
)
Noncontrolling interests
(8
)
Total purchase consideration allocation
$
622
The purchase consideration and the fair values of the assets acquired and liabilities assumed are provisional and could be revised as a result of additional information obtained regarding indemnified matters and liabilities assumed and revisions of provisional estimates of fair values, including but not limited to, the completion of independent appraisals and valuations related to inventory, intangibles and property, plant and equipment.
Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is not deductible for tax purposes. The provisional fair values assigned to intangibles includes $11 allocated to developed technology, $13 allocated to trademarks and trade names and $34 allocated to customer relationships. We used the relief from royalty method, an income approach, to value developed technology and trademarks and trade names. We used the multi-period excess earnings method, an income approach, to value customer relationships. We used a replacement
10
cost method to value fixed assets. The developed technology, trademarks and trade names and customer relationship intangible assets are being amortized on a straight-line basis over seven, ten and twelve years, respectively. Property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from three to twenty-five years.
The results of operations of ODS are reported in our Off-Highway and Commercial Vehicle operating segments. Transaction related expenses associated with completion of the acquisition totaling $13 were charged to other expense, net. During the second quarter and first six months of 2019, the business contributed sales of $211 and $286, respectively.
The following unaudited pro forma information has been prepared as if the ODS acquisition and the related debt financing had occurred on January 1, 2018.
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
Net sales
$
2,306
$
2,285
$
4,614
$
4,645
Net income (loss)
$
(59
)
$
121
$
67
$
208
The unaudited pro forma results include adjustments primarily related to purchase accounting, interest expense related to the debt proceeds used in connection with the acquisition of ODS, and non-recurring strategic transaction expense. The unaudited pro forma financial information is not indicative of the operational results that would have been obtained had the transactions actually occurred as of that date, nor is it necessarily indicative of Dana’s future operational results.
SME — On January 11, 2019, we acquired a 100% ownership interest in the S.M.E. S.p.A. (SME). SME designs, engineers, and manufactures low-voltage AC induction and synchronous reluctance motors, inverters, and controls for a wide range of off-highway electric vehicle applications, including material handling, agriculture, construction, and automated-guided vehicles. The addition of SME's low-voltage motors and inverters, which are primarily designed to meet the evolution of electrification in off-highway equipment, significantly expands Dana's electrified product portfolio.
We paid $88 at closing, consisting of $62 in cash on hand and a note payable of $26 which allows for net settlement of potential contingencies as defined in the purchase agreement. The note is payable in five years and bears annual interest of 5%. The purchase consideration and the related provisional allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:
Total purchase consideration
$
88
Accounts receivable - Trade
4
Accounts receivable - Other
1
Inventories
8
Goodwill
68
Intangibles
24
Other noncurrent assets
1
Property, plant and equipment
5
Short-term debt
(8
)
Accounts payable
(6
)
Accrued payroll and employee benefits
(1
)
Other accrued liabilities
(1
)
Other noncurrent liabilities
(7
)
Total purchase consideration allocation
$
88
The fair value of the assets acquired and liabilities assumed are provisional and could be revised as a result of additional information obtained regarding liabilities assumed and revisions of provisional estimates of fair values including but not limited to, the completion of independent appraisals and valuations related to intangibles.
Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is not deductible for tax purposes. The provisional fair values assigned to intangibles include $15 allocated to developed technology and $9 allocated to customer relationships. We used the relief from royalty method, an income approach, to value developed technology. We used the multi-period excess earnings method, an income approach, to value customer relationships. We used a replacement cost method to value fixed assets. The developed technology and
11
customer relationship intangible assets are being amortized on a straight-line basis over twelve and ten years, respectively, and property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from one to twenty years.
The results of operations of the business are reported in our Off-Highway operating segment from the date of acquisition. 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 statements were presented. During the second quarter and first six months of 2019, the business contributed sales of $6 and $12, respectively.
TM4 — On June 22, 2018, we acquired a 55% ownership interest in TM4 Inc. (TM4) from Hydro-Québec. TM4 designs and manufactures motors, power inverters, and control systems for electric vehicles, offering a complementary portfolio to Dana's electric gearboxes and thermal-management technologies for batteries, motors, and inverters. The transaction establishes Dana as the only supplier with full e-Drive design, engineering, and manufacturing capabilities – offering electro-mechanical propulsion solutions to each of its end markets. The transaction further strengthens Dana's position in China, the world's fastest-growing market for electric vehicles. TM4 owns a 50% interest in PEPS, a joint venture in China with PEBL, which offers electric mobility solutions throughout China and Asia. See discussion of Dana's subsequent acquisition of PEBL's 50% interest in PEPS above. The terms of the agreement provide Hydro-Québec with the right to put all, and not less than all, of its shares in TM4 to Dana at fair value any time after June 22, 2021.
We paid $125 at closing, using cash on hand. The purchase consideration and the related allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:
Total purchase consideration
$
125
Cash and cash equivalents
$
3
Accounts receivable - Trade
3
Accounts receivable - Other
1
Inventories
4
Goodwill
148
Intangibles
24
Investments in affiliates
49
Property, plant and equipment
5
Accounts payable
(2
)
Accrued payroll and employee benefits
(1
)
Other accrued liabilities
(7
)
Redeemable noncontrolling interest
(102
)
Total purchase consideration allocation
$
125
Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is not deductible for tax purposes. The provisional fair values assigned to intangibles include $14 allocated to developed technology and $10 allocated to trademarks and trade names. We used the relief from royalty method, an income approach, to value developed technology and the trademarks and trade names. We used a replacement cost method to value fixed assets. We used a combination of the discounted cash flow, an income approach, and the guideline public company method, a market approach, to value the equity method investment in PEPS. The developed technology intangible assets are being amortized on a straight-line basis over ten years, and property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from five to six years. The trademarks and trade names are considered indefinite-lived intangible assets.
Dana is consolidating TM4 as the governing documents provide Dana with a controlling financial interest. The results of operations of the business are reported in our Commercial Vehicle operating segment from the date of acquisition. Transaction related expenses associated with completion of the acquisition totaling $5 were charged to other expense, net in 2018. 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 statements are presented. During 2018, the business contributed sales of $11.
BFP and BPT —On February 1, 2017, we acquired 80% ownership interests in Brevini Fluid Power S.p.A. (BFP) and Brevini Power Transmission S.p.A. (BPT) from Brevini Group S.p.A. (Brevini). The acquisition expands our Off-Highway operating segment product portfolio to include technologies for tracked vehicles, doubling our addressable market for off-highway
12
driveline systems and establishing Dana as the only off-highway solutions provider that can manage the power to both move the equipment and perform its critical work functions. This acquisition also brings a platform of technologies that can be leveraged in our light and commercial-vehicle end markets, helping to accelerate our hybridization and electrification initiatives.
We paid $181 at closing, using cash on hand, and refinanced a significant portion of the debt assumed in the transaction during the first half of 2017. In December 2017, a purchase price reduction of $9 was agreed under the sale and purchase agreement provisions for determination of the net indebtedness and net working capital levels of BFP and BPT as of the closing date. In connection with the acquisition of BFP and BPT, Dana agreed to purchase certain real estate being leased by BPT from a Brevini affiliate for €25. Completion of the real estate purchase and receipt of the purchase price adjustment occurred in the second quarter of 2018 with a net cash payment of $20.
On August 8, 2018, we entered into an agreement to acquire Interfind S.p.A.'s, formerly Brevini Group S.p.A., remaining 20% ownership interests in BFP and BPT and to settle all claims between the parties. We paid $43 to acquire Interfind S.p.A.'s remaining ownership interests and received $10 in settlement of all pending and future claims. See Note 9 for additional information.
Note 3. Disposal Groups and Divestitures
Disposal group held for sale — In December 2017, we entered into an agreement to divest our Brazil suspension components business (the disposal group) for no consideration to an unaffiliated company. The results of operations of the Brazil suspension components business were reported within our Commercial Vehicle operating segment. To effectuate the sale, Dana was obligated to contribute $10 of additional cash to the business prior to closing. We classified the disposal group as held for sale at December 31, 2017, recognizing a $27 loss to adjust the carrying value of the net assets to fair value and to recognize the liability for the additional cash required to be contributed to the business prior to closing. During the first quarter of 2018, we made the required cash contribution to the disposal group. After being unable to complete the transaction with the counterparty to the December 2017 agreement, we entered into an agreement with another third party in June 2018. The transaction with the new counterparty closed in July 2018 and we received cash proceeds of $2. We reversed $3 of the previously recognized $27 pre-tax loss, inclusive of the proceeds received in July 2018, during the second quarter of 2018.
Note 4. Goodwill and Other Intangible Assets
Goodwill — The change in the carrying amount of goodwill in 2019 is due to the acquisitions of PEPS, ODS and SME and currency fluctuation. See Note 2 for additional information on recent acquisitions.
Changes in the carrying amount of goodwill by segment —
Light Vehicle
Commercial Vehicle
Off-Highway
Power Technologies
Total
Balance, December 31, 2018
$
3
$
150
$
105
$
6
$
264
Acquisitions
73
190
263
Currency impact
6
6
Balance, June 30, 2019
$
3
$
229
$
295
$
6
$
533
13
Components of other intangible assets —
June 30, 2019
December 31, 2018
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
$
133
$
(91
)
$
42
$
107
$
(89
)
$
18
Trademarks and trade names
13
31
(5
)
26
16
(4
)
12
Customer relationships
9
502
(405
)
97
460
(400
)
60
Non-amortizable intangible assets
Trademarks and trade names
75
75
74
74
Used in research and development activities
—
20
(20
)
—
$
741
$
(501
)
$
240
$
677
$
(513
)
$
164
During the third quarter of 2012, we entered a strategic alliance with Fallbrook Technologies Inc. (Fallbrook). The transaction with Fallbrook was accounted for as a business combination and the original purchase price allocation included $20 of intangible assets used in research and development activities, which had been classified as indefinite-lived. Since the third quarter of 2012, we had been working with several customers to commercialize the continuously variable planetary (CVP) technology primarily in combustion engine applications. During the second quarter of 2018 key customers notified us of their intention to redirect their development efforts to electrification and cease further development efforts of the CVP technology in combustion engine applications. We determined that it was more likely than not that the fair value of the related intangible assets was less than their carrying amount. We used the multi-period excess earnings method, an income approach, to fair value the assets used in research and development activities. Given the lack of adequate identifiable future revenue streams, it was determined that the $20 of intangible assets used in research and development activities was fully impaired during the second quarter of 2018.
The net carrying amounts of intangible assets, other than goodwill, attributable to each of our operating segments at June 30, 2019 were as follows: Light Vehicle — $26, Commercial Vehicle — $54, Off-Highway — $152 and Power Technologies — $8.
Amortization expense related to amortizable intangible assets —