2016 Annual Report
Shifting Into Overdrive
Our Mission
Our talented people power a customer-centric
organization that is continuously improving
the performance and efficiency of vehicles and
machines around the globe. We will consistently
deliver superior products and service to our
customers and will generate exceptional value
for our shareholders.
This mission is embodied in our company theme:
All cover photos were taken at
a meeting of investors at the
New York Stock Exchange.
Dana Incorporated
Financial Summary
For the year ended Dec. 31, 2016
$ in millions except per share amounts
Annual Operating Results
Sales
Net Income Attributable to Dana1
Adjusted EBITDA2
Margin
Diluted Adjusted Earnings per Share3
Cash Flow from Operations
Capital Spend
Employees at Year End
Major Facilities at Year End
2016
$5,826
$640
$660
11.3%
$1.94
$384
$322
24,900
91
2015
$6,060
$159
$652
10.8%
$1.74
$406
$260
23,100
90
Balance Sheet
Total Cash and Marketable Securities: $737
Net Debt: $948
Liquidity: $1,209
1
Global
Presence
Investment Highlights
8
Solid
Investment
Priorities
7
Solid
Balance
Sheet
6
Expanding
Margins
5
Cycle
Positioning
2
4
Customer
Diversity
3
Technology
Portfolio
Sales
Growth
1 2016 net income includes a tax benefit of $476 million for net release of tax valuation allowances and after-tax charges of $52 million on divestitures and $11 million for loss on debt
extinguishment. Net income in 2016 includes net charges of $68 million relating to impairment of a 50-percent-owned equity affiliate and for certain intangible and other assets.
2 See page 32 of Dana’s 2016 Form 10-K, included herein, for explanation and reconciliation of non-GAAP financial measures.
3 Diluted adjusted EPS is a non-GAAP financial measure, which we have defined as adjusted net income divided by adjusted diluted shares. See the “Quarterly Financial Information and
Reconciliations of Non-GAAP Information” on Dana’s Investor Relations website at www.dana.com/investors for explanation and calculation of diluted adjusted EPS.
2016 Annual Report 1
Our Vision
To be the global technology leader in efficient
power conveyance and energy-management
solutions that enable our customers to achieve
their sustainability objectives.
2 Dana Incorporated
Global Footprint
Business Units
One of the ways we create value is by positioning our
technical and manufacturing resources where customers
need us globally. With the 2017 acquisition of Brevini,
Dana now operates in 34 countries.
Global Sales
As of December 31, 2016.
Consolidated sales only.
Business
Units
Markets
45%
Light Vehicle Driveline
Commercial Vehicle Driveline 21%
Off-Highway Drive and Motion 16%
18%
Power Technologies
Light Vehicle
61%
Commercial Vehicle 23%
Regions
16%
Off-Highway
Customers
Markets
Regions
Markets
Regions
Customers
North America
Europe
Asia Pacific
South America
Customers
Ford
FCA*
Nissan
PACCAR
GM
Toyota
Tata
Deere
Ab Volvo
Daimler
Others
53%
28%
13%
6%
22%
10%
6%
5%
4%
4%
3%
3%
2%
2%
39%
* Sales to Fiat Chrysler Automobiles include
sales to Hyundai Mobis.
Light Vehicle Driveline Technologies
Dana is a leading supplier of traditional and electrified
light-vehicle driveline technologies, including complete
drivetrain systems and components for passenger
cars, crossover vehicles, SUVs, vans, and light trucks.
Dana works collaboratively with original-equipment
manufacturers and the aftermarket to deliver Dana®
axles, Spicer® driveshafts, VariGlide® planetary variator
transmission technology, and driveline components with
best-in-class efficiency.
Commercial Vehicle Driveline Technologies
Dana is one of the world’s premier providers of
drivetrain and tire-pressure management systems, as
well as genuine service parts for medium- and heavy-
duty commercial vehicles. Our cutting-edge Spicer®
innovations increase fuel efficiency and decrease weight
while reducing maintenance and total cost of ownership.
Off-Highway Drive and Motion Technologies
Dana delivers fully optimized Spicer® drivetrain systems and
individual product solutions to customers in construction,
agriculture, material-handling, and underground-mining
markets, as well as Brevini™ power-transmission and fluid-
power technologies for associated work systems, tracked
vehicles, and stationary industrial equipment. We bring our
global expertise to the local level with solutions customized
to individual requirements through a network of strategically
located technology centers, manufacturing locations, and
distribution facilities.
Power Technologies
Dana delivers Victor Reinz® sealing solutions and Long®
thermal-management technologies to help reduce fuel
consumption and emissions, while improving vehicle
durability and performance. Our engineers anticipate
industry trends to provide innovation, value, and quality
in every technology, and our strong engineering know-
how leads to high product performance, flexibility, and
speed to market.
2016 Annual Report 3
expanding our product portfolio. Titled
processes, enhancing customer
“Shifting into Overdrive,” our strategy
satisfaction, and ultimately
uses our well-established technology
increasing profitability.
and commitment to continuous
improvement as a base and sets clear
enterprise priorities that guide our
activities and investments.
Shared engineering and manufacturing
resources supported by a centralized
purchasing function enable Dana to
leverage expertise across the enterprise,
Announced at a presentation to investors
optimize resources to support multiple
at the New York Stock Exchange, this
business units, and ultimately deliver
all-encompassing framework directs
modular designs that can be tailored
our collective decision-making and
to multiple end markets.
Dear Fellow
Shareholder,
For well over a century, Dana has
demonstrated the value of innovation
by improving the performance and
efficiency of the world’s vehicles and
industrial equipment through advanced,
durable solutions.
drives our functional expertise across
all our business units. It focuses our
attention on five primary dimensions:
leveraging the core, strengthening
customer centricity, expanding
global markets, commercializing
new technology, and accelerating
hybridization and electrification.
Leveraging the Core
Dana occupies a unique position as
one of the few suppliers that delivers
advanced technologies and integration
support to all major vehicle markets –
passenger vehicles, commercial trucks,
The effectiveness of this approach
and off-highway machines – as well as
is reflected in our solid financial
stationary industrial equipment. As a
performance. For the sixth consecutive
result, we benefit from a substantial
year, Dana has delivered double-digit
competitive advantage based on our
margins. In 2016, adjusted EBITDA was
ability to leverage our technology,
$660 million, or 11.3 percent margin,
processes, and assets across these
on more than $5.8 billion in revenues.
end markets.
In fact, all four of our business units
improved year-over-year margins.
Our extremely dedicated people will
further capitalize on this advantage
Moving forward, we will employ the
through the sharing of best practices –
considerable talents of our people
in areas such as purchasing and safety –
as we address exciting changes in
across our operational and functional
our industry that include tightening
activities, thus reducing costs and
regulations on emissions, a growing
improving performance.
Dana serves the aftermarket across
all four of its segments with a single
organization that offers a unified supply
chain with shared distribution centers
around the world. We see a tremendous
growth opportunity by expanding
our geographic footprint and product
offering, which, in part, is why we
acquired Magnum Gaskets® in 2016.
This transaction reflects our desire to
seek inorganic opportunities that fit our
growth strategy and help to provide
greater value to our customers.
Last year, we also closed the acquisition
of strategic assets of SIFCO S.A. in
Brazil, and we announced the purchase
of the power-transmission and fluid
power businesses of Brevini Group,
S.p.A. This transaction was completed
Feb. 1, 2017, and integration efforts are
already underway. The 2017 acquisition
of a U.S. Manufacturing Corporation
operation will strengthen our supply
chain while providing new product and
process technologies for lightweighting.
Strengthening Customer Centricity
Customer satisfaction is a result, not an
action a company takes. The foundation
appetite for more sustainable modes
of transport, and the rapid rise of
autonomous vehicle operation.
Our pursuit of operational excellence
for achieving exceptional success in this
through our Dana Operating System
area starts with a company-wide culture
will continue to drive our world-
that positions the customer at the center
To capitalize on these changes, in 2016
class engineering and manufacturing
of everything we do as an organization.
we developed an enterprise strategy
capabilities, reinforcing quality
for increasing market penetration and
4 Dana Incorporated
Dana has made tremendous strides in
across all product categories and end
the never-ending journey to strengthen
markets. However, our success in
customer centricity. We are intensely
commercializing new technologies is
focused on the relationships with those
ultimately demonstrated in sales to
we serve by providing outstanding
our customers. Our 2017-2019 sales
quality, delivery, and cost performance,
backlog of $750 million is a powerful
while supporting new vehicle programs
indicator of our ability to transform
with innovative technology and products.
innovations into production-ready
solutions.
“Shifting into Overdrive”
in Every Dimension
The quantifiable value we deliver to our
customers, our deep roster of talented
employees, and the reliable financial
performance we offer our shareholders
have provided tremendous momentum.
As we move forward, we are shifting our
performance into overdrive as a unified
Expanding Global Markets
Putting customers first requires a
global perspective that enables full
alignment through every phase of
the relationship, including design,
engineering, production, delivery,
and aftermarket support.
Our success in this arena is further
organization with a comprehensive
evidenced with recognition by industry
enterprise strategy designed to further
associations. For example, three Dana
penetrate the markets we serve, expand
technologies have been named as
our product portfolio, and ultimately
finalists for the 2017 Automotive News
increase customer satisfaction and
PACE Awards, which recognize superior
shareholder value.
innovation, technological advancement,
We continue to deepen our commitment
and business performance among
to our global markets by making
automotive suppliers. Dana was the only
investments that optimize our already
company with three technologies earning
substantial footprint and by driving
finalist status this year.
growth in Asia and other key regions.
Our success in emerging markets will be
driven by locally engineered and branded
solutions – through our 16 technology
centers around the world – as well as
continued support for the global vehicle
platforms of our largest customers.
With the addition of Brevini to the Dana
family, it is worth noting that we are
now serving our customers through
operations in 34 countries.
Commercializing New Technology
In 2016, Dana invested $196 million
in engineering, which represents the
seventh consecutive annual increase.
This commitment to innovation has
reaped clear dividends, as Dana
engineers not only grew the number of
Accelerating Hybridization
and Electrification
Dana’s expertise in electronic controls
and system integration provides an ideal
platform for us to develop innovative
products for hybrid and electric vehicles.
Dana already demonstrates leadership in
electrification and hybridization through
our market-leading Long® brand of
battery and power-electronics cooling
products, and our Spicer® Electrified™
portfolio of fully integrated motor,
control, and e-drive technologies will
propel the commercialization of electric
propulsion systems in each of Dana’s
vehicle end markets.
Dana currently supplies Spicer® Helios™
EV Drive for electric vehicles, and
patent applications by more than 50
we plan to introduce new e-axles for
percent over the previous year, but the
company was also awarded its 10,000th
patent in 2016.
Engineering innovations are delivering
real-world benefits, and our product
pipeline is growing with technologies
electric transit buses and city delivery
vehicles in 2018. Our engineers are also
working with automotive manufacturers
to develop all-wheel-drive e-axles that
deliver superior performance, packaging,
and reliability.
We are excited about our current position
in the market and the opportunities that
lie ahead. The underlying fundamentals
of Dana’s business have been and
remain strong. We have delivered
consistently solid financial results in
spite of economic headwinds, and we
are poised to grow profitably by adding
$1.4 billion of revenue over the course of
the next three years while expanding our
margins by more than 150 basis points.
On behalf of the Board of Directors
and the thousands of Dana employees
around the globe, I thank you for
your confidence in our team as we
further build upon our reputation as a
customer-centric company that delivers
on its commitments and always strives
for improvement.
Sincerely,
James K. Kamsickas
President and Chief Executive Officer
2016 Annual Report 5
Dana brings a laser focus to the five dimensions
of its enterprise strategy – leveraging the core,
strengthening customer centricity, expanding
global markets, commercializing new
technology, and accelerating hybridization and
electrification. By aligning each of our efforts
under this overarching framework, Dana is
building on established competencies with a
renewed commitment while penetrating new
markets and expanding product offerings.
6 Dana Incorporated
and establishes Dana as the only
off-highway solutions provider that
can manage the power to both move
equipment and perform its critical
work functions. It also adds tracked
vehicles and a broader range of industrial
equipment to Dana’s addressable market
while providing a platform of proven
technologies that can serve Dana’s
on-highway end markets and accelerate
the company’s hybridization and
electrification initiatives.
Expanding manufacturing presence
to serve global markets
Leveraging design
across end markets
Developing modular designs that can
be tailored to numerous end markets
is a priority for Dana. Our Spicer®
AdvanTEK® gear design extends this
expertise across numerous categories,
including passenger cars, SUVs, pickup
trucks, and commercial vehicles. This
unified approach optimizes Dana’s
engineering, components, supply chain,
and manufacturing footprint to best
support our customers.
Efficient Spicer AdvanTEK gearing
In support of new vehicle programs,
offers best-in-class noise, vibration,
Dana is constructing a state-of-the-art
and harshness performance, along with
gear manufacturing facility in Eastern
greater power density in a compact
Europe. The new factory in Györ,
package. The offering helps customers
Hungary – where Dana has operated
improve durability while reducing
for more than a decade – will serve
vehicle weight.
as a significant enabler to further
meet the regional needs of Dana’s
global customers.
Leverage
the Core
Central to our strategy is leveraging
core operations by sharing capabilities,
technologies, assets, and people across
the enterprise – leading to improved
execution and increased customer
satisfaction. Leveraging investments
across multiple end markets and making
disciplined, value-enhancing acquisitions
will allow us to bring products to market
more quickly, grow top-line sales, and
The facility will enable Dana to deliver
enhance financial returns.
technologies to its regional customers
Brevini welcomed
to Dana portfolio
more quickly and cost effectively while
providing access to the company’s
advanced engineering, manufacturing,
A seamless complement to Dana’s
and sourcing expertise.
current offerings, the power-transmission
and fluid power technologies of
Brevini Group, S.p.A. increase Dana
content on off-highway and stationary
industrial equipment.
The facility will produce Spicer®
AdvanTEK® hypoid or spiral bevel
ring and pinion gear sets. Dana
manufactures primary ring and pinion
drive gearing for traditional banjo
The acquisition expands Dana’s product
and beam axles, as well as all-wheel-
portfolio with adjacent technologies
drive systems.
Dana is adding Brevini™ hydraulic wheel
and track drives to its product portfolio.
The ability to leverage
investments across
multiple end markets is
differentiating Dana.
Dana will expand regional
gear manufacturing with a
new facility in Hungary.
2016 Annual Report 7
Strengthen
Customer
Centricity
for Navistar’s school bus platform
and its Durastar® medium-duty truck
program. Spicer® S140 Series and
Spicer 060 Series axles, Spicer E-Series
steer axles, and Spicer driveshafts are
all available components covered under
the International Durastar Powertrain
Warranty program. Dana also offers
additional extended warranties on
medium-duty truck and bus applications
through the Dana Productivity and Dana
Assurance packages.
New axle facility to
support Jeep® brand
Magnum Gaskets® expands
lineup of sealing products
With the acquisition of Magnum
Gaskets,® Dana adds a supplier of
aftermarket gaskets and sealing
products for automotive and
commercial-vehicle applications.
The business enhances Dana’s sealing
product offerings and complements the
company’s Victor Reinz® and Glaser®
global sealing brands.
This acquisition aligns with Dana’s
growth strategy and enables the
company to increase customer
A high-tech axle manufacturing
satisfaction, while accelerating
Foundational to growing the business is
facility opens this year at a historically
aftermarket growth by expanding the
company’s portfolio of products and
their availability.
Dana 30™ and Dana 44™ axles will
soon be assembled at a new facility
in Toledo, Ohio.
directing the entire organization to put
the customer at the center of our value
system and shift from transactional to
significant location in Toledo, Ohio.
Supporting the Jeep® brand, Dana’s new
facility was previously home to the site
relationship-based interactions. These
where the original Jeep was born more
relationships are built on a foundation of
than 75 years ago and is located less
providing unparalleled technology with
than three miles from the facility where
exceptional quality, delivery, and value.
the iconic vehicle will be built.
Dana efficiency aids Navistar
With an eye to exceeding efficiency
standards, Dana has entered into
a multi-year commercial sales
agreement with Navistar International
Corporation for driveline components
for on-highway, city delivery, bus, and
vocational vehicles.
The facility will integrate Dana’s best
global manufacturing practices and
advanced operating systems.
Dana plans to assemble enhanced
versions of its industry-recognized
Dana 30™ and Dana 44™ axles, which
will deliver increased power density
and performance in a smaller package.
Future axle programs will be announced
The truck maker has access to the full
soon. The 300,000 sq. ft. facility will
range of Dana’s driveline products, and
employ more than 300 associates
the agreement serves as a platform for
by 2020.
collaboration on new technologies –
bringing the two companies together to
develop solutions that meet the specific
needs of Navistar’s customers.
Dana also offers industry-leading
technologies optimized for engine
downspeeding for select Navistar
linehaul trucks.
In addition to this agreement, Navistar
and Dana concurrently launched
several extended warranty packages
Dana supplies advanced
drivelines for Navistar’s
high-efficiency linehaul trucks.
8 Dana Incorporated
also hosted a symposium to promote
efficiency at a lesser weight than
innovation and manufacturing excellence
competing offerings while delivering
in support of the country’s “Made in
increased efficiency that is required by
China 2025” initiative.
the industry and regional customization
Held at the company’s technical and
that buyers demand.
manufacturing campus in Wuxi, Jiangsu
Engineered for 6x2 and 4x2 axle
Province, representatives from Chinese
configurations, this family of single-
vehicle manufacturers and other industry
reduction solo drive axles can
leaders addressed market trends and
be customized for a variety of
evolving technologies that influence
vehicle applications.
the initiative.
Spicer® global axle:
a local solution
Strategic driveline assets
of SIFCO added in Brazil
The purchase of manufacturing and
A vast network of engineering,
other assets of SIFCO S.A., a leading
manufacturing, and distribution facilities
producer of forged and machined
gives Dana the ability to devise and
components in Brazil, enhances Dana’s
quickly bring new concepts to market.
vertically integrated supply chain and
With a commitment to local engineering,
further improves the company’s cost
Dana tailors globally available
structure and customer satisfaction by
technologies to the specific needs
leveraging SIFCO’s extensive experience
of regions around the world.
and knowledge of sophisticated
The Spicer® global single axle for trucks
and coaches offers greater mechanical
Dana tailors globally
available technologies
to the specific needs of
regions around the world.
forged components.
Expanding manufacturing capabilities
in Brazil – where Dana has operated
for nearly 70 years – enables the
company to help vehicle manufacturers
better accommodate local content
requirements and further strengthens
Dana’s position as a central source for
products that use forged and machined
components throughout the region.
Expand
Global
Markets
We continue to deepen our
commitment to our global markets by
making investments that optimize our
already substantial footprint, extensive
market knowledge, and established
supply chain.
Dana celebrates 25 years
of business in China
Dana’s presence in China dates back
to 1991, and today the company
operates more than a dozen facilities
manufacturing a full range of products
for each of the company’s end markets.
Throughout the year the company
celebrated its quarter century in the
country at a variety of industry events,
including Bauma China 2016. Dana
The Spicer® global single axle
can be customized for a variety
of vehicle applications.
Dana celebrated its 25th
anniversary in China in 2016.
2016 Annual Report 9
commercial-vehicle tractor market and
transmits air to tires on both steer and
drive axles. It helps fleets extend tire
life and reduce preventable blowouts
by accurately monitoring and adjusting
tire pressure.
Multi-Layer Steel Transmission Pump Gasket
Dana designed this Victor Reinz® five-
layer gasket to improve the performance
and fuel economy of vehicles with
higher-speed transmissions and to
meet the sealing needs of higher
operating pressures.
This marks the sixth consecutive
year that Dana has been named a
PACE Awards finalist. Only six global
automotive suppliers have achieved
this distinction.
Commercialize
New Technology
Bringing new innovations will drive
growth as our new products and
technology provide our customers with
cutting-edge solutions, address end-
user needs, and capitalize on key market
trends. In 2016, Dana engineers not only
Dana earns CLEPA Innovation
Award for collaboration
grew the number of patent applications
by more than 50 percent over the
previous year, but the company was
also awarded its 10,000th patent.
Three technologies
named finalists for
industry award
Dana earned first place in the CLEPA
Innovation Awards’ Cooperation category
for its work with Audi AG in developing
multi-layer-steel transmission valve body
separator plates.
The CLEPA Innovation Award recognizes
the innovation capabilities of automotive
Three Dana technologies were named
suppliers with a presence in Europe.
finalists for the 2017 Automotive News
Receiving this accolade is a reflection
PACE Awards, which are recognized
on Dana’s ability to effectively work with
globally as the industry benchmark
original-equipment manufacturers to
among automotive suppliers. Dana
develop game-changing technologies.
finalists include:
CLEPA is the European Association of
Automotive Suppliers.
Spicer® Smart Suite™ boosts
telehandler performance, safety
Dana’s Spicer® Smart Suite™ Intelligent
Load Monitoring System (ILMS) is
an advanced technology option for
telehandlers that uses data from
across the vehicle to prevent tip-over
incidents, provide better estimates
of static loads, and supply intelligent
calibration management.
The first in a series of connected-vehicle
technology packages, ILMS collects data
from the axle and other vehicle systems to
provide robust, real-time operating metrics.
As such, ILMS can offer vehicle and load
monitoring in dynamic conditions, such as
cornering, lifting, and shuttling.
In its basic implementation, the technology
provides alerts of improper operating
maneuvers. In its most sophisticated
form, ILMS can monitor hazardous
movements and work in conjunction with
vehicle controllers to provide automatic
countermeasures and restore safe
operating conditions, such as retracting
the boom.
Spicer® Smart Suite™ system uses
vehicle data to help prevent tip-overs.
Adaptive Air/Oil Separation System
This system incorporates Dana’s
Multi-Twister™ passive-adaptive
air/oil separator into the company’s
Victor Reinz® cylinder-head cover.
This cost-effective, maintenance-free
solution optimizes engine performance
while reducing oil consumption and
vehicle emissions.
Tire-Pressure Management System
The Spicer® OpTiMa™ automatic
tire inflation solution is new to the
10 Dana Incorporated
PACE Award Finalist: Multi-Twister™
passive-adaptive air/oil separator
PACE Award Finalist:
Multi-layer steel
transmission
pump gasket
complements the company’s battery
Friedrichshafen, Germany. VariGlide
and power-electronics cooling solutions
offered under the Long® brand.
Currently in production, Spicer® EV
Drive manages speed and torque from
the e-motor to the wheels. Planned
technology features a planetary
coaxial configuration and eliminates
belts and pulleys used in conventional
CVTs – improving fuel economy by
5-10 percent.
for launch in 2018, Dana’s e-axles for
Developed as a modular, bolt-in
electric transit buses and city delivery
solution, the VariGlide variator provides
vehicles feature a fully integrated
a flexible, highly adaptable, power-
motor and gear box and leverage the
dense solution that integrates into
company’s vast experience in chassis
existing front-wheel-drive, all-wheel-
drivetrain applications.
drive, and rear-wheel-drive vehicle
Our Spicer Electrified brand is the result
of a comprehensive strategy to leverage
configurations with the added ability
to support towing.
Dana’s experience and research across
VariGlide technology offers superior
all vehicle markets to accelerate the
NVH characteristics through its
introduction of cleaner, more efficient
smooth and seamless operation.
drivetrain components for electric and
The scalable nature of this
hybrid vehicles.
VariGlide® beltless transmission
featured at industry conference
Dana’s VariGlide® planetary variator
for beltless continuously variable
transmissions (CVT) was featured at
the International VDI Conference in
Dana is building on
a half century of
research in electric
driveline technologies.
innovation provides solutions for
vehicle architectures ranging from
subcompacts to pickups and internal
combustion to hybrid powertrains.
Dana’s VariGlide® planetary
variator technology helps
improve fuel efficiency by
5-10 percent.
Accelerate
Hybridization &
Electrification
Dana’s growing portfolio of hybrid and
electric driveline solutions represents
significant opportunities for growth
as consumers and governments
demand more sustainable modes
of transportation.
Spicer® Electrified™
portfolio introduced
Expanding on the company’s portfolio
of power technologies and drive axles
for electric and hybrid vehicles, Dana
has introduced the Spicer® Electrified™
portfolio of fully integrated motor, control,
and e-drive technologies that advance
electric propulsion systems.
Addressing light-, commercial-, and off-
highway vehicle markets, the portfolio
builds on Dana’s extensive research
in electric driveline technologies and
Dana’s Spicer® Electrified™ portfolio of fully integrated motor, control,
and e-drive technologies advance electric propulsion systems.
2016 Annual Report 11
Dana Leadership
Board of Directors
Rachel A. Gonzalez 2, 4
Executive Vice
James K. Kamsickas
President and Chief
Virginia A. Kamsky 3, 4*
Chairman and Chief
Terrence J. Keating 2, 4
Retired Chairman of
President and General
Executive Officer of
Executive Officer of
Accuride Corporation
Counsel of Sabre
Director since 2017
Dana Incorporated
Director since 2015
Kamsky Associates, Inc.
Director since 2008
Director since 2011
Raymond E. Mabus, Jr. 3, 4
Former Secretary of
R. Bruce McDonald 2,* 3
Chairman and Chief
Mark A. Schulz 2, 4
Chief Executive Officer of
Keith E. Wandell 1, 3*
Retired President and
the United States Navy
Executive Officer of
M.A. Schulz & Associates, LLC
Chief Executive Officer
Director since 2017
Adient plc
Founding Partner of
of Harley-Davidson, Inc.
Director since 2014
Fortinalis Partners
Director since 2008
Director since 2008
1 Non-executive chairman
2 Member, Audit Committee
3 Member, Compensation Committee
4 Member, Nominating and
Corporate Governance Committee
* Committee Chair
For full biographies, please refer to
dana.com/investors or the proxy.
Leadership Team
Aziz S. Aghili
M. Craig Price
President, Off-Highway Drive
Vice President, Purchasing and
and Motion Technologies
Supplier Development
Jonathan M. Collins
Robert D. Pyle
Executive Vice President and
President, Light Vehicle
Chief Financial Officer
Driveline Technologies
George T. Constand
Mariya Trickett
Senior Vice President and
Senior Vice President,
Chief Technology Officer
Human Resources
James K. Kamsickas
Antonio Valencia
President and
Senior Vice President, China
Chief Executive Officer
Mark E. Wallace
Marc S. Levin
Executive Vice President and
Senior Vice President, General
President, Commercial Vehicle
Counsel, and Secretary
Driveline Technologies
Dwayne E. Matthews
President, Power Technologies
12 Dana Incorporated
Remembering Joseph C. Muscari
In September 2016, Dana lost the Chairman of its Board of
Directors, Joseph C. Muscari, who passed away suddenly.
A tremendous leader and a true gentleman, Mr. Muscari
brought great wisdom, foresight, and business acumen to
Dana’s boardroom.
Mr. Muscari was first elected to the Dana Board of Directors
in 2010 and served as its chairman since 2012. He also was
Chairman of the Audit committee and was a member of the
Compensation committee. At the time of his passing, he was
Chairman and CEO of Minerals Technologies Inc. and was
a member of its Board of Directors for more than 12 years.
Prior to this, he spent more than 37 years with Alcoa Inc.,
where he held a number of executive positions, including
Executive Vice President and Chief Financial Officer.
He also served on the Board of Directors of EnerSys.
Dana is tremendously grateful for Mr. Muscari’s service,
and he is truly missed by the Dana family.
Form 10-K
(This page intentionally left blank.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended: December 31, 2016
Commission File Number: 1-1063
Dana Incorporated
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
3939 Technology Drive, Maumee, OH
(Address of principal executive offices)
26-1531856
(IRS Employer Identification Number)
43537
(Zip Code)
Registrant’s telephone number, including area code: (419) 887-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.01 per share
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
No
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 and posted on its corporate web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the common stock held by non-affiliates of the registrant computed by reference to the closing
price of the common stock on June 30, 2016 was $1,512,538,357.
APPLICABLE ONLY TO CORPORATE ISSUERS:
There were 144,016,355 shares of the registrant's common stock outstanding at January 31, 2017.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of
Stockholders to be held on April 27, 2017 are incorporated by reference into Part III.
DANA INCORPORATED
FORM 10-K
YEAR ENDED DECEMBER 31, 2016
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Pages
1
5
10
11
11
11
13
14
39
41
94
94
94
94
94
95
95
95
96
97
98
PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
PART II
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Item 15
Signatures
Exhibit Index
Exhibits
i
Forward-Looking Information
Statements in this report (or otherwise made by us or on our behalf) that are not entirely historical constitute “forward-
looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements can often be identified by words such as “anticipates,” “expects,” “believes,” “intends,” “plans,” “predicts,” “seeks,”
“estimates,” “projects,” “outlook,” “may," “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing” and similar
expressions, variations or negatives of these words. These statements represent the present expectations of Dana Incorporated
and its consolidated subsidiaries (Dana) based on our current information and assumptions. Forward-looking statements are
inherently subject to risks and uncertainties. Our plans, actions and actual results could differ materially from our present
expectations due to a number of factors, including those discussed below and elsewhere in this report and in our other filings
with the Securities and Exchange Commission (SEC). All forward-looking statements speak only as of the date made and we
undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances that may
arise after the date of this report.
ii
PART I
(Dollars in millions, except per share amounts)
Item 1. Business
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 our
customer base includes virtually every major vehicle manufacturer in the global light vehicle, medium/heavy vehicle and off-
highway markets. As of December 31, 2016 we employed approximately 24,900 people, operated in 25 countries and had 91
major facilities around the world.
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.
Overview of our Business
We have aligned our organization around four operating segments: Light Vehicle Driveline Technologies (Light Vehicle),
Commercial Vehicle Driveline Technologies (Commercial Vehicle), Off-Highway Driveline Technologies (Off-Highway) and
Power Technologies. These operating segments have global responsibility and accountability for business commercial activities
and financial performance.
External sales by operating segment for the years ended December 31, 2016, 2015 and 2014 are as follows:
Light Vehicle
Commercial Vehicle
Off-Highway
Power Technologies
Total
2016
2015
2014
Dollars
$ 2,607
1,254
909
1,056
$ 5,826
% of
Dollars
Total
44.8% $ 2,482
1,533
21.5%
1,040
15.6%
1,005
18.1%
$ 6,060
% of
Dollars
Total
40.9% $ 2,496
1,838
25.3%
1,231
17.2%
1,052
16.6%
$ 6,617
% of
Total
37.7%
27.8%
18.6%
15.9%
Refer to Segment Results of Operations in Item 7 and Note 19 to our consolidated financial statements in Item 8 for further
financial information about our operating segments.
1
Our business is diversified across end-markets, products and customers. The following table summarizes the markets,
products and largest customers of each of our operating segments as of December 31, 2016.
Segment
Light Vehicle
Commercial Vehicle
Off-Highway
Power Technologies
Markets
Products
Front axles
Rear axles
Driveshafts/Propshafts
Differentials
Torque couplings
Modular assemblies
Light vehicle market:
Light trucks (full frame)
Sport utility vehicles
Crossover utility vehicles
Vans
Passenger cars
Medium/heavy vehicle market: Steer axles
Drive axles
Medium duty trucks
Driveshafts
Heavy duty trucks
Tire inflation systems
Buses
Specialty vehicles
Off-Highway market:
Construction
Earth moving
Agricultural
Mining
Forestry
Rail
Material handling
Light vehicle market
Medium/heavy vehicle market Cover modules
Off-Highway market
Front axles
Rear axles
Driveshafts
Transmissions
Torque converters
Tire inflation systems
Electronic controls
Gaskets
Largest
Customers
Ford Motor Company
Fiat Chrysler Automobiles*
Renault-Nissan Alliance
Toyota Motor Company
General Motors Company
Tata Motors
PACCAR Inc
Ford Motor Company
AB Volvo
Daimler AG
Navistar International Corporation
Deere & Company
AGCO Corporation
Manitou Group
Oshkosh Corporation
Sandvik AB
Ford Motor Company
General Motors Company
Renault-Nissan Alliance
Heat shields
Engine sealing systems Mahle GmbH
Cooling
Heat transfer products
Volkswagen AG
* Via a directed supply relationship with Hyundai Mobis.
Geographic Operations
We maintain administrative and operational organizations in North America, Europe, South America and Asia Pacific to
support our operating segments, assist with the management of affiliate relations and facilitate financial and statutory reporting
and tax compliance on a worldwide basis. Our operations are located in the following countries:
North America
Europe
South America
Asia Pacific
Canada
Mexico
United States
Belgium
France
Germany
Hungary
Italy
Russia
South Africa
Spain
Sweden
Switzerland
United Kingdom
Argentina
Brazil
Colombia
Ecuador
Australia
China
India
Japan
South Korea
Taiwan
Thailand
Our non-U.S. subsidiaries and affiliates manufacture and sell products similar to those we produce in the United States.
Operations outside the U.S. may be subject to a greater risk of changing political, economic and social environments, changing
governmental laws and regulations, currency revaluations and market fluctuations than our domestic operations. See the
discussion of risk factors in Item 1A.
Sales reported by our non-U.S. subsidiaries comprised $3,131 of our 2016 consolidated sales of $5,826. A summary of
sales and long-lived assets by geographic region can be found in Note 19 to our consolidated financial statements in Item 8.
2
Customer Dependence
We are largely dependent on light vehicle, medium- and heavy-duty vehicle and off-highway original equipment
manufacturer (OEM) customers. Ford Motor Company (Ford) was the only individual customer accounting for 10% or more of
our consolidated sales in 2016. As a percentage of total sales from operations, our sales to Ford were approximately 22% in
2016, 20% in 2015 and 18% in 2014 and our sales to Fiat Chrysler Automobiles (via a directed supply relationship with
Hyundai Mobis), our second largest customer, were approximately 9% in 2016, 9% in 2015 and 8% in 2014. Renault-Nissan
Alliance, PACCAR Inc and General Motors Company were our third, fourth and fifth largest customers in 2016. Our 10 largest
customers collectively accounted for approximately 62% of our sales in 2016.
Loss of all or a substantial portion of our sales to Ford or other large volume customers would have a significant adverse
effect on our financial results until such lost sales volume could be replaced and there is no assurance that any such lost volume
would be replaced.
Sources and Availability of Raw Materials
We use a variety of raw materials in the production of our products, including steel and products containing steel, stainless
steel, forgings, castings and bearings. Other commodity purchases include aluminum, brass, copper and plastics. These
materials are typically available from multiple qualified sources in quantities sufficient for our needs. However, some of our
operations remain dependent on single sources for certain raw materials.
While our suppliers have generally been able to support our needs, our operations may experience shortages and delays in
the supply of raw material from time to time due to strong demand, capacity limitations, short lead times, production schedule
increases from our customers and other problems experienced by the suppliers. A significant or prolonged shortage of critical
components from any of our suppliers could adversely impact our ability to meet our production schedules and to deliver our
products to our customers in a timely manner.
Seasonality
Our businesses are generally not seasonal. However, in the light vehicle market, our sales are closely related to the
production schedules of our OEM customers and those schedules have historically been weakest in the third quarter of the year
due to a large number of model year change-overs that occur during this period. Additionally, third-quarter production
schedules in Europe are typically impacted by the summer vacation schedules and fourth-quarter production is affected globally
by year-end holidays.
Backlog
A substantial amount of the new business we are awarded by OEMs is granted well in advance of a program launch. These
awards typically extend through the life of the given program. This backlog of new business does not represent firm orders. We
estimate future sales from new business using the projected volume under these programs.
Competition
Within each of our markets, we compete with a variety of independent suppliers and distributors, as well as with the in-
house operations of certain OEMs. With a renewed focus on product innovation, we differentiate ourselves through efficiency
and performance, reliability, materials and processes, sustainability and product extension.
3
The following table summarizes our principal competitors by operating segment as of December 31, 2016.
Light Vehicle
Segment
Commercial Vehicle
Off-Highway
Power Technologies
Intellectual Property
Principal Competitors
ZF Friedrichshafen AG
GKN plc
American Axle & Manufacturing Holdings, Inc.
Magna International Inc.
Wanxiang Group Corporation
Hitachi Automotive Systems, Ltd.
IFA ROTORION Holding GmbH
Neapco, LLC
Vertically integrated OEM operations
Meritor, Inc.
American Axle & Manufacturing Holdings, Inc.
Hendrickson (a subsidiary of the Boler Company)
Klein Products Inc.
Tirsan Kardan
Vertically integrated OEM operations
Carraro Group
ZF Friedrichshafen AG
GKN plc
Kessler + Co.
Meritor, Inc.
YTO Group
Comer Industries
Hema Endustri A.S.
Vertically integrated OEM operations
ElringKlinger AG
Federal-Mogul Corporation
Freudenberg NOK Group
MAHLE GmbH
Modine Manufacturing Company
Valeo Group
YinLun Co., LTD
Denso Corporation
Our proprietary driveline and power technologies product lines have strong identities in the markets we serve. Throughout
these product lines, we manufacture and sell our products under a number of patents that have been obtained over a period of
years and expire at various times. We consider each of these patents to be of value and aggressively protect our rights
throughout the world against infringement. We are involved with many product lines and the loss or expiration of any particular
patent would not materially affect our sales and profits.
We own or have licensed numerous trademarks that are registered in many countries, enabling us to market our products
worldwide. For example, our Spicer®, Victor Reinz® and Long® trademarks are widely recognized in their market segments.
Engineering and Research and Development
Since our introduction of the automotive universal joint in 1904, we have been focused on technological innovation. Our
objective is to be an essential partner to our customers and we remain highly focused on offering superior product quality,
technologically advanced products, world-class service and competitive prices. To enhance quality and reduce costs, we use
4
statistical process control, cellular manufacturing, flexible regional production and assembly, global sourcing and extensive
employee training.
We engage in ongoing engineering and research and development activities to improve the reliability, performance and
cost-effectiveness of our existing products and to design and develop innovative products that meet customer requirements for
new applications. We are integrating related operations to create a more innovative environment, speed product development,
maximize efficiency and improve communication and information sharing among our research and development operations. At
December 31, 2016, we had eight stand-alone technical and engineering centers and eight additional sites at which we conduct
research and development activities. Our research and development costs were $81 in 2016, $75 in 2015 and $72 in 2014. Total
engineering expenses including research and development were $196 in 2016, $183 in 2015 and $176 in 2014.
Our research and development activities continue to improve customer value. For all of our markets, this means drivelines
with higher torque capacity, reduced weight and improved efficiency. End-use customers benefit by having vehicles with better
fuel economy and reduced cost of ownership. We are also developing a number of power technologies products for vehicular
and other applications that will assist fuel cell, battery and hybrid vehicle manufacturers in making their technologies
commercially viable in mass production.
Employees
The following table summarizes our employees by operating segment as of December 31, 2016.
Segment
Light Vehicle
Commercial Vehicle
Off-Highway
Power Technologies
Technical and administrative
Total
Environmental Compliance
Employees
10,100
5,900
2,700
4,900
1,300
24,900
We make capital expenditures in the normal course of business as necessary to ensure that our facilities are in compliance
with applicable environmental laws and regulations. The cost of environmental compliance has not been a material part of
capital expenditures and did not have a material adverse effect on our earnings or competitive position in 2016.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended (Exchange Act) are available,
free of charge, on or through our Internet website at http://www.dana.com/investors as soon as reasonably practicable after we
electronically file such materials with, or furnish them to, the SEC. Copies of any materials we file with the SEC can also be
obtained free of charge through the SEC’s website at http://www.sec.gov, at the SEC’s Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549, or by calling the SEC’s Office of Investor Education and Advocacy at 1-800-732-0330. We also
post our Corporate Governance Guidelines, Standards of Business Conduct for Members of the Board of Directors, Board
Committee membership lists and charters, Standards of Business Conduct and other corporate governance materials on our
Internet website. Copies of these posted materials are also available in print, free of charge, to any stockholder upon request
from: Dana Incorporated, Investor Relations, P.O. Box 1000, Maumee, Ohio 43537, or via telephone in the U.S. at
800-537-8823 or e-mail at InvestorRelations@dana.com. The inclusion of our website address in this report is an inactive
textual reference only and is not intended to include or incorporate by reference the information on our website into this report.
Item 1A. Risk Factors
We are impacted by events and conditions that affect the light vehicle, medium/heavy vehicle and off-highway markets
that we serve, as well as by factors specific to Dana. Among the risks that could materially adversely affect our business,
financial condition or results of operations are the following, many of which are interrelated.
5
Risk Factors Related to the Markets We Serve
Failure to sustain a continuing economic recovery in the United States and elsewhere could have a substantial adverse effect
on our business.
Our business is tied to general economic and industry conditions as demand for vehicles depends largely on the strength of
the economy, employment levels, consumer confidence levels, the availability and cost of credit and the cost of fuel. These
factors have had and could continue to have a substantial impact on our business.
We expect global market conditions to result in overall comparable sales in 2017. We expect the North America economic
climate will continue to be modestly strong to stable with light vehicle demand levels continuing to be strong, while the
medium/heavy truck market is expected to be weaker and the off-highway market remains relatively stable at already weak
levels. The economy in Europe is expected to improve modestly, with on-highway markets being slightly stronger while the
off-highway market remains weak but stable. The South America countries where we do business are expected to remain
relatively weak, but show signs of improvement as we progress through 2017. We expect the rate of growth to be more modest
in the Asia Pacific region in 2017, with the markets we serve in the region being relatively stable or facing some headwinds.
Adverse developments in the economic conditions of any of these markets could reduce demand for new vehicles, causing our
customers to reduce their vehicle production and, as a result, demand for our products would be adversely affected.
Certain political developments occurring this past year have provided increased economic uncertainty. The United
Kingdom's decision to exit the European Union and the results of the presidential election in the U.S. both could result in
economic and trade policy actions that would impact economic conditions in various countries, the cost of importing into the
U.S. and the competitive landscape of our customers, suppliers and competitors.
Adverse global economic conditions could also cause our customers and suppliers to experience severe economic
constraints in the future, including bankruptcy, which could have a material adverse impact on our financial position and results
of operations.
We could be adversely impacted by the loss of any of our significant customers, changes in their requirements for our products
or changes in their financial condition.
We are reliant upon sales to several significant customers. Sales to our ten largest customers accounted for 62% of our
overall sales in 2016. Changes in our business relationships with any of our large customers or in the timing, size and
continuation of their various programs could have a material adverse impact on us.
The loss of any of these customers, the loss of business with respect to one or more of their vehicle models on which we
have high component content, or a significant decline in the production levels of such vehicles would negatively impact our
business, results of operations and financial condition. Pricing pressure from our customers also poses certain risks. Inability on
our part to offset pricing concessions with cost reductions would adversely affect our profitability. We are continually bidding
on new business with these customers, as well as seeking to diversify our customer base, but there is no assurance that our
efforts will be successful. Further, to the extent that the financial condition of our largest customers deteriorates, including
possible bankruptcies, mergers or liquidations, or their sales otherwise decline, our financial position and results of operations
could be adversely affected.
We may be adversely impacted by changes in international legislative and political conditions.
We operate in 25 countries around the world and we depend on significant foreign suppliers and customers. Further, we
have several growth initiatives that are targeting emerging markets like China and India. Legislative and political activities
within the countries where we conduct business, particularly in emerging markets and less developed countries, could adversely
impact our ability to operate in those countries. The political situation in a number of countries in which we operate could
create instability in our contractual relationships with no effective legal safeguards for resolution of these issues, or potentially
result in the seizure of our assets. Through January 23, 2015, we operated in Venezuela where government exchange controls
and policies placed restrictions on our ability to operate effectively and repatriate funds. Our risk associated with operating in
this country was eliminated with the divestiture of our operations in Venezuela on January 23, 2015. However, we expect to
continue exporting product to Venezuela, and our ability to do so effectively could be adversely impacted by Venezuela
government policies. We operate in Argentina, where trade-related initiatives and other government restrictions limit our
6
ability to optimize operating effectiveness. At December 31, 2016, our net asset exposure related to Argentina was
approximately $15, including $10 of net fixed assets.
We may be adversely impacted by the strength of the U.S. dollar relative to the currencies in the other countries in which we do
business.
Approximately 54% of our sales in 2016 were from operations located in countries other than the U.S. Currency variations
can have an impact on our results (expressed in U.S. dollars). Currency variations can also adversely affect margins on sales of
our products in countries outside of the U.S. and margins on sales of products that include components obtained from affiliates
or other suppliers located outside of the U.S. Strengthening of the U.S. dollar against the euro and currencies of other countries
in which we have operations has had and could continue to have an adverse effect on our results reported in U.S. dollars. We
use a combination of natural hedging techniques and financial derivatives to mitigate foreign currency exchange rate risks.
Such hedging activities may be ineffective or may not offset more than a portion of the adverse financial impact resulting from
currency variations.
We may be adversely impacted by new laws, regulations or policies of governmental organizations related to increased fuel
economy standards and reduced greenhouse gas emissions, or changes in existing ones.
The markets and customers we serve are subject to substantial government regulation, which often differs by state, region
and country. These regulations, and proposals for additional regulation, are advanced primarily out of concern for the
environment (including concerns about global climate change and its impact) and energy independence. We anticipate that the
number and extent of these regulations, and the costs to comply with them, will increase significantly in the future.
In the U.S., vehicle fuel economy and greenhouse gas emissions are regulated under a harmonized national program
administered by the National Highway Traffic Safety Administration and the Environmental Protection Agency (EPA). Other
governments in the markets we serve are also creating new policies to address these same issues, including the European
Union, Brazil, China and India. These government regulatory requirements could significantly affect our customers by altering
their global product development plans and substantially increasing their costs, which could result in limitations on the types of
vehicles they sell and the geographical markets they serve. Any of these outcomes could adversely affect our financial position
and results of operations.
Company-Specific Risk Factors
We have taken, and continue to take, cost-reduction actions. Although our process includes planning for potential negative
consequences, the cost-reduction actions may expose us to additional production risk and could adversely affect our sales,
profitability and ability to attract and retain employees.
We have been reducing costs in all of our businesses and have discontinued product lines, exited businesses, consolidated
manufacturing operations and positioned operations in lower cost locations. The impact of these cost-reduction actions on our
sales and profitability may be influenced by many factors including our ability to successfully complete these ongoing efforts,
our ability to generate the level of cost savings we expect or that are necessary to enable us to effectively compete, delays in
implementation of anticipated workforce reductions, decline in employee morale and the potential inability to meet operational
targets due to our inability to retain or recruit key employees.
We depend on our subsidiaries for cash to satisfy the obligations of the company.
Our subsidiaries conduct all of our operations and own substantially all of our assets. Our cash flow and our ability to meet
our obligations depend on the cash flow of our subsidiaries. In addition, the payment of funds in the form of dividends, intercompany
payments, tax sharing payments and otherwise may be subject to restrictions under the laws of the countries of incorporation of
our subsidiaries or the by-laws of the subsidiary.
Labor stoppages or work slowdowns at Dana, key suppliers or our customers could result in a disruption in our operations and
have a material adverse effect on our businesses.
We and our customers rely on our respective suppliers to provide parts needed to maintain production levels. We all rely on
workforces represented by labor unions. Workforce disputes that result in work stoppages or slowdowns could disrupt
operations of all of these businesses, which in turn could have a material adverse effect on the supply of, or demand for, the
products we supply our customers.
7
We could be adversely affected if we are unable to recover portions of commodity costs (including costs of steel, other raw
materials and energy) from our customers.
We continue to work with our customers to recover a portion of our material cost increases. While we have been successful
in the past recovering a significant portion of such cost increases, there is no assurance that increases in commodity costs will
not adversely impact our profitability in the future.
We could be adversely affected if we experience shortages of components from our suppliers or if disruptions in the supply
chain lead to parts shortages for our customers.
A substantial portion of our annual cost of sales is driven by the purchase of goods and services. To manage and minimize
these costs, we have been consolidating our supplier base. As a result, we are dependent on single sources of supply for some
components of our products. We select our suppliers based on total value (including price, delivery and quality), taking into
consideration their production capacities and financial condition, and we expect that they will be able to support our needs.
However, there is no assurance that adverse financial conditions, including bankruptcies of our suppliers, reduced levels of
production, natural disasters or other problems experienced by our suppliers will not result in shortages or delays in their
supply of components to us or even in the financial collapse of one or more such suppliers. If we were to experience a
significant or prolonged shortage of critical components from any of our suppliers, particularly those who are sole sources, and
were unable to procure the components from other sources, we would be unable to meet our production schedules for some of
our key products and to ship such products to our customers in a timely fashion, which would adversely affect our sales,
profitability and customer relations.
Adverse economic conditions, natural disasters and other factors can similarly lead to financial distress or production
problems for other suppliers to our customers which can create disruptions to our production levels. Any such supply-chain
induced disruptions to our production are likely to create operating inefficiencies that will adversely affect our sales,
profitability and customer relations.
We ended the contractual relationship with one of our largest suppliers at the end of 2014 and established relationships
with alternative suppliers. During the first half of 2015, as we transitioned to the new suppliers, we were challenged with
relatively high levels of demand in the market segment supported by these suppliers. This resulted in increased costs in the first
half of 2015. Additionally, our inability to fully satisfy customer demands led to some lost business with a significant customer.
There is a risk that our operating results and customer relationships could be adversely impacted if other supplier transitions are
not completed effectively.
In 2014, the financial condition of a major supplier to our South America operations led to them pursuing legal
reorganization. As more fully described in Notes 2 and 3 of the consolidated financial statements in Item 8, legal actions were
required in 2015 to maintain the supply of product from this supplier and, in 2016, we ultimately acquired strategic assets from
this supplier necessary to satisfy our customer commitments.
In 2016, the financial condition of a single source supplier to our North American operations led them to request
significant price increases which we have not accepted. Although this supplier is providing us with the required supply, there is
continued uncertainty whether we will be able to maintain cost-effective, uninterrupted supply.
Our profitability and results of operations may be adversely affected by program launch difficulties.
The launch of new business is a complex process, the success of which depends on a wide range of factors, including the
production readiness of our manufacturing facilities and manufacturing processes and those of our suppliers, as well as factors
related to tooling, equipment, employees, initial product quality and other factors. Our failure to successfully launch material
new or takeover business could have an adverse effect on our profitability and results of operations.
We use important intellectual property in our business. If we are unable to protect our intellectual property or if a third party
makes assertions against us or our customers relating to intellectual property rights, our business could be adversely affected.
We own important intellectual property, including patents, trademarks, copyrights and trade secrets, and are involved in
numerous licensing arrangements. Our intellectual property plays an important role in maintaining our competitive position in a
number of the markets that we serve. Our competitors may develop technologies that are similar or superior to our proprietary
technologies or design around the patents we own or license. Further, as we expand our operations in jurisdictions where the
8
protection of intellectual property rights is less robust, the risk of others duplicating our proprietary technologies increases,
despite efforts we undertake to protect them. Developments or assertions by or against us relating to intellectual property rights,
and any inability to protect these rights, could have a material adverse impact on our business and our competitive position.
We could encounter unexpected difficulties integrating acquisitions and joint ventures.
We acquired businesses in 2016, and we expect to complete additional acquisitions and investments in the future that
complement or expand our businesses. The success of this strategy will depend on our ability to successfully complete these
transactions or arrangements, to integrate the businesses acquired in these transactions and to develop satisfactory working
arrangements with our strategic partners in the joint ventures. We could encounter unexpected difficulties in completing these
transactions and integrating the acquisitions with our existing operations. We also may not realize the degree or timing of
benefits anticipated when we entered into a transaction.
Several of our joint ventures operate pursuant to established agreements and, as such, we do not unilaterally control the
joint venture. There is a risk that the partners’ objectives for the joint venture may not be aligned with ours, leading to potential
differences over management of the joint venture that could adversely impact its financial performance and consequent
contribution to our earnings. Additionally, inability on the part of our partners to satisfy their contractual obligations under the
agreements could adversely impact our results of operations and financial position.
We could be adversely impacted by the costs of environmental, health, safety and product liability compliance.
Our operations are subject to environmental laws and regulations in the U.S. and other countries that govern emissions to
the air; discharges to water; the generation, handling, storage, transportation, treatment and disposal of waste materials; and the
cleanup of contaminated properties. Historically, other than an EPA settlement as part of our bankruptcy proceedings,
environmental costs related to our former and existing operations have not been material. However, there is no assurance that
the costs of complying with current environmental laws and regulations, or those that may be adopted in the future, will not
increase and adversely impact us.
There is also no assurance that the costs of complying with current laws and regulations, or those that may be adopted in
the future, that relate to health, safety and product liability matters will not adversely impact us. There is also a risk of warranty
and product liability claims, as well as product recalls, if our products fail to perform to specifications or cause property
damage, injury or death. (See Notes 15 and 16 to our consolidated financial statements in Item 8 for additional information on
product liabilities and warranties.)
A failure of our information technology infrastructure could adversely impact our business and operations.
We recognize the increasing volume of cyber attacks and employ commercially practical efforts to provide reasonable
assurance that the risks of such attacks are appropriately mitigated. Each year, we evaluate the threat profile of our industry to
stay abreast of trends and to provide reasonable assurance our existing countermeasures will address any new threats identified.
Despite our implementation of security measures, our IT systems and those of our service providers are vulnerable to
circumstances beyond our reasonable control including acts of terror, acts of government, natural disasters, civil unrest and
denial of service attacks which may lead to the theft of our intellectual property, trade secrets or business disruption. To the
extent that any disruption or security breach results in a loss or damage to our data or an inappropriate disclosure of
confidential information, it could cause significant damage to our reputation, affect our relationships with our customers,
suppliers and employees, lead to claims against the company and ultimately harm our business. Additionally, we may be
required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.
We participate in certain multi-employer pension plans which are not fully funded.
We contribute to certain multi-employer defined benefit pension plans for our union-represented employees in the U.S. in
accordance with our collective bargaining agreements. Contributions are based on hours worked except in cases of layoff or
leave where we generally contribute based on 40 hours per week for a maximum of one year. The plans are not fully funded as
of December 31, 2016. We could be held liable to the plans for our obligation, as well as those of other employers, due to our
participation in the plans. Contribution rates could increase if the plans are required to adopt a funding improvement plan, if the
performance of plan assets does not meet expectations or as a result of future collectively bargained wage and benefit
agreements. (See Note 11 to our consolidated financial statements in Item 8 for additional information on multi-employer
pension plans.)
9
Changes in interest rates and asset returns could increase our pension funding obligations and reduce our profitability.
We have unfunded obligations under certain of our defined benefit pension and other postretirement benefit plans. The
valuation of our future payment obligations under the plans and the related plan assets are subject to significant adverse
changes if the credit and capital markets cause interest rates and projected rates of return to decline. Such declines could also
require us to make significant additional contributions to our pension plans in the future. A material increase in the unfunded
obligations of these plans could also result in a significant increase in our pension expense in the future.
We may incur additional tax expense or become subject to additional tax exposure.
Our provision for income taxes and the cash outlays required to satisfy our income tax obligations in the future could be
adversely affected by numerous factors. These factors include changes in the level of earnings in the tax jurisdictions in which
we operate, changes in the valuation of deferred tax assets, changes in our plans to repatriate the earnings of our non-U.S.
operations to the U.S. and changes in tax laws and regulations. The 2016 presidential election in the U.S. has resulted in an
administration and Congress that are controlled by the same party. Changes to tax policy and tax rates are considered likely
and, depending on the nature of these changes, could have a significant impact on our business and financial results. Our
income tax returns are subject to examination by federal, state and local tax authorities in the U.S. and tax authorities outside
the U.S. The results of these examinations and the ongoing assessments of our tax exposures could also have an adverse effect
on our provision for income taxes and the cash outlays required to satisfy our income tax obligations.
Our ability to utilize our net operating loss carryforwards may be limited.
Net operating loss carryforwards (NOLs) approximating $796 were available at December 31, 2016 to reduce future U.S.
income tax liabilities. Our ability to utilize these NOLs may be limited as a result of certain change of control provisions of the
U.S. Internal Revenue Code of 1986, as amended (Code). Of this amount, NOLs of approximately $577 are treated as losses
incurred before the change of control upon emergence from Chapter 11 and are limited to annual utilization of $84. The balance
of our NOLs, treated as incurred subsequent to the change in control, is not subject to limitation as of December 31, 2016.
However, there can be no assurance that trading in our shares will not effect another change in control under the Code, which
would further limit our ability to utilize our available NOLs. Such limitations may cause us to pay income taxes earlier and in
greater amounts than would be the case if the NOLs were not subject to limitation.
Risk Factors Related to our Securities
Provisions in our Restated Certificate of Incorporation and Bylaws may discourage a takeover attempt.
Certain provisions of our Restated Certificate of Incorporation and Bylaws, as well as the General Corporation Law of the
State of Delaware, may have the effect of delaying, deferring or preventing a change in control of Dana. Such provisions,
including those governing the nomination of directors, limiting who may call special stockholders’ meetings and eliminating
stockholder action by written consent, may make it more difficult for other persons, without the approval of our board of
directors, to make a tender offer or otherwise acquire substantial amounts of common stock or to launch other takeover
attempts that a stockholder might consider to be in such stockholder’s best interest.
Item 1B. Unresolved Staff Comments
The Company has received no written comments regarding its periodic or current reports from the staff of the SEC that
were issued 180 days or more preceding the end of its 2016 fiscal year and that remain unresolved.
10
Item 2. Properties
Type of Facility
North
America
Europe
South
America
Asia
Pacific
Total
Light Vehicle
Manufacturing/Distribution
Commercial Vehicle
Manufacturing/Distribution
Off-Highway
Manufacturing/Distribution
Power Technologies
Manufacturing/Distribution
Technical and Engineering Centers
Corporate and other
Administrative Offices
Technical and Engineering Centers - Multiple Segments
13
8
2
12
3
2
2
42
5
5
3
4
8
4
19
10
9
4
2
1
1
3
20
30
21
12
17
3
3
5
91
As of December 31, 2016, we operated in 25 countries and had 91 major facilities housing manufacturing and distribution
operations, technical and engineering centers and administrative offices. In addition to the eight stand-alone technical and
engineering centers in the table above, we have eight technical and engineering centers housed within manufacturing sites. We
lease 34 of these facilities and a portion of four others and own the remainder. We believe that all of our property and
equipment is properly maintained.
Our world headquarters is located in Maumee, Ohio. This facility and other facilities in the greater Detroit, Michigan and
Maumee, Ohio areas house functions that have global or North American regional responsibility for finance and accounting,
treasury, risk management, legal, human resources, procurement and supply chain management, communications and
information technology.
Item 3. Legal Proceedings
We are a party to various pending judicial and administrative proceedings that arose in the ordinary course of business.
After reviewing the currently pending lawsuits and proceedings (including the probable outcomes, reasonably anticipated costs
and expenses and our established reserves for uninsured liabilities), we do not believe that any liabilities that may result from
these proceedings are reasonably likely to have a material adverse effect on our liquidity, financial condition or results of
operations. Legal proceedings are also discussed in Notes 3 and 15 to our consolidated financial statements in Item 8.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market information — Our common stock trades on the New York Stock Exchange (NYSE) under the symbol "DAN." The
following table shows the high and low prices of our common stock as reported by the NYSE for each of our fiscal quarters
during 2016 and 2015.
Fourth quarter
Third quarter
Second quarter
First quarter
2016
2015
High
Low
High
Low
$
$
19.81
15.70
14.55
14.32
$
13.93
9.80
10.21
10.62
$
18.12
20.81
22.73
23.48
13.01
15.33
20.35
20.04
11
Holders of common stock — Based on reports by our transfer agent, there were approximately 3,494 registered holders of our
common stock on January 31, 2017.
Reference is made to the Equity Compensation Plan Information section of Item 12 for certain information regarding our
equity compensation plans.
Stockholder return — The following graph shows the cumulative total shareholder return for our common stock since
December 31, 2011. The graph compares our performance to that of the Standard & Poor’s 500 Stock Index (S&P 500) and the
Dow Jones US Auto Parts Index. The comparison assumes $100 was invested at the closing price on December 31, 2011. Each
of the returns shown assumes that all dividends paid were reinvested.
Performance chart
Index
Dana Incorporated
S&P 500
Dow Jones US Auto Parts Index
12/31/2011
100.00
$
100.00
100.00
12/31/2012
129.28
$
116.00
111.90
12/31/2013
162.96
$
153.58
174.63
12/31/2014
181.52
$
174.60
193.20
12/31/2015
119.84
$
177.01
186.03
12/31/2016
172.21
$
198.18
196.10
Dividends — We declared and paid quarterly common stock dividends in 2016 and 2015, raising the dividend from five cents
to six cents per share in the second quarter of 2015.
Issuer's purchases of equity securities — Our Board of Directors approved an expansion of our existing common stock share
repurchase program from $1,400 to $1,700 on January 11, 2016. The share repurchase program expires on December 31, 2017.
We repurchase shares utilizing available excess cash either in the open market or through privately negotiated transactions. The
stock repurchases are subject to prevailing market conditions and other considerations. During the second half of 2016, there
were no shares of our common stock repurchased under the program. Approximately $219 remained available under the
program for future repurchases as of December 31, 2016.
Annual meeting — We will hold an annual meeting of stockholders on April 27, 2017.
12
Item 6. Selected Financial Data
Operating Results
Net sales
Income from continuing operations before income taxes
Income from continuing operations
Income (loss) from discontinued operations
Net income
Net income attributable to the parent company
Preferred stock dividend requirements
Preferred stock redemption premium
Net income (loss) available to common stockholders
Net income (loss) per share available to common stockholders
Basic
Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income (loss)
Diluted
Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income (loss)
Depreciation and amortization of intangibles
Net cash provided by operating activities
Purchases of property, plant and equipment
Financial Position
Cash and cash equivalents and marketable securities
Total assets
Long-term debt, less debt issuance costs
Total debt
Preferred stock
Common stock and additional paid-in capital
Treasury stock
Total parent company stockholders' equity
Book value per share
Common Share Information
Dividends declared per common share
Weighted-average common shares outstanding
Basic
Diluted
Market prices
High
Low
Year Ended December 31,
2016
2015
2014
2013
2012
$
$
$
$
$
$
$
$
$
$
5,826
215
653
653
640
—
—
640
4.38
—
4.38
4.36
—
4.36
182
384
322
737
4,860
1,595
1,664
—
2,329
(83)
1,157
7.92
$
$
$
$
$
$
$
$
6,060
292
176
4
180
159
—
—
159
0.98
0.02
1.00
0.97
0.02
0.99
174
406
260
953
4,301
1,553
1,575
—
2,313
(1)
728
4.58
$
$
$
$
$
$
$
$
6,617
260
343
(15)
328
319
7
—
312
2.07
(0.10)
1.97
1.93
(0.09)
1.84
213
510
234
1,290
4,893
1,588
1,653
—
2,642
(33)
1,080
6.83
$
$
$
$
$
$
$
$
$
6,769
368
261
(1)
260
7,224
364
315
—
315
$
244
25
232
(13) $
(0.08) $
(0.01)
(0.09)
(0.08) $
(0.01)
(0.09)
262
577
209
1,366
5,068
1,541
1,598
372
2,842
(366)
1,309
8.94
$
$
$
300
31
—
269
1.82
—
1.82
1.40
—
1.40
277
339
164
1,119
5,097
790
891
753
2,670
(25)
1,836
12.41
0.24
$
0.23
$
0.20
$
0.20
$
0.20
146.0
146.8
159.0
160.0
158.0
173.5
146.4
146.4
148.0
214.7
$
19.81
9.80
$
23.48
13.01
24.82
16.81
$
$
23.46
15.17
16.76
11.13
Note: Total assets for 2015, 2014, 2013 and 2012 have been recast to reflect the adoption of the accounting standard requiring all deferred income tax
liabilities and assets to be classified as noncurrent on the balance sheet rather than separated into current and noncurrent amounts. The recasting of
total assets resulted in reductions of $25, $12, $35 and $34 for 2015, 2014, 2013 and 2012. See Note 1 to our consolidated financial statements in Item
8 for additional information.
13
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions)
Management's discussion and analysis of financial condition and results of operations should be read in conjunction with
the financial statements and accompanying notes in Item 8.
Management Overview
We are a global provider of high technology driveline, sealing and thermal-management products for virtually every major
vehicle manufacturer in the on-highway and off-highway markets. Our driveline products – axles, driveshafts and transmissions
– are delivered through our Light Vehicle Driveline Technologies (Light Vehicle), Commercial Vehicle Driveline Technologies
(Commercial Vehicle) and Off-Highway Driveline Technologies (Off-Highway) operating segments. Our fourth global
operating segment – Power Technologies – is the center of excellence for the sealing and thermal technologies that span all
customers in our on-highway and off-highway markets. We have a diverse customer base and geographic footprint which
minimizes our exposure to individual market and segment declines. In 2016, 54% of our sales came from North American
operations and 46% from operations throughout the rest of the world. Our sales by operating segment were Light Vehicle –
45%, Commercial Vehicle – 21%, Off-Highway – 16% and Power Technologies – 18%.
Operational and Strategic Initiatives
In 2016 we outlined our current enterprise strategy which leverages our strong technology foundation and our commitment
to continuous improvement. Our strategy places increased focus leveraging resources across the organization, satisfying
customer requirements, expanding products and markets and accelerating commercialization of new technology.
Central to our strategy is leveraging our core operations by sharing our capabilities, technology, assets and people across
the enterprise, leading to improved execution and increased customer satisfaction. Although we have taken significant strides
to improve our profitability and margins, particularly through streamlining and rationalizing our manufacturing activities, we
believe additional opportunities remain to further improve our cost performance. Leveraging investments across multiple end
markets and making disciplined, value enhancing acquisitions, will allow us to bring product to market faster, grow our top-line
sales and enhance financial returns.
Strengthening customer centricity and expanding global markets are key elements of our strategy that focus on market
penetration. Foundational to growing the business is directing the entire organization to putting the customer at the center of
our value system and shifting from transactional to relationship-based interactions. These relationships are built on a
foundation of providing unparalleled technology with exceptional quality, delivery and value. With even stronger relationships
we will be better positioned to support our customers’ most important global and flagship programs and capitalize on future
growth opportunities.
We continue to enhance and expand our global footprint, optimizing it to capture growth across all of our end markets.
Specifically, our manufacturing and technology center footprint positions us to support customers globally – an important
factor as many of our customers are increasingly focused on common solutions for global platforms. While growth
opportunities are present in each region of the world, we have a primary focus on building our presence and local capability in
the Asia Pacific region. Over the last few years, we have opened two new engineering facilities in the region and recently new
gear manufacturing facilities were established in India and Thailand.
In addition to Asia, we see further growth opportunity in Eastern Europe where we recently announced plans to establish a
new gear manufacturing facility in Hungary. This will be our third facility in the country and will give us the capability to cost
effectively manufacture gears, one of our core technologies, and efficiently service our customers within the region.
The final two elements of our enterprise strategy, commercializing new technology and accelerating hybridization and
electrification, focus on opportunities for product expansion. Bringing new innovations to market as industry leading products
will drive growth as our new products and technology provide our customers with cutting edge solutions, address end user
needs and capitalize on key market trends. An example is our industry leading electronically disconnecting all-wheel drive
technology, which we believe is the most fuel efficient rapidly disconnecting system in the market, was recently selected by a
major global customer for a significant new global vehicle platform – opening up new commercial channels for us in the
passenger car, crossover and sport utility vehicle markets.
Initiatives to capitalize on evolving hybridization and electrification vehicle trends are a core ingredient of the current
strategy. In addition to our current technologies in battery cooling and fuel cells, this element of the strategy is leveraging our
electronics controls expertise across all our business units and applications such as advanced vehicle hybridization and
14
electrification initiatives. We are working with customers to develop new solutions for those markets where electrification will
be adopted first such as hybrids, buses and urban delivery vehicles. These new solutions, which include advanced electric
propulsion systems with fully integrated motors and controls, are included in our recently launched Spicer Electrified portfolio
of products.
The development and implementation of this enterprise strategy is positioning Dana to grow profitably over the next few
years due to increased customer focus as we leverage our core capabilities, expand into new markets, develop and
commercialize new technologies including for hybrid and electric vehicles.
Shareholder returns and capital structure actions — When evaluating capital structure initiatives, we balance our growth
opportunities and shareholder value initiatives with maintaining a strong balance sheet and access to capital. Our strong
financial position has enabled us to simplify our capital structure while providing returns to our shareholders in the form of
cash dividends and reduction in the number of shares outstanding. Over the past four years, we returned $1,481 of cash to
shareholders in connection with redemption of all of our preferred stock and repurchase of common shares. From program
inception in 2012 through December 31, 2016, we repurchased approximately 74 million shares, inclusive of the common share
equivalent reduction resulting from redemption of preferred shares. Remaining share repurchase authorization under the
program approved by our Board of Directors is $219. We declared and paid quarterly common stock dividends over the past
four years, raising the dividend from five cents to six cents per share in the second quarter of 2015.
We have taken advantage of the lower interest rate environment to refinance our senior notes at lower rates while
extending the maturities. In December 2014 and the first quarter of 2015, we completed the redemption of notes maturing in
2019, replacing them with notes maturing in 2024. During the second quarter of 2016, we redeemed notes maturing in 2021,
replacing them with notes maturing in 2026.
Aftermarket opportunities — We have a global group dedicated to identifying and developing aftermarket growth opportunities
that leverage the capabilities within our existing businesses – targeting increased future aftermarket sales. In January 2016, we
completed the acquisition of Magnum® Gaskets' (Magnum) aftermarket distribution business which includes the Magnum
brand, product portfolio, existing customer contracts and distribution rights. The Magnum brand is the third largest aftermarket
sealing brand in the U.S. and Canada, providing us with access to new customers for sealing products and an additional
aftermarket channel for other products.
Selective acquisitions — Our acquisition focus is principally directed at “bolt-on” or adjacent acquisition opportunities that
have a strategic fit with our existing core businesses, particularly opportunities that support our enterprise strategy and enhance
the value proposition of our product offerings. Any potential acquisition will be evaluated in the same manner we currently
consider customer program opportunities and other uses of capital – with a disciplined financial approach designed to ensure
profitable growth and increased shareholder value.
Acquisitions
SIFCO — On December 23, 2016, we acquired strategic assets of the commercial vehicle steer axle systems and related forged
components businesses of SIFCO. The acquisition enables us to enhance our vertically integrated supply chain, which will
further improve our cost structure and customer satisfaction by leveraging SIFCO's extensive experience and knowledge of
sophisticated forged components. In addition to strengthening our position as a central source for products that use forged and
machined parts throughout the region, this acquisition enables us to better accommodate the local content requirements of our
customers, which reduces their import and other region-specific costs.
In 2011, we began purchasing parts from SIFCO under an exclusive supply agreement. In April 2014, SIFCO began
operating with judicial oversight under reorganization proceedings in Brazil. We continued purchasing parts from SIFCO under
an interim agreement while also pursuing the purchase of certain assets through the judicial reorganization proceedings. In
connection with the December 2016 acquisition, we acquired the assets supporting the business previously conducted under the
exclusive supply agreement along with certain additional related business. As part of the acquisition, we added two
manufacturing facilities and approximately 1,400 employees. The strategic assets were acquired by Dana free and clear of any
liens, claims or encumbrances, and without assumption of any legacy liabilities of SIFCO. We had sales of $86 in 2016
resulting from business conducted under the previous supply agreement with SIFCO. With the acquisition completed in
December 2016, we obtained additional business relationships that are expected to generate incremental sales of approximately
$50 at current production levels.
The purchase price was $69, with the payment of $9 of the purchase price deferred until December 2017 pending any
claims under indemnification provisions of the purchase agreement. The purchase price is subject to customary post-closing
15
adjustments for final determination of working capital and other items. Reference is made to Note 2 of the consolidated
financial statements in Item 8 of Part II for the allocation of purchase consideration to assets acquired and liabilities assumed.
The results of operations of the SIFCO related business are reported within our Commercial Vehicle operating segment.
Magnum — On January 29, 2016, we acquired the aftermarket distribution business of Magnum, a U.S.-based supplier of
gaskets and sealing products for automotive and commercial vehicle applications, for a purchase price of $18 at closing and
additional cash payments of up to $2 contingent upon the achievement of certain sales metrics over a future two-year period. As
of the closing date of the acquisition, the contingent consideration was assigned a fair value of approximately $1. Assets
acquired included trademarks and trade names, customer relationships and goodwill. The results of operations of Magnum are
reported within our Power Technologies operating segment.
Brevini — 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 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. The
acquisition is expected to add approximately $350 of sales and $35 of adjusted EBITDA in 2017.
We paid €167 at closing, using cash on hand, and intend to refinance debt assumed in the transaction during the first
quarter of 2017. The purchase price is subject to adjustment upon determination of the net indebtedness and net working capital
levels of BFP and BPT as of the closing date. The terms of the agreement provide Dana the right to call Brevini's
noncontrolling interests in BFP and BPT, and Brevini the right to put its noncontrolling interests in BFP and BPT to Dana,
assuming Dana does not exercise its call rights, at dates and prices defined in the agreement.
Divestitures
Nippon Reinz — On November 30, 2016, we sold our 53.7% interest in Nippon Reinz Co. Ltd. (Nippon Reinz) to Nichias
Corporation. Dana received net cash proceeds of $5 and recognized a pre-tax loss of $3 on the divestiture of Nippon Reinz,
inclusive of the derecognition of the related noncontrolling interest. Nippon Reinz had sales of $42 in 2016 through the
transaction date.
Dana Companies — On December 30, 2016, we completed the divestiture of Dana Companies, LLC (DCLLC), a consolidated
wholly-owned limited liability company that was established as part of our reorganization in 2008 to hold and manage personal
injury asbestos claims retained by the reorganized Dana Corporation, which was merged into DCLLC. The assets of DCLLC at
time of sale included cash and marketable securities along with the rights to insurance coverage in place to satisfy a significant
portion of its liabilities. We received net cash proceeds of $29 at closing on December 30, 2016, with $3 retained by the
purchaser subject to the satisfaction of certain future conditions that we expect will be achieved in 2017. We recognized a pre-
tax loss of $77 in 2016 upon completion of the transaction. In the event the conditions associated with the retained purchase
price of $3 are satisfied in the future, income of $3 will be recognized at such time. Following completion of the sale, Dana has
no obligation with respect to current or future asbestos claims. The sale of this business also enhanced our available liquidity
since the net proceeds from the sale are available for use in our core businesses.
Disposal of operations in Venezuela — The operating, political and economic environment in Venezuela in recent years was
very challenging. Foreign exchange controls restricted our ability to import required parts and material and satisfy the related
U.S. dollar obligations. Production activities were curtailed for most of 2014 as our major original equipment customers
suspended production, with a limited amount of activity coming back on line later in the year. Our sales in Venezuela during
2014 approximated $110 as compared to $170 in 2013. Results of operations were adversely impacted by the reduced
production levels making break-even operating performance a significant challenge. Further, devaluations of the bolivar along
with other foreign exchange developments provided added volatility to results of operations and increased uncertainty around
future performance.
In December 2014, we entered into an agreement to divest our operations in Venezuela (the disposal group) to an
unaffiliated company for no consideration. We completed the divestiture in January 2015. In connection with the divestiture,
we entered into a supply and technology agreement whereby Dana will supply product and technology to the operations at
competitive market prices. Dana has no obligations to otherwise provide support to the operations. The disposal group was
classified as held for sale at December 31, 2014, and we recognized a net charge of $77 – an $80 loss to adjust the carrying
value of the net assets to fair value less cost to sell, with a reduction of $3 for the noncontrolling interest share of the loss.
These assets and liabilities were presented as held for sale on our December 31, 2014 balance sheet. Upon completion of the
16
divestiture of the disposal group in January 2015, we recognized a gain of $5 on the derecognition of the noncontrolling interest
in a former Venezuelan subsidiary in Other income, net. We also credited other comprehensive loss attributable to the parent for
$10 and other comprehensive loss attributable to noncontrolling interests for $1 to eliminate the unrecognized pension expense
recorded in accumulated other comprehensive loss. See Note 3 to our consolidated financial statements in Item 8 for additional
information. With the completion of the sale in January 2015, Dana has no remaining investment in Venezuela.
Structural Products Business — In 2010, we completed the sale of substantially all of the assets of our Structural Products
business to Metalsa S.A. de C.V. (Metalsa) and reached a final agreement with the buyer on disputed issues in May 2014. Prior
to the third quarter of 2012, Structural Products was reported as an operating segment of continuing operations. With the
cessation of the retained operations in the third quarter of 2012, we began reporting the activities relating to the Structural
Products business as discontinued operations. Legal and other costs incurred in 2014 to settle a customer complaint and the
remaining disputes with Metalsa and insurance recoveries in 2015 related to previously outstanding claims have extended the
reporting of discontinued operations.
Segments
We manage our operations globally through four operating segments. Our Light Vehicle and Power Technologies segments
primarily support light vehicle original equipment manufacturers (OEMs) with products for light trucks, SUVs, CUVs, vans
and passenger cars. The Commercial Vehicle segment supports the OEMs of on-highway commercial vehicles (primarily trucks
and buses), while our Off-Highway segment supports OEMs of off-highway vehicles (primarily wheeled vehicles used in
construction, mining and agricultural applications).
Trends in Our Markets
Global Vehicle Production
(Units in thousands)
North America
Light Truck (Full Frame)
Light Vehicle Engines
Medium Truck (Classes 5-7)
Heavy Truck (Class 8)
Agricultural Equipment
Construction/Mining Equipment
Europe (including Eastern Europe)
Light Truck
Light Vehicle Engines
Medium/Heavy Truck
Agricultural Equipment
Construction/Mining Equipment
South America
Light Truck
Light Vehicle Engines
Medium/Heavy Truck
Agricultural Equipment
Construction/Mining Equipment
Asia-Pacific
Light Truck
Light Vehicle Engines
Medium/Heavy Truck
Agricultural Equipment
Construction/Mining Equipment
Dana 2017 Outlook
2016
4,200 to 4,300
15,800 to 16,200
235 to 250
190 to 210
50 to 60
150 to 160
9,300 to 9,500
23,800 to 24,300
440 to 470
190 to 210
290 to 310
1,000 to 1,050
2,000 to 2,100
75 to 85
25 to 35
10 to 15
26,500 to 27,500
50,000 to 51,500
1,450 to 1,550
680 to 720
380 to 410
4,438
16,065
235
227
53
150
9,279
23,224
471
193
290
1,010
2,091
70
29
10
27,179
50,075
1,620
648
396
Actual
2015
4,136
15,474
237
323
58
158
8,546
22,570
434
202
299
940
2,439
88
32
13
24,160
47,209
1,383
676
405
2014
3,834
15,119
226
297
64
158
7,790
21,510
397
220
301
1,146
3,176
167
43
17
22,337
46,497
1,573
710
509
17
North America
Light vehicle markets — Improving economic conditions during the past few years have contributed to increased light vehicle
sales and production levels in North America. Release of built-up demand to replace older vehicles, greater availability of
credit, stronger consumer confidence and other factors have combined to stimulate new vehicle sales. Light vehicle sales in
2016 increased about 1% from 2015, with sales that year being up 6% from 2014. Many of our programs are focused in the full
frame light truck segment. Helped by comparatively lower fuel prices, sales in this segment were especially strong, being up
about 6% in 2016 and 9% in 2015. Production levels were reflective of the stronger light vehicle sales. Production of
approximately 17.8 million light vehicles in 2016 was 2% higher than in 2015, following an increase in production that year of
about 3% from 2014. Light vehicle engine production was similarly higher, up 4% in 2016 and 2% in 2015. In the key full
frame light truck segment, production levels increased about 7% in 2016 compared with an increase of 8% in 2015. Days’
supply of total light vehicles in the U.S. at the end of December 2016 was around 62 days, up slightly from 61 days at
December 2015 and 2014. In the full frame light truck segment, inventory levels have been relatively stable – 65 days at the
end of December 2016, compared with 62 days at the end of 2015 and 63 days at the end of 2014.
Looking ahead to 2017, we expect steady employment levels, stable fuel prices and favorably trending consumer
confidence will provide a generally solid economic climate in North America. However, with the strength in this market the
past couple years, we believe slightly lower production levels are likely. Our full year 2017 outlook for light vehicle engine
production is 15.8 to 16.2 million units, a decrease of 2% to an increase of 1% compared with 2016. In the full frame light
truck segment where the past two years have been especially strong, our 2017 production outlook is 4.2 to 4.3 million units, a
decrease of 3 to 5% from 2016.
Medium/heavy vehicle markets — Similar to the light vehicle market, the commercial vehicle segment benefited from an
improving North America economy in recent years. After increasing 12% in 2014, Medium duty Classes 5-7 truck production
the past three years has been relatively stable, between 226,000 and 237,000 units. In the Class 8 segment, production levels
increased 21% in 2014 and another 9% in 2015 to reach 323,000 units. High levels of production in 2014 and the first half of
2015 led to more trucks than required for freight demand. As such, order levels and production began declining in the second
half of 2015 and continued into 2016, resulting in Class 8 production of around 227,000 units, a decline of about 30% from
2015.
With new government leadership in the U.S. in 2017, there is considerable uncertainty around the potential impact of
policy changes on the economy. Although modest economic growth is forecast in 2017, more Class 8 trucks are expected to be
in service than are needed to satisfy freight demand levels. Accordingly, we expect weaker Class 8 production of around
200,000 units in 2017, a reduction of about 12% from 2016. In the medium duty segment, we expect 2017 production to be in
the range of 235,000 to 250,000 units, comparable to up about 6% from 2016.
Markets Outside of North America
Light vehicle markets — Signs of an improved overall European economy have been evident, albeit mixed at times, during the
past few years. Reflective of a modestly improved economy, light vehicle production levels have increased with light vehicle
engine production being up about 3% in 2016 after increasing 5% in 2015 and light truck production being higher by 9 to 10%
in each of the past two years. The United Kingdom's decision in 2016 to withdraw from the European Union along with
political developments in other European countries has cast an element of uncertainty around continued economic improvement
in the region. At present, we expect overall stable to improving economic conditions across the entire region in 2017, with
production levels up more modestly in the range of 2% to 5% for light vehicle engines and flat to up 2% for light trucks. The
economic climate in most South America markets the past couple years has been weak, volatile and challenging. Light truck
production declined 12% in 2014 and was down another 18% in 2015. Light vehicle engine production was similarly down
16% in 2014 and another 23% in 2015. Overall weakness persisted through 2016, with light vehicle engine production down
another 14%, but with light truck production showing some improvement in the region with an increase of 7% from 2015. We
believe that the region's economic weakness has largely plateaued, and that we'll begin to see some improving market
conditions in 2017. Our full year 2017 outlook for South America light vehicle markets has light truck production flat to up 4%
and light vehicle engine production flat to down 4% compared with 2016. The Asia Pacific markets have been relatively strong
the past few years. Light truck production increased 9% in 2014, 8% in 2015 and was up another 12% in 2016, while light
vehicle engine production increased 3% in 2014, 2% in 2015 and another 6% in 2016. We expect to see relatively stable to
modest growth in the region during 2017. Our full year 2017 outlook for the Asia Pacific light vehicle markets has light truck
production down 2% to up 1% and light vehicle engine production flat to up 3% compared with 2016.
Medium/heavy vehicle markets — Some of the same factors referenced above that affected light vehicle markets outside of
North America similarly affected the medium/heavy markets, albeit with improvements in the medium/heavy truck market
18
being a little slower to manifest. Signs of a strengthening European market emerged in 2015 with medium/heavy truck
production in 2015 being up about 9% from the preceding year. Production levels in 2016 reflected continued improvement
with an increase of about 9% from 2015. Given the higher production levels the past two years and more modest overall
economic growth in 2017, we expect Europe medium/heavy truck production this year to be flat to down 7% compared to
2016. A weakening South America economic climate beginning in 2014 led to medium/heavy truck production declining about
23% in 2014, 47% in 2015 and another 20% in 2016. As with the light vehicle markets, we have seen additional weakness in
South America in early 2016. As indicated above, we expect to see improving economic conditions in the region as we move
through 2017. Our full year 2017 outlook for South America has medium/heavy truck production increasing from about 70,000
units in 2016 to 75,000 to 85,000 units this year. The medium/heavy truck market in Asia Pacific was sluggish the prior two
years, being up a modest 3% in 2014 and declining about 12% in 2015 as a slowdown in the China market materialized. A
stronger than expected China market and an improving India market contributed to higher medium/heavy truck production in
the region of about 17% in 2016. Given a more modest overall economic outlook for the region in 2017 and the strong level of
production in 2016, we expect 2017 medium/heavy truck production outlook to be 4% to 10% lower than in 2016.
Off-Highway Markets — Our off-highway business has a large presence outside of North America, with more than 75% of its
sales coming from Europe and more than 10% from South America and Asia Pacific combined. We serve several segments of
the diverse off-highway market, including construction, agriculture, mining and material handling. Our largest markets are the
construction/mining and agricultural equipment segments. After experiencing increased global demand in 2011 and 2012, these
markets have been relatively weak over the past four years. Global demand in the agriculture market was down about 11% in
2014, 7% in 2015 and 5% in 2016. The construction/mining segment weakened about 4% in 2014, 11% in 2015 and 3% in
2016. We expect global demand will continue to be relatively weak in 2017, with improving markets to begin in late 2017 and
subsequent years. We expect higher global production in the agriculture segment in 2017, driven by stronger demand in the
Asia Pacific region. In the construction market, we expect 2017 global production on balance to be relatively comparable to up
slightly from 2016.
Foreign Currency and Brexit Effects
Weaker international currencies relative to the U.S. dollar have had a significant impact on our sales and results of
operations the past few years. The United Kingdom's decision to exit the European Union ("Brexit") has provided further
uncertainty and potential volatility around European currencies, along with uncertain effects of future trade and other cross-
border activities of the United Kingdom with the European Union and other countries. With new government leadership in the
U.S. assuming control in early 2017, there is added uncertainly around future economic and trade policy and its potential
impact on the U.S. dollar relative to other currencies. Approximately 54% of our consolidated sales in 2016 were outside the
U.S., with euro zone countries, Mexico, the United Kingdom and Brazil accounting for approximately 40%, 8%, 6% and 6% of
our non-U.S. sales. The potential impact of future U.S. economic and trade policy has led to significant weakening of the
Mexican peso against the U.S. dollar since the U.S. presidential election in November 2016. Although sales in Argentina and
South Africa are each less than 5% of our non-U.S. sales, weaker currencies of those countries significantly impacted this past
year's sales. Translation of our international activities at average exchange rates in 2015 as compared to average rates in 2014
reduced sales by $516, with $268 attributable to a weaker euro and $91 to a weaker Brazil real. In 2016, weaker international
currencies reduced sales by another $173. A weaker Argentine peso, British pound, Mexican peso, South African rand and
Brazilian real reduced sales by $70, $23, $19, $18 and $11. The euro was relatively stable in 2016. Weaker international
currencies are expected to be a headwind to sales again in 2017. Based on our current sales outlook, we expect the translation
effect of weaker currencies will reduce 2017 sales by approximately $150, with the impact of an expected weaker euro
comprising about $70 of the headwind. Our 2017 outlook is based on an assumed euro/U.S. dollar rate of 1.05, a U.S. dollar/
Brazil real rate of 3.80, a British pound/U.S. dollar rate of 1.30 and a U.S. dollar/Mexican peso rate of 21.0. At sales levels in
our current outlook for 2017, a 5% movement on the euro would impact our annual sales by approximately $65. A 5% change
on the Brazil real, British pound or Mexican peso rates would impact our annual sales in each of those countries by
approximately $10.
Brazil Market
The Brazil market is an important market for our Commercial Vehicle segment, representing about 12% of this segment's
2016 sales. Our medium/heavy truck sales in Brazil account for approximately 75% of our total sales in the country. Reduced
market demand resulting from the weak economic environment in Brazil in 2015 led to production levels in the light vehicle
and medium/heavy duty vehicle markets that were lower by about 22% and 44% from 2014. Continued weakness in 2016
resulted in further reductions in medium/heavy truck production of about 20% and a light vehicle production decline of around
10%. As a consequence, sales by our operations in Brazil for 2016 approximated $200, down from about $500 in 2014. In
response to the challenging economic conditions in this country, we implemented restructuring and other cost reduction actions
the past two years and continue to trim costs to the extent practicable. The economic environment led to one of our major
19
suppliers operating with judicial oversight after entering reorganization proceedings in Brazil in 2014. We continued to work
with this supplier to enable us to satisfy our customer requirements while also pursuing the option of purchasing certain assets
from this supplier through the judicial reorganization proceedings. As discussed in Note 2 to our consolidated financial
statements in Item 8, we completed a transaction in December 2016 that provided us with the underlying assets and personnel
supporting our pre-existing business with this supplier along with some incremental business. Looking ahead to 2017, we
expect to begin seeing improving market conditions in Brazil, leading to stronger vehicle production levels. With the above-
mentioned acquisition, we have enhanced our competitive position in the market and should benefit significantly in future years
as the Brazilian markets rebound.
Commodity Costs
The cost of our products may be significantly impacted by changes in raw material commodity prices, the most important
to us being those of various grades of steel, aluminum, copper and brass. The effects of changes in commodity prices are
reflected directly in our purchases of commodities and indirectly through our purchases of products such as castings, forgings,
bearings and component parts that include commodities. Most of our major customer agreements provide for the sharing of
significant commodity price changes with those customers. Where such formal agreements are not present, we have historically
been successful implementing price adjustments that largely compensate for the inflationary impact of material costs. Material
cost changes will customarily have some impact on our financial results as customer pricing adjustments typically lag
commodity price changes.
Higher commodity prices, driven in part by inflationary costs in Argentina, increased our costs by approximately $8 in
2016, while in 2015 lower commodity prices decreased costs by $10. In 2014, higher commodity prices increased cost by $35.
Material recovery and other pricing actions increased sales by $10 in 2016, $1 in 2015 and $65 in 2014.
Sales, Earnings and Cash Flow Outlook
Sales
Adjusted EBITDA
Net cash provided by operating activities
Purchases of property, plant and equipment
Free Cash Flow
2017
Outlook
$6,200 - $6,400
$695 - $725
$410 - $450
$350 - $370
$50 - $90
2016
$ 5,826
660
$
384
$
322
$
62
$
2015
$ 6,060
652
$
406
$
260
$
146
$
2014
$ 6,617
746
$
510
$
234
$
276
$
Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. See the Non-GAAP Financial Measures
discussion below for definitions of our non-GAAP financial measures and reconciliations to the most directly comparable U.S.
generally accepted accounting principles (GAAP) measures. We have not provided a reconciliation of our adjusted EBITDA
outlook to the most comparable GAAP measure of net income. Providing net income guidance is potentially misleading and
not practical given the difficulty of projecting event driven transactional and other non-core operating items that are included in
net income, including restructuring actions, asset impairments and income tax valuation adjustments. 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.
During the past three years, weaker international currencies relative to the U.S. dollar were the most significant factor
reducing our sales. The sales reduction attributable to currency over the three-year period approximated $900. We divested our
Venezuela operation in January 2015, which further reduced consolidated sales by approximately $100. Adjusted for currency
and divestiture effects, sales in the three preceding years increased slightly. We experienced uneven end user markets, with
some being relatively strong and others somewhat weak, and the conditions across the regions of the world differing quite
dramatically. New business with customers has largely offset the lower sales attributable to overall weaker end user demand.
With the closing of the Brevini transaction on February 1, 2017 we expect full year 2017 sales to be $6,200 to $6,400. The
Brevini acquisition is expected to add approximately $400 to 2017 sales. Our net new business backlog will increase sales by
about $175, with overall stronger market demand also expected to contribute to higher sales. Partially offsetting these increases
are currency headwinds from further weakening of international currencies against the U.S. dollar that are expected to reduce
2017 sales by $150 to $200.
Over the past three years, adjusted EBITDA margin as a percent of sales has remained relatively constant at around 11%
despite certain markets being weak and volatile. Where practicable, we have aligned our cost with weaker demand levels in
20
certain markets. We continue to focus on margin improvement through right sizing and rationalizing our manufacturing
operations, implementing other cost reduction initiatives and ensuring that customer programs are competitively priced. Further
margin improvement beyond 2017 is anticipated as we expect to see increased end user demand in certain markets, along with
continued benefit from additional new business and cost reduction actions.
We have generated positive free cash flow the past three years while increasing capital spending to support organic
business growth through launching new business with customers. Free cash flow in 2014 benefited from the receipt of $40 of
interest from the sale of an in-kind note receivable. Lower pension contributions, restructuring payments and cash taxes also
benefited free cash flow in 2014, while increased new program launches resulted in higher capital spending. The lower free
cash flow in 2015 was primarily due to lower earnings and increased capital spend to support new program launches, with
lower cash taxes and restructuring payments providing a partial offset. Reduced free cash flow in 2016 is primarily attributable
to our continued success in being awarded significant new customer programs. Although many of the recent program wins are
not scheduled to begin production until 2018, these programs required capital investment beginning in 2016. As such, cash used
for capital investment in 2016 was $62 higher than in 2015. An elevated level of capital investment will continue into 2017,
with capital spending expected to approximate $350 to $370. Our 2017 outlook anticipates that the higher level of earnings will
largely offset the increased level of capital spend, resulting in 2017 free cash flow that is relatively comparable to this past year.
The higher level of capital spend in recent years associated with increased new program launches is expected to dissipate after
2017.
Among our Operational and Strategic Initiatives are increased focus on and investment in product technology – delivering
products and technology that are key to bringing solutions to issues of paramount importance to our customers. Our success on
this front is measured, in part, by our sales backlog which is net new business received that will be launching in the future and
adding to our base annual sales. This backlog excludes replacement business and represents incremental sales associated with
new programs for which we have received formal customer awards. At December 31, 2016, our sales backlog of net new
business for the 2017 through 2019 period was $750. This current backlog is comparable to our three-year sales backlog at the
end of 2015, with new business wins that added sales approximating $150 being offset by reductions to the backlog to reflect
the effects of weaker international currencies relative to the U.S. dollar and reduced demand levels now expected during the
three-year period.
21
Summary Consolidated Results of Operations (2016 versus 2015)
Consolidated Results of Operations
Net sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Amortization of intangibles
Restructuring charges, net
Loss on sale of subsidiaries
Impairment of long-lived assets
Other income, net
Income before interest and income taxes
Loss on extinguishment of debt
Interest income
Interest expense
Income from continuing operations before
income taxes
Income tax expense (benefit)
Equity in earnings (losses) of affiliates
Income from continuing operations
Income from discontinued operations
Net income
Less: Noncontrolling interests net income
Net income attributable to the parent company
2016
2015
Dollars
% of
Net Sales
Dollars
% of
Net Sales
86.0%
14.0%
6.5%
$
$
5,826
4,982
844
406
8
36
(80)
18
332
(17)
13
113
215
(424)
14
653
653
13
640
$
85.5%
14.5%
7.0%
$
6,060
5,211
849
391
14
15
(36)
1
394
(2)
13
113
292
82
(34)
176
4
180
21
159
Increase/
(Decrease)
(234)
$
(229)
(5)
15
(6)
21
(80)
36
17
(62)
(15)
—
—
(77)
(506)
48
477
(4)
473
(8)
481
$
Sales — The following table shows changes in our sales by geographic region.
North America
Europe
South America
Asia Pacific
Total
2016
2015
Increase/
(Decrease)
$
$
3,128
1,616
338
744
5,826
$
$
3,210
1,723
377
750
6,060
$
$
(82) $
(107)
(39)
(6)
(234) $
Currency
Effects
Amount of Change Due To
Acquisitions
(Divestitures)
7
$
Organic
Change
(24) $
(44)
(82)
(23)
(173) $
(65)
(63)
43
20
(65)
(3)
4
$
Sales in 2016 were $234 lower than in 2015. Weaker international currencies decreased sales by $173. The acquisition of
Magnum earlier this year added sales of $7, with the divestiture of Nippon Reinz at the end of November 2016 reducing sales
by $3. A volume-related organic sales decrease of $75 resulted primarily from weaker global Off-Highway demand, lower
commercial vehicle production in North America and Brazil and lower sales with a major North America commercial vehicle
customer, partially offset by stronger overall light vehicle volume levels in North America, Europe and Asia Pacific and
contributions from new customer programs. Cost recovery pricing actions increased sales by $10.
The North America organic sales reduction of 2% was driven principally by a decline in Class 8 production of about 30%,
reduced sales levels with a major commercial vehicle customer and weaker Off-Highway demand. These effects were partially
offset by growth in full frame light truck production of around 7%, an increase in light vehicle engine build of 4% and higher
sales from new customer programs.
Excluding currency effects, principally from a weaker South African rand and British pound, our 2016 sales in Europe
were 4% lower than in 2015. Weaker Off-Highway demand was the primary driver of this reduction in sales, with increased
light vehicle engine and light truck production providing a partial offset.
22
South America sales in 2016 were impacted by weaker currencies in Argentina and Brazil. Excluding these effects, sales
were up 11% from 2015. The organic sales increase in the region was driven largely by pricing actions, primarily recovery of
inflationary cost increases in Argentina and contributions from new customer programs. These increases were partially offset
by medium/heavy truck production levels being around 20% lower.
Asia Pacific sales in 2016 were relatively comparable to those in the preceding year. Weaker currencies in Thailand, India
and China contributed to the currency-related sales reduction. The 3% organic sales increase resulted primarily from increased
production levels in the region along with new customer programs.
Cost of sales and gross margin — Cost of sales declined $229, or 4%, in 2016 when compared to 2015. Similar to the factors
affecting sales, the reduction was primarily due to currency effects and lower overall sales volumes. Cost of sales as a percent
of 2016 sales was 50 basis points lower than in the previous year. Underabsorption of costs as a result of lower sales volumes
increased cost of sales as a percent of sales. Cost of sales in 2016 was also higher due to increases in engineering and product
development costs of $13 and material commodity prices of $8 and incremental start-up/launch costs of $8. More than
offsetting the margin impact of these increases were savings from lower material costs of $67 and avoidance of supplier
transition costs in our Commercial Vehicle segment of $14 in 2015, and a decline in environmental remediation expense of $6.
Gross margin of $844 for 2016 decreased $5 from 2015. Gross margin as a percent of sales was 14.5% in 2016, 50 basis
points higher than in 2015. Margin improvement was driven principally by the cost of sales factors referenced above.
Selling, general and administrative expenses (SG&A) — SG&A expenses in 2016 were $406 (7.0% of sales) as compared to
$391 (6.5% of sales) in 2015. Salary and benefits expenses in 2016 were $9 higher than in 2015, while selling and other
discretionary spending increased $6, due in part to execution of certain strategic project initiatives.
Amortization of intangibles — The reduction of $6 in amortization of intangibles was primarily attributable to certain customer
related intangibles becoming fully amortized.
Restructuring charges — Restructuring charges of $36 in 2016 included a fourth-quarter expense of $10 in conjunction with
the SIFCO acquisition to eliminate certain positions in our Brazil Commercial Vehicle business to align with expected market
demand. Third-quarter 2016 expense included $14 for separation costs in connection with headcount reduction actions in our
Off-Highway segment that are being implemented as a result of continuing weak demand levels in this business. The
remaining $12 of restructuring expense this year relates to the closure of our Commercial Vehicle manufacturing facility in
Glasgow, Kentucky, headcount reduction actions at our corporate facilities in the U.S., other headcount reductions in Brazil and
employee separation and exit costs associated with previously announced headcount reduction and facility closure actions.
Restructuring charges of $15 in 2015 were primarily attributable to headcount reductions in our Commercial Vehicle business
in Brazil which were significantly impacted by lower demand levels, along with costs associated with previously announced
restructuring actions.
Loss on sale of subsidiaries — Reference is made to Note 3 of the consolidated financial statements in Item 8 of Part II for a
discussion of the fourth-quarter 2016 divestitures of DCLLC and Nippon Reinz.
Impairment of long-lived assets — Reference is made to Note 3 of the consolidated financial statements in Item 8 of Part II for
a discussion of charges recognized in the third quarter of 2015 in connection with an impairment of long-lived assets
attributable to an exclusive supply relationship with a South American supplier.
Other income, net — The following table shows the major components of Other income, net.
Government grants and incentives
Foreign exchange gain (loss)
Gain on derecognition of noncontrolling interest
Strategic transaction expenses
Insurance and other recoveries
Gain on sale of marketable securities
Amounts attributable to previously divested/closed operations
Other, net
Other income, net
23
2016
2015
$
8
(3)
(13)
10
7
9
18
$
3
(20)
5
(4)
4
1
1
11
1
$
$
During 2015, foreign exchange losses were primarily driven by the impact the strengthening U.S. dollar had on our
Mexican peso and euro forward contracts. Upon completion of the divestiture of our operations in Venezuela in January 2015,
we recognized a $5 gain on the derecognition of the noncontrolling interest in one of our former Venezuelan subsidiaries. See
Note 3 to our consolidated financial statements in Item 8 of Part II for additional information. The increase in strategic
transaction expenses in 2016 is primarily attributable to an increased level of inorganic growth opportunities that were being
pursued, including the SIFCO acquisition that closed in December 2016 and the Brevini acquisition that closed in February
2017. Additionally, we incurred transactional costs in connection with the divestitures of DCLLC and Nippon Reinz. See Notes
2 and 3 for additional information. During 2016, we received a recovery of $8 of costs previously incurred on behalf of other
participants in a consortium that existed to administer certain legacy personal injury claims. During 2015, we reached a
settlement with an insurance carrier for the recovery of previously incurred legal costs.
Loss on extinguishment of debt — During the second quarter of 2016, we redeemed our February 2021 Notes and incurred a
redemption premium of $12. We also restructured our domestic revolving credit facility. In connection with these actions, we
wrote off $5 of previously deferred financing costs. The prior year expense was attributable to the call premium and write-off
of previously deferred financing costs associated with the redemption of $15 of our February 2019 Notes in the first quarter of
2015.
Interest income and interest expense — Interest income was $13 in both 2016 and 2015. Interest expense was $113 in both
2016 and 2015. A lower average interest rate on borrowings was offset by higher average debt levels in 2016. As discussed in
Note 13 to our consolidated financial statements in Item 8 of Part II, Dana Financing Luxembourg S.à r.l. issued $375 of its
June 2026 Notes on May 27, 2016 and we redeemed $350 of our February 2021 Notes on June 23, 2016. In conjunction with
the issuance of the June 2026 Notes, we entered into two 10-year fixed-to-fixed cross-currency swaps which have the effect of
economically converting the June 2026 Notes to euro-denominated debt at a fixed rate of 5.140%. Average effective interest
rates, inclusive of amortization of debt issuance costs, approximated 6.5% and 6.6% in 2016 and 2015.
Income tax expense — Income taxes were a benefit of $424 in 2016, whereas we had a tax expense of $82 in 2015. In the
fourth quarter of 2016, we determined that most of the valuation allowances against U.S. deferred taxes were no longer
required. Release of these valuation allowances resulted in a $501 income tax benefit. Additionally, developments in Brazil led
to our determination that an allowance against certain deferred taxes in that country was appropriate, and we recognized tax
expense of $25 to establish this valuation allowance. During 2015, we completed an intercompany transfer of an affiliate's
stock and certain operating assets. In connection with this transaction, we released $66 of valuation allowance on U.S. deferred
tax assets and recognized $23 of tax expense related to the stock sale and $2 of amortization of a prepaid tax asset created as
part of the transaction. Amortization of the prepaid tax asset in 2016 was $11. In 2015, we also established a valuation
allowance of $15 against the deferred tax assets of a subsidiary in Brazil. See Note 17 to our consolidated financial statements
in Item 8 of Part II for further disclosures around these valuation allowance adjustments.
The effective income tax rates vary from the U.S. federal statutory rate of 35% primarily due to valuation allowances in
several countries, nondeductible expenses, different statutory rates outside the U.S. and withholding taxes. Contributing to the
lower effective rate in 2016 were benefits of $58 for a reduction of accrued taxes on earnings of foreign operations resulting
from legal entity restructuring and a revised determination as to permanent reinvestment. Partially offsetting this benefit was
tax expense of $17 on dividends and other income attributable to foreign operations, and $30 of expense recognized to establish
provisions associated with uncertain tax positions. Excluding the effects of the items described above, the effective tax rate was
24% in 2016 and 37% in 2015. In 2016, jurisdictions with effective tax rates less than the U.S. tax rate of 35% decreased the
overall effective rate. In 2015, jurisdictions with valuation allowances had lower pre-tax income, which increased the effective
rate.
In the U.S. and certain other countries, where our history of operating losses did not allow us to satisfy the “more likely
than not” criterion for recognition of deferred tax assets, we have generally recognized no income tax on the pre-tax income or
losses in these jurisdictions as valuation allowance adjustments offset the associated tax effects. With the release of valuation
allowances on our U.S. deferred tax assets in 2016, the future impact of valuation allowance adjustments will be less
significant, resulting in tax expense that will be more reflective of a customary global effective tax rate.
Equity in earnings of affiliates — Net earnings from equity investments was $14 in 2016 and a net loss of $34 in 2015. Equity
in earnings from Bendix Spicer Foundation Brake, LLC (BSFB) were $7 in 2016 and $11 in 2015. Our share of Dongfeng
Dana Axle Co., Ltd. (DDAC) operating results were $7 in 2016 and a loss of $7 in 2015. During the fourth quarter of 2015, we
determined that we had an other-than-temporary decrease in the carrying value of our DDAC investment and recorded a $39
impairment charge. See Note 20 to our consolidated financial statements in Item 8.
24
Noncontrolling interests net income — As more fully discussed in Note 1 to our consolidated financial statements in Item 8 of
Part II, the first quarter of 2015 included $9 for correction of previously reported noncontrolling interests net income.
Segment Results of Operations (2016 versus 2015)
Light Vehicle
2015
Volume and mix
Performance
Currency effects
2016
Sales
2,482
235
31
(141)
2,607
$
$
Segment
EBITDA
262
$
37
(4)
(16)
279
$
Segment
EBITDA
Margin
10.6%
10.7%
Light Vehicle sales in 2016 were reduced by currency translation effects, primarily as a result of a weaker Mexico peso,
Argentina peso, Thailand baht, South Africa rand and British pound sterling. Sales, exclusive of currency effects, were 11%
higher than in 2015. The volume-related increases were driven primarily by stronger production levels. North America full
frame light truck production in 2016 was up 7%, while light truck production in Europe and Asia Pacific was stronger by 9%
and 12% compared to 2015. Sales in this segment also benefited from new customer programs, including $45 relating to a
program previously supported by our Commercial Vehicle segment that moved to Light Vehicle in 2016 when the axle used to
support the program was replaced with an axle produced by the Light Vehicle segment. Cost recovery actions, including
inflationary cost recovery in Argentina, were the primary drivers of the sales increase categorized as performance.
Light Vehicle segment EBITDA of $279 in 2016 was $17 higher than in the same period of 2015. Higher sales volumes
from overall stronger production levels and new business provided a benefit of $37, while weaker international currencies
reduced segment EBITDA by $16. The year-over-year performance-related earnings reduction was driven partly by an increase
in material commodity costs of $16, higher warranty costs of $7, start-up and launch-related costs of $10, an increase in
engineering and product development expense, net of customer recoveries, of $9 and inflationary and other cost increases of
$17. Partially offsetting these factors which reduced segment EBITDA were cost recovery pricing actions of $31 and savings
from material cost initiatives of $24.
Commercial Vehicle
2015
Volume and mix
Performance
Currency effects
2016
Sales
1,533
(265)
3
(17)
1,254
$
$
Segment
EBITDA
100
$
(52)
52
(4)
96
$
Segment
EBITDA
Margin
6.5%
7.7%
Currency effects which reduced sales in 2016 were primarily due to a year-over-year weaker Brazil real and Mexico peso.
After adjusting for the effects of currency, 2016 sales in our Commercial Vehicle segment decreased 17% compared to 2015.
The volume-related reduction was primarily attributable to lower sales in North America where Class 8 production was down
about 30%, a program having sales of $45 was transfered to the Light Vehicle segment who began supplying the axle for the
program, and our share of sales with a major customer declined. Weaker end market demand in Brazil also contributed to lower
sales volumes, with 2016 medium/heavy truck production being down about 20%.
Commercial Vehicle segment EBITDA of $96 was $4 lower than in 2015. Lower sales volumes reduced 2016 segment
EBITDA by $52. Largely offsetting the effects of lower volume was improved year-over-year performance-related segment
EBITDA of $52, resulting from material cost savings of $15, avoidance of supplier transition costs of $14 incurred in 2015, a
decline in warranty expense of $8, pricing actions of $3 and other net cost reductions of $12.
25
Off-Highway
2015
Volume and mix
Performance
Currency effects
2016
Sales
1,040
(110)
(11)
(10)
909
$
$
Segment
EBITDA
147
$
(31)
11
2
129
$
Segment
EBITDA
Margin
14.1%
14.2%
Currency-adjusted 2016 sales were down 12% compared to 2015, primarily from lower global end-market demand.
Off-Highway segment EBITDA of $129 in 2016 was down $18 from 2015. The impact of lower sales volumes on segment
EBITDA was partially offset by performance-related earnings improvement, principally from year-over-year material cost
savings of $17 and other net cost reductions of $5 which were partially offset by pricing actions of $11.
Power Technologies
2015
Volume and mix
Performance
Currency effects
2016
Sales
1,005
69
(13)
(5)
1,056
$
$
Segment
EBITDA
149
$
17
(6)
(2)
158
$
Segment
EBITDA
Margin
14.8%
15.0%
Power Technologies primarily serves the light vehicle market but also sells product to the medium/heavy truck and off-
highway markets. Net of currency effects, sales in 2016 increased about 5% due to stronger market demand. Light vehicle
engine build in North America and Europe was up about 4% and 3% compared to 2015. Pricing actions during 2016 reduced
year-over-year sales by $13.
Segment EBITDA of $158 in 2016 was $9 higher than in 2015, driven primarily by higher sales volumes. Although
performance-related segment EBITDA in 2016 benefited by $17 from lower material commodity costs and other material cost
savings, those benefits were more than offset by $13 of pricing actions, higher engineering and development expense of $4 and
other net cost increases of $6.
26
Summary Consolidated Results of Operations (2015 versus 2014)
2015
2014
Dollars
% of
Net Sales
Dollars
% of
Net Sales
Net sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Amortization of intangibles
Restructuring charges, net
Impairment of long-lived assets
Loss on disposal group held for sale
Pension settlement charges
Other income, net
Income before interest and income taxes
Loss on extinguishment of debt
Interest income
Interest expense
Income from continuing operations before
income taxes
Income tax expense (benefit)
Equity in earnings (losses) of affiliates
Income from continuing operations
Income (loss) from discontinued operations
Net income
Less: Noncontrolling interests net income
Net income attributable to the parent company
85.7%
14.3%
6.2%
$
$
6,060
5,211
849
391
14
15
(36)
1
394
(2)
13
113
292
82
(34)
176
4
180
21
159
$
86.0%
14.0%
6.5%
$
6,617
5,672
945
411
42
21
(80)
(42)
33
382
(19)
15
118
260
(70)
13
343
(15)
328
9
319
Increase/
(Decrease)
(557)
$
(461)
(96)
(20)
(28)
(6)
(36)
80
42
(32)
12
17
(2)
(5)
32
152
(47)
(167)
19
(148)
12
(160)
$
Sales — The following table shows changes in our sales by geographic region.
North America
Europe
South America
Asia Pacific
Total
2015
2014
3,210
1,723
377
750
6,060
$
$
3,126
1,978
771
742
6,617
$
$
$
Increase/
(Decrease)
84
(255)
(394)
8
(557) $
$
$
Amount of Change Due To
Acquisitions
(Divestitures)
Organic
Change
Currency
Effects
(48) $
(313)
(110)
(45)
(516) $
— $
(107)
(107) $
132
58
(177)
53
66
Sales for 2015 declined $557 or 8% from 2014. Weaker international currencies decreased sales by $516 and the
divestiture of our operations in Venezuela reduced sales by $107. The organic sales increase resulted from stronger overall
volume levels that added $65 and cost recovery pricing which contributed $1.
Stronger light vehicle and light vehicle engine production levels in North America were largely responsible for the 4%
organic sales increase in this region. Full frame light truck production was 8% stronger than last year, while light vehicle
engine production levels were about 2% higher. Increased medium/heavy truck production of about 6% and new customer
programs coming on line over the past year also contributed to increased year-over-year sales. Partially offsetting this stronger
demand and new business was lower sales with a significant Commercial Vehicle segment customer.
Excluding currency effects, principally from a weaker euro and British pound, our sales in Europe were 3% higher than in
2014. Higher sales from increases in light vehicle engine and light truck production of around 5% and 9%, growth in medium/
heavy truck production of about 10% and new customer programs were partially offset by weaker off-highway demand levels.
South America sales were reduced by weaker currencies in Brazil, Argentina and Colombia and the divestiture of our
operations in Venezuela. Excluding these effects, sales were down 23% from 2014. The organic sales decrease in the region
was primarily driven by reductions in medium/heavy truck production levels of about 49%, a decline in light truck production
27
of 17% and weaker off-highway demand. Partially offsetting weaker demand levels in the region were higher sales associated
with light vehicle new business, content increases and cost recovery pricing.
Asia Pacific sales in 2015 were up slightly from 2014. The organic sales increase of 7% in the region was driven
principally by stronger light vehicle and medium/heavy truck sales volumes in Thailand and India and increased off-highway
sales levels in our operation in China.
Cost of sales and gross margin — Cost of sales for 2015 declined $461, or 8%, when compared to 2014. Similar to our
reduction in sales, the change was due primarily to currency effects with a partial offset provided by higher sales volumes. Cost
of sales as a percent of sales in 2015 was 30 basis points higher than last year. In addition to the benefit of stronger volume
levels in some of our markets, savings from material cost reduction initiatives reduced cost by $48, with lower commodity
costs contributing an additional $14. These favorable impacts on cost of sales were more than offset by an increase in warranty
expense of $11, costs attributed to supply chain disruptions in our Commercial Vehicle segment of $16, an increase in
engineering and product development expense of $7, an increase in environmental remediation expense of $8, higher costs in
certain markets where we were unable to effectively flex our cost with lower demand levels and other inflationary cost
increases.
Gross margin of $849 in 2015 was $96 lower than last year, representing 14.0% of sales in 2015 as compared to 14.3% of
sales in 2014. The 30 basis point decrease in gross margin was principally driven by the net effect of the cost factors referenced
above, partially offset by a nominal pricing and cost recovery benefit.
Selling, general and administrative expenses (SG&A) — SG&A expenses in 2015 were $391 (6.5% of sales) as compared to
$411 (6.2% of sales) in 2014. Salary and benefits expenses in 2015 were $15 lower than in 2014 primarily due to lower
anticipated payouts under various annual incentive programs, while selling expense and other discretionary spending declined
$5.
Amortization of intangibles — The reduction of $28 in amortization of intangibles is primarily attributable to certain customer
related intangibles becoming fully amortized.
Restructuring charges — Restructuring charges of $15 in 2015 included $12 of employee separation costs and $3 of exit costs.
The majority of the separation cost was attributable to headcount reductions in our Brazil operations, primarily in our
Commercial Vehicle segment, in response to significantly lower demand levels. The exit costs in 2015 were primarily related to
activities associated with previously announced facility closure and realignment actions. The restructuring charges of $21 in
2014 primarily represented the impact of headcount reduction initiatives in our Commercial Vehicle and Light Vehicle
businesses in South America and Europe, including the closure of our Commercial Vehicle foundry in Argentina and other
severance and exit costs associated with previously announced initiatives.
Impairment of long-lived assets — Reference is made to Note 3 of the consolidated financial statements in Item 8 for
discussion of charges recognized in connection with an impairment of long-lived assets attributable to an exclusive supply
relationship with a South American supplier.
Loss on disposal group held for sale — During the fourth quarter of 2014, we entered into an agreement to sell our operations
in Venezuela. We completed the sale in January 2015. The divested business was determined to be held for sale at December
31, 2014, resulting in the recognition of a loss of $80 to reduce the assets and liabilities of this business to their fair value less
cost to sell. Reference is made to Divestitures in this Item 7 and to Note 3 of the consolidated financial statements in Item 8 for
additional disclosures regarding this transaction.
Pension settlement charges — We completed two actions in the fourth quarter of 2014 that reduced our pension plan
obligations. Lump sum payments to deferred vested salaried participants in our U.S. pension plans under a voluntary program
resulted in a settlement charge of $36, while completion of a wind-up of certain Canadian pension plans resulted in a charge of
$6. See Note 11 of the consolidated financial statements in Item 8 for additional discussion of these two actions.
28
Other income, net — The following table shows the major components of Other income, net.
Government grants and incentives
Foreign exchange gain (loss)
Gain on derecognition of noncontrolling interest
Strategic transaction expenses
Insurance and other recoveries
Gain on sale of marketable securities
Recognition of unrealized gain on payment-in-kind note receivable
Amounts attributable to previously divested/closed operations
Other, net
Other income, net
2015
2014
$
$
$
3
(20)
5
(4)
4
1
1
11
1
$
4
11
(3)
2
2
17
33
During 2015, net foreign exchange loss primarily reflects the adverse impact of settlements of certain Mexican peso and
euro forward contracts driven by the strengthening of the U.S. dollar. Net foreign exchange gain in 2014 resulted in large part
from favorable currency movement on an intercompany loan that was fully paid in the first half of 2014. As described in Notes
1 and 18 to the consolidated financial statements in Item 8, devaluation of the Venezuelan bolivar, net of transactional gains,
resulted in a net foreign currency gain of $2 in 2014. Upon completion of the divestiture of our operations in Venezuela in
January 2015, we recognized a $5 gain on the derecognition of the noncontrolling interest in one of our former Venezuelan
subsidiaries. See Notes 3 and 18 to our consolidated financial statements in Item 8 for additional information. The January
2014 sale of a payment-in-kind note resulted in the recognition of $2 of unrealized gain that arose following the valuation of
the note below its callable value at emergence from bankruptcy. During 2015, we reached a $3 settlement with an insurance
carrier for the recovery of previously incurred legal costs, while 2014 included a payment of $2 from the liquidation
proceedings of an insolvent insurer carrier. Additionally, as part of correcting overstatements of our pension obligations and
goodwill in 2014, we credited Other income, net for $6 to effectively reverse a portion of the write-off of goodwill assigned to
our former Driveshaft segment in 2008. See Note 1 to our consolidated financial statements in Item 8 for additional
information.
Loss on extinguishment of debt — Actions to refinance a portion of our long-term debt that commenced in the fourth quarter of
2014 were completed in the first quarter of 2015, with expense recognized for the call premium incurred and write-off of
unamortized financing costs associated with debt extinguished in this year's first quarter.
Interest income and interest expense — Interest income was $13 and $15 in 2015 and 2014. Interest expense was $113 and
$118 in 2015 and 2014. The impact of higher average debt levels was more than offset by a lower average effective interest rate
on borrowings. As discussed in Note 13 to our consolidated financial statements in Item 8, we completed the sale of $425 of
5.5% senior unsecured notes in December 2014, utilizing the proceeds to redeem $400 of 6.5% senior unsecured notes.
Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 6.6% and 6.9% in 2015 and
2014.
Income tax expense (benefit) — Income tax expense of our continuing operations was $82 in 2015 and a benefit of $70 in 2014.
The effective income tax rates vary from the U.S. federal statutory rate of 35% primarily due to valuation allowances in several
countries, nondeductible expenses, different statutory rates outside the U.S. and withholding taxes. During 2015, we completed
an intercompany transfer of an affiliate’s stock and certain operating assets, as discussed in Note 17 of the consolidated
financial statements in Item 8. In conjunction with this transaction, we released $66 of valuation allowance on U.S. deferred tax
assets and recognized $23 of tax expense related to the stock sale and $2 of amortization of a prepaid tax asset created as a part
of the transaction. We also established a valuation allowance of $15 against the deferred tax assets of a South American
subsidiary. During 2014, we released valuation allowance of $179 related to the intercompany transaction discussed above that
was partially offset by a valuation allowance adjustment related to the $80 charge recorded in connection with the divestiture of
our Venezuelan operations. Excluding these items, the effective tax rate was 37% in 2015 as compared to 33% in 2014. The
main driver of the increase is related to the jurisdictional mix of the earnings of our non-U.S. operations.
In the U.S. and certain other countries, our recent history of operating losses does not allow us to satisfy the “more likely
than not” criterion for recognition of deferred tax assets. Therefore, there is generally no income tax recognized on the pre-tax
income or losses in these jurisdictions as valuation allowance adjustments offset the associated tax effects. See Note 17 to our
consolidated financial statements in Item 8 for a discussion of the factors considered in our evaluation of the valuation
allowances against our U.S. deferred tax assets.
29
Equity in earnings (losses) of affiliates — Equity investments provided a net loss of $34 in 2015 and earnings of $13 in 2014.
Our equity in earnings from BSFB were $11 in 2015 and $10 in 2014. Our share of DDAC's operating results were a loss of $7
in 2015 and earnings of $5 in 2014. During the fourth quarter of 2015, we determined that we had an other-than-temporary
decrease in the carrying value of our DDAC investment and recorded a $39 impairment charge. See Note 20 to our
consolidated financial statements in Item 8.
Income (loss) from discontinued operations — Income (loss) from discontinued operations activity relates to our Structural
Products business. See Note 3 to our consolidated financial statements in Item 8.
Noncontrolling interests net income — As more fully discussed in Note 1 to our consolidated financial statements in Item 8, the
first quarter of 2015 included $9 for correction of previously reported noncontrolling interests net income.
Segment Results of Operations (2015 versus 2014)
Light Vehicle
2014
Volume and mix
Performance
Venezuelan divestiture
Currency effects
2015
Segment
EBITDA
Margin
10.0%
Segment
EBITDA
250
$
34
(22)
262
$
10.6%
Sales
2,496
200
(12)
(107)
(95)
2,482
$
$
Light Vehicle sales in 2015 were reduced by currency translation effects, primarily as a result of a weaker British pound
sterling, Brazil real, Argentina peso, Thailand baht and South African rand, and the divestiture of our Venezuela operations in
January 2015. Sales, exclusive of currency and divestiture effects, were 8% higher in 2015 than in 2014. The volume related
increases were driven in part by stronger production levels. North America full frame light truck production in 2015 was up 8%
from the same period of 2014, and light truck production in Europe and Asia Pacific was stronger by 9% and 8%. Light Vehicle
volume increases in 2015 also benefited from new customer programs that came on line over the past couple years.
Light Vehicle segment EBITDA of $262 in 2015 is $12 higher than 2014 as the benefit of stronger sales volumes was
partially offset by currency effect. In addition to reductions resulting from translation of international results at weaker
exchange rates relative to the U.S. dollar, we experienced increased year-over-year transactional currency losses of $10 on non-
functional currency denominated activities and intercompany balances. Performance-related segment EBITDA was neutral,
with $33 from material cost savings and lower commodity costs being offset by $12 due to lower pricing, a $4 increase in
warranty costs, a $2 increase in program launch costs, an additional $2 of engineering and product development expense, net of
customer reimbursement, and other items.
Commercial Vehicle
2014
Volume and mix - Brazil
Volume and mix - All other
Performance
Currency effects
2015
Sales
1,838
(166)
(19)
24
(144)
1,533
$
$
Segment
EBITDA
172
$
(35)
(9)
(11)
(17)
100
$
Segment
EBITDA
Margin
9.4%
6.5%
The currency related reduction in sales was primarily due to a weaker euro, Brazil real and Mexico peso. After adjusting
for the effects of currency, 2015 sales in our Commercial Vehicle segment decreased 9% compared to 2014. Weaker end market
demand in Brazil where year-over-year medium/heavy truck production was down 44% reduced sales by $166. The remaining
volume reduction is primarily attributable to lower sales of about $100 from lost market share with a major customer due to
30
residual effects of the supply chain inefficiencies that impacted our performance in the first half of 2015. Partially offsetting
this was higher sales from stronger production levels in North America where year-over-year medium/heavy truck production
was up about 6%. Pricing recoveries provided a partial offset to the currency and volume impacts on 2015 sales.
Commercial Vehicle segment EBITDA of $100 was $72 lower than in 2014. Weaker Brazil market demand contributed
$35, with an additional $9 resulting from net lower sales elsewhere, principally in North America as a result of the above-
mentioned market share reduction with a major customer. Year-over-year performance-related segment EBITDA includes a
benefit of $25 for increased pricing/recoveries and material cost savings and lower commodity costs of $5. These benefits were
more than offset by increased warranty expense of $16, higher supplier transition costs of $8 and other cost increases.
Off-Highway
2014
Volume and mix
Performance
Currency effects
2015
Sales
1,231
(25)
(1)
(165)
1,040
$
$
Segment
EBITDA
169
$
(10)
14
(26)
147
$
Segment
EBITDA
Margin
13.7%
14.1%
Reduced year-over-year sales due to currency effects resulted principally from a weaker euro. Currency-adjusted sales for
2015 were down slightly from 2014. New business gains in this business are largely offsetting the impact of continued
weakness in global end-market demand.
Off-Highway segment EBITDA of $147 in 2015 was down $22 from 2014. Currency effects are the primary driver of the
reduced EBITDA, reflecting a weaker euro and other international currencies. The performance-related segment EBITDA
improvement is primarily attributable to material cost savings of $18 and lower warranty expense of $3 which is partially offset
by increases in other costs.
Power Technologies
2014
Volume and mix
Performance
Currency effects
2015
Sales
1,052
75
(10)
(112)
1,005
$
$
Segment
EBITDA
154
$
15
2
(22)
149
$
Segment
EBITDA
Margin
14.6%
14.8%
Power Technologies primarily serves the light vehicle market but also sells product to the medium/heavy truck and off-
highway markets. A weaker euro and Canadian dollar were the primary drivers of the reduced sales due to currency. Net of
currency effects, sales in 2015 increased about 6% compared to 2014, principally from stronger market demand. Increases in
year-over-year light vehicle engine build of 2% in North America and 5% in Europe were the primary drivers of the volume
increase.
Segment EBITDA of $149 in 2015 was $5 lower than 2014, due principally to currency effects. The performance-related
improvement in 2015 segment EBITDA was primarily driven by lower warranty expense of $7 and higher material cost savings
of $6, partially offset by pricing actions which reduced segment earnings by $10.
31
Non-GAAP Financial Measures
Adjusted EBITDA
We have defined adjusted EBITDA as net income before interest, taxes, depreciation, amortization, equity grant expense,
restructuring expense 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. We use adjusted EBITDA in assessing the effectiveness of our business
strategies, evaluating and pricing potential acquisitions and as a factor in making incentive compensation decisions. 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 income before income taxes, net income or other results reported in accordance with
GAAP. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
The following table provides a reconciliation of net income to adjusted EBITDA.
Net income
Income (loss) from discontinued operations
Income from continuing operations
Equity in earnings (losses) of affiliates
Income tax expense (benefit)
Income from continuing operations before income taxes
Depreciation and amortization
Restructuring
Interest expense, net
Other*
Adjusted EBITDA
*
2016
2015
2014
$
653
$
653
14
(424)
215
182
36
100
127
660
$
$
180
4
176
(34)
82
292
174
15
100
71
652
$
$
328
(15)
343
13
(70)
260
213
21
103
149
746
Other includes stock compensation expense, strategic transaction expenses, gain on derecognition of noncontrolling interest, distressed supplier costs,
amounts attributable to previously divested/closed operations, loss on extinguishment of debt, loss on sale of subsidiaries and other items. See Note 19 to
our consolidated financial statements in Item 8 of Part II for additional details.
Free Cash Flow
We have defined free cash flow as cash provided by operating activities less purchases of property, plant and equipment.
We believe this measure 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 neither intended to represent nor be an alternative to the measure of net
cash provided by operating activities reported under 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 operating activities to free cash flow.
Net cash provided by operating activities
Purchases of property, plant and equipment
Free cash flow
Liquidity
2016
2015
2014
$
$
384
(322)
62
$
$
406
(260)
146
$
$
510
(234)
276
The following table provides a reconciliation of our liquidity, a non-GAAP measure, to cash and cash equivalents at
December 31, 2016:
Cash and cash equivalents
Less: Deposits supporting obligations
Available cash
Additional cash availability from revolving facility
Marketable securities
Total liquidity
32
$
$
707
(6)
701
478
30
1,209
Cash deposits are maintained to provide credit enhancement for certain agreements and are reported as part of cash and
cash equivalents. For most of these deposits, the cash may be withdrawn if 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 global liquidity as these investments can be readily liquidated at our
discretion.
The components of our December 31, 2016 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
Consolidated cash balance
U.S.
Non-U.S.
Total
$
$
150
$
3
153
$
480
6
68
554
$
$
630
6
71
707
On February 1, 2017, we used €167 of cash to acquire an 80% ownership interest in BFP and BPT from Brevini. We intend
to refinance debt assumed in the transaction during the first quarter of 2017.
A portion of the non-U.S. cash and cash equivalents is utilized for working capital and other operating purposes. Several
countries have local regulatory requirements that significantly restrict the ability of our operations to repatriate this cash.
Beyond these restrictions, there are practical limitations on repatriation of cash from certain subsidiaries because of the
resulting tax withholdings and subsidiary by-law restrictions which could limit our ability to access cash and other assets.
The principal sources of liquidity available for our future cash requirements are expected to be (i) cash flows from
operations, (ii) cash and cash equivalents on hand and (iii) borrowings from our revolving facility. We believe that our overall
liquidity and operating cash flow will be sufficient to meet our anticipated cash requirements for capital expenditures, working
capital, debt obligations, common stock repurchases and other commitments during the next twelve months. While uncertainty
surrounding the current economic environment could adversely impact our business, based on our current financial position, we
believe it is unlikely that any such effects would preclude us from maintaining sufficient liquidity.
In May 2016, Dana Financing Luxembourg S.à r.l. completed the issuance of $375 of its June 2026 Notes. Net proceeds of
the offering after transaction costs totaled $368, of which $362 was used to redeem all of our February 2021 Notes at a price of
103.375%.
On June 9, 2016, we entered into a new $500 revolving credit facility (the "Revolving Facility") which matures on June 9,
2021. The Revolving Facility refinanced and replaced our previous revolving credit facility. At December 31, 2016, we had no
borrowings under the revolving facility but we had utilized $22 for letters of credit. We had availability at December 31, 2016
under the Revolving Facility of $478 after deducting the outstanding letters of credit.
At December 31, 2016, 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. The incurrence-based covenants in the Revolving Facility permit us to, among other things, (i) issue foreign
subsidiary indebtedness, (ii) incur general secured indebtedness subject to a pro forma first lien net leverage ratio not to exceed
1.50:1.00 in the case of first lien debt and a pro forma secured net leverage ratio of 2.50:1.00 in the case of other secured debt
and (iii) incur additional unsecured debt subject to a pro forma total net leverage ratio not to exceed 3.50:1.00. We may also
make dividend payments in respect of our common stock as well as certain investments and acquisitions subject to a pro forma
total net leverage ratio of 2.75:1.00. In addition, the Revolving Facility is subject to a financial covenant requiring us to
maintain a first lien net leverage ratio not to exceed 2.00:1.00. The indentures governing the senior notes include other
incurrence-based covenants that may subject us to additional specified limitations.
Our Board of Directors approved an expansion of our existing common stock share repurchase program from $1,400 to
$1,700 on January 11, 2016. During the first half of 2016, we paid $81 to acquire 6,612,537 shares of common stock in the
open market. We did not repurchase any shares during the second half of 2016.
From time to time, depending upon market, pricing and other conditions, as well as our cash balances and liquidity, we
may seek to acquire our senior notes or other indebtedness or our common stock through open market purchases, privately
negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as we may determine
33
(or as may be provided for in the indentures governing the notes), for cash, securities or other consideration. There can be no
assurance that we will pursue any such transactions in the future, as the pursuit of any alternative will depend upon numerous
factors such as market conditions, our financial performance and the limitations applicable to such transactions under our
financing and governance documents.
Cash Flow
Cash used for changes in working capital
Other cash provided by operations
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
2016
2015
2014
(51) $
435
384
(365)
(88)
(69) $
(41) $
447
406
(258)
(403)
(255) $
(39)
549
510
(246)
(254)
10
$
$
The table above summarizes our consolidated statement of cash flows. In January 2014, we sold a payment-in-kind note
receivable to a third party for $75. The proceeds included $35 of principal and $40 of interest related to prior years. The
principal portion of the payment has been classified as cash provided by investing activities and the interest portion has been
classified as cash provided by operating activities.
Operating activities — Exclusive of working capital, other cash provided by operations was $435 during 2016 compared to
$447 during 2015 and $549 during 2014. The decrease during 2016 was primarily attributable to a year-over-year increase in
cash paid for interest of $15 and cash paid on the settlement of foreign currency forward contracts and swaps of $7, partially
offset by higher operating earnings. The decrease during 2015 was primarily attributable to lower operating earnings and the
$40 of cash received in 2014 on our payment-in-kind note receivable that was attributable to interest, partially offset by year-
over-year reductions in cash income taxes of $26, cash paid for interest of $26 and restructuring payments of $10.
Working capital used cash of $51 and $41 in 2016 and 2015. Cash of $86 was used to finance increased receivables in
2016. Cash of $13 and $28 was used to fund higher inventory levels in 2016 and 2015. Increases in accounts payable and other
net liabilities provided cash of $48 in 2016 while decreases in accounts payable and other net liabilities used cash of $13 in
2015. Increased working capital levels at the end of 2016 were due in part to November and December sales in 2016 being
higher than in 2015. The significant increase in capital project activity during the fourth quarter of 2016, in support of new
business awarded by our customers, contributed to increased levels of accounts payable and other liabilities.
Working capital used cash of $41 and $39 in 2015 and 2014. Cash of $32 was used to finance increased receivables in
2014. Cash of $28 and $56 was used to fund higher inventory levels in 2015 and 2014. Decreases in accounts payable and
other net liabilities used cash of $13 in 2015 while increases in accounts payable and other net liabilities provided cash of $49
in 2014.
Investing activities — Expenditures for property plant and equipment were $322, $260 and $234 in 2016, 2015 and 2014.
During 2016, we paid $18 to acquire the aftermarket distribution business of Magnum and $60 to acquire the strategic assets of
SIFCO's commercial vehicle steer axle systems and related forged components businesses. During 2016, we received net
proceeds of $5 and $29 related to the sale of our Nippon Reinz and DCLLC subsidiaries. During 2016 and 2015, purchases of
marketable securities were funded by proceeds from sales and maturities of marketable securities. As discussed above, we
received proceeds in 2014 from the sale of a payment-in-kind note receivable which included $35 of principal. During 2014,
net purchases of marketable securities were primarily funded by cash receipts related to the sale of our payment-in-kind notes
receivable. Also during 2014, we received $9 that was released from escrow related to the 2010 sale of our former Structural
Products business.
Financing activities — During 2016, Dana Financing Luxembourg S.à r.l. completed the issuance of $375 of its June 2026
Notes and paid financing costs of $7 related to the notes. We paid financing costs of $3 to enter our Revolving Facility and a
premium of $12 to redeem all of our February 2021 Notes. Also during 2016, we made scheduled repayments of $32 and took
out $66 of additional long-term debt at international locations. During 2015, we redeemed $55 of our February 2019 Notes at a
$2 premium. During 2014, we completed the sale of $425 in senior unsecured notes and paid financing costs of $7 related to
the notes. Also during 2014, we redeemed $345 of our February 2019 Notes at a $15 premium. We used cash of $81, $311 and
$260 to repurchase common shares under our share repurchase program in 2016, 2015 and 2014. We used $8 for dividend
payments to preferred stockholders in 2014 and used $35, $37 and $32 for dividend payments to common stockholders in 2016,
2015 and 2014. Distributions to noncontrolling interests totaled $17, $9 and $9 in 2016, 2015 and 2014.
34
Off-Balance Sheet Arrangements
In connection with the divestiture of our Structural Products business in 2010, leases covering three U.S. facilities were
assigned to a U.S. affiliate of Metalsa. Under the terms of the sale agreement, we guarantee the affiliate’s performance under
the leases, which run through June 2025, including approximately $6 of annual payments. In the event of a required payment
by Dana as guarantor, we are entitled to pursue full recovery from Metalsa of the amounts paid under the guarantee and to take
possession of the leased property.
Contractual Obligations
We are obligated to make future cash payments in fixed amounts under various agreements. The following table
summarizes our significant contractual obligations as of December 31, 2016.
Payments Due by Period
$
$
2017
Total
Contractual Cash Obligations
Long-term debt(1)
Interest payments(2)
Leases(3)
Unconditional purchase obligations(4)
Pension contribution(5)
Retiree health care benefits(6)
Uncertain income tax positions(7)
Total contractual cash obligations
______________________________________________________
Notes:
(1) Principal payments on long-term debt and capital lease obligations in place at December 31, 2016.
1,653
673
214
166
12
91
45
97
38
163
12
4
2,809
359
$
$
2018 - 2019
58
$
181
63
1
$
2020 - 2021 After 2021
1,100
$
215
68
1
450
180
45
1
10
10
67
$
313
$
686
$
1,451
(2)
Interest payments are based on long-term debt and capital leases in place at December 31, 2016 and the interest rates applicable to such obligations.
(3) Operating leases related to real estate, vehicles and other assets.
(4) Unconditional purchase obligations are comprised principally of commitments for procurement of fixed assets and the purchase of raw materials.
(5) This amount represents estimated 2017 minimum required contributions to our global defined benefit pension plans. We have not estimated pension
contributions beyond 2017 due to the significant impact that return on plan assets and changes in discount rates might have on such amounts.
(6) This amount represents estimated payments under our non-U.S. retiree health care programs. Obligations under the non-U.S. retiree health care programs
are not fixed commitments and will vary depending on various factors, including the level of participant utilization and inflation. Our estimates of the
payments to be made in the future consider recent payment trends and certain of our actuarial assumptions.
(7) We are not able to reasonably estimate the timing of payments related to uncertain tax positions because the timing of settlement is uncertain. The above
table does not reflect unrecognized tax benefits at December 31, 2016 of $117. See Note 17 to our consolidated financial statements in Item 8 for
additional discussion.
At December 31, 2016, we maintained cash balances of $6 on deposit with financial institutions primarily to support
property insurance policy deductibles, certain employee retirement obligations and specific government approved
environmental remediation efforts.
Contingencies
For a summary of litigation and other contingencies, see Note 15 to our consolidated financial statements in Item 8. We
believe that any liabilities beyond the amounts already accrued that may result from these contingencies will not have a
material adverse effect on our liquidity, financial condition or results of operations.
Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with GAAP requires us to use estimates and make
judgments and assumptions about future events that affect the reported amounts of assets, liabilities, revenue, expenses and the
related disclosures. Considerable judgment is often involved in making these determinations. Critical estimates are those that
require the most difficult, subjective or complex judgments in the preparation of the financial statements and the accompanying
35
notes. We evaluate these estimates and judgments on a regular basis. We believe our assumptions and estimates are reasonable
and appropriate. However, the use of different assumptions could result in significantly different results and actual results could
differ from those estimates. The following discussion of accounting estimates is intended to supplement the Summary of
Significant Accounting Policies presented as Note 1 to our consolidated financial statements in Item 8.
Income taxes — Accounting for income taxes is complex, in part because we conduct business globally and therefore file
income tax returns in numerous tax jurisdictions. Significant judgment is required in determining the income tax provision,
uncertain tax positions, deferred tax assets and liabilities and the valuation allowances recorded against our net deferred tax
assets. A valuation allowance is provided when, in our judgment based upon available information, it is more likely than not
that a portion of such deferred tax assets will not be realized. To make this assessment, we consider the historical and projected
future taxable income or loss by tax jurisdiction. We consider all components of comprehensive income and weight the positive
and negative evidence, putting greater reliance on objectively verifiable historical evidence than on projections of future
profitability that are dependent on actions that have not taken place as of the assessment date. We also consider changes to
historical profitability of actions that occurred through the date of assessment and objectively verifiable effects of material
forecasted events that would have a sustained effect on future profitability, as well as the effect on historical profits of
nonrecurring events. We also incorporate the changes to historical and prospective income from tax planning strategies
expected to be implemented.
Prior to 2016, we carried a valuation allowance against deferred tax assets in the U.S. While our U.S. operations have
experienced improved profitability in recent years, our analysis of the income of the U.S. operations, as adjusted for changes in
historical results due to developments through 2015, demonstrated historical losses as of December 31, 2015. Additionally,
there were considerable uncertainties in the U.S. in certain of our end markets. Therefore, we had not achieved a level of
sustained profitability that would, in our judgment, support a release of the valuation allowance prior to 2016.
During the fourth quarter, following the completion of an enterprise wide strategy assessment and our annual one and five
year financial plans, the Company assessed the weight of all available positive and negative evidence and determined it was
more likely than not that future earnings will be sufficient to realize most of our deferred tax assets in the U.S. Accordingly, we
have released most of the U.S. valuation allowance at December 31, 2016, resulting in an income tax benefit of $501. In
arriving at the conclusion that we had achieved sustained profitability in the U.S., we considered the following positive
evidence: we were in a cumulative three-year historical income position in the U.S., we had income in seven of the eight
previous quarters; we successfully launched a replacement business for one of our largest customer programs for Light Vehicle
in the U.S. with actual volumes and margins which were consistent with our forecast in the fourth quarter; we stabilized our
U.S. Commercial Vehicle business despite lower than expected volumes; and, we secured certain new programs with customers
that increased our sales backlog in the U.S.
We have retained a valuation allowance of $137 against deferred tax assets in the U.S. primarily related to state operating
loss carryforwards and other credits which do not meet the more likely than not criterion for releasing the valuation allowance.
Our analysis of the operations of a subsidiary in Brazil, adjusted for changes in the historical results due to the effects of
developments through the current date and planned future actions, reflects three years of historical cumulative losses and our
annual one and five year financial plans forecast continued near term losses. Therefore, we determined it was not more likely
than not that future earnings will be sufficient to realize the deferred tax assets. Accordingly, we have recorded a valuation
allowance as of December 31, 2016, resulting in income tax expense of $25.
In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is less
than certain. We are regularly under audit by the various applicable tax authorities. Although the outcome of tax audits is always
uncertain, we believe that we have appropriate support for the positions taken on our tax returns and that our annual tax provisions
include amounts sufficient to pay assessments, if any, which may be proposed by the taxing authorities. Nonetheless, the amounts
ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued
for each year. See additional discussion of our deferred tax assets and liabilities in Note 17 to our consolidated financial statements
in Item 8.
Retiree benefits — Accounting for pension benefits and other postretirement benefits (OPEB) involves estimating the cost of
benefits to be provided well into the future and attributing that cost to the time period each employee works. These plan
expenses and obligations are dependent on assumptions developed by us in consultation with our outside advisers such as
actuaries and other consultants and are generally calculated independently of funding requirements. The assumptions used,
including inflation, discount rates, investment returns, life expectancies, turnover rates, retirement rates, future compensation
levels and health care cost trend rates, have a significant impact on plan expenses and obligations. These assumptions are
regularly reviewed and modified when appropriate based on historical experience, current trends and the future outlook.
36
Changes in one or more of the underlying assumptions could result in a material impact to our consolidated financial statements
in any given period. If actual experience differs from expectations, our financial position and results of operations in future
periods could be affected.
Mortality rates are based in part on the company's plan experience and actuarial estimates. The inflation assumption is
based on an evaluation of external market indicators, while retirement and turnover rates are based primarily on actual plan
experience. Health care cost trend rates are developed based on our actual historical claims experience, the near-term outlook
and an assessment of likely long-term trends. For our largest plans, discount rates are based upon the construction of a yield
curve which is developed based on a subset of high-quality fixed-income investments (those with yields between the 40th and
90th percentiles). The projected cash flows are matched to this yield curve and a present value developed which is then
calibrated to develop a single equivalent discount rate. Pension benefits are funded through deposits with trustees that satisfy, at
a minimum, the applicable funding regulations. For our largest defined benefit pension plans, expected investment rates of
return are based on input from the plans’ investment advisers and actuary regarding our expected investment portfolio mix,
historical rates of return on those assets, projected future asset class returns, the impact of active management and long-term
market conditions and inflation expectations. We believe that the long-term asset allocation on average will approximate the
targeted allocation and we regularly review the actual asset allocation to periodically re-balance the investments to the targeted
allocation when appropriate. OPEB and the majority of our non-U.S. pension benefits are funded as they become due.
Actuarial gains or losses may result from changes in assumptions or when actual experience is different from that which
was expected. Under the applicable standards, those gains and losses are not required to be immediately recognized in our
results of operations as income or expense, but instead are deferred as part of accumulated other comprehensive income
(AOCI) and amortized into our results of operations over future periods.
U.S. retirement plans
Our U.S. defined benefit pension plans comprise about 85% of our consolidated defined benefit pension obligations at
December 31, 2016. These plans are frozen and no service-related costs are being incurred. Changes in our net obligations are
principally attributable to changing discount rates and the performance of plan assets. Pension obligations are valued using
discount rates established annually in consultation with our outside actuarial advisers using the same yield curve approach
described above. Rising discount rates decrease the present value of future pension obligations – a 25 basis point increase in the
discount rate would decrease our U.S. pension liability by about $41. As indicated above, when establishing the expected long-
term rate of return on our U.S. pension plan assets, we consider historical performance and forward looking return estimates
reflective of our portfolio mix and investment strategy. Based on the most recent analysis of projected portfolio returns, we
concluded that the use of 6.0% as the expected return on our U.S. pension plan assets for 2017 is appropriate. See Note 11 to
the consolidated financial statements in Item 8 for information about the investing and allocation objectives related to our U.S.
pension plan assets.
The Society of Actuaries (SOA) issued new mortality improvement scales in the fourth quarter of 2016, marking the third
consecutive year for revised guidance. In developing MP-2016, the SOA considered actual experience for 2012 and 2013 and
preliminary experience for 2014. When it issued MP-2014, the SOA had projected improvement from the beginning of 2008
after analyzing historical data through 2007. In connection with selecting our assumptions in 2014, we had compared actual
experience for years after 2007 to the improvement projected in MP-2014, along with other information, before concluding that
a 0.75% long-term improvement rate (LTIR) for periods beginning with 2014 was appropriate and assuming that the LTIR
would be attained by 2020, sooner than the period assumed in MP-2014. The mortality improvement assumptions adopted in
2014 were not modified in 2015 as they were generally consistent with MP-2015. We reviewed the data in MP-2016 and
concluded that the adjustments made to MP-2014 are also appropriate with respect to the latest guidance, resulting in the
adoption of MP-2016 modified to reflect an LTIR of 0.75% being achieved by 2027. Adopting the modified MP-2016 scale did
not have a material effect on our pension obligations.
Effective January 1, 2016, we changed the method used to estimate the service (where applicable) and interest components
of the annual cost of our pension and other postretirement benefit plans. Prior to 2016, we estimated interest and service
expense using the discount rate underlying the calculation of the related projected benefit obligation at the end of the preceding
year, which was a weighted-average rate derived from the corresponding yield curve. The new method, referred to as a full
yield curve approach, estimates interest and service expense using the specific spot rates, from the yield curve, that relate to
projected cash flows. This method, which we believe is more precise, reduced interest expense for our pension plans in the U.S.
by approximately $14 in 2016 and will reduce the interest component by $11 in 2017. The determination of the projected
benefit obligation at year end is unchanged, however, so the actuarial gain or loss is affected by the amount of the change in
interest and service expense.
37
At December 31, 2016, we have $560 of unrecognized losses relating to our U.S. pension plans. Actuarial gains and losses,
which are primarily the result of changes in the discount rate and other assumptions and differences between actual and
expected asset returns, are deferred in AOCI and amortized to expense following the corridor approach. We use the average
remaining service period of active participants unless almost all of the plan’s participants are inactive, in which case we use the
average remaining life expectancy of inactive participants.
Actuarial gains and losses can also impact required cash contributions. Based on the current funded status of our U.S.
plans, there are no minimum contribution requirements for 2017.
See Note 11 to our consolidated financial statements in Item 8 for additional discussion of our pension and OPEB
obligations.
Goodwill and other indefinite-lived intangible assets — Our goodwill and other indefinite-lived intangible assets are tested for
impairment annually as of October 31 for all of our reporting units, and more frequently if events or circumstances warrant
such a review. We make significant assumptions and estimates about the extent and timing of future cash flows, growth rates
and discount rates. The cash flows are estimated over a significant future period of time, which makes those estimates and
assumptions subject to a high degree of uncertainty. We also utilize market valuation models which require us to make certain
assumptions and estimates regarding the applicability of those models to our assets and businesses. We use our internal
forecasts, which we update quarterly, to make our cash flow projections. These forecasts are based on our knowledge of our
customers’ production forecasts, our assessment of market growth rates, net new business, material and labor cost estimates,
cost recovery agreements with customers and our estimate of savings expected from our restructuring activities.
The most likely factors that would significantly impact our forecasts are changes in customer production levels and loss of
significant portions of our business. We believe that the assumptions and estimates used in the assessment of the goodwill and
other indefinite-lived intangible assets as of October 31, 2016 were reasonable. Aside from the goodwill recorded in 2016 in
connection with the Magnum and SJT Forjaria Ltda. acquisitions, we believe there is a significant excess of fair value over the
carrying value of these assets at December 31, 2016.
Long-lived assets with definite lives — We perform impairment assessments on our property, plant and equipment and our
definite-lived intangible assets whenever events and circumstances indicate that the carrying amounts of the assets may not be
recoverable. When indications are present, we compare the estimated future undiscounted net cash flows of the operations to
which the assets relate to the carrying amounts of such assets. We utilize the cash flow projections discussed above for
property, plant and equipment and amortizable intangibles. We group the assets and liabilities at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group
against the undiscounted future cash flows using the life of the primary assets. If the carrying amounts of the long-lived assets
are not recoverable from future cash flows and exceed their fair value, an impairment loss is recognized to reduce the carrying
amounts of the long-lived assets to their fair value. Fair value is determined based on discounted cash flows, third party
appraisals or other methods that provide appropriate estimates of value. Determining whether a triggering event has occurred,
performing the impairment analysis and estimating the fair value of the assets require numerous assumptions and a
considerable amount of management judgment.
Investments in affiliates — At both December 31, 2016 and 2015, we had aggregate investments in affiliates of $150. We
monitor our investments in affiliates for indicators of other-than-temporary declines in value on an ongoing basis in accordance
with GAAP. If we determine that an other-than temporary decline in value has occurred, we recognize an impairment loss,
which is measured as the difference between the recorded carrying value and the fair value of the investment. Fair value is
generally determined using the discounted cash flows (an income approach) or guideline public company (a market approach)
methods. A deterioration in industry conditions and decline in the operating results of our non-consolidated affiliates could
result in the impairment of our investments. During 2015, we recorded a $39 impairment charge related to our investment in
DDAC. See Note 20 to our consolidated financial statements in Item 8 for additional information.
Warranty — Costs related to product warranty obligations are estimated and accrued at the time of sale with a charge against
cost of sales. Warranty accruals are evaluated and adjusted as appropriate based on occurrences giving rise to potential warranty
exposure and associated experience. Warranty accruals and adjustments require significant judgment, including a determination
of our involvement in the matter giving rise to the potential warranty issue or claim, our contractual requirements, estimates of
units requiring repair and estimates of repair costs. If actual experience differs from expectations, our financial position and
results of operations in future periods could be affected.
Contingency reserves — We have numerous other loss exposures, such as product liability and warranty claims and matters
involving litigation. Establishing loss reserves for these matters requires the use of estimates and judgment in regards to risk of
38
exposure and ultimate liability. Product liability and warranty claims are generally estimated based on historical experience and
the estimated costs associated with specific events giving rise to potential field campaigns or recalls. In the case of legal
contingencies, estimates are made of the likely outcome of legal proceedings and potential exposure where reasonably
determinable based on the information presently known to us. New information and developments in these matters could
materially affect our recorded liabilities.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to fluctuations in foreign currency exchange rates, commodity prices for products we use in our
manufacturing and interest rates. To reduce our exposure to these risks, we maintain risk management controls to monitor these
risks and take appropriate actions to attempt to mitigate such forms of market risks.
Foreign currency exchange rate risk — Our foreign currency exposures are primarily associated with intercompany and third
party sales and purchase transactions, cross-currency intercompany loans and external debt. We use forward contracts to
manage our foreign currency exchange rate risk associated with a portion of our forecasted foreign currency-denominated sales
and purchase transactions and with certain foreign currency-denominated assets and liabilities. We also use currency swaps,
including a fixed-to-fixed cross-currency interest rate swap, to manage foreign currency exchange rate risk associated with our
intercompany loans and external debt. Foreign currency exposures are reviewed quarterly, at a minimum, and natural offsets
are considered prior to entering into derivative instruments.
Changes in the fair value of derivative instruments treated as cash flow hedges are reported in OCI. Deferred gains and
losses are reclassified to earnings in the same period in which the underlying transactions affect earnings. Specifically, with
respect to the cross-currency interest rate swap, to the extent we recognize an exchange gain or loss on the underlying external
debt, we reclassify an offsetting portion from OCI to earnings in the same period.
Changes in the fair value of derivative instruments not treated as cash flow hedges are recognized in earnings in the period
in which those changes occur. Changes in the fair value of derivative instruments associated with product-related transactions
are recorded in cost of sales, while those associated with non-product transactions are recorded in Other income, net. See Note
14 to our consolidated financial statements in Item 8.
The following table summarizes the sensitivity of the fair value of our derivative instruments, including forward contracts
and currency swaps, at December 31, 2016 to a 10% change in foreign exchange rates (versus the currencies presented).
Foreign currency rate sensitivity:
Forward contracts and currency swaps
Long U.S. dollars
Short U.S. dollars
Long euros (short other than U.S. dollar)
Short euros (long other than U.S. dollar)
Other, net
10%
Increase
in Rates
Gain (Loss)
10%
Decrease
in Rates
Gain (Loss)
$
$
$
$
$
(13) $
$
51
(5) $
2
$
(1) $
13
(51)
5
(2)
1
At December 31, 2016, of the $714 total notional amount of foreign currency derivatives, approximately 50% represents a
fixed-to-fixed cross-currency interest rate swap associated with recorded external debt, 30% represents currency swaps
associated with recorded intercompany loans and the remaining 20% primarily represents forward contracts associated with our
forecasted foreign currency-denominated sales and purchase transactions. Except where not necessary due to the existence of
natural hedges, our foreign currency-denominated intercompany loans are nearly fully hedged, eliminating virtually all
currency exposure on those loans. Our foreign currency-denominated external debt is fully hedged by our fixed-to-fixed cross-
currency interest rate swap at December 31, 2016. At December 31, 2015, the total notional amount of our currency derivative
portfolio was $431 and included currency swaps and forward contracts associated with certain foreign currency-denominated
intercompany loans and forecasted sales and purchase transactions.
We are also subject to currency translation risk with respect to our net investments in foreign subsidiaries and, as deemed
appropriate, we hedge such risk. At December 31, 2016, no net investment hedge contracts remain outstanding.
39
Commodity price risk — We do not utilize derivative contracts to manage commodity price risk. Our overall strategy is to pass
through commodity risk to our customers in our pricing agreements. A substantial portion of our customer agreements include
contractual provisions for the pass-through of commodity price movements. In instances where the risk is not covered
contractually, we have generally been able to adjust customer pricing to recover commodity cost increases.
Interest rate risk — Our long-term debt portfolio consists mostly of fixed-rate instruments. On occasion we enter into interest
rate swaps to convert fixed-rate debt to floating-rate debt. As described in Note 14 to the consolidated financial statements, we
entered into a fixed-to-floating interest rate swap during 2015 but terminated that swap prior to the end of 2015. At
December 31, 2016, we do not hold any fixed-to-floating interest rate swaps. Our fixed-to-fixed cross-currency interest rate
swap remains outstanding at December 31, 2016 and hedges the currency risk of our 6.50% U.S. dollar-denominated 2026
Notes by economically converting them to a 5.14% euro-denominated instrument.
40
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Dana Incorporated
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all
material respects, the financial position of Dana Incorporated and its subsidiaries at December 31, 2016 and December 31,
2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016
in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the
financial statement schedule listed in the index appearing under Item 15(a)(3) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016,
based on criteria established in Internal Control - Integrated Framework 2013 issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements
and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial
Reporting under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company's internal
control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it classifies
deferred taxes in 2016.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As described in Item 9A. Management's report on internal control over financial reporting, management has excluded SJT
Forjaria Ltda. from its assessment of internal control over financial reporting as of December 31, 2016 because it was acquired
by the Company in a purchase business combination during 2016. We have also excluded SJT Forjaria Ltda. from our audit of
internal control over financial reporting. SJT Forjaria Ltda. is a wholly-owned subsidiary whose total assets and total revenues
represent less than 2% and 0%, respectively, of the related consolidated financial statement amounts as of and for the year
ended December 31, 2016.
/s/ PricewaterhouseCoopers LLP
Toledo, Ohio
February 10, 2017
41
Dana Incorporated
Consolidated Statement of Operations
(In millions, except per share amounts)
Net sales
Costs and expenses
Cost of sales
Selling, general and administrative expenses
Amortization of intangibles
Restructuring charges, net
Loss on sale of subsidiaries
Impairment of long-lived assets
Loss on disposal group held for sale
Pension settlement charges
Other income, net
Income before interest and income taxes
Loss on extinguishment of debt
Interest income
Interest expense
Income from continuing operations before income taxes
Income tax expense (benefit)
Equity in earnings (losses) of affiliates
Income from continuing operations
Income (loss) from discontinued operations
Net income
Less: Noncontrolling interests net income
Net income attributable to the parent company
Preferred stock dividend requirements
Net income available to common stockholders
Net income per share available to parent company common stockholders:
Basic:
Income from continuing operations
Income (loss) from discontinued operations
Net income
Diluted:
Income from continuing operations
Income (loss) from discontinued operations
Net income
Weighted-average common shares outstanding
Basic
Diluted
2016
2015
2014
$
5,826
$
6,060
$
6,617
5,211
391
14
15
5,672
411
42
21
4,982
406
8
36
(80)
18
332
(17)
13
113
215
(424)
14
653
653
13
640
(36)
1
394
(2)
13
113
292
82
(34)
176
4
180
21
159
$
$
$
$
$
$
$
640
$
159
$
4.38
$
— $
$
4.38
4.36
$
— $
$
4.36
0.98
0.02
1.00
0.97
0.02
0.99
$
$
$
$
$
$
146.0
146.8
159.0
160.0
158.0
173.5
(80)
(42)
33
382
(19)
15
118
260
(70)
13
343
(15)
328
9
319
7
312
2.07
(0.10)
1.97
1.93
(0.09)
1.84
Dividends declared per common share
$
0.24
$
0.23
$
0.20
The accompanying notes are an integral part of the consolidated financial statements.
42
Dana Incorporated
Consolidated Statement of Comprehensive Income
(In millions)
2016
2015
2014
Net income
Less: Noncontrolling interests net income
Net income attributable to the parent company
$
$
653
13
640
$
180
21
159
Other comprehensive income (loss) attributable to the parent company, net of
tax:
Currency translation adjustments
Hedging gains and losses
Investment and other gains and losses
Defined benefit plans
Other comprehensive loss attributable to the parent company
Other comprehensive income (loss) attributable to noncontrolling interests, net
of tax:
Currency translation adjustments
Defined benefit plans
Other comprehensive loss attributable to noncontrolling interests
Total comprehensive income (loss) attributable to the parent company
Total comprehensive income attributable to noncontrolling interests
Total comprehensive income (loss)
$
(38)
(30)
(2)
(40)
(110)
(3)
1
(2)
530
11
541
$
(181)
5
(3)
2
(177)
(5)
1
(4)
(18)
17
(1) $
328
9
319
(185)
(9)
2
(78)
(270)
(4)
(4)
49
5
54
The accompanying notes are an integral part of the consolidated financial statements.
43
Dana Incorporated
Consolidated Balance Sheet
(In millions, except share and per share amounts)
2016
2015
Assets
Current assets
Cash and cash equivalents
Marketable securities
Accounts receivable
Trade, less allowance for doubtful accounts of $6 in 2016 and $5 in 2015
Other
Inventories
Other current assets
Total current assets
Goodwill
Intangibles
Deferred tax assets
Other noncurrent assets
Investments in affiliates
Property, plant and equipment, net
Total assets
Liabilities and equity
Current liabilities
Notes payable, including current portion of long-term debt
Accounts payable
Accrued payroll and employee benefits
Taxes on income
Other accrued liabilities
Total current liabilities
Long-term debt, less debt issuance costs of $21 in 2016 and 2015
Pension and postretirement obligations
Other noncurrent liabilities
Total liabilities
Commitments and contingencies (Note 15)
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, 143,938,280 and
150,068,040 shares outstanding
Additional paid-in capital
Retained earnings (accumulated deficit)
Treasury stock, at cost (6,812,784 and 23,963 shares)
Accumulated other comprehensive loss
Total parent company stockholders' equity
Noncontrolling interests
Total equity
Total liabilities and equity
$
$
707
30
791
162
673
115
625
65
2,431
80
102
96
275
150
1,167
4,301
22
712
145
17
193
1,089
1,553
521
307
3,470
721
110
638
78
2,284
90
109
588
226
150
1,413
4,860
69
819
149
15
201
1,253
1,595
565
205
3,618
$
$
—
—
2
2,327
195
(83)
(1,284)
1,157
85
1,242
4,860
$
2
2,311
(410)
(1)
(1,174)
728
103
831
4,301
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
44
Dana Incorporated
Consolidated Statement of Cash Flows
(In millions)
2016
2015
2014
Operating activities
Net income
Depreciation
Amortization of intangibles
Amortization of deferred financing charges
Call premium on senior notes
Write-off of deferred financing costs
Earnings of affiliates, net of dividends received
Stock compensation expense
Deferred income taxes
Pension expense (contributions), net
Loss on sale of subsidiaries
Impairment of long-lived assets
Impairment of equity affiliate
Loss on disposal group held for sale
Interest payment received on payment-in-kind note receivable
Change in working capital
Change in other noncurrent assets and liabilities
Other, net
Net cash provided by operating activities
Investing activities
Purchases of property, plant and equipment
Acquisition of businesses
Principal payment received on payment-in-kind note receivable
Purchases of marketable securities
Proceeds from sales of marketable securities
Proceeds from maturities of marketable securities
Proceeds from sale of subsidiaries
Other
Net cash used in investing activities
Financing activities
Net change in short-term debt
Proceeds from letters of credit
Repayment of letters of credit
Proceeds from long-term debt
Repayment of long-term debt
Call premium on senior notes
Deferred financing payments
Dividends paid to preferred stockholders
Dividends paid to common stockholders
Distributions to noncontrolling interests
Repurchases of common stock
Other
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents - beginning of period
Effect of exchange rate changes on cash balances
Less: cash of disposal group held for sale
Cash and cash equivalents - end of period
$
$
653
173
9
5
12
5
(3)
17
(480)
(16)
80
(51)
(1)
(19)
384
(322)
(78)
(93)
47
47
34
(365)
9
441
(382)
(12)
(11)
(35)
(17)
(81)
(88)
(69)
791
(15)
$
180
158
16
5
2
1
12
14
(10)
(18)
36
39
(41)
(7)
19
406
328
164
49
5
15
4
4
16
(199)
30
78
40
(39)
(16)
31
510
(260)
(234)
(43)
17
30
(2)
(258)
(5)
(4)
18
(60)
(2)
(37)
(9)
(311)
7
(403)
(255)
1,121
(75)
35
(84)
7
21
9
(246)
(8)
12
(8)
448
(372)
(15)
(7)
(8)
(32)
(9)
(260)
5
(254)
10
1,256
(118)
(27)
1,121
The accompanying notes are an integral part of the consolidated financial statements.
45
$
707
$
791
$
Dana Incorporated
Consolidated Statement of Stockholders’ Equity
(In millions)
Parent Company Stockholders'
Preferred
Stock
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
(Accumulated
Deficit)
Treasury
Stock
Accumulated
Other
Compre-
hensive
Loss
Parent
Company
Stockholders'
Equity
Non-
controlling
Interests
Total
Equity
Balance, December 31, 2013 $
372
$
2
$
2,840
$
(812) $
(366) $
(727) $
1,309
$
104
$ 1,413
Net income
Other comprehensive loss
Preferred stock dividends
($3.00 per share)
Common stock dividends
($0.20 per share)
Distributions to
noncontrolling interests
Share conversion
Common stock share
repurchases
Retire treasury shares
Stock compensation
Stock withheld for employees
taxes
(372)
74
(294)
20
Balance, December 31, 2014
—
2
2,640
Net income
Other comprehensive loss
Common stock dividends
($0.23 per share)
Distributions to
noncontrolling interests
Derecognition of
noncontrolling interest
Common stock share
repurchases
Retire treasury shares
Stock compensation
Stock withheld for employees
taxes
(346)
17
Balance, December 31, 2015
—
2
2,311
Net income
Other comprehensive loss
Common stock dividends
($0.24 per share)
Distributions to
noncontrolling interests
Derecognition of
noncontrolling interest
Common stock share
repurchases
Stock compensation
Stock withheld for employees
taxes
16
(270)
(997)
(177)
(1,174)
(110)
319
(7)
(32)
(532)
159
(37)
(410)
640
(35)
301
(260)
294
(2)
(33)
(311)
346
(3)
(1)
(81)
(1)
319
(270)
(7)
(32)
—
3
(260)
—
20
(2)
1,080
159
(177)
(37)
—
—
(311)
—
17
(3)
728
640
(110)
(35)
—
—
(81)
16
(1)
9
(4)
328
(274)
(9)
(7)
(32)
(9)
3
(260)
—
20
(2)
100
1,180
21
(4)
(9)
(5)
103
13
(2)
(17)
(12)
180
(181)
(37)
(9)
(5)
(311)
—
17
(3)
831
653
(112)
(35)
(17)
(12)
(81)
16
(1)
Balance, December 31, 2016 $
— $
2
$
2,327
$
195
$
(83) $
(1,284) $
1,157
$
85
$ 1,242
The accompanying notes are an integral part of the consolidated financial statements.
46
Dana Incorporated
Index to Notes to the Consolidated
Financial Statements
1.
2.
3.
4.
5.
6.
7.
8.
9.
Organization and Summary of Significant Accounting Policies
Acquisitions
Disposal Groups and Impairment of Long-Lived Assets
Goodwill and Other Intangible Assets
Restructuring of Operations
Inventories
Supplemental Balance Sheet and Cash Flow Information
Stockholders' Equity
Earnings per Share
10.
Stock Compensation
11.
Pension and Postretirement Benefit Plans
12. Marketable Securities
13.
Financing Agreements
14.
Fair Value Measurements and Derivatives
15.
Commitments and Contingencies
16. Warranty Obligations
17.
Income Taxes
18. Other Income, Net
19.
Segments, Geographical Area and Major Customer Information
20.
Equity Affiliates
47
Page
48
55
57
58
60
61
62
63
65
65
67
75
75
77
81
82
82
86
87
90
Notes to the Consolidated Financial Statements
(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 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 include the accounts of all subsidiaries where we hold a
controlling financial interest. The ownership interests in subsidiaries held by third parties are presented in the consolidated
balance sheet within equity, but separate from the parent’s equity, as noncontrolling interests. All significant intercompany
balances and transactions have been eliminated in consolidation. Investments in 20 to 50%-owned affiliates, which are not
required to be consolidated, are generally accounted for under the equity method. Equity in earnings of these investments is
presented separately in the consolidated statement of operations, net of tax. Investments in less-than-20%-owned companies are
generally included in the financial statements at the cost of our investment. Dividends, royalties and fees from these cost basis
affiliates are recorded in income when received.
We have added the subtotal "Income before interest and income taxes" to our consolidated statement of operations. Interest
income, interest expense and loss on extinguishment of debt are presented below the new subtotal but above the subtotal
"Income from continuing operations before income taxes." Interest income was previously included in Other income, net. Prior
year amounts have been reclassified to conform to the 2016 presentation.
In the first quarter of 2015, we identified an error attributable to the calculation of noncontrolling interests net income of a
subsidiary. The error resulted in an understatement of noncontrolling equity and noncontrolling interests net income and a
corresponding overstatement of parent company stockholders' equity and net income attributable to the parent company in prior
periods. Based on our assessments of qualitative and quantitative factors, the error and related impacts were not considered
material to the financial statements of the prior periods to which they relate. The error was corrected in March 2015 by
increasing noncontrolling interests net income by $9. The correction was not considered material to our 2015 net income
attributable to the parent company.
In the third quarter of 2014, we identified an error that had resulted in a $10 overstatement of the values assigned to our
defined benefit pension obligation and goodwill when we applied fresh start accounting in 2008. These overstatements affected
pension expense, other comprehensive income and impairment of goodwill in subsequent periods. Based on our assessments of
qualitative and quantitative factors, the error and the related impacts were not considered material to the financial statements
for the quarter ended September 30, 2014 or the prior periods to which they relate. The error was corrected in September 2014
by decreasing pension and postretirement obligations by $17, decreasing accumulated other comprehensive loss by $3 to
eliminate the related impacts on unrecognized pension expense and currency translation adjustments, decreasing goodwill by
$3, decreasing cost of sales by $5 to reverse the cumulative impact on pension expense and crediting Other income, net for $6
to effectively reverse a portion of the goodwill impairment recognized in 2008.
Held for sale — We classify long-lived assets or disposal groups as held for sale in the period: management commits to a plan
to sell; the long-lived asset or disposal group is available for immediate sale in its present condition subject only to terms that
are usual and customary for sales of such long-lived assets or disposal groups; an active program to locate a buyer and other
actions required to complete the plan to sell have been initiated; the sale is probable within one year; the asset or disposal group
is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and it is unlikely that
significant changes to the plan will be made or that the plan will be withdrawn. Long-lived assets and disposal groups classified
as held for sale are measured at the lower of their carrying amount or fair value less costs to sell.
Discontinued operations — Prior to January 1, 2015, we would classify a business component that had been disposed of or
classified as held for sale as discontinued operations if the cash flows of the component were eliminated from our ongoing
48
operations and we no longer had any significant continuing involvement in or with the component. The results of operations of
our discontinued operations, including any gains or losses on disposition, were aggregated and presented on one line in the
income statement. See Recently adopted accounting pronouncements in this note for a description of the current practice and
Note 3 for additional information regarding our discontinued operations.
Estimates — Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in
the United States (GAAP), which require the use of estimates, judgments and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying disclosures. We believe our assumptions and estimates are reasonable
and appropriate. However, due to the inherent uncertainties in making estimates, actual results could differ from those
estimates.
Fair value measurements — A three-tier fair value hierarchy is used to prioritize the inputs to valuation techniques used to
measure fair value. The three levels of inputs are as follows: Level 1 inputs (highest priority) include unadjusted quoted prices
in active markets for identical instruments. Level 2 inputs include quoted prices for similar instruments that are observable
either directly or indirectly. Level 3 inputs (lowest priority) include unobservable inputs in which there is little or no market
data, which require management to develop its own assumptions. Classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value measurement.
The inputs we use in our valuation techniques include 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. When available, we use quoted market prices to determine the fair value
(market approach). In the absence of active markets for the identical assets or liabilities, such measurements involve developing
assumptions based on market observable data and, in the absence of such data, we consider the amount and timing of estimated
future cash flows and assumed discount rates reflecting varying degrees of credit risk that is consistent with what market
participants would use in a hypothetical transaction that occurs at the measurement date (income approach). Fair values may
not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized
in the future.
Cash and cash equivalents — Cash and cash equivalents includes cash on hand, demand deposits and short-term cash
investments that are highly liquid in nature and have maturities of three months or less when purchased.
Marketable securities — Our investments in marketable securities reported in the accompanying balance sheet are classified as
available for sale and carried at fair value. Unrealized gains and losses are recorded in accumulated other comprehensive
income (loss) (AOCI) until realized. Realized gains and losses are recorded using the specific identification method.
Inventories — Inventories are valued at the lower of cost or market. Cost is determined using the average or first-in, first-out
(FIFO) cost method.
Property, plant and equipment — As a result of our adoption of fresh start accounting on February 1, 2008, property, plant and
equipment was stated at fair value with useful lives ranging from two to thirty years. Useful lives of newly acquired assets are
generally twenty to thirty years for buildings and building improvements, five to ten years for machinery and equipment, three
to five years for tooling and office equipment and three to ten years for furniture and fixtures. Depreciation is recognized over
the estimated useful lives using primarily the straight-line method for financial reporting purposes and accelerated depreciation
methods for federal income tax purposes. If assets are impaired, their value is reduced via an increase in accumulated
depreciation.
Pre-production costs related to long-term supply arrangements — The costs of tooling used to make products sold under long-
term supply arrangements are capitalized as part of property, plant and equipment and amortized over their useful lives if we
own the tooling or if we fund the purchase but our customer owns the tooling and grants us the irrevocable right to use the
tooling over the contract period. If we have a contractual right to bill our customers, costs incurred in connection with the
design and development of tooling are carried as a component of other accounts receivable until invoiced. Design and
development costs related to customer products are deferred if we have an agreement to collect such costs from the customer;
otherwise, they are expensed when incurred. At December 31, 2016, the machinery and equipment component of property,
plant and equipment includes $9 of our tooling related to long-term supply arrangements, while trade and other accounts
receivable includes $32 of costs related to tooling that we have a contractual right to collect from our customers.
Goodwill — We test goodwill for impairment annually as of October 31 and more frequently if events occur or circumstances
change that would warrant an interim review. Goodwill impairment testing is performed at the reporting unit level, which is our
operating segment. We estimate the fair value of the reporting unit in the first step using various valuation methodologies,
49
including projected future cash flows and multiples of current earnings. If the estimated fair value of the reporting unit exceeds
its carrying value, the goodwill is considered not impaired. If the carrying value of the reporting unit exceeds its estimated fair
value, then the second step of the test would be required to determine the implied fair value of the goodwill and any resulting
impairment. The vast majority of our goodwill is assigned to our Off-Highway segment. The estimated fair value of our Off-
Highway reporting unit was significantly greater than its carrying value at October 31, 2016. No impairment of goodwill
occurred during the three years ended December 31, 2016.
Intangible assets — Intangible assets include the value of core technology, trademarks and trade names, customer relationships
and intangible assets used in research and development activities. Core technology and customer relationships have definite
lives while intangible assets used in research and development activities and substantially all of our trademarks and trade
names have indefinite lives. Definite-lived intangible assets are amortized over their useful life using the straight-line method
of amortization and are periodically reviewed for impairment indicators. Amortization of core technology is charged to cost of
sales. Amortization of trademarks and trade names and customer relationships is charged to amortization of intangibles.
Intangible assets used in research and development activities have an indefinite life until completion of the associated research
and development efforts. Upon completion of development, the assets are amortized over their useful life; if the project is
abandoned, the assets are written off immediately. Indefinite-lived intangible assets are tested for impairment annually and
more frequently if impairment indicators exist. See Notes 3 and 4 for more information about intangible assets.
Investments in affiliates — Investments in affiliates include investments accounted for under the equity and cost methods. We
monitor our investments in affiliates for indicators of other-than-temporary declines in value on an ongoing basis in accordance
with GAAP. Indicators include, but are not limited to, current economic and market conditions, operating performance of the
affiliate, including current earnings trends and undiscounted cash flows, and other affiliate-specific information. If we
determine that an other-than-temporary decline in value has occurred, we recognize an impairment loss, which is measured as
the excess of the investment's recorded carrying value over its fair value. The fair value determination, particularly for
investments in privately-held companies, requires significant judgment to determine appropriate estimates and assumptions.
Changes in these estimates and assumptions could affect the calculation of the fair value of the investments and determination
of whether any identified impairment is other than temporary. See Note 20 for further information about our investment in
affiliates.
Tangible asset impairments — We review the carrying value of amortizable long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of the assets to the undiscounted future net cash flows
expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds their fair value. Assets to be disposed of are
reported at the lower of their carrying amount or fair value less costs to sell and are no longer depreciated.
Other long-lived assets and liabilities — We discount our workers’ compensation and asbestos liabilities and the related
amounts recoverable from insurers by applying blended risk-free rates that are appropriate for the duration of the projected cash
flows. The use of risk-free rates is considered appropriate given that other risks affecting the volume and timing of payments
have been considered in developing the probability-weighted projected cash flows. The blended risk-free rates are revised
annually to consider incremental cash flow projections.
Financial instruments — The carrying values of cash and cash equivalents, trade receivables and short-term borrowings
approximate fair value. Notes receivable are carried at fair value, which considers the contractual call or selling price, if
applicable. Borrowings under our credit facilities are carried at historical cost and adjusted for principal payments and foreign
currency fluctuations.
Derivatives — Foreign currency forward contracts and currency swaps are carried at fair value. We enter into these contracts to
manage our exposure to the impact of currency fluctuations on certain foreign currency-denominated assets and liabilities and
on a portion of our forecasted purchase and sale transactions. On occasion, we also enter into net investment hedges to protect
the translated U.S. dollar value of our investment in certain foreign subsidiaries.
Changes in the fair value of currency-related contracts treated as cash flow hedges are deferred and included as a
component of other comprehensive income (loss) (OCI) to the extent the contracts remain effective and the associated
forecasted transactions remain probable. Effectiveness is measured by using regression analysis to determine the degree of
correlation between the change in the fair value of the derivative instrument and the change in the associated foreign currency
exchange rates. Deferred gains and losses are reclassified to Other income, net in the same periods in which the underlying
transactions affect earnings.
50
Changes in the fair value of contracts not treated as cash flow hedges or as net investment hedges are recognized in Other
income, net in the period in which those changes occur. Changes in the fair value of contracts treated as net investment hedges
are recorded in the cumulative translation adjustment (CTA) component of OCI. Amounts recorded in CTA are deferred until
such time as the investment in the associated subsidiary is substantially liquidated.
We may also use interest rate swaps to manage exposure to fluctuations in interest rates and to adjust the mix of our fixed-
rate and variable-rate debt. With our current portfolio of fixed-rate debt, we occasionally execute a fixed-to-floating interest
rate swap which serves to convert our fixed-rate debt to variable-rate debt. As a fair value hedge of the underlying debt,
changes in the fair values of the swap and the underlying debt are recorded in interest expense. We do not use derivatives for
trading or speculative purposes and we do not hedge all of our exposures.
Warranty — Costs related to product warranty obligations are estimated and accrued at the time of sale with a charge against
cost of sales. Warranty accruals are evaluated and adjusted as appropriate based on occurrences giving rise to potential warranty
exposure and associated experience. Warranty accruals and adjustments require significant judgment, including a determination
of our involvement in the matter giving rise to the potential warranty issue or claim, our contractual requirements, estimates of
units requiring repair and estimates of repair costs.
Environmental compliance and remediation — Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to existing conditions caused by past operations that do not contribute to our
current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial
efforts are probable and the costs can be reasonably estimated. We consider the most probable method of remediation, current
laws and regulations and existing technology in determining our environmental liabilities.
Pension and other postretirement defined benefits — Net pension and postretirement benefits expenses and the related
liabilities are determined on an actuarial basis. These plan expenses and obligations are dependent on management’s
assumptions developed in consultation with our actuaries. We review these actuarial assumptions at least annually and make
modifications when appropriate. With the input of independent actuaries and other relevant sources, we believe that the
assumptions used are reasonable; however, changes in these assumptions, or experience different from that assumed, could
impact our financial position, results of operations or cash flows.
Postemployment benefits — Costs to provide postemployment benefits to employees are accounted for on an accrual basis.
Obligations that do not accumulate or vest are recorded when payment is probable and the amount can be reasonably estimated.
For those obligations that accumulate or vest and the amount can be reasonably estimated, expense and the related liability are
recorded as service is rendered.
Equity-based compensation — We measure compensation cost arising from the grant of share-based awards to employees at
fair value. We recognize such costs in income over the period during which the requisite service is provided, usually the vesting
period. The grant date fair value is estimated using valuation techniques that require the input of management estimates and
assumptions. We believe that the assumptions used are reasonable; however, due to inherent uncertainties in making estimates,
if other assumptions had been used, it could have impacted our financial position and results of operations.
Revenue recognition — Sales are recognized when products are shipped and risk of loss has transferred to the customer. We
accrue for warranty costs, sales returns and other allowances based on experience and other relevant factors when sales are
recognized. Adjustments are made as new information becomes available. Shipping and handling fees billed to customers are
included in sales, while costs of shipping and handling are included in cost of sales. Taxes collected from customers are
excluded from revenues and credited directly to obligations to the appropriate governmental agencies.
Foreign currency translation — The financial statements of subsidiaries and equity affiliates outside the U.S. located in non-
highly inflationary economies are measured using the currency of the primary economic environment in which they operate as
the functional currency, which typically is the local currency. Transaction gains and losses resulting from translating assets and
liabilities of these entities into the functional currency are included in Other income, net or in equity in earnings of affiliates.
When translating into U.S. dollars, income and expense items are translated at average monthly rates of exchange, while assets
and liabilities are translated at the rates of exchange at the balance sheet date. Translation adjustments resulting from translating
the functional currency into U.S. dollars are deferred and included as a component of AOCI in stockholders’ equity. For
operations whose functional currency is the U.S. dollar, nonmonetary assets are translated into U.S. dollars at historical
exchange rates and monetary assets are translated at current exchange rates.
51
Because the economy in Venezuela was considered highly inflationary under GAAP, we remeasured the financial
statements of our subsidiaries in Venezuela through the January 2015 date of divestiture as if their functional currency was the
U.S. dollar.
Prior to 2014, the Venezuelan government through its Commission for the Administration of Foreign Exchange (CADIVI)
maintained a fixed official exchange rate. In March 2013, the Venezuelan government announced the creation of the
Complementary System of Foreign Currency Administration (SICAD), a supplementary currency auction system regulated by
the Central Bank of Venezuela for purchases of U.S. dollars by certain eligible importers. During 2013, our subsidiaries in
Venezuela were not eligible to utilize SICAD and therefore we continued to use the official exchange rate to remeasure the
financial statements of our subsidiaries in Venezuela.
In the first quarter of 2014, the Venezuelan government transferred the administration of the official exchange rate to the
National Center of Foreign Commerce (CENCOEX) and indicated that the official exchange rate would be increasingly
reserved only for the settlement of U.S. dollar-denominated obligations related to purchases of “essential goods and services.”
In addition, the Venezuelan government expanded the entities and transactions that would be eligible to use SICAD.
Transactions eligible for SICAD included foreign investments and payments of royalties. Also during the first quarter of 2014,
the Venezuelan government announced the creation of SICAD 2, a market-based exchange mechanism regulated by the Central
Bank of Venezuela. SICAD 2 could be used by all companies incorporated or domiciled in Venezuela who want to obtain U.S.
dollars for any purpose.
With the expansion of SICAD and the formation of SICAD 2 there was uncertainty surrounding transactions that
CENCOEX would allow to be transacted at the official exchange rate. In consultation with legal counsel we determined that the
SICAD rate, which we believed would apply to dividend remittances, was the appropriate rate to remeasure the bolivar-
denominated net monetary assets of our subsidiaries in Venezuela. Effective March 31, 2014, we ceased using the official
exchange rate and began using the SICAD rate to remeasure the financial statements of our subsidiaries in Venezuela. See Note
18 for additional information. In January 2015, we completed the divestiture of our operations in Venezuela. See Note 3 for
additional information.
Income taxes — In the ordinary course of business there is inherent uncertainty in quantifying our income tax positions. We
assess our income tax positions and record tax assets or liabilities for all years subject to examination based upon
management’s evaluation of the facts and circumstances and information available at the reporting dates. For those tax
positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit
with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of
all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained,
no tax benefit has been recognized in the financial statements. Where applicable, the related interest cost has also been
recognized as a component of the income tax provision.
Research and development — Research and development costs include expenditures for research activities relating to product
development and improvement. Salaries, fringes and occupancy costs, including building, utility and overhead costs, comprise
the vast majority of these expenses and are expensed as incurred. Research and development expenses were $81, $75 and $72
in 2016, 2015 and 2014.
Recently adopted accounting pronouncements
In March 2016, the Financial Accounting Standards Board (FASB) issued guidance intended to simplify various aspects
related to how share-based payments are accounted for and presented in the financial statements. The guidance addresses
income tax effects of share-based payments, tax withholding requirements, recognition for forfeitures and presentation
requirements in the statement of cash flows. This guidance has an effective date of January 1, 2017 with earlier adoption
permitted. We elected to adopt the new guidance in the third quarter of 2016, requiring us to reflect any adjustments as of
January 1, 2016 in retained earnings. The primary impact of adopting the new guidance was an increase in deferred tax assets
of $32 related to the cumulative excess tax benefits resulting from share-based payments. Previous guidance resulted in credits
to equity for such tax benefits and delayed recognition until the tax benefits reduced income taxes payable. Because we
continued to carry a valuation allowance against certain of our deferred tax assets in the U.S., the increase in deferred tax assets
was offset by an increase in our valuation allowance of $32, resulting in no impact to retained earnings as of January 1, 2016.
With respect to other provisions in the new guidance, our plans currently do not permit tax withholdings in excess of the
statutory minimums and we have elected to continue estimating forfeitures expected to occur when determining the amount of
compensation cost to be recognized in each period. The presentation requirements for cash flows under the new standard had
no impact on our consolidated statement of cash flows.
52
In November 2015, the FASB issued guidance that simplifies the balance sheet classification of deferred taxes. Previously,
an entity separated its deferred income tax liabilities and assets into current and noncurrent amounts in a classified balance
sheet. This amendment simplifies the presentation to require that all deferred tax liabilities and assets be classified as
noncurrent on the balance sheet. The guidance does not change the existing requirement that only permits offsetting within a
jurisdiction. The change to noncurrent classification does have an impact on working capital. This guidance becomes effective
January 1, 2017, with earlier adoption permitted and allows for prospective or retrospective application. We elected to adopt the
guidance in the fourth quarter of 2016 and applied the retrospective approach. As of December 31, 2015, Other current assets
was reduced by $43, Deferred tax assets was increased by $18, Taxes on income was reduced by $2 and Other noncurrent
liabilities was reduced by $23. As of December 31, 2014, Other current assets was reduced by $50, Deferred tax assets was
increased by $39, Taxes on income was reduced by $1 and Other noncurrent liabilities was reduced by $10.
In September 2015, the FASB issued an amendment that eliminates the requirement to restate prior period financial
statements for measurement period adjustments in accounting for business combinations. Entities must recognize adjustments
to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment
amounts are determined. This guidance became effective January 1, 2016 and requires prospective application to qualifying
business combinations.
In May 2015, the FASB issued guidance that modifies disclosures related to investments for which fair value is measured
using the net asset value (or its equivalent) per share practical expedient by eliminating the requirement to categorize such
assets under the fair value hierarchy. The new guidance also eliminates the requirement to include in certain disclosures those
investments that are merely eligible to be measured using the practical expedient, limiting the disclosures to those investments
actually valued under that approach. This guidance became effective January 1, 2016 and requires retrospective application.
This guidance resulted in all of the commingled funds, hedge fund of funds and real estate investments held by our pension
plans being removed from the fair value hierarchy within our year-end pension disclosures.
In April, 2015, the FASB issued an amendment to provide explicit guidance about a customer's accounting for fees paid in
a cloud computing arrangement. If a cloud computing arrangement includes a software license, then the customer must account
for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud
computing arrangement does not include a software license, then the customer must account for the arrangement as a service
contract. We adopted the new guidance effective January 1, 2016. Applying the amendment to all arrangements entered into or
materially modified after the effective date did not have an impact on our consolidated financial statements.
In April 2015, the FASB issued guidance to provide for a practical expedient that permits an entity to measure defined
benefit plan assets and obligations as of the month end that is closest to the date of a significant event, such as a plan
amendment, settlement or curtailment, that calls for a remeasurement in accordance with existing requirements. An entity is
required to disclose the accounting policy election and the date used to measure defined benefit plan assets and obligations. The
new guidance was effective January 1, 2016 and did not impact our consolidated financial statements.
In February 2015, the FASB released updated consolidation guidance that entities must use to evaluate specific ownership
and contractual arrangements that lead to a consolidation conclusion. The updates could change consolidation outcomes
affecting presentation and disclosures. The new guidance was effective January 1, 2016 and did not impact our consolidated
financial statements.
In June 2014, the FASB issued guidance to provide clarity on whether to treat a performance target that could be achieved
after the requisite service period as a performance condition that affects vesting or as a nonvesting condition that affects the
grant-date fair value of a share-based payment award. Generally, an award with a performance target also requires an employee
to render service until the performance target is achieved. In some cases, however, the terms of an award may provide that the
performance target could be achieved after an employee completes the requisite service period. The amendment requires that a
performance target that affects vesting and extends beyond the end of the service period be treated as a performance condition
and not as a factor in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in
which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable
to the period(s) for which the requisite service has already been rendered. The new guidance was effective January 1, 2016 and
did not impact our consolidated financial statements.
Recently issued accounting pronouncements
In November 2016, the FASB released guidance that addresses the diversity in practice in the classification and
presentation of changes in restricted cash on the statement of cash flows. Amounts generally described as restricted cash and
restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and
53
end-of-period total amounts shown on the statement of cash flows. This guidance becomes effective January 1, 2018 and must
be applied on a retrospective basis. This guidance will result in a change in presentation of our consolidated statement of cash
flows.
In October 2016, the FASB issued guidance that simplifies the accounting for the income tax consequences of intra-entity
transfers of assets other than inventory. Current GAAP prohibits the recognition in earnings of current and deferred income
taxes for an intra-entity transfer until the asset is sold to an outside party or recovered through use. This amendment simplifies
the accounting by requiring entities to recognize the income tax consequences of an intra-entity transfer of an asset other than
inventory when the transfer occurs. The new guidance, which could impact effective tax rates, becomes effective January 1,
2018 and requires modified retrospective application. Early adoption is permitted as of the beginning of an annual reporting
period for which interim or annual financial statements have not yet been issued. We intend to adopt this guidance effective
January 1, 2017. The adoption of the new guidance will result in a decrease in Other current assets of $10, a decrease in Other
noncurrent assets of $168 and a decrease in beginning retained earnings at January 1, 2017 of $178.
In August 2016, the FASB released guidance intended to reduce diversity in practice in how certain cash receipts and cash
payments are classified in the statement of cash flows. This guidance becomes effective January 1, 2018 and must be applied
on a retrospective basis. This guidance is not expected to have a material impact on our consolidated statement of cash flows.
In June 2016, the FASB issued 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.
In March 2016, the FASB issued simplification guidance to eliminate the requirement for an entity to retrospectively apply
the equity method of accounting upon obtaining significant influence over an investment that it previously accounted for under
the cost basis or at fair value. That is, it is no longer required to restate all periods as if the equity method had been in effect
during all previous periods that the investment had been held. The guidance applies to covered transactions that occur after
December 31, 2016. Early adoption is permitted. The significance of this guidance for us is dependent on any qualifying future
investments.
In March 2016, the FASB issued guidance that simplifies the embedded derivative analysis for debt instruments containing
contingent call or put options. The amendment clarifies that an exercise contingency does not need to be evaluated to determine
whether it relates to interest rates and credit risk in an embedded derivative analysis. That is, a contingent put or call option
embedded in a debt instrument would be evaluated for possible separate accounting as a derivative instrument without regard to
the nature of the exercise contingency. This guidance becomes effective January 1, 2017 and must be applied on a modified
retrospective basis to all existing and future debt instruments. We do not expect the adoption of this guidance to have an impact
on our consolidated financial statements.
In March 2016, the FASB issued guidance that clarifies the hedge accounting impact when there is a change in one of the
counterparties to a derivative contract. The new guidance clarifies that a change in the counterparty to a derivative contract by
itself does not require the dedesignation of a hedging relationship provided that all other hedge accounting criteria continue to
be met. This guidance becomes effective January 1, 2018 and can be applied on either a prospective basis or a modified
retrospective basis. Early adoption is permitted. We do not expect the adoption of this guidance to have an impact on our
consolidated financial statements.
In February 2016, the FASB issued its new lease accounting standard. The primary focus of the standard is on the
accounting by lessees. This standard requires lessees to recognize a right-of-use asset and a lease liability for virtually all leases
(other than leases that meet the definition of a short-term lease) on the balance sheet. The recognition, measurement and
presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP.
Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern in the
income statement. Quantitative and qualitative disclosures are required to provide insight into the extent of revenue and
expense recognized and expected to be recognized from leasing arrangements. Approximately three-fourths of our global lease
portfolio represents leases of real estate, including manufacturing, assembly and office facilities, while the remainder represents
leases of personal property, including manufacturing, material handling and IT equipment. Many factors will impact the
ultimate measurement of the lease obligation to be recognized upon adoption, including our assessment of the likelihood of
renewal of leases that provide such an option. We continue to evaluate the impact this guidance will have on our consolidated
financial statements. This guidance becomes effective January 1, 2019 with early adoption permitted.
54
In January 2016, the FASB issued an amendment that addresses the recognition, measurement, presentation and disclosure
of certain financial instruments. Investments in equity securities currently classified as available-for-sale and carried at fair
value, with changes in fair value reported in other comprehensive income (OCI), will be carried at fair value determined on an
exit price notion and changes in fair value will be reported in net income. The new guidance also affects the assessment of
deferred tax assets related to available-for-sale securities, the accounting for liabilities for which the fair value option is elected
and the disclosures of financial assets and financial liabilities in the notes to the financial statements. This guidance, which
becomes effective January 1, 2018, is not expected to have a material impact on our consolidated financial statements.
In July 2015, the FASB issued an amendment that changes the measurement principle for inventory from the lower of cost
or market to lower of cost and net realizable value. This amendment only addresses the measurement of inventory if its value
declines or is impaired. The guidance on determining the cost of inventory is not being amended. This guidance becomes
effective January 1, 2017 and requires prospective application. Adoption of this guidance will have no impact on our
consolidated financial statements.
In May 2014, the FASB issued guidance that requires companies to recognize revenue in a manner that depicts the transfer
of promised goods or services to customers in amounts that reflect the consideration a company expects to be entitled to in
exchange for those goods or services. The new guidance will also require new disclosures about the nature, amount, timing and
uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB adopted a one-year
deferral of this guidance. In March 2016, the FASB issued an amendment to clarify the principal versus agent assessment in a
revenue transaction. In April 2016, the FASB finalized amendments on identifying performance obligations and accounting for
licenses of intellectual property. In May 2016, the FASB finalized amendments on collectibility, noncash consideration,
presentation of sales tax and transition. This guidance will be effective January 1, 2018 for Dana. The guidance allows for
either a full retrospective or a modified retrospective transition method. We are in the process of assessing our customer
contracts, identifying contractual provisions that may result in a change in the timing or the amount of revenue recognized in
comparison with current guidance, as well as assessing the enhanced disclosure requirements of the new guidance. Under
current guidance we generally recognize revenue when products are shipped and risk of loss has transferred to the customer.
Under the proposed requirements, the customized nature of some of our products and contractual provisions in many of our
customer contracts that provide us with an enforceable right to payment, may require us to recognize revenue prior to the
product being shipped to the customer. We are also assessing pricing provisions contained in certain of our customer contracts.
Pricing provisions contained in some of our customer contracts represent variable consideration or may provide the customer
with a material right, potentially resulting in a different allocation of the transaction price than under current guidance. In
addition, we are evaluating how the new guidance may impact our accounting for customer tooling, engineering and design
services and pre-production costs. We continue to evaluate the impact this guidance will have on our financial statements.
Note 2. Acquisitions
SIFCO — On December 23, 2016, we acquired strategic assets of SIFCO S.A.'s (SIFCO) commercial vehicle steer axle
systems and related forged components businesses. The acquisition enables us to enhance our vertically integrated supply
chain, which will further improve our cost structure and customer satisfaction by leveraging SIFCO's extensive experience and
knowledge of sophisticated forged components. In addition to strengthening our position as a central source for products that
use forged and machined parts throughout the region, this acquisition enables us to better accommodate the local content
requirements of our customers, which reduces their import and other region-specific costs. See Note 3 for additional
information on Dana's prior relationship with SIFCO.
SIFCO contributed the strategic assets to SJT Forjaria Ltda., a newly created legal entity, and Dana acquired all of the
issued and outstanding quotas of SJT Forjaria Ltda. The strategic assets were acquired by Dana free and clear of any liens,
claims or encumbrances. The acquisition was funded using cash on hand and has been accounted for as a business combination.
The purchase consideration and the related allocation to the acquisition date fair values of the assets acquired are presented in
the following table:
55
Purchase price, cash consideration
Purchase price, deferred consideration
Total purchase consideration
Accounts receivable - Trade
Accounts receivable - Other
Inventories
Goodwill
Intangibles
Property, plant and equipment
Accounts payable
Accrued payroll and employee benefits
Total purchase consideration allocation
$
$
$
$
60
9
69
1
1
10
6
3
59
(2)
(9)
69
The purchase consideration and fair value of the assets acquired and liabilities assumed are preliminary and could be
revised as a result of adjustments made to the purchase price, 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 property, plant and equipment and intangibles. The deferred consideration, less any claims for
indemnification made by Dana, is to be paid on December 23, 2017.
Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the
assembled workforce, and is deductible for tax purposes. Intangibles includes $2 allocated to developed technology and $1
allocated to trade names. We used the relief from royalty method, an income approach, to value developed technology and trade
names. We used a replacement cost method to value fixed assets. The developed technology and trade name intangible assets
are being amortized on a straight-line basis over seven and five years respectively, and property, plant and equipment is being
depreciated on a straight-line basis over useful lives ranging from three to ten years.
The results of operations of the business are reported in our Commercial Vehicle operating segment from the date of
acquisition. As a result of the acquisition, we incurred transaction related expenses totaling $5, which were charged to Other
income, net. 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.
Magnum — On January 29, 2016, we acquired the aftermarket distribution business of Magnum® Gaskets (Magnum), a U.S.-
based supplier of gaskets and sealing products for automotive and commercial-vehicle applications, for a purchase price of $18
at closing and additional cash payments of up to $2 contingent upon the achievement of certain sales metrics over a future two-
year period. As of the closing date of the acquisition, the contingent consideration was assigned a fair value of approximately
$1. Assets acquired included trademarks and trade names, customer relationships and goodwill. The results of operations of
Magnum are reported within our Power Technologies operating segment. We acquired Magnum using cash on hand. 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.
Brevini — 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 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 €167 at closing, using cash on hand, and intend to refinance debt assumed in the transaction during the first
quarter of 2017. The purchase price is subject to adjustment upon determination of the net indebtedness and net working capital
levels of BFP and BPT as of the closing date. The terms of the agreement provide Dana the right to call Brevini's
noncontrolling interests in BFP and BPT, and Brevini the right to put its noncontrolling interests in BFP and BPT to Dana,
assuming Dana does not exercise its call rights, at dates and prices defined in the agreement.
56
Due to the recentness of the transaction, we are currently not able to provide an allocation of the purchase price to the fair
value of the assets acquired, liabilities assumed and the redeemable noncontrolling interests or pro forma financial information.
Note 3. Disposal Groups and Impairment of Long-Lived Assets
Divestiture of Dana Companies — On December 30, 2016, we completed the divestiture of Dana Companies, LLC (DCLLC),
a consolidated wholly-owned limited liability company that was established as part of our reorganization in 2008 to hold and
manage personal injury asbestos claims retained by the reorganized Dana Corporation which was merged into DCLLC.
DCLLC had net assets of $165 at the time of sale including cash and cash equivalents, marketable securities and rights to
insurance coverage in place to satisfy a significant portion of its liabilities. We received cash proceeds of $88 – $29 net of cash
divested – with $3 retained by the purchaser subject to the satisfaction of certain future conditions that we expect will be
achieved in 2017. We recognized a pre-tax loss of $77 in 2016 upon completion of the transaction. In the event the conditions
associated with the retained purchase price of $3 are satisfied in the future, income of $3 will be recognized at such time.
Following completion of the sale, Dana has no obligation with respect to current or future asbestos claims.
Divestiture of Nippon Reinz — On November 30, 2016, we sold our 53.7% interest in Nippon Reinz Co. Ltd. (Nippon Reinz) to
Nichias Corporation. Dana received net cash proceeds of $5 and recognized a pre-tax loss of $3 on the divestiture of Nippon
Reinz, inclusive of the $12 gain on derecognition of the noncontrolling interest. Nippon Reinz had sales of $42 in 2016 through
the transaction date.
Disposal of operations in Venezuela — In December 2014, we entered into an agreement to divest our Light Vehicle operations
in Venezuela (the disposal group) to an unaffiliated company for no consideration. Upon classification of the disposal group as
held for sale in December 2014, we recognized an $80 loss to adjust the carrying value of the net assets of our operations in
Venezuela to fair value less cost to sell. The assets and liabilities of our operations in Venezuela were presented as held for sale
on our balance sheet as of December 31, 2014. Upon completion of the divestiture of the disposal group in January 2015, we
recognized a gain of $5 on the derecognition of the noncontrolling interest in a former Venezuelan subsidiary in Other income,
net. We also credited other comprehensive loss attributable to the parent for $10 and other comprehensive loss attributable to
noncontrolling interests for $1 to eliminate the unrecognized pension expense recorded in accumulated other comprehensive
loss.
Discontinued operations of Structural Products business — The sale of substantially all of the assets of our Structural Products
business to Metalsa S.A. de C.V. (Metalsa) in 2010 excluded the facility in Longview, Texas and its employees and
manufacturing assets related to a significant customer contract. The customer contract was satisfied and operations concluded
in August 2012. As a result of the cessation of all operations, activities related to the former Structural Products business have
been presented as discontinued operations in the accompanying financial statements.
The Longview facility was sold in March 2013 and a previously closed plant in Canada was sold in January 2014. The
proceeds from both transactions approximated the carrying values of the facilities. We reached a final agreement on the
remaining issues with the buyer in May 2014, resulting in the receipt of $9 from the escrow agent and a charge of $1 to other
income (expense) within discontinued operations in 2014.
The results of the discontinued operations were as follows:
Sales
Other income (expense)
Pre-tax income (loss)
Income tax expense (benefit)
Income (loss) from discontinued operations
2015
2014
— $
5
5
1
4
$
—
(19)
(19)
(4)
(15)
$
$
In 2012, Ford Motor Company (Ford) filed a complaint alleging quality issues relating to products supplied by the former
Structural Products business at Dana Canada Corporation. The Dana Canada facility was closed in 2008. In December 2014,
while admitting no liability related to the complaint, we reached a settlement agreement with Ford. The cost of the settlement
with Ford and the associated legal fees incurred in connection with this matter were charged to Other income (expense) within
discontinued operations in the fourth quarter of 2014. The loss reported for 2014 also includes the charge that resulted from the
final settlement of the claims presented by Metalsa along with the related legal fees. The income reported for 2015 includes
insurance recoveries related to previously outstanding claims.
57
Impairment of long-lived assets — On February 1, 2011, we entered into an agreement with SIFCO, a leading producer of
steer axles and forged components in South America. In return for payment of $150 to SIFCO, we acquired the distribution
rights to SIFCO's commercial vehicle steer axle systems as well as an exclusive long-term supply agreement for key driveline
components. During 2014, our Commercial Vehicle operating segment had $225 of sales attributable to SIFCO supplied axles
and parts.
This agreement was accounted for as a business combination for financial reporting purposes. The aggregate fair value of
the net assets acquired was allocated primarily to the exclusivity provisions of the supply agreement as a contract-based
intangible asset and recorded within our Commercial Vehicle operating segment. Fair value was also allocated to fixed assets
and an embedded lease obligation. The intangible asset was being amortized and the fixed assets were being depreciated on a
straight-line basis over ten years. The embedded lease obligations were being amortized using the effective interest method
over the ten-year useful lives of the related fixed assets.
On April 22, 2014, SIFCO and affiliated companies filed for judicial reorganization before Bankruptcy Court in São Paulo,
Brazil and an ancillary Chapter 15 proceeding before the Bankruptcy Court of the Southern District of New York. The Brazilian
bankruptcy case has subsequently been moved to the 5th Lower Civil Court in the Judicial District of Jundiai, the location of
SIFCO's principal operations. Until the third quarter of 2015, SIFCO complied with the terms of the supply agreement. In
August 2015, SIFCO discontinued production of our orders and failed to comply with provisions of the supply agreement. We
obtained a judicial injunction requiring that SIFCO release any finished product in their possession that was produced pursuant
to the supply agreement, resume production and parts supply pursuant to the terms of the supply agreement and cease
communications with our customers regarding direct sale of parts. SIFCO contested the injunction we obtained, without
success, and refused to comply with the injunction. Through a judicial seizure order we were successful in obtaining the release
of the finished product.
Based on SIFCO's refusal to comply with the terms of the supply agreement and the court injunctions as noted above, we
believed that the carrying amount of the contract-based intangible asset was not recoverable and therefore tested the associated
asset group for impairment as of September 30, 2015 under ASC 360-10. Based upon management's conclusion that there were
no future economic benefits and related cash flows associated with the long-lived assets of this asset group, which is comprised
predominantly of the intangible asset, management concluded that the fair value of the asset group was de minimis and
accordingly recorded a full impairment charge of $36 in the third quarter of 2015.
On October 27, 2015, we entered into an interim agreement with SIFCO under which they continued to supply product
while pursuing various mutually satisfactory longer-term alternatives. During 2015, in addition to the above mentioned
impairment charge, we incurred approximately $8 of increased costs in connection with maintaining product supply from
SIFCO. On December 23, 2016, we acquired strategic assets of SIFCO's commercial vehicle steer axle systems and related
forged components businesses. See Note 2 for additional information.
Note 4. Goodwill and Other Intangible Assets
Goodwill —The change in the carrying amount of goodwill in 2016 is due to currency fluctuation and the acquisitions of SJT
Forjaria Ltda. and the aftermarket distribution business of Magnum. See Note 2 for additional information. Based on our
October 31, 2016 impairment assessment, the fair value of our Off-Highway segment is significantly higher than its carrying
value, including goodwill. We do not believe that our goodwill is at risk of being impaired.
Changes in the carrying amount of goodwill by segment —
Balance, December 31, 2014
Currency impact
Balance, December 31, 2015
Acquisitions
Currency impact
Balance, December 31, 2016
Off-Highway
90
$
(10)
80
$
(2)
78
$
Commercial
Vehicle
Power
Technologies
Total
$
— $
— $
—
6
—
6
6
$
6
$
90
(10)
80
12
(2)
90
Non-amortizable intangible assets — Our non-amortizable intangible assets include trademarks, trade names and intangible
assets used in research and development activities. Trademarks and trade names consist of the Dana® and Spicer® trademarks
and trade names utilized in our Commercial Vehicle and Off-Highway segments. We value trademarks and trade names using a
58
relief from royalty method which is based on revenue streams. No impairment was recorded during the three years ended
December 31, 2016 in connection with the required annual assessment. Intangible assets used in research and development
activities relate to our strategic alliance formed with Fallbrook Technologies Inc. in September 2012. We use the multi-period
excess earnings method, an income approach, to value the intangible assets used in research and development activities. No
impairment has been recorded during the three years ended December 31, 2016 in connection with the required annual
assessment.
Amortizable intangible assets — Our amortizable intangible assets include core technology, customer relationships and a
portion of our trademarks and trade names. Core technology includes the proprietary know-how and expertise that is inherent in
our products and manufacturing processes. Customer relationships include the established relationships with our customers and
the related ability of these customers to continue to generate future recurring revenue and income.
These assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts
may not be recoverable. We group the assets and liabilities at the lowest level for which identifiable cash flows are largely
independent of the cash flows of other assets and liabilities and evaluate the asset group against the undiscounted future cash
flows. We use our internal forecasts, which we update quarterly, to develop our cash flow projections. These forecasts are based
on our knowledge of our customers’ production forecasts, our assessment of market growth rates, net new business, material
and labor cost estimates, cost recovery agreements with customers and our estimate of savings expected from our restructuring
activities. The most likely factors that would significantly impact our forecasts are changes in customer production levels and
loss of significant portions of our business. Our valuation is applied over the life of the primary assets within the asset groups.
If the undiscounted cash flows do not indicate that the carrying amount of the asset group is recoverable, an impairment charge
is recorded if the carrying amount of the asset group exceeds its fair value based on discounted cash flow analyses or
appraisals.
There were no impairments for the year ended December 31, 2016. During the third quarter of 2015, we impaired the
customer relationships intangible asset associated with our exclusive long-term supply agreement with SIFCO. See Note 3 for
additional information.
Components of other intangible assets —
December 31, 2016
December 31, 2015
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
Trademarks and trade
names
Customer relationships
Non-amortizable intangible
assets
Trademarks and trade
names
Used in research and
development activities
7
$
88
$
(83) $
(2)
(374)
11
7
6
389
65
20
5
4
15
65
20
$
86
$
(83) $
(2)
(370)
3
383
65
20
$
568
$
(459) $
109
$
557
$
(455) $
3
1
13
65
20
102
The net carrying amounts of intangible assets, other than goodwill, attributable to each of our operating segments at
December 31, 2016 were as follows: Light Vehicle Driveline (Light Vehicle) – $22, Commercial Vehicle – $37, Off-Highway –
$36 and Power Technologies – $14.
Amortization expense related to amortizable intangible assets —
Charged to cost of sales
Charged to amortization of intangibles
Total amortization
2016
2015
2014
$
$
1
8
9
$
$
2
14
16
$
$
7
42
49
59
The following table provides the estimated aggregate pre-tax amortization expense related to intangible assets for each of
the next five years based on December 31, 2016 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.
Amortization expense
$
7
$
4
$
2
$
2
$
2
2017
2018
2019
2020
2021
Note 5. 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, however, in response to lower
demand and other market conditions in certain businesses, our focus has primarily been headcount reduction initiatives to
reduce operating costs. Restructuring expense includes costs associated with current and previously announced actions and is
comprised of contractual and noncontractual separation costs and exit costs, including costs associated with lease continuation
obligations and certain operating costs of facilities that we are in the process of closing.
During 2016, we approved plans to implement certain headcount reduction initiatives across our businesses, including the
first-quarter 2016 announcement of the planned closure of our Commercial Vehicle manufacturing facility in Glasgow,
Kentucky by mid-2017. During the second half of 2016, we also approved and began to implement certain other headcount
reduction initiatives, the most significant of which are associated with our Off-Highway business in Europe and our
Commercial Vehicle and Light Vehicle businesses in Brazil, in response to continued market weakness in those businesses.
Additionally, in conjunction with the SJT Forjaria Ltda. acquisition in December 2016, we approved plans to eliminate certain
redundant positions as one of our initial steps toward the integration of the SJT Forjaria Ltda. operations into our Commercial
Vehicle business in that region. Including costs associated with these actions and with other previously announced initiatives,
restructuring expense during 2016 was $36, including $33 of severance and benefits costs and $3 of exit costs.
During 2015, we implemented certain headcount reduction programs, primarily in our Commercial Vehicle business in
Brazil in response to lower demand in that region. Including costs associated with these actions and with other previously
announced initiatives, total restructuring expense in 2015 was $15 and included $12 of severance and related benefits costs and
$3 of exit costs.
During 2014, we implemented various cost reduction programs, including the closure of our Commercial Vehicle foundry
in Argentina and other headcount reduction programs in our Light Vehicle and Commercial Vehicle businesses in South
America and Europe. Total restructuring expense in 2014 associated with these actions and with other previously announced
initiatives was $21 and included $15 of severance and related benefits costs and $6 of exit costs.
Accrued restructuring costs and activity, including noncurrent portion —
Balance at December 31, 2013
Charges to restructuring
Adjustments of accruals
Cash payments
Currency impact
Balance at December 31, 2014
Charges to restructuring
Cash payments
Currency impact
Balance at December 31, 2015
Charges to restructuring
Adjustments of accruals
Cash payments
Balance at December 31, 2016
Employee
Termination
Benefits
Exit
Costs
Total
$
$
14
17
(2)
(18)
1
12
12
(12)
(3)
9
35
(2)
(10)
32
$
$
$
11
6
(8)
9
3
(4)
8
3
(5)
6
$
25
23
(2)
(26)
1
21
15
(16)
(3)
17
38
(2)
(15)
38
At December 31, 2016, accrued employee termination benefits include costs to the reduce approximately 800 employees
over the next two years. The exit costs relate primarily to lease continuation obligations.
60
Cost to complete — The following table provides project-to-date and estimated future restructuring expenses for completion of
our approved restructuring initiatives for our business segments at December 31, 2016.
Light Vehicle
Commercial Vehicle
Off-Highway
Corporate
Total
Expense Recognized
Prior to
2016
2016
Total
to Date
Future
Cost to
Complete
$
$
$
9
25
34
$
2
18
14
2
36
$
$
11
43
14
2
70
$
$
1
15
16
The future cost to complete includes estimated separation costs, primarily those associated with one-time benefit programs,
and exit costs through 2021, including lease continuation costs, equipment transfers and other costs which are required to be
recognized as closures are finalized or as incurred during the closure.
Note 6. Inventories
Inventory components at December 31 —
Raw materials
Work in process and finished goods
Inventory reserves
Total
2016
2015
$
$
321
368
(51)
638
$
$
306
365
(46)
625
61
Note 7. Supplemental Balance Sheet and Cash Flow Information
Supplemental balance sheet information at December 31 —
Other current assets:
Prepaid expenses
Other
Total
Other noncurrent assets:
Prepaid income taxes
Amounts recoverable from insurers
Prepaid expenses
Deferred financing costs
Pension assets, net of related obligations
Other
Total
Property, plant and equipment, net:
Land and improvements to land
Buildings and building fixtures
Machinery and equipment
Total cost
Less: accumulated depreciation
Net
Other accrued liabilities (current):
Non-income taxes payable
Accrued interest
Warranty reserves
Asbestos claims obligations
Deferred income
Work place injury costs
Restructuring costs
Payable under forward contracts
Environmental
Other expense accruals
Total
Other noncurrent liabilities:
Income tax liability
Asbestos claims obligations
Deferred income tax liability
Work place injury costs
Warranty reserves
Restructuring costs
Other noncurrent liabilities
Total
62
2016
2015
67
11
78
$
$
168
$
11
5
2
40
226
172
435
2,108
2,715
(1,302)
1,413
30
17
35
6
5
29
8
3
68
201
$
$
$
$
$
57
$
37
26
31
9
45
205
$
57
8
65
178
44
5
4
2
42
275
185
405
1,760
2,350
(1,183)
1,167
30
24
31
12
8
5
10
15
5
53
193
78
66
60
30
25
7
41
307
$
$
$
$
$
$
$
$
$
$
Supplemental cash flow information —
Change in working capital:
Change in accounts receivable
Change in inventories
Change in accounts payable
Change in accrued payroll and employee benefits
Change in accrued income taxes
Change in other current assets and liabilities
Net
Cash paid during the period for:
Interest
Income taxes
Non-cash investing and financing activities:
Purchases of property, plant and equipment held in accounts payable
Stock compensation plans
Conversion of preferred stock into common stock
Conversion of preferred dividends into common stock
Note 8. Stockholders' Equity
Preferred Stock
2016
2015
2014
$
$
$
$
(86) $
(13)
70
5
(13)
(14)
(51) $
$
$
111
89
113
14
—
—
— $
(28)
(22)
3
(1)
7
(41) $
$
$
96
90
55
15
—
—
(32)
(56)
66
13
(2)
(28)
(39)
122
116
48
13
372
3
We are authorized to issue 50,000,000 of Dana preferred stock, par value $0.01 per share. There were no preferred shares
outstanding at December 31, 2016 or 2015.
Series B Preferred stock issuance and conversion — We had issued 5.4 million shares of our 4.0% Series B Preferred on
January 31, 2008 to certain investors. Dividends accrued daily until conversion into common stock. During 2014, holders of
2,296,802 Series B preferred shares elected to convert those preferred shares into common stock and received 19,517,593
common shares. The common stock issued included shares to satisfy the accrued dividends owed to the converting Series B
preferred stockholders. Based on the market price of Dana common stock on the date of conversion, the fair value of the
conversions totaled $409. As of July 2, 2014, the per share closing price of our common stock exceeded $22.24 for 20
consecutive trading days. As a result, we exercised our right to cause the conversion of all of the remaining outstanding Series
B preferred shares at the conversion price of $11.93 upon fulfillment of the required 90-day notice period ending September 30,
2014. We caused the conversion of 1,506,972 Series B shares with holders receiving 12,631,780 common shares valued at $250
based on the market price of Dana common stock on the date of conversion.
Common Stock
We are authorized to issue 450,000,000 shares of Dana common stock, par value $0.01 per share. At December 31, 2016,
there were 150,751,064 shares of our common stock issued and 143,938,280 shares outstanding, net of 6,812,784 in treasury
shares. Treasury shares include those shares withheld at cost to satisfy tax obligations from stock awards issued under our stock
compensation plan in addition to share repurchases noted below.
Our Board of Directors declared a quarterly cash dividend of six cents per share of common stock in each quarter of 2016.
Aggregate 2016 declared and paid dividends total $35. 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.
Treasury stock — During 2014, we reissued 14,879,935 shares of treasury stock in conjunction with the conversion of
1,772,693 Series B preferred shares into common stock. The reissuance of the treasury shares resulted in a $127 charge to
additional paid-in capital as the carrying value of the treasury shares reissued exceeded the carrying value of the Series B
preferred shares converted. We use the weighted-average pool price of our treasury shares at the date of reissuance to determine
the carrying value of treasury shares reissued. In December 2014, we retired 14,600,000 shares of treasury stock. The $294
excess of the cost of the treasury stock over the common stock par value, based on the weighted-average pool price of our
treasury shares at the date of retirement, was charged to additional paid-in capital. In December 2015, we retired 18,100,000
63
shares of treasury stock. The $346 excess of the cost of the treasury stock over the common stock par value, based on the
weighted-average pool price of our treasury shares at the date of retirement, was charged to additional paid-in capital.
Share repurchase program — Our Board of Directors approved an expansion of our existing common stock share repurchase
program from $1,400 to $1,700 on January 11, 2016. The program expires on December 31, 2017. Under the program, we
spent $81 to repurchase 6,612,537 shares of our common stock during 2016 through open market transactions. Approximately
$219 remained available under the program for future share repurchases as of December 31, 2016.
Changes in each component of AOCI of the parent —
Parent Company Stockholders
Defined
Benefit
Plans
Accumulated
Other
Comprehensive
Loss
Hedging
Investments
3
— $
$
(488) $
Foreign
Currency
Translation
$
(242) $
(185)
(185)
(427)
(179)
(2)
(181)
(608)
(43)
(12)
2
1
(9)
(9)
(14)
20
(1)
5
(4)
(16)
(14)
Balance, December 31, 2013
Other comprehensive income (loss):
Currency translation adjustments
Holding gains and losses
Reclassification of amount to net income (a)
Venezuela bolivar devaluation
Net actuarial losses
Reclassification adjustment for net actuarial
losses included in net periodic benefit cost (b)
Other
Tax benefit
Other comprehensive income (loss)
Balance, December 31, 2014
Other comprehensive income (loss):
Currency translation adjustments
Holding loss on net investment hedge
Holding gains and losses
Reclassification of amount to net income (a)
Net actuarial losses
Reclassification adjustment for net actuarial
losses included in net periodic benefit cost (b)
Elimination of net prior service cost and
actuarial losses of disposal group
Tax expense
Other comprehensive income (loss)
Balance, December 31, 2015
Other comprehensive income (loss):
Currency translation adjustments
Holding gains and losses
Reclassification of amount to net income (a)
Net actuarial losses
Reclassification adjustment for net actuarial
losses included in net periodic benefit cost (b)
Elimination due to sale of subsidiary
Tax benefit
Other comprehensive loss
Balance, December 31, 2016
___________________________________________________
Notes:
(a) Foreign currency contract and investment reclassifications are included in Other income, net.
(b) See Note 11 for additional details.
$
2
3
(38)
(646) $
(30)
(34) $
64
(727)
(185)
(9)
1
4
(156)
60
3
12
(270)
(997)
(179)
(2)
(17)
20
(28)
25
10
(6)
(177)
(1,174)
(43)
(13)
(21)
(88)
26
5
24
(110)
(1,284)
3
(1)
2
5
(3)
(3)
2
3
(7)
2
(2)
— $
4
(156)
60
3
11
(78)
(566)
(28)
25
10
(5)
2
(564)
(88)
26
1
21
(40)
(604) $
Note 9. Earnings per Share
Reconciliation of the numerators and denominators of the earnings per share calculations —
Income from continuing operations
Less: Noncontrolling interests net income
Less: Preferred stock dividend requirements
Income from continuing operations available to common stockholders -
Numerator basic
Preferred stock dividend requirements
Numerator diluted
Net income available to common stockholders - Numerator basic
Preferred stock dividend requirements
Numerator diluted
Weighted-average number of shares outstanding - Denominator basic
Employee compensation-related shares, including stock options
Conversion of preferred stock
Denominator diluted
$
$
$
$
2016
2015
2014
$
653
13
$
176
21
$
$
$
640
640
640
640
146.0
0.8
146.8
$
$
$
155
155
159
159
159.0
1.0
160.0
343
9
7
327
7
334
312
7
319
158.0
1.2
14.3
173.5
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 1.7
million and 0.4 million million CSEs from the calculations of diluted earnings per share for the years 2016 and 2015 as the
effect of including them would have been anti-dilutive.
Note 10. Stock Compensation
2012 Omnibus Incentive Plan
Our 2012 Omnibus Incentive Plan (the Plan), as approved by our stockholders, authorizes the grant of stock options, stock
appreciation rights (SARs), RSUs and performance share units (PSUs) through April 2022. Cash-settled awards do not count
against the maximum aggregate number. At December 31, 2016, there were 3.2 million shares available for future grants.
Shares of common stock to be issued under the Plan are made available from authorized and unissued Dana common stock.
Award activity — (shares in millions)
Options
SARs
RSUs
PSUs
Exercise
Price
per Share*
14.50
$
Shares
1.8
Exercise
Price
per Share*
15.46
$
Shares
0.3
(0.1)
(0.2)
1.5
11.74
16.31
14.56
0.3
15.42
Grant-Date
Fair Value
per Share*
20.09
$
13.31
16.51
16.75
16.54
Shares
1.3
1.2
(0.6)
(0.1)
1.8
Grant-Date
Fair Value
per Share*
22.92
$
13.21
Shares
0.4
0.4
(0.2)
0.6
22.61
16.31
December 31, 2015
Granted
Exercised or vested
Forfeited or expired
December 31, 2016
* Weighted-average
Total stock compensation expense
Total grant-date fair value of awards vested
Cash received from exercise of stock options
Cash paid to settle SARs and RSUs
Intrinsic value of stock options and SARs exercised
Intrinsic value of RSUs and PSUs vested
65
$
2016
2015
2014
$
17
11
2
1
1
7
$
14
21
2
2
1
16
16
13
7
2
7
8
Compensation expense is generally measured based on the fair value at the date of grant and is recognized on a straight-
line basis over the vesting period. For options and SARs, we use an option-pricing model to estimate fair value. For RSUs and
PSUs, the fair value is based on the closing market price of our common stock at the date of grant. Awards that are settled in
cash are subject to liability accounting. Accordingly, the fair value of such awards is remeasured at the end of each reporting
period until settled or expired. We had accrued $5 and $3 for cash-settled awards at December 31, 2016 and 2015. We issued
0.5 million shares of common stock in 2016 to settle vested RSUs. At December 31, 2016, the total unrecognized compensation
cost related to the nonvested awards granted and expected to vest was $21. This cost is expected to be recognized over a
weighted-average period of 1.8 years.
Stock options and stock appreciation rights — The exercise price of each option or SAR equals the closing market price of our
common stock on the date of grant. Options and SARs generally vest over three years and their maximum term is ten years.
Shares issued upon the exercise of options are recorded as common stock and additional paid-in capital at the option price.
SARs are settled in cash for the difference between the market price on the date of exercise and the exercise price. We have not
granted stock options or SARs since 2013. All outstanding awards are fully vested and exercisable. At December 31, 2016, the
outstanding awards have an aggregate intrinsic value of $8 and a weighted-average remaining contractual life of 4.9 years.
Restricted stock units and performance shares units — Each RSU or PSU granted represents the right to receive one share of
Dana common stock or, at the election of Dana (for units awarded to board members) or for employees located outside the U.S.
(for employee awarded units), cash equal to the market value per share. All RSUs contain dividend equivalent rights. RSUs
granted to non-employee directors vest on the first anniversary date of the grant and those granted to employees generally cliff
vest fully after three years. PSUs granted to employees vest if specified performance goals are achieved during the respective
performance period, generally three years.
The number of PSUs that ultimately vest is contingent on achieving specified return on invested capital targets and
specified total shareholder return targets relative to peer companies. For the portion of the PSU award based on the return on
invested capital performance metric, we estimated the fair value 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 award is not dividend
protected. The estimated grant date value is accrued over the performance period and adjusted as appropriate based on
performance relative to the target. For the portion of the PSU award based on shareholder returns, we estimated the fair value 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 performance period. The risk-free interest rate was based on U.S. Treasury constant maturity rates at
the grant date. The dividend yield was calculated by dividing the expected annual dividend by the average stock price over the
prior year. The expected volatility was based on historical volatility using daily stock price observations.
Expected term (in years)
Risk-free interest rate
Dividend yield
Expected volatility
2016
3.0
1.00%
1.40%
33.4%
PSUs
2015
3.0
0.89%
0.98%
33.9%
2014
3.0
0.64%
1.02%
43.6%
Cash incentive awards — Our 2012 Omnibus Incentive Plan provides for cash incentive awards. We make awards annually to
certain eligible employees designated by Dana, including certain executive officers. Awards under the plan are based on
achieving certain financial performance goals. The performance goals of the plan are established annually by the Board of
Directors.
Under the 2016, 2015 and 2014 annual incentive programs, participants were eligible to receive cash awards based on
achieving earnings, cash flow and working capital performance goals. Our 2016, 2015 and 2014 long-term incentive programs
each have a three-year contractual period and include a performance-based cash component. For the 2016 long-term incentive
program the vesting of the performance-based cash component is based on achieving the required return-on-invested-capital
target, established at the grant date of the award, measured on an average basis over the three-year contractual period of the
program. For the 2015 and 2014 long-term incentive programs the vesting of the performance-based cash component is based
on achieving the required return-on-invested-capital target, established at the grant date of the award, in the third year of the
three-year contractual period of the respective program. We accrued $41, $35 and $44 of expense in 2016, 2015 and 2014 for
the expected cash payments under these programs.
66
Note 11. Pension and Postretirement Benefit Plans
We sponsor various 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.
We also sponsor various defined contribution plans that cover the majority of our employees. Under the terms of the
qualified defined contribution retirement plans, employee and employer contributions may be directed into a number of diverse
investments. None of these qualified defined contribution plans allow direct investment in our stock.
Components of net periodic benefit cost (credit) and other amounts recognized in OCI —
2016
Pension Benefits
2015
2014
Interest cost
Expected return on plan assets
Service cost
Amortization of net actuarial loss
Settlement loss
Other
Net periodic benefit cost (credit)
Recognized in OCI:
Amount due to net actuarial (gains)
losses
Reclassification adjustment for net
actuarial losses in net periodic
benefit cost
Venezuelan bolivar devaluation
Other
Total recognized in OCI
Net recognized in benefit cost
(credit) and OCI
Interest cost
Service cost
Amortization of net actuarial gain
Net periodic benefit cost
Recognized in OCI:
Non-U.S.
11
$
(1)
6
3
6
(1)
24
U.S.
$
53
(92)
21
(18)
68
(21)
47
$
Non-U.S.
7
$
(2)
5
6
U.S.
66
(108)
18
Non-U.S.
8
$
(2)
5
7
1
17
16
(6)
(1)
9
(24)
18
40
(18)
22
(6)
(7)
(11)
(24)
$
U.S.
80
(111)
16
36
(5)
16
93
(52)
(2)
39
$
29
$
26
$
(2) $
(6) $
55
$
53
(9)
(4)
(1)
39
63
5
1
(1)
5
10
1
11
16
2016
$
OPEB - Non-U.S.
2015
2014
3
1
(1)
3
4
1
5
8
$
$
$
3
1
4
(6)
(6)
(2) $
Amount due to net actuarial (gains) losses
Reclassification adjustment for net actuarial gain in net periodic benefit cost
Total recognized in OCI
Net recognized in benefit cost and OCI
$
Our U.S. defined benefit pension plans are frozen and no additional service cost is being accrued. The estimated net
actuarial loss for the defined benefit pension plans that will be amortized from AOCI into benefit cost in 2017 is $24 for our
U.S. plans and $6 for our non-U.S. plans. We use the corridor approach for purposes of systematically amortizing deferred
gains or losses as a component of net periodic benefit cost into the income statement in future reporting periods. The
amortization period used is generally the average remaining service period of active participants in the plan unless almost all of
the plan’s participants are inactive, in which case we use the average remaining life expectancy of the inactive participants. No
portion of the estimated net actuarial gain related to OPEB plans will be amortized from AOCI into benefit cost in 2017.
67
As discussed in Note 3, upon the divestiture of our operations in Venezuela, we eliminated unrecognized pension expense
of $11, of which $1 was attributable to noncontrolling interests.
Funded status — The following tables provide reconciliations of the changes in benefit obligations, plan assets and funded
status.
Pension Benefits
2016
2015
OPEB - Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
2016
2015
Reconciliation of benefit
obligation:
Obligation at beginning of
period
Interest cost
Service cost
Actuarial (gain) loss
Benefit payments
New plans
Settlements
Other
Translation adjustments
Obligation at end of period
$
$
1,692
53
59
(122)
$
1,682
$
288
7
5
18
(12)
14
(2)
(5)
(4)
309
$
$
1,823
66
(70)
(127)
$
86
3
1
4
(5)
$
325
8
5
(5)
(11)
4
(2)
$
1,692
$
(36)
288
$
2
91
$
110
3
1
(6)
(5)
(17)
86
The amount included on the New plans line in the preceding table includes obligations under a pension plan in
Switzerland, gratuity plans in India and a termination benefit plan covering certain employees in Italy. We determined in 2016
that these obligations should be included within our defined benefit pension plan obligation and the related disclosures. The
adjustments were primarily reclassifications from Other noncurrent liabilities to Pension and postretirement obligations and did
not have a material impact on pension expense.
Pension Benefits
2016
2015
OPEB - Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
2016
2015
Reconciliation of fair value of
plan assets:
Fair value at beginning of
period
Actual return on plan assets
Employer contributions
Benefit payments
Settlements
New plans
Translation adjustments
Fair value at end of period
Funded status at end of period
$
$
$
$
1,493
83
(122)
1,454
$
40
4
15
(12)
(2)
4
2
51
$
$
1,622
(2)
(127)
$
1,493
$
44
3
12
(11)
(2)
3
(9)
40
$
— $
5
(5)
$
— $
(228) $
(258) $
(199) $
(248) $
(91) $
—
5
(5)
—
(86)
68
Amounts recognized in the balance sheet —
Amounts recognized in the
consolidated balance sheet:
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net amount recognized
Amounts recognized in AOCI —
Amounts recognized in AOCI:
Net actuarial loss (gain)
AOCI before tax
Deferred taxes
Net
$
$
$
$
Pension Benefits
2016
2015
OPEB - Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
2016
2015
— $
(228)
(228) $
$
2
(9)
(251)
(258) $
— $
(199)
(199) $
$
2
(10)
(240)
(248) $
— $
(5)
(86)
(91) $
Pension Benefits
2016
2015
OPEB - Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
2016
2015
560
560
(17)
543
$
$
92
92
(24)
68
$
$
$
513
513
513
$
83
83
(21)
62
$
$
(10) $
(10)
3
(7) $
—
(4)
(82)
(86)
(15)
(15)
4
(11)
We initiated a program in September 2014 under which certain former U.S. employees with vested pension benefits were
offered lump sum payments to settle their pension obligations. The same participants were also offered the option to begin
receiving monthly benefits soon after the program ended – earlier than previously allowed under the related plans. This
voluntary program ended in early November with 71% of the participants in the program accepting accelerated payments. The
lump sum payments were made in December. Together with routine settlements occurring in the U.S. throughout 2014, these
actions resulted in the distribution of plan assets of $133 to effect settlement of the related obligations. We charged earnings for
$36 to write off a pro rata portion of the cumulative actuarial loss related to the settled obligations. Because of differences in
valuation methods, the reduction in pension obligations exceeded the assets distributed by $38, which was credited to other
comprehensive income as a component of the actuarial loss for 2014.
During the fourth quarter of 2014, a defined benefit pension plan in Canada distributed the remainder of its assets in
accordance with the related agreement. We incurred a charge of $6 to write off the remaining unrecognized pension expense
related to this plan.
The other elements of the 2014 actuarial loss resulted from changes in assumptions and investment returns. Reducing our
discount rate at the end of 2014 caused an increase in the U.S. pension benefit obligation and an actuarial loss of $165. During
the fourth quarter of 2014, the Society of Actuaries (SOA) issued new mortality tables (RP-2014) and mortality improvement
scales (MP-2014). After studying our recent experience and evaluating the new tables, we adopted the RP-2014 Blue Collar
table for hourly participants and the No Collar table for salaried participants in our U.S. plans. With respect to the improvement
scales, the SOA had projected improvement from the beginning of 2008 after analyzing historical data through 2007. We
compared actual experience for years after 2007 to the improvement projected in MP-2014 and, in concert with our actuarial
advisers, considered other relevant data before concluding that a 0.75% long-term improvement rate (LTIR) for periods
beginning with 2014 was appropriate and assuming that the LTIR would be attained by 2020, sooner than the period assumed
in MP-2014. Adopting the new mortality assumptions in 2014 caused an increase in our pension obligations and an actuarial
loss of $83. The actual return on U.S. plan assets provided a partial offset to these losses as it exceeded the assumed return by
$119.
The 2016 actuarial loss is largely the result of decreases in the discount rates used to value our year-end pension
obligations. Other elements of the actuarial loss include the impact of using spot rates in 2016 to determine pension service and
interest expense. The spot rate approach reduces pension expense but the impact is effectively offset by an increase in the
actuarial loss. In the fourth quarter of 2016, the SOA issued new mortality scales (MP-2016) based on historical data through
2013 and preliminary data for 2014. After studying the new data and consulting with our actuarial advisers, we concluded that
adopting MP-2016, modified to reflect an LTIR of 0.75% being attained in 2027, was appropriate. This change in assumption
did not have a significant impact on the 2016 valuation.
69
Aggregate funding levels — The following table presents information regarding the aggregate funding levels of our defined
benefit pension plans at December 31:
Plans with fair value of plan assets in excess of obligations:
Accumulated benefit obligation
Projected benefit obligation
Fair value of plan assets
Plans with obligations in excess of fair value of plan assets:
Accumulated benefit obligation
Projected benefit obligation
Fair value of plan assets
Fair value of pension plan assets —
Asset Category
Equity securities:
U.S. all cap (b)
U.S. large cap
U.S. small cap
EAFE composite
Emerging markets
Fixed income securities:
U.S. core bonds (c)
Corporate bonds
U.S. Treasury strips
Non-U.S. government securities
Emerging market debt
Alternative investments:
Hedge fund of funds (d)
Insurance contracts (e)
Real estate
Other (f)
Cash and cash equivalents
Total
2016
2015
U.S.
Non-U.S.
U.S.
Non-U.S.
$
— $
1,682
1,682
1,454
15
15
17
272
294
34
$
— $
1,692
1,692
1,493
10
10
12
254
278
28
Fair Value Measurements at December 31, 2016
Total
Level 1
Level 2 NAV (a) Level 1
U.S.
Non-U.S.
Level 2
Level 3
$
76
102
26
119
66
137
419
269
25
65
66
16
36
10
73
$ 1,505
$
76
$ — $
— $ — $ — $ —
102
26
119
66
70
221
65
66
36
$
745
$ — $
67
198
269
1
72
607
$
102
$
25
9
1
35
16
$
16
70
Asset Category
Equity securities:
U.S. all cap (b)
U.S. large cap
U.S. small cap
EAFE composite
Emerging markets
Fixed income securities:
U.S. core bonds (c)
Corporate bonds
U.S. Treasury strips
Non-U.S. government securities
Emerging market debt
Alternative investments:
Hedge fund of funds (d)
Insurance contracts (e)
Real estate
Other (f)
Cash and cash equivalents
Total
Fair Value Measurements at December 31, 2015
Total
Level 1
Level 2 NAV (a) Level 1
U.S.
Non-U.S.
Level 2
Level 3
$
64
72
20
132
60
136
471
264
21
64
75
12
41
16
85
$ 1,533
$
64
$ — $
— $ — $ — $ —
72
20
1
132
59
71
223
64
75
41
$
737
$
1
$
65
248
264
11
84
672
21
5
1
27
12
$
12
$
84
$
________________________________
Notes:
(a) Certain assets that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in
the fair value hierarchy.
(b) This category comprises a combination of small-, mid- and large-cap equity stocks that are allocated at the investment manager's discretion. Investments
include common and preferred securities as well as equity funds that invest in these instruments.
(c) This category represents a combination of investment grade corporate bonds, sovereign bonds, Yankee bonds, asset-backed securities and U.S.
government bonds. Investments include fixed income funds that invest in these instruments.
(d) This category includes fund managers that invest in a well-diversified group of hedge funds where strategies include, but are not limited to, event driven,
relative value, long/short market neutral, multistrategy and global macro. Investments may be made directly or through pooled funds.
(e) This category comprises contracts placed with insurance companies where the underlying assets are invested in fixed interest securities.
(f) Other assets in the U.S. represent interest rate derivatives which had a market value of $1 at December 31, 2016 and $11 at December 31, 2015.
2016
2015
Reconciliation of Level 3 Assets
Fair value at beginning of period
Currency impact
Transfers into (out of) Level 3
Fair value at end of period
Non-U.S. Non-U.S.
Insurance
Insurance
Contracts
Contracts
10
$
12
$
(1)
3
12
4
16
$
$
Our pension assets in the U.S. include certain investments in commingled funds, hedge fund of funds and real estate that
are valued using the net asset value (NAV) per share practical expedient. In the past, those investments were classified under
the fair value hierarchy. New accounting guidance that became effective at the beginning of 2016 eliminated, on a retrospective
basis, the requirement to classify such assets under the fair value hierarchy. We have determined that no Level 3 assets were
held by our U.S. pension plans during the period covered by the preceding table and have modified the table accordingly.
Valuation Methods
Equity securities — The fair value of equity securities held directly by the trust is based on quoted market prices. When the
equity securities are held in commingled funds that are not publicly traded, the fair value of our interest in the fund is its NAV
as determined by quoted market prices for the underlying holdings.
Fixed income securities — The fair value of fixed income securities held directly by the trust is based on a bid evaluation
process with input from independent pricing sources. When the fixed income securities are held in commingled funds that are
71
not publicly traded, the fair value of our interest in the fund is its NAV as determined by a similar valuation of the underlying
holdings.
Hedge funds — The fair value of hedge funds is provided by the managers of the underlying investments. Those managers
develop a NAV based on market quotes for the most liquid assets and alternative methods for assets that do not have sufficient
trading activity to derive prices.
Insurance contracts — The values shown for insurance contracts are the amounts reported by the insurance company and
approximate the fair values of the underlying investments.
Real estate — The investments in real estate represent ownership interests in commingled funds and partnerships that invest in
real estate. The investment managers determine the NAV of these ownership interests using the fair value of the underlying real
estate which is obtained via independent third party appraisals prepared on a periodic basis. Assumptions used to value the
properties are updated quarterly. For the component of the real estate portfolio under development, the investments are carried
at cost until they are completed and valued by a third party appraiser.
Cash and cash equivalents — The fair value of cash and cash equivalents is set equal to its amortized cost.
The methods described above may produce a fair value that may not be indicative of net realizable value or reflective of
future fair values. Furthermore, while we believe the valuation methods are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could
result in a different fair value measurement at the reporting date.
Investment policy — Target asset allocations of U.S. pension plans are established through an investment policy, which is
updated periodically and reviewed by an Investment Committee, comprised of certain company officers and directors. The
investment policy allows for a flexible asset allocation mix which is intended to provide appropriate diversification to lessen
market volatility while assuming a reasonable level of economic risk.
Our policy recognizes that properly managing the relationship between pension assets and pension liabilities serves to
mitigate the impact of market volatility on our funding levels. The investment policy permits plan assets to be invested in a
number of diverse categories, including a Growth Portfolio, an Immunizing Portfolio and a Liquidity Portfolio. These sub-
portfolios are intended to balance the generation of incremental returns with the management of overall risk.
The Growth Portfolio is invested in a diversified pool of assets in order to generate an incremental return with an
acceptable level of risk. The Immunizing Portfolio is a hedging portfolio that may be comprised of fixed income securities and
overlay positions. This portfolio is designed to offset changes in the value of the pension liability due to changes in interest
rates. The Liquidity Portfolio is a cash portfolio designed to meet short-term liquidity needs and reduce the plans’ overall risk.
As a result of our diversification strategies, there are no significant concentrations of risk within the portfolio of investments.
The allocations among portfolios may be adjusted to meet changing objectives and constraints. We expect that as the
funded status of the plans changes, we will increase or decrease the size of the Growth Portfolio in order to manage the risk of
losses in the plan. At December 31, 2016, the Growth Portfolio (U.S. and non-U.S. equities, core and high-yield fixed income,
hedge fund of funds, real estate, emerging market debt and cash) comprises 47% of total assets, the Immunizing Portfolio (long
duration U.S. Treasury strips, corporate bonds and cash) comprises 51% and the Liquidity Portfolio (cash and short-term
securities) comprises 2%. During 2016, the mid-points of the target ranges were 50.5% for the Growth Portfolio, 48.5% for the
Immunizing Portfolio and 5% for the Liquidity Portfolio.
Significant assumptions — The significant weighted-average assumptions used in the measurement of pension benefit
obligations at December 31 of each year and the net periodic benefit cost for each year are as follows:
Pension benefit obligations:
Discount rate
Net periodic benefit cost:
Discount rate
Rate of compensation increase
Expected return on plan assets
2016
2015
2014
U.S.
Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
3.92%
2.48%
4.13%
2.83%
3.81%
3.75%
3.29%
N/A
6.50%
2.56%
3.12%
5.42%
72
3.81%
N/A
7.00%
3.75%
4.83%
5.87%
4.63%
N/A
7.00%
4.15%
3.77%
3.41%
The pension plan discount rate assumptions are evaluated annually in consultation with our outside actuarial advisers.
Long-term interest rates on high quality corporate debt instruments are used to determine the discount rate. For our largest
plans, discount rates are developed using a discounted bond portfolio analysis, with appropriate consideration given to defined
benefit payment terms and duration of the liabilities.
We have historically estimated the interest and service cost components of net periodic benefit cost for pension and other
postretirement benefits using a single weighted-average discount rate derived from the yield curve used to measure the benefit
obligation of the plan at the most recent remeasurement date. At December 31, 2015, we changed the method used to estimate
those interest and service components for pension and other postretirement benefit plans that utilize a yield curve approach.
The new method uses a full yield curve approach to estimate the interest and service components by applying the specific spot
rates along the yield curve used in the most recent remeasurement of the benefit obligation to the relevant projected cash flows.
We believe this method improves the correlation between the projected cash flows and the corresponding interest rates and
provides a more precise measurement of interest and service costs. This change in accounting estimate affected the calculation
of the interest and service components of net periodic benefit cost, reducing the total for 2016 by $16. Since the remeasurement
of total benefit obligations is not affected, the 2016 reduction in periodic benefit cost was offset by an increase in the actuarial
loss.
The expected rate of return on plan assets was selected on the basis of our long-term view of return and risk assumptions
for major asset classes. We define long-term as forecasts that span at least the next ten years. Our long-term outlook is
influenced by a combination of return expectations by individual asset class, actual historical experience and our diversified
investment strategy. We consult with and consider the opinions of financial professionals in developing appropriate capital
market assumptions. Return projections are also validated using a simulation model that incorporates yield curves, credit
spreads and risk premiums to project long-term prospective returns. The appropriateness of the expected rate of return is
assessed on an annual basis and revised if necessary. We have a high percentage of total assets in fixed income securities since
the benefit accruals are frozen for all of our U.S. pension plans. Based on this assessment, we have selected a 6.00% expected
return on asset assumption for 2017 for our U.S. plans.
The significant weighted-average assumptions used in the measurement of OPEB obligations at December 31 of each year
and the net periodic benefit cost for each year are as follows:
OPEB benefit obligations:
Discount rate
Net periodic benefit cost:
Discount rate
Initial health care cost trend rate
Ultimate health care cost trend rate
Year ultimate reached
2016
Non-U.S.
2015
Non-U.S.
2014
Non-U.S.
3.69%
3.45%
5.32%
5.02%
2018
3.96%
3.84%
5.62%
5.03%
2018
3.84%
4.65%
5.91%
5.02%
2018
The discount rate selection process was similar to the process used for the pension plans. Assumed health care cost trend
rates have a significant effect on the health care obligation. To determine the trend rates, consideration is given to the plan
design, recent experience and health care economics.
A one-percentage-point change in assumed health care cost trend rates would have the following effects for 2016:
Effect on total of service and interest cost components
Effect on OPEB obligations
1% Point
Increase
1% Point
Decrease
$
$
1
10
(1)
(9)
Estimated future benefit payments and contributions — Expected benefit payments by our pension and OPEB plans for each of
the next five years and for the following five-year period are as follows:
73
Year
2017
2018
2019
2020
2021
2022 to 2026
Total
Pension Benefits
U.S.
Non-U.S.
OPEB
Non-U.S.
$
$
126
120
118
114
113
537
1,128
$
$
12
14
14
15
15
89
159
$
$
4
5
5
5
5
26
50
Pension benefits are funded through deposits with trustees that satisfy, at a minimum, the applicable funding regulations.
OPEB benefits are funded as they become due. Projected contributions to be made during 2017 to the defined benefit pension
plans are $12 for our non-U.S. plans. Based on the current funded status of our U.S. plans, there are no minimum contributions
required for 2017.
Multi-employer pension plans — We participate in the Steelworkers Pension Trust (SPT) multi-employer pension plan which
provides pension benefits to substantially all of our U.S. union-represented employees. We also have a small participation in the
IAM National Pension Fund. Benefit levels are set by trustees who manage the plans. Contributions are made in accordance
with our collective bargaining agreements and rates are generally based on hours worked. The collective bargaining agreement
expires May 31, 2017. The trustees of the SPT have provided us with the latest data available for the plan year ended
December 31, 2016. As of that date, the plan is not fully funded. We could be held liable to the plan for our obligations as well
as those of other employers as a result of our participation in the plan. Contribution rates could increase if the plan is required
to adopt a funding improvement plan or a rehabilitation plan, if the performance of plan assets does not meet expectations or as
a result of future collectively bargained wage and benefit agreements. If we choose to stop participating in the plan, we may be
required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
The Pension Protection Act (PPA) defines a zone status for each plan. Plans in the green zone are at least 80% funded,
plans in the yellow zone are at least 65% funded and plans in the red zone are generally less than 65% funded. The SPT plan
has utilized extended amortization provisions to amortize its losses from 2008. The plan recertified its zone status after using
the extended amortization provisions as allowed by law. The SPT plan has not implemented a funding improvement or
rehabilitation plan, nor are such plans pending. Our contributions to the SPT have not exceeded 5% of the total contributions to
the plan.
Pension
Fund
Employer
Identification
Number/
Plan Number
PPA
Zone Status
2016
2015
Funding Plan
Pending/
Implemented
Contributions by Dana
2016
2015
2014
Surcharge
Imposed
SPT
23-6648508 / 499
Green
Green
No
$
10
$
10
$
9
No
74
Note 12. Marketable Securities
U.S. government securities
Corporate securities
Certificates of deposit
Other
Total marketable securities
2016
Unrealized
Gains
(Losses)
Cost
Fair
Value
Cost
2015
Unrealized
Gains
(Losses)
Fair
Value
$
$
2
2
22
4
30
$
$
— $
— $
2
2
22
4
30
$
$
38
42
18
62
160
$
$
— $
2
2
$
38
42
18
64
162
U.S. government securities include bonds issued by government-sponsored agencies and Treasury notes. Corporate
securities include primarily debt securities. Other consists of investments in mutual and index funds. U.S. government
securities, corporate debt and certificates of deposit maturing in one year or less and after one year through five years total $22
and $4 at December 31, 2016. The divestiture of DCLLC caused a substantial reduction in marketable securities in the current
year. See Note 3 for additional information.
Note 13. Financing Agreements
Long-term debt at December 31 —
2016
2015
Principal
Unamortized
Debt Issue
Costs
Principal
Unamortized
Debt Issue
Costs
Interest
Rate
6.750%
5.375%
6.000%
5.500%
6.500% *
$
Senior Notes due February 15, 2021
Senior Notes due September 15, 2021
Senior Notes due September 15, 2023
Senior Notes due December 15, 2024
Senior Notes due June 1, 2026
Other indebtedness
Total
* In conjunction with the issuance of the June 2026 Notes we entered into two 10-year fixed-to-fixed cross-currency swaps which have the effect of
— $
450
300
425
375
120
1,670
— $
(5)
(4)
(6)
(6)
350
450
300
425
66
1,591
(21) $
$
$
$
$
(4)
(6)
(5)
(6)
(21)
economically converting the June 2026 Notes to euro denominated debt at a fixed rate of 5.140%. See Note 14 for additional information.
Interest on the senior notes is payable semi-annually. Other indebtedness includes borrowings from various financial
institutions, capital lease obligations, the unamortized fair value adjustment related to a terminated interest rate swap and the
financial liability related to a build-to-suit lease. See Note 14 for additional information on the terminated interest rate swap.
During the third quarter of 2015, we reversed the $6 embedded capital lease obligation associated with our exclusive long-term
supply agreement with SIFCO. See Note 3 for additional information.
Scheduled principal payments on long-term debt at December 31, 2016 —
Debt maturities
$
45
$
55
$
3
$
— $
450
2017
2018
2019
2020
2021
Thereafter
1,100
$
Total
$
1,653
Senior notes activity — On June 23, 2016, we redeemed all of our February 2021 Notes at a price equal to 103.375% 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 February 2021 Notes.
On May 27, 2016, Dana Financing Luxembourg S.à r.l., a wholly-owned subsidiary of Dana, issued $375 in senior notes
(June 2026 Notes). The June 2026 Notes were issued through a private placement and will not be registered under the U.S.
Securities Act of 1933, as amended (the Securities Act). The June 2026 Notes were offered only to qualified institutional buyers
in reliance on Rule 144A under the Securities Act and, outside the United States, only to non-U.S. investors in reliance on
Regulation S under the Securities Act. The June 2026 Notes rank equally with Dana's other unsecured senior notes. Interest on
the notes is payable on June 15 and December 15 of each year, beginning on December 15, 2016. The June 2026 Notes will
75
mature on June 1, 2026. Net proceeds of the offering totaled $368. Financing costs of $7 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 our
February 2021 Notes, to pay related fees and expenses and for general corporate purposes.
In December 2014, we completed the sale of $425 in senior unsecured notes. Net proceeds of the offering totaled $418.
Financing costs of $7 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 our February 2019 Notes.
During December 2014, we redeemed $345 of our February 2019 Notes pursuant to a tender offer at a weighted average
price equal to 104.116% plus accrued and unpaid interest. The $19 loss on extinguishment of debt recorded in December 2014
includes the redemption premium and transaction costs associated with the tender offer and the write-off of $4 of previously
deferred financing costs associated with the February 2019 Notes.
On December 9, 2014, we elected to redeem $40 of our February 2019 Notes effective January 8, 2015 at a price equal to
103.000% plus accrued and unpaid interest. On March 16, 2015, we redeemed the remaining $15 of our February 2019 Notes
at a price equal to 103.250% plus accrued and unpaid interest. The $2 loss on extinguishment of debt includes the redemption
premium and the write-off of previously deferred financing costs associated with the February 2019 Notes.
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 years set forth below:
Year
2017
2018
2019
2020
2021
2022
2023
2024
2025
Redemption Price
September
2021 Notes
September
2023 Notes
December
2024 Notes
June
2026 Notes
102.688%
101.344%
100.000%
100.000%
103.000%
102.000%
101.000%
100.000%
100.000%
102.750%
101.833%
100.917%
100.000%
100.000%
103.250%
102.167%
101.083%
100.000%
100.000%
Prior to September 15, 2018 for the September 2023 Notes, we may redeem some or all of such notes at a price equal to
the principal amount thereof, plus accrued and unpaid interest, 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.
Prior to December 15, 2019, we may redeem some or all of the December 2024 Notes at a price equal to the principal
amount thereof, plus accrued and unpaid interest, 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 December 15, 2017, we may redeem up to 35% of the original aggregate principal amount of the
December 2024 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to
105.500% of the principal amount of such notes, plus accrued and unpaid interest thereon, provided that at least 50% of the
original aggregate principal amount of the December 2024 Notes remains outstanding after giving effect to any such
redemption.
At any time prior to June 1, 2019, we may redeem up to 35% of the aggregate principal amount of the June 2026 Notes in
an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 106.500% 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 2026 Notes remains outstanding after the redemption.
76
Prior to June 1, 2021, we may redeem some or all of the June 2026 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.
Revolving facility — On June 9, 2016, we entered into a new $500 revolving credit facility (the Revolving Facility) which
matures on June 9, 2021. The Revolving Facility refinanced and replaced our previous revolving credit facility. In connection
with the Revolving Facility, we paid $3 in deferred financing costs to be amortized to interest expense over the life of the
facility. We wrote off $1 of previously deferred financing costs associated with our prior revolving credit facility to loss on
extinguishment of debt. 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,
including exceptions for Dana Credit Corporation and its subsidiaries (the guarantors), and grants a first-priority lien on
substantially all of the assets of Dana and the guarantors, subject to certain exceptions.
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 revolving credit agreement) plus a margin as set forth below:
Total Net Leverage Ratio
Less than or equal to 1.00:1.00
Greater than 1.00:1.00 but less than or equal to 2.00:1.00
Greater than 2.00:1.00
Margin
Base Rate
Eurodollar Rate
0.50%
0.75%
1.00%
1.50%
1.75%
2.00%
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
Less than or equal to 1.00:1.00
Greater than 1.00:1.00 but less than or equal to 2.00:1.00
Greater than 2.00:1.00
Commitment Fee
0.250%
0.375%
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.
There were no borrowings under the Revolving Facility at December 31, 2016 but we had utilized $22 for letters of credit.
We had availability at December 31, 2016 under the Revolving Facility of $478 after deducting the outstanding letters of credit.
Debt covenants — At December 31, 2016, 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 requiring us to maintain a first lien
net leverage ratio not to exceed 2.00 to 1.00.
Note 14. 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.
77
Fair value measurements on a recurring basis — Assets and liabilities that are carried in our balance sheet at fair value are as
follows:
December 31, 2016
Marketable securities
Currency forward contracts - Accounts receivable other
Cash flow hedges
Undesignated
Currency forward contracts - Other accrued liabilities
Cash flow hedges
Undesignated
Currency swaps - Other accrued liabilities
Undesignated
Currency swaps - Other noncurrent liabilities
Cash flow hedges
December 31, 2015
Marketable securities
Currency forward contracts - Accounts receivable other
Cash flow hedges
Undesignated
Currency forward contracts - Other accrued liabilities
Cash flow hedges
Undesignated
Currency swaps - Accounts receivable other
Undesignated
Currency swaps - Other accrued liabilities
Undesignated
Fair Value Measurements Using
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Total
$
30
$
4
$
26
2
1
4
1
3
12
$
162
$
64
$
1
2
5
1
4
9
2
1
4
1
3
12
98
1
2
5
1
4
9
Fair value of financial instruments — The financial instruments that are not carried in our balance sheet at fair value are as
follows:
2016
2015
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
Senior notes
Other indebtedness*
Total
* The carrying value includes the unamortized portion of a fair value adjustment related to a terminated interest rate swap at both dates. At December 31,
1,550
120
1,670
1,525
66
1,591
1,612
101
1,713
1,552
56
1,608
$
$
$
$
$
$
$
$
2016, the carrying value and fair value also include a financial liability associated with a build-to-suit lease arrangement.
The fair value of our senior notes is estimated based upon a market approach (Level 2) while the fair value of our other
indebtedness is based upon an income approach (Level 2). See Note 13 for additional information about financing
arrangements.
Fair value measurements on a nonrecurring basis — Certain assets are measured at fair value on a nonrecurring basis. These
are long-lived assets that are subject to fair value adjustments only in certain circumstances. These assets include intangible
assets and property, plant and equipment which may be written down to fair value when they are held for sale or as a result of
impairment.
Interest rate derivatives — Our portfolio of derivative financial instruments periodically includes interest rate swaps designed
to mitigate our interest rate risk. As of December 31, 2016, no fixed-to-floating interest rate swaps remain outstanding.
78
However, a $7 fair value adjustment to the carrying amount of our December 2024 Notes, associated with a fixed-to-floating
interest rate swap that had been executed but was subsequently terminated during 2015, remains deferred at December 31,
2016. This amount is being amortized as a reduction of interest expense through the period ending December 2024, the
scheduled maturity date of the December 2024 Notes. Approximately $1 was amortized as a reduction of interest expense
during 2016.
Foreign currency derivatives — Our foreign currency derivatives include forward contracts associated with forecasted
transactions, primarily involving the purchases and sales of inventory through the next twelve months, as well as currency
swaps associated with certain recorded external notes payable and intercompany loans receivable and payable. Periodically, our
foreign currency derivatives also include net investment hedges of certain of our investments in foreign operations.
During May 2016, in conjunction with the issuance of the U.S. dollar-denominated June 2026 Notes by euro-functional
Dana Financing Luxembourg S.à r.l. (euro-functional subsidiary), we executed two fixed-to-fixed cross-currency swaps with
the same critical terms as the June 2026 Notes to eliminate the variability in the functional-currency-equivalent cash flows due
to changes in the U.S. dollar / euro exchange rates associated with the forecasted principal and interest payments. Designated as
a cash flow hedge of the forecasted principal and interest payments of the June 2026 Notes, or subsequent replacement debt,
the swaps economically convert the June 2026 Notes from $375 of U.S. dollar-denominated debt at a fixed rate of 6.500% to
€338 of euro-denominated debt at a fixed rate of 5.140%. The June 2026 Notes and any subsequent replacement debt have both
been designated as the hedged items (collectively, the "designated debt") in the cash flow hedge relationship. See Note 13 for
additional information about the June 2026 Notes.
The swaps are expected to be highly effective in offsetting the corresponding currency-based changes in cash outflows
related to the designated debt. Based on our qualitative assessment that the critical terms of the June 2026 Notes and the swaps
match and that all other required criteria have been met, we do not expect to incur any ineffectiveness. As an effective cash
flow hedge, changes in the fair value of the swaps will be recorded in OCI during each period. Additionally, to the extent the
swaps remain effective, the appropriate portion of AOCI will be reclassified to earnings each period as an offset to the foreign
exchange gain or loss resulting from the remeasurement of the underlying U.S. dollar-denominated debt by the euro-functional
subsidiary.
In the event our ongoing assessment demonstrates that the critical terms of either the swaps or the designated debt have
changed, or that there have been adverse developments regarding counterparty risk, we will use the long haul method to assess
ineffectiveness of the hedging relationship. To the extent the swaps are no longer effective, changes in their fair values will be
recorded in earnings. During 2016, a deferred loss of $32 associated with the fixed-to-fixed cross-currency swaps was recorded
in OCI and reflects $12 as the unfavorable fair value of the swaps and a $20 reclassification from AOCI to earnings. The
reclassification from AOCI to earnings represents an offset to a foreign exchange remeasurement loss on the designated debt
for the year ended December 31, 2016.
The total notional amount of outstanding foreign currency forward contracts, involving the exchange of various currencies,
was $143 at December 31, 2016 and $212 at December 31, 2015. The total notional amount of outstanding foreign currency
swaps, including the fixed-to-fixed cross-currency swaps, was $571 at December 31, 2016 and $219 at December 31, 2015.
79
The following currency derivatives were outstanding at December 31, 2016:
Functional Currency
U.S. dollar
Euro
British pound
Swedish krona
Traded Currency
Mexican peso, Euro
U.S. dollar, Canadian dollar,
Hungarian forint, British pound,
Swiss franc, Indian rupee,
Russian ruble
U.S. dollar, Euro
Euro
South African rand
U.S. dollar, Euro, Thai baht
Canadian dollar
U.S. dollar
Thai baht
Brazilian real
Indian rupee
Total forward contracts
U.S. dollar, Australian dollar
U.S. dollar, Euro
U.S. dollar, British pound, Euro
U.S. dollar
Euro
Mexican peso, Euro, Canadian
dollar
U.S. dollar, British pound
South African rand
U.S. dollar
Total currency swaps
Total currency derivatives
$
Notional Amount (U.S. Dollar Equivalent)
Designated as
Cash Flow
Hedges
Undesignated
Total
Maturity
$
$
47
29
$
1
5
48
34
4
13
Nov-17
Jun-18
Sep-17
Dec-17
14 May-17
Dec-17
5
Jun-17
Nov-17
Dec-17
9
2
14
143
171
Dec-17
393
Jun-26
7 Mar-17
571
714
$
4
13
93
375
375
468
$
14
5
9
2
14
50
171
18
7
196
246
Cash flow hedges — With respect to contracts designated as cash flow hedges, changes in fair value during the period in which
the contracts remain outstanding are reported in OCI to the extent such contracts remain effective. Effectiveness is measured by
using regression analysis to determine the degree of correlation between the change in the fair value of the derivative
instrument and the change in the associated foreign currency exchange rates. Changes in fair value of contracts not designated
as cash flow hedges or as net investment hedges are recognized in Other income, net in the period in which the changes occur.
Realized gains and losses from currency-related forward contracts, including those that have been designated as cash flow
hedges and those that have not been designated, are recognized in Other income, net.
Net investment hedges — With respect to contracts designated as net investment hedges, we apply the forward method and
report changes in fair value in the CTA component of OCI during the period in which the contracts remain outstanding to the
extent such contracts remain effective.
During the second quarter of 2015, we settled a $98 forward contract that had been executed and designated as a net
investment hedge of the equivalent portion of certain of our European operations during the first quarter of 2015. Although no
net investment hedges remain outstanding at December 31, 2016, a deferred loss of $2 associated with this settled contract has
been recorded in AOCI as of that date and will remain deferred until such time as the investment in the associated subsidiary is
substantially liquidated.
Amounts to be reclassified to earnings — Deferred gains or losses associated with effective cash flow hedges of forecasted
transactions are reported in AOCI and are reclassified to earnings in the same periods in which the underlying transactions
affect earnings. Amounts expected to be reclassified to earnings assume no change in the current hedge relationships or to
December 31, 2016 exchange rates. Deferred losses of $2 at December 31, 2016 are expected to be reclassified to earnings
during the next twelve months, compared to deferred losses of $4 at December 31, 2015. Amounts reclassified from AOCI to
earnings arising from the discontinuation of cash flow hedge accounting treatment were not material during 2016.
80
Note 15. Commitments and Contingencies
Asbestos personal injury liabilities — As part of our reorganization in 2008, assets and liabilities associated with personal
injury asbestos claims were retained in Dana Corporation which was then merged into Dana Companies, LLC (DCLLC), a
consolidated wholly-owned limited liability company. The assets of DCLLC included insurance rights relating to coverage
against personal injury asbestos claims, marketable securities and other assets which were considered sufficient to satisfy its
liabilities. As described in Note 3 of the financial statements, DCLLC was divested on December 30, 2016. Following
completion of the sale, Dana has no obligation with respect to current or future asbestos claims.
DCLLC had approximately 25,000 active pending asbestos personal injury liability claims at December 31, 2015.
DCLLC had $78 accrued for indemnity and defense costs for settled, pending and future claims at December 31, 2015. A
fifteen-year time horizon was used to estimate the value of this liability. In addition to claims and litigation experience, we
considered additional qualitative and quantitative factors such as changes in legislation, the legal environment, our strategy in
managing claims and obtaining insurance, including our defense strategy, and health related trends in the overall population
of individuals potentially exposed to asbestos in determining whether a change in the estimate of its liability for pending and
future claims and defense costs or insurance assets was warranted.
At December 31, 2015, DCLLC had $51 recorded as an asset for probable recovery from insurers for the pending and
projected asbestos personal injury liability claims. The recorded asset represented our assessment of the capacity of our
insurance agreements to provide for the payment of anticipated defense and indemnity costs for pending claims and projected
future demands. The recognition of these recoveries was based on our assessment of our right to recover under the respective
contracts and on the financial strength of the insurers. DCLLC had coverage agreements in place with insurers confirming
substantially all of the related coverage and payments were being received on a timely basis. The financial strength of these
insurers was reviewed at least annually with the assistance of a third party. The recorded asset did not represent the limits of
our insurance coverage, but rather the amount DCLLC would expect to recover if the accrued indemnity and defense costs
were paid in full.
Other product liabilities — We had accrued $5 and $1 for non-asbestos product liability costs at December 31, 2016 and
2015 and $4 of recovery expected from third parties at December 31, 2016. The increases in the liability and recoverable
amounts at December 31, 2016 largely reflect the recognition of the estimated cost, net of payments made, and the expected
recovery of an insured matter. We estimate these liabilities based on assumptions about the value of the claims and about the
likelihood of recoveries against us derived from our historical experience and current information.
Environmental liabilities — Accrued environmental liabilities were $8 at December 31, 2016 and $11 at December 31, 2015.
The decline during 2016 reflects the impact of the sale of Dana Companies, LLC and the associated environmental liabilities
thereof. We consider the most probable method of remediation, current laws and regulations and existing technology in
estimating our environmental liabilities.
Guarantee of lease obligations — In connection with the divestiture of our Structural Products business in 2010, leases
covering three U.S. facilities were assigned to a U.S. affiliate of Metalsa. Under the terms of the sale agreement, we will
guarantee the affiliate’s performance under the leases, which run through June 2025, including approximately $6 of annual
payments. In the event of a required payment by Dana as guarantor, we are entitled to pursue full recovery from Metalsa of
the amounts paid under the guarantee and to take possession of the leased property.
Other legal matters — We are subject to various pending or threatened legal proceedings arising out of the normal course of
business or operations. In view of the inherent difficulty of predicting the outcome of such matters, we cannot state what the
eventual outcome of these matters will be. However, based on current knowledge and after consultation with legal counsel,
we believe that any liabilities that may result from these proceedings will not have a material adverse effect on our liquidity,
financial condition or results of operations.
In November 2013, we received an arbitration notice from Sypris Solutions, Inc. (Sypris), formerly our largest supplier,
alleging damage claims under the long-term supply agreement that expired on December 31, 2014. The arbitration
proceedings related to these claims concluded in the second quarter of 2015 with Sypris being awarded immaterial damages.
Sypris also alleged that Dana and Sypris entered into a new binding long-term supply agreement in July 2013. Dana filed suit
against Sypris requesting declaratory judgment that the parties did not enter into a new supply agreement. During the first
quarter of 2015, the court granted summary judgment in Dana’s favor, rejecting Sypris’ position that a new contract was
formed in July 2013. The Ohio Sixth District Court of Appeals upheld the summary judgment ruling in December 2015 and
81
that decision is no longer subject to appeal. We have been advised that Sypris will not pursue its claim that Dana failed to
negotiate in good faith under the 2007 agreement.
On September 25, 2015, the Brazilian antitrust authority (“CADE”) announced an investigation of an alleged cartel
involving a former Dana business in Brazil and various competitors related to sales of shock absorbers between 2000 and
2014. We divested this business as a part of the sale of our aftermarket business in 2004. The investigation of Dana's
involvement in this matter concluded in the second quarter of 2016 without a material impact on Dana.
Lease commitments — Cash obligations under future minimum rental commitments under operating leases and net rental
expense are shown in the table below. Operating lease commitments are primarily related to facilities, including the two
facilities associated with the SJT Forjaria Ltda. acquisition.
Lease commitments
$
38
$
34
$
29
$
24
$
21
2017
2018
2019
2020
2021
Thereafter
68
$
Total
$
214
Rent expense
Note 16. Warranty Obligations
2016
$50
2015
$49
2014
$51
We record a liability for estimated warranty obligations at the dates our products are sold. We record the liability based on
our estimate of costs to settle future claims. Adjustments to our estimated costs at time of sale are made as claim experience and
other new information becomes available. Obligations for service campaigns and other occurrences are recognized as
adjustments to prior estimates when the obligation is probable and can be reasonably estimated.
Changes in warranty liabilities —
Balance, beginning of period
Amounts accrued for current period sales
Adjustments of prior estimates
Settlements of warranty claims
Currency impact
Balance, end of period
Note 17. Income Taxes
Income tax expense (benefit) attributable to continuing operations —
Current
U.S. federal and state
Non-U.S.
Total current
Deferred
U.S. federal and state
Non-U.S.
Total deferred
Total expense (benefit)
2016
2015
2014
$
$
$
56
25
26
(41)
66
$
47
26
22
(36)
(3)
56
$
$
54
19
18
(41)
(3)
47
2016
2015
2014
$
$
(18) $
74
56
(497)
17
(480)
(424) $
12
80
92
(9)
(1)
(10)
82
$
$
(5)
134
129
(177)
(22)
(199)
(70)
We record interest and penalties related to uncertain tax positions as a component of income tax expense or benefit. Net
interest expense for the periods presented herein is not significant.
82
Income from continuing operations before income taxes —
U.S. operations
Non-U.S. operations
Income from continuing operations before income taxes
2016
2015
2014
$
$
(56) $
271
215
$
72
220
292
$
$
175
85
260
Income tax audits — We conduct business globally and, as a result, file income tax returns in multiple jurisdictions that are
subject to examination by taxing authorities throughout the world. With few exceptions, we are no longer subject to U.S.
federal, state and local or foreign income tax examinations for years before 2009. The U.S. federal income tax audits for 2011
and 2012 were settled during the first quarter of 2015, resulting in no incremental cash taxes.
We are currently under audit by U.S. and foreign authorities for certain taxation years. When the issues related to these
periods are settled, the total amounts of unrecognized tax benefits for all open tax years may be modified. Audit outcomes and
the timing of the audit settlements are subject to uncertainty and we cannot make an estimate of the impact on our financial
position at this time.
Effective tax rate reconciliation for continuing operations —
U.S. federal income tax rate
Adjustments resulting from:
State and local income taxes, net of federal benefit
Non-U.S. income (expense)
Credits and tax incentives
U.S. tax on non-U.S. earnings
Intercompany sale of certain operating assets
Settlement and return adjustments
Enacted change in tax rates
Venezuela write-down
Miscellaneous items
Valuation allowance adjustments
Effective income tax rate for continuing operations
2016
2015
2014
35 %
35%
35 %
5
(15)
(5)
(19)
5
14
4
2
(222)
(196)%
(1)
(11)
(4)
9
9
1
5
(15)
28%
4
(7)
(6)
(16)
17
10
2
(66)
(27)%
In the fourth quarter of 2016, we determined that valuation allowances against U.S. deferred taxes were no longer required.
Release of these valuation allowances resulted in $501 of tax benefit. Additionally, developments in Brazil led to our
determination that an allowance against certain deferred taxes in that country was appropriate, and we recognized tax expense
of $25 to establish this valuation allowance. Excluding the effects of the valuation allowance adjustments, the effective tax rate
was 26% in 2016, which varies from the U.S. federal statutory rate of 35% primarily due to nondeductible expenses, different
statutory tax rates outside the U.S. and withholding taxes.
In 2014, income tax expense in the U.S. was reduced by $179 for release of valuation allowances for income forecasted to
be realized in 2015 in connection with a tax planning action that involved a sale of an affiliate’s stock and certain operating
assets by a U.S. subsidiary of the company to a non-U.S. affiliate expected to be completed in 2015. During the fourth quarter
of 2015, the tax planning action was completed. The final income generated by the transaction was higher than anticipated as a
consequence of proposed Internal Revenue Service regulations issued in 2015 providing guidance on the tax treatment afforded
a component of the tax planning action we undertook, as well as revised income estimates, which resulted in an additional $66
release of valuation allowance. In conjunction with the completion of the intercompany sale of certain operating assets to a
non-U.S. affiliate, a prepaid tax asset of $190 was recorded. The prepaid tax asset represents the usage of tax attributes
recognized in 2014 and 2015, through the release of valuation allowance on our deferred tax assets, and is being amortized into
tax expense over the life of the assets transferred in the transaction. We recognized tax expense of $11 and $2 in 2016 and 2015
as a result of this amortization. In addition, we recognized tax expense of $23 in 2015 related to the sale of the affiliate’s stock.
83
No tax benefit was recognized on a charge of $80 in 2014 relating to the divestiture of our Venezuela operations due to the
existence of a valuation allowance, resulting in an increase in the effective tax rate.
Foreign income repatriation — We provide for U.S. federal income and non-U.S. withholding taxes on the earnings of our non-
U.S. operations that are not considered to be permanently reinvested. Accordingly, we continue to analyze and adjust the
estimated tax impact of the income and non-U.S. withholding liabilities based on the amount and source of these earnings. We
recognized net benefit of $58 for 2016 and expense of $1 and $3 for 2015 and 2014 related to future income taxes and non-U.S.
withholding taxes on repatriations from operations that are not permanently reinvested. We also paid withholding taxes of $6,
$7 and $7 during 2016, 2015 and 2014 related to the actual transfer of funds to the U.S. The unrecognized tax liability
associated with the operations in which we are permanently reinvested is $30 at December 31, 2016.
The earnings of our non-U.S. subsidiaries will likely be repatriated to the U.S. in the form of repayments of intercompany
borrowings and distributions from earnings. Certain of our international operations had intercompany loan obligations to the
U.S. totaling $978 at the end of 2016. Included in this amount are intercompany loans and related interest accruals with an
equivalent value of $32 which are denominated in a foreign currency and considered to be permanently invested.
Valuation allowance adjustments — We have recorded valuation allowances in several entities where the recent history of
operating losses does not allow us to satisfy the “more likely than not” criterion for the recognition of deferred tax assets.
Consequently, there is no income tax expense or benefit recognized on the pre-tax income or losses in these jurisdictions as
valuation allowances are adjusted to offset the associated tax expense or benefit.
When evaluating the need for a valuation allowance we consider all components of comprehensive income, and we weigh
the positive and negative evidence, putting greater reliance on objectively verifiable evidence than on projections of future
profitability that are dependent on actions that have not occurred as of the assessment date. We also consider changes to the
historical financial results due to activities that were either new to the business or not expected to recur in the future, in order to
identify the core earnings of the business. A sustained period of profitability, after considering changes to the historical results
due to implemented actions and nonrecurring events, along with positive expectations for future profitability are necessary to
reach a determination that a valuation allowance should be released.
Prior to 2016, we carried a valuation allowance against deferred tax assets in the U.S. While our U.S. operations have
experienced improved profitability in recent years, our analysis of the income of the U.S. operations, as adjusted for changes in
historical results due to developments through 2015, demonstrated historical losses as of December 31, 2015. Additionally,
there were considerable uncertainties in the U.S. in certain of our end markets. Therefore, we had not achieved a level of
sustained profitability that would, in our judgment, support a release of the valuation allowance prior to 2016.
During the fourth quarter, following the completion of an enterprise wide strategy assessment and our annual one and five
year financial plans, the Company assessed the weight of all available positive and negative evidence and determined it was
more likely than not that future earnings will be sufficient to realize most of our deferred tax assets in the U.S. Accordingly, we
have released the U.S. valuation allowance at December 31, 2016, resulting in an income tax benefit of $501. In arriving at the
conclusion that we had achieved sustained profitability in the U.S., we considered the following positive evidence: we were in
a cumulative three-year historical income position in the U.S., we had income in seven of the eight previous quarters; we
successfully launched a replacement business for one of our largest customer programs for Light Vehicle in the U.S. with actual
volumes and margins which were consistent with our forecast in the fourth quarter; we stabilized our U.S. Commercial Vehicle
business despite lower than expected volumes; and, we secured certain new programs with customers that increased our sales
backlog in the U.S.
We have retained a valuation allowance of $137 against deferred tax assets in the U.S. primarily related to state operating
loss carryforwards and other credits which do not meet the more likely than not criterion for releasing the valuation allowance.
Our analysis of the operations of a subsidiary in Brazil, adjusted for changes in the historical results due to the effects of
developments through the current date and planned future actions, reflects three years of historical cumulative losses and our
annual one and five year financial plans forecast continued near term losses. Therefore, we determined it was not more likely
than not that future earnings will be sufficient to realize the deferred tax assets. Accordingly, we have recorded a valuation
allowance as of December 31, 2016, resulting in income tax expense of $25.
84
Deferred tax assets and liabilities — Temporary differences and carryforwards give rise to the following deferred tax assets and
liabilities.
Net operating loss carryforwards
Postretirement benefits, including pensions
Research and development costs
Expense accruals
Other tax credits recoverable
Capital loss carryforwards
Inventory reserves
Postemployment and other benefits
Other
Total
Valuation allowance
Deferred tax assets
Unremitted earnings
Intangibles
Depreciation
Other
Deferred tax liabilities
Net deferred tax assets
2016
2015
$
$
472
152
113
54
67
40
18
8
20
944
(285)
659
(27)
(29)
(52)
$
(108)
551
$
448
137
89
58
63
50
15
5
865
(662)
203
(68)
(29)
(43)
(27)
(167)
36
Carryforwards — Our deferred tax assets include benefits expected from the utilization of net operating loss (NOL), capital
loss and credit carryforwards in the future. The following table identifies the net operating loss deferred tax asset components
and the related allowances that existed at December 31, 2016. Due to time limitations on the ability to realize the benefit of the
carryforwards, additional portions of these deferred tax assets may become unrealizable in the future.
Net operating losses
U.S. federal
U.S. state
Brazil
France
Australia
South Africa
U.K.
Argentina
China
Total
Deferred
Tax
Asset
Valuation
Allowance
Carryforward
Period
$
$
279
97
38
11
31
2
5
8
1
472
$
$
—
20
(92)
Various
(38)
Unlimited
— Unlimited
(31)
Unlimited
— Unlimited
(3)
Unlimited
(8)
5
(1)
5
(173)
Earliest
Year of
Expiration
2028
2017
2017
2019
In addition to the NOL carryforwards listed in the table above, we have deferred tax assets related to capital loss
carryforwards of $40 which are fully offset with valuation allowances at December 31, 2016. We also have deferred tax assets
of $67 related to other credit carryforwards which are offset with $23 of valuation allowances at December 31, 2016. The
capital losses can be carried forward indefinitely while the other credits are generally available for 10 to 20 years with portions
currently expiring. We elected to adopt the new guidance for share based payments in the third quarter of 2016, requiring us to
reflect any adjustments as of January 1, 2016 in retained earnings. The primary impact of adopting the new guidance was an
increase in deferred tax assets of $32 related to the cumulative excess tax benefits resulting from share-based payments.
Because we continued to carry a valuation allowance against certain of our deferred tax assets in the U.S., the increase in
deferred tax assets was offset by an increase in our valuation allowance of $32, resulting in no impact to retained earnings as of
January 1, 2016.
85
The use of a portion of our $796 U.S. federal NOL as of December 31, 2016 is subject to limitation due to the change in
ownership of our stock upon emergence from bankruptcy. Generally, the application of the relevant Internal Revenue Code
(IRC) provisions will release the limitation on $84 of pre-change NOLs each year, allowing pre-change losses to offset post-
change taxable income. Through further evaluation and audit adjustment, and after considering U.S. taxable income in 2016,
we estimate that $577 of our U.S. federal NOLs remains subject to limitation as of December 31, 2016. The remainder of our
U.S. federal NOLs represents a combination of post-change NOLs and pre-change NOLs on which the limitation has been
released. However, there can be no assurance that trading in our shares will not effect another change in ownership under the
IRC which would further limit our ability to utilize our available NOLs.
Unrecognized tax benefits — Unrecognized tax benefits are the difference between a tax position taken, or expected to be
taken, in a tax return and the benefit recognized for accounting purposes. Interest income or expense, as well as penalties
relating to income tax audit adjustments and settlements, are recognized as components of income tax expense or benefit.
Interest of $7 and $6 was accrued on the uncertain tax positions at December 31, 2016 and 2015.
Reconciliation of gross unrecognized tax benefits —
Balance, beginning of period
Decrease related to expiration of statute of limitations
Decrease related to prior years tax positions
Increase related to prior years tax positions
Increase related to current year tax positions
Decrease related to settlements
Balance, end of period
2016
2015
2014
$
$
$
87
(5)
(1)
28
8
117
$
109
(6)
(9)
1
8
(16)
87
$
$
101
(3)
25
(14)
109
We anticipate that the change in our gross unrecognized tax benefits as a result of examinations in various jurisdictions will
not be significant in the next twelve months. The settlement of these matters will not impact the effective tax rate. Gross
unrecognized tax benefits of $72 would impact the effective tax rate if recognized. If other open matters are settled with the
IRS or other taxing jurisdictions, the total amounts of unrecognized tax benefits for open tax years may be modified.
Note 18. Other Income, Net
Government grants and incentives
Foreign exchange gain (loss)
Gain on derecognition of noncontrolling interest
Strategic transaction expenses
Insurance and other recoveries
Gain on sale of marketable securities
Recognition of unrealized gain on payment-in-kind note receivable
Amounts attributable to previously divested/closed operations
Other, net
Other income, net
2016
2015
2014
$
$
$
8
(3)
(13)
10
7
9
18
$
$
3
(20)
5
(4)
4
1
1
11
1
$
4
11
(3)
2
2
17
33
Foreign exchange gains and losses on cross-currency intercompany loan balances that are not of a long-term investment
nature are included above. Foreign exchange gains and losses on intercompany loans that are permanently invested are reported
in OCI. During 2015, foreign exchange losses were primarily driven by the impact the strengthening U.S. dollar had on our
Mexican peso and euro forward contracts. As discussed in Note 1 above, effective March 31, 2014, we ceased using the official
bolivar exchange rate of 6.3 and began using the SICAD rate, which was 10.7 bolivars per U.S. dollar (as published by the
Central Bank of Venezuela) at March 31, 2014, to remeasure the financial statements of our subsidiaries in Venezuela. The
change to the SICAD rate resulted in a charge of $17 during the first quarter of 2014. After remaining relatively unchanged
during the second quarter the SICAD rate declined to 12.0 bolivars per U.S. dollar at September 30, 2014, resulting in a
remeasurement charge of $3 during the third quarter. During 2014, we realized gains of $8 as CENCOEX approved a portion of
our pending claims to settle U.S. dollar obligations at the official exchange rate of 6.3. Also during 2014, we realized net gains
of $14 on sales and purchases of U.S. dollars through SICAD 2 at average rates of 49.9 bolivars per U.S. dollar. The foreign
exchange gains and losses associated with our subsidiaries in Venezuela are included in the segment EBITDA of our Light
Vehicle operating segment.
86
Upon completion of the divestiture of our operations in Venezuela in January 2015, we recognized a gain on the
derecognition of the noncontrolling interest in a former Venezuelan subsidiary.
Strategic transaction expenses relate primarily to costs incurred in connection with acquisition and divestiture related
activities. The increase in strategic transaction expenses in 2016 is primarily attributable to our acquisition of SJT Forjaria Ltda.
and our divestitures of DCLLC and Nippon Reinz. See Notes 2 and 3 for additional information.
During 2016, we received a recovery of costs previously incurred on behalf of other participants in a consortium that
existed to administer certain legacy personal injury claims. During 2015, we reached a settlement with an insurance carrier for
the recovery of previously incurred legal costs. During 2014, we received a payment from the liquidation proceedings of
insurers.
The sale of our payment-in-kind note receivable during the first quarter of 2014 resulted in the recognition of the
remaining unrealized gain that arose following the valuation of the note receivable below its callable value at emergence from
bankruptcy.
As part of correcting overstatements of our pension and postretirement obligations and goodwill in September 2014, we
credited Other income, net for $6 to effectively reverse a portion of the write-off of goodwill assigned to our former Driveshaft
segment in 2008. See Note 1 for additional information.
Note 19. Segments, Geographical Area and Major Customer Information
We are a global provider of high technology driveline, sealing and thermal-management products for virtually every major
vehicle manufacturer in the on-highway and off-highway markets. Our driveline products – axles, driveshafts and transmissions
– are delivered through our Light Vehicle, Commercial Vehicle and Off-Highway operating segments. Our fourth global
operating segment – Power Technologies – is the center of excellence for the sealing and thermal technologies that span all
customers in our on-highway and off-highway markets. These operating segments have global responsibility and accountability
for business commercial activities and financial performance.
Dana evaluates the performance of its operating segments based on external sales and segment EBITDA. Segment
EBITDA is a primary driver of cash flows from operations and a measure of our ability to maintain and continue to invest in
our operations and provide shareholder returns. Our segments are charged for corporate and other shared administrative costs.
Segment EBITDA may not be comparable to similarly titled measures reported by other companies.
87
Segment information —
2016
Light Vehicle
Commercial Vehicle
Off-Highway
Power Technologies
Eliminations and other
Total
2015
Light Vehicle
Commercial Vehicle
Off-Highway
Power Technologies
Eliminations and other
Total
2014
Light Vehicle
Commercial Vehicle
Off-Highway
Power Technologies
Eliminations and other
Total
External
Sales
Inter-
Segment
Sales
Segment
EBITDA
Capital
Spend
$
$
$
$
$
$
2,607
1,254
909
1,056
$
113
83
30
14
(240)
$
279
96
129
158
5,826
$
— $
662
$
$
2,482
1,533
1,040
1,005
$
126
95
37
15
(273)
$
262
100
147
149
6,060
$
— $
658
$
$
2,496
1,838
1,231
1,052
$
139
92
37
19
(287)
$
250
172
169
154
$
6,617
$
— $
745
$
208
34
21
32
27
322
140
33
18
34
35
260
129
38
23
30
14
234
Depreciation
71
$
33
20
29
20
173
$
$
$
$
$
63
32
20
28
15
158
63
34
21
32
14
164
Net
Assets
1,194
699
262
440
760
3,355
1,002
692
310
423
467
2,894
1,003
870
346
445
360
3,024
$
$
$
$
$
$
Net assets include certain cash balances, accounts receivable, inventories, other current assets, certain intangibles,
investments in affiliates, other noncurrent assets, net property, plant and equipment, notes payable and short term debt, accounts
payable and current accrued liabilities.
88
Reconciliation of segment EBITDA to consolidated net income —
Segment EBITDA
$
2016
2015
2014
$
662
(2)
(173)
(9)
(36)
(17)
(13)
(2)
(80)
(1)
3
(17)
(113)
13
215
(424)
14
653
658
(6)
(158)
(16)
(15)
(14)
(4)
(6)
(36)
(8)
(6)
(2)
5
(113)
13
292
82
(34)
176
4
180
$
$
745
1
(164)
(49)
(21)
(16)
(3)
9
(80)
(42)
(19)
2
(118)
15
260
(70)
13
343
(15)
328
2016
2015
$
$
3,355
1,254
251
4,860
$
$
2,894
1,090
317
4,301
$
653
$
Corporate expense and other items, net
Depreciation
Amortization of intangibles
Restructuring
Stock compensation expense
Strategic transaction expenses
Other items
Loss on sale of subsidiaries
Impairment of long-lived assets
Distressed supplier costs
Amounts attributable to previously divested/closed operations
Loss on disposal group held for sale
Pension settlement charges
Loss on extinguishment of debt
Gain on derecognition of noncontrolling interest
Recognition of unrealized gain on payment-in-kind note receivable
Interest expense
Interest income
Income from continuing operations before income taxes
Income tax expense (benefit)
Equity in earnings (losses) of affiliates
Income from continuing operations
Income (loss) from discontinued operations
Net income
Reconciliation of segment net assets to consolidated total assets —
Segment net assets
Accounts payable and other current liabilities
Other current and long-term assets
Consolidated total assets
89
Geographic information — Of our 2016 consolidated net sales, the U.S., Italy and Germany account for 46%, 9% and 6%,
respectively. No other country accounted for more than 5% of our consolidated net sales during 2016. Sales are attributed to the
location of the product entity recording the sale. Long-lived assets represent property, plant and equipment.
North America
United States
Other North America
Total
Europe
Italy
Germany
Other Europe
Total
South America
Asia Pacific
Total
2016
Net Sales
2015
2014
2016
Long-Lived Assets
2015
2014
$
$
2,695
433
3,128
499
377
740
1,616
338
744
5,826
$
$
2,805
405
3,210
570
368
785
1,723
377
750
6,060
$
$
2,760
366
3,126
703
429
846
1,978
771
742
6,617
$
$
$
634
80
714
$
441
90
531
58
98
157
313
172
214
1,413
$
58
100
153
311
99
226
1,167
$
368
111
479
61
106
151
318
141
238
1,176
Sales to major customers — Ford is the only individual customer to whom sales have exceeded 10% of our consolidated sales
in the past three years. Sales to Ford for the three most recent years were $1,300 (22%) in 2016, $1,187 (20%) in 2015 and
$1,217 (18%) in 2014.
Note 20. Equity Affiliates
We have a number of investments in entities that engage in the manufacture of vehicular parts – primarily axles,
driveshafts and wheel-end braking systems – supplied to OEMs.
Dividends received from equity affiliates were $11, $16 and $16 in 2016, 2015 and 2014.
Equity method investments exceeding $5 at December 31, 2016 —
Dongfeng Dana Axle Co., Ltd. (DDAC)
Bendix Spicer Foundation Brake, LLC
Axles India Limited
All others as a group
Investments in equity affiliates
Investment in affiliates carried at cost
Investment in affiliates
Ownership
Percentage
50%
20%
48%
Investment
85
$
47
7
9
148
2
150
$
Our equity method investments in DDAC, Bendix Spicer Foundation Brake, LLC and Axles India Limited are included in
the net assets of our Commercial Vehicle operating segment.
The significant decline in China's commercial vehicle market during 2015 resulted in a series of monthly operating losses
by DDAC. These factors when combined with updated long-range plan information received from DDAC in the fourth quarter
of 2015, which incorporated China's projected "new normal" future growth rate, indicated that we may not be able to recover
the carrying value of our investment in DDAC. During the fourth quarter of 2015, we calculated the fair value of our
investment in DDAC to determine if we had an other-than-temporary decline in the carrying value of our investment. We used
both the discounted cash flow (an income approach) and guideline public company (a market approach) methods, weighting
each equally, to fair value our investment in DDAC. The discounted cash flow method used DDAC's updated long-range plan
and focuses on estimating the expected after-tax cash flows attributable to the subject company over its life and converting
these after-tax cash flows to present value through discounting. The discount rate of 16.0% which was used in our assessment
accounts for both the time value of money and subject company risk factors. The guideline public company method focuses on
comparing a subject company to reasonably similar (or "guideline") publicly-traded companies. Under this method, valuation
90
multiples are: (i) derived from the operating data of selected guideline public companies; (ii) evaluated and adjusted based on
the strengths and weaknesses of the subject company relative to the selected guideline companies; and (iii) applied to the
operating data of the subject company to arrive at an indication of fair value. The carrying value of our investment in DDAC
exceeded the calculated fair value by $39. The $39 impairment charge has been included in equity in earnings of affiliates.
The carrying value of our equity method investments at December 31, 2016 was $27 more than our share of the affiliates’
book value, including $19 attributable to goodwill. The difference between the investment carrying value and the amount of
underlying equity in assets, excluding goodwill, is being amortized on a straight-line basis over the underlying assets’ estimated
useful lives of five to forty-five years.
Summarized financial information for DDAC and other equity affiliates on a combined basis —
2016
DDAC
2015
2014
Other Equity Affiliates Combined
2014
2015
2016
Sales
Gross profit
Income (loss) before income taxes
Net income (loss)
Dana's equity in earnings (loss) of affiliate
$
$
$
$
$
646
83
15
18
7
$
$
$
$
$
$
554
$
45
(14) $
(6) $
(45) $
762
82
23
17
5
$
$
$
$
$
498
98
26
24
7
Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities
DDAC
2016
2015
$
$
$
$
547
191
738
512
87
599
$
$
$
$
406
206
612
385
95
480
$
$
$
$
$
$
$
$
$
582
113
42
40
11
$
$
$
$
$
564
100
33
32
8
Other Equity
Affiliates Combined
2015
2016
169
74
243
96
13
109
$
$
$
$
180
71
251
97
12
109
91
Dana Incorporated
Quarterly Results (Unaudited)
(In millions, except per share amounts)
2016
Net sales
Gross margin
Net income
Net income attributable to the parent company
Net income per share available to parent company common
stockholders
Basic
Diluted
2015
Net sales
Gross margin
Net income (loss)
Net income (loss) attributable to the parent company
Net income (loss) per share available to parent company common
stockholders
Basic
Diluted
_________________________________________________________
Note: Gross margin is net sales less cost of sales.
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
$
$
$
$
$
$
$
$
$
$
$
1,449
199
48
45
0.30
0.30
First
Quarter
1,608
228
74
63
0.38
0.38
$
$
$
$
$
$
$
$
$
$
$
$
1,546
233
55
53
0.36
0.36
Second
Quarter
1,609
236
63
59
0.36
0.36
$
$
$
$
$
$
$
$
$
$
$
$
1,384
208
61
57
0.40
0.39
Third
Quarter
1,468
213
122
119
0.75
0.75
$
$
$
$
$
$
$
$
$
$
$
$
1,447
204
489
485
3.37
3.34
Fourth
Quarter
1,375
172
(79)
(82)
(0.54)
(0.54)
Net income for the fourth quarter of 2016 includes a combined loss of $80 ($52 after tax) on the divestiture of our Nippon
Reinz Co. Ltd. and Dana Companies, LLC subsidiaries and a $476 credit resulting from the release of valuation allowance on
our U.S. deferred tax assets of $501 net of an increase in valuation allowance of $25 in Brazil. Net income for the second
quarter of 2016 includes a $17 pre-tax loss on extinguishment of debt. Net income for the third quarter of 2015 includes a $36
($24 after tax) loss on impairment of long-lived assets and a deferred tax asset valuation allowance release of $100. Net income
for the fourth quarter of 2015 includes a $39 impairment loss related to our equity method investment in DDAC, a charge
resulting from deferred tax asset valuation allowance adjustments of $49 and tax expense of $23 on the sale of an affiliate's
stock to a non-U.S. affiliate.
92
Dana Incorporated
Schedule II
Valuation and Qualifying Accounts and Reserves
(In millions)
Amounts deducted from assets in the balance sheets —
Balance at
beginning
of period
Amounts
charged
(credited)
to income
Allowance
utilized
Adjustments
arising
from change
in currency
exchange
rates
and other
items
Balance at
end of
period
$
$
$
$
$
$
$
$
$
5
6
7
46
48
48
662
728
982
$
$
$
$
$
$
$
$
$
2
1
1
19
18
20
$
$
$
$
$
$
(483) $
(49) $
(246) $
— $
(1) $
(1) $
(13) $
(16) $
(15) $
— $
(1) $
(7) $
(1) $
(1) $
(1) $
(1) $
(4) $
(5) $
106
$
(16) $
(1) $
6
5
6
51
46
48
285
662
728
Accounts Receivable - Allowance for Doubtful
Accounts
2016
2015
2014
Inventory Reserves
2016
2015
2014
Deferred Tax Assets - Valuation Allowance
2016
2015
2014
93
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure controls and procedures — Our management, with the participation of our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as amended, (the Exchange Act)) as of the end of the period covered by
this report. Based on such evaluations, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the
end of such period, our disclosure controls and procedures are effective.
Management's report on internal control over financial reporting — Our management is responsible for establishing and
maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).
Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. As permitted by Securities and Exchange
Commission guidance, management excluded from its assessment of internal control over financial reporting SJT Forjaria
Ltda., which was acquired on December 23, 2016 and accounted for less than 2% of Dana's consolidated total assets and none
of Dana's consolidated net sales as of and for the year ended December 31, 2016. Based on this evaluation, management has
concluded that, as of December 31, 2016, our internal control over financial reporting was effective.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of our
internal control over financial reporting as of December 31, 2016, as stated in its report which is included herein.
Changes in internal control over financial reporting — There has been no change in our internal control over financial
reporting during the quarter ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Dana has adopted Standards of Business Conduct that apply to all of its officers and employees worldwide. Dana also has
adopted Standards of Business Conduct for the Board of Directors. Both documents are available on Dana’s Internet website at
http://www.dana.com/investors.
The remainder of the response to this item will be included under the sections captioned “Corporate Governance,”
“Selection of Chairman and Chief Executive Officer; Succession Planning,” “Information About the Nominees,” “Risk
Oversight,” “Committees and Meetings of Directors,” “Executive Officers” and “Section 16(a) Beneficial Ownership
Reporting Compliance” of Dana’s definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on
April 27, 2017, which sections are hereby incorporated herein by reference.
Item 11. Executive Compensation
The response to this item will be included under the sections captioned “Compensation Committee Interlocks and Insider
Participation,” “Compensation of Executive Officers,” “Compensation Discussion and Analysis,” “Compensation of
Directors,” “Officer Stock Ownership Guidelines,” “Compensation Committee Report,” “Summary Compensation Table,”
“Grants of Plan-Based Awards at Fiscal Year-End,” “Outstanding Equity Awards at Fiscal Year-End,” “Option Exercises and
Stock Vested During Fiscal Year,” “Pension Benefits,” “Nonqualified Deferred Compensation at Fiscal Year-End,” “Executive
Agreements” and “Potential Payments and Benefits Upon Termination or Change in Control” of Dana’s definitive Proxy
94
Statement relating to the Annual Meeting of Shareholders to be held on April 27, 2017, which sections are hereby incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The response to this item will be included under the section captioned “Security Ownership of Certain Beneficial Owners
and Management” of Dana’s definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 27,
2017, which section is hereby incorporated herein by reference.
Equity Compensation Plan Information
The following table contains information at December 31, 2016 about shares of stock which may be issued under our
equity compensation plans, all of which have been approved by our shareholders.
(Shares in millions)
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights(1)
Weighted Average
Exercise Price of
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights(2)
Number of Securities
Remaining Available
for
Future Issuance
3.9
$
14.56
3.9
$
14.56
3.2
3.2
________________________________________
Notes:
(1)
In addition to stock options, restricted stock units and performance shares have been awarded under Dana's equity compensation plans and were
outstanding at December 31, 2016.
(2) Calculated without taking into account the 2.4 shares of common stock subject to outstanding restricted stock and performance share units that become
issuable as those units vest since they have no exercise price and no cash consideration or other payment is required for such shares.
Item 13. Certain Relationships and Related Transactions and Director Independence
The response to this item will be included under the sections captioned “Director Independence and Transactions of
Directors with Dana,” “Transactions of Executive Officers with Dana” and “Information about the Nominees” of Dana’s
definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 27, 2017, which sections are
hereby incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The response to this item will be included under the section captioned "Independent Auditors" of Dana's definitive Proxy
Statement relating to the Annual Meeting of Shareholders to be held on April 27, 2017, which section is hereby incorporated
herein by reference.
95
Item 15. Exhibits and Financial Statement Schedules
PART IV
(a) List of documents filed as a part of this report:
1.
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Statement of Operations
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Stockholders' Equity
Notes to the Consolidated Financial Statements
2.
3.
Quarterly Results (Unaudited)
Financial Statement Schedule:
Valuation and Qualifying Accounts and Reserves (Schedule II)
All other schedules are omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto.
4.
Exhibit Index
10-K
Pages
41
42
43
44
45
46
47
92
93
98
96
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, hereunto duly authorized.
SIGNATURES
Date: February 10, 2017
DANA INCORPORATED
By:
/s/ James K. Kamsickas
James K. Kamsickas
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 10th day of
February 2017 by the following persons on behalf of the registrant and in the capacities indicated, including a majority of the
directors.
Signature
/s/ James K. Kamsickas
James K. Kamsickas
/s/ Jonathan M. Collins
Jonathan M. Collins
/s/ Rodney R. Filcek
Rodney R. Filcek
/s/ Virginia A. Kamsky*
Virginia A. Kamsky
/s/ Terrence J. Keating*
Terrence J. Keating
/s/ R. Bruce McDonald*
R. Bruce McDonald
/s/ Mark A. Schulz*
Mark A. Schulz
/s/ Keith E. Wandell*
Keith E. Wandell
*By:
/s/ Marc S. Levin
Marc S. Levin, Attorney-in-Fact
Title
President and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
Non-Executive Chairman and Director
97
EXHIBIT INDEX
All documents referenced below were filed by Dana Corporation or Dana Incorporated (as successor registrant) - file
number 001-01063, unless otherwise indicated.
No.
Description
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
10.1**
10.2**
10.3**
10.4**
10.5**
10.6**
10.7**
10.8**
10.9**
10.10**
10.11**
10.12**
10.13**
Second Restated Certificate of Incorporation of Dana Holding Corporation. Filed as Exhibit 3.2 to Registrant’s
Current Report on Form 8-K dated October 29, 2014, and incorporated herein by reference.
Certificate of Amendment to the Second Restated Certificate of Incorporation of Dana Holding Corporation. Filed
as Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated August 1, 2016, and incorporated herein by
reference.
Amended and Restated Bylaws of Dana Holding Corporation. Filed as Exhibit 3.2 to Registrant’s Current Report
on Form 8-K dated August 1, 2016, and incorporated herein by reference.
Specimen Common Stock Certificate. Filed as Exhibit 4.1 to Registrant’s Registration Statement on Form 8-A
dated January 31, 2008, and incorporated herein by reference.
Indenture, dated as of January 28, 2011, among Dana and Wells Fargo Bank, National Association, as trustee. Filed
as Exhibit 4.6 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and
incorporated herein by reference.
Second Supplemental Indenture, dated August 2, 2013, with respect to the Indenture, dated January 28, 2011,
between Dana Holding Corporation and Wells Fargo Bank, National Association, as trustee. Filed as Exhibit 4.1 to
Registrant's Current Report on Form 8-K dated August 5, 2013, and incorporated herein by reference.
Third Supplemental Indenture, dated December 9, 2014, with respect to the Indenture, dated January 28, 2011,
between Dana Holding Corporation and Wells Fargo Bank, National Association, as trustee. Filed as Exhibit 4.1 to
Registrant's Current Report on Form 8-K dated December 9, 2014, and incorporated herein by reference.
Indenture, dated as of May 27, 2016, among Dana Luxembourg Financing S.à r.l., Dana Holding Corporation and
Wells Fargo Bank, National Association, as trustee. Filed as Exhibit 4.1 to Registrant’s Current Report on Form 8-
K dated May 27, 2016, and incorporated herein by reference.
Executive Employment Agreement dated August 11, 2015 by and between James K. Kamsickas and Dana Holding
Corporation. Filed as Exhibit 10.1 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December
31, 2015, and incorporated herein by reference.
Form of Proprietary Interest Protection and Non-Solicitation Agreement. Filed as Exhibit 10.3 to Registrant’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and incorporated herein by reference.
Dana Limited Supplemental Executive Retirement Plan. Filed as Exhibit 10.4 to Registrant’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2012, and incorporated herein by reference.
Dana Holding Corporation 2008 Omnibus Incentive Plan. Filed as Exhibit 10.10 to Registrant's Current Report on
Form 8-K dated February 6, 2008, and incorporated herein by reference.
Dana Holding Corporation 2012 Omnibus Incentive Plan. Filed as Exhibit 4.3 to Registrant’s Form S-8
Registration Statement dated May 2, 2012, and incorporated herein by reference.
Form of Indemnification Agreement. Filed as Exhibit 10.4 to Registrant’s Current Report on Form 8-K dated
February 6, 2008, and incorporated herein by reference.
Form of Option Right Agreement for Non-Employee Directors. Filed as Exhibit 10.22 to Registrant’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2007, and incorporated herein by reference.
Form of Restricted Stock Unit Award Agreement for Non-Employee Directors. Filed as Exhibit 10.23 to
Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and incorporated herein by
reference.
Form of Option Agreement under the Dana Holding Corporation 2008 Omnibus Incentive Plan. Filed as Exhibit
10.38 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and incorporated
herein by reference.
Form of Restricted Stock Unit Agreement under the Dana Holding Corporation 2008 Omnibus Incentive Plan.
Filed as Exhibit 10.39 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008,
and incorporated herein by reference.
Form of Performance Share Agreement under the Dana Holding Corporation 2008 Omnibus Incentive Plan. Filed
as Exhibit 10.40 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and
incorporated herein by reference.
Form of Share Appreciation Rights Agreement under the Dana Holding Corporation 2008 Omnibus Incentive Plan.
Filed as Exhibit 10.41 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008,
and incorporated herein by reference.
Form of Option Agreement under the Dana Holding Corporation 2012 Omnibus Incentive Plan. Filed as Exhibit
10.15 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and incorporated
herein by reference.
98
No.
10.14**
10.15**
10.16**
Description
Form of Restricted Stock Unit Agreement under the Dana Holding Corporation 2012 Omnibus Incentive Plan.
Filed as Exhibit 10.16 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012,
and incorporated herein by reference.
Form of Performance Share Agreement under the Dana Holding Corporation 2012 Omnibus Incentive Plan. Filed
as Exhibit 10.17 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and
incorporated herein by reference.
Form of Share Appreciation Rights Agreement under the Dana Holding Corporation 2012 Omnibus Incentive Plan.
Filed as Exhibit 10.18 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012,
and incorporated herein by reference.
10.17** Dana Holding Corporation Executive Perquisite Plan. Filed as Exhibit 10.4 to Registrant’s Current Report on Form
8-K dated April 18, 2008, and incorporated herein by reference.
10.18** Dana Holding Corporation Executive Severance Plan. Filed as Exhibit 10.1 to Registrant’s Current Report on Form
10.19
10.20
12
21
23
24
31.1
31.2
32
101
8-K dated June 24, 2008, and incorporated herein by reference.
Revolving Credit and Guaranty Agreement, dated as of June 9, 2016, among Dana Holding Corporation, as
borrower, the guarantors party thereto, Citibank, N.A., as administrative agent and collateral agent, and the other
lenders party thereto. Filed as Exhibit 10.1 to Registrant's Current Report on Form 8-K dated June 9, 2016, and
incorporated herein by reference.
Revolving Facility Security Agreement, dated as of June 9, 2016, from Dana Holding Corporation and the other
guarantors referred to therein, as grantors, to Citibank, N.A., as collateral agent. Filed as Exhibit 10.2 to
Registrant's Current Report on Form 8-K dated June 9, 2016, and incorporated herein by reference.
Computation of Ratio of Earnings to Fixed Charges. Filed with this Report.
List of Consolidated Subsidiaries of Dana Incorporated. Filed with this Report.
Consent of PricewaterhouseCoopers LLP. Filed with this Report.
Power of Attorney. Filed with this Report.
Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer. Filed with this Report.
Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer. Filed with this Report.
Section 1350 Certification of Periodic Report (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002). Filed
with this Report.
The following materials from Dana Incorporated’s Annual Report on Form 10-K for the year ended December 31,
2016, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statement of Operations,
(ii) the Consolidated Statement of Comprehensive Income, (iii) the Consolidated Balance Sheet, (iv) the Consolidated
Statement of Cash Flows, (v) the Consolidated Statement of Shareholders’ Equity and (vi) Notes to the Consolidated
Financial Statements, filed herewith.
** Management contract or compensatory plan required to be filed as part of an exhibit pursuant to Item 15(b) of
Form 10-K.
99
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, James K. Kamsickas, certify that:
1. I have reviewed this Annual Report on Form 10-K of Dana Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 10, 2017
/s/ James K. Kamsickas
James K. Kamsickas
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Jonathan M. Collins, certify that:
1. I have reviewed this Annual Report on Form 10-K of Dana Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 10, 2017
/s/ Jonathan M. Collins
Jonathan M. Collins
Executive Vice President and Chief Financial Officer
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Annual Report of Dana Incorporated (Dana) on Form 10-K for the year ended December 31, 2016,
as filed with the Securities and Exchange Commission on the date hereof (the Report), each of the undersigned officers of Dana
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to
such officer's knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of Dana as of the dates and for the periods expressed in the Report.
Date: February 10, 2017
/s/ James K. Kamsickas
James K. Kamsickas
President and Chief Executive Officer
/s/ Jonathan M. Collins
Jonathan M. Collins
Executive Vice President and Chief Financial Officer
(This page intentionally left blank.)
Investor Information
World Headquarters
Dana Incorporated
3939 Technology Drive
Maumee, OH 43537-7000
USA
Telephone: 419-887-3000
Fax: 419-887-5200
Annual Meeting Information
The 2017 Annual Meeting of Shareholders
will be held at the Westin Detroit Metropolitan
Airport in Romulus, Michigan, on April 27, 2017.
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
406 Washington St.
Suite 200
Toledo, OH 43604
USA
Form 10-K and Other Reports
Dana’s Annual Report on Form 10-K and its
Proxy Statement may be accessed online at
www.dana.com/investors, or printed copies
may be obtained without charge by writing:
Investor Relations
Dana Incorporated
P.O. Box 1000
Maumee, OH 43537-7000
USA
or by calling Dana’s Investor Relations
Department at 800-537-8823.
Stock Listing
The New York Stock Exchange
is the principal market for
Dana common stock.
Ticker Symbol: DAN
Shareholder Services
Inquiries related to shareholder records, such as change of
name, address, or ownership of stock, should be directed to
the transfer agent and registrar:
Wells Fargo Shareowner Services
Telephone: 800-468-9716 toll free
or direct: (651) 450-4064
Written Requests:
Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874
USA
Certified/Overnight Mail:
Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120
USA
Wells Fargo’s stock transfer website:
www.shareowneronline.com
Investor Services
Go to www.dana.com/investors to find the
latest investor relations information about
Dana, including stock quotes, news releases,
and financial data.
Requests for information may be directed to:
Investor Relations
Dana Incorporated
P.O. Box 1000
Maumee, OH 43537-7000
USA
E-mail: InvestorRelations@dana.com
Dana’s Investor Line: 800-537-8823
Through this 24-hour phone service, a caller may
leave his or her name with a message, and the
call will be returned by a Dana representative.
www.dana.com
©2017 Dana Limited DI201610K