Edgar Filing: DANA HOLDING CORP

Weighted-average Per Share

Granted
(In millions)

Grant Date
Fair Value

DAN-2015.06.30-10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the quarterly period ended: June 30, 2015

Commission File Number: 1-1063

Dana Holding Corporation

(Exact name of registrant as specified in its charter)



Delaware		26-1531856
(State of incorporation)		(IRS Employer Identification Number)

3939 Technology Drive, Maumee, OH		43537
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (419) 887-3000

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 þ No o

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 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

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. (Check one):



Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

There were 160,279,736 shares of the registrant’s common stock outstanding at July 10, 2015.

DANA HOLDING CORPORATION – FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2015

TABLE OF CONTENTS



		10-Q Pages

PART I – FINANCIAL INFORMATION

Item 1	Financial Statements
	Consolidated Statement of Operations (Unaudited)	3
	Consolidated Statement of Comprehensive Income (Unaudited)	4
	Consolidated Balance Sheet (Unaudited)	5
	Consolidated Statement of Cash Flows (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	7

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3	Quantitative and Qualitative Disclosures About Market Risk	43

Item 4	Controls and Procedures	43

PART II – OTHER INFORMATION

Item 1	Legal Proceedings	44

Item 1A	Risk Factors	44

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 6	Exhibits	44

Signatures		45
Exhibit Index		46

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Dana Holding Corporation

Consolidated Statement of Operations (Unaudited)

(In millions except per share amounts)



	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2014			2015			2014
Net sales	$	1,609	$	1,710		$	3,217		$	3,398
Costs and expenses
Cost of sales	1,373		1,462			2,753			2,916
Selling, general and administrative expenses	101		108			201			213
Amortization of intangibles	4		10			9			23
Restructuring charges, net	11		3			12			12
Loss on extinguishment of debt						(2		)
Other income, net	4		21			16			15
Income from continuing operations before interest expense and income taxes	124		148			256			249
Interest expense	27		29			55			59
Income from continuing operations before income taxes	97		119			201			190
Income tax expense	36		33			67			67
Equity in earnings of affiliates	2		6			3			7
Income from continuing operations	63		92			137			130
Loss from discontinued operations	—		(2		)	—			(3		)
Net income	63		90			137			127
Less: Noncontrolling interests net income	4		4			15			7
Net income attributable to the parent company	59		86			122			120
Preferred stock dividend requirements			2						5
Net income available to common stockholders	$	59	$	84		$	122		$	115

Net income per share available to parent company common stockholders:
Basic:
Income from continuing operations	$	0.36	$	0.55		$	0.75		$	0.77
Loss from discontinued operations	$	—	$	(0.01	)	$	—		$	(0.02	)
Net income	$	0.36	$	0.54		$	0.75		$	0.75

Diluted:
Income from continuing operations	$	0.36	$	0.50		$	0.74		$	0.70
Loss from discontinued operations	$	—	$	(0.01	)	$	—		$	(0.02	)
Net income	$	0.36	$	0.49		$	0.74		$	0.68

Weighted-average common shares outstanding
Basic	162.1		156.7			163.4			153.7
Diluted	163.2		175.1			164.6			176.0

Dividends declared per common share	$	0.06	$	0.05		$	0.11		$	0.10

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

Dana Holding Corporation

Consolidated Statement of Comprehensive Income (Unaudited)

(In millions)



	Three Months Ended June 30,					Six Months Ended June 30,
	2015			2014		2015			2014
Net income	$	63		$	90	$	137		$	127
Less: Noncontrolling interests net income	4			4		15			7
Net income attributable to the parent company	59			86		122			120

Other comprehensive income (loss) attributable to the parent company, net of tax:
Currency translation adjustments	14			14		(85		)	2
Hedging gains and losses	3			1		2			1
Investment and other gains and losses	(1		)	3					3
Defined benefit plans	7			3		23			10
Other comprehensive income (loss) attributable to the parent company	23			21		(60		)	16

Other comprehensive income (loss) attributable to noncontrolling interests, net of tax:
Currency translation adjustments	(2		)	1		(2		)
Defined benefit plans						1
Other comprehensive income (loss) attributable to noncontrolling interests	(2		)	1		(1		)	—

Total comprehensive income attributable to the parent company	82			107		62			136
Total comprehensive income attributable to noncontrolling interests	2			5		14			7
Total comprehensive income	$	84		$	112	$	76		$	143

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

Dana Holding Corporation

Consolidated Balance Sheet (Unaudited)

(In millions except share and per share amounts)



	June 30, 2015			December 31, 2014
Assets
Current assets
Cash and cash equivalents	$	894		$	1,121
Marketable securities	169			169
Accounts receivable
Trade, less allowance for doubtful accounts of $5 in 2015 and $6 in 2014	881			755
Other	110			117
Inventories
Raw materials	335			304
Work in process and finished goods	360			350
Other current assets	130			111
Current assets of disposal group held for sale				27
Total current assets	2,879			2,954
Goodwill	82			90
Intangibles	150			169
Other noncurrent assets	316			337
Investments in affiliates	195			204
Property, plant and equipment, net	1,168			1,176
Total assets	$	4,790		$	4,930

Liabilities and equity
Current liabilities
Notes payable, including current portion of long-term debt	$	51		$	65
Accounts payable	860			791
Accrued payroll and employee benefits	147			158
Taxes on income	57			32
Other accrued liabilities	187			194
Current liabilities of disposal group held for sale				21
Total current liabilities	1,302			1,261
Long-term debt	1,570			1,613
Pension and postretirement obligations	532			580
Other noncurrent liabilities	277			279
Noncurrent liabilities of disposal group held for sale				17
Total liabilities	3,681			3,750
Commitments and contingencies (Note 12)
Parent company stockholders' equity
Preferred stock, 50,000,000 shares authorized, $0.01 par value, zero shares outstanding	—			—
Common stock, 450,000,000 shares authorized, $0.01 par value, 160,631,551 and 166,070,057 shares outstanding	2			2
Additional paid-in capital	2,650			2,640
Accumulated deficit	(428		)	(532		)
Treasury stock, at cost (7,532,298 and 1,588,990 shares)	(161		)	(33		)
Accumulated other comprehensive loss	(1,057		)	(997		)
Total parent company stockholders' equity	1,006			1,080
Noncontrolling equity	103			100
Total equity	1,109			1,180
Total liabilities and equity	$	4,790		$	4,930

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

Dana Holding Corporation

Consolidated Statement of Cash Flows (Unaudited)

(In millions)



	Six Months Ended June 30,
	2015			2014
Operating activities
Net income	$	137		$	127
Depreciation	78			81
Amortization of intangibles	10			27
Amortization of deferred financing charges	2			3
Call premium on senior notes	2
Dividends received in excess of current earnings of affiliates	9			6
Stock compensation expense	8			9
Deferred income taxes	2			(5		)
Pension contributions, net	(9		)	(5		)
Interest payment received on payment-in-kind note receivable				40
Change in working capital	(108		)	(66		)
Other, net	(3		)	6
Net cash provided by operating activities	128			223

Investing activities
Purchases of property, plant and equipment	(122		)	(126		)
Principal payment received on payment-in-kind note receivable				35
Purchases of marketable securities	(26		)	(57		)
Proceeds from sales of marketable securities	12			1
Proceeds from maturities of marketable securities	16			2
Proceeds from sale of business				9
Other	(3		)	3
Net cash used in investing activities	(123		)	(133		)

Financing activities
Net change in short-term debt	3			(5		)
Proceeds from letters of credit				12
Repayment of letters of credit	(4		)	(6		)
Proceeds from long-term debt	18			1
Repayment of long-term debt	(58		)	(19		)
Call premium on senior notes	(2		)
Dividends paid to preferred stockholders				(4		)
Dividends paid to common stockholders	(18		)	(16		)
Distributions to noncontrolling interests	(3		)	(2		)
Repurchases of common stock	(126		)	(113		)
Other	1
Net cash used in financing activities	(189		)	(152		)

Net decrease in cash and cash equivalents	(184		)	(62		)
Cash and cash equivalents – beginning of period	1,121			1,256
Effect of exchange rate changes on cash balances	(43		)	(22		)
Cash and cash equivalents – end of period	$	894		$	1,172

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

Dana Holding Corporation

Index to Notes to Consolidated Financial Statements



1.	Organization and Summary of Significant Accounting Policies

2.	Disposal Groups and Discontinued Operations

3.	Goodwill and Other Intangible Assets

4.	Restructuring of Operations

5.	Stockholders' Equity

6.	Earnings per Share

7.	Stock Compensation

8.	Pension and Postretirement Benefit Plans

9.	Marketable Securities

10.	Financing Agreements

11.	Fair Value Measurements and Derivatives

12.	Commitments and Contingencies

13.	Warranty Obligations

14.	Income Taxes

15.	Other Income, Net

16.	Segments

17.	Equity Affiliates

Notes to Consolidated Financial Statements (Unaudited)

(In millions, except share and per share amounts)

Note 1. Organization and Summary of Significant Accounting Policies

General

Dana Holding Corporation (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 are prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. These statements are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. The results reported in these consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the consolidated financial statements in Item 8 of our 2014 Form 10-K.

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 is not anticipated to be material to our 2015 full year net income attributable to the parent company.

Historically, we have not adjusted the purchases of property, plant and equipment presented in our consolidated statement of cash flows for invoices not paid in cash as of the end of the period. While the error had no impact on the total net cash flows presented in any prior period it did result in a misclassification between net cash provided by (used in) operating activities and net cash used in investing activities. Prior period amounts have been revised to properly reflect capital invoices not paid in cash as of the end of each period presented. Purchases of property, plant and equipment previously presented for the six months ended June 30, 2014, have been increased by $30 with a corresponding offset to change in working capital. At June 30, 2015 and 2014, we had $46 and $13 of purchases of property, plant and equipment included in accounts payable.

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. See Note 2 for additional information regarding the disposal group held for sale at the end of 2014 and divested in January 2015.

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 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 Note 2 for additional information regarding our discontinued operations.

Recently adopted accounting pronouncements

In April 2014, the Financial Accounting Standards Board (FASB) issued guidance that revises the definition of a discontinued operation. The revised definition limits discontinued operations reporting to disposals of components of an entity

that represent strategic shifts that have (or will have) a major effect on operations and financial results. The guidance also requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The guidance applies to covered transactions that occur after December 31, 2014. The significance of this guidance for Dana is dependent on any qualifying future dispositions or disposals.

Recently issued accounting pronouncements

In May 2015, the FASB issued guidance that removes from the fair value hierarchy investments for which fair value is measured at net asset value (or its equivalent) using the available practical expedient. The new guidance also modifies the scope of the disclosures related to such investments, eliminating from scope those investments eligible for but not actually valued using the practical expedient. Entities must continue to disclose information on investments for which fair value is measured at net asset value (or its equivalent) using the practical expedient, including information that helps readers understand the investments and whether the investments, if sold, are probable of being sold at amounts that differ from the net asset value. This guidance becomes effective January 1, 2016 and requires retrospective application. Early adoption is permitted. We are currently evaluating the impact this guidance will have on disclosures covering certain assets held by our pension plans.

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 should 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 should account for the arrangement as a service contract. The guidance is effective January 1, 2016 and can be adopted either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. We are currently evaluating the impact this guidance will have 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 entity's fiscal year end or the month end that is closest to the date of a significant event caused by the entity that occurred in an interim period. Significant events, such as a plan amendment, settlement or curtailment, call 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 guidance is effective January 1, 2016 and early adoption is permitted. The guidance will not impact our consolidated financial statements.

In April 2015, the FASB issued guidance which changes the presentation of debt issuance costs. Debt issuance costs related to term debt will be presented on the balance sheet as a direct deduction from the related debt liability rather than recorded as a separate asset. The amendment does not affect the recognition and measurement of debt issuance costs. There is no effect on the statement of operations as debt issuance costs will continue to be amortized to interest expense. The guidance becomes effective January 1, 2016 and requires retrospective application to all prior periods presented. We intend to early adopt the guidance effective December 31, 2015.

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. This guidance becomes effective January 1, 2016. We are currently evaluating the impact this guidance will have on 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 guidance, which is effective January 1, 2016, is not expected to impact 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. As a result, this guidance will be effective January 1, 2018 with the option to adopt the standard as of the original effective date, January 1, 2017. The guidance allows for either a full retrospective or a modified retrospective transition method. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

Note 2. Disposal Groups and Discontinued Operations

Disposal of operations in Venezuela — In December 2014, we entered into an agreement to divest our Light Vehicle operations in Venezuela (the disposal group) for no consideration to an unaffiliated company. 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. The carrying amounts of the major classes of assets and liabilities of our operations in Venezuela as of that date were as follows:



	December 31,
	2014
Cash and cash equivalents	$	27
Current assets classified as held for sale	$	27

Accounts payable	$	16
Accrued payroll and employee benefits	4
Other accrued liabilities	1
Current liabilities classified as held for sale	$	21

Pension obligations	$	11
Other noncurrent liabilities	6
Noncurrent liabilities classified as held for sale	$	17

Accumulated other comprehensive loss classified as held for sale	$	(11	)

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 — In March 2010, we sold substantially all of the assets of our Structural Products business to Metalsa S.A. de C.V. (Metalsa). Upon cessation of all operations in August 2012, the former Structural Products business was presented as discontinued operations in the accompanying financial statements. 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 expense within discontinued operations during the second quarter of 2014. The loss from discontinued operations for the first six months of 2014 also included legal fees and other costs associated with resolving claims of the buyer and a former customer.

Note 3. Goodwill and Other Intangible Assets

Goodwill — Our goodwill is assigned to our Off-Highway operating segment. The change in the carrying amount of goodwill in 2015 is due to currency fluctuation.

Components of other intangible assets —



		June 30, 2015							December 31, 2014
	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	7	$	87	$	(83	)	$	4	$	90	$	(85	)	$	5
Trademarks and trade names	16	3		(2		)	1		3		(1		)	2
Customer relationships	8	467		(407		)	60		493		(416		)	77
Non-amortizable intangible assets
Trademarks and trade names		65					65		65					65
Used in research and development activities		20					20		20					20
		$	642	$	(492	)	$	150	$	671	$	(502	)	$	169

The net carrying amounts of intangible assets, other than goodwill, attributable to each of our operating segments at June 30, 2015 were as follows: Light Vehicle — $12, Commercial Vehicle — $81, Off-Highway — $47 and Power Technologies — $10.

Amortization expense related to amortizable intangible assets —



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Charged to cost of sales	$	—	$	2	$	1	$	4
Charged to amortization of intangibles	4		10		9		23
Total amortization	$	4	$	12	$	10	$	27

The following table provides the estimated aggregate pre-tax amortization expense related to intangible assets for each of the next five years based on June 30, 2015 exchange rates. Actual amounts may differ from these estimates due to such factors as currency translation, customer turnover, impairments, additional intangible asset acquisitions and other events.



	Remainder of 2015		2016		2017		2018		2019
Amortization expense	$	8	$	16	$	13	$	10	$	9

Note 4. Restructuring of Operations

Our restructuring activities primarily include rationalizing our operating footprint by consolidating facilities, positioning operations in lower cost locations and reducing overhead 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 the second quarter of 2015, we implemented certain headcount reduction initiatives, primarily in our Commercial Vehicle business in Brazil in response to lower demand in that region. Including costs associated with this action and with other previously announced initiatives, restructuring expense during the second quarter of 2015 was $11 and primarily represented severance and related benefits costs.

During the first quarter of 2015, we continued to execute our previously announced initiatives. Restructuring expense during the first quarter of 2015 was $1 and primarily represented continuing exit costs.

During the first and second quarters of 2014, we continued to implement certain headcount reduction programs, primarily associated with the closure of our Commercial Vehicle foundry operation in Argentina. Including costs associated with this action and with other previously announced initiatives, restructuring expense for the six months ended June 30, 2014 was $12, including $8 of severance and related benefit costs and $4 of exit costs.

Accrued restructuring costs and activity, including noncurrent portion —



	Employee Termination Benefits			Exit Costs			Total
Balance at March 31, 2015	$	7		$	9		$	16
Charges to restructuring	11						11
Cash payments	(3		)				(3		)
Balance at June 30, 2015	$	15		$	9		$	24

Balance at December 31, 2014	$	12		$	9		$	21
Charges to restructuring	11			1			12
Cash payments	(7		)	(1		)	(8		)
Currency impact	(1		)				(1		)
Balance at June 30, 2015	$	15		$	9		$	24

At June 30, 2015, the accrued employee termination benefits include costs to reduce approximately 250 employees over the next two years. The exit costs relate primarily to lease continuation obligations.

Cost to complete — The following table provides project-to-date and estimated future expenses for completion of our restructuring initiatives.



	Expense Recognized						Future Cost to Complete
	Prior to 2015		2015		Total to Date		Future Cost to Complete
Light Vehicle	$	9	$	1	$	10	$	2
Commercial Vehicle	23		11		34		10
Total	$	32	$	12	$	44	$	12

The future cost to complete includes estimated separation costs and exit costs, 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 5. Stockholders’ Equity

Common stock — Our Board of Directors declared a quarterly cash dividend of six cents per share of common stock in the second quarter of 2015 and five cents per share of common stock in the first quarter of 2015. Dividends accrue on restricted stock units (RSUs) granted under our stock compensation program and will be paid in cash or additional units when the underlying units vest.

Share repurchase program — Our Board of Directors approved a share repurchase program of $1,400, expiring on December 31, 2015. Under the program, we spent $126 to repurchase 5,822,021 shares of our common stock during the first six months of 2015 through open market transactions. Approximately $185 remained available under the program for future share repurchases as of June 30, 2015.

Changes in equity —



	2015									2014
Three Months Ended June 30,	Attributable to Parent			Attributable to Non- controlling Interests			Total Equity			Attributable to Parent			Attributable to Non- controlling Interests			Total Equity
Balance, March 31	$	991		$	106		$	1,097		$	1,272		$	105		$	1,377
Total comprehensive income	82			2			84			107			5			112
Preferred stock dividends							—			(2		)				(2		)
Common stock dividends	(10		)				(10		)	(9		)				(9		)
Distributions to noncontrolling interests				(5		)	(5		)				(6		)	(6		)
Common stock share repurchases	(63		)				(63		)	(49		)				(49		)
Stock compensation	6						6			4						4
Stock withheld for employee taxes							—			(1		)				(1		)
Balance, June 30	$	1,006		$	103		$	1,109		$	1,322		$	104		$	1,426

Six Months Ended June 30,
Balance, December 31	$	1,080		$	100		$	1,180		$	1,309		$	104		$	1,413
Total comprehensive income	62			14			76			136			7			143
Preferred stock dividends							—			(5		)				(5		)
Common stock dividends	(18		)				(18		)	(16		)				(16		)
Distributions to noncontrolling interests				(6		)	(6		)				(7		)	(7		)
Share conversion							—			3						3
Common stock share repurchases	(126		)				(126		)	(113		)				(113		)
Derecognition of noncontrolling interests				(5		)	(5		)							—
Stock compensation	10						10			10						10
Stock withheld for employee taxes	(2		)				(2		)	(2		)				(2		)
Balance, June 30	$	1,006		$	103		$	1,109		$	1,322		$	104		$	1,426

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




	Parent Company Stockholders
	Foreign Currency Translation			Hedging			Investments			Defined Benefit Plans			Accumulated Other Comprehensive Income (Loss)
Balance, March 31, 2015	$	(526	)	$	(10	)	$	6		$	(550	)	$	(1,080	)
Other comprehensive income (loss):
Currency translation adjustments	18												18
Holding loss on net investment hedge	(4		)										(4		)
Holding gains and losses				(3		)	(1		)				(4		)
Reclassification of amount to net income (a)				6									6
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)										7			7
Other comprehensive income (loss)	14			3			(1		)	7			23
Balance, June 30, 2015	$	(512	)	$	(7	)	$	5		$	(543	)	$	(1,057	)

Balance, March 31, 2014	$	(254	)	$	—		$	3		$	(481	)	$	(732	)
Other comprehensive income:
Currency translation adjustments	14												14
Holding gains and losses				1			3						4
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)										3			3
Other comprehensive income	14			1			3			3			21
Balance, June 30, 2014	$	(240	)	$	1		$	6		$	(478	)	$	(711	)



	Parent Company Stockholders
	Foreign Currency Translation			Hedging			Investments			Defined Benefit Plans			Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2014	$	(427	)	$	(9	)	$	5		$	(566	)	$	(997	)
Other comprehensive income (loss):
Currency translation adjustments	(83		)										(83		)
Holding loss on net investment hedge	(2		)										(2		)
Holding gains and losses				(9		)							(9		)
Reclassification of amount to net income (a)				11									11
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)										13			13
Elimination of net prior service costs and actuarial losses of disposal group										10			10
Other comprehensive income (loss)	(85		)	2			—			23			(60		)
Balance, June 30, 2015	$	(512	)	$	(7	)	$	5		$	(543	)	$	(1,057	)

Balance, December 31, 2013	$	(242	)	$	—		$	3		$	(488	)	$	(727	)
Other comprehensive income (loss):
Currency translation adjustments	2												2
Holding gains and losses				1			5						6
Reclassification of amount to net income (a)							(2		)				(2		)
Venezuelan bolivar devaluation										3			3
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)										8			8
Tax expense										(1		)	(1		)
Other comprehensive income	2			1			3			10			16
Balance, June 30, 2014	$	(240	)	$	1		$	6		$	(478	)	$	(711	)

(a) Foreign currency contract and investment reclassifications are included in other income, net.

(b) See Note 8 for additional details.

Upon completion of the divestiture of our operations in Venezuela in January 2015, we eliminated the unrecognized pension expense and the noncontrolling interest related to our former Venezuelan subsidiaries. See Note 2 for additional information regarding the disposal group held for sale at the end of 2014 and divested in January 2015.

Note 6. Earnings per Share

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



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Income from continuing operations	$	63	$	92	$	137	$	130
Less: Noncontrolling interests	4		4		15		7
Less: Preferred stock dividend requirements			2				5
Income from continuing operations available to common stockholders - Numerator basic	59		86		122		118
Preferred stock dividend requirements			2				5
Numerator diluted	$	59	$	88	$	122	$	123

Net income available to common stockholders - Numerator basic	$	59	$	84	$	122	$	115
Preferred stock dividend requirements			2				5
Numerator diluted	$	59	$	86	$	122	$	120


Weighted-average number of shares outstanding - Denominator basic	162.1		156.7		163.4		153.7
Employee compensation-related shares, including stock options	1.1		1.3		1.2		1.2
Conversion of preferred stock			17.1				21.1
Denominator diluted	163.2		175.1		164.6		176.0

The share count for diluted earnings per share is computed on the basis of the weighted-average number of common shares outstanding plus the effects of dilutive common stock equivalents (CSEs) outstanding during the period. We excluded 0.3 million and 0.2 million CSEs from the calculations of diluted earnings per share for the quarter and year-to-date periods ended June 30, 2015 as the effect of including them would have been anti-dilutive.

Note 7. Stock Compensation

The Compensation Committee of our Board of Directors approved the grant of RSUs and performance share units (PSUs) shown in the table below during the first half of 2015.

We calculated the fair value of the RSUs at grant date based on the closing market price of our common stock at the date of grant. The number of PSUs that ultimately vest is contingent on achieving specified return on invested capital targets and specified total shareholder return targets relative to peer companies. For the portion of the award based on the return on invested capital performance metric, we estimated the fair value of the PSUs at grant date based on the closing market price of our common stock at the date of grant adjusted for the value of assumed dividends over the period because the award is not dividend protected. For the portion of the award based on shareholder returns, we estimated the fair value of the PSUs at grant date using various assumptions as part of a Monte Carlo simulation. The expected term represents the period from the grant date to the end of the three-year performance period. The risk-free interest rate of 0.92% was based on U.S. Treasury constant maturity rates at the grant date. The dividend yield of 0.92% was calculated by dividing the expected annual dividend by the average stock price over the prior year. The expected volatility of 35.1% was based on historical volatility over the prior three years using daily stock price observations.

Stock options and stock appreciation rights (SARs) related to 0.2 million shares were exercised and a small number of shares were forfeited in 2015. We received $2 of cash from the exercise of stock options and we paid $2 of cash to settle SARs and RSUs during 2015. We issued 0.4 million shares of common stock based on the vesting of RSUs.

We recognized stock compensation expense of $5 during the second quarters of both 2015 and 2014 and $8 and $9 during the first half of 2015 and 2014. At June 30, 2015, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $31. This cost is expected to be recognized over a weighted-average period of 2.0 years.

Note 8. Pension and Postretirement Benefit Plans

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

Components of net periodic benefit cost (credit) —



	Pension
	2015						2014					OPEB - Non-U.S.
Three Months Ended June 30,	U.S.			Non-U.S.			U.S.			Non-U.S.		2015		2014
Interest cost	$	17		$	2		$	20		$	3	$	1	$	2
Expected return on plan assets	(28		)				(28		)
Service cost				1						2
Amortization of net actuarial loss	5			2			4			1
Net periodic benefit cost (credit)	$	(6	)	$	5		$	(4	)	$	6	$	1	$	2

Six Months Ended June 30,
Interest cost	$	34		$	4		$	40		$	6	$	2	$	3
Expected return on plan assets	(55		)	(1		)	(55		)
Service cost				3						3
Amortization of net actuarial loss	10			3			8			2
Net periodic benefit cost (credit)	$	(11	)	$	9		$	(7	)	$	11	$	2	$	3

Note 9. Marketable Securities



	June 30, 2015						December 31, 2014
	Cost		Unrealized Gain (Loss)		Fair Value		Cost		Unrealized Gain (Loss)		Fair Value
U.S. government securities	$	40	$	—	$	40	$	38	$	—	$	38
Corporate securities	42				42		36				36
Certificates of deposit	22				22		23				23
Other	60		5		65		67		5		72
Total marketable securities	$	164	$	5	$	169	$	164	$	5	$	169

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, after one year through five years and after five years through ten years total $38, $62 and $3 at June 30, 2015.

Note 10. Financing Agreements

Long-term debt at —



	Interest Rate	June 30, 2015		December 31, 2014
Senior Notes due February 15, 2019	6.500%	$	—	$	55
Senior Notes due February 15, 2021	6.750%	350		350
Senior Notes due September 15, 2021	5.375%	450		450
Senior Notes due September 15, 2023	6.000%	300		300
Senior Notes due December 15, 2024	5.500%	425		425
Other indebtedness*		80		79
Total		1,605		1,659
Less: current maturities		35		46
Total long-term debt		$	1,570	$	1,613

* Includes fair value adjustments related to an interest rate swap. See Note 11 for additional information.

Interest on the senior notes is payable semi-annually. Other indebtedness includes borrowings from various financial institutions and capital lease obligations.

Senior notes — In December 2014, we completed the sale of $425 in senior unsecured notes. Interest on the December 2024 Notes is payable on June 15 and December 15 of each year beginning on June 15, 2015. 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 net 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 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. The notes redeemed on January 8, 2015 have been included in current portion of long-term debt as of December 31, 2014. 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.

Revolving facility — Advances under our $500 revolving facility bear interest at a floating rate based on, at our option, the base rate or LIBOR (each as described in the revolving credit agreement) plus a margin based on the undrawn amounts available under the agreement as set forth below:



Remaining Borrowing Availability	Base Rate		LIBOR Rate
Greater than $350	0.50	%	1.50	%
Greater than $150 but less than or equal to $350	0.75	%	1.75	%
$150 or less	1.00	%	2.00	%

Commitment fees are applied based on the average daily unused portion of the available amounts under the revolving facility. If the average daily unused portion of the revolving facility is less than 50%, the applicable fee will be 0.25% per annum. If the average daily unused portion of the revolving facility is equal to or greater than 50%, the applicable fee will be 0.375% per annum. Up to $300 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 LIBOR margin based on quarterly average availability under the revolving facility and a per annum fronting fee of 0.125%, payable quarterly.

There were no borrowings under the revolving facility at June 30, 2015 but we had utilized $39 for letters of credit. Based on our borrowing base collateral of $431, we had potential availability at June 30, 2015 under the revolving facility of $392 after deducting the outstanding letters of credit.

Debt covenants — At June 30, 2015, 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.

Note 11. Fair Value Measurements and Derivatives

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

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



			Fair Value Measurements Using
			Quoted Prices in Active Markets		Significant Inputs Observable
June 30, 2015	Total		(Level 1)		(Level 2)
Marketable securities	$	169	$	65	$	104
Currency forward contracts - Accounts receivable other
Undesignated	2				2
Currency forward contracts - Other accrued liabilities
Cash flow hedges	8				8
Undesignated	1				1
Currency swaps - Other noncurrent liabilities
Undesignated	1				1
Interest rate swap - Other noncurrent liabilities
Fair value hedge	2				2

December 31, 2014
Marketable securities	$	169	$	72	$	97
Currency forward contracts - Accounts receivable other
Cash flow hedges	1				1
Undesignated	1				1
Currency forward contracts - Other accrued liabilities
Cash flow hedges	11				11
Currency swaps - Other accrued liabilities
Undesignated	9				9

Fair value of financial instruments – The financial instruments that are not carried in our balance sheet at fair value are as follows:



	June 30, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Senior notes	$	1,525	$	1,563	$	1,580	$	1,643
Other indebtedness*	80		78		79		77
Total	$	1,605	$	1,641	$	1,659	$	1,720

* The carrying value includes fair value adjustments related to an interest rate swap at June 30, 2015.

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).

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 interest rate derivatives include a fixed-to-floating interest rate swap on our $425, 5.500% fixed-rate senior notes, due December 15, 2024 (the "designated fixed-rate debt"). Executed near the end of the second quarter of 2015, the interest rate swap has the same total notional amount and maturity date as the designated fixed-rate debt and economically serves to convert the designated fixed-rate debt into variable-rate debt, using the 3-month U.S. LIBOR as the benchmark interest rate plus a spread of 307 basis points. Of the $425 total notional amount of the interest rate swap, $340 has been designated as a fair value hedge of the $425 fixed-rate debt. Using retrospective and prospective regression analysis, we will perform effectiveness testing on a monthly basis.

Changes in fair value of the interest rate swap are recorded in the balance sheet as an other noncurrent receivable or payable while changes in the fair value of the designated fixed-rate debt are recorded in the balance sheet as a change in the carrying amount of debt. The difference between the changes in fair value of the designated portion of the interest rate swap and the designated fixed-rate debt represents ineffectiveness and is recorded in the income statement as an adjustment to interest expense during each period. Changes in the fair value associated with the undesignated portion of the interest rate swap do not represent ineffectiveness but are also recorded as an adjustment to interest expense during each period.

As of June 30, 2015, the notional amount of the interest rate swap in a fair value hedge relationship with the designated fixed-rate debt was $340. Subsequent to the execution of the swap at the end of the second quarter of 2015, the change in the fair value of the swap was a loss of $2 while the change in the fair value of the designated fixed-rate debt was a gain of $2. The amounts recorded in earnings as ineffectiveness and as interest expense savings during the applicable portion of the second quarter of 2015 were not material.

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 eighteen months, as well as currency swaps associated with certain recorded intercompany loans receivable and payable. Periodically, our foreign currency derivatives also include net investment hedges of certain of our investments in foreign operations.

The total notional amount of outstanding foreign currency forward contracts, involving the exchange of various currencies, was $204 as of June 30, 2015 and $296 as of December 31, 2014. The total notional amount of outstanding foreign currency swaps was $214 as of June 30, 2015 and $10 as of December 31, 2014.

The following currency derivatives were outstanding at June 30, 2015:



		Notional Amount (U.S. Dollar Equivalent)
Functional Currency	Traded Currency	Designated as Cash Flow Hedges		Undesignated		Total		Maturity
U.S. dollar	Mexican peso	$	78	$	—	$	78	Sep-16
Euro	U.S. dollar, Canadian dollar, Hungarian forint, British pound, Swiss franc, Indian rupee, Russian ruble	19		29		48		Dec-16
British pound	U.S. dollar, Euro	6		1		7		Sep-16
Swedish krona	Euro	14				14		Sep-16
South African rand	U.S. dollar, Euro			7		7		Sep-15
Thai baht	U.S. dollar, Australian dollar			19		19		May-16
Brazilian real	U.S. dollar, Euro			5		5		Mar-16
Indian rupee	U.S. dollar, British pound, Euro			26		26		Apr-16
Total forward contracts		117		87		204

U.S. dollar	Euro			116		116		Dec-16
Euro	Canadian dollar, British pound			88