Edgar Filing: DANA INC

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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: September 30, 2016

Commission File Number: 1-1063

Dana Incorporated

(Exact name of registrant as specified in its charter)



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

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

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

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 143,823,091 shares of the registrant’s common stock outstanding at October 7, 2016.

DANA INCORPORATED – FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016

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	28

Item 3	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4	Controls and Procedures	46

PART II – OTHER INFORMATION

Item 1	Legal Proceedings	46

Item 1A	Risk Factors	46

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 6	Exhibits	46

Signatures		47
Exhibit Index		48

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Dana Incorporated

Consolidated Statement of Operations (Unaudited)

(In millions, except per share amounts)



	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016			2015
Net sales	$	1,384	$	1,468		$	4,379		$	4,685
Costs and expenses
Cost of sales	1,176		1,255			3,739			4,008
Selling, general and administrative expenses	99		98			303			299
Amortization of intangibles	2		4			6			13
Restructuring charges, net	17		1			23			13
Impairment of long-lived assets			(36		)				(36		)
Loss on extinguishment of debt						(17		)	(2		)
Other income, net	9		2			17			18
Income before interest expense and income taxes	99		76			308			332
Interest expense	27		31			84			86
Income before income taxes	72		45			224			246
Income tax expense (benefit)	13		(77		)	66			(10		)
Equity in earnings of affiliates	2		—			6			3
Net income	61		122			164			259
Less: Noncontrolling interests net income	4		3			9			18
Net income attributable to the parent company	$	57	$	119		$	155		$	241

Net income per share attributable to the parent company
Basic	$	0.40	$	0.75		$	1.06		$	1.49
Diluted	$	0.39	$	0.75		$	1.05		$	1.48

Weighted-average shares outstanding - Basic	144.0		158.0			146.7			161.6
Weighted-average shares outstanding - Diluted	144.6		158.9			147.1			162.7

Cash dividends declared per share	$	0.06	$	0.06		$	0.18		$	0.17

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

Dana Incorporated

Consolidated Statement of Comprehensive Income (Unaudited)

(In millions)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net income	$	61		$	122		$	164		$	259
Less: Noncontrolling interests net income	4			3			9			18
Net income attributable to the parent company	57			119			155			241

Other comprehensive income (loss) attributable to the parent company, net of tax:
Currency translation adjustments	(8		)	(66		)	(3		)	(151		)
Hedging gains and losses	(11		)	1			(21		)	3
Investment and other gains and losses	(5		)	(5		)	(2		)	(5		)
Defined benefit plans				17			13			40
Other comprehensive loss attributable to the parent company	(24		)	(53		)	(13		)	(113		)

Other comprehensive income (loss) attributable to noncontrolling interests, net of tax:
Currency translation adjustments				(3		)	1			(5		)
Defined benefit plans										1
Other comprehensive income (loss) attributable to noncontrolling interests	—			(3		)	1			(4		)

Total comprehensive income attributable to the parent company	33			66			142			128
Total comprehensive income attributable to noncontrolling interests	4			—			10			14
Total comprehensive income	$	37		$	66		$	152		$	142

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

Dana Incorporated

Consolidated Balance Sheet (Unaudited)

(In millions, except share and per share amounts)



	September 30, 2016			December 31, 2015
Assets
Current assets
Cash and cash equivalents	$	727		$	791
Marketable securities	126			162
Accounts receivable
Trade, less allowance for doubtful accounts of $6 in 2016 and $5 in 2015	802			673
Other	150			115
Inventories
Raw materials	331			303
Work in process and finished goods	365			322
Other current assets	140			108
Total current assets	2,641			2,474
Goodwill	89			80
Intangibles	108			102
Other noncurrent assets	345			353
Investments in affiliates	147			150
Property, plant and equipment, net	1,283			1,167
Total assets	$	4,613		$	4,326

Liabilities and equity
Current liabilities
Notes payable, including current portion of long-term debt	$	50		$	22
Accounts payable	833			712
Accrued payroll and employee benefits	147			145
Taxes on income	20			19
Other accrued liabilities	202			193
Total current liabilities	1,252			1,091
Long-term debt, less debt issuance costs of $23 in 2016 and $21 in 2015	1,615			1,553
Pension and postretirement obligations	508			521
Other noncurrent liabilities	368			330
Total liabilities	3,743			3,495
Commitments and contingencies (Note 13)
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, 143,813,145 and 150,068,040 shares outstanding	2			2
Additional paid-in capital	2,322			2,311
Accumulated deficit	(281		)	(410		)
Treasury stock, at cost (6,810,678 and 23,963 shares)	(83		)	(1		)
Accumulated other comprehensive loss	(1,187		)	(1,174		)
Total parent company stockholders' equity	773			728
Noncontrolling equity	97			103
Total equity	870			831
Total liabilities and equity	$	4,613		$	4,326

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

Dana Incorporated

Consolidated Statement of Cash Flows (Unaudited)

(In millions)



	Nine Months Ended September 30,
	2016			2015
Operating activities
Net income	$	164		$	259
Depreciation	129			117
Amortization of intangibles	7			14
Amortization of deferred financing charges	4			3
Call premium on senior notes	12			2
Write-off of deferred financing costs	5			1
Earnings of affiliates, net of dividends received	3			12
Stock compensation expense	11			14
Deferred income taxes	1			(97		)
Pension contributions, net	(12		)	(14		)
Impairment of long-lived assets				36
Change in working capital	(142		)	(92		)
Other, net				11
Net cash provided by operating activities	182			266

Investing activities
Purchases of property, plant and equipment	(198		)	(192		)
Acquisition of business	(18		)
Purchases of marketable securities	(41		)	(29		)
Proceeds from sales of marketable securities	47			15
Proceeds from maturities of marketable securities	33			21
Other	(10		)	(3		)
Net cash used in investing activities	(187		)	(188		)

Financing activities
Net change in short-term debt	14			3
Repayment of letters of credit				(4		)
Proceeds from long-term debt	441			18
Repayment of long-term debt	(378		)	(59		)
Call premium on senior notes	(12		)	(2		)
Deferred financing payments	(10		)
Dividends paid to common stockholders	(26		)	(27		)
Distributions to noncontrolling interests	(16		)	(8		)
Repurchases of common stock	(81		)	(245		)
Other	(4		)	6
Net cash used in financing activities	(72		)	(318		)

Net decrease in cash and cash equivalents	(77		)	(240		)
Cash and cash equivalents – beginning of period	791			1,121
Effect of exchange rate changes on cash balances	13			(64		)
Cash and cash equivalents – end of period	$	727		$	817

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

Dana Incorporated

Index to Notes to Consolidated Financial Statements



1.	Organization and Summary of Significant Accounting Policies

2.	Acquisitions

3.	Disposal Groups and Impairment of Long-Lived Assets

4.	Goodwill and Other Intangible Assets

5.	Restructuring of Operations

6.	Stockholders' Equity

7.	Earnings per Share

8.	Stock Compensation

9.	Pension and Postretirement Benefit Plans

10.	Marketable Securities

11.	Financing Agreements

12.	Fair Value Measurements and Derivatives

13.	Commitments and Contingencies

14.	Warranty Obligations

15.	Income Taxes

16.	Other Income, Net

17.	Segments

18.	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

Effective August 1, 2016, Dana Holding Corporation changed its legal name to Dana Incorporated. 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 are prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. These statements are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods. The results reported in these consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the consolidated financial statements in Item 8 of our 2015 Form 10-K.

In the third quarter of 2016, we identified an error attributable to our second quarter 2016 calculation of cash used for purchases of property, plant and equipment. While the error had no impact on the total net cash flows presented for the period it did result in a misclassification between net cash provided by operating activities and net cash used in investing activities. Purchases of property, plant and equipment previously presented for the six months ended June 30, 2016 should have been $18 lower with a corresponding offset to the change in working capital. Based on our assessments of qualitative and quantitative factors, the error and related impacts were not considered to be material to our consolidated financial statements in Item 1 of Part I of our June 30, 2016 Form 10-Q. Purchases of property, plant and equipment and change in working capital for the six months ended June 30, 2016, will be revised to reflect the correction when presented as the comparable period in our June 30, 2017 Form 10-Q. At September 30, 2016 and September 30, 2015, we had $82 and $42 of purchases of property, plant and equipment included in accounts payable.

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.

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 becomes effective 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 continue 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.

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. We believe that this guidance will result in substantially all of the 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 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 is 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. Early adoption is permitted. 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 addresses the accounting by lessees. This standard requires all 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. We continue to evaluate the impact this guidance will have on our consolidated financial statements. This guidance becomes effective January 1, 2019. Early adoption is permitted.

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 November 2015, the FASB issued guidance that simplifies the balance sheet classification of deferred taxes. Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. 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 will have an impact on working capital. This guidance becomes effective January 1, 2017 and allows for prospective or retrospective application, with appropriate disclosures. Early adoption is permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements and expect to complete out assessment and early adopt the guidance in the fourth quarter of 2016.

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. Early adoption is permitted. 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 with the option to adopt the standard as

of the original January 1, 2017 effective date. 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. Acquisitions

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.

Note 3. Disposal Groups and Impairment of Long-Lived Assets

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.

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.

Impairment of long-lived assets — On February 1, 2011, we entered into an agreement with SIFCO S.A. (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. Our Commercial Vehicle operating segment had sales attributable to SIFCO supplied axles and parts of $98 and $225 in 2015 and 2014.

This agreement was accounted for as a business combination for financial reporting purposes. The aggregate fair value of the net assets acquired were 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 obligation was 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 issued on September 9, 2015, 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 benefit 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 have continued to supply us product while pursuing various mutually satisfactory longer-term alternatives. On October 10, 2016, we submitted a bid to the

Brazilian bankruptcy court overseeing SIFCO’s reorganization in the competitive process to sell SIFCO's commercial vehicle steer axle systems business and its related forged components business. The bid and the proposed transaction are governed by a purchase agreement entered into between certain of Dana’s affiliates and SIFCO and certain of its affiliates. The transaction is subject to certain closing conditions, including that Dana is the winning bidder pursuant to the bankruptcy court supervised competitive auction process and certain Brazilian regulatory approvals. If Dana’s bid is approved in the bankruptcy court supervised competitive auction process and the applicable Brazilian regulatory approvals are received, closing is expected to occur in the fourth quarter of 2016. The purchase price for the business being acquired is 275 Brazilian reals, which approximates $85 at current exchange rates.

Our ability to maintain continued uninterrupted product supply to satisfy our customer commitments is somewhat uncertain, dependent on SIFCO's compliance with the terms of the supply agreement until the closing of the transaction. We continue to preserve the ability to pursue the legal rights and remedies available to us to enforce compliance with the original supply agreement.

Note 4. Goodwill and Other Intangible Assets

Goodwill — The carrying amount of goodwill attributable to each of our operating segments at September 30, 2016 were as follows: Off-Highway — $83 and Power Technologies — $6. The change in the carrying amount of goodwill in 2016 is due to currency fluctuation and the acquisition of an aftermarket distribution business. See Note 2 for additional information.

Components of other intangible assets —



		September 30, 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	7	$	87	$	(85	)	$	2	$	86	$	(83	)	$	3
Trademarks and trade names	12	5		(2		)	3		3		(2		)	1
Customer relationships	7	399		(381		)	18		383		(370		)	13
Non-amortizable intangible assets
Trademarks and trade names		65					65		65					65
Used in research and development activities		20					20		20					20
		$	576	$	(468	)	$	108	$	557	$	(455	)	$	102

The net carrying amounts of intangible assets, other than goodwill, attributable to each of our operating segments at September 30, 2016 were as follows: Light Vehicle — $23, Commercial Vehicle — $34, Off-Highway — $36 and Power Technologies — $15.

Amortization expense related to amortizable intangible assets —



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Charged to cost of sales	$	1	$	—	$	1	$	1
Charged to amortization of intangibles	2		4		6		13
Total amortization	$	3	$	4	$	7	$	14

The following table provides the estimated aggregate pre-tax amortization expense related to intangible assets for each of the next five years based on September 30, 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.



	Remainder of 2016		2017		2018		2019		2020
Amortization expense	$	2	$	6	$	3	$	2	$	1

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 the third quarter of 2016, we approved plans to implement certain headcount reduction initiatives, primarily in our Off-Highway business. Including costs associated with this action and with other previously announced initiatives, restructuring expense during the third quarter of 2016 was $17, including $16 of severance and benefits costs and $1 of exit costs.

During the first half of 2016, we approved and announced the closure of our Commercial Vehicle manufacturing facility in Glasgow, Kentucky. The closure is expected to be completed by mid-2017. We expect that completion of this action will require cash expenditures in the range of $15 to $20, of which $6 represents estimated restructuring charges for employee separation costs, $3 represents estimated restructuring charges for equipment relocation costs and the remainder represents expected capital investment costs for supplier tooling and other exit costs. Including costs associated with these actions and with other previously announced initiatives, restructuring expense for the nine months ended September 30, 2016 was $23, including $20 of contractual severance and benefits costs and $3 of exit costs.

During the first nine months 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 first nine months of 2015 was $13, including $11 of severance and benefits costs and $2 of exit costs.

Accrued restructuring costs and activity, including noncurrent portion



	Employee Termination Benefits			Exit Costs			Total
Balance at June 30, 2016	$	9		$	7		$	16
Charges to restructuring	16			1			17
Cash payments	(2		)	(1		)	(3		)
Balance at September 30, 2016	$	23		$	7		$	30

Balance at December 31, 2015	$	9		$	8		$	17
Charges to restructuring	21			3			24
Adjustments of accruals	(1		)				(1		)
Cash payments	(6		)	(4		)	(10		)
Balance at September 30, 2016	$	23		$	7		$	30

At September 30, 2016, the accrued employee termination benefits include costs to reduce approximately 400 employees to be completed 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 restructuring expenses for completion of our approved restructuring initiatives for our business segments at September 30, 2016.



	Expense Recognized						Future Cost to Complete
	Prior to 2016		2016		Total to Date		Future Cost to Complete
Light Vehicle	$	9	$	1	$	10	$	1
Commercial Vehicle	25		6		31		17
Off-Highway			14		14
Corporate			2		2
Total	$	34	$	23	$	57	$	18

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. Stockholders’ Equity

Common stock — Our Board of Directors declared quarterly cash dividends of six cents per share of common stock in each of the first three quarters of 2016. 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 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 the first nine months of 2016 through open market transactions. Approximately $219 remained available under the program for future share repurchases as of September 30, 2016.

Changes in equity —



	2016									2015
Three Months Ended September 30,	Attributable to Parent			Attributable to Non- controlling Interests			Total Equity			Attributable to Parent			Attributable to Non- controlling Interests			Total Equity
Balance, June 30	$	743		$	95		$	838		$	1,006		$	103		$	1,109
Total comprehensive income	33			4			37			66						66
Common stock dividends	(8		)				(8		)	(9		)				(9		)
Distributions to noncontrolling interests				(2		)	(2		)				(2		)	(2		)
Common stock share repurchases							—			(119		)				(119		)
Stock compensation	5						5			7						7
Stock withheld for employee taxes							—			(1		)				(1		)
Balance, September 30	$	773		$	97		$	870		$	950		$	101		$	1,051

Nine Months Ended September 30,
Balance, December 31	$	728		$	103		$	831		$	1,080		$	100		$	1,180
Total comprehensive income	142			10			152			128			14			142
Common stock dividends	(26		)				(26		)	(27		)				(27		)
Distributions to noncontrolling interests				(16		)	(16		)				(8		)	(8		)
Common stock share repurchases	(81		)				(81		)	(245		)				(245		)
Derecognition of noncontrolling interests							—						(5		)	(5		)
Stock compensation	11						11			17						17
Stock withheld for employee taxes	(1		)				(1		)	(3		)				(3		)
Balance, September 30	$	773		$	97		$	870		$	950		$	101		$	1,051

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, June 30, 2016	$	(603	)	$	(14	)	$	5		$	(551	)	$	(1,163	)
Other comprehensive income (loss):
Currency translation adjustments	(8		)										(8		)
Holding gains and losses				(17		)	2						(15		)
Reclassification of amount to net income (a)				6			(7		)				(1		)
Actuarial loss on census update										(6		)	(6		)
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)										7			7
Tax expense										(1		)	(1		)
Other comprehensive loss	(8		)	(11		)	(5		)	—			(24		)
Balance, September 30, 2016	$	(611	)	$	(25	)	$	—		$	(551	)	$	(1,187	)

Balance, June 30, 2015	$	(512	)	$	(7	)	$	5		$	(543	)	$	(1,057	)
Other comprehensive income (loss):
Currency translation adjustments	(66		)										(66		)
Holding gains and losses				(4		)	(5		)				(9		)
Reclassification of amount to net income (a)				5									5
Actuarial gain on census update										13			13
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)										5			5
Tax expense										(1		)	(1		)
Other comprehensive income (loss)	(66		)	1			(5		)	17			(53		)
Balance, September 30, 2015	$	(578	)	$	(6	)	$	—		$	(526	)	$	(1,110	)



Balance, December 31, 2015	$	(608	)	$	(4	)	$	2		$	(564	)	$	(1,174	)
Other comprehensive income (loss):
Currency translation adjustments	(3		)										(3		)
Holding gains and losses				(30		)	5						(25		)
Reclassification of amount to net income (a)				9			(7		)				2
Actuarial loss on census update										(6		)	(6		)
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)										20			20
Tax expense										(1		)	(1		)
Other comprehensive income (loss)	(3		)	(21		)	(2		)	13			(13		)
Balance, September 30, 2016	$	(611	)	$	(25	)	$	—		$	(551	)	$	(1,187	)

Balance, December 31, 2014	$	(427	)	$	(9	)	$	5		$	(566	)	$	(997	)
Other comprehensive income (loss):
Currency translation adjustments	(149		)										(149		)
Holding loss on net investment hedge	(2		)										(2		)
Holding gains and losses				(13		)	(5		)				(18		)
Reclassification of amount to net income (a)				16									16
Actuarial gain on census update										13			13
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)										18			18
Elimination of net prior service costs and actuarial losses of disposal group										10			10
Tax expense										(1		)	(1		)
Other comprehensive income (loss)	(151		)	3			(5		)	40			(113		)
Balance, September 30, 2015	$	(578	)	$	(6	)	$	—		$	(526	)	$	(1,110	)

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

(b) See Note 9 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 3 for additional information regarding the disposal group held for sale at the end of 2014 and divested in January 2015.

Note 7. Earnings per Share

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Numerator - Basic and Diluted:
Net income attributable to the parent company	$	57	$	119	$	155	$	241

Denominator:
Weighted-average shares outstanding - Basic	144.0		158.0		146.7		161.6
Employee compensation-related shares, including stock options	0.6		0.9		0.4		1.1
Weighted-average shares outstanding - Diluted	144.6		158.9		147.1		162.7

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 2.1 million and 0.2 million CSEs from the calculations of diluted earnings per share for the third quarters of 2016 and 2015 and excluded 2.1 million and 0.1 million CSEs for the year-to-date periods of 2016 and 2015 as the effect of including them would have been anti-dilutive.

Note 8. 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 nine months of 2016.

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 1.00% was based on U.S. Treasury constant maturity rates at the grant date. The dividend yield of 1.40% was calculated by dividing the expected annual dividend by the average stock price over the prior year. The expected volatility of 33.4% was based on historical volatility over the prior three years using daily stock price observations.

We paid $1 of cash to settle RSUs and issued 0.5 million shares of common stock based on the vesting of RSUs during 2016. We recognized stock compensation expense of $4 and $6 during the third quarter of 2016 and 2015 and $11 and $14 during the first nine months of 2016 and 2015. At September 30, 2016, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $24. This cost is expected to be recognized over a weighted-average period of 2.0 years.

Note 9. 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
	2016						2015						OPEB - Non-U.S.
Three Months Ended September 30,	U.S.			Non-U.S.			U.S.			Non-U.S.			2016		2015
Interest cost	$	13		$	2		$	16		$	2		$	1	$	1
Expected return on plan assets	(23		)	(1		)	(27		)	(1		)
Service cost				2						2					1
Other
Amortization of net actuarial loss	6			1			4			1
Net periodic benefit cost (credit)	$	(4	)	$	4		$	(7	)	$	4		$	1	$	2

Nine Months Ended September 30,
Interest cost	$	39		$	6		$	50		$	6		$	3	$	3
Expected return on plan assets	(69		)	(2		)	(82		)	(2		)
Service cost				4						5					1
Other				1
Amortization of net actuarial loss	16			4			14			4
Net periodic benefit cost (credit)	$	(14	)	$	13		$	(18	)	$	13		$	3	$	4

Pension expense for the nine months ended September 30, 2016 increased modestly versus the same period in 2015 as the effect of a lower assumed return on plan assets was mostly offset by a reduction in the interest component. The $11 reduction in interest resulted primarily from adopting a full yield curve approach to estimating interest expense effective at the beginning of 2016. The new method applies the specific spot rates along the yield curve used in the most recent remeasurement of the benefit obligation, resulting in a more precise estimate.

Note 10. Marketable Securities



	September 30, 2016						December 31, 2015
	Cost		Unrealized Gain (Loss)		Fair Value		Cost		Unrealized Gain (Loss)		Fair Value
U.S. government securities	$	34	$	—	$	34	$	38	$	—	$	38
Corporate securities	42				42		42				42
Certificates of deposit	24				24		18				18
Other	26				26		62		2		64
Total marketable securities	$	126	$	—	$	126	$	160	$	2	$	162

U.S. government securities include bonds issued by government-sponsored agencies and Treasury notes. Corporate securities are 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 $41, $48 and $11 at September 30, 2016.

Note 11. Financing Agreements

Long-term debt at —



			September 30, 2016					December 31, 2015
	Interest Rate		Principal		Unamortized Debt Issue Costs			Principal		Unamortized Debt Issue Costs
Senior Notes due February 15, 2021	6.750%		$	—	$	—		$	350	$	(4	)
Senior Notes due September 15, 2021	5.375%		450		(6		)	450		(6		)
Senior Notes due September 15, 2023	6.000%		300		(4		)	300		(5		)
Senior Notes due December 15, 2024	5.500%		425		(6		)	425		(6		)
Senior Notes due June 1, 2026	6.500%	*	375		(7		)
Other indebtedness			119		—			66
Total			$	1,669	$	(23	)	$	1,591	$	(21	)


*	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%. See Note 12 for additional information.

Interest on the senior notes is payable semi-annually. Other indebtedness includes borrowings from various financial institutions, capital lease obligations and the unamortized fair value adjustment related to a terminated interest rate swap. See Note 12 for additional information on the terminated interest rate swap.

Senior 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 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.

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.

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.

We may redeem some or all of the June 2026 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 June 1 in the years set forth below:



Year		Redemption Price
2021		103.250%
2022		102.167%
2023		101.083%
2024		100.000%
2025		100.000%

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 December 9, 2014, we elected to redeem $40 of our previously outstanding 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.

Revolving facility — On June 9, 2016, we received commitments from new and existing lenders for a $500 amended and restated revolving credit facility (the Amended Revolving Facility) which expires on June 9, 2021. In connection with the Amended 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 Amended Revolving Facility are included in other noncurrent assets.

The Amended Revolving Facility is guaranteed by all of our wholly-owned domestic subsidiaries, subject to certain exceptions, including exceptions for Dana Credit Corporation and Dana Companies, LLC and their respective 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 Amended 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. The margins on the base rate and Eurodollar rate are 0.75% and 1.75% per annum respectively until September 30, 2016 and as set forth below thereafter:



	Margin
Total Net Leverage Ratio	Base Rate		Eurodollar Rate
Less than or equal to 1.00:1.00	0.50	%	1.50	%
Greater than 1.00:1.00 but less than or equal to 2.00:1.00	0.75	%	1.75	%
Greater than 2.00:1.00	1.00	%	2.00	%

Commitment fees are applied based on the average daily unused portion of the available amounts under the Amended Revolving Facility. The applicable fee will be 0.375% per annum until September 30, 2016 and as set forth below thereafter:



Total Net Leverage Ratio	Commitment Fee
Less than or equal to 1.00:1.00	0.250	%
Greater than 1.00:1.00 but less than or equal to 2.00:1.00	0.375	%
Greater than 2.00:1.00	0.500	%

Up to $275 of the Amended 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 quarterly average availability under the revolving facility and a per annum fronting fee of 0.125%, payable quarterly.

There were no borrowings under the Amended Revolving Facility at September 30, 2016 but we had utilized $22 for letters of credit. We had availability at September 30, 2016 under the Amended Revolving Facility of $478 after deducting the outstanding letters of credit.

Debt covenants — At September 30, 2016, we were in compliance with the covenants of our financing agreements. Under the Amended 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 Amended Revolving Facility, a maintenance covenant that the first lien net leverage ratio not to exceed 2.00 to 1.00.

Note 12. 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 Other Observable Inputs
September 30, 2016	Total		(Level 1)		(Level 2)
Marketable securities	$	126	$	26	$	100
Currency forward contracts - Accounts receivable other
Cash flow hedges	1				1
Undesignated	2				2
Currency forward contracts - Other accrued liabilities
Cash flow hedges	3				3
Undesignated	2				2
Currency swaps - Accounts receivable other
Undesignated	1				1
Currency swaps - Other accrued liabilities
Undesignated	12				12
Currency swaps - Other noncurrent liabilities
Cash flow hedges	28				28

December 31, 2015
Marketable securities	$	162	$	64	$	98
Currency forward contracts - Accounts receivable other
Cash flow hedges	1				1
Undesignated	2				2
Currency forward contracts - Other accrued liabilities
Cash flow hedges	5				5
Undesignated	1				1
Currency swaps - Accounts receivable other
Undesignated	4				4
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:



	September 30, 2016				December 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Senior notes	$	1,550	$	1,611	$	1,525	$	1,552
Other indebtedness*	119		97		66		56
Total	$	1,669	$	1,708	$	1,591	$	1,608


*	The carrying value includes the unamortized portion of a fair value adjustment related to a terminated interest rate swap.

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 portfolio of derivative financial instruments periodically includes interest rate swaps designed to mitigate our interest rate risk. As of September 30, 2016, no fixed-to-floating interest rate swaps remain outstanding. However, an $8 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 September 30, 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. The amount amortized as a reduction of interest expense was not material during the quarter or nine months ended September 30, 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 fifteen 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 11 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. At September 30, 2016, a deferred loss of $24 associated with the fixed-to-fixed cross-currency swaps remains in AOCI. The deferred loss represents the unfavorable fair value of the swaps, net of a $4 reclassification from AOCI to earnings as an offset to a foreign exchange remeasurement gain during the quarter and nine months ended September 30, 2016.

The total notional amount of outstanding foreign currency forward contracts, involving the exchange of various currencies, was $136 as of September 30, 2016 and $212 as of December 31, 2015. The total notional amount of outstanding foreign currency swaps, including the fixed-to-fixed cross-currency swaps, was $519 as of September 30, 2016 and $219 as of December 31, 2015.

The following currency derivatives were outstanding at September 30, 2016:



		Notional Amount (U.S. Dollar Equivalent)
Functional Currency	Traded Currency	Designated as Cash Flow Hedges		Undesignated		Total		Maturity
U.S. dollar	Mexican peso, euro	$	40	$	1	$	41	Sep-17
Euro	U.S. dollar, Canadian dollar, Hungarian forint, British pound, Swiss franc, Indian rupee, Russian ruble	28		6		34		Sep-17
British pound	U.S. dollar, Euro	3				3		Sep-17
Swedish krona	Euro	10				10		Sep-17
South African rand	U.S. dollar, Euro			10		10		Dec-16
Thai baht	U.S. dollar, Australian dollar			14		14		Jun-17
Canadian dollar	U.S. dollar			2		2		May-17
Brazilian real	Euro			1		1		May-17
Indian rupee	U.S. dollar, British pound, Euro			21		21		Dec-17
Total forward contracts		81		55		136

U.S. dollar	Mexican peso			76		76		Oct-16