Edgar Filing: DANA INC

Classification

March 31, 2019

Finance lease right-of-use assets

Property, plant and equipment, net

Finance lease liabilities

Current portion of long-term debt

Finance lease liabilities

Long-term debt

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

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

Securities Exchange Act of 1934

For the quarterly period ended: March 31, 2019

Commission File Number: 1-1063

Dana Incorporated

(Exact name of registrant as specified in its charter)



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

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

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



Common stock $0.01 par value	New York Stock Exchange	DAN
(Title of each class)	(Name of exchange on which registered)	(Trading Symbol)

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

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



Large accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
Accelerated filer o		Emerging growth company o

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

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

There were 143,912,782 shares of the registrant’s common stock outstanding at April 19, 2019.

DANA INCORPORATED – FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019

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	30

Item 3	Quantitative and Qualitative Disclosures About Market Risk	47

Item 4	Controls and Procedures	47

PART II – OTHER INFORMATION

Item 1	Legal Proceedings	47

Item 1A	Risk Factors	47

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 6	Exhibits	48

Signatures		49

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Dana Incorporated

Consolidated Statement of Operations (Unaudited)

(In millions, except per share amounts)



	Three Months Ended March 31,
	2019			2018
Net sales	$	2,163		$	2,138
Costs and expenses
Cost of sales	1,863			1,831
Selling, general and administrative expenses	136			130
Amortization of intangibles	2			2
Restructuring charges, net	9			1
Other expense, net	(13		)
Earnings before interest and income taxes	140			174
Interest income	2			3
Interest expense	27			24
Earnings before income taxes	115			153
Income tax expense	20			48
Equity in earnings of affiliates	6			6
Net income	101			111
Less: Noncontrolling interests net income	4			2
Less: Redeemable noncontrolling interests net income (loss)	(1		)	1
Net income attributable to the parent company	$	98		$	108

Net income per share available to common stockholders
Basic	$	0.68		$	0.74
Diluted	$	0.68		$	0.73

Weighted-average common shares outstanding
Basic	143.9			145.6
Diluted	144.8			147.5

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

Dana Incorporated

Consolidated Statement of Comprehensive Income (Unaudited)

(In millions)



	Three Months Ended March 31,
	2019			2018
Net income	$	101		$	111
Other comprehensive income (loss), net of tax:
Currency translation adjustments	27			10
Hedging gains and losses	5			(8		)
Defined benefit plans	5			7
Other comprehensive income	37			9
Total comprehensive income	138			120
Less: Comprehensive income attributable to noncontrolling interests	(2		)	(2		)
Less: Comprehensive income attributable to redeemable noncontrolling interests	(4		)	(2		)
Comprehensive income attributable to the parent company	$	132		$	116

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

Dana Incorporated

Consolidated Balance Sheet (Unaudited)

(In millions, except share and per share amounts)



	March 31, 2019			December 31, 2018
Assets
Current assets
Cash and cash equivalents	$	383		$	510
Marketable securities	20			21
Accounts receivable
Trade, less allowance for doubtful accounts of $8 in 2019 and $9 in 2018	1,416			1,065
Other	202			178
Inventories	1,282			1,031
Other current assets	140			102
Total current assets	3,443			2,907
Goodwill	456			264
Intangibles	185			164
Deferred tax assets	464			445
Other noncurrent assets	87			80
Investments in affiliates	226			208
Operating lease assets	181
Property, plant and equipment, net	2,242			1,850
Total assets	$	7,284		$	5,918

Liabilities and equity
Current liabilities
Short-term debt	$	14		$	8
Current portion of long-term debt	41			20
Accounts payable	1,448			1,217
Accrued payroll and employee benefits	207			186
Taxes on income	62			47
Current portion of operating lease liabilities	39
Other accrued liabilities	302			269
Total current liabilities	2,113			1,747
Long-term debt, less debt issuance costs of $29 in 2019 and $18 in 2018	2,425			1,755
Noncurrent operating lease liabilities	147
Pension and postretirement obligations	602			561
Other noncurrent liabilities	353			313
Total liabilities	5,640			4,376
Commitments and contingencies (Note 16)
Redeemable noncontrolling interests	105			100
Parent company stockholders' equity
Preferred stock, 50,000,000 shares authorized, $0.01 par value, no shares outstanding	—			—
Common stock, 450,000,000 shares authorized, $0.01 par value, 143,901,808 and 144,663,403 shares outstanding	2			2
Additional paid-in capital	2,372			2,368
Retained earnings	538			456
Treasury stock, at cost (10,095,558 and 8,342,185 shares)	(150		)	(119		)
Accumulated other comprehensive loss	(1,328		)	(1,362		)
Total parent company stockholders' equity	1,434			1,345
Noncontrolling interests	105			97
Total equity	1,539			1,442
Total liabilities and equity	$	7,284		$	5,918

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

Dana Incorporated

Consolidated Statement of Cash Flows (Unaudited)

(In millions)



	Three Months Ended March 31,
	2019			2018
Operating activities
Net income	$	101		$	111
Depreciation	73			64
Amortization	4			3
Amortization of deferred financing charges	1			1
Earnings of affiliates, net of dividends received	(5		)	(5		)
Stock compensation expense	5			4
Deferred income taxes	(14		)	12
Pension contributions, net	4
Change in working capital	(175		)	(216		)
Other, net	(10		)	(2		)
Net cash used in operating activities	(16		)	(28		)
Investing activities
Purchases of property, plant and equipment	(98		)	(65		)
Acquisition of businesses, net of cash acquired	(606		)
Purchases of marketable securities	(5		)	(17		)
Proceeds from sales of marketable securities				4
Proceeds from maturities of marketable securities	6			11
Settlements of undesignated derivatives	(20		)
Other, net	(1		)
Net cash used in investing activities	(724		)	(67		)
Financing activities
Net change in short-term debt	(2		)	(7		)
Proceeds from long-term debt	675
Repayment of long-term debt	(9		)	(1		)
Deferred financing payments	(12		)
Dividends paid to common stockholders	(14		)	(15		)
Distributions to noncontrolling interests	(1		)	(1		)
Contributions from noncontrolling interests	1
Repurchases of common stock	(25		)
Other, net	(3		)	(4		)
Net cash provided by (used in) financing activities	610			(28		)
Net decrease in cash, cash equivalents and restricted cash	(130		)	(123		)
Cash, cash equivalents and restricted cash – beginning of period	520			610
Effect of exchange rate changes on cash balances	5			14
Less: Cash contributed to disposal group				(10		)
Cash, cash equivalents and restricted cash – end of period (Note 6)	$	395		$	491

Non-cash investing activity
Purchases of property, plant and equipment held in accounts payable	$	84		$	81

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 Divestitures

4.	Goodwill and Other Intangible Assets

5.	Restructuring of Operations

6.	Supplemental Balance Sheet and Cash Flow Information

7.	Leases

8.	Stockholders' Equity

9.	Redeemable Noncontrolling Interests

10.	Earnings per Share

11.	Stock Compensation

12.	Pension and Postretirement Benefit Plans

13.	Marketable Securities

14.	Financing Agreements

15.	Fair Value Measurements and Derivatives

16.	Commitments and Contingencies

17.	Warranty Obligations

18.	Income Taxes

19.	Other Expense, Net

20.	Revenue from Contracts with Customers

21.	Segments

22.	Equity Affiliates

Notes to Consolidated Financial Statements (Unaudited)

(In millions, except share and per share amounts)

Note 1. Organization and Summary of Significant Accounting Policies

General

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

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

Summary of significant accounting policies

Basis of presentation — Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. These statements are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods. The results reported in these consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the consolidated financial statements in Item 8 of our Annual Report on Form-K for the year ended December 31, 2018 (the "2018 Form 10-K").

Recently adopted accounting pronouncements

On January 1, 2019, we adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), using the modified retrospective approach and an application date of January 1, 2019. Prior period amounts have not been adjusted and continue to be reflected in accordance with our historical accounting. This transition method resulted in the recognition of a right-of-use asset and a lease liability for virtually all leases at the application date with a cumulative-effect adjustment to retained earnings. Short-term leases of less than 12 months have not been recorded on the balance sheet.

We elected the package of practical expedients, which among other things, allowed us to carry forward the historical lease classification. We did not elect the practical expedient that allowed for hindsight to determine the lease term of existing leases. We separated the lease components from the non-lease components of each lease arrangement and, therefore, did not elect the practical expedient that would enable us to not separate them.

We also adopted the following standards during the first quarter of 2019, none of which had a material impact on our financial statements or financial statement disclosures:



Standard		Effective Date
2017-11	Earnings Per Share, Distinguishing Liabilities from Equity, Derivatives and Hedging – (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception	January 1, 2019

Recently issued accounting pronouncements

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance allows for capitalization of implementation costs associated with certain cloud computing arrangements. This guidance becomes effective January 1, 2020 and early adoption is permitted. The guidance is to be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We do not expect the adoption of this guidance to impact our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General, Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. The guidance eliminated certain

disclosures about defined benefit plans, added new disclosures, and clarified other requirements. This guidance becomes effective January 1, 2020 and early adoption is permitted. There were no changes to interim disclosure requirements. Adoption of this guidance will not have a material effect on our annual financial statement disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The guidance removed or modified some disclosures while others were added. The removal and amendment of certain disclosures can be adopted immediately with retrospective application. The additional disclosure guidance becomes effective January 1, 2020. Adoption of this guidance will not have a material effect on our financial statement disclosures.

In January 2017, the FASB issued ASU 2017-04, Goodwill – Simplifying the Test for Goodwill Impairment, guidance that simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 of the goodwill impairment test. The new guidance quantifies goodwill impairment as the amount by which the carrying amount of a reporting unit, including goodwill, exceeds its fair value, with the impairment loss limited to the total amount of goodwill allocated to that reporting unit. This guidance becomes effective January 1, 2020 and will be applied on a prospective basis. Early adoption is permitted for impairment tests performed after January 1, 2017. We do not expect the adoption of this guidance to impact our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Credit Losses – Measurement of Credit Losses on Financial Instruments, new guidance for the accounting for credit losses on certain financial instruments. This guidance introduces a new approach to estimating credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. This guidance, which becomes effective January 1, 2020, is not expected to have a material impact on our consolidated financial statements.

Note 2. Acquisitions

Oerlikon Drive Systems — On February 28, 2019, we acquired a 100% ownership interest in the Oerlikon Drive Systems (“ODS”) segment of the Oerlikon Group. ODS is a global manufacturer of high-precision gears, planetary hub drives for wheeled and tracked vehicles, and products, controls, and software that support vehicle electrification across the mobility industry. The acquisition of ODS is expected to deliver significant long-term value by accelerating our commitment to vehicle electrification and strengthening the technology portfolio for each of our end markets while further expanding and balancing the manufacturing presence of our off-highway business in key geographical markets. The business employs approximately 5,900 people and operates 10 manufacturing and engineering facilities in China, India, Italy, the United Kingdom, and the United States, with two additional facilities under construction in China.

We paid $626 at closing which was funded primarily through debt proceeds. See Note 14 for additional information. The purchase consideration and related provisional allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:



Purchase consideration paid at closing	$	626
Less purchase consideration to be recovered for indemnified matters	(4		)
Total purchase consideration	$	622

Cash and cash equivalents	$	76
Accounts receivable - Trade	150
Accounts receivable - Other	15
Inventories	202
Other current assets	16
Goodwill	126
Deferred tax assets	37
Other noncurrent assets	28
Investments in affiliates	7
Property, plant and equipment	345
Current portion of long-term debt	(2		)
Accounts payable	(151		)
Accrued payroll and employee benefits	(33		)
Other accrued liabilities	(48		)
Long-term debt	(8		)
Pension and postretirement obligations	(47		)
Other noncurrent liabilities	(83		)
Noncontrolling interests	(8		)
Total purchase consideration allocation	$	622

The purchase consideration and the fair value of the assets acquired and liabilities assumed are provisional and could be revised as a result of additional information obtained regarding indemnified matters and liabilities assumed and revisions of provisional estimates of fair values, including but not limited to, the completion of independent appraisals and valuations related to intangibles and the equity method investment.

Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is not deductible for tax purposes. We used a replacement cost method to value fixed assets. Property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from three to twenty-five years.

The results of operations of ODS are reported in our Off-Highway and Commercial Vehicle operating segments. Transaction related expenses associated with completion of the acquisition totaling $12 were charged to other expense, net. During the first quarter of 2019, the business contributed sales of $75.

The following unaudited pro forma information has been prepared as if the ODS acquisition and the related debt financing had occurred on January 1, 2018.



	Three Months Ended March 31,
	2019		2018
Net sales	$	2,308	$	2,360
Net income	$	126	$	89

The unaudited pro forma results include adjustments primarily related to purchase accounting, interest expense related to the proceeds of debt used in connection with the acquisition of ODS, and non-recurring strategic transaction expense. The unaudited pro forma financial information is not indicative of the operational results that would have been obtained had the transactions actually occurred as of that date, nor is it necessarily indicative of Dana’s future operational results.

SME — On January 11, 2019, we acquired a 100% ownership interest in the S.M.E. S.p.A. (SME). SME designs, engineers, and manufactures low-voltage AC induction and synchronous reluctance motors, inverters, and controls for a wide range of off-highway electric vehicle applications, including material handling, agriculture, construction, and automated-guided vehicles. The addition of SME's low-voltage motors and inverters, which are primarily designed to meet the evolution of electrification in off-highway equipment, significantly expands Dana's electrified product portfolio.

We paid $88 at closing, consisting of $62 in cash on hand and a note payable of $26 which allows for net settlement of potential contingencies as defined in the purchase agreement. The note is payable in five years and bears annual interest of 5%. The purchase consideration and the related provisional allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:



Total purchase consideration	$	88

Accounts receivable - Trade	4
Accounts receivable - Other	1
Inventories	8
Goodwill	68
Intangibles	24
Other noncurrent assets	1
Property, plant and equipment	5
Short-term debt	(8		)
Accounts payable	(6		)
Accrued payroll and employee benefits	(1		)
Other accrued liabilities	(1		)
Other noncurrent liabilities	(7		)
Total purchase consideration allocation	$	88

The fair value of the assets acquired and liabilities assumed are provisional and could be revised as a result of additional information obtained regarding liabilities assumed and revisions of provisional estimates of fair values including but not limited to, the completion of independent appraisals and valuations related to intangibles.

Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is not deductible for tax purposes. The provisional fair values assigned to intangibles include $15 allocated to developed technology and $9 allocated to customer relationships. We used the relief from royalty method, an income approach, to value developed technology. We used the multi-period excess earnings method, an income approach, to value customer relationships. We used a replacement cost method to value fixed assets. The developed technology and customer relationship intangible assets are being amortized on a straight-line basis over twelve and ten years, respectively, and property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from one to twenty years.

The results of operations of the business are reported in our Off-Highway operating segment from the date of acquisition. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial statements were presented. During the first quarter of 2019, the business contributed sales of $6.

TM4 — On June 22, 2018, we acquired a 55% ownership interest in TM4 Inc. (TM4) from Hydro-Québec. TM4 designs and manufactures motors, power inverters, and control systems for electric vehicles, offering a complementary portfolio to Dana's electric gearboxes and thermal-management technologies for batteries, motors, and inverters. The transaction establishes Dana as the only supplier with full e-Drive design, engineering, and manufacturing capabilities – offering electro-mechanical propulsion solutions to each of its end markets. The transaction further strengthens Dana's position in China, the world's fastest-growing market for electric vehicles. TM4 owns a 50% interest in Prestolite E-Propulsion Systems Limited (PEPS), a joint venture in China with Prestolite Electric Beijing Limited, which offers electric mobility solutions throughout China and Asia. The terms of the agreement provide Hydro-Québec with the right to put all, and not less than all, of its shares in TM4 to Dana at fair value any time after June 22, 2021.

We paid $125 at closing, using cash on hand. The purchase consideration and the related allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:



Total purchase consideration	$	125

Cash and cash equivalents	$	3
Accounts receivable - Trade	3
Accounts receivable - Other	1
Inventories	4
Goodwill	148
Intangibles	24
Investments in affiliates	49
Property, plant and equipment	5
Accounts payable	(2		)
Accrued payroll and employee benefits	(1		)
Other accrued liabilities	(7		)
Redeemable noncontrolling interest	(102		)
Total purchase consideration allocation	$	125

Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is not deductible for tax purposes. The provisional fair values assigned to intangibles include $14 allocated to developed technology and $10 allocated to trademarks and trade names. We used the relief from royalty method, an income approach, to value developed technology and the trademarks and trade names. We used a replacement cost method to value fixed assets. We used a combination of the discounted cash flow, an income approach, and the guideline public company method, a market approach, to value the equity method investment in PEPS. The developed technology intangible assets are being amortized on a straight-line basis over ten years, and property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from five to six years. The trademarks and trade names are considered indefinite-lived intangible assets.

Dana is consolidating TM4 as the governing documents provide Dana with a controlling financial interest. The results of operations of the business are reported in our Commercial Vehicle operating segment from the date of acquisition. Transaction related expenses associated with completion of the acquisition totaling $5 were charged to other expense, net in 2018. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial statements are presented. During 2018, the business contributed sales of $11.

BFP and BPT — On February 1, 2017, we acquired 80% ownership interests in Brevini Fluid Power S.p.A. (BFP) and Brevini Power Transmission S.p.A. (BPT) from Brevini Group S.p.A. (Brevini). The acquisition expands our Off-Highway operating segment product portfolio to include technologies for tracked vehicles, doubling our addressable market for off-highway driveline systems and establishing Dana as the only off-highway solutions provider that can manage the power to both move the equipment and perform its critical work functions. This acquisition also brings a platform of technologies that can be leveraged in our light and commercial-vehicle end markets, helping to accelerate our hybridization and electrification initiatives.

We paid $181 at closing, using cash on hand, and refinanced a significant portion of the debt assumed in the transaction during the first half of 2017. In December 2017, a purchase price reduction of $9 was agreed under the sale and purchase agreement provisions for determination of the net indebtedness and net working capital levels of BFP and BPT as of the closing date. In connection with the acquisition of BFP and BPT, Dana agreed to purchase certain real estate being leased by BPT from a Brevini affiliate for €25. Completion of the real estate purchase and receipt of the purchase price adjustment occurred in the second quarter of 2018 with a net cash payment of $20.

On August 8, 2018, we entered into an agreement to acquire Interfind S.p.A.'s, formerly Brevini Group S.p.A., remaining 20% ownership interests in BFP and BPT and to settle all claims between the parties. We paid $43 to acquire Interfind S.p.A.'s remaining ownership interests and received $10 in settlement of all pending and future claims. See Note 9 for additional information.

Note 3. Disposal Groups and Divestitures

Disposal group held for sale — In December 2017, we entered into an agreement to divest our Brazil suspension components business (the disposal group) for no consideration to an unaffiliated company. The results of operations of the Brazil suspension components business were reported within our Commercial Vehicle operating segment. To effectuate the sale, Dana was

obligated to contribute $10 of additional cash to the business prior to closing. We classified the disposal group as held for sale at December 31, 2017, recognizing a $27 loss to adjust the carrying value of the net assets to fair value and to recognize the liability for the additional cash required to be contributed to the business prior to closing. During the first quarter of 2018, we made the required cash contribution to the disposal group. After being unable to complete the transaction with the counterparty to the December 2017 agreement, we entered into an agreement with another third party in June 2018. The transaction with the new counterparty closed in July 2018 and we received cash proceeds of $2. We reversed $3 of the previously recognized $27 pre-tax loss, inclusive of the proceeds received in July 2018, during the second quarter of 2018.

Note 4. Goodwill and Other Intangible Assets

Goodwill — The change in the carrying amount of goodwill in 2019 is due to currency fluctuation and the acquisitions of SME and ODS. See Note 2 for additional information on recent acquisitions.

Changes in the carrying amount of goodwill by segment —



	Light Vehicle		Commercial Vehicle		Off-Highway			Power Technologies		Total
Balance, December 31, 2018	$	3	$	150	$	105		$	6	$	264
Acquisitions					194					194
Currency impact			3		(5		)			(2		)
Balance, March 31, 2019	$	3	$	153	$	294		$	6	$	456

Components of other intangible assets —



		March 31, 2019							December 31, 2018
	Weighted Average Useful Life (years)	Gross Carrying Amount		Accumulated Impairment and Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Impairment and Amortization			Net Carrying Amount
Amortizable intangible assets
Core technology	9	$	121	$	(89	)	$	32	$	107	$	(89	)	$	18
Trademarks and trade names	16	16		(4		)	12		16		(4		)	12
Customer relationships	8	465		(399		)	66		460		(400		)	60
Non-amortizable intangible assets
Trademarks and trade names		75					75		74					74
Used in research and development activities		20		(20		)	—		20		(20		)	—
		$	697	$	(512	)	$	185	$	677	$	(513	)	$	164

During the third quarter of 2012, we entered a strategic alliance with Fallbrook Technologies Inc. (Fallbrook). The transaction with Fallbrook was accounted for as a business combination and the original purchase price allocation included $20 of intangible assets used in research and development activities, which had been classified as indefinite-lived. Since the third quarter of 2012, we have been working with several customers to commercialize the continuously variable planetary (CVP) technology primarily in combustion engine applications. During the second quarter of 2018 key customers notified us of their intention to redirect their development efforts to electrification and cease further development efforts of the CVP technology in combustion engine applications. While we have not abandoned the CVP technology, we determined that it was more likely than not that the fair value of the related intangible assets was less than their carrying amount. We used the multi-period excess earnings method, an income approach, to fair value the assets used in research and development activities. Given the lack of adequate identifiable future revenue streams, it was determined that the $20 of intangible assets used in research and development activities was fully impaired during the second quarter of 2018.

The net carrying amounts of intangible assets, other than goodwill, attributable to each of our operating segments at March 31, 2019 were as follows: Light Vehicle — $27, Commercial Vehicle — $54, Off-Highway — $95 and Power Technologies — $9.

Amortization expense related to amortizable intangible assets —



	Three Months Ended March 31,
	2019		2018
Charged to cost of sales	$	1	$	1
Charged to amortization of intangibles	2		2
Total amortization	$	3	$	3

The following table provides the estimated aggregate pre-tax amortization expense related to intangible assets for each of the next five years based on March 31, 2019 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 2019		2020		2021		2022		2023
Amortization expense	$	8	$	10	$	10	$	10	$	10

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 certain operating costs of facilities that we are in the process of closing.

Restructuring charges of $9 in the first quarter of 2019 were comprised of severance and benefit costs related to integration of the ODS acquisition, headcount reductions across our operations and exit costs related to previously announced actions.

During the first quarter of 2018, we continued to execute our previously announced actions. Restructuring expense was $1, primarily representing continuing exit costs associated with previously announced actions.

In accordance with the transition provisions of the new leasing standard, we reclassified $4 of previously accrued lease cease-use costs as an adjustment to the initial measurement of the related right-of-use operating lease asset.

Accrued restructuring costs and activity —



	Employee Termination Benefits			Exit Costs			Total
Balance, December 31, 2018	$	25		$	4		$	29
Charges to restructuring	7			2			9
Cash payments	(6		)	(2		)	(8		)
Lease cease-use reclassification				(4		)	(4		)
Balance, March 31, 2019	$	26		$	—		$	26

At March 31, 2019, the accrued employee termination benefits include costs to reduce approximately 300 employees to be completed over the next year.

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 March 31, 2019.



	Expense Recognized						Future Cost to Complete
	Prior to 2019		2019		Total to Date		Future Cost to Complete
Commercial Vehicle	$	35	$	1	$	36	$	7

The future cost to complete includes estimated separation costs, primarily those associated with one-time benefit programs, and exit costs through 2021, equipment transfers and other costs which are required to be recognized as closures are finalized or as incurred during the closure.

Note 6. Supplemental Balance Sheet and Cash Flow Information

Inventory components at —



	March 31, 2019			December 31, 2018
Raw materials	$	515		$	433
Work in process and finished goods	822			649
Inventory reserves	(55		)	(51		)
Total	$	1,282		$	1,031

Cash, cash equivalents and restricted cash at —



	March 31, 2019		December 31, 2018		March 31, 2018		December 31, 2017
Cash and cash equivalents	$	383	$	510	$	479	$	603
Restricted cash included in other current assets	9		7		8		3
Restricted cash included in other noncurrent assets	3		3		4		4
Total cash, cash equivalents and restricted cash	$	395	$	520	$	491	$	610

Note 7. Leases

Our global lease portfolio represents leases of real estate, including manufacturing, assembly and office facilities, while the remainder represents leases of personal property, including manufacturing, material handling and IT equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Short term lease costs were insignificant in the three months ended March 31, 2019. We account for lease components separately from the non-lease components of each lease arrangement.

Our leases generally have remaining lease terms of 1 year to 11 years, some of which include options to extend the leases for up to 7 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table provides a summary of the location and amounts related to finance leases recognized in the consolidated balance sheet.

Components of lease expense —



	Three Months Ended March 31, 2019
Operating lease cost	$	12
Finance lease cost:
Amortization of right-of-use assets	$	1
Interest on lease liabilities	—
Total finance lease cost	$	1

Supplemental cash flow information related to leases —



	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	12
Operating cash flows from finance leases	—
Financing cash flows from finance leases	1
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	6
Finance leases	10

Supplemental balance sheet information related to leases —



	March 31, 2019
Weighted-average remaining lease term (years):
Operating leases	10
Finance leases	6
Weighted-average discount rate:
Operating leases	4.0	%
Finance leases	6.0	%

Maturities —



	Operating Leases		Finance Leases
Remainder of 2019	$	37	$	4
2020	44		4
2021	37		4
2022	27		4
2023	20		3
Thereafter	57		15
Total lease payments	222		34
Less: interest	36		5
Present value of lease liabilities	$	186	$	29

As of March 31, 2019 we have operating lease payments that have not yet commenced of approximately $8 . This lease is expected to commence in July 2019.

Disclosures related to periods prior to adoption of ASU 2016-02 —

Cash obligations under future minimum rental commitments under operating leases as of December 31, 2018 are shown in the table below. Operating lease commitments are primarily related to facilities.



	2019		2020		2021		2022		2023		Thereafter		Total
Lease commitments	$	57	$	41	$	35	$	27	$	21	$	64	$	245

Note 8. Stockholders’ Equity

Common stock — Our Board of Directors declared quarterly a cash dividend of ten cents per share of common stock in the first quarter of 2019. Dividends accrue on restricted stock units (RSUs) granted under our stock compensation program and will be paid in cash or additional units when the underlying units vest.

Share repurchase program — On March 24, 2018 our Board of Directors approved an expansion of our existing common stock share repurchase program to $200. The program expires on December 31, 2019. Under the program, we spent $25 to repurchase 1,432,275 shares of our common stock during the first quarter of 2019 through open market transactions. Approximately $150 remained available for future share repurchases as of March 31, 2019.

Changes in equity —



	Three Months Ended March 31,
2019	Common Stock		Additional Paid-In Stock			Retained Earnings			Treasury Stock			Accumulated Other Compre-hensive Loss			Non-controlling Interests			Total Equity
Balance, December 31, 2018	$	2	$	2,368		$	456		$	(119	)	$	(1,362	)	$	97		$	1,442
Adoption of ASU 2016-02 leases, January 1, 2019						(1		)										(1		)
Net income						98									4			102
Other comprehensive income (loss)												34			(2		)	32
Common stock dividends						(15		)										(15		)
Distributions to noncontrolling interests															(1		)	(1		)
Increase from business combination															7			7
Common stock share repurchases									(25		)							(25		)
Stock compensation			4															4
Stock withheld for employee taxes									(6		)							(6		)
Balance, March 31, 2019	$	2	$	2,372		$	538		$	(150	)	$	(1,328	)	$	105		$	1,539

2018
Balance, December 31, 2017	$	2	$	2,354		$	86		$	(87	)	$	(1,342	)	$	101		$	1,114
Adoption of ASU 2016-01 financial instruments adjustment, January 1, 2018						2						(2		)				—
Net income						108									2			110
Other comprehensive income												8						8
Common stock dividends						(15		)										(15		)
Distributions to noncontrolling interests															(1		)	(1		)
Purchase of noncontrolling interests			(9		)										9			—
Stock compensation			5															5
Stock withheld for employee taxes									(6		)							(6		)
Balance, March 31, 2018	$	2	$	2,350		$	181		$	(93	)	$	(1,336	)	$	111		$	1,215

During the first quarter of 2018, a wholly-owned subsidiary of Dana purchased the ownership interest in Dana Spicer (Thailand) Limited (a non wholly-owned consolidated subsidiary of Dana) held by ROC Spicer, Ltd. (a non wholly-owned consolidated subsidiary of Dana). Dana maintained its controlling financial interest in Dana Spicer (Thailand) Limited and accordingly accounted for the purchase as an equity transaction. The excess of the fair value of the consideration paid over the carrying value of the investment attributable to the noncontrolling interest in ROC Spicer, Ltd. was recognized as additional noncontrolling interest with a corresponding reduction of the additional paid-in capital of Dana.

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



	Parent Company Stockholders
	Foreign Currency Translation			Hedging			Investments			Defined Benefit Plans			Total
Balance, December 31, 2018	$	(721	)	$	(54	)	$	—		$	(587	)	$	(1,362	)
Other comprehensive income (loss):
Currency translation adjustments	24												24
Holding gains and losses				29									29
Reclassification of amount to net income (a)				(24		)							(24		)
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)										7			7
Tax expense										(2		)	(2		)
Other comprehensive income	24			5			—			5			34
Balance, March 31, 2019	$	(697	)	$	(49	)	$	—		$	(582	)	$	(1,328	)

Balance, December 31, 2017	$	(670	)	$	(64	)	$	2		$	(610	)	$	(1,342	)
Other comprehensive income (loss):
Currency translation adjustments	14												14
Holding loss on net investment hedge	(5		)										(5		)
Holding gains and losses				(38		)							(38		)
Reclassification of amount to net income (a)				29									29
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)										9			9
Tax (expense) benefit				1						(2		)	(1		)
Other comprehensive income (loss)	9			(8		)	—			7			8
Adoption of ASU 2016-01 financial instruments adjustment, January 1, 2018							(2		)				(2		)
Balance, March 31, 2018	$	(661	)	$	(72	)	$	—		$	(603	)	$	(1,336	)

(a) Realized gains and losses from currency-related forward contracts associated with forecasted transactions or from other derivative instruments treated as cash flow hedges are reclassified from AOCI into the same line item in the consolidated statement of operations in which the underlying forecasted transaction or other hedged item is recorded. See Note 15 for additional details.

(b) See Note 12 for additional details.

Note 9. Redeemable Noncontrolling Interests

In connection with the acquisition of a controlling interest in TM4 from Hydro-Québec on June 22, 2018, we recognized $102 for Hydro-Québec's 45% redeemable noncontrolling interest. The terms of the agreement provide Hydro-Québec with the right to put all, and not less than all, of its shares to Dana at fair value any time after June 22, 2021. See Note 2 for additional information.

On August 8, 2018, we entered into an agreement to acquire Brevini's remaining 20% ownership interests in BFP and BPT and to settle all claims between the parties. We paid $43 to acquire Brevini's remaining ownership interests and received $10 in settlement of all pending and future claims. AOCI attributable to Brevini's redeemable noncontrolling interests was reclassified to AOCI of the parent company. The difference between the carrying value of Brevini's redeemable noncontrolling interests and the cash paid was recorded to additional paid-in capital of the parent company.

Redeemable noncontrolling interests reflected as of the balance sheet date are the greater of the redeemable noncontrolling interest balances adjusted for comprehensive income items and distributions or the redemption values. Redeemable noncontrolling interest adjustments of redemption value are recorded in retained earnings.

Reconciliation of changes in redeemable noncontrolling interests —



	Three Months Ended March 31,
	2019			2018
Balance, beginning of period	$	100		$	47
Cash contributions from redeemable noncontrolling interests	1
Comprehensive income (loss) adjustments:
Net income (loss) attributable to redeemable noncontrolling interests	(1		)	1
Other comprehensive income (loss) attributable to redeemable noncontrolling interests	5			1
Balance, end of period	$	105		$	49

Note 10. Earnings per Share

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



	Three Months Ended March 31,
	2019		2018
Net income attributable to the parent company	$	98	$	108
Less: Redeemable noncontrolling interests adjustment to redemption value	—		—
Net income available to common stockholders - Numerator basic and diluted	$	98	$	108

Denominator:
Weighted-average common shares outstanding - Basic	143.9		145.6
Employee compensation-related shares, including stock options	0.9		1.9
Weighted-average common shares outstanding - Diluted	144.8		147.5

The share count for diluted earnings per share is computed on the basis of the weighted-average number of common shares outstanding plus the effects of dilutive common stock equivalents (CSEs) outstanding during the period. We excluded 0.4 million and 0.2 million CSEs from the calculations of diluted earnings per share for 2019 and 2018 as the effect of including them would have been anti-dilutive.

Note 11. 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 2019.

* Weighted-average per share

We calculated the fair value of the RSUs at grant date based on the closing market price of our common stock at the date of grant. The number of PSUs that ultimately vest is contingent on achieving specified return on invested capital targets and specified margin targets, with an even distribution between the two targets. We estimated the fair value of the PSUs at grant date based on the closing market price of our common stock at the date of grant adjusted for the value of assumed dividends over the period because the awards are not dividend protected.

We paid $2 of cash to settle RSUs. We issued 0.7 million and 0.2 million shares of common stock based on the vesting of RSUs and PSUs during 2019. We recognized stock compensation expense of $5 and $4 during the first quarters of 2019 and 2018. At March 31, 2019, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $37. This cost is expected to be recognized over a weighted-average period of 2.3 years.

Note 12. 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 —



	Pension
	2019						2018						OPEB - Non-U.S.
Three Months Ended March 31,	U.S.			Non-U.S.			U.S.			Non-U.S.			2019		2018
Interest cost	$	9		$	2		$	11		$	1		$	1	$	1
Expected return on plan assets	(12		)	(1		)	(18		)	(1		)
Service cost				2						2
Amortization of net actuarial loss	5			2			7			2
Net periodic benefit cost	$	2		$	5		$	—		$	4		$	1	$	1

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

Pension expense for 2019 increased versus the same period in 2018 as a result of a lower assumed return on plan assets, partially offset by lower interest expense and amortization of the net actuarial loss in the U.S.

Plan termination — In October 2017, upon authorization by the Dana Board of Directors, we commenced the process of terminating one of our U.S. defined benefit pension plans. Ultimate plan termination is subject to prevailing market conditions and other considerations, including interest rates and annuity pricing. Settlement of the plan obligations is expected to occur in the first half of 2019. At December 31, 2018, this plan had benefit obligations of $938 and assets of $773. The benefit obligations have been valued at the amount expected to be required to settle the obligations, using assumptions regarding the portion of obligations expected to be settled through participant acceptance of lump sum payments or annuities and the cost to purchase those annuities. The unrecognized actuarial losses of the plan in AOCI totaled $370 at the end of 2018. If the settlement is effected as expected in 2019, the plan's deferred actuarial losses remaining in AOCI at that time will be recognized as expense.

Note 13. Marketable Securities



	March 31, 2019						December 31, 2018
	Cost		Unrealized Gain (Loss)		Fair Value		Cost		Unrealized Gain (Loss)		Fair Value
U.S. government securities	$	2	$	—	$	2	$	2	$	—	$	2
Corporate securities	4				4		4				4
Certificates of deposit	14				14		15				15
Total marketable securities	$	20	$	—	$	20	$	21	$	—	$	21

U.S. government securities include bonds issued by government-sponsored agencies and Treasury notes. Corporate securities are primarily debt securities. 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 $15, $2 and $3 at March 31, 2019.

Note 14. Financing Agreements

Long-term debt at —



	Interest Rate		March 31, 2019			December 31, 2018
Senior Notes due September 15, 2023	6.000%		$	300		$	300
Senior Notes due December 15, 2024	5.500%		425			425
Senior Notes due April 15, 2025	5.750%	*	400			400
Senior Notes due June 1, 2026	6.500%	*	375			375
Term Facility			932			265
Other indebtedness			63			28
Debt issuance costs			(29		)	(18		)
			2,466			1,775
Less: Current portion of long-term debt			41			20
Long-term debt, less debt issuance costs			$	2,425		$	1,755

In conjunction with the issuance of the April 2025 Notes we entered into 8-year fixed-to-fixed cross-currency swaps which have the effect of economically converting the April 2025 Notes to euro-denominated debt at a fixed rate of 3.850%. In conjunction with the issuance of the June 2026 Notes we entered into 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 15 for additional information.

Interest on the senior notes is payable semi-annually and interest on the Term Facility is payable quarterly. Other indebtedness includes borrowings from various financial institutions, financing lease obligations and the unamortized fair value adjustment related to a terminated interest rate swap. See Note 15 for additional information on the terminated interest rate swap.

Credit agreement — On February 28, 2019, we entered into an amended credit and guaranty agreement comprised of a $500 term facility (the Term A Facility), a $450 term facility (the Term B Facility and, together with the Term A Facility, the Term Facilities) and a $750 revolving credit facility (the Revolving Facility). The Term A Facility is an expansion of our existing $275 term facility. The Term A Facility and the Revolving Facility mature on August 17, 2022. The Term B Facility matures on February 28, 2026. On February 28, 2019, we drew the $225 available under the Term A Facility and the $450 available under the Term B Facility. Financing costs of $12 were recorded as deferred cost and are being amortized to interest expense over the life of the applicable term facilities. We are required to make equal quarterly installments on the Term A Facility on the last day of each fiscal quarter of $8 beginning March 31, 2019 and 0.25% of the aggregate principal advances of the Term B Facility quarterly commencing on June 30 2019. We may prepay some or all of the amounts under the term facilities without penalty. The proceeds from the term facilities were used to acquire the Oerlikon Drive Systems segment of the Oerlikon Group and pay for related integration activities. The Revolving Facility amended our previous revolving credit facility. In connection with this amendment, we paid $1 in deferred financing costs to be amortized to interest expense over the life of the facility. Deferred financing costs on our Revolving Facility are included in other noncurrent assets.

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

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



	Margin
Total Net Leverage Ratio	Base Rate		Eurodollar Rate
Less than or equal to 1.00:1.00	0.50	%	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	%

The Term B Facility bears interest based on, at our option, the Base Rate plus 1.25% or the Eurodollar rate plus 2.25%. We have elected to pay interest on our advances under the Term Facilities at the Eurodollar Rate. The interest rate on the Term A Facility was 4.249% and the Term B Facility was 4.749%, inclusive of the applicable margins, as of March 31, 2019.

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



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

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

As of March 31, 2019, we had no outstanding borrowings under the Revolving Facility but we had utilized $21 for letters of credit. We had availability at March 31, 2019 under the Revolving Facility of $729 after deducting the outstanding letters of credit.

Debt covenants — At March 31, 2019, we were in compliance with the covenants of our financing agreements. Under the Term Facilities, 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 Term A Facility and Revolving Facility, a maintenance covenant tested on the last day of each fiscal quarter requiring us to maintain a first lien net leverage ratio not to exceed 2.00 to 1.00.

Note 15. Fair Value Measurements and Derivatives

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

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



			Fair Value
Category	Balance Sheet Location	Fair Value Level	March 31, 2019		December 31, 2018
Available-for-sale securities	Marketable securities	2	$	20	$	21
Currency forward contracts
Cash flow hedges	Accounts receivable - Other	2	8		6
Cash flow hedges	Other accrued liabilities	2	5		5
Undesignated	Accounts receivable - Other	2	2		2
Undesignated	Other accrued liabilities	2			1
Currency swaps
Cash flow hedges	Other noncurrent liabilities	2	92		118

Fair Value Level 1 assets and liabilities reflect quoted prices in active markets. Fair Value Level 2 assets and liabilities reflect the use of significant other observable inputs.

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



		March 31, 2019				December 31, 2018
	Fair Value Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Senior notes	2	$	1,500	$	1,515	$	1,500	$	1,442
Term Facility	2	932		928		265		265
Other indebtedness*	2	63		58		28		23
Total		$	2,495	$	2,501	$	1,793	$	1,730


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

Interest rate derivatives — Our portfolio of derivative financial instruments periodically includes interest rate swaps designed to mitigate our interest rate risk. As of March 31, 2019, no fixed-to-floating interest rate swaps remain outstanding. However, a $5 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 March 31, 2019. 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 three months ended March 31, 2019.

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 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.

We have executed fixed-to-fixed cross-currency swaps in conjunction with the issuance of certain notes to eliminate the variability in the functional-currency-equivalent cash flows due to changes in exchange rates associated with the forecasted principal and interest payments. All of the underlying designated financial instruments, and any subsequent replacement debt, have been designated as the hedged items in each respective cash flow hedge relationship, as shown in the table below. Designated as cash flow hedges of the forecasted principal and interest payments of the underlying designated financial instruments, or subsequent replacement debt, all of the swaps economically convert the underlying designated financial instruments into the functional currency of each respective holder. The impact of the interest rate differential between the inflow and outflow rates on all fixed-to-fixed cross-currency swaps is recognized during each period as a component of interest expense.

The following fixed-to-fixed cross-currency swaps were outstanding at March 31, 2019:



Underlying Financial Instrument						Derivative Financial Instrument
Description	Type	Face Amount		Rate		Designated Notional Amount		Traded Amount		Inflow Rate		Outflow Rate
June 2026 Notes	Payable	$	375	6.50	%	$	375	€	338	6.50	%	5.14	%
April 2025 Notes	Payable	$	400	5.75	%	$	400	€	371	5.75	%	3.85	%
Luxembourg Intercompany Notes	Receivable	€	281	3.91	%	€	281	$	300	6.00	%	3.91	%

All of the swaps are expected to be highly effective in offsetting the corresponding currency-based changes in cash outflows related to the underlying designated financial instruments. Based on our qualitative assessment that the critical terms of all of the underlying designated financial instruments and all of the associated swaps match and that all other required criteria have been met, we do not expect to incur any ineffectiveness. As effective cash flow hedges, 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 designated financial instruments. See Note 14 for additional information about the June 2026 Notes and the April 2025 Notes. To the extent the swaps are no longer effective, changes in their fair values will be recorded in earnings.

The total notional amount of outstanding foreign currency forward contracts, involving the exchange of various currencies, was $516 at March 31, 2019 and $1,007 at December 31, 2018. The total notional amount of outstanding foreign currency swaps, including the fixed-to-fixed cross-currency swaps, was $1,090 at March 31, 2019 and $1,097 at December 31, 2018.

The following currency derivatives were outstanding at March 31, 2019:



		Notional Amount (U.S. Dollar Equivalent)
Functional Currency	Traded Currency	Designated as Cash Flow Hedges		Undesignated		Total		Maturity
U.S. dollar	Mexican peso, euro	$	149	$	13	$	162	Jun-20
Euro	U.S. dollar, Canadian dollar, Hungarian forint, British pound, Swiss franc, Indian rupee, Russian ruble, Chinese renminbi, Mexican peso	123		3		126		Jan-24
British pound	U.S. dollar, euro	2				2		Nov-19
Swedish krona	euro	11				11		Dec-19
South African rand	U.S. dollar, euro, Thai baht	7		4		11		Mar-20
Thai baht	U.S. dollar	21				21		Mar-20
Canadian dollar	U.S. dollar	18				18		Jun-20
Brazilian real	U.S. dollar, euro	44		45		89		Mar-20
Indian rupee	U.S. dollar, British pound, euro			53		53		Mar-20
Chinese renminbi	U.S. dollar, Canadian dollar, euro			10		10		Jul-19
Taiwan dollar	Chinese renminbi			13		13		Mar-20
Total forward contracts		375		141		516

U.S. dollar	euro	315				315		Sep-23
Euro	U.S. dollar	775				775		Jun-26
Total currency swaps		1,090		—		1,090
Total currency derivatives		$	1,465	$	141	$	1,606

Cash flow hedges — With respect to contracts designated as cash flow hedges, changes in fair value during the period in which the contracts remain outstanding are reported in OCI to the extent such contracts remain effective. Effectiveness is measured by using regression analysis to determine the degree of correlation between the change in the fair value of the derivative instrument and the change in the associated foreign currency exchange rates. Changes in fair value of contracts not designated as cash flow hedges or as net investment hedges are recognized in other expense, net in the period in which the changes occur. Realized gains and losses from currency-related forward contracts associated with forecasted transactions or from other derivative instruments, including those that have been designated as cash flow hedges and those that have not been designated, are recognized in the same line item in the consolidated statement of operations in which the underlying forecasted transaction or other hedged item is recorded. Accordingly, amounts are potentially recorded in sales, cost of sales or, in certain circumstances, other expense, net.

The following table provides a summary of deferred gains (losses) reported in AOCI as well as the amount expected to be reclassified to income in one year or less:



	Deferred Gain (Loss) in AOCI
	March 31, 2019			December 31, 2018			Gain (loss) expected to be reclassified into income in one year or less
Forward Contracts	$	3		$	2		$	3
Cross-Currency Swaps	(56		)	(60		)	—
Total