Dana(DAN) - 2023 Q4 - Annual Report

Sales Performance - Dana reported total external sales of $10,555 million in 2023, a 3.9$10,156 million in 2022[18]. - Light Vehicle Drive Systems accounted for 38.2% of total sales in 2023, down from 40.3% in 2022, while Off-Highway Drive and Motion Systems increased to 30.2% from 29.0%[18]. - Sales to Ford Motor Company represented approximately 20% of total sales in 2023, while Stellantis accounted for about 9%[22]. - Dana's sales to its ten largest customers accounted for 55% of overall sales in 2023[54]. - In 2023, net sales reached $10,555 million, an increase of$399 million compared to 2022, with a gross margin of 8.5%[143]. - Commercial Vehicle sales in 2023 were $2,092 million, a 5$3,185 million in 2023, reflecting an 8% increase from 2022, supported by strong global markets and net customer pricing actions[162]. - Power Technologies sales were $1,243 million in 2023, a 9$10,555 million, a $399 million increase from 2022, with an organic sales increase of$408 million or 4%[144]. Financial Performance - The company reported a net income of $48 million, a significant improvement from a net loss of$311 million in 2022[169]. - Adjusted EBITDA for 2023 was $845 million, up 20.7$700 million in 2022[169]. - Free cash flow for 2023 was $(25) million, a decline from$209 million in 2022, primarily due to increased capital expenditures[172]. - Cash and cash equivalents totaled $529 million as of December 31, 2023, with total liquidity reaching$1.67 billion[173]. - The company had net cash provided by operating activities of $476 million in 2023, down from$649 million in 2022[178]. - Capital expenditures increased to $501 million in 2023 from$440 million in 2022, supporting next-generation programs and new business[181]. - The company expects adjusted EBITDA for 2024 to approximate $875 million to$975 million, with an expected adjusted EBITDA margin improvement of 50 basis points over 2023[139]. - The company reported a decrease in cash provided by changes in working capital, with $70 million in 2023 compared to$199 million in 2022[180]. Research and Development - Research and development costs increased to $237 million in 2023 from$201 million in 2022, reflecting a focus on electrification initiatives[32]. - Dana's engineering expenses, including research and development, totaled $369 million in 2023, up from$321 million in 2022[32]. - The company has developed innovative fuel cell products to support new-energy hydrogen vehicles and industrial stationary markets[33]. - The transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs) is expected to increase content opportunity up to three-fold, but also brings increased competition[84]. - The company anticipates elevated research and development costs and capital investment during the transition to EVs, which could negatively impact profitability[85]. - The company is focused on expanding its presence in Asia, particularly in India and China, through acquisitions and organic investments[118]. - Dana's investments in electrodynamic technologies aim to lead the market in electric vehicle propulsion systems[120]. Employee and Operational Insights - Dana employed approximately 41,800 people across 31 countries as of December 31, 2023[34]. - The company emphasizes the importance of employee development, providing regular training and mentorship programs to enhance skills and leadership diversity[36]. - Dana's health and wellness initiatives include enhanced employee assistance programs addressing emotional, physical, and financial needs[40]. - The company is continuously evaluating new health-related programs to support employee well-being[40]. - Dana's development of Business Resource Groups (BRGs) aims to enhance talent retention and attract diverse employees[38]. Market and Economic Factors - Rising interest rates could negatively impact demand for Dana's products and make financing more difficult[52]. - The company faces risks from potential changes in international trade policies and tariffs that could affect manufacturing costs[57]. - Labor stoppages or slowdowns at key suppliers or customers could disrupt operations and adversely affect sales and profitability[66]. - The company faces volatility in commodity, labor, transportation, and energy costs, which could pressure profit margins if not recovered from customers[67]. - A significant portion of annual cost of sales is driven by purchased goods and services, and reliance on single-source suppliers increases risk of shortages[68]. - Approximately 57% of Dana's sales in 2023 were from operations located outside the U.S., exposing the company to currency exchange rate risks[59]. - International currency movements affected 2023 sales, decreasing them by $9 million due to weaker currencies against the U.S. dollar[134]. Compliance and Risk Management - The cost of environmental compliance did not have a material adverse effect on Dana's earnings or competitive position in 2023[42]. - Failure to maintain effective internal controls could result in financial misstatements or noncompliance, adversely impacting financial condition[89]. - The company employs risk management controls to mitigate exposure to fluctuations in foreign currency exchange rates, commodity prices, and interest rates[210]. - The company has maintained compliance with financing covenants, allowing for potential future borrowings and dividend payments[175]. Debt and Liquidity - As of December 31, 2023, the company had consolidated debt obligations of$2,679 million, with cash and cash equivalents of $529 million and unused revolving credit capacity of$1,141 million[91]. - Total contractual cash obligations amounted to $4.6 billion as of December 31, 2023, with long-term debt obligations of$2.6 billion[185]. - The company expects sufficient liquidity to meet anticipated cash requirements for capital expenditures and other commitments over the next twelve months[177]. Pension and Benefits - The company's U.S. defined benefit pension plans represent 62% of its consolidated defined benefit pension obligations as of December 31, 2023[195]. - A 25 basis point increase in the discount rate would decrease the U.S. pension liability by approximately $11 million[196]. - The expected long-term rate of return on U.S. pension plan assets is set at 5.75$7 million to its U.S. pension plans during 2024[199]. - The company has $136 million of unrecognized losses related to its U.S. pension plans as of December 31, 2023[198]. - Warranty costs are estimated and accrued at the time of sale, with adjustments made based on actual occurrences[207]. - The company utilizes a full yield curve approach to estimate the annual cost of pension and other postretirement benefit plans[197]. - Changes in assumptions regarding pension benefits can significantly impact the company's consolidated financial statements[192].