Dana Holding Corporation announces first-quarter 2016 financial results, significant new business growth

Highlights Sales of $1.45 billion Net income attributable to Dana of $45 million Diluted adjusted EPS of $0.34 Adjusted EBITDA of $148 million, providing a margin of 10.2 percent Significant new business wins Affirmed key financial guidance; adjusts capital spending and free cash flow as a result of new business wins Acquisition of Magnum Gaskets® completed Repurchase of $28 million of common stock; 70 million shares repurchased or redeemed since program inception Dana Holding Corporation (NYSE: DAN) today announced financial results for the first quarter of 2016. Sales totaled $1.45 billion, compared with $1.61 billion in 2015. Foreign-currency translation lowered sales by $72 million. Currency-adjusted sales were lower in 2016, reflecting weaker market demand in the commercial-vehicle and off-highway segments. Dana’s Light Vehicle Driveline and Power Technologies business units posted combined currency-adjusted sales growth of $28 million, or 3 percent higher than a year ago, driven by higher light-vehicle end-market demand in North America and Europe, as well as new business gains. Net income attributable to Dana for the first quarter of 2016 was $45 million, compared with $63 million a year ago, with lower adjusted EBITDA partially offset by lower tax expense and income relating to non-controlling interests. Adjusted EBITDA for the first quarter of 2016 was $148 million, compared with $176 million in 2015. Weaker international currencies accounted for $10 million of this decrease, with the remaining $18 million decline resulting primarily from weaker commercial-vehicle and off-highway market demand. This was tempered by higher demand in the light-vehicle market. Diluted adjusted earnings per share in the first quarter of 2016 were $0.34, compared with $0.50 in the same period last year. Lower earnings were partially offset by the benefit of a lower share count. Free cash flow for the quarter was a use of $98 million, an increased use of $16 million when compared with 2015. Lower earnings, higher cash taxes, and increased capital spending was partially offset by lower working capital requirements. Significant New Business Wins Dana continues to win new business and grow its sales backlog. Dana has secured driveline content on an all-new compact pick-up truck and SUV program with a global OEM that will be incremental to its backlog beginning in 2019. The company also expects that strong demand for the next-generation Jeep® Wrangler will benefit the sales backlog beginning in late 2018. These two programs are expected to generate an additional $1.5 billion in sales over the life of both programs. “I am especially pleased by the focus, energy, and commitment that our team members place upon customer satisfaction,” said James Kamsickas, president and CEO. “This recent new business win and expected strong demand for the Jeep Wrangler, combined with the new business for the disconnecting all-wheel-drive platform that we announced earlier this year, are a result of our commitment to providing advanced technologies and meeting the needs of our customers. As we maintain this direction, we look to further grow our sales backlog through new and expanded customer programs, thus creating long-term profitable growth.” Business Unit Performance Light Vehicle Driveline Technologies Sales were $613 million in the first quarter of 2016, compared with $637 million in 2015. Stronger light-truck production in North America and Asia, along with incremental new business, increased sales by $12 million, providing an organic growth rate of 2 percent. The effects of weaker foreign currencies lowered sales by $36 million. Segment EBITDA was $58 million, $6 million lower than the first quarter of 2015, providing margin of 9.5 percent. Higher end-market demand and new customer programs partially offset the impacts of currency headwinds and increased engineering and development costs. Commercial Vehicle Driveline Technologies Sales were $333 million for 2016, compared with $433 million in 2015. Lower volumes reduced sales by $79 million, primarily due to higher share with a key customer in the first half of last year, weaker Class 8 production in North America this year, and weaker demand in Brazil, where medium- and heavy-truck production was down 35 percent from first-quarter 2015. Foreign currency – principally a weaker Brazilian real – lowered sales by an additional $20 million. The commercial-vehicle segment EBITDA for the first quarter was $26 million, $9 million lower than 2015, resulting in a margin of 7.8 percent. Segment earnings were adversely impacted by $14 million from lower sales levels and by $3 from weaker international currencies. Segment EBITDA in 2016 improved by $8 million, primarily from cost savings associated with the supplier-transition initiative completed in 2015 and the elimination of premium freight costs incurred in last year’s first quarter. Off-Highway Driveline Technologies Sales were $241 million in the first quarter of 2016, lower by $43 million compared with 2015. Foreign currency effects, principally a weaker euro, lowered sales by $8 million. The remaining decrease of $35 million was attributable primarily to lower global end-market demand. Segment EBITDA was $32 million, compared with $39 million a year ago, providing a 13.3 percent margin. Unfavorable foreign currency effects and lower end-market demand of $2 million and $8 million, respectively, was partially offset by improved cost performance of $3 million. Power Technologies Sales were $262 million, compared with $254 million in 2015. A stronger light-vehicle engine build in North America and Europe provided a benefit of $20 million that was partially offset by foreign currency effects of $8 million and lower pricing and material cost recoveries of $4 million. Segment EBITDA was $35 million, a decrease of $3 million from the first quarter of 2015, yielding a 13.4 percent margin. Unfavorable foreign currency effects and cost performance of $7 million were partially offset by a $4 million benefit from increased sales volume. “We are off to a good start toward achieving our objectives this year. Our Light Vehicle Driveline and Power Technologies businesses grew organically by 3 percent. First-quarter demand was lower, as expected, in the commercial- and off-highway vehicle markets, but both groups flexed their businesses accordingly,” said Mr. Kamsickas. “Our Commercial Vehicle Driveline business has stabilized and continues to improve, leading to enhanced margins from last year’s fourth quarter. While a few of our end markets will remain challenging this year, we are taking action to improve operational efficiencies.” 2016 Full-Year Financial Targets The new program wins achieved in this year’s first quarter will require additional capital investment during the remainder of the year. Dana has affirmed key financial guidance and has adjusted capital spending and free cash flow targets to reflect this success: Sales of $5.8 to $6.0 billion; Adjusted EBITDA of $640 to $670 million; Adjusted EBITDA as a percent of sales of 11.0 to 11.2 percent; Diluted adjusted EPS of approximately $1.65 to $1.75 (excluding the impact of share repurchases after March 31, 2016); Capital spending of $320 to $340 million; and Free cash flow of $120 to $140 million. Other New Business Wins Dana announced last week at Bauma 2016 in Munich, Germany, that Sany Group has selected Spicer® drivetrain components for the new, high-performance Sany SW405K 18.5-tonne wheel loader designed for end users in Europe and North America. Available commercially later this year, the Sany SW405K wheel loader features both Dana’s powershift transmission and rigid planetary axles. The company also secured major new business in the commercial vehicle market, including a full product line of steer axle modules, drive axle modules, and driveshafts for the 2018 Isuzu FTR, an all-new entry in the Class 6 medium-duty truck segment. In addition, Dana secured 100 percent of the drive axle housing business on a new truck and bus program for a prominent, global customer in South America and will also be supplying front and rear axles for two major truck platforms with another major customer in this region. In Asia, Dana will be supplying rear axles on four new trucks for a major Indian original-equipment manufacturer beginning in 2018. The Power Technologies group also won new business in the North American, European, and Asian markets, including China where it will be supplying transmission plates to Volkswagen. Company completed acquisition of Magnum Gaskets® Dana announced in February that it completed the acquisition of Magnum Gaskets,®, a U.S.-based supplier of aftermarket gaskets and sealing products for light- and commercial-vehicle applications. The Magnum Gaskets® brand will enhance Dana’s sealing product offerings and complement the company’s Victor Reinz® and Glaser® global sealing brands. Share Repurchase Program During the first quarter of 2016, the company completed $28 million of share repurchases, and since inception of the program in late 2012, the company has repurchased or redeemed the equivalent of 70 million common shares, returning over $1.4 billion to shareholders. The remaining availability under its current authorization is $272 million.