Dana Holding Corporation (DAN)

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Dana Holding Corporation (DAN)

Q3 2012 Earnings Call

October 26, 2012 11:00 AM ET


Craig Barber – Director, IR

Roger Wood – President and CEO

Bill Quigley – EVP and CFO

Mark Wallace – EVP and President, Light Vehicle Driveline Technologies


Brian Johnson – Barclays

Brett Hoselton – KeyBanc

Pat Nolan – Deutsche Bank

Pat Archambault – Goldman Sachs

John Lovallo – Merrill Lynch

Amy Caroline – JP Morgan

Brian Sponheimer – Gabelli

Tim Denoyer – Wolfe Trahan



Good morning, and welcome to Dana Holding Corporation’s Third Quarter 2012 Webcast and Conference Call. My name is Sarah and I’ll be your conference facilitator. Please be advised that our meeting today, both the speakers’ remarks and Q&A session will be recorded for replay purposes. There will be a question-and-answer period after the speakers’ remarks, and we will take questions from the telephone only. (Operator Instructions) At this time, I would like to begin the presentation by turning the call over to Dana’s Director of Investor Relations, Craig Barber. Please go ahead, Mr. Barber.

Craig Barber

Thank you, Sarah. And welcome to all of you that are joining us, either on the phone or by webcast. On behalf of the Dana management team, I would like to thank you for joining us this morning. With me is Roger Wood, President and Chief Executive Officer, and Bill Quigley, Executive Vice President and Chief Financial Officer. Also in the room is Mark Wallace, Executive Vice President and President of Light Vehicle Driveline Technologies.

Before we begin, I would like to review a couple of items. Copies of this morning’s earnings release and the accompanying slides have been posted on Dana’s investor website for your reference. Today’s call is being recorded and the supporting materials are the property of Dana Holding Corporation. They may not be recorded, copied or re-broadcast without our written consent. Today’s call will also include a Q&A session. In order to allow as many questions as possible, please keep your questions brief.

Finally, today’s presentation contains some forward-looking statements about our expectations for Dana’s future performance. Actual results could differ materially from those suggested by our comments here. Additional information about the factors that could affect future results are summarized in our Safe Harbor Statement. These list of factors are also detailed in our SEC filings, including our annual, quarterly and current reports with the SEC. With that, I’d like to turn the call over to Roger Wood.

Roger Wood

Thank you, Craig. And good morning, everyone. We are pleased to report solid financial results for the third quarter despite volatile demand and a rapid softening in some of our end markets. Sales for the period were more than $1.7 billion, with currency impacting us again this quarter versus last year.

Net income for the period was $56 million, marking our sixth consecutive quarter of positive net income. And our adjusted EBITDA margin was 11% for the quarter, 80 basis points higher than the same period in 2011. All-in-all, Dana responded very quickly and continues to respond to the changing market conditions during the quarter, judiciously spending capital and reducing costs in all areas of the business, while generating positive cash flow of $88 million.

In addition to the common dividend that our board of directors declared, I’m pleased to announce that our board of directors has also authorized a share repurchase program for up to $250 million of our currently outstanding shares of common stock. This program reflects the strength of our balance sheet, our confidence in the long-term prospects of the business and a solid commitment to delivering value to our shareholders.

Turning to the next slide. This is the latest breakdown of our sales by region for the year-to-date. Our regional diversification gives us a distinct advantage in creating synergies and leveraging products and technologies across our markets. But more importantly in an environment of volatility, this regional diversification coupled with vehicle market and customer diversification allows us to better weather the economic storms.

The right side of this slide provides market highlights from the third quarter. As you can see, there was softening in many markets in regions that we have. While light vehicle production in North America remained strong, we saw a fall-off in commercial vehicle production, especially in Class 8, both year-over-year and sequentially quarter-over-quarter.

In Europe, volumes weakened in both the commercial and the light vehicle markets but within our previously stated expectations. Commercial vehicle volumes in South America, primarily Brazil, remained sluggish but we did see quarter-over-quarter improvement.

In the Asia Pacific region, the heavy truck sector remains depressed, especially in China, although the bus and coach market was stable for us. The takeaway is that our flexible operating model coupled with our work to significantly reduce cost in all areas of the business provides assurance that Dana will remain strong even amid volatile market conditions.

Turning to slide six, I’d like to share some highlights from the quarter beginning with a few important programs that we launched. The 2013 Ford Fusion, for instance, is arguably the biggest new car launch in North America this year and depending on engine configuration, Dana’s Power Technologies group provides a number of products that contribute to the performance and efficiency of this vehicle.

Of note is the exhaust system gasket for the 2-liter GTDi engine. Dana engineers overcame a significant design challenge because of the higher temperatures of this engine configuration. The solution was a multi-layer steel gasket with a high nickel alloy that provides improved durability and reduced emissions.

We also began producing five models of medium and large-sized Spicer mining axles at our facility in Wuxi, China. The addition of this production capacity in China supports our strategic customers in China with production in Radian and better positions us for long-term expansion.

Our light vehicle axle plant in Birmingham, U.K. recently launched front and rear axle production for the new 2013 Range Rover vehicle. These axles include the latest generation of advanced Spicer axles providing even higher efficiency.

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