Dana Inc (DAN) 2015 Q4 法說會逐字稿

Good morning, and welcome to Dana Holding Corporation's fourth-quarter and full-year 2015 financial webcast and conference call. My name is Brent, and I will be your conference facilitator. Please be advised that in our meeting today, both the speakers' remarks and Q&A session will be recorded for replay purposes. (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.

Thanks, Brent, and thank you to everyone on the call for joining us today. Copies of our press release and presentation have been posted on Dana's investor website. Today's call is being recorded, and the supporting materials are the property of Dana Holding Corporation. They may not be recorded, copied or rebroadcast without our consent. Today's call will include a Q&A session. In order to allow as many questions as possible, please keep your questions brief.

Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from those suggested by our comments today. Additional information about the factors that could affect future results are summarized in our Safe Harbor statement. These risk factors are also detailed in our public filings, including our reports with the SEC.

Presenting this morning is Jim Kamsickas, President and Chief Executive Officer; Rod Filcek, Senior Vice President and Interim Chief Financial Officer; and joining us for Q&A is George Constand, Vice President and Chief Technical Officer. Now, I'd like to turn the call over to Jim.

Thank you, Craig. Good morning, everyone, and thank you for joining the call. The results for 2015 were in line with the preliminary results we presented in January. We recorded sales of $6.06 billion, as we battled strong currency headwinds last year. Adjusting for currency effects, full-year sales would have been approximately $6.7 billion. We did see positive organic growth last year, with three of our business units posting a combined 5% organic growth rate compared with 2014.

Net income was $159 million, including some one-time items that Rod will discuss, and diluted adjusted earnings per share of $1.74. Adjusted EBITDA was $652 million, or 10.8% of sales. As you will see, performance in our commercial vehicle segment was really our only margin issue last year. We generated positive free cash flow of $146 million, including the capital investments we've been making to support our new business backlog.

We concluded the execution of our $1.4 billion share repurchase program by returning $311 million to our shareholders in 2015. As mentioned in January, the Dana Board of Directors authorized an additional $300 million in share repurchases through 2017.

We had several successful program launches last year, and we continue to win new business, with our three-year backlog up to 10%, to $750 million. We're winning the new business by providing the right products and technology, and satisfying customers. In fact, importantly, we ended last year with 15 customer awards.

Moving to page 5, Dana is not only winning awards from our customers, but our technologies are continuing to help power award-winning vehicles and engines, including this year's Motor Trend Truck of the Year, the hot selling Chevy Colorado. This pickup features Dana front axles and rear axles, as well as our gaskets and heat shields. The 2016 Chevy Camaro, Motor Trend's Car of the Year, includes Dana's oil coolers, as well as cylinder head gaskets, valve stem seals, and heat shields.

The next generation Honda Civic, which is the 2016 North America Car of the Year, features Dana cam cover modules and engine coolers. In addition to the Civic, Dana products were also found on three additional finalists for the North America Car and Truck of the Year. Dana also has extensive expertise in alternative energy market, and we are proud to be supplying battery cooler, secondary gasket, valve stem seals, and heat shields for the Green Car of the Year, the 2016 Chevy Volt.

In addition to being featured on these popular vehicles, Dana's full range of Power Technologies can be found on 5 of the 10 best engines as recognized by Wards Magazine. We're very honored that Dana technologies are helping to support some of the most popular and award-winning vehicles in the marketplace. This success demonstrates our commitment to working with the customers to develop unique solutions that address key market drivers, including durability, performance, and fuel economy.

And speaking of performance and fuel economy, on slide 6, I would like to talk for a moment about the growing all-wheel drive segment. In January, we announced our entry into this segment with our new AdvanTEK disconnecting all-wheel drive system. We have received a lot of positive comments about this technology, and several questions about what this means for Dana.

First, let's start with the technology. Consumers expect improved safety, and traditional all-wheel drive provides that, with better traction and control, but at a cost of fuel economy. Turning four wheels is less efficient than turning only the front wheels. That is where our disconnecting all-wheel drive system comes in.

By rapidly connecting and disconnecting the rear wheels when required, fuel efficiency is greatly improved, and more in line with front wheel drive-only drive systems, but with the improved safety and traction of an all-wheel drive system.

What does this mean for Dana? Currently, there are about 9 million all-wheel drive vehicles globally. This is an untapped market for Dana. All-wheel drive is the fastest-growing segment in light vehicle. The market is expected to grow 5% over the next three years, with North America expected to grow 6% and the China market expected to grow 12%.

And Dana has been sourced on the largest global disconnecting all-wheel drive program to date. We still can't say too much about the program, but this will be incremental to our backlog, and positions Dana for even further penetration in this growing commercial channel. We will update you as this project progresses, as we commit resources and investment into this technology.

And the AdvanTEK disconnecting all-wheel drive is just one of the technologies we have or are currently developing to meet market needs and customer value drivers. On slide 7, we look out over the next decade at the sustainability regulations landscape, not just in the light vehicle market, but for commercial and off-highway vehicles, as well.

These upcoming regulations align with Dana's core competencies: light weighting, low friction, electronic controls, and thermal management for electronics and battery systems, hydrogen fuel cells, and hydraulic hybrid systems. As we advance toward zero emission vehicles, the Dana products shown here include disconnecting all-wheel drive for passenger cars, similar technology called Dual Range Disconnect for commercial vehicles, our PACE award nominated electronic cooling products, hydromechanical transmissions, and several more to meet market needs and exceed the customers' expectations, as we transition into a new era of mobility.

Slide 8 shows the results of our efforts, as our technology and innovative products drive new business growth. Over the next three years, we have incremental sales of $750 million coming online, a 10% increase over the prior period. This represents real new business wins, net of any losses, that are added to our base. This chart shows the cadence of $750 million of new business flow by year, with 2016 being another big launch year for us, and 2016 and 2017 seeing the higher run rates.

Our backlog has a solid regional and customer balance, and while weighted more towards our Light Vehicle business, all business units have new sales in the backlog, including Commercial Vehicle. And we continue to win new business, as I mentioned earlier, that is not included here, and while maintaining our financial discipline. As we continue to win new business, this will require us to maintain or in some cases increase our investment, but we see the organic growth opportunities offer the best returns and the surest path for profitable growth.

Moving to slide 9, we look ahead to 2016 for the end market expectations. We expect light vehicle to remain strong in North America. As you know, our product and customer mix is weighted more towards light trucks, and this segment has been strong for the last few years for our key customers, and does not show signs of letting up this year. Additionally, our Light Vehicle driveline business should benefit from the launch later this year of the new Ford Super Duty line.

We're expecting Class 8 production in North America to be down from the last year, but still a good year, at 240,000 to 260,000 units in 2016, while medium truck builds should remain stable with last year, as should off-highway equipment demand. South America will continue to see economic uncertainty and currency headwinds, while we expect demand for commercial vehicles in Brazil to remain at a low level. We will see new business coming on in Argentina for the Light Vehicle Driveline, offsetting some of the currency and market headwinds.

In Europe, we expect improved demand for light vehicles, which will benefit our Power Technologies business, while we're seeing flat demand for commercial vehicles and off-highway. Currency will continue to be a headwind this year, with our exposure to the euro, rand, and the pound.

In Asia Pacific, we look for some modest volume growth in India for commercial vehicles, and in Thailand for light vehicles. While in China, we're expecting markets to be stable. Overall, we see market demand mostly flat this year, with some pockets of strength making up for some weaker segments. And while currency will remain a headwind, we should see some volume benefit, as we continue to roll on new business this year.

Turning to slide 10, this is another year of exciting and very important program launches for us. Some of these are replacement programs. Some are new programs. But almost all of them have added content, as we put our backlog into production. As you can see on the slide, these key launches represent good regional, customer, and market balance.

While there isn't time to go through each of them, I would like to highlight a few. A very significant new program launching for us this year is the next generation Ford Super Duty pickup truck, which not only includes our Spicer axles and driveshafts, but also incorporates our sealing and thermal management products. This is an example of a replacement program where we also won added content.

We also have a key launch with Nissan for their all new Titan pickup truck, which features Spicer driveshafts and exhaust manifold shields. Additionally, our axles will be found on the new Nissan Navara pickup and Navara SUV.

Jaguar Land Rover are launching several new platforms with our new technologies, including the highly anticipated F-PACE, Jaguar's first ever SUV, which will feature Spicer axles and driveshaft and Long fuel coolers. Also for 2016, GM will introduce the new Chevy Colorado ZR2 pickup to its hot selling Colorado and Canyon line of compact pickups. Outfitted with Dana axles, the ZR2 will fuse Colorado's styling with all-pro performance, for a combination of fuel efficiency, horsepower, and capability.

Other notable launches for us in the segment include the Toyota HiLux pickup, featuring Dana's driveshafts and rear differentials. We'll supply this global program in both South America and South Africa.

And we have business ramping up in Commercial Vehicle with Daimler in India, and launches in the Off-Highway, including Terex tele-boom handlers in North America, and also further penetration with key Off-Highway customers in Europe and in Asia, including Claas, Same Deutz-Fahr, and Sany.

One recent transaction I'd like to touch on is our acquisition of Magnum Gasket brands. This is a small but important piece of our after-market strategy. As you know, the after-market is incorporated into each of our product groups, and is about 12% of the overall sales for Dana.

We are continuously pursuing new commercial channels to grow our after-market, and the Magnum brand aligns especially well with our Power Technologies group. What is the Magnum brand? It is the third largest after-market sealing brand in the United States and Canada, with a very experienced management team, not only in terms of product, but also in business development of the after-market channel.

This is a new commercial channel for Dana, and provides Dana access to over 150 new customers for sealing products. And this brand has a wide reach, as it's aimed at older vehicles, what is called a value line, and covers over 90% of the vehicles on the road in North America.

Strategically, this acquisition supports our three main areas of focus. First, it fills a product gap, and establishes Dana in the value line segment for the broadest market reach. Second is geographic. While we have significant gasket after-market penetration in Europe, North America was underserved by Dana. This will fill that gap.

And finally is customer reach. Magnum will connect us to a new group of customers. The additional product offering will form the basis for eventually pulling other Dana products besides gaskets through the after-market commercial channels. We're pleased with the addition to the Dana family.

As we look forward on to page 12, I would like to highlight our three key go-forward priorities. First, we look to improve our competitive position and grow. Of course, two perfect examples of Dana taking actions here are the acquisition of Magnum Gaskets, and the relentless development of new technology as presented a few moments ago.

Second, we continue to drive waste elimination, therefore cost, out of our business. We have done so in the past, but we believe there's more opportunity. Along this, our Commercial Vehicle business faced several challenges last year, but is now stabilized, and is incrementally improving every day. We successfully, though not without pain, completed our supply chain improvement project last year, and this year we see benefits from that.

Our fourth quarter was undoubtedly a tough one for our CV group. We saw volume drop off rapidly, and naturally hurt margins, as we were unable to take cost out as quickly as we would have liked. Margins were also negatively impacted, as we made an adjustment to our warranty accrual to cover any future costs, as we obsoleted a legacy product line, which is being replaced by our new AdvanTEK 40 line of commercial vehicle axles. This warranty charge, as well as the premium freight costs, which we saw in the first half of last year, will not reoccur this year, and we will continue to focus on driving profitable growth.

And finally, we will maintain our strong balance sheet. As we continue to invest and grow the business, we'll retain the flexibility to take full advantage of opportunities, and return excess capital to shareholders, as we've done for the past three years. Now, I'll turn the call over to Rod, to walk us through the financial results.

Thank you, Jim. Let's start on slide 14 with a review of our fourth quarter. As Jim mentioned, the results for 2015 were in line with the preliminary results we presented in January. Fourth-quarter sales of $1.4 billion were down $207 million from 2014. Weaker international currencies accounted for about half of the difference, with another $38 million resulting from the divestiture of our Venezuela operation.

Adjusted EBITDA for the quarter was $129 million, $49 million lower than 2014. Lower Commercial Vehicle sales was the primary driver, with some increased warranty cost also contributing.

Free cash flow of $72 million and diluted adjusted EPS of $0.34 were down from 2014, principally due to lower adjusted EBITDA. As was the case in 2014, this past year we also had a few nonrecurring items that are laid out on the right hand side of this slide, which resulted in this year's net income being lower by $118 million.

At the end of 2014, we undertook several actions, including the divestiture of our Venezuela operations, a pension settlement, and debt refinancing. These totaled $141 million in pre-tax charges that year.

We also began some internal legal entity restructuring. As a result of this action, we released US income tax valuation allowances, which benefited net income by $179 million in 2014. In total, those items increased net income in 2014 by $41 million.

In the fourth quarter of 2015, we recognized non-cash tax charges of $64 million, to reflect the final valuation and completion of the internal legal entity restructuring action. This past quarter also included a tax charge of $15 million, to establish a valuation allowance on a portion of our deferred tax assets in Brazil, bringing the fourth-quarter impact of tax items to a charge of $79 million.

Lastly, our fourth-quarter 2015 results included an impairment charge of $39 million, to write down our equity interest in a 50% owned China affiliate, DDAC, reflecting a decline in China's commercial vehicle sector in 2015, and a reduced level of expected growth. Adjusting net income in both years for the nonrecurring items noted here would result in adjusted net income of $38 million in 2015, and $68 million in 2014, a comparison more reflective of the operational decrease in sales and adjusted EBITDA.

On slide 15, we focus on the key drivers of the sales and adjusted EBITDA change compared with the fourth quarter of 2014. As has been the case throughout 2015, currency effects have significantly impacted sales, lowering fourth quarter 2015 sales by $103 million.

Excluding currency and divestiture effects, fourth-quarter sales were $66 million lower, driven by lower sales volume of about $100 million in our Commercial Vehicle segment, reflecting continued weakness in the Brazil market, lower North America Class 8 production levels, and lower sales with a major customer. Our Light Vehicle Driveline, Off-Highway and Power Technologies groups, when combined, delivered 3% organic growth in the fourth quarter.

On the earnings front, currency and divestiture effects accounted for $24 million of the lower adjusted EBITDA. The remaining performance-related reduction of $25 million resulted from our Commercial Vehicle segment performance, where adjusted EBITDA was down $36 million.

In addition to the flow-through effects of currency and lower sales volume, we recognized $16 million of incremental warranty expense in this past year's fourth quarter. The adjustment to warranty accruals related primarily to addressing expected remaining costs attributed to a product that's no longer being sold. As such, as Jim mentioned, we don't expect further costs associated with this in 2016.

The fourth-quarter performance of our Light Vehicle, Off-Highway, and Power Technologies businesses were in line with our expectations. Although margins were down slightly from 2014, in the case of Light Vehicle and Power Technologies, when adjusted for currency, 2015 margins are at or better than 2014 levels. The lower margin in Off-Highway is reflective of market weakness in the fourth quarter, but still at a pretty solid level for this business. Let's move to our full-year 2015 results on slide 16.

2015 sales were about $6.1 billion, $557 million lower than last year. The decrease was entirely attributed to currency and the divestiture of our Venezuela operations.

Adjusted EBITDA for 2015 was $652 million, down $94 million from the preceding year.

Currency effects were a primary factor, reducing adjusted EBITDA by $93 million. From an operational performance standpoint, when adjusted for currency, our Light Vehicle, Off-Highway, and Power Technologies businesses generated higher segment EBITDA in 2015. The performance of these businesses, however, was largely offset by lower earnings in the Commercial Vehicle group.

On the right hand side of the slide, we've charted the full-year impact of nonrecurring tax items and asset impairments. In the third quarter of 2015, we recognized a $36 million pre-tax, $24 million after-tax impairment charge on certain assets related to a distressed supplier in Brazil. We recognized tax benefits in the first nine months of 2015, in connection with the internal legal entity restructuring action previously mentioned.

When combined with the fourth-quarter effect of nonrecurring tax items, the full-year impact of this legal entity and tax impact was $5 million. The nonrecurring after-tax asset impairment expense of $27 million is comprised of the $39 million fourth-quarter equity investment impairment, net of a tax benefit of $12 million relating to the $36 million pre-tax impairment charge.

Excluding these nonrecurring items from net income in both years, adjusted 2015 net income of $227 million compares with $278 million in 2014. The reduced net income, as adjusted, of $51 million was driven primarily by lower adjusted EBITDA, with some offset for lower amortization expense and a year-over-year benefit from discontinued operations.

Diluted adjusted EPS in 2015 was $1.74, compared with $1.99 in 2014, reflecting reduced earnings partially offset by a lower share count. Capital spend of $260 million in 2015 was $26 million higher than a year ago, to support the increased level of program launches in 2015. Free cash flow for the year came in at $146 million, down from 2014, primarily due to the lower operating earnings.

Let's go to slide 17 now for a closer look at the sales and adjusted EBITDA comparisons. Focusing first on sales, as I mentioned earlier, currency effects were a significant headwind, reducing 2015 sales by $516 million, with the divestiture of Venezuela in early 2015 lowering sales by $107 million.

In terms of volume and mix, our Light Vehicle, Off-Highway and Power Technologies businesses had a collective increase in sales of $250 million, representing strong organic growth of 5%. Stronger light vehicle demand levels in North America, Europe, and Asia Pacific, along with new customer programs coming online in 2015, were the primary factors for this increase. Partially offsetting the higher sales, volume and mix in those three businesses was lower sales in our Commercial Vehicle group, where sales were impacted by significantly weaker truck demand in Brazil.

The currency impact on adjusted EBITDA was $93 million, with a portion of this coming from currency transaction losses, as well as from translation impact. The volume-related adjusted EBITDA reduction in CV more than offset the pickup from our other businesses. As noted above, lower demand levels in Brazil were a significant factor. While we've taken necessary steps to reduce costs where possible in Brazil, at current demand levels, there's an element of under-absorbed fixed cost that remains.

If we go now to slide 18, we'll look at year-over-year business unit performance. Our Light Vehicle Driveline unit had a strong year. Sales of $2.5 billion in 2015 was about the same as the preceding year, despite currency and divestiture effects lowering sales by about $200 million. Volume and mix increased sales in 2015 by $200 million, an increase of 8%, reflecting the benefits of stronger light truck market demand in North America, Europe, and Asia Pacific, and the addition of new customer programs in this group.

The benefit from higher sales volumes more than offset the effects of currency, as segment EBITDA of $262 million was up $12 million from 2014. Margins improved for the third consecutive year, coming in at 10.6%, 60 basis points higher than 2014.

As already noted, the convergence of a number of headwinds made 2015 a challenging year for our Commercial Vehicle business. Weaker international currencies reduced 2015 sales by $144 million, with the Brazilian real accounting for nearly half of the impact. Weaker truck demand in Brazil reduced sales by another $166 million, and while we benefited from stronger medium and heavy truck production in North America, this was offset by lower sales with a major customer.

Segment EBITDA for 2015 was $100 million, for margin of 6.5%. The effects of currency and weaker Brazilian market demand had a significant impact on our business, accounting for over 70% of the decrease in segment EBITDA. On the performance line, as you know, we completed our supplier transition initiative in the first half of 2015, but in the process, we incurred premium costs of about $14 million.

And as already mentioned, in this past year's fourth quarter, warranty accrual adjustments resulted in incremental charges of $16 million, primarily to address expected costs associated with a legacy product no longer being sold. Partially offsetting these items were pricing actions of $25 million. As we look ahead to 2016, the supplier transition and warranty cost that drove down performance last year are not expected to recur.

Turning to slide 19, let's look at the Off-Highway and Power Technologies segments. Sales in the Off-Highway segment were just over $1 billion, down $191 million from 2014. The weaker euro drove the currency-related reduction in sales of $165 million. Lower end-user demand globally in our two largest markets, agriculture and construction equipment, was partially offset by new customer programs.

On the earnings front, this segment has continued to perform pretty well in a weak demand environment. The reduced segment EBITDA attributed to currency effects and lower sales volumes was partially offset by improved cost performance, principally from material cost savings. The strong cost performance helped this business achieve year-over-year margin improvement of 40 basis points, coming in at 14.1% for 2015.

Power Technologies' broad customer base and technology-oriented solutions allowed them to benefit from stronger light vehicle market demand in most regions, with sales for 2015 of $1 billion. Stronger market demand wasn't enough to offset the $112 million impact of weaker currencies, primarily the euro and Canadian dollar. As a result, sales were down $47 million compared to 2014.

Segment EBITDA of $149 million in 2015 was lower by $5 million, due entirely to currency effects. Good conversion on the higher sales volume, and favorable cost performance, resulted in margin of 14.8% for the full year 2015, an improvement of 20 basis points despite lower sales.

Now let's move to slide 20, to look at cash and liquidity. Free cash flow of $146 million in 2015 was lower than the prior year, largely due to lower adjusted EBITDA and higher investment in new programs to support future growth. The comparison to 2014 is also impacted by $40 million of interest received in 2014, in connection with the sale of a note receivable that year, which is masking the lower interest expense achieved through our debt refinancing in 2014.

Capital spending is a little lower than our original estimate for 2015, due mostly to customer program timing, but still up from 2014, reflecting the higher level of program launch activity. Cash used for working capital was a little higher in 2015, in part to support a distressed supplier in Brazil. The other elements of free cash flow were generally in line with our original expectations for 2015.

At the end of 2015, cash and marketable securities were $953 million, while outstanding debt was just under $1.6 billion, resulting in a net debt position of $643 million. Total liquidity, including the availability under our credit facility, was just over $1.2 billion.

We continued to focus on capital structure actions in 2015 and into 2016, as you can see on slide 21. Last year, we returned $311 million of cash to shareholders in the form of share repurchases, completing the remaining portion of our $1.4 billion authorization. From inception of that authorization in 2012, we repurchased 67 million common shares or common share equivalents, a reduction of about 31% of shares outstanding at program inception.

In January of this year, our Board authorized a $300 million program expansion, executable through 2017. We began executing under the program in January, at a cadence contemplating utilization of the expanded program amount evenly through 2017. We expect to continuously evaluate the pace of execution, in light of other available capital deployment opportunities.

The funding status of our US pension plans at December 31, 2015 remains strong at 88%, relatively comparable with the prior year, reflecting the significant immunizing and fixed income investment component of plan assets. As was the case in 2015, we're not contemplating any cash contributions to the US plans in 2016.

Now, let's move to our expectations for 2016, which are summarized on slide 22. Our 2016 sales, adjusted EBITDA, EPS and cash flow guidance is unchanged from that provided in January during the North American International Auto Show. We expect sales to be slightly lower than 2015, with currency again being a significant headwind of $200 million to $300 million. The exchange rate assumptions for our key currencies are indicated here.

We expect volume, mix and performance to be a net addition to sales of about $100 million to $200 million, with our sales backlog providing increased sales of around $150 million, and overall market demand being relatively flat with 2015. We're targeting adjusted EBITDA of $640 million to $670 million in 2016, and expect full-year margins to get back to 11%, with some help from new business and non-recurrence of some one-time costs in 2015.

Looking at business unit performance, Light Vehicle Driveline sales are expected to be slightly higher than 2015, even with a currency headwind, with margins being comparable to up slightly at around 11%. Commercial Vehicle sales are expected to be about $200 million lower this year, due to currency effects, lower North America Class 8 market production, and a full year of lower sales with a major customer.

As Jim mentioned in the market discussion, we're not expecting any rebound in Brazil in 2016, and that's an important market for our Commercial Vehicle unit. This segment incurred one-time supplier transition and warranty costs in 2015, which are not expected to impact 2016. As such, we expect 2016 margin to hold at around 7%.

Our Off-Highway and Power Technologies sales and margins are expected to be relatively comparable, with currency being a bit of a headwind for both, and new business or market demand providing a slight uplift in sales.

On the cash front, we're targeting free cash flow in the range of $160 million to $180 million in 2016. That includes higher capital spend of $280 million to $300 million for increased launch activity. We expect working capital to be a small contribution to free cash flow in 2016, as some of the investment in 2015 to support a Brazil supplier should be recovered in 2016.

That concludes our presentation this morning, and we'll now turn the call over to the operator for any questions. Thank you for listening in today.

Thank you. At this time, we would like to begin the Q&A session. (Operator Instructions) Your first question comes from the line of Ryan Brinkman with JPMorgan.

Thanks for taking my question. First is on cadence of repurchases: Given the decline in the market, auto stocks generally and your stock in particular, would you consider maybe front end loading the execution of that authorization that extends out through 2017?

Ryan, this is Rod. As I mentioned, we're continuously looking at the cadence there. Quite frankly, we have other opportunities that we're looking at, some additional organic growth and some other opportunities. And so we're going to continue to evaluate the cadence, as we look at those other opportunities.

So at this point, we're not prepared to depart from the cadence that I mentioned, which is basically even throughout the next couple years. But that's subject to looking at the other opportunities.

Okay, thanks. That's helpful. Lastly, any update on the situation at PACCAR? I remember on the 3Q call, you mentioned wanting to regain some share there by year end. Then Meritor at their analyst day in December talked about them gaining some additional production share. Then in Detroit, you talked about the backlog that you shared there being updated for share losses. But I'm just curious if you still see any opportunity to, over time, rebuild share at that particular customer?

Good morning, Ryan. This is Jim. Thanks for the question. It's a little early for that. Fair question, but it's a little bit early to tell.

I can only pass along to you that, from a quality delivery, overall execution, customer satisfaction, we're very comfortable with where we're at with all of our Commercial Vehicle customers. And -- but things don't change overnight, so we'll see where that positions us, not just specific to your question about PACCAR, but across all the CV customers.

Okay. Great to hear. Thanks a lot.

Your next question comes from the line of Justin Long with Stephens.

Good morning. This is actually Brian Colley on for Justin. My first question was on the competitive landscape in the Off-Highway business. How has that evolved during the past few years, as we've weathered the difficult environment that we're seeing today? And mainly, I'm just curious to know if you think Dana is better positioned, competitively, once this market starts to come off the bottom.

Thank you, Brian, for the question. This is Jim again. I guess I would characterize it like this. I think we are better positioned, but I don't want to come across as an advertisement.

I think we're better positioned, because, frankly, you know, looking at the numbers, that we're financially stable. And when markets get difficult, customers, one of the first things they do is they, when they're placing their bets and thinking about where they're going to put the next piece of business, they want to make sure they're going to put it at somebody is going to be here. Comment one.

Comment two, they want to make sure they're dealing with a supplier that's still continuing to invest in technology. And I'm not going to go back to January, or some other prior presentation talking about all our technology, but we provide real technology in that market, as well as our other markets.

So I feel very bullish about our opportunity to continue to take share. Unfortunately, with the market continuing to decrease, you just don't see it on the top line today, but I certainly feel good about tomorrow.

Thanks for the color there. And secondly, I wanted to ask about the cost structure of the business. A lot has changed since the prior cycle. So I was wondering if you could talk about how the cost structure breaks out between fixed and variable cost today and how that split compares to what it was, maybe, in the prior cycle.

Brian, this is Rod. I wouldn't say there's any significant shift in the cost structure. We're continuously looking at opportunities and ways, and I think we still have some opportunities to continue to improve on the cost front. Those are opportunities we're certainly looking at pursuing. But in terms of the mix between variable and fixed, I don't think that's changed significantly.

All right. Thanks for your time.

Your next question comes from the line of Patrick Nolan with Deutsche Bank. Please go ahead.

Good morning, everyone. One question on -- two questions. On the cost savings side, the $25 million that you're looking to spend this year, how are you thinking about that in terms of, do you see additional opportunities here to take more cost out of this business as -- or as some of your business is potentially peaking and going to a volume downturn? Is that something you could take up those restructuring actions this year?

Yes, Patrick, this is Rod. I was assuming you were talking about the $25 million of cash spend on restructuring. A portion of that, probably a little less than half of it, is for actions that we've already taken. And then there's still some additional cash to be incurred.

The remaining portion, quite frankly, we're still finalizing exactly what the plans will be for that. As I just mentioned, we're continuously looking at some opportunities to further improve the cost position and cost structure. And we just haven't finalized all those plans yet, to be definitive about how the entire amount of that $25 million is going to be spent at this point.

Got it. And if I could turn to the Commercial Vehicle business. Just simplistically, it looks like that you're implying a bit of a pickup in the revenue run rate, versus what we saw in Q4. Is that just seasonality? Or are you assuming any improvement in underlying trends?

And within that, the performance has been pretty positive on the revenue side, for that business, over the last couple years. Do you expect that to turn negative, as the industry goes into a downturn over the next couple years?

Let me take at least the second of those first. The downturn, to reiterate, the thing about Commercial Vehicle is, last year, you're talking about record highs, and all that type of thing. So to be in the 240,000 to the 260,000 range in Class 8 this year, we see that as really more of a normal situation. So to answer (technical difficulty), that's where we're at.

As it relates to Q4 to Q1, I think, Rod, I think it's safe to say it's relatively stable.

Yes, I think that is certainly seasonality, Patrick. We still see the -- I'll call it seasonally adjusted run rate being in the 240,000 to 260,000 range that we're forecasting for 2016.

Thanks very much. I'll get back in the queue.

Your next question comes from the line of Brian Sponheimer with Gabelli & Company.

Good morning, guys. Jim, this is your second call now. You've been on since August. You've made the Magnum acquisition. And I guess just a longer term -- as you've had some time to reflect on the last six months, where do you think are the best opportunities to really drive value in this business, as you look at some choppy markets, over the next couple years?

Good question. All good questions. Thank you, Brian. First, I'm a believer in organic growth is usually the best. I'm almost dating myself, three decades in the business, and usually that's where it comes back to, if you execute appropriately. And so that's certainly going to be our focus.

I'm very bullish on what we can continue to do. You saw the growth numbers in this presentation, as well as in January, so I feel very strongly there.

In terms of allocation, other than that, I think it all depends, right? And not to be non-direct on that question, it all depends on the opportunity that's in front of you. And from an inorganic standpoint versus, we just touched on, potentially, some restructuring opportunities, to all the other levers that you can pull in the business. Only thing I can say -- and I wish I could be more direct, because it all depends on what's coming at you -- we won't do -- if it's relative to inorganic, we won't do a deal just for sake of doing a deal.

The Magnum situation was absolutely right down the fairway, a no-brainer for where we should be focusing our capital and attention. I think everybody knows enough about the after-market business to recognize the importance of that, and putting balance to our portfolio, because we had an imbalance, essentially, Europe to North America.

So I don't think I'm answering your question directly. I can only tell you, with me, after the six months to put it in perspective, we'll put a balanced view to all those decisions, and make the right ones for our shareholders.

Thank you, and you lead to a good follow-up. Was Magnum -- were discussions with Magnum in place prior to your arrival? And I guess the second part of that is, how many other potential fairways exist, right now, for you guys to explore?

Thank you again for the question. I would say Magnum was talked about. There was some discussion around it, but no different than any of us do in our jobs. We went into a pretty deep assessment with the team here, looked at the various opportunities, inorganic, organic and other. And that one, it was obvious, and let's get it done. So it was about execute and execute quickly. Every day is a day lost, if it's a real good opportunity, so the team did a fantastic job getting that over the goal line.

I challenged them to get it done before January, to close it January, and I didn't think they had a chance, but they did it. So congratulations to the Dana team out there.

Further to your question about more opportunities down the fairway, I think most CEOs in this segment, probably all segments, would say they've got 15 to 20 on their desk at any given time. I think that's not any different for me. But I can't say just yet if any of them are going to make the fairway, or they're off in the rough. Because everybody comes in with different aspirations of what they may want to sell a company for, and they're just a waste of time.

I'm really much more focused -- at this time, I'm much more focused on launch execution, all this new business that's coming at us, including -- I believe, anyway -- it's our largest program on the heavy duty truck. That's where our focus is, but we're not going to just walk past opportunities. So I can't say that there's something right in my sights right now, but we're always working it.

Thank you very much.

Your next question comes from the line of Brian Johnson with Barclays.

Yes, good morning. I want to -- two questions. One drill-down on CV walk, and then second is more of a strategic question around light vehicle. On the Commercial Vehicle side, we certainly understand the non-repeat of warranty, but -- and on some of the premium freight. But could you give us, as you do in your annual walk, the currency, volume, mix performance walk from 2015 to 2016, in Commercial Vehicles, on the EBITDA side?

From the -- if I -- you were a little -- I'm not sure I heard the entire question, Brian, but I think your question was about walking the volume from 2015 to 2016.

Yes, breaking it into currency, volume, mix and performance of 2016 over 2015.

Yes. And certainly, as we walk the volume from 2015 to 2016 in CV, the Class 8 market in North America is going to be down. That's going to take volume down a little bit. And we're going to have a full year of run rate on the lower sales with our major customer in that group.

So that's really what's driving the lower sales in CV, from 2015 to 2016. It's really those two factors, I would say, from a volume perspective.

And on the EBITDA walk side?

I'm sorry?

The EBITDA walk, how much was volume, mix, and how much was performance?

The EBITDA walk? The EBITDA reduction, again, the currency, you can calculate the currency on it, of about $5 million or so. And most of the other impact, aside from the performance pickup of the one-time cost, is going to be volume-related.

Okay. So performance really comes from the non-repeat. Second, on the light vehicle side, both in Power Tech and in Driveline, what benefits are you seeing, if any yet, from the shift from cars to light trucks in the showroom? And then in terms of quoting activity, and maybe new business, some of the capacity expansion in light truck that companies like Fiat Chrysler, and Ford have been hinting at?

Yes, I'll take a swing at that. Thank you, Brian. Just real quick. We're not -- on the second question -- not really prepared to -- and I don't think you're asking me to -- to quote on the rumors that we're all hearing out there. I would only tell you that Dana certainly is in play. It's our sweet spot for that, for potential incremental volumes on some of those programs, we're in play. And for potential new programs, we're in play.

So feel good about our chances, given our product portfolio. Brian, what was the first part of that question, just to make sure I didn't miss it?

Are you seeing it in current production volumes, in terms of take rates on light trucks, base being either Power Tech or Driveline?

I think it's in line, basically, with our guidance, and so on and so forth. Nothing more of any substance. We're certainly busy. We're certainly running full out, but nothing any more than what we've put into our numbers, at this point.

Okay. Thank you.

Your next question comes from the line of Pat Archambault with Goldman Sachs.

Thanks very much, and good morning. Yes, I guess just a follow-up. I don't know if I heard this incorrectly on page 18. So you gave the number for the premium freight and the warranty piece, in terms of the Commercial Vehicle walk, but -- which won't repeat. Did you say there was a positive of $25 million that was one-time in nature? Or did I just mishear that, which is probably what happened?

There was a $25 million pricing action, that benefited the EBITDA, that partially offset the supplier transition warranty cost that I mentioned. That would not be one-time. That pricing action continues into the future.

Okay, yes, because that was my question then. Because it seems, like net of those things, right, they washed out in 2015. So there wouldn't -- so, okay. Unless that does repeat, in the same order of magnitude, right, you won't really get much of a one-time benefit, if you will.

Right.

Okay. But it does. All right. My second question is just on the content of the Super Duty. Can you -- is it possible to just mention what the CPV is on that program, in broad brush strokes? And -- let's just go with that.

We haven't typically provided content per vehicle kind of data, and don't really have that at my fingertips to give that to you.

All right, failing my luck at that, can I ask maybe -- (laughter) -- I had to try. Is there a difference between -- in your content moving from the old model to the new model? Does it step up? Does it step down? Is it more or less the same? Clearly, from a volume perspective, it's probably an opportunity, but is it from a content, as well?

No, there is incremental content. I can tell you that, Pat.

Any kind of dimensioning on that?

Craig is telling me no, so I guess no. (laughter) Look, I like your effort.

All right, guys. That's what I had for you. Thanks a lot.

Thank you.

Okay. Brent, I think we have time for one more call.

Final question will come from the line of Irina Hodakovsky with KeyBanc.

Thank you. Good morning, everyone. To follow up a little bit on that last question, for the Commercial Vehicle, just to be able to gauge maybe some sensitivity, in terms of potential downturn. Your estimate right now for the market is 250,000 at midpoint. If we were to gauge what that means, if another 5,000 units came down, how can we think about that, in terms of modeling decremental margins or revenue impact?

Hi, Irina. This is Craig. We haven't given that specific sensitivity. As you know, our mix in Commercial Vehicle is maybe a little bit different than some of the peers, since we have a higher percentage of medium duty, as well. So it's not a straight line. We can look at maybe providing that in the future, but we don't have anything on that right now that we can share.

Got you. And just one last question, also in terms of volume and expectations. Brazil, a small piece of your mix, but a large impact on earnings. And wondering, you're looking at a flat market into 2016 in Brazil. The start of the year so far was what one headline described as dismal. Wondering what's driving your confidence that would improve, as we go through the rest of the year?

We're certainly -- this is Rod speaking. We're not looking for it to improve, quite frankly, in 2016. We're just hunkered down there, doing everything we can to keep the cost base as minimal as possible. So I think the improvement we expect is going to be post-2016.

But you're not expecting the market to decline, relative to 2015 and 2016?

Not significantly.

All right. Thank you.

Okay. Thank you again, everyone, for joining the call. Just a quick summary, from my standpoint anyway, there's no question that we had a bit of a difficult year in the Commercial Vehicle group, largely due to currency in the Brazilian market. But the group is certainly stable now, and improving every day. However, I'm sure it's not lost on anyone that three of the four business units performed exceptionally well, and continue to perform at a very high level.

Even that, with some very challenging end markets, which will naturally improve some day. Now, after six months at Dana, I would say I'm very excited about Dana, and our prospects, and frankly, achieving our guidance as we presented not only in January, but we reiterated today. So thank you very much for your support, and joining the call. Have a great day.

Thank you. This concludes today's conference call. You may now disconnect.