Honesty and Integrity | Good Corporate Citizenship | Open Communication | Continuous Improvement
S e p a r a t e d Together
2020 First-quarter
Earnings Conference Call
April 30, 2020
Safe Harbor Statement
Certain statements and projections contained in this presentation are, by their nature, forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, estimates and projections about our industry and business, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. Dana's Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss important risk factors that could affect our business, results of operations and financial condition. The forward-looking statements in this presentation speak only as of this date. Dana does not undertake any obligation to revise or update publicly any forward-looking statement for any reason.
© 2020 Dana | 2 |
Agenda
Introduction | Craig Barber |
Senior Director, | |
Investor Relations and | |
Strategic Planning |
Business Review | James Kamsickas |
Chairman and | |
Chief Executive Officer |
Financial Review | Jonathan Collins |
Executive Vice President | |
and Chief Financial Officer |
© 2020 Dana | 3 |
Pandemic Response Priorities
Employees Communities
Protecting our…
Customers Future
© 2020 Dana | 4 |
Protecting Our Employees
Ensuring Safe Workplaces
© 2020 Dana | 5 |
Protecting Our Communities
Dana People Making a Difference
Dana utilizes engineering expertise and 3D printing capability to develop needed protective equipment and provide it as open source
Reusable | Improved light-weight | CPAP mask |
patient enclosures | face shields for | adapter |
for hospitals | frontline responders |
© 2020 Dana | 6 |
Protecting Our Customers
Customer Support in the Most Challenging of Times
Supporting continued production | Ongoing engineering support |
Managing supply chain | Ramping for restart |
© 2020 Dana | 7 |
Protecting Our Future
Financial Strength | Technology Development |
Cash
Conservation
Access to
Liquidity
© 2020 Dana | 8 |
Current Customer Status1
Light-Duty Market | Heavy-Duty Markets | |||
50% | 50% | |||
of Sales* | of Sales* |
Light Vehicle | Commercial Vehicle | Off-Highway | |||
Idle through April | Idle through April | Mixed by end market | |||
Limited production | Limited production | Limited production | |||
Idle through April | Idle through April | Idle through April | |||
Idle through April | Limited production | Limited production | |||
Solid production | Solid production | Solid production |
- Aftermarket, agriculture, and mining remained mostly operational as "essential businesses"
- Supply base assessment: stable but with focused monitoring
- Customer new program development delays remain minimal
- Most European customers are in restart mode
- Remaining customers expected to return to some level of production in May
1Statuses based on an aggregation of publicly available information regarding customer production and restart plans and are subject to change * 2019 Dana sales including 100% of DDAC Joint Venture
© 2020 Dana | 9 |
Honesty and Integrity | Good Corporate Citizenship | Open Communication | Continuous Improvement
Financial Review
Near-Term Financial Priorities
| Significant opportunity to |
generate cash by reducing | |
inventory as production | |
demand declines | |
| Pulling all levers to flex |
Conserve Cash | Maximize Liquidity |
hourly and salary labor costs | |
including temporary lay-offs | |
and pay reductions (50% | |
CEO, 20% board and | |
management, 4-day work | |
week in US, intermittent TLO | |
in EU, etc.) | |
| Capital spending reductions |
initiated in first quarter (35%) | |
| Temporary dividend |
suspension preserves | |
additional flexibility | |
Carrying more of liquidity in | |
the form cash | |
Secured $0.5B of additional | |
liquidity in form of bridge | |
facility |
Reduce Flex
Material Conversion
Orders Costs
Scale Back | Suspend |
Capital | Shareholder |
Spend | Dividend |
Cash Balance1 | $646 M |
Revolver Capacity | $679 M |
Bridge Facility | $500 M |
Q1 PF Liquidity2 | >$1.8 B |
- Available cash and marketable securities as of 3/31/2020
- 3/31 liquidity pro forma for subsequent event bridge facility
Laser focus on conserving cash and maximizing liquidity
See appendix for comments regarding the presentation of non-GAAP measures | © 2020 Dana | 11 |
2020 Q1 Financial Results
- Sales and profit declines primarily attributed to production shutdowns associated with the globalCOVID-19 pandemic
- Lower diluted adjusted EPS primarily due to lower earnings
- Adj. FCF use comparable with prior year as first quarter is typically a use of cash due to seasonal working capital requirements
- Capital expenditures rapidly flexed down to lower rate in expectation of lowerfull-year production demand
Changes from Prior Year
($ in millions except EPS) | Q1 '20 | Q1 '19 | Change | ||||
Sales | $ | 1,926 | $ | 2,163 | $ | (237) | |
Adjusted EBITDA | 205 | 257 | (52) | ||||
Margin | 10.6% | 11.9% | (130) bps | ||||
EBIT | 47 | 140 | (93) | ||||
Interest Expense, Net | 27 | 25 | 2 | ||||
Income Tax Expense (Benefit) | (16) | 20 | (36) | ||||
Net Income(attributable to Dana) | 38 | 98 | (60) | ||||
Diluted Adjusted EPS | $ | 0.47 | $ | 0.78 | $ (0.31) | ||
Operating Cash Flow | (51) | (16) | (35) | ||||
Capital Spending | 63 | 98 | (35) | ||||
Adjusted Free Cash Flow | (114) | (114) | flat | ||||
Financial impact of COVID-19 pandemic experienced in last couple weeks of March
See appendix for comments regarding the presentation of non-GAAP measures | © 2020 Dana | 12 |
2020 Q1 Sales and Profit Changes
- Organic decline primarily driven by production shutdowns across the globe due to theCOVID-19 pandemic
- January and February sales associated with the Graziano and Fairfield businesses acquired on Feb 28thof 2019 drove inorganic sales increase
- Currency translation was a headwind to sales primarily due to the weakening of the euro and Brazilian real to the U.S. dollar
- Lower commodity costs modestly increased profit margins
QuarterPositive Negative
Change Change
Sales
Adjusted
EBITDA
$2,163M
$257M
11.9%
21% | ||||
Decremental | $1,926M | |||
$(64)M | $112M | $(4)M | $2M | |
$14M | ||||
$(34)M | $(16)M | |||
$(299)M | $205M | |||
(150) bps | Flat | Flat | 20 bps | 10.6% |
2019 | Organic | Inorganic | Currency | Commodities | 2020 |
See appendix for comments regarding the presentation of non-GAAP measures
Decremental margin of 21% on lower production due to COVID-19 global pandemic
© 2020 Dana | 13 |
2020 Q1 Cash Flow
- Adj. FCF flat v. prior year as lower profit was offset by lowerone-time costs and capital expenditures
- Adj. FCF is typically a use of cash in Q1 due to seasonal working capital requirements
- No stock repurchased in Q1 2020
- Cash flow increase due to revolver draw of $300M shifting liquidity mix to ~ 50 / 50 between cash and committed financing
- Strengthening of the USD against foreign currencies decreased the value of foreign denominated cash balances
Changes from Prior Year
($ in millions) | Q1 '20 | Q1 '19 | Change | |||
Adjusted EBITDA | $ | 205 | $ | 257 | $ | (52) |
One-time Costs1 | (11) | (25) | 14 | |||
Interest, net | (6) | (11) | 5 | |||
Taxes | (17) | (19) | 2 | |||
Working Capital / Other2 | (222) | (218) | (4) | |||
Capital Spending | (63) | (98) | 35 | |||
Adj. Free Cash Flow | $ | (114) | $ | (114) | $ | - |
Dividends | (15) | (14) | (1) | |||
Share Repurchases | - | (25) | 25 | |||
Revolver Draw | 300 | - | 300 | |||
Currency Effect on Cash | (29) | 5 | (34) | |||
All Other3 | (24) | 23 | (47) | |||
Total Cash Flow | $ | 118 | $ | (125) | $ | 243 |
1Includes costs associated with business acquisitions and divestitures and restructuring. 2Changes in working capital relating to interest, taxes, restructuring, and transaction costs are included in those respective categories. 3Includes other financing and investing activities. See appendix for comments regarding the presentation of non-GAAP measures.
Q1 Adj. FCF flat from prior year as lower capital spending offset earnings decline
© 2020 Dana | 14 |
Flexible Cost Structure
Cost of Goods Sold1
Material Cost | 2/3 |
- Limited vertical integration
- Best-of-bestsupply base
- Centralized global commodity purchasing
- Rapid response to customer demand changes
- Inbound freight and logistics optimization
Conversion Cost | 1/3 |
- Hourly labor flexibility / subsidy programs
- Eliminatehigh-volume premium costs
- Maintenance and repair efficiencies
- Salary cost actions and austerity measures
- Manufacturing footprint optimization
Sales
Composition2
Engineering ~3%
COGS <80%
SG&A ~6%
Profit ~12%
Engineering Spend
- Acceleration and scope of commercial recoveries
- Research and development prioritization
- Rate of investment in electrified technology
- De-prioritizeinvestments in legacy products
SG&A / Other1
- Complete cost synergies from recent acquisitions
- Leverage synergies across all mobility markets
- Lean principles and process consolidation
- Global shared services and automation
Other Free Cash Flow Impacts
- Capital expenditure delay or deferrals
- Working capital source of cash
2019A
1 Adjusted to remove engineering expense
2 Based on 2019 full year results, adjusted for depreciation, amortization, restructuring, and non-recurring items as defined in Adjusted EBITDA See appendix for comments regarding the presentation of non-GAAP measures
Continued focus on cost reduction required to manage through market downturn
© 2020 Dana | 15 |
Cash Flow Sensitivity Analysis
- Originalfull-year financial guidance has been withdrawn due to abnormally high level of uncertainty regarding end- market demand
- April sales expected to be down ~75% from prior year with widespread production shutdowns; however, aftermarket and some OEM demand remained
- Most OEM customers communicating resumption of production in May leading to a Q2 sales decline of ~50% from prior year, nearly breakeven adj. EBITDA, and modest use of adj. FCF
- Estimated breakeven point for FY adj. FCF is ~$6B, a YoY sales decline of ~30%
- Strong YE liquidity under illustrative scenario
2020 Full Year Illustrative Scenario
($ in millions) | 2020 | 2020 | ||||
2019 | Withdrawn | Breakeven | ||||
Actuals | Guidance | Scenario | ||||
Sales | $ | 8,620 | $ | ~8,500 | $ | ~6,000 |
Adjusted EBITDA | 1,019 | ~1,000 | ~400 | |||
One-time Costs1 | (81) | ~(30) | ~(50) | |||
Interest, net | (107) | ~(95) | ~(110) | |||
Taxes | (125) | ~(135) | ~(90) | |||
Working Capital / Other² | (8) | ~20 | ~125 | |||
Capital Spending | (426) | ~(385) | ~(275) | |||
Adj. Free Cash Flow | $ | 272 | $ | ~375 | ~Breakeven | |
YE Liquidity | $ | 1,501 | $ | ~1,500 | $ | ~1,950 |
1Includes costs associated with business acquisitions and divestitures and restructuring. 2Changes in working capital relating to interest, taxes, restructuring, and transaction costs are included in those respective categories. See appendix for comments regarding the presentation of non-GAAP measures.
Full-year guidance withdrawn; sensitivity analysis demonstrates ample liquidity
© 2020 Dana | 16 |
Continued Financial Strength
- Key credit metrics remain relatively unchanged in the first quarter with net leverage at ~2x and coverage at >9x
- Revolver draw of $300M delivers new liquidity mix of ~1/2 : ~1/2 compared to previous mix of ~1/3 : ~2/3
- No significant debt maturities for the next few years
Credit Metrics
($ in millions) | |||
12/31/2019 | 3/31/2020 | ||
Available cash & MS | $522 | $646 | |
Cash flow revolver | 979 | 679 | |
Total Liquidity | $1,501 | $1,325 | |
Bonds | 1,500 | 1,500 | |
Term loans | 823 | 823 | |
Cash flow revolver draw | 300 | ||
Other | 75 | 78 | |
Total Debt | 2,398 | 2,701 | |
Net Debt | $1,876 | $2,055 | |
Q1 2020 LTM Adj EBITDA | 1,019 | 967 | |
Net Leverage | 1.8x | 2.1x | |
LTM Net Interest | $107 | $102 | |
Coverage | 9.5x | 9.5x |
Liquidity mix | ~1/3 | ~1/2 | ||
shifted to more | ~2/3 | Cash | ~1/2 | |
CFR | CFR | |||
Cash | ||||
cash on hand | Capacity | Capacity | ||
Debt Maturity Profile
$1,000
$370 | $349 | |||||||||
$500 | $400 | |||||||||
$425 | ||||||||||
$375 | ||||||||||
$300 | ||||||||||
$15 | $30 | $30 | $30 | |||||||
2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | |||
Bonds | Term Loans Bridge | CFR | ||||||||
Credit metrics remain strong, liquidity mix shifts to 50/50, and no debt maturities for years
See appendix for comments regarding the presentation of non-GAAP measures | © 2020 Dana | 17 |
© 2020 Dana | 18 |
Appendix
2020 Q1 Sales and Profit Change by Segment
Light Vehicle Drive Systems | Commercial Vehicle Drive and Motion Systems |
$906M | $431M | |||||||||||||
$808M | ||||||||||||||
($18)M | $(1)M | ($12)M | $(16)M | $3M | $333M | |||||||||
$102M | $(5)M | $83M | $41M | $(1)M | $1M | |||||||||
($81)M | ||||||||||||||
$(4)M | ||||||||||||||
$(86)M | $(13)M | $(2)M | $21M | |||||||||||
11.3% | 10.3% | 9.5% | ||||||||||||
6.3% | ||||||||||||||
Q1 2019 | Organic | Inorganic | Currency Commodities | Q1 2020 | ||||||||||
Q1 2019 | Organic | Inorganic | Currency | Commodities | Q1 2020 | |||||||||
Off-Highway Drive and Motion Systems | Power Technologies | |||||||||||||
$552M | $113M | $532M | ||
$(23)M | $(2)M | $1M | ||
$14M | $(12)M | $(2)M | ||
$82M | ||||
$72M | ||||
$(119)M | QuarterPositive Negative | |||
14.9% | Change Change | |||
13.5% |
Sales
$274M | $253M | |
$(4)M | ||
$34M | $(17)M | $(4)M |
$30M | ||
12.4% | 11.9% |
Q1 2019 Organic Inorganic Currency Commodities Q1 2020Q1 2019 Organic Inorganic Currency Commodities Q1 2020
Segment
EBITDA
See appendix for comments regarding the presentation of non-GAAP measures
© 2020 Dana | 20 |
Segment Profiles
Light Vehicle Drive Systems
Year to Date 3/31/2020
Commercial Vehicle Drive
and Motion Systems
Year to Date 3/31/2020
Off-Highway Drive and Motion Systems
Year to Date 3/31/2020
Power Technologies
Year to Date 3/31/2020
Customer Sales
Regional Sales
Other 18%
GM 5%
Tata 5%
Toyota
6%
FCA * 26%
Asia Pacific
11%
Europe
13%
South
America
4%
$ Millions
Ford 40%
- Includes sales to system integrators for driveline products that support FCA vehicles
Paccar 23%
Other
46%
Volvo
8%
Volkswagen
8%
Navistar
Daimler 8%
7%
Asia Pacific
6%
Europe
15%
South
America$ Millions
Deere 11%
CNH 6%
Agco 6%
Oshkosh
5%
Manitou
4%
Other
68%
^ Estimates used for acquisition customer data
North America
Asia Pacific14%
19%
South
America
1%
$ Millions
Ford | |
16% | |
GM | |
6% | |
Cummins | |
5% | |
Volkswagen | |
Other | 5% |
FCA NV | |
64% | |
4% | |
Asia Pacific 4%
Europe
45%
North America
72%
19%
North America
60%
Europe
66%
North America
49%
South America 2%
Performance
$ Millions | Q1 | |
2020 | 2019 | |
Sales | $808 | $906 |
Segment | $83 | $102 |
EBITDA | ||
EBITDA | 10.3% | 11.3% |
Margin | ||
Q1 | ||
2020 | 2019 | |
Sales | $333 | $431 |
Segment | $21 | $41 |
EBITDA | ||
EBITDA | 6.3% | 9.5% |
Margin | ||
Q1
2020 | 2019 | |
Sales | $532 | $552 |
Segment | $72 | $82 |
EBITDA | ||
EBITDA | 13.5% | 14.9% |
Margin | ||
Q1
2020 | 2019 | ||
Sales | $253 | $274 | |
Segment | $30 | $34 | |
EBITDA | |||
EBITDA | 11.9% | 12.4% | |
Margin | |||
© 2020 Dana | 21 |
Diluted Adjusted EPS
DANA INCORPORATED
Diluted Adjusted EPS (Unaudited)
For the Three Months Ended March 31, 2020 and 2019
(In millions, except per share amounts) | |||||
Three Months Ended | |||||
March 31, | |||||
2020 | 2019 | ||||
Net income attributable to parent company | $ | 38 | $ | 98 | |
Items impacting income before income taxes: | |||||
Restructuring charges | 3 | 9 | |||
Amortization | 4 | 4 | |||
Strategic transaction expenses, net of transaction breakup fee income | 6 | 13 | |||
Acquisition related inventory adjustments | 4 | ||||
Non-income tax legal judgment | (6) | ||||
Impairment of goodwill | 51 | ||||
Loss on deal contingent forward | 13 | ||||
Other items | (1) | ||||
Items impacting income taxes: | |||||
Net income tax expense on items above | (3) | (5) | |||
Tax benefit attributable to utilization of federal tax credits, state tax | |||||
law changes and valuation allowance adjustments | (31) | (16) | |||
Adjusted net income | $ | 68 | $ | 113 | |
Diluted shares - as reported | 144.8 | 144.8 | |||
Adjusted diluted shares | 144.8 | 144.8 | |||
Diluted adjusted EPS | |||||
$ | 0.47 | $ | 0.78 |
© 2020 Dana | 22 |
Segment Data
DANA INCORPORATED
Segment Sales and Segment EBITDA (Unaudited) For the Three Months Ended March 31, 2020 and 2019
Three Months Ended | |||||
(In millions) | March 31, | ||||
2020 | 2019 | ||||
Sales | |||||
Light Vehicle | $ | 808 | $ | 906 | |
Commercial Vehicle | 333 | 431 | |||
Off-Highway | 532 | 552 | |||
Power Technologies | 253 | 274 | |||
Total Sales | $ | 1,926 | $ | 2,163 | |
Segment EBITDA | |||||
Light Vehicle | $ | 83 | $ | 102 | |
Commercial Vehicle | 21 | 41 | |||
Off-Highway | 72 | 82 | |||
Power Technologies | 30 | 34 | |||
Total Segment EBITDA | 206 | 259 | |||
Corporate expense and other items, net | (1) | (2) | |||
Adjusted EBITDA | $ | 205 | $ | 257 | |
DANA INCORPORATED
Reconciliation of Segment and Adjusted EBITDA to Net Income (Unaudited) For the Three Months Ended March 31, 2020 and 2019
Three Months Ended | ||||||
(In millions) | March 31, | |||||
2020 | 2019 | |||||
Segment EBITDA | $ | 206 | $ | 259 | ||
Corporate expense and other items, net | (1) | (2) | ||||
Adjusted EBITDA | 205 | 257 | ||||
Depreciation | (85) | (74) | ||||
Amortization | (4) | (3) | ||||
Non-service cost components of pension and OPEB costs | (2) | (6) | ||||
Restructuring charges, net | (3) | (9) | ||||
Stock compensation expense | (4) | (5) | ||||
Strategic transaction expenses, net of transaction fee breakup income | (6) | (13) | ||||
Impairment of goodwill | (51) | |||||
Acquisition related inventory adjustments | (4) | |||||
Non-income tax legal judgment | 6 | |||||
Other items | (3) | (9) | ||||
Earnings before interest and income taxes | 47 | 140 | ||||
Interest income | 2 | 2 | ||||
Interest expense | 29 | 27 | ||||
Earnings before income taxes | 20 | 115 | ||||
Income tax expense (benefit) | (16) | 20 | ||||
Equity in earnings of affiliates | 2 | 6 | ||||
Net income | $ | 38 | $ | 101 |
© 2020 Dana | 23 |
Cash Flow
DANA INCORPORATED
Reconciliation of Net Cash Provided by Operating Activities to
Free Cash Flow and Adjusted Free Cash Flow (Unaudited)
Three Months Ended | |||||
(In millions) | March 31, | ||||
2020 | 2019 | ||||
Net cash used in operating activities | $ | (51) | $ | (16) | |
Purchases of property, plant and equipment | (63) | (98) | |||
Free cash flow | (114) | (114) | |||
Discretionary pension contributions | - | - | |||
Adjusted free cash flow | $ | (114) | $ | (114) | |
© 2020 Dana | 24 |
Non-GAAP Financial Information
Adjusted EBITDA is a non-GAAP financial measure which we have defined as net income before interest, income taxes, depreciation, amortization, equity grant expense, restructuring expense, non-service cost components of pension and other postretirement benefit costs and other adjustments not related to our core operations (gain/loss on debt extinguishment, pension settlements, divestitures, impairment, etc.). Adjusted EBITDA is a measure of our ability to maintain and continue to invest in our operations and provide shareholder returns. We use adjusted EBITDA in assessing the effectiveness of our business strategies, evaluating and pricing potential acquisitions and as a factor in making incentive compensation decisions. In addition to its use by management, we also believe adjusted EBITDA is a measure widely used by securities analysts, investors and others to evaluate financial performance of our company relative to other Tier 1 automotive suppliers. Adjusted EBITDA should not be considered a substitute for earnings before income taxes, net income or other results reported in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
Diluted adjusted EPS is a non-GAAP financial measure which we have defined as adjusted net income divided by adjusted diluted shares. We define adjusted net income as net income attributable to the parent company, excluding any nonrecurring income tax items, restructuring charges, amortization expense and other adjustments not related to our core operations (as used in adjusted EBITDA), net of any associated income tax effects. We define adjusted diluted shares as diluted shares as determined in accordance with GAAP based on adjusted net income. This measure is considered useful for purposes of providing investors, analysts and other interested parties with an indicator of ongoing financial performance that provides enhanced comparability to EPS reported by other companies. Diluted adjusted EPS is neither intended to represent nor be an alternative measure to diluted EPS reported in accordance with GAAP.
Free cash flow is a non-GAAP financial measure which we have defined as net cash provided by (used in) operating activities less purchases of property, plant and equipment. Adjusted free cash flow is a non-GAAP financial measure which we have defined as net cash provided by (used in) operating activities excluding discretionary pension contributions less purchases of property, plant and equipment. We believe these measures are useful to investors in evaluating the operational cash flow of the company inclusive of the spending required to maintain the operations. Free cash flow and adjusted free cash flow are not intended to represent nor be an alternative to the measure of net cash provided by (used in) operating activities reported in accordance with GAAP. Free cash flow and adjusted free cash flow may not be comparable to similarly titled measures reported by other companies.
The accompanying financial information provides reconciliations of adjusted EBITDA, diluted adjusted EPS, free cash flow and adjusted free cash flow to the most directly comparable financial measures calculated and presented in accordance with GAAP. We have not provided a reconciliation of our adjusted EBITDA and diluted adjusted EPS outlook to the most comparable GAAP measures of net income (loss) and diluted EPS. Providing net income (loss) and diluted EPS guidance is potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items that are included in net income (loss) and diluted EPS, including restructuring actions, asset impairments and certain income tax adjustments. The accompanying reconciliations of these non-GAAP measures with the most comparable GAAP measures for the historical periods presented are indicative of the reconciliations that will be prepared upon completion of the periods covered by the non-GAAP guidance.
© 2020 Dana | 25 |
Attachments
- Original document
- Permalink
Disclaimer
DANA Incorporated published this content on 30 April 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 May 2020 09:38:11 UTC