Dana Incorporated (DAN) Q1 2016 Earnings Report, Transcript and Summary

Good morning and welcome to Dana Holding Corporation's First Quarter 2016 Financial Webcast and Conference Call. My name is Brent, and I will 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.

Thanks Brent. And thank you to everyone on the call for joining us today for Dana’s first quarter 2016 earnings call. 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 written 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; Jonathan Collins, Senior Vice President and Chief Financial Officer; and joining us for Q&A is Rod Filcek, Senior Vice President and Chief Accounting Officer. With that I'd like to turn the call over to Jim. James Kamsickas Thank you, Craig. Good morning everyone, thank you for joining us. We are pleased to report that we are off to the good start this year. Our focus on customer satisfaction and technology is coming through in a big way this year with new business wins. In our calls earlier this year we talked about a various significant win with one of our global customers and in a few minutes I will update you on two very important programs one of which is significant new business win which we have received since our last call in February. On the financial front for the first quarter sales were $1.45 billion in the quarter, a decline of 10% from the first quarter of last year. Coming into the year, we expect the currency headwinds from a stronger dollar and this accounted for about half of our sales decline in the quarter. Also as expected our sales were impacted by lower commercial vehicle production levels and customer demand. The markets have been a bit weaker than expected thus far this year and that's been balanced by continuing strength in the light vehicle markets where we closed at 3% organic sales growth. Our earnings in the quarter were in-line with sales were about 10.2% adjusted EBITDA margin was driven by strong light vehicle markets offset by currency headwinds and weaker commercial vehicle in our highway markets. On the customer front, on numerous occasions I’ve stated that customer satisfaction is the key to our success. Accordingly we are continuing to strengthen our customer relationships by reluctantly improving performance and increasing our portfolio of advanced technologies. Recognition from our customers and industry organization in the form of words are certainly an important testimony of these efforts. However, more importantly our customers voice their commitment by entrusting Dana through new business to words. We are very excited with this success with which we are increasing our sales backlog and new business wins in each of our four business segments. As discussed in the February call, we completed the acquisition of Magnum Gaskets in the first quarter. The integration is transitioning very well. Our extremely talented and dedicated new team members have contributed to the business and we will continue to generate benefits side by side with the Dana team for years to come. And finally, we continue the execution on a $1.7 billion share repurchase program returning $28 million to our shareholders in the first quarter. Some of our customer initiatives, recognition and new business wins are highlighted on the next two slides, so let’s move to page slide. Page 5, I’d like to share a few notable accomplishments achieved this quarter by each of our business units. Dana was privileged to once again participate in the Easter Jeep Safari which was celebrating its 50th anniversary this month in Moab, Utah. This safari is a premier off-road enthusiastic and attracts thousands of national and international attendees like. It's a great opportunity to showcase our entire aftermarket product range specially performance products for stream off-road and to highlight Dana, Spicer and [SVL] brands as some of the technology we provide to jeep and the broader truck and SUV market in general. In our commercial vehicle business we started this year by winning new business around the globe. Three of these wins totaled more than $350 million over the next ten years. In North America we will be supplying a full product line of steer axle modules, drive axle modules. And driveshafts with the 2018 - FTR the company's all new entry into the classic medium duty truck segment. The FTR will be assembled by Spartan motors. Further to our business relationships with Spartan we are also proud to share with you that Dana recently was awarded the Spartan truck supplier of the year award which recognizes the top performance suppliers who maintain relentlessness commitment to quality, on time delivery, cost control and excellent customer support. We have been instrumental in helping Spartan to progress its continuous improvement initiatives and improving quality. Our commercial vehicle team in South America is also doing an outstanding job winning new business in spite of a very challenging economic environment in that region. Recently we secured 100% of the drive axle housing business and a new truck and bus program for very prominent global customer. In addition we also been supplying, we will be supplying front and rear axles for two major truck platforms with the second major customer in the region. In Asia, Dana is teaming up with the major India OEM to provide rear axles to [Foden] Trucks beginning in 2018. Moving to our highway business. The team continues to perform well in-spite of the volatility in the global market. Just last week at the Wal-Mart construction trade show in Munich, Germany we announced that Dana’s front and rear axles and transmissions will begin the new Sany 18.5 ton wheel loader, which features the latest technologies from improved fuel economy, and maximizing performance. Sany believes that our commitment to innovation as well as extensive engineering and manufacturing researchers in China make us the ideal partner. And finally, our power technologies group has done an outstanding job winning new business in the North American, European and Asian markets including China where we will be supplying transmissions value body separated place just Volkswagen. We are also recently recognized by the European association of Oil motor suppliers for work with Audi and developing transmission software place which are featured on the next generation Audi A3. This award recognizes the innovation capabilities for automotive suppliers with the presence in Europe and demonstrates our ability to work closely with valued customers. Turning to slide six, Dana customer service and innovative products continue to drive positive organic growth which we believe offers the best return and highest compass path to profitable growth. As you know over the next three years we have incremental sales of $750 million coming online. This represents secured new business wins and will provide profitable top line growth in excess of market factors. Last quarter we announced new business with our disconnecting all wheel drive technology. This quarter I am excited to talk about new business that will have a major impact on our backlog. We have secured drive line content in all new truck and SUV program with a very successful global OEM. Unfortunately, we aren't able to provide you details about the program just yet, but it will begin, backlog beginning in 2018 with an eight year program life. We will update you as the project progresses. And if you recall during the third quarter of 2015, we announced that we had been awarded both the front and rear axles on the next generation jeep work. We are anticipating strong demand for this iconic vehicle and this will further manifest our sales backlog beginning in late 2018. These two programs are expected to provide Dana an additional $1.5 billion in sales over the life of the programs. We are thrilled with the opportunity to further demonstrate our technology and dedicated to our customers naturally these programs will require some capital investment on our part and we will see this as an excellent opportunity to further profitable growth objective. Moving to slide 7, lastly I would like to highlight some of the actions we have taken this past quarter to further the priorities we laid out at the beginning of the year on last side of the page our three key priorities, enhancing our competitive position in growing our core business, continue driving profit margin improvement and maintaining a strong balance sheet. This quarter we have certainly grown our core business with more than 1.5 billion and new business that will be added to the future backlog in our light vehicle drive line alone. Combined with new business and all of our other business units we are certainly on a growth trajectory. When it comes to driving our profit margins we are taking significant actions one of the key drivers of our profitable growth is the development of new products and technologies. We have been very successful and continue to bring our new products. As you know the majority of our capital investment goes to supporting new business wins and with these latest new business wins it's exciting to report that we are adding capacity in light vehicle drive line business in the near future. We will be talking more about this as our plans unfold over the next year or so. We are also continuously looking opportunities to optimize our manufacturing footprint. We announced earlier this week that we will be closing a North America facility in our commercial vehicle business. To be clear we are not reducing our end products and capacity we are rationalizing our footprint or fore space capacity to improve our operational efficiency. This project should be largely completed by the end of the year and the cost of the structuring has already been included in our guidance. And speaking of the commercial vehicle drive line that for business is performing well in the margins every now and then from the issues last year as we communicated. Jonathan will go into more detail in just a moment. And finally, we are focused on maintain our strong balance sheet. We see our investment in organic growth is an excellent use of capital, our capital investment is driven by business wins. These programs are generally long life sometimes decades long, so our returns will remain strong. And in consistent with the capital allocation priorities we continue to return excess capital to our shareholders. Thank you. before we go through the financials, I would like to take just a minute to introduce our new Senior Vice President and Chief Financial Officer Jonathan Collins, Jonathan joined Dana at the end of March prior this. He was recently served as CFO for ProQuest and worked in executive level operational and commercial finance positions at international automotive components and Lear Corporation. Jonathan has extensive experience in various facets of corporate finance and has built a solid reputation from it for improving profitability and executing growth objectives. We are so pleased to have some of his caliber join the Dana team and with this I will turn the call over to him to review the financial results. Jonathan?

Thank you, Jim. I am very excited to be a part of the Dana team. The company has an excellent longstanding reputation and a very bright future. Please turn with me to slide 9 for an overview of the first quarter results. The first quarter sales of $1.45 billion were down $159 million or 10% from the same period in 2015 half of the decline is attributable to foreign exchange as the US dollar continue to appreciate against other foreign currencies. Lower demand in the commercial vehicle and off-highway segments more than account for the balance of the decline as we experienced volume growth in the light vehicle and power technologies segments. Adjusted EBITDA for the quarter was $148 million, $28 million lower than last year yielding 10.2% adjusted EBITDA margin. While slightly below last year this presents solid improvement over the fourth quarter and is in line with our expectation. Net income was $45 million, $18 million lower than the first quarter last year as the adjusted EBITDA decline was partially offset by lower tax expense and income from non controlling interests. Capital expenditures were $71 million slightly higher than last year as we increased our investment to support new program launches and deliver our growing backlog. Free cash flow for the quarter was the use of $98 million, while the first use of cash it was a bit higher than last year due to lower earnings, higher cash taxes and increased capital spending partially offset by lower working capital requirements. Slide ten provides a more detailed look at the consolidated sales and adjusted EBITDA changes versus the prior year. As you can see on the left side of the page, sales declined 5% on a constant currency basis as the growth in the light vehicle and power technologies segments were offset by declines in the commercial vehicle and off-highway segments. The foreign currency headwind to $72 million is primarily result of the devaluation of the Brazilian Real, Argentine Peso and the Euro against the US dollar. Volumes in light vehicle and power technologies increase sales by $28 million for 3% growth rate on a constant currency basis. Stronger light vehicle demand levels in North America, Europe and Asia-Pacific along with new customer programs drove the increase. Looking at the right side of the page, the $28 million decline in EBITDA and 70 basis points margin deterioration was due to the flow through impact of foreign exchange, volume mix and pricing recovery as remunerated by $6 million of cost saving actions. Let’s now move to slide 11 and 12 for a closer look at the year-over-year changes to sales and adjusted EBITDA by business segment. On the left side of page 11 you can see the light vehicle group had a strong first quarter with sales of 613 million up $12 million or 2% on a constant currency basis on higher volumes in the light truck market in North America and Asia-Pacific as well as the incremental sales from new business. We anticipate sales will trend higher through the remainder of this year. Adjusted EBITDA was $58 million this quarter down nominally from last year adjusted for the negative effects of currency as the conversion on the incremental volume was offset by unfavorable performance which was caused by the timing of engineering cost recovery from our customers. For the reminder of the year we anticipate our light vehicle margin will improve to over 11% as we launch new business. On the right side of the page you can see the commercial vehicle sales of $333 million were down $100 million compared to the first quarter last year. Weaker international currencies reduced first quarter's sales by $20 million with the Brazilian Real accounting for half of the impact. The expected lower market demand in North America which began in the fourth quarter of last year coupled with our reduced share in the classic market lowered sales by $60 million. For the next few quarters, volume will be headwind comparing to last year with this year's classic market production which is expected to be in the range of 240,000 to 260,000 units down from over 300,000 units last year. Weaker truck demand in Brazil reduced sales by another $19 million. If you recall demand in Brazil didn't see the full impact of the slow down until the second quarter last year. As we said in February we expect demand in Brazil to remain weak for the reminder of the year. It's useful to note that while overall sales were down compared to last year on a tough comp when comparing sequentially commercial vehicle sales are up 10% over the fourth quarter due to beneficial product mix and higher medium duty sales. Medium duty now makes up a more meaningful portion of our commercial vehicle sales and we expect this sub segment to be stable this year. Segment EBITDA for the first quarter was $26 million lower than last year by $9 million. While the margin for the first quarter was 7.8% slightly below last year due to the lower volume it is up significantly from the fourth quarter as the one-time warranty charge last year didn't recur and we have continued to bring our cost structure in line with demand. When we look at the year-over-year comparison on the bottom right of page 11, we experienced the anticipated flow through of currency and volume which accounted for a combined 17 million of the change. Offsetting this decline was improved operational performance yielding $8 million of cost reductions these improvements has stabilized our commercial vehicle business and will continue to take actions like the footprint actions Jim mentioned that will improve our cost structuring margins which we expect to remain on target for the remainder of the year. On the left side of page 12, you can see sales in the off-highway segments were $241 million down $43 million from the first quarter last year. The weaker euro drove the currency related reduction in sales of $8 million. Lower end user demand globally and key end markets and unfavorable mix in industrial and aftermarket accounted for the volume decline. We remain cautious on the end markets this year, however, new business that came on late in 2015 is providing a buffer to the market volatility. Segment EBITDA for off-highway was $32 million or 13.3% margin compared to $39 million in adjusted EBITDA last year. Currency effects and lower sales volumes were partially offset by improved cost performance principally material cost savings. Power technologies demonstrated solid top line growth with sales of $262 million which is more than 6% year-over-year growth on a constant currency basis. Increased volume of $20 million driven by light vehicle market strength in North America and Europe was partially offset by weaker currencies primarily the Euro and the Canadian dollar which lowered sales by $8 million. Segment EBITDA of $35 million in the first quarter was lower by $3 million compared to last year due to a combination of engineering investments and operational inefficiencies we experienced as we ramped up to deliver a higher volume levels. As we move through the reminder of the year we expect margins in power technologies will recover due to efficiency improvements. Slide 13 highlights our free cash flow for the quarter as well as our ending liquidity position. As this is typical on our business free cash flow was a use in the first quarter of $98 million. It was $16 million lower than prior year largely due to lower adjusted EBITDA and higher investment in new programs to support future growth which were partially offset by improved working capital efficiency, at the end of the first quarter cash and marketable securities were $833 million while outstanding debt was $1.6 billion resulting in a net debt position of $789 million. Total liquidity including the availability in our credit facility, was more than $1.1 billion of which nearly $1 billion is available for operating usage. Slide 14 highlights our outlook for the full year. Our 2016 sales adjusted EBITDA and EPS guidance is unchanged from what we provided in February, we are increasing our capital spending due to the new program wins we booked in the first quarter. We expect sales to still be in the range of $5.8 billion to $6 billion with adjusted EBITDA of $640 million to $670 million and a full year margin between 11% and 11.2%. Our diluted adjusted EPS target remains in the range of $0.65 to $0.75. From a cash flow perspective as mentioned before we are now planning for higher capital spend of $320 million to $340 million. This increase is entirely driven by the new business we delivered in the first quarter as a result of the higher capital spend we are targeting cash flow free cash flow in the range of $120 million to $140 million for the full year. If you turn with me to slide 15 we can take a closer look at how we see the rest of the year unfolding. Our sales growth is on track for the year to meet our earnings our guidance range. Our light vehicle markets are mostly stable with North America, Europe performing well and while we remain cautious on South America we have new business launches in Argentina which will help to offset volume headwinds in the region. Within the commercial vehicle segment the North American class eight truck markets remains stable. While there is meaningful variation in third party volume projections for the remainder of the year, we’ve yet to see the weakness in our order patterns or discussions with our customers. The medium duty market is held up well and we expect this market will be a growth opportunity for Dana going forward. The off-highway market remains challenging. We are monitoring volatility in the orders and we will make adjustments to our cost structure as necessary. But just like last year we continue to win new business as customers look for strong partners. This will help offset some of the market pressures and will certainly be a benefit when markets rebound. As implied in our guidance our margins will improve throughout the year. Light vehicle second half margins will outpace the first as new business rolls on with a improved margin profile and as we experience the impact of the timing of commercial recoveries. Commercial vehicle is right on track with their margins in the first quarter and the base business will continue to be strong, but there will be a slight margin decline in the second half as we shift production to one of our light vehicle facilities of the single truck platform that will now use a newly designed light vehicle axle this move will be a net positive for Dana as we gain manufacturing efficiency with the new product. Finally, off-highway and power technologies will see improving margins from continued cost actions in the normal seasonality of market demand. As Jim mentioned at the start of the call, we continue to be extremely encouraged by the confidence our customers have placed in us by awarding us new business in the first quarter and we are acutely focused on executing on these new programs. That concludes our presentation this morning and I will now turn the call back over to Brent for any questions. Thank you for listening in today.

Thank you. [Operator Instructions] Your first question comes from the line of Brian Johnson with Barclays. Please go ahead.

Yes. Good morning. A couple of questions. One can you give us some color on the capital spending, we certainly appreciate the new business wins but there seem to be out in 2018 what’s the capital going forward this year?

Yes, so Brian this is Jonathan. In order to be prepared for those programs we are going to have to start to make investment on some of the longer lean items so primarily machinery and equipment that we have to kick off and get moving to be able to meet the demand of the program so the incremental amount that we have included is what we have to spend in 2016 to be able to meet the production requirements for the customers.

Okay. Even though they don't launch for a year or two?

That's correct. Yes. So there is a meaningful lag between when they have the initiative the investment and when we will start production.

Okay. Secondly can you give us some more color around the initiative to make medium duty capacity in light vehicle capacity tangible, couple of things what percentage of the capacity is tangible, are there operational or capital cost as you reflect back and then just more mechanically how are you going to kind of allocate transfer pricing or cost to allocation so we think about the two divisions.

Good morning Brian. This is Jim. Nice to hear your voice and talk to you again. Relative to moving around if you want to call it that the production, just one of the key initiatives where we strike for and continue to work in that direction our making our capacity between our light vehicle group and our commercial vehicle group more flexible the vehicle to support one to another so to answer your question specifically yes we are able to do that particularly on the program that Jonathan referred to earlier today.

Yes, and then Brian this is Jonathan your question relating to the cost allocation we are actually moving a business from a CV facility to light vehicle facility so the cost are attribution of those is pretty straight forward.

Okay. So actually both the cost from the revenue will be over in CV?

You got it which is why you will see a little bit of other way, yes it's going from CV to LV excuse me.

Okay. Great. It’s going to be manufacturing light vehicle platforms not medium vehicle platforms?

Yes, Brian in our business there is a tweaner areas sometimes depending on customer demand and in product requirements etc. sometime we will find that our products need to skew over into our commercial vehicle group and sometimes we will have to skew over in light vehicle this stuff that we are talking about today are skewing from commercial to light. No loss of business actually incremental business but it does fall from CV to LV.

Okay. Thank you.

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

Good morning everyone.

Hi Patrick. Morning.

Two questions. Just wanted to discuss the dynamics of the new business falling through at better margins in the light vehicle business is that going to be similar trend we are going to see over the next couple of years is that the bigger part of your backlog and I mean does that mean we that will be your meaningful improvement on light vehicle drive line business for the next couple of years?

The big picture entry to that one Patrick, good morning again, is that we have some pretty dated older programs that roll on and roll out you get that very, very well that they are naturally there is going to be some improvement it falls in line with what our return and our investment criteria to be able to pay for the investment but punch line to it is they will be improve for all the factors I just mentioned.

And given the new business wins could you maybe give us a little bit of clarity of how you see that CapEx find turning for the next couple of years?

Yes, Patrick this is Jonathan given the success that we are having in winning the new business in our growing backlog we think that it's likely that over the next few years we will see a capital spending level in line with what we are projecting for this year which is slightly elevated over what you have seen in last few years so again we think it's a directly attributable to the success we are having in the market.

Okay back in the queue. Thanks guys.

Your next question comes from the line of [Joe Speck] with RBC Capital Market. Please go ahead.

Hi good morning everyone. Thanks for taking question. Speaking with the major new business ones I guess I just wanted to first get some color on the Wrangler because that that's the platform you already on so is there a CPV uptake on that or it's just sort of should we think that more as a continuation of business you already won, get volume up as it changes over?

Yeas, good morning again Joe. Good question. All good questions. Big picture from where we were at what we kind of projected is our volume assumptions back when we announced in I guess Q3 last year to where we are at today. It's a volume pick up is what we are ultimately getting to. So hopefully that answers your question.

Okay. And then on the I guess still unnamed when I mean, can you talk a little bit about that process was is it something you went after it depends on were you approached by the customer and I guess just given the life of that program, I am a little bit surprised that sort of I think it’s about 1.5 is a life time number I guess some little surprised that this isn't little bit higher so maybe some of the volume assumption associated with that?

Again, I do want to reinforce you Joe that that's the revenue for both of the two announcements that you want to call that comment one. I can tell you from generally speaking what we saw products for against volume, it's a very good normal program. Good normal program. So it's not a small program by any stretch or the imagination into I guess to your question on that about how do we go about it if that's specifically what it was it's really the blocking and tackling what I told you from day one since I came on we will continue to be laser focused on customer satisfaction and making sure that we are providing that technology to separate ourselves for these key wins and this obviously is a very instrumental and this is a big one for us.

Okay. And then last question just with relation to your full year guidance which was I guess good to see obviously at least versus where the street was, the quarter was a little bit light so can you just help us a little bit with some of the cadence especially since you have a big program of the Super View which is going to explain some downtime here in second and third quarter so should we be thinking more of the growth is fourth quarter related versus over the next two?

Joe this is Jonathan. I have a couple of things. In the light vehicle segment it is the fact that we have new business coming out in the improved margins as we just mentioned a moment ago and you will see that program referring to launching about midyear but it's also the fact that you remember you follow this business we sometimes have different timing associated with commercial recoveries. And as it turns out the commercial recoveries that we had in the first quarter relative to what we expect for the balance of the year will be different so that - those are the real main drivers of the improvement in the margin within light vehicle between the first quarter and the balance of the year. And then just the second thing I would note when you look at power technologies we mentioned the fact that we started to see little bit of inefficiencies as we ramped up production very quickly but we made progress on confirming our cost more towards standard and becoming more efficient and that's going to play out in the balance for the year as well. So when you look at each of the segments those are the two items that drive most of the improvement in the margin and the balance for the year.

Great, that's helpful. Thanks.

Your next question comes from the line of Colin Langan with UBS. Please go ahead.

Great thanks for taking my question just a follow-up on your comment on power technologies I mean what’s the driver of the $6 million of negative performance did you had I am trying to understand the margin on higher sale what was the exact issue for the quarter?

Yes, to a lesser extent we experienced incremental engineering investment in the quarter the larger issue we saw though was performance related dealing with material conversion labor and those types of issues as we ramped up to a higher production level. So often times it jumps off pretty quickly it can catch us a little bit off guard well little bit inefficient but the reality is as I mentioned we have taken steps and made improvements to get those costs in line and that's what you will see a big driver of the improvement in the balance of the year and then also we had a little bit of timing on recovery. You remember in that segment of the business we have recovery for material cost that can be somewhat on a lag and also depressed first quarter results as well.

Any color on in commercial vehicle how your share with [ProQuest] has been trending I mean it was an issue in Q1 is that stable now at this point or and at what point would you start anniversary and sort of the share issue?

Good morning Colin, thank you for the questions. It's we have been running it in a pretty solid trajectory obviously there is the impact to deal overall market that’s out there but it all relates to share we are about where we had been to get to a clear clean if everything stayed the same when would that level itself you are talking about Q4 this year.

Okay. And just lastly I mean looking at commercial vehicle decremented is actually pretty low on the lower volume so is that how we should think about you could actually manage pretty what is driving sort of strong performance in the margin?

Colin, this is Jonathan certainly the management of the cost structure is part of that equation but you also remember in the past we had experienced some higher cost associated with performance issues last year which we made improvement on which has helped to improve the situation and make our ability to flex cost even greater. So combination normal operating and dealing with some of the anomalies issues from last year.

Okay. Thank you very much.

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

Hi, good morning guys. This is actually Brian calling on the line for Justin. So first question looking at your end market expectations for this year in kind of what’s embedded within your guidance which area is do you guys see the best chance for upside and then also where do you see the most risk based on how things progress for this year.

Good morning Brian. Thanks for the questions. I guess if I frame those terms I would say risk might be a bit of a strong word but for lack of better word I will use that as well that we are cautious on the I will we are cautious on the highway side of the business agriculture remains depressed, I am talking on a global I am not going to get these segments too much in construction I would say it's flat but stable so that one I would say it's too early in the year to tell I think I said I know I said in my comments just at the event which is just the biggest event in construction industry last week so certainly a lot of Intel or perspective from lot of people but I think everybody is just cautious but still it's too early to tell beyond the risk side and I think on the opportunity side big picture I think everybody still pretty bullish particularly in the truck market where we play so much in light vehicle so hopefully that answers your question.

Yes absolutely. That's helpful. Thank you and then secondly just on CapEx you guys have given the new target $320 billion to $340 billion if you stress test the model and assume that demand weakens more than your current expectations could you speak to your ability to take that CapEx number lower?

Hey Brian this is Jonathan. There is certainly some flexibility there not only on the capital spending side but also on our operating expenditures given where the market goes but in many cases we need to make sure that we deliver for our customers and we follow their productions schedule but we certainly have some control over the timing but we could influence that.

Okay great. Thanks for taking my questions.

Sure.

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

Hi, good morning. Welcome Jonathan.

Thank you.

Yes, I guess just one most of my questions have been answered but just you mentioned some timing of recoveries in light vehicle in the first quarter anyway you can quantify that?

In terms of sequentially it was noticeable from the end of last year. It will be noticeable but we have not given the specifics in the balance of the year but it will have a noticeable impact on the margin profile.

Okay. And one thing I have asked few times over the last year and half or so with regarding the super duty change over and expected downtime and I mean can you measure kind of looking at this large platform going to aluminum what’s the confidence level that you are not going to see a major disruption in your own light vehicle business as you kind of head down the path this year that change over.

Thank you Brian. Nice talking to you again. I am bullish. I am and I tell you otherwise you know me by now I am bullish that falls in pretty good shape as it relates to launch date. They put a lot of focus energy resources and other into their ability to launch over the last two or three years we have seen the evolution coming off of some fusion just talking with North America fusion platforms was the challenge they would be the first one to say it too two three years ago or two much better success as it relates to the up series, up 150 -- with a couple of snaps here and there okay and whatever not the two substantial but they know a lot of things right things I think to put themselves in the good position as it relates to our releases you understand that well in terms of what we are seeing. They are still in line with our forecast and I feel pretty confident I mean any manufacturing company would be the first one to say this you never know that something can come up and bite you, but they certainly have pulled a lot of their activities, AP, QP activities and focus on their launches. So I feel pretty good about it.

Alright. Great and with the increase CapEx any changes on capital to shareholders given the need to effectively be there for your customers over the course of next several years?

Yes, not necessarily Brian we still have the ability of more than sufficient liquidity to be able to continue our share repurchase programs so in the balance of the year we will continue to evaluate the market and continue to execute on that opportunistically.

Alright. Thank you.

Thanks Brian.

Your next question comes from the line of Christopher Van Horn with FBR & Company, please go ahead.

Good morning guys. Thanks for taking my question. Could you highlight the new business wins as you talked about in commercial and in light vehicle and even maybe off-highway could you give us a sense of the mix of what were kind of conquest wins versus maybe the OEM moving from doing it themselves to going outside and then on the Jeep wrangler I know you were incumbent there but was there was that a competitive bid or was that just kind of you guys rebidding on the existing contract?

Let me take that you have got a lot of -- Chris or Christopher?

Chris is fine thanks.

Okay Chris, thanks for the questions. I will try to get all these make sure you tell me if I miss one here. So let’s go to the last one first. On the wrangler I would tell you that nothing to free passing any of our businesses and so certainly the customers could have chosen to do different things I don't know if they had any dialog with any of our competitors but I know we are in a good position to take on the incremental volumes so I would call it more fleet towards the volume side of that to answer that question that we fill online. The as it relates to your CV questions as it relates to the conquest -- moving to supplier it's a combination of all of the above when you look at the I announced three different words one being with the Spartan no wonder I think falls into more it could be often, I am pretty sure that it falls on the new platforms in general. The two that I mentioned down in Brazil one was conquest one was caped at supply moving out into the base which of course is Dana.

Got it. Got it and then one last one as you look kind of the portfolio is there anything that looks interesting from a possible divestiture standpoint or a do you see you think you talked about in the past gaps that could be filled from possible acquisition is that still on the radar for you or just given the CapEx ramp maybe that's on pause for a little while?

Again thanks Chris. Divestitures I don't see anything in there I very much like the way Dana fits together I hope the risk not be redundant anything I said in the past we are not talking about a company that's trying to putting hole bumpers with seats with tiers with whatever. We are very much linear from the engine back to the rear axle and everything in between and we see lot of internal benefits with our customers because of that and of course all of our drive lines stuff goes cost to the four platforms. So I feel very good about that at least for today. Anything is possible in terms of change but nothing -- to do list on that one. As it relates to the inorganic side when you go there I think anybody work themselves, running a company has to see that as one of the levers of opportunity all depending on what does strategically the price point of what you maybe so we keep them on the radar like any good sophisticated company would.

Got it. Thanks again for taking my call.

Thanks Chris.

Your next question comes from the line of Irina Hodakovsky with KeyBanc. Please go ahead.

Good morning Jim, Jonathan, Rod and Craig.

Hi Brad how are you.

Good. Why don’t you talk a little bit about the $1.5 billion in new business first question would simply be how do we can you quantify the impact on the 2018 backlog?

Yes, the impact on 2018 backlog is quite small most of the volumes for these program ramp up in 2019 and beyond so that's where you start to see the impact which is why we referenced the total program volumes rather than the backlog period that we are currently measuring.

Fair enough and then specifically with reference to the new trucks and utility program can you quantify the annual revenue impact?

We haven't provided that but what I can tell you is that the program by sales that make up the majority of what we announced today for that program.

Got it and is that program steel or aluminum by chance?

Yes, so we are not sure we can disclose it at this point.

Fair enough and then I presume it seems like a very large program I presume it's as is the case with most of the programs that rolling on it at this point in time I assume that it's higher margin in your current core related vehicle business is that a fair assessment or is it more likely to be in line with your current core margin structure?

Yes, we have not commented on the margin profile of the business well out into the future.

Fair enough. Thank you very much gentlemen.

Okay. I think that's it for the presentation and question and comments so thank you everyone for joining the call. Just a quick summary sort of to the, at least the window when I came here almost nine months now one of the key things many of us have talked about is about we need to get the top-line headed in the right direction to me that's always a result of the actions the actions or course our customers satisfaction and being the supplier of the choice and certainly I am very proud of the Dana team for putting us in that position to be able and also things we announced today. Certainly staying the path and doing the right thing so I hope that comes through loud and clear. But, we are still very comfortable with where we are at for the year thank you for your attendance today.

Thank you that concludes today's conference call, you may now disconnect.