Craig Barber - Director-Investor Relations Roger J. Wood - President, Chief Executive Officer & Director William G. Quigley - Chief Financial Officer & Executive Vice President Mark Wallace - Executive Vice President and Group President, On-Highway Driveline Technologies.

Brett D. Hoselton - KeyBanc Capital Markets, Inc. Patrick E. Nolan - Deutsche Bank Securities, Inc. Justin Long - Stephens, Inc. Samik X. Chatterjee - JPMorgan Securities LLC David J. Tamberrino - Goldman Sachs & Co. Steven Hempel - Barclays Capital, Inc..

Good morning, and welcome to Dana Holding Corporation's First Quarter 2015 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 the 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. 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 all for joining us today for Dana's first quarter 2015 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 some forward-looking statements about our expectations for Dana's future performance.

Actual results could differ from those suggested by our comments here. Additional information about the factors that could affect future results are summarized in our Safe Harbor statement. These risk factors are also detailed in our public filings, including our Annual Report, Quarterly, and Current Report with the SEC.

Presenting this morning will be Roger Wood, President and Chief Executive Officer; Bill Quigley, Executive Vice President and Chief Financial Officer; and Mark Wallace, Executive Vice President and Group President of On-Highway Driveline Technologies. I will now turn the call over to Roger Wood..

Thank you, Craig, and good morning. The first quarter of this year had its challenges with currency movements and softer markets in South America, but we continue to execute well on our plan. The quarter ended very well for us and we remain on track for the year.

Starting on slide four, in the first quarter of 2015, we recorded sales of $1.6 billion, which represents 4% organic growth compared to the first quarter of last year. Net income for the year was $63 million, an 85% increase versus last year, and diluted adjusted earnings per share were up 56% to $0.50.

This quarter, we improved our adjusted EBITDA and our margin. We ended the quarter at $176 million, about 6% better than last year, and we recorded a margin of 10.9%, a full 110 basis point improvement. Once again this quarter, we continued the execution on our $1.4 billion share repurchase program by returning another $63 million to our shareholders.

This brings the total we have returned to our shareholders to $1.15 billion since we started the program and we had $248 million remaining at the end of March.

I'm very proud to announce that in addition to being named a finalist for a PACE Award this year for our transmission separator plate, we also won the PACE Innovation Partnership Award for our work with Volkswagen's Audi unit on transmission technology. These achievements and our focus on product technology are showing results.

Our first quarter organic growth of 4% is faster than the rate of the global market growth. This quarter, we also highlighted a few new technologies for Class 8 trucks at the Mid-America Trucking Show and we will be showcasing other new technologies and products for different markets throughout the year. Moving to slide five.

As I mentioned, Dana was selected for the 2015 PACE Innovation Partnership Award which is presented to OEMs and shared with suppliers for exemplifying superior collaboration during the commercialization process of an innovation.

We're very proud to have partnered with Audi along with Continental and FTE automotive to develop the valve body separator plate technology for cutting-edge transmissions used in the Audi A4 through A7 sedans as well as the Audi Q5 Crossover.

This award demonstrates our commitment to working with our customers to develop unique solutions that address key market drivers including fuel economy, durability, and performance.

We're really honored to have been recognized by the PACE judges, but being recognized by your customers is certainly one of the greatest compliments any organization can hope to achieve. On slide six, you can see that Dana's Power Technologies facility in Paris, Tennessee recently earned Honda's Excellence in Value award.

Additionally, our Off-Highway facility in Como, Italy was recognized by AGCO as Supplier of the Year for outstanding quality of products. AGCO is one of the world's largest manufacturers of agriculture equipment and we're honored to be recognized as a top supplier to them.

Lastly in South America, John Deere recently recognized us for continued excellence in operational and commercial performance. This is the second year that we've received this honor from John Deere.

So moving to slide seven, the new business backlog that we shared with you last quarter is being driven by the technology and growth strategy that we put in place a few years ago. We continue to gain momentum with many of our leading-edge technologies currently hitting the marketplace.

This month is a very busy time for us as we're in the middle of a jam-packed spring trade show circuit where we're showcasing many of our leading-edge technologies that will drive our growth over the next few years and beyond. Asia and specifically China is a very important market for us.

This week at Auto Shanghai, we're showcasing an all-wheel drive system designed for the Chinese market that enhances overall driving performance, it improves fuel efficiency and reduces noise vibration and harshness.

At INTERMAT 2015 in Paris this week, sorry, we announced the development of a new series of Spicer axles for rough terrain cranes as well as an axle specifically designed for forklift trucks and other medium-size material-handling equipment.

In addition, we introduced an upgraded drivetrain system for wheeled excavators, for teleboom handlers and for frontend loaders. The system allows the vehicle to disengage one of the axles during high speed operation which reduces power loss, fuel consumption, and also tire wear.

This is similar to the Dual Range Disconnect product announcement that we'll speak about in a moment in the commercial vehicle segment and is another great example of using similar advanced technology across multiple end markets and business units.

In North America, we presented a new tire pressure system technology at the Fire Department Instructors Conference engineered to automatically maintain proper inflation of tires on emergency vehicles, the first internal axle system of its kind for severe duty vehicles.

It will be the only solution in the market to offer an inflate system for every tire on fire and rescue vehicles, and it will also feature the unique ability to deflate tires where traction needs require it.

This technology uses patent pending sealing technology from our PTG business integrated with the vehicles' axles to automatically initiate periodic system and pressure checks while driving, adjusting the tires to the optimum pressure.

Dana's tire optimization technology has been proven in the field on thousands of military vehicles worldwide over the past two decades. And we also had an opportunity to participate in the Institute of Scrap Recycling Industries show in Vancouver, Canada where we featured our Spicer industrial driveshafts used for steel recycling.

These driveshafts are a great example of how our technologies have capabilities beyond our traditional end markets. So moving to slide eight, Dana shared its comprehensive lineup of driveline technologies for the commercial vehicle market at this year's Mid-America Trucking Show.

On this slide, you'll see our new Spicer AdvanTEK Dual Range Disconnect technology which we introduced at the show. Designed for tandem axles used in Class 8 linehaul applications, this technology enables engine down speeding and improves powertrain efficiency from 2% to 5% over conventional tandem axles on the market today.

Just to put that into perspective, for every 1% efficiency improvement, the operator of the vehicle can save approximately $730 per year in fuel cost. When you multiply that by the entire fleet, it's easy to see how the technology can provide a significant economic benefit for our customers.

We also introduced a new family of single reduction drive axles for North American commercial vehicles that leverages our industry-leading AdvanTEK technology. Lighter weight than competing axles on the market today, these axles improve efficiency and enhance durability.

We're very excited about this new technology in the commercial vehicle market overall. The North America market continues its growth trend this year. We're taking up our expectations for full year Class 8 production to a range of 310,000 to 330,000 trucks which should help to offset the volume headwinds that we're experiencing in Brazil.

New products such as these are opening doors with new customers for us and will be the key to our long term growth strategy. And finally on slide nine, one other notable event where Dana recently had a presence is the 2015 Easter Jeep Safari, America's largest and best known event for recreational four wheeling.

While the other trade shows I talked about provide us valuable time to interact with OEMs, dealers, fleet owners and operators, the Easter Jeep Safari gave us the opportunity to stay connected with our end users, who are extremely enthusiastic and passionate about our Spicer Driveline products.

It's held in Moab, Utah; the Safari attracts enthusiasts from all over the United States and provided us a great opportunity to showcase our entire aftermarket product range, especially performance products for extreme off-roading and to highlight the Dana brand and some of the technology that we provide to Jeep as well as the full frame market in general.

We're very proud of our longstanding history with Jeep which is one of the longest if not the longest, continuous OEM supplier relationships in the industry. We've supplied Spicer Driveline products for Jeep brand since the early 1940s. As you'll see when Bill walks through the numbers, our Light Vehicle Driveline Group had a great quarter.

The full frame truck market in North America continues to be strong and we're seeing improvement in the light vehicle market in Asia and Europe, which is good for our Power Technologies Group as well. So to wrap up, I'm really pleased that we continue to demonstrate that Dana can operate well in these rocky environments around the world.

We remain on course for profitable growth with a robust new business backlog and a strong balance sheet that gives us the flexibility to grow the business and increase shareholder value. So with that, let me hand it over to Bill and he'll walk you through the financial performance and our outlook for the year. Thank you..

Thanks, Roger and good morning to everyone. Let's first start with a summary of our 2015 first quarter financial performance in comparison to last year. Sales totaled $1.608 billion in the quarter, $80 million lower than the last year reflecting the impact of currency due to the stronger U.S.

dollar as well as the divesture of our Venezuela operations, which we completed in January of this year.

These two factors alone lowered sales in the quarter by about $148 million and adjusting for these items, sales increased in the quarter by $68 million or an increase of 4% compared with last year, driven by improved market demand in certain segments, new business, and pricing and recoveries.

Adjusted EBITDA for the quarter totaled $176 million, $11 million higher than last year and providing a margin of 10.9%, which is a 110 basis point improvement compared with last year. Favorable conversion on increased volume and mix and net favorable performance were key factors driving the strong results in the quarter.

Net income totaled $63 million compared with $34 million a year ago, driven mostly by higher adjusted EBITDA and lower amortization, restructuring, and income tax expenses.

Net income in the quarter also included a net charge of about $4 million for previously reported non-controlling interest income and an offsetting gain from the completion of the sale of our joint venture in Venezuela.

Diluted adjusted EPS increased 56% to $0.50 per share compared with $0.32 a year ago, reflecting higher adjusted net income in the quarter as well as a lower share count related to the continued execution of our share repurchase program.

Free cash flow was a use in the quarter of $82 million, largely a result of seasonal working capital requirements and $46 million higher than last year, principally reflecting the receipt of $40 million of accrued interest in the first quarter of 2014 upon the sale of an outstanding note receivable.

Now let's go into some further detail in discussion of our first quarter results starting with sales and adjusted EBITDA comparisons as highlighted on slide 12. We're going to spend a little time on this slide which provides a sales and EBITDA comparison for the first quarter of 2015 as well as the key drivers of the year-over-year change.

So, let's first review the regional distribution of sales in the first quarter compared with a year ago.

On the upper left of this slide, you'll note a significant change in our regional sales this quarter as our South America results are lower 21% compared with last year, reflecting the divestiture of our Venezuela operations, lower light and commercial vehicle demand, and unfavorable currency.

North America sales increased to 52% of sales as demand was higher for both light and commercial vehicles in the region while Europe as a percent of sales fell slightly to 29%, principally reflecting the result of unfavorable currency of about $87 million.

Adjusting for the effects of currency, we experienced increased demand in the region of about $17 million as all but our Off-Highway group had volume gains. South America represented about 7% of sales compared to 12% last year as sales fell about $92 million.

Currency in the Venezuela divestiture lowered sales by $20 million and $27 million respectively with lower end market demand, primarily in the commercial vehicle front accounting for the remaining $45 million reduction.

Asia-Pacific was up slightly from a year ago driven by increased demand across all of our business segments and a relatively stable currency environment. The chart from the bottom left provides the key drivers of the $80 million sales change in the quarter.

As highlighted, currency was the main driver, lowering sales by $121 million or 7% driven mostly by the strength of the U.S. dollar against many currencies, but most notably the euro and Brazil real, which accounted for about $90 million plus of the change.

The divestiture of our Venezuelan operations reduced sales by $27 million, and on a full-year basis will represent about $110 million in sales reduction in our light vehicle driveline business segment.

Volume and pricing drove sales $68 million higher than last year or about 4% as we saw the expected increased demand in the light and commercial vehicle markets in North America as well as new business rolling on that overcame headwinds in both Brazil and the off-highway equipment markets.

While sales were lower in the quarter by $80 million, adjusted EBITDA increased by $11 million to $176 million in the first quarter, with margins improving 110 basis points to 10.9%. And the chart to the bottom right provides the key drivers of the increase in adjusted EBITDA for the quarter.

So, currency lowered adjusted EBITDA by about $25 million, which does include transaction gains of about $6 million in last year's results which did not recur. The remaining $19 million principally reflects the impact of translation of about 16%, which is in line with the guidance we provided in February.

You can note factors offsetting currency totaled $36 million in the quarter, driving an improvement in both absolute adjusted EBITDA as well as margin performance, and included the year-over-year impact of Venezuela, favorable conversion on higher volume and mix, and positive net performance reflecting continued progress in our net cost efficiencies and productivity around the world.

On the next two slides, I will walk through the sales and segment EBITDA performance for each of our business segments, starting with Light Vehicle Driveline and Commercial Vehicle Driveline on slide 13. Light Vehicle Driveline posted sales of $637 million in the quarter, an increase of $19 million compared with last year.

As highlighted here, currency lowered sales by $17 million with the euro and South America currencies representing the majority of the impact and the divestiture of our Venezuela operations, which accounted for $27 million of the change.

Adjusting for these two items, sales rose by nearly 11% compared with last year with volume and mix, providing an increase of $56 million, reflecting continued strength in North America and some improvement in Europe as well as new business.

Pricing and recoveries further increased sales by about $7 million, largely reflecting inflation recoveries in South America. Segment EBITDA was $34 million this quarter, improving by $4 million compared to last year. The divestiture of Venezuela improved the comparison by about $18 million.

Volume and mix contributed $11 million and increased EBITDA with net performance provided an additional $6 million in increased earnings. Segment EBITDA margin of 10% improved by 510 basis points compared with last year.

And even adjusting for the impact of the Venezuela divestiture, margins still rose by almost 200 basis points in the current quarter. Let's move to Commercial Vehicle Driveline. Sales totaled $433 million in the quarter, $24 million lower than last year.

As highlighted here as well, currency lowered sales by about $30 million with a weaker Brazil real and euro accounting for most of the impact.

On the volume mix front, significantly weaker demand in South America provided a $43 million headwind which was mostly offset by a stronger North American demand environment, and finally pricing and recoveries increased sales by about $7 million in the quarter. Segment EBITDA was $35 million for the quarter, or 8.1% of sales.

Currency reduced EBITDA by $2 million and the decline in South America market demand further impacted earnings by $8 million. Rest of world demand increase is principally a strong environment in North America provided a $5 million offset.

Net performance in the fourth quarter was lower by $4 million compared with last year as we did incur premium costs to meet increased production demand in North America, as we moved to completion of our supply chain improvement initiative in the current quarter.

Now let's review the performance of Off-Highway Driveline and Power Technologies for the quarter. Off-Highway Driveline sales totaled $284 million for the first quarter, $57 million lower than last year with the weaker euro accounting for most all of the headwind.

Volume and mix was down only $12 million compared to last year as new business from the North American construction market muted the impact of global ag equipment demand weakness.

Off-Highway posted segment EBITDA of $39 million, about $3 million less than last year, yet margins improved again by 140 basis points to 13.7%, and as highlighted here, currency was the main driver, lowering earnings by about $10 million compared to last year with strong performance from material savings and cost efficiencies added $90 million to the comparison, tempering the impact of currency and as well as the market impacts, which further drove the improved margin performance.

Moving to Power Technologies, sales for the quarter were $254 million, $18 million lower than a year ago, and similar Off-Highway, currency was a major driver, lowering sales by about $28 million, principally reflecting a weaker euro and Canadian dollar.

Increased light-vehicle demand in both North America and Europe increased sales by $10 million or almost 4% compared with a year ago. Segment EBITDA of $38 million was $6 million lower than year ago reflecting the impact of currency with favorable volume and mix, targeted increased new product development and engineering.

Now let's turn to our cash metrics for the first quarter, which are highlighted on slide 15. Free cash flow was a use of $82 million compared to a use of $36 million last year.

And as highlighted here, the principal difference overall relates to a non-recurring receipt of about $40 million in interest and a note receivable in the first quarter of last year.

Working capital this quarter was a use of about $139 million compared to a use of $79 million a year ago largely reflecting seasonal movements, higher demand of certain end markets, and to support our supply chain initiatives.

Cash interest was lower $19 million in the quarter compared with last year, a result of the unsecured debt refinancing we executed in the fourth quarter and the timing of our semiannual interest payments on our current outstanding unsecured notes.

Going forward this year, our net cash interest payments will be about $12 million in the second quarter, $33 million in the third quarter, and $11 million in the fourth quarter. Cash taxes were $14 million, $13 million lower than a year ago, largely reflecting the timing of our estimated tax payments as well as jurisdictional profitability.

Capital spending was $62 million, slightly lower than last year. But we do expect capital spending to increase over the remaining course of the year principally driven by light vehicle driveline investment to operationalize new business launches in 2015 as well as 2016. At the end of the quarter, cash and marketable securities totaled $1.05 billion.

In addition to free cash flow for the quarter, we executed $63 million in share repurchases as Roger highlighted and completed the redemption of our remaining 2019 unsecured notes for about $55 million. Lastly, currency lowered cash balances by about $53 million in the quarter compared to our year-end 2014 balances.

Outstanding debt was $1.625 billion at the end of the quarter and resulted in net debt position of about $575 million. And finally, total liquidity stood at $1.414 billion at the end of March of this year, including $384 million of availability under our U.S. credit facility.

Now let's move to our full year 2015 financial targets which are highlighted on page 16. As we experienced in the first quarter, we certainly expect currency movements to further impact sales for the remainder of the year, in particular our expectation of further weakening of the euro and the Brazil real compared to our previous expectations.

Our full year 2015 sales guidance now reflects the euro at $1.05/€ compared to our previous expectation of $1.1/€ and the Brazil real at BRL 3/$ compared to our previous expectation of BRL 2.5/$.

The translation impact of these currency changes results in Dana's full year expected sales now to be in the range of $6.3 billion to $ 6.4 billion compared to our prior range of $6.4 billion to $6.5 billion.

As highlighted here, we are tightening our adjusted EBITDA range to $740 million to $750 million and increasing our margin target to about 11.7% for the full year.

Despite the impact of currency translation on our expected full year results, we're able to maintain our adjusted EBITDA and improve our margin as improving market mix and our cost performance tempered the impact of translation.

And while we expect the low demand environment in South America to continue largely impacting our Commercial Vehicle Driveline business, we are seeing an increase in light commercial vehicle demand in North America and Europe that's providing an offset.

Our diluted adjusted EPS guidance of $2.05 to $2.15 per share, capital spending of $300 million to $320 million, and our free cash flow target range of $190 million to $220 million remain unchanged. So this concludes our presentation and we'll now turn the call over to the operator for any questions. Thank you..

[Operator Instruction] Your first question comes from the line of Brett Hoselton with KeyBanc. Please go ahead with your question..

Hi, Brett..

Good morning, gentlemen..

Hi, Brett..

Hi, Brett..

Two quick questions here.

First of all just from a clarification standpoint, slide 13, the volume and mix in the Brazil market, what's the difference between those two?.

Oh, yes. I'm sorry Brett, this is Bill. What we've highlighted on – you're speaking to Commercial Vehicle Driveline obviously, on the bridge, correct..

Yup..

If you look at the volume mix, it's basically rest of world demand, but most notably North America, so we separated the two to highlight what's going on in North America vis-à-vis what we're seeing in the Brazil market currently.

So it was to separate the two and you'll note here about the net impact being a slight margin – or a slight sales undercall if you will of $1 million, but certainly, different regions are contributing to that change in sales, so we wanted to highlight that for the audience..

Okay. And Brazil, so the Brazil market is simply volume mix.

It's not necessarily incorporating currency or anything along those lines?.

Correct, the currency line as highlighted here, Brett, the $30 million, that is all currency impacts with respect to operations around the world for commercial vehicle..

Okay. Perfect. And then with regards to again slide 13, so 10% margins in the Light Vehicle Driveline, 8.1% margins in the Commercial Vehicle Driveline, obviously below your corporate average margins and kind of your longer term margin expectations.

Can you kind of talk about as we look through the next year or two, how do we think about margin progression in each of those two segments? What might that look like? And what might be some of the key drivers of margin improvement in those segments?.

Sure, sure, Brett. It's Bill. I'll take a stab at this and certainly Roger or Mark will jump in as well. Let's talk a bit about Light Vehicle Driveline. I think you can see the performance here in the quarter at 10% margin, a very good performance.

And as we move forward, as we've spoken to many of you in the past, we certainly expect Light Vehicle Driveline to contribute to our overall exit target margins that we've talked about with respect to, I would say, near term performance 2016 and post. So they are certainly on the path there.

The drivers of that margin performance I think continue, one, to be the cost efficiency being driven in the business, but probably most notably is the net business that's coming on line from a sales backlog perspective.

And I think to some extent you're seeing that impact already in our first quarter on the volume mix line which is a contribution margin of about 20% in Light Vehicle Driveline. So certainly we expect Light Vehicle Driveline to contribute to our overall margin move forward in the coming, I'd say, medium term.

On the Commercial Vehicle front, and I'll let Mark talk a bit to this as well, from my perspective though obviously going through from a margin perspective the impact of the supply chain initiative that we embarked upon last year and have just have completed, if you will, with respect to execution.

That certainly has been somewhat of a headwind to us, but by default, it turns into a tailwind and probably most notably, it provides us additional flexibility and competitiveness moving forward. So certainly, we would expect that margin to move up as we move into the intermediate term.

It is certainly dependent on what happens from a demand perspective, but an 8% margin certainly is not our expectation for the business and quite frankly by year-end of 2015 our expectation would still remain at about a 10% margin for the business with opportunity moving forward..

Yeah, and Brett, Mark Wallace.

On the Commercial Vehicle business with our supply chain initiative, again as Bill mentioned, it's about capacity, flexibility, and competitiveness, and if we kind of exclude our premium cost that we've been incurring to fill the pipeline at these elevated market levels, we're definitely seeing a contribution margin improvement already in our North American business.

We definitely would need some help from Brazil. As you can see very low levels, we're back at 10-year ago levels, at 2004 and 2005 levels. So definitely we would like to see some improvement in the revenue in Brazil, that would be definitely be part of our exit rates in 2016.

And back over to the Light Vehicle Driveline, as Bill mentioned, we have new programs that are coming on and as we've committed, they're coming on at better margins than our run rate has shown in the past.

And as we've also articulated, we have new businesses launching later this year and into 2016 that will definitely be supporting our 2016 exit rates. So we're positive on both of these businesses driving our exit rates in 2016..

Thank you, gentlemen..

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

Good morning, everyone..

Hi, Pat..

Good morning, Pat..

Just a couple of questions. I wanted to follow up on the last one about the Commercial Vehicle Driveline business. Mark, how are you thinking about – I mean next year we're probably looking at probably a better market in South America, but there could be some headwinds in North America.

I know today the decrementals in South America are worse than the incrementals you're seeing in North America. So in North America, you're getting even before these startup costs, it's seems like it's close to a 10% incremental and Brazil, it seems like it's almost twice that on the downside.

When it flip-flops and Brazil starts going up, are you going to get the same type of incrementals and Brazil are going to be twice that of the decrement you'll see in North America or – and that's why you can offset the North America headwinds? Am I thinking about it right in that context?.

Yes. I think on the Brazil market, I mean clearly with the volumes at the levels they're at, I mean we've gotten closer and closer and closer to our breakeven point. Although, we're still profitable in Brazil, it's definitely – the decrementals are flowing through at a higher rate than we would typically see at a normal market.

So I think as volumes get back to Brazil at a closer rate, it will be back to the normal incremental levels.

However, in North America, even if we see some volumes subsiding, we do expect margin improvement in our North American business due to our supply chain initiatives as we mentioned, so we should see overall margin improvement in 2016 moving forward..

Got it. And if we could switch gears a little bit to the Off-Highway business, it looks like you're actually tracking ahead of your plan for margins for 2015 in that business. I think you're guiding to around 13%.

You were at 13.% in Q1, but my question is, you're doing really strong margins in that Off- Highway business, arguably at the trough of the cycle.

How do you think about what the long term potential of that business is as margins have improved? I mean can this be a mid double-digit EBITDA margin business or even higher going forward?.

Yeah. So this is Roger.

The Off-Highway group has done a really nice job even in light of the very, very difficult market conditions around the world in that segment, but as you recall maybe three or four years ago, we separated that group out to be run independently with a separate management team just like the rest of the business units, so that they could focus their energies and effort on just that market and just that business, taking advantage of the global strength synergies that we have across the four different business units that we have, but thus facing that market for the customers and so forth.

By doing that, they were able to very quickly over the last two to three years make some tremendous efficiency gains in what they're doing, because it wasn't kind of embedded in another business unit, if you will. It was out there on their own and they've done a really nice job with that.

In addition to that, by focusing on the customers and utilizing the technologies that we have throughout the organization across the four business units, have been able to apply specific technology to specific applications and those are now coming on board in light of the trough of the market.

So we're not just riding the trough of the market, we're also being able to penetrate a little bit some new customers with new technology and just exactly what Mark had just mentioned about CV and LV, the new technologies coming on board with expanded margins from the older products that we were shipping.

So, the combination of all that is allowing that group to do very well at the low part of the trough in the market.

And I have said many, many times before, one of the things that we are really excited about with that business is because we have been able to get the business in the position that's it in, similar to the other businesses, when this market turns up, we can take advantage of the increased volumes if you will with the efficiencies that we now have in place.

In terms of the last part of your questions of where this could ultimately go, ultimately, we think that there is room for improvement in the business but as we've mentioned for the overall aggregate of Dana.

When we get into the 13% to 14% range that doesn't mean that we couldn't make those margins go higher because we certainly could, but our focus is really going to be transitioned over to optimizing our growth potential of the business with great margins in the business as opposed to continuing to narrow the focus on more and more and more and more profitability with the business that we have.

We think that the great way to produce the best shareholder value, and this was few years ago that we come up with this was to get the entire business in the profitability profile that we wanted it in and then focus on the growth potential that we have in the business.

So we have products above that range, certainly, but that range is probably a great range for this business to start optimizing the growth potential, and we are really excited about that not only in our highway but the rest of our businesses as well..

Thanks very much, I will get back in the queue..

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

Thanks, good morning..

Hi, Justin..

Hey, so first question I wanted to ask, the divestiture in Venezuela was about an $18 million benefit to adjusted EBITDA in the quarter, but I was curious if you had any update to the impact that divestiture would have for the full year? I think last quarter you talked about it being about breakeven in terms of the EBITDA impact in 2015, has that view changed at all?.

Justin, it's Bill. Not at all right now, obviously our sales last were about $110 million for the business and all of that obviously included our Light Vehicle Driveline business and to your point, we ended up in a breakeven position in 2014 on the business.

What you'll see obviously as quarters roll on here during the course of 2015, we've got an $18 million charge, if you will, a loss if you will on an EBITDA basis a year ago which certainly we avoided given the elegant solution that we executed for the business.

About a year ago then we started recoveries, right, and mechanisms that we were working through, so we're going to get a little volatility in kind of year-over-year basis with respect to kind of the ups and downs of Venezuela from a quarterly perspective.

But from your comment, you're exactly right, annual basis $110 million sales reduction for Light Vehicle Driveline year-over-year with no impact from an EBITDA perspective..

Okay, great. That's helpful.

And secondly, as you think about the multiyear backlog you discussed at the beginning of the year, do you see any potential for the timing of that revenue changing at all, whether it's you know the market dynamics you're seeing today, or product launch changes? Just curious if there are any major swing factors on the horizon or if that cadence of revenue over the next couple of years is pretty firm at this point?.

Justin, it's Mark Wallace. Actually it's pretty firm at this point. We're actually seeing our passenger – our Light Vehicle Driveline business continues to improve in their backlog but I don't see anything else in the rest of the business units would have any dramatic impact to it.

So we're still very optimistic and supportive of what we put out in the backlog and hopefully we have more upside..

And Justin, just, it's Bill as well. Just probably maybe a little finer touch on it as we progress as well. You know certainly distribution of the business and we're talking about – everyone is talking about FX, right.

Certainly there will be an impact of FX on the backlog but I think to Mark's point, what we are seeing is obviously opportunities that we're executing upon even in the current environment in fact probably being offsets, but we will give an update to the market obviously later part of this year, early next year with respect to an updated backlog, but to-date very firm..

Great. That's helpful update. I appreciate the time..

Thank you..

Your next question comes from the line of Ryan Brinkman with JPMorgan. Please go ahead with your question..

Hi. This is Samik on behalf of Ryan. The first question I had was just to clarify on the revenue guidance. You did take down your revenue guidance by $100 million.

I was wondering is that entirely just due to currency or are there other moving parts in terms of the underlying market, or for example backlog, are you seeing any push out on that? Is there any other components of that that we need to keep in mind here just outside currency?.

Yeah I think if you – excellent question. You know that $100 million neck down if you will on the top line is almost 100% obviously currency and in fact probably a touch higher on the currency level.

We are seeing offsets and as part of our margin maintenance, if you will, with respect – or actually improvement in our adjusted EBITDA maintenance, opportunities to the upside on end market demand, I think as reflected in our first quarter results as well as what we're seeing a bit on the new business front and the actual, I would say the actual realization of sales versus what our expectation was at the beginning of the year.

So you are exactly right.

I think that headwind from a currency perspective, about $140 million kind of being offset by about $40 million net that we see today with respect to upside on demand as well as new business being launched during the course of the year as well as new business that has already been launched late last year that's operating at a higher level than our expectation.

So, you're right, it's a little mix of both, but largely FX..

So, just to follow up on that, obviously margins, you are raising your margin guidance here and you had mentioned your (40:05) coming in at better margin rate but is there any raw material benefit here that you're looking at? Maybe remind us if there's any outlook for – that you've given for what benefit from raw materials do you get during – in 2015 as well?.

Yeah, it's Mark Wallace. Just on raw material, basically especially in our Light Vehicle and Commercial Vehicle Driveline business, most of those are pass-through issues with our customers. So, mainly whatever favorability we pick up in the near term will be passed back to the customer and vice versa.

So, right now there's really no significant impact for materials in 2015..

Okay, great.

And just my last question here, you mentioned that utilization levels in your North American facilities are running quite high and maybe there's some premium cost that you are incurring but just thinking about probably what one of your competitors mentioned here that they have sort of on the Class 8 side that capacity is more at the 320,000 units level.

So what is the sort of capacity you have currently or what level, up to which level will you be able to comfortably support and are you open to putting in more capacity if required if the market has more upside here?.

Sure, good question. Again it's Mark Wallace; actually the rates recently have been running around 340,000 units, so, definitely a strong market. We've actually been putting in capacity at our supply network.

Our assembly plants, we have the capacity and obviously are supporting the current run rates today and we do expect in the future to be able to support these higher rates that we're seeing today, so we're confident as we move forward into 2015 and beyond that we can support rates at this current run rate we're at today..

Okay. Great.. Thanks for taking our questions. Thank you..

Your next question comes from the line of David Tamberrino with Goldman Sachs. Please go ahead with your question. David, please make sure that you line is not on mute..

Yes, thanks, it actually was on mute..

Hi, David..

Hi, David..

Yeah, rookie mistakes over here.

Piggybacking off of that last question, the net performance drag that you saw in the first quarter on Commercial Vehicle Driveline, is that expected to continue into the second quarter of this year or is that pretty much – and I think you said that it was completed this quarter, but should we see the benefit start to hit the P&L now or is that more second half?.

Yeah, Dave, it's Mark Wallace. A couple of things, one, you've already – seeing sequential improvement from Q4-to-Q1 related to premium.

We'll also experience some premium costs in Q2, but it will be actually on the declining basis, so we should see margin progression throughout the rest of the year and as already mentioned, we should approximate our 10% EBITDA target we had for full year..

Okay, that's helpful. And then I guess we were a little bit caught off guard on the Light Vehicle Driveline and the Venezuela divestiture.

I mean you guys kind have kind of spoken to exactly what you think there, but for the rest of the business, I mean when we strip it out year-over-year and take a look at it, is it fully just the content growth from incremental new business? Is there some additional benefit from mix shift, from smaller cars, medium cars and the light truck that's helping you kind of at least outperform what we were expecting?.

Yeah, Dave, it's Mark Wallace again. When you look at our Light Vehicle Driveline business, we've obviously had strong demand with Jeep and the Ford Super Duty. We had very strong demand with Jaguar Land Rover in England as well as we see a recovering market in Thailand.

But on top of that, as mentioned before, we're seeing the expansion on the Colorado/Canyon hitting us full year at better than we expected. So kind of a good news across the board, we're seeing definitely some improvement in the current base of business, but as well as our new business coming on at the better margin rates..

Understood. That all makes sense. And just lastly, the U.S.

GAAP tax rate, I think that was moved up from 24% to 31%, anything there we should be aware of?.

Yeah, we touched that up a bit. This is Bill. And you're exactly right, we touched it up to about 31%. And what you'll note here is we're seeing kind some incremental tax expense largely around our U.S. operations.

You'll recall in the fourth quarter of last year, we released or had a benefit in the income statement of about $179 million of our deferred tax valuation allowance. And what we're seeing is under the accounting rules, we now have to book a tax expense at the – basically the U.S.

rate even though we haven't completed the planning action that we undertook to realize the benefit a year ago. So basically, what you're seeing is kind of neck up on that tax expense.

And as we kind of proceed the rest of the year, as we look also at our valuation allowance and our deferred tax asset positions, that probably will be a fourth quarter discussion item as well. There is no cash impact to this, obviously, with respect the utilization of the NOLs.

It's just more of the timing of expense recognition via the accounting rules versus what we had expected when we put our guidance out at 23%..

Understood. And that's all from me. Thanks again and congrats on the quarter..

Thank you..

Thank you..

Your final question comes from the line of Brian Johnson with Barclays. Please go ahead with your question..

Hi, good morning, team. It's actually Steven Hempel on for Brian Johnson..

Oh, okay..

Just wanted to touch base on a couple of things that are inter-related here. Related to new business launching in 2015, I believe in the Q here, you lay out that some of the offsets from higher market volumes and weaker currencies are being offset by contributions from new business programs launching in 2015.

I believe that's likely related to the GMs new mid-size truck program, but before, you noted that the net backlog is actually firm at this point.

So is basically, the net backlog coming in from that program higher than expected, but being offset by currencies, euro, and other programs that might – the net backlog might be lower or I guess if you could just help us clarify what you actually meant by higher contribution from new business programs?.

Yeah. Let me take is for first shot, Mark, and you can follow up on this. If you think about the backlog and we had the progression and how it was going to increment 2015 forward, there was an incremental increase of about $140 million expected for 2015 as we progress through the year. So I think it's twofold actually.

One was that was based on an assumption of production and we use one particular platform being the GM platform that we launched late last year. It had an assumption with respect to demand.

So twofold, one is we're certainly meeting that assumption if not exceeding it, but I think the more important piece of the puzzle as well is, is that we're seeing the margins that we expected on that business and obviously from a volume perspective, we're seeing an uptick in our contribution margin.

So you're exactly right, it's kind of the best of the best if you will. It's a great program for us, hopefully a great program for GM as we're seeing.

Reasonable and good returns on that business in excess of our base business and you're right, we're seeing some upside in the production environment as we head through not only the first quarter, but the rest of the year..

Okay.

And is there any offsets that are offsetting that additional, I would assume that should be grouped in that backlog then or is there a potential upside to that net backlog for 2015?.

I would suggest there was really no offsets to that other than outside of FX, right, but from a pure volume perspective, probably in the current year, might be some positive there..

Okay, and then just kind of related question here. I looked at volume mix for LVD was roughly 20% on an incremental margin basis. I assume that's largely related to the new business that's rolling in.

Should we expect similar type of kind of incremental margins here for that business moving forward through kind of 2016 and 2017? I believe historically you've kind of indicated 15%-ish type incremental margins, so just trying to gauge what we should be expecting as new business starts to ramp?.

Steven, just on the margin for Q1, definitely the new business is driving the higher major portion of the margin, but also we continued to work on our cost improvement initiatives inside. So we do expect that the LVD business will continue to have stronger margins than historically and will be again part of our margin expansion into 2016 as well..

Okay, great, and then just one quick follow-up housekeeping, are you still expecting pricing recoveries to be a $75 million to $100 million tailwind in 2015?.

Steven, this is Bill. No, not at all, because much of that if you think about it, was what we were experiencing largely in South America, largely around Venezuela.

What the expectation was obviously as we discussed in early January pre the disposition was, that was going to be the same situation, certainly with the solution that we came up with Venezuela, that's going to neck down significantly.

I would suggest it's going to be more of a normal course inflation recoveries that we have around the world with respect to certain countries that we operate in, that are kind of well-worn paths with the customers. I think the exception a year ago and really two years ago is largely around Venezuela..

Right, great, thanks for taking my question..

Okay, this is Roger, I just want to thank everyone for joining the call today and we'll see you next time. Thank you very much..

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