Craig Barber - IR James Kamsickas - President, CEO & Director Jonathan Collins - CFO & EVP.

Emmanuel Rosner - Guggenheim Securities Joseph Spak - RBC Capital Markets Brian Johnson - Barclays PLC Brian Sponheimer - G. Research Justin Long - Stephens Inc..

Good morning, and welcome to Dana Incorporated's Fourth Quarter and Full Year 2017 Financial Webcast and Conference Call. My name is Dennis, 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. [Operator Instructions].

At this time, I would like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Strategic Planning, Craig Barber. Please go ahead, Mr. Barber..

Thanks, Dennis, and thank you to everyone on the call for joining us today for Dana's Fourth Quarter and Full Year 2017 Earnings Call. Copies of our press release and presentation have been posted to our investor website. As always, today's call is being recorded, and the supporting materials are the property of Dana Incorporated.

They may not be recorded, copied or rebroadcast without our written consent. [Operator Instructions]. 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. Presenting this morning are Jim Kamsickas, President and Chief Executive Officer; and Jonathan Collins, Executive Vice President and Chief Financial Officer.

Jim, I'll turn the call over to you..

Thank you, Craig. Good morning, everyone, and thank you for joining us. Last month, we announced our preliminary results for 2017 and our outlook for 2018. So today, I'd like to take a few minutes to briefly review what was an excellent year for Dana.

Jonathan will take you through the numbers in detail, but I think it's important to highlight just a few of the key accomplishments of the Dana team. Dana saw a 24% increase in sales, which is $1.4 billion higher than 2016.

It was an excellent year all around as market demand was higher and we had the benefit of new business and our recent acquisitions. But perhaps, the most important facilitator of our success has been the execution of our strategy. Our enterprise strategy is the blueprint for success.

Over the last 2 years, we have refreshed and relaunched our 2 largest customer programs, and last year, we continued to commercialize our backlog at a rapid pace.

In addition, we expanded our global footprint by greenfielding 4 key production facilities in strategic locations, continue to win new business in all of our segments to fuel our future growth, completed 2 strategic acquisitions and launched our Spicer Electrified brand for electric drivetrain products.

The Dana team accomplished all this while, at the same time, successfully handling dramatic short lead time surges in demand from the commercial vehicle, mining and construction segments. A quick look at our results show that we met or exceeded our operational milestones. We finished the year where we expected, earning $835 million in adjusted EBITDA.

Notably, every year since 2015, we have grown our earnings. Profit in 2017 was $175 million higher or 27% over the prior year as we we're able to capitalize on the rapid increasing demand and convert on our new business wins. Our margin increased 30 basis points above last year, despite absorbing slightly higher costs as we launched our new products.

This was investment well-spent as we set production on key long-lived customer programs. Translating this success to earnings-per-share, we achieved 30% higher EPS versus last year.

We have achieved steady EPS growth over the past 3 years due to improved earnings and our commitment to maintaining value for our shareholders by aggressively managing our capital structure. We remain committed to this priority.

As we mentioned last month, we have put in place a $100 million share repurchase program, and we announced this year that we will be increasing our quarterly dividend by 67%, a sign of confidence in our ability to deliver results.

Underlining our financial success has been the focus on our customers, which is reflected in the Supplier Awards we earned last year for our commitment to quality, on-time delivery and sustainability.

Ford, Volvo, FCA, MAN, Caterpillar and Manitou represent the dozens of customers, all of whom recognize Dana in 2017 for the significant contributions we made through their businesses. This trust has led to Dana playing the key role in major upcoming program launches and new business wins.

This includes delivering advanced technologies for the Jeep Wrangler, Ford Ranger, new medium-duty Chevy Silverado, Kalmar lift trucks, [indiscernible], boom handlers and numerous other new and revitalized vehicle platforms. In total, our new business backlog for 2018 to 2020 has risen to $800 million, a 7% improvement over a 3-year backlog.

This is the third year in a row that we've added new business to our backlog. Organic growth is the cornerstone of our long-range target as we continue to outpace the growth of our end markets. Our focus on customer centricity is a core driver of our financial performance as is our technology, services and products.

In 2017, we crossed the major milestone with over 10,000 patents issued to Dana. Last year alone, we increased our patent activity by 20%, including more than 150 patents related to vehicle electrification. And finally, we have successfully integrated our recent acquisitions, including USM and Brevini.

These 2 businesses have added $500 million in new sales and dozens of new customers. In addition, they have opened new markets for our products while bringing new technology into Dana for use across all of our end markets. So that's it for 2017, an excellent year for Dana, and we are not done. As we look forward to 2018, we see more success ahead.

We have new business launching right now, with the new Jeep Wrangler; and later this year, with the Ford Ranger; our disconnecting all-wheel drive global program with Ford; as well as numerous other exciting vehicles.

Our end markets remain strong for light trucks, and we expect high demand in commercial vehicles in both North America and Europe, as well as improving demand for construction and mining equipment. As we announced this morning, we have affirmed the 2018 guidance we gave last month as well as the improved 2019 outlook.

Thank you, and I will turn the call over to Jonathan for a more detailed review of the numbers..

Thank you, Jim. Slide 6 is an overview of the 2017 fourth quarter and full year financial results. Our numbers were in line with our guidance as well as the preliminary results we disclosed last month. For the fourth quarter, sales of $1.84 billion were up $390 million versus the same period in 2016, representing growth of 27%.

On a full year basis, sales are up nearly $1.4 billion compared to 2016, driven by strong double-digit organic growth from the conversion of our backlog and higher end market demand as well as the impact of acquisitions. Adjusted EBITDA was $197 million for the fourth quarter, a $31 million increase from the prior year.

For the full year, adjusted EBITDA was up $175 million over the prior year to $835 million or 11.6% of sales. This is a 30 basis-point improvement over 2016, primarily driven by conversion on the higher volume. Net income for the fourth quarter was a loss of $104 million.

The fourth quarter of 2017 included $186 million onetime noncash charge due to the remeasurement of our net deferred tax assets based on the lower corporate tax rate included in the recent U.S. tax reform.

Net income in the fourth quarter of 2016 included $485 million, a $426 million net benefit from the release of income tax valuation allowances and divestiture-related charges. Excluding these onetime impacts, fourth quarter net income was $82 million in 2017 and $59 million in 2016, a $26 million year-over-year improvement.

For the full year, net income was $111 million compared to $640 million for the prior year. Excluding the fourth quarter onetime items from both periods, net income was $297 million in 2017 and $214 million in 2016, an $83 million improvement.

The increased earnings this past year was driven by higher adjusted EBITDA and lower restructuring and interest expense, partially offset by higher acquisition-related expenses and onetime gains in 2016 from a divested business.

Diluted adjusted EPS, which excludes the impact of nonrecurring items, was $0.62 per share in the fourth quarter, an improvement of $0.03 per share compared with the prior year. And for the full year, EPS was up $0.58, primarily reflecting the higher earnings as noted previously.

We ended the year with free cash flow of $161 million, $99 million higher than 2016, driven by growth in adjusted EBITDA and improved working capital efficiency, which more than offset higher capital spending and onetime expenditures for acquisition-related expenses and restructuring.

Please turn with me to Slide 7 for further details regarding the fourth quarter sales and profit growth. Fourth quarter sales increased by $390 million compared to the same period in the prior year, and adjusted EBITDA was higher by $31 million. The year-over-year growth is attributable to 4 key factors.

First, organic growth added $204 million in sales as demand in all 3 of our key end markets remain strong and augmented our backlog conversion. The organic growth delivered an incremental $20 million of profit.

The conversion on this growth was muted by a higher incentive compensation provision and launch costs principally related to the new Jeep Wrangler, which has just gone into production. Second, the business acquisitions made earlier in 2017, Brevini and USM, contributed $144 million in sales and $13 million in adjusted EBITDA.

Third, foreign currency was a tailwind in the quarter, aiding sales by $42 million and adjusted EBITDA by $6 million due to translation of foreign subsidiary results at currency rates that strengthened against the U.S. dollar.

Finally, in the fourth quarter, similar to the third quarter, the year-over-year adjusted EBITDA comparison was negatively impacted by an $8 million gain recorded in 2016 in our Dana company subsidiary that was divested at the end of 2016. Please turn with me now to Slide 8 for a review of the full year 2017 sales and profit growth.

2017 full year sales increased by $1.4 billion compared to 2016. Adjusted EBITDA was higher by $175 million, and margins expanded by 30 basis points. As with the fourth quarter, the year-over-year growth is attributable to the same 4 factors. First, organic growth added $382 million in sales. It's illustrated on the chart in the constituent parts.

You may recall the expected contribution from our $750 million sales backlog that we announced last year was $175 million. However, due to stronger end market demand, it ended up increasing to $226 million. The balance of the organic sales growth was over $600 million of higher demand in all 3 of our key end markets.

The organic growth delivered $143 million of profit. As with the fourth quarter, the conversion on this growth was slightly muted by higher launch costs as well as higher incentive compensation expense. Second, the business acquisitions made earlier in 2017 added nearly $0.5 billion of sales and more than $50 million of adjusted EBITDA.

The conversion on these businesses last year, was largely pre-synergy, and we expect to see margins expand in the acquired businesses in 2018 as the bulk of the synergies are realized.

Third, foreign currency was a modest tailwind, adding $54 million to sales on a translational basis, but with a slight $5 million headwind to adjusted EBITDA due to some transactional losses earlier in the year.

Finally, the adjusted EBITDA comparison was negatively impacted by $15 million of gains recorded in 2016 and are now divested Dana company subsidiary. Please turn now to Slide 9 for an overview of how the adjusted EBITDA will convert to free cash -- or converted to free cash flow.

Higher profit more than offset increased capital investments, yielding nearly a $100 million increase to free cash flow, improving from 1% of sales in 2016 to over 2% last year.

Incremental adjusted EBITDA of $175 million in 2017, combined with a $20 million improvement in working capital efficiency and slightly lower cash interest due to our debt refinancing actions, were partially offset by 2 factors.

First, onetime costs were $33 million higher than the prior year, about 1/3 of which was due to higher restructuring outflows and the remainder for transactional costs related to our recent acquisitions. Second, capital expenditures were $71 million higher than the prior year as we made investments to support our growth.

Doubling free cash flow as a percentage of sales compared to the prior year at peak capital spending is an important step forward as we progress towards our 2019 goal of delivering free cash flow at 5% of sales. Please turn with me now to Slide 10 for our financial outlook for this year. Today, we're affirming the 2018 guidance we provided last month.

We expect sales to be approximately $7.6 billion, which is a $400 million or 6% increase over last year.

We expect adjusted EBITDA to grow by about $100 million or 12% over last year, and those expectations translate to an implied margin of 12.3%, which is an expansion of 70 basis points over last year, leading to a cumulative increase of 150 basis points over 3 years.

This profit growth, combined with lower capital spending requirements, will drive free cash flow to improve by about 130 basis points to 3.5% in 2018. We expect diluted adjusted EPS to grow by about $0.23 per share to approximately $2.75, including a $0.10 benefit associated with the lower corporate tax rate included in the recently enacted U.S.

tax reform. This guidance reflects significant improvements in all of our key financial metrics and positions us to exceed our original 2019 financial targets, which I'll touch on in a moment. Please turn with me now to Page 11 for a closer look at the drivers of the expected change in our sales and profits versus last year.

For 2018, we expect sales to grow by $400 million compared with 2017 and profit to increase by $100 million, which will increase implied margins by 70 basis points. There are three key factors that will drive the improvement.

First, organic growth is expected to be about 6% or $400 million, driven primarily by $300 million from conversion of our new business backlog, including major programs, such as the Jeep Wrangler. The backlog contribution this year is about 10% higher than we projected in our previous 3-year backlog due to new wins and higher demand.

We're also expecting about $100 million in improved demand, principally in commercial vehicles in the Americas and off-highway equipment globally.

We're expecting a more normalized conversion of approximately 20% on the higher sales as we move beyond the period of elevated launch cost related to our new programs, adding approximately $80 million in adjusted EBITDA.

Second, inorganic growth from the acquisitions we made during the first quarter last year will increase sales as we'll have year benefit of the Brevini and USM businesses this year. An expected investor divestiture of an operation in Brazil will provide a partial offset, leading to higher net sales of about $25 million.

Adjusted EBITDA is expected to improve by $20 million, primarily representing the benefit of the planned synergies. Third, we expect the translation headwind of sales of about $25 million from other foreign currencies in spite of the fact that we're forecasting the euro at $1.15, which is essentially flat with last year's average rate.

Please turn with me to Slide 12 to see how we expect this year's profit will convert to free cash flow. We expect free cash flow in 2018 to increase by more than $100 million compared to last year, which represents 130 basis point improvement when expressed as a percentage of sales.

We'll benefit from the $100 million increase in adjusted EBITDA and lower onetime cost us our acquisition and integration plan is completed. Cash taxes will be higher in 2018 by approximately $50 million, due in part to the timing of tax payments on an entity restructuring outside of the U.S.

This restructuring, while generating a onetime cash outflow, will allow for lower cash taxes moving forward. We expect working capital to be a higher use in 2018, primarily due to the timing of new business launches and higher incentive compensation payments.

Finally, capital spending will be subsiding from last year's peak level as we've completed a large percentage of our investments to support our new business backlog. The combination of these factors will allow us to efficiently convert more than 100% of our profit growth into free cash flow.

Slide 13 provides an overview of our revised financial targets for next year. Bolstered by strong market fundamentals and the progress we've made in winning and commercializing new business, we're affirming the increase targets we shared last month when we projected significant increases in all financial metrics.

We expect sales to be about $7.9 billion, representing a $700 million increase from the guidance that we provided for 2019 early last year, and 4% growth over this year's target. We expect profit to top $1 billion, achieving our 12.8% margin target.

That represents about a $90 million improvement over what we had previously targeted and the 7% growth over 2018's profit target and a cumulative 4-year margin expansion of 200 basis points.

We remain convicted that our free cash flow will achieve a level of 5% of sales by the end of next year as more of our major launches are behind us and we transition to a more normalized level of capital spending as well as the contribution of higher incremental profit.

Lastly, we expect to be able to achieve $3 of diluted adjusted EPS next year, which is about a $0.40 increase compared to what we had highlighted over a year ago and $0.25 per share better than this year.

Slide 14 provides a perspective of where we've been over the last couple of years, what we plan to accomplish this year and how this positions us for next year. In 2016, we laid the groundwork for our future success by introducing our enterprise strategy and acquired two businesses, Magnum Gaskets and the forging operations from SIFCO in Brazil.

Last year, we completed and integrated the Brevini and USM acquisitions while profitably managing over $1 billion of revenue expansion and secured as sales backlog of $750 million.

This year, we plan to fully realize the synergies from our recent acquisitions, and our sales growth will continue to be driven by conversion of our new business backlog, with several major launches this year as well as improving end market demand.

We're now poised to deliver 70 basis points of margin expansion and efficiently convert that higher profit into cash flow at approximately 3.5% of sales.

As we look forward to next year, we expect to exceed our original long-term financial targets as our markets remain strong, our backlog is converted and we capitalize on the growth by delivering another 50 basis points of margin expansion and 150 basis points of free cash flow growth.

The entire Dana team is very excited about what this trajectory implies for all of our stakeholders. Thank you for listening in today, and I'd now like to turn the call back over to Dennis to take your questions..

[Operator Instructions]. And your first question is from the line of Emmanuel Rosner with Guggenheim..

So first question, really on the volume conversion. So as you highlighted, there were some lower-than-usual incrementals in the fourth quarter, partly driven by launch costs.

Can you maybe quantify how much of a headwind launch costs were in the fourth quarter and then for the -- in 2017 overall, and what you expect that to be in 2018?.

Sure. The end of the fourth quarter, we indicated that launch costs in Q4, we expected to be about $10 million. They came in a little bit higher. They were closer to $15 million, which was slightly higher than the third quarter.

We do expect that we'll have some launch costs in the first quarter, but it'll begin to taper, primarily as the Wrangler launch moves past job 1 to a more steady state. And then relative to the balance of the fourth quarter conversion, the other thing we mentioned is that we had some incremental volume.

You'll note that we were at the higher end of our guidance range. And we indicated last month that part of that was due to the fact that we had to convert some of that incremental volume on premium time in the fourth quarter, which also put a little bit of pressure on fourth quarter margins.

But both of those items we see as episodic, and we'll be able to move past as we step into the first and second quarter of this year..

And so on the full year basis, 2018 versus 2017, how much of a tailwind is -- are you getting from launch costs?.

Yes. We haven't provided the number exactly, but we would expect there to be a pretty significant improvement as we go from 2017 to 2018..

Okay, that's helpful. And then the second question is really around the revenue guidance for 2018. So you're making $100 million of benefit from markets in volume growth. That seems a little low to us in light of continued strength in light trucks and off-highway and commercial.

Can you please give a little bit more color on the puts and takes within that guidance? And in particular, on Slide 17, I was a little surprised to see that your assumption for North American light trucks to be down in 2018 versus 2017 and maybe just talk about what goes into that $100 million revenue benefit from the market..

Sure. So I'll just touch on it based on each of our end markets. So we do expect the commercial vehicle market to be quite strong. There are some people that are calling from North America to be well over $300 million. We've called the market at $300 million.

I think the difference there is we have seen very strong build rate in the fourth quarter, moving to the first quarter. And our visibility into the order book is very good. I think we have a little bit more of a conservative perspective on the second half of the year.

So to the extent that the build rate remains strong throughout the entire year, we could see some opportunity. But based on our past experience, we're a little bit cautious on the second half of the year. But that's certainly a meaningful driver of the $100 million. The second market that's a meaningful input is off-highway.

We do see meaningful growth across the market in off-highway, so we expect that to be a -- that market to remain strong and to be a significant contributor.

I think as far as the global light truck market, we've probably been a little more cautious than most on the North American truck market, which has a small impact on our top line as we look at it.

The other factor that we noted last month as well too is that as we move into the second year of producing the Ford Super Duty program, we think it's possible that the rich -- that the mix on those vehicles in the second year, even though volumes remain strong, could be a little bit softer.

In our experience, you typically, in the inaugural year, have a very rich content mix, so that's another thing that we've provisioned for in our guidance for 2018..

Your next question is from the line of Joe Spak with RBC Capital Markets..

Just one quick one, a clarification.

The $15 million in launch costs, was that for the entire company? Or is that just related to light vehicle and the Wrangler launch?.

Yes. It was primarily on the light vehicle segment, which is what we had called out previously. So we had indicated light vehicle, which is the vast majority, was going to be about $10 million, ended up coming in at about $15 million..

Okay.

And just going to the slides and the walks by segment, the inorganic number in Power Technologies, what exactly is in that number?.

Yes. We had divested the Nippon Reinz JV last year, so we had announced that. And it was not a meaningful impact on a full year basis. However, there was a few million dollars of profit in the fourth quarter that didn't recur this year. So that was the driver, and it put a little bit of pressure on Power Tech margins..

Okay. And then last question for me, and I guess following up on Emmanuel. I understand you took sort of a more conservative approach to Class 8s and -- or just commercial trucks, and that's probably prudent.

But if it were to sort of still trend, keep at current levels and trend higher in the back half of the year, and you have like Class 8 equivalents, probably something north of $320 million, would there need be incremental costs that come in? Or your capacitizing would be able to handle that?.

Joe, this is Jim. Thanks for the question, and good morning. We've been running at a pretty high rate, maybe close to that for, I don't know, 3 months now, ish, plus, minus. So I don't see any significant major cost to it. I'm quite proud of the team.

As you know, it's really difficult for any supplier, not just Dana, to go through some pretty significant short-term surge of volume. And I think we're in really good shape if that were to happen..

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

I want to continue on that theme, and I have a couple more strategic questions. So can you give us the margin, or at least color on the margin outlook by segment and the incrementals by segment? If I back out of those $15 million launch costs from LVD or most of them, I do get to the 20% incremental there.

You had mid-teens on commercial -- mid- to low-teens on commercial and off-highway. Your major competitor there also had mid-teens off of big volume increases.

So how are you kind of thinking about incrementals and hence, margin direction in each of the segments?.

Yes, Brian, this is Jonathan. Broadly speaking, we think that light vehicle is approaching the 20% range. It's probably a little bit higher than what we've indicated in the past, but we have a lot of confidence in the strength of the programs that are coming online and the demand for those, the ability to meet demand.

Commercial vehicle is typically going to convert at a little bit less than that. And I think as we continue, if you look at just the off-highway business, excluding Brevini and not taking into account the benefit of the synergy recognition, we think off-highway is probably a bit better than that.

So across the markets on blend, you get to about 20% with the light vehicle anchoring in the middle, commercial vehicle a little bit lower and the off-highway a bit higher..

Okay. Second question.

Is your customer on track in Toledo for the launch of the JLR? Are the volumes up? Is there any, what, another automaker call production hell going on? Or is it pretty smooth, and the expectations?.

Brian, this is Jim. Good morning. For our perspective, good. I mean, they're very much on a good trajectory. And since we're on the topic, things are going very well for us. It's a very high complexity. You may not think so thinking Wrangler, but it actually is a very high-complexity product, a highly engineered product.

Things are going well as we were launching, not just at our new facility in Toledo, but across 15 plants.

The other quick aside or -- I'd also mentioned to some of the other conversations we were just having with the group, I'd like to remind everybody that we have the Ranger and we have the Bronco going, coming up and some of them going into the same facility.

So there's a little bit of a blending in the Q4 to get some stuff done there, not a lot but some, and there may just be a Chrysler/G products that's going to be produced in a similar plant. So I just want to put -- point that out here, so you guys can model and do what you do for a living..

And this isn't my third question, but could you comment on the Super Bowl ad with the Wrangler with the Dana 44s going up a waterfall?.

Well, my parents always tell me never answer a question with a question. But I would put it in that phrase -- wasn't that pretty spectacular? We believe it was..

So the next question, on the e-axle. You've mentioned, and the competitors mentioned as well, that some of the e-axle drive that you've developed for the bus market is very similar to the requirements in the medium-duty truck market.

So kind of where are you both on the bus effort and then how you're thinking about taking that over on medium-duty trucks? And are you in pipeline discussions, quoting? And when can we expect that to start hitting the P&L?.

Yes. That's a kind of a brave, big, big question. I know you that, even asking it, but I'll do my best to answer it.

We've already, with multiple kind of boutique different customers, we're already doing other different types of electric -- or e-axle type of products, but that's what -- because it's only been on the pull-through so far for the markets in which we participate, which you said, buses, trucks, et cetera, et cetera.

I would tell you that there's not one end market that we're not in some form of conversation, product development, launch, you name it, as it relates to -- and I'm not just staying with light vertical or commercial vehicle. That could be mining, construction, forklifts, glass material handling.

Every single one of them, we're managing through by type of stuff and working with our customers relative to full system integration and engineering. So it really goes across the board.

We are very, very fortunate that our lessons learned and our people, everything that we're doing in one segment, that completely blends over into our other segments, and we don't have to kind of pick up from scratch. So things are going well is the bottom line..

Yes. And related to your question on the P&L, Brian, just given the volume projections for those segments, it's still going to be a few years before the sales are material or significant..

Okay, final question. The trade, obviously, you disclosed would be on the Silverado Class 45, which, I believe, is going to be made by -- at a Navistar plant. Do you have any more color? Is that in the '18 backlog? It's sort of promised late this year.

Is it more of a 2019 event?.

Yes. Thank you for the disclaimer that I've got to be little bit careful. As I said a couple of weeks back, I do not want to get in front of my customers on this.

For those of you that didn't know, the General Motors has been very public that they'll make their announcement with more detail on the truck, the Work Truck Show in Indianapolis next month, so stay tuned for that.

It branch to your specific question, it is in our backlog starting this year at lower volumes, and there'd be more to come after -- or later this year for you..

Your next question is from the line of Brian Sponheimer with Gabelli..

A quick question on the capital allocation. Given that 2018 setup is maybe not exactly what your goal is for free cash.

What's your comfort in looking outward for acquisitions versus maybe just another year of continuing to integrate what you've done from a portfolio standpoint for the last couple?.

Brian, I hate to -- at the risk of sounding like a broken record, I'd hate to say that we were completely locked in on any one specific thing. We've been pretty clear on our capital allocation priorities.

We are very comfortable, as you've been able to figure out, over the last 2 to 3 years since working together with me and Jonathan, et cetera, that we look at all opportunities kind of coming and going on the organic -- inorganic side, if that's the right play. In the meantime, we're very focused on the organic side.

That is priority 1, and it continues to pull through. I think the -- kind of if you take, for example, we always talk about the high kind of marquee type of programs, the Bronco, the Ranger, the Wrangler, you name it, and more recently, the Chevy Silverado. But even PTG last year was over 60 launches.

You just don't hear about them because they're smaller in nature. So we're focused on there, but again, we are -- we also don't have our head in the sand. If any right opportunity comes our way, we'll do the right thing for our shareholders..

Understood. And then I'm just -- when thinking about kind of the broader automotive landscape on a global basis. We've seen some automakers, I guess, most notably GM this morning, start to pull out some unprofitable areas.

How are you thinking about that relative to your own customer base? And what sort of shakeup you think that, that could cause long-term if your customer base starts to pull out of areas that they deem unprofitable?.

Yes. Let me answer that kind of in two parts. Again, you folks can do your job. That specific announcement is not impacting, if you're curious on that, the plant closure over there, number one. Number two, I mean, it is the benefit for Dana that, yes, we have a very global platform. We're in very -- every market that's out there.

We have the benefit of cascading across from one market to another to another as it relates to our products. We can essentially produce any of our products in the other plant, if need be. And so we've always found that should -- we can certainly derisk that in a blended approach of how we -- our manufacturing strategy will get us through the day.

So I'm not overly concerned about that on that front. And the other thing is I don't see a tremendous amount of groundswell of a lot of other OEMs taking that approach at this point. I'm sure there could always be something, but I don't think it's going to be anything significant or material that we would be overly concerned about..

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

So I wanted to start with a question on the quarterly cadence of EBITDA. I'm just curious what you're expecting over the course of 2018. And from a margin perspective, I was also wondering where you're expecting to end the year.

I know you gave the guidance for 12.3% margins for all of 2018, but do you think you'll be north of that number at year-end once you lap all the launch costs and get the benefit of additional synergies?.

Sure. So Justin, when you think about our business, if you look at the sales and profit and margin distribution on a quarterly basis over the last few years, I would say what's more typical is that the second and third quarter are higher from the sales profit and margin perspective.

And typically, due to build patterns of our major markets, the first and fourth quarter are typically a little softer.

There have been some anomalies with the significant Super Duty launch in 2016 and the Wrangler launch at the end of this year, but I think as we move into 2018, you're going to see more of a normal pattern where first quarter margins and fourth quarter margins are a little lower than the second and third quarter.

So I wouldn't necessarily look at where we expect fourth quarter margins next year to be and extrapolate that for the full year of '19. But certainly, the higher margin quarters this year, we think will start to exceed 12.3% and move us close to that 12.8% in 2019..

Okay, great. That's helpful. And secondly, I wanted to ask about the $20 million of EBITDA contribution from inorganic growth that you're expecting this year.

Could you talk about how much of that is coming from the divestiture you've mentioned in Brazil and synergies? I just wanted to put some numbers around those 2 items and get a better sense for the underlying incremental margin from those acquisitions..

Sure. The profit impact of the disposal of the noncore underperforming Brazilian asset is negligible. So virtually, all of the $20 million, there's a few million dollars of contribution on the incremental sales on a base case, and then the balance of that are the incremental synergies from Brevini.

You'll note that we indicated we were a little bit ahead of schedule on the synergies last year, but this represents the most significant step-up to get us real close to that $30 million by the end of this year..

Okay. Thanks, everybody. I kept it relatively short as you could tell early on in the discussion or presentation because I was -- we were just in front of you back 3 or 4 weeks ago, whatever it may be. But I'm going to close out with a little bit more maybe than usual, not a lot, but as you can see on the page in front of you.

Let me just start kind of candidly off the top.

I can honestly tell you that now more than probably ever since I've been here and rolling up on 3 years, I couldn't be more excited in the prospects of our business from a sales perspective, from a products -- profit expansion perspective, so on and so forth, really because the team has done a tremendous job.

And probably the thing I'm most proud of, I guess, is that everything we said we we're going to do, we've done up to this point. 2017 was really a great year. I think the proof is in the pudding there. 2018 is shaping up to be even better.

We're extra great that we've executed our synergy plan as it relates to all of the acquisitions we've done without a glitch. The team is doing a fantastic job. And on top of that, we're progressing on a great trajectory to achieve our 2019 targets.

From a new business growth perspective, we've been adding business consistently over the past several years. I spent a lot of time, as you guys know, it's part of my job, like maybe it's part of yours, but part of my job to be out in front of the customers, making sure I have a good voice for the customer.

And frankly, I couldn't be more proud of the team in terms of the feedback I'm receiving. That could be on our new technology portfolio. You heard me talk about the patents from our launch performance. Our overall customer satisfaction from a quality, cost, delivery, expense, et cetera, really things are going in the right direction there.

And then ultimately, things come back to what's your strategy. Do you have a real strategy that isn't just a paper shuffled that ends up in the bottom of the drawer? Instead, we have a true enterprise strategy that's working. It's the blueprint for our success.

It's certainly led us down the road of what I believe are really four important and appropriate acquisitions that we've talked about many times. It maintains our focus on the customer. It pushes us into expanding in the markets and commercializing new products the way we should be.

And it's making sure we're taking the right steps at the right time end as it relates to electrification. So every one of those key elements is important, and the team continues to execute on them. But at the end of the day, the score board doesn't lie, and it comes down to increasing shareholder value.

The shareholders in our company have seen great returns over the last several years. We're hard at work every single day trying to unlock more value. But in my view, we're just getting started, and our team members will continue to execute our plan.

I'd like to thank everybody for attending the call today and look forward to seeing you or talking to you soon..

Ladies and gentlemen, this does conclude the Dana Incorporated's Fourth Quarter and Full Year 2017 Financial Webcast and Conference Call. Thank you for your participation. You may now disconnect..