UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 29, 2018
Dana Incorporated
(Exact name of registrant as specified in its charter)
| Delaware | 1-1063 | 26-1531856 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification Number) |
3939 Technology Drive, Maumee, Ohio 43537
(Address of principal executive offices) (Zip Code)
(419) 887-3000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 7.01. | Regulation FD. |
In connection with the announcement of the Acquisition (as defined below) and the related debt financing, Dana Incorporated (“Dana”) intends to present and/or distribute to certain investors a slide presentation dated July 30, 2018, which is attached hereto as Exhibit 99.1 and incorporated by reference herein (the “Investor Presentation”). Dana undertakes no obligation to update, supplement or amend the materials attached hereto as Exhibit 99.1. The Investor Presentation may also be used by executive management of Dana in future meetings with investors and analysts. The Investor Presentation will also be available on Dana’s website at www.dana.com.
The information in this section is being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, is not subject to the liabilities of that section and is not deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such a filing.
| Item 8.01. | Other Events. |
On July 30, 2018, Dana issued a news release announcing the entry into a definitive agreement to purchase the Drive Systems business of the Oerlikon Group (the “Acquisition”). A copy of the press release is attached to this report as Exhibit 99.2 and is incorporated herein by reference.
Cautionary Note Regarding Forward-Looking Statements
Certain statements and projections contained in this communication are, by their nature, forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, estimates and projections about our industry and business, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions, and variations or negatives of these words. Forward-looking statements include, among other things, statements about the potential benefits of the proposed transaction; the prospective performance and outlook of the company’s business, performance and opportunities following the completion of the transaction, including the ability of the parties to complete the proposed transaction and the expected timing of completion of the proposed transaction; as well as any assumptions underlying any of the foregoing. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. Such risks and uncertainties, include, without limitation, risks related to Dana’s ability to complete the proposed transaction on the proposed terms and schedule, including obtaining regulatory approvals; unforeseen liabilities; future capital expenditures; risks associated with the proposed transaction such as the risk that the acquired business will not be integrated successfully, that such integration may be more difficult, time-consuming or costly than expected or that the expected benefits of the proposed transaction will not occur; risks related to future opportunities and plans for the company, including
uncertainty of the expected financial performance and results of the company following completion of the proposed transaction; disruption from the proposed transaction, making it more difficult to conduct business as usual or maintain relationships with customers, employers or suppliers; and the possibility that if the company does not achieve the perceived benefits of the proposed transaction as rapidly or to the extent anticipated by financial analysts or investors, the market price of the company’s shares could decline, as well as other risks related to Dana’s business. Dana’s Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss important risk factors that could affect our business, results of operations and financial condition. The forward-looking statements in this communication speak only as of this date. Dana does not undertake any obligation to revise or update publicly any forward-looking statement for any reason.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits. The following exhibits are being filed and furnished with this report.
| Exhibit No. |
Description | |
| 99.1 | Investor Presentation, dated July 30, 2018. | |
| 99.2 | Dana Incorporated News Release, dated July 30, 2018. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| DANA INCORPORATED | ||||||
| Date: July 30, 2018 | By: | /s/ Douglas H. Liedberg | ||||
| Name: | Douglas H. Liedberg | |||||
| Title: | Senior Vice President, General Counsel & Secretary | |||||
Exhibit 99.1
J.Acquisition P. Morgan of Auto Oerlikon Conference Drive Systems August 8, 2017 Jonathan Collins Executive Vice President & Chief Financial Officer July 30, 2018 © Dana 2018 1
Safe Harbor Statement Certain statements and projections contained in this presentation are, by their nature, forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, estimates and projections about our industry and business, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. Dana’s Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss important risk factors that could affect our business, results of operations and financial condition. The forward-looking statements in this presentation speak only as of this date. Dana does not undertake any obligation to revise or update publicly any forward-looking statement for any reason. © Dana 2018 2
Agenda Transaction Overview Craig Barber Senior Director, Investor Relations and Strategic Planning Business Overview / James Kamsickas Strategic Rationale President and Chief Executive Officer Acquisition Benefits Jonathan Collins Executive Vice President and Chief Financial Officer © Dana 2018 3
Transaction Summary Dana to acquire Oerlikon’s Drive Systems segment: ï,§ CHF 600 million in cash ï,§ Assumption of certain net liabilities Transaction Transaction Value Terms ï,§ Implied ~6x NTM adjusted EBITDA ï,§ ~4x NTM adjusted EBITDA (pro forma for expected cost synergies) Includes a controlling interest in a Chinese joint venture ï,§ Will be consolidated in Dana financials Timing / Subject to customary regulatory approvals Approvals Estimated close in late 2018 or Q1 2019 Deal Committed financing in place Financing Pro forma 2018 net leverage to remain well below 2x See appendix for comments regarding the presentation of non-GAAP measures © Dana 2018 4
J. Business P. Morgan Overview / Auto Strategic Conference Rationale August 8, 2017 Jonathan Collins Executive Vice President & Chief Financial Officer © Dana 2018 5
Oerlikon Drive Systems Snapshot 2018T Revenue: End Markets Sales by End Market Sales by Region ~$800M Commercial $ Vehicle Asia-Pacific Construction 18% 25% Americas Off Highway 27% 62% Diverse Product Portfolio Agriculture Light Vehicle 20% Mining Europe Advanced Gears Planetary drives 48% Light Vehicle Key Customers Shifting solutions e-Drives & transmissions Commercial Vehicle Key Brands 5 R&D test centers ~6,000 12 Manufacturing sites people Includes facilities currently under construction Nearly 100 year history © Dana 2018 6
Acquisition Benefits Enhances Propulsion Increases Emerging Technology Portfolio Market Capabilities Extends Off-Highway Delivers Significant Market Presence Long-Term Value © Dana 2018 7
Product Portfolio Overview Markets Products Description and Applications LV CV OH Advanced Broad range of high-precision helical gear solutions Gearing Shifting Wide range of synchronisers, clutches and clutch packs solutions Planetary Electric and hydraulic planetary drives for off-highway applications drives Drive Complete drive axle systems Systems Power transfer units, front and rear differentials, AWD systems High Performance High performance transmissions: manual, automated manual, dual-clutch transmission Drivelines e-drives for hybrid and electric light vehicles © Dana 2018 8
Advanced Electrification Engineering Core Competencies 20+ years of expertise in electric driveline design and engineering 30+ years driveline control software engineering Electronic hardware and actuation controls Integrated software and hardware design Vehicle application, calibration, and testing Applications Electric vehicle drivetrains Hybrid powertrain Automated manual transmission Dual clutch transmission Active differentials © Dana 2018
Strategic Fit Multiple market focus Wheel and track drives Proximity to customers “Build where we sell” Adding key OEM Transmissions customers Controls and Software Expanded product offering Leveraging position India expansion in e-Drives Core electrification China expansion technology applicable to all mobility markets Increasing off-highway Complementary market market penetration portfolio Adds elite engineering capability © Dana 2018 10
Strategic Inorganic Growth Q1 2016 Q4 2016 Q1 2017 Q1 2017 Q2 2018 Q4 2018 2018 11
Acquisition J.P. Morgan Benefits Auto Conference August 8, 2017 Jonathan Collins Executive Vice President & Chief Financial Officer © Dana 2018 12
Acquisition Benefits Enhances Propulsion Increases Emerging Technology Portfolio Market Capabilities Extends Off-Highway Delivers Significant Market Presence Long-Term Value © Dana 2018 13
Core Planetary Hub Drive Technology Product Expansion Wheel Drives Track Drives Slew Drives Mobile Gearboxes Electric Drives Vehicle Weight (tons) <1 2 10 18 28 35 50 80 100 120 Compact Small Medium Large © Dana 2018 14
e-Drive Expansion Oerlikon Electric Drive Capabilities Dana Electric Drive Capabilities Single-speed e-Axles Multi-speed e-Axles e-Drive Integrated e-Axles e-Drive Motors & Inverters Cooling Systems Select Vehicles Passanger Recreational Utility City Delivery Light Trucks Freight Truck Transit Bus Mining Truck Car Club Car Taylor Dunn Bolloré Blue Car Zenith Electric Van DongFeng Alpha Bus Sandvik DD422iE Gross Vehicle Weight Continuum Gross Vehicle Weight Continuum Dana and Oerlikon’s electric-vehicle capabilities and end markets are highly complementary © Dana 2018 15
Manufacturing Footprint Focus India China Selected Customers Selected Customers Includes facilities currently under construction © Dana 2018 16
Optimizes Geographic Footprint Dana1 Oerlikon DS Pro Forma1 Asia-Pacific Asia-Pacific Asia-Pacific 21% 25% 22% Americas Americas 52% Americas 27% = 49% Europe Europe 27% 29% Europe 48% Oerlikon DS Footprint Manufacturing sites (12) R&D test centers (5) Includes Includes facilities 100% of currently DDAC JV under construction © Dana 2018 17
Penetration in Off-Highway Pro Forma Segment Revenue Mix Dana1 Oerlikon Drive Systems Pro Forma1 Light Off Highway Vehicle Off Highway 19% Light 20% 23% Light Vehicle Vehicle 51% = 49% Off Highway Commercial Commercial Commercial 62% Vehicle Vehicle Vehicle 28% 18% 30% 1 Includes 100% of DDAC JV Drive System Market Growth Light Vehicle Off-Highway Commercial Vehicle 2017-2022 2017-2022 CAGR: >6% CAGR: 4% 2017-2022 CAGR: 4% Oerlikon Group 2015 2016 2017 2022 2015 2016 2017 2022 2015 2016 2017 2022 © Dana 2018 18
Synergies and Value Creation Purchasing efficiencies Near Term (Cost) Lean implementation and increased productivity $40 Million Over 24 Months Fixed cost rationalization Manufacturing footprint optimization Medium to Long Cross-selling of products across both companies customer bases Term Opportunity (Commercial) Expands addressable market into tracked vehicle driveline Immediate EPS accretion and creation of ~$240M in equity value © Dana 2018 19
Strong Balance Sheet Pro Forma Capitalization ($ in millions) Dana Transaction Pro forma 12/31/2018 Adjustments Dana Cash and Marketable Securities $600 $100 $700 Revolver $575 $(40) $535 Liquidity $1,175 $60 $1,235 New Financing $600 $600 Term Loan A $265 $265 Senior Notes 1,500 $1,500 Other Debt $35 $35 Total Debt $1,800 $640 $2,440 Net Debt $1,200 $540 $1,740 Adjusted EBITDA (pre-synergies) $980 $90 $1,070 Net Leverage 1.2x 1.6x See appendix for comments regarding the presentation of non-GAAP measures Attractive acquisition multiple Committed financing in place No note maturities until 2023 Maintain robust liquidity Flexible financing and strong cash flow generation enables rapid deleveraging © Dana 2018 20
Acquisition Benefits Enhances Propulsion Increases Emerging Technology Portfolio Market Capabilities Extends Off-Highway Delivers Significant Market Presence Long-Term Value © Dana 2018 21
Accelerating Growing Through Executing Enterprise Increasing Electrified Transformation Strategy Shareholder Value Mobility
Non-GAAP Financial Information The preceding slides refer to Adjusted EBITDA, a non-GAAP financial measure which we have defined as net income before interest, taxes, depreciation, amortization, equity grant expense, restructuring expense, non-service cost components of pension and other postretirement benefit costs and other adjustments not related to our core operations (gain/loss on debt extinguishment, pension settlements, divestitures, impairment, etc.). Adjusted EBITDA is a measure of our ability to maintain and continue to invest in our operations and provide shareholder returns. We use adjusted EBITDA in assessing the effectiveness of our business strategies, evaluating and pricing potential acquisitions and as a factor in making incentive compensation decisions. In addition to its use by management, we also believe adjusted EBITDA is a measure widely used by securities analysts, investors, and others to evaluate financial performance of our company relative to other Tier 1 automotive suppliers. Adjusted EBITDA should not be considered a substitute for income before income taxes, net income or other results reported in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. Diluted adjusted EPS is a non-GAAP financial measure, which we have defined as adjusted net income divided by adjusted diluted shares. We define adjusted net income as net income (loss) attributable to the parent company, excluding any nonrecurring income tax items, restructuring charges, amortization expense, and other adjustments not related to our core operations (as used in adjusted EBITDA), net of any associated income tax effects. We define adjusted diluted shares as diluted shares as determined in accordance with GAAP based on adjusted net income. This measure is considered useful for purposes of providing investors, analysts, and other interested parties with an indicator of ongoing financial performance that provides enhanced comparability to EPS reported by other companies. Diluted adjusted EPS is neither intended to represent nor be an alternative measure to diluted EPS reported under GAAP. Free cash flow is a non-GAAP financial measure, which we have defined as cash provided by (used in) operating activities, less purchases of property, plant, and equipment. We believe this measure is useful to investors in evaluating the operational cash flow of the company inclusive of the spending required to maintain the operations. Free cash flow is neither intended to represent nor be an alternative to the measure of net cash provided by (used in) operating activities reported under GAAP. Free cash flow may not be comparable to similarly titled measures reported by other companies. The accompanying financial information provides reconciliations of adjusted EBITDA, diluted adjusted EPS and free cash flow to the most directly comparable financial measures calculated and presented in accordance with GAAP. We have not provided a reconciliation of our adjusted EBITDA and diluted adjusted EPS outlook to the most comparable GAAP measures of net income and diluted EPS. Providing net income and diluted EPS guidance is potentially misleading and not practical given the difficulty of projecting event-driven transactional and other non-core operating items that are included in net income and diluted EPS, including restructuring actions, asset impairments and income tax valuation adjustments. The accompanying reconciliations of these non-GAAP measures with the most comparable GAAP measures for the historical periods presented are indicative of the reconciliations that will be prepared upon completion of the periods covered by the non-GAAP guidance. Please reference the “Non-GAAP financial information” on our website at www.dana.com/investors for our GAAP results and the reconciliations of these measures, where used, to the comparable GAAP measures. © Dana 2018 23
Exhibit 99.2
| IMMEDIATE | Contact: | Jeff Cole 419-887-3535 jeff.cole@dana.com |
Dana to Purchase Drive Systems Segment of Oerlikon Group
Acquisition adds complementary products, key electrification technologies
for each of Dana’s end markets
MAUMEE, Ohio, July 30, 2018 – Dana Incorporated (NYSE: DAN) announced today that it has signed a definitive agreement to purchase the Drive Systems segment of the Oerlikon Group (SIX: OERL), a global manufacturer of high-precision gears; planetary hub drives for wheeled and tracked vehicles; and products, controls, and software that support vehicle electrification across the mobility industry.
Under the terms of the agreement, Dana will acquire Oerlikon’s Drive Systems business for CHF 600 million (approximately $600 million). Committed financing has been arranged to complete the transaction, which will be immediately accretive to earnings upon closing. Subject to customary regulatory approvals, the acquisition is expected to close in late 2018 or the first quarter of 2019.
Consistent with Dana’s enterprise strategy, the acquisition of Oerlikon Drive Systems provides numerous opportunities to drive profitable growth. Among them, the transaction:
| • | complements and extends Dana’s current technology portfolio, especially with respect to high-precision helical gears for the light- and commercial-vehicle markets and planetary hub drives for wheeled and tracked vehicles in the off-highway market; |
| • | provides products, controls, and software that support vehicle electrification in each of Dana’s end markets – light vehicle, commercial vehicle, and off-highway; |
| • | optimizes Dana’s global manufacturing presence to be closer to customers in key growth markets such as China and India, as well as the United States; and |
| • | adds five research and development facilities to Dana’s extensive network of technology centers. |
“Oerlikon Drive Systems is a well-respected technology company that has provided exceptional product innovation and customer satisfaction for nearly a century,” said Jim Kamsickas, president and chief executive officer of Dana. “A great fit culturally, this investment will deliver significant long-term value by accelerating our commitment to vehicle electrification and strengthening the technology portfolio for each of our end markets while further expanding and balancing the manufacturing presence of our off-highway business in key geographical markets.”
Founded in 1919, Oerlikon Drive Systems generated revenue of CHF 730 million (approximately $730 million) in 2017. The business employs approximately 5,900 people and operates 10 manufacturing and engineering facilities in China, India, Italy, the United Kingdom, and the United States, with two additional facilities under construction in China.
The business serves a global roster of original-equipment manufacturers. Selected customers include AGCO, Ashok Leyland, Aston Martin, BMW, Caterpillar, CNH, Daimler, John Deere, Ferrari, Fiat Chrysler Automobiles, MAN, McLaren, Oshkosh, SANY, Scania, Terex, Volkswagen, and AB Volvo.
Oerlikon Drive Systems is composed of two global brands, Oerlikon Graziano and Oerlikon Fairfield, which offer engineering and manufacturing expertise in the development of gear-driven solutions for mobile vehicles and industrial equipment. Its high-tech products can be found in a wide range of applications for operating machinery and equipment used in agriculture, construction, energy, mining, transportation, and high-performance sports cars.
“This strategic deployment of capital for inorganic growth strengthens our product portfolio, will be immediately accretive to earnings upon closing, will create incremental value for shareholders, and preserves our strong balance sheet,” said Jonathan Collins, executive vice president and chief financial officer.
Mr. Kamsickas added: “Oerlikon’s technology will enable Dana to expand our product offerings for customers in the off-highway segment while complementing our rapidly growing portfolio of electrified product offerings for all end markets. Further, Oerlikon’s manufacturing and R&D footprint enhances our ability to serve many of our current customers while connecting us with new customers, especially in India and China.”
This transaction complements Dana’s strategy for accelerating hybridization and electrification and closely follows the company’s acquisition of TM4, which established Dana as the only supplier with full e-Propulsion design, engineering, and manufacturing capabilities – offering electro-mechanical propulsion solutions to each of its end markets.
Goldman Sachs & Co. LLC acted as financial advisor to Dana for this transaction. Citi provided committed financing to Dana for the transaction. Maven Global provided additional advisory services.
Dana to Host Conference Call at 9 a.m. Today
Dana will host a webcast and conference call at 9 a.m. EDT today. Participants may listen to the audio portion of the conference call either through audio streaming online or by telephone. Slide viewing is available online via a link provided on the Dana investor website: www.dana.com/investors. U.S. and Canadian locations should dial 1-888-311-4590 and international locations should
call 1-706-758-0054. Please enter conference I.D. 2052149 and ask for the “Dana Business Update.” Phone registration will be available starting at 8:30 a.m. EDT.
An audio recording of the webcast will be available after 5 p.m. EDT on July 30 by dialing 1-855-859-2056 (U.S. or Canada) or 1-404-537-3406 (international) and entering conference I.D. 2052149. A webcast replay will also be available after 5 p.m. EDT and may be accessed via Dana’s investor website.
About Oerlikon Group
Oerlikon (SIX: OERL) engineers materials, equipment and surfaces and provides expert services to enable customers to have high-performance products and systems with extended lifespans. Drawing on its key technological competencies and strong financial foundation, the group is sustaining mid-term growth by executing three strategic drivers: addressing attractive growth markets, securing structural growth, and expanding through targeted mergers and acquisitions. A leading global technology and engineering group, Oerlikon operates its business in three Segments – Surface Solutions, Manmade Fibers and Drive Systems – and has a global footprint of around 15,000 employees at 186 locations in 37 countries. In 2017, Oerlikon generated CHF 2.8 billion in sales and invested CHF 107 million in R&D.
About Dana Incorporated
Dana is a world leader in highly engineered solutions for improving the efficiency, performance, and sustainability of powered vehicles and machinery. Dana supports the passenger vehicle, commercial truck, and off-highway markets, as well as industrial and stationary equipment applications. Founded in 1904, Dana employs more than 30,000 people in 33 countries on six continents who are committed to delivering long-term value to customers. Based in Maumee, Ohio, USA, the company reported sales of $7.2 billion in 2017. Dana is ranked among the Drucker Institute’s listing of the 250 most effectively managed companies. For more information, please visit dana.com.
###