Dana Holding may use excess cash for M&A opportunities, treasurer says

By Lisa Kerner

Charlotte, N.C., Dec. 3 - Dana Holding Corp.'s first priority for the use of excess cash is to support the business, according to vice president and treasurer Lillian Etzkorn.

The company needs about $600 million to adequately operate and ended the quarter with about $1.2 billion of cash, Etzkorn said during a presentation at the 2013 Bank of America Merrill Lynch Leveraged Finance Conference in Boca Raton, Fla., on Tuesday.

Having excess cash is "a nice problem to have at this stage," Etzkorn said.

Dana's other priorities for the use of excess cash include merger and acquisition opportunities, technology investment and debt service, followed by returning value to shareholders.

Etzkorn said the company is not planning on issuing new debt in the near term, unless it would be for a specific reason. Currently, its leverage is at about half a turn, and Etzkorn would be comfortable going up to a full turn.

According to Etzkorn, while the company is actively looking for M&A opportunities that would dovetail technology into the existing business, Dana is not "looking to add another leg to the stool."

Financial results

In general, Etzkorn said the company is pleased with the results it has delivered over the past several years.

"We've grown EBITDA margins from 4% back in 2008 to an expected about 11.1% for this year. We've also driven and delivered consistent free cash flow, and we expect that to continue as we look forward as well," Etzkorn said.

Dana's diluted adjusted earnings per share have more than doubled over the past several years.

"And, importantly, we've built a very strong balance sheet with about $400 million of net debt and total liquidity of $1.6 billion at the end of the third quarter."

Dana will continue to opportunistically repurchase shares under its $1 billion share repurchase authorization.

"In the third quarter of this year, we issued $750 million in unsecured notes while at the same time we reached an agreement to repurchase all of the series A preferred shares that we had," she said.

This streamlined the capital structure and retired the equivalent of 21 million common shares.

"To round out the quarter, we executed a $200 million common share repurchase program that immediately retired over 7 million of common shares," Etzkorn said.

"So since we began last year, we've returned about $780 million to our shareholders."

Dana has repurchased about 34 million shares on a diluted basis and has about $220 million remaining under the $1 billion repurchase authorization, according to Etzkorn.

Dana is a supplier of driveline, sealing and thermal-management technologies for passenger, commercial and off-highway vehicles. The company is based in Maumee, Ohio.

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