Oct 29, 2013
Executives
Craig Barber Roger J. Wood - Chief Executive Officer, President, Director, Member of Strategy Board and Member of Series A Nominating Committee William G.
Quigley - Chief Financial Officer, Executive Vice President and Member of Strategy Board Mark E. Wallace - Executive Vice President, President of Light Vehicle Driveline Technologies and Member of Strategy Board
Analysts
Joseph Spak - RBC Capital Markets, LLC, Research Division John Lovallo - BofA Merrill Lynch, Research Division Brian Arthur Johnson - Barclays Capital, Research Division Patrick Archambault - Goldman Sachs Group Inc., Research Division Colin Langan - UBS Investment Bank, Research Division Patrick Nolan - Deutsche Bank AG, Research Division Brian Sponheimer - Gabelli & Company, Inc. Ryan J.
Brinkman - JP Morgan Chase & Co, Research Division Brett D. Hoselton - KeyBanc Capital Markets Inc., Research Division
Operator
Good morning, and welcome to Dana Holding Corporation's Third Quarter 2013 Webcast and Conference Call. My name is Jennifer, 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 Director of Investor Relations, Craig Barber.
Please go ahead, Mr. Barber.
Craig Barber
Thank you, Jennifer, and thanks to all of you for joining us today. Presenting this morning will be Roger Wood, President and Chief Executive Officer; and Bill Quigley, Executive Vice President and Chief Financial Officer.
Also with us this morning is Mark Wallace, Executive Vice President and President of our Light Vehicle Driveline Technologies. As always, copies of this morning’s earnings release and our 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 also include a Q&A session. [Operator Instructions] 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 our future results are summarized in our Safe Harbor statement.
These risk factors are also detailed in our filings, including our annual, quarterly and current reports with the SEC. I will now turn the call over to Roger Wood.
Roger J. Wood
Thank you, Craig, and good morning, everyone. We're pleased to report another quarter of strong operating performance for Dana and to spend to some time with you this morning to help you understand how we see the rest of the year unfolding in our 3 end markets.
For the third quarter of 2013, we recorded sales of $1.7 billion, while net income for the quarter was $68 million and diluted adjusted earnings per share were $0.47. We improved our adjusted EBITDA margin to 11.9%, an improvement of 90 basis points over the third quarter of last year.
And this is the second time this year that we've posted margins near 12% in this low-volume market. We continue to execute on our share repurchase program in the third quarter, redeeming our Series A preferred shares and launching an accelerated share repurchase program.
In total, we've repurchased more than 34 million shares and returned about $780 million to shareholders since we began this program about a year ago, executing on our tenacious commitment of shareholder value creation in the company. In 2013, our end markets have not produced as expected, which means we will adjust our expectations for the year and we remain cautious on volume for next year.
A few of our end markets around the world continue to be challenged, requiring us to flex our operations as we navigate them and simultaneously secure new business that will drive our future growth. So turning to Slide 5, we'll highlight a few of these opportunities.
We've continued to focus our market-driven technologies to secure new business, much of it launching in 2015 and beyond. One example of this is our thermoplastic cylinder-head cover assembly, which a Japanese automaker has sourced for its entire V-6 program globally.
This lightweight solution improves fuel economy, while allowing for better integration of a proprietary air oil separation unit, reducing oil consumption and emissions. You may have seen a recent announcement that we're expanding our business with Mahindra & Mahindra by supplying them efficient, lightweight Spicer AdvanTEK axles for their new platform of sport utility vehicles and small trucks launching in mid-2015.
These axles are engineered to deliver enhanced efficiency and fuel economy, as well as improve power density and best-in-class NVH. That's noise, vibration and harshness characteristics.
Turning to Slide 6, you may recall that 3 years ago, Nissan also chose Spicer Life Series driveshafts for its CUV and SUV platform to be built in Japan. We're launching production of these driveshafts this month out of our operations in Thailand.
But this quarter, Nissan has also awarded Dana a contract to supply Spicer Life Series driveshafts to their vehicle manufacturing operations in Korea and Russia. Considered the industry standard for low-emission, high-efficiency light vehicles, this driveshaft is precision balanced for reduced NVH.
Finally, we don't talk much about our specialty vehicle market, but this diverse group of customers manufacture buses, recreational vehicles, fire trucks, cement mixers, yard tractors, refuse haulers, military tactical wheeled vehicles and similar equipment. This quarter alone, we were awarded business for 6 new platforms of axles for fire trucks, RVs and refuse vehicles.
In all cases, we displaced the incumbent supplier. Dana's primary advantage is its very robust yet lighter weight axle portfolio.
Key features include a tighter turning radius for steer axles, as well as drive axles that allow for the mounting of auxiliary equipment that improves performance, reduces maintenance and extends the life of the vehicle. Our customers also tell us that our best-in-market lead times provide them the manufacturing flexibility that they require for their end-use customers.
On Slide 7, you'll see that Dana continues to be recognized for the technologies that we're bringing to the market. Earlier this month, Dana Spicer AdvanTEK 40 tandem axle was selected as a finalist for the 2014 Automotive News PACE Awards.
That marks the third consecutive year that Dana has had a finalist in the automotive industry's premier award program. This new 40,000 pound tandem axle for a variety of Class 8 applications features a market-leading design that increases fuel economy, improves reliability, it reduces the vehicle weight and it decreases total ownership costs.
The theme that you're hearing through each of these new product introductions is that we're engineering our products to meet the market drivers that our customers value, validated by the new business awards that we're receiving and the industry recognition. Our engineering investments are getting results.
And as new programs begin to launch, we will grow the business despite the end-market volatility that we've been experiencing over the last few years. So turning to Slide 8.
Let's talk about the key trend in our major end markets that we saw in the most recent quarter and we expect to see for the rest of the year. As has been the case all year, we continue to see strong production in North America for full-frame trucks in the third quarter, a continuation of the strength that we saw in 2012.
This drives mainly our Light Vehicle Driveline segment. We do expect a normal seasonal slowdown in the fourth quarter, though.
Auto production in Europe continues to show signs of improvement, though we don't expect any significant ramp-up in the fourth quarter. The month-long labor disruption that impacted several of our OE customers in South Africa in August has been resolved, and we hope to make up at least some of that lost revenue yet this year.
The markets remain challenging in Argentina and Venezuela, as economic concerns and inflation place downward pressure on the demand there. We continue to monitor the situation in South America, in particular, Argentina, and we're taking the necessary actions to mitigate the risks.
Likewise, India has been seeing its own macroeconomic issues that are dampening light vehicle demand, and this lower volume environment is likely to continue into next year. In the North American commercial vehicle market, we've not seen the improvement in production that we expected and that we discussed last quarter.
Class 8 production in the third quarter was down 8% from previous forecasts, and the fourth quarter production is now expected to be flat with the third quarter. Consequently, we're adjusting Class 8 unit production guidance down, and we're now expecting 245,000 to 250,000 units for the year.
In the off-highway vehicle market, weakness continues in the construction equipment and the mining end markets, as we mentioned last quarter, and we expect lower demand to continue through at least the remainder of this year. Despite the challenging demand environment, our team has done an outstanding job of delivering on the performance of the business.
And as we finish out this year, we'll continue to focus on our execution and to continue to position this business for the future growth that we'll see. Now let me turn it over to Bill for a review of the financials.
William G. Quigley
Thanks, Roger, and good morning, everyone. Slide 10 provides a summary of Dana's third quarter 2013 financial results.
Third quarter sales totaled almost $1.7 billion, $46 million lower when compared to last year. As we have highlighted over the course of this year, this quarter reflects the last of the year-over-year impacts of Light Vehicle Driveline program roll-offs and the divestiture of the off-highway leisure products business, which was completed in August of 2012.
In the current quarter, these items accounted for $33 million of the comparison, while currency further lowers sales by $46 million. We will review in further detail end market impacts across our businesses.
Yet, as Roger indicated, positive year-over-year demand principally in the North American light vehicle and South America commercial vehicle markets were largely offset by further weakening in India, Venezuela and in Argentina, as well as continued weakness in underground mining equipment demand impacting our off-highway business. Adjusted EBITDA for the quarter was $198 million compared to $190 million in the third quarter of last year.
Adjusted EBITDA margin for the quarter was 11.9%, a 90 basis point improvement compared to a year ago. In light of a weak demand environment across a number of end markets, our operations continue to flex our manufacturing cost structure.
In addition, pricing and other actions offset ongoing inflationary pressures in South America, including the recovery of the impacts of the first quarter Venezuela devaluation and certain insurance recoveries completed in the quarter, bolstered adjusted EBITDA performance compared to a year ago. Net income totaled $68 million compared to $56 million a year ago, an increase of $12 million.
In addition to higher adjusted EBITDA in the quarter, lower depreciation expense and higher equity income of about $10 million in total was partially offset by higher interest expense attributable to the $750 million debt raise we completed in August. Diluted adjusted EPS of $0.47 in the quarter compares with $0.37 a year ago, driven by both increased earnings and lower share count, reflecting significant execution under Dana's $1 billion share repurchase program.
Capital spending for the quarter was $52 million, $10 million higher compared to a year ago. Free cash flow for the quarter was $54 million, $34 million lower than last year, due to slightly higher capital spend, cash taxes and pension contribution.
Slide 11 provides a comparison of our consolidated sales, the change by business segment, as well as the key drivers of the year-over-year change for the third quarter. North America sales totaled $728 million in the quarter and represented about 44% of total sales compared to 45% a year ago.
Sales were lower than a year ago by about $48 million. Program roll-offs and the leisure products divestiture contributed $33 million of the comparison.
While North America light vehicle volumes were higher in the quarter, benefiting Light Vehicle Driveline and Power Technologies, lower commercial vehicle and off-highway end market demand more than offset this favorability. Europe represented about 29% of total sales or $482 million in the quarter, higher than last year by $22 million, principally driven by favorable currency of $16 million [ph] and the benefit of slightly increased light vehicle demand.
South America sales totaled $261 million in the quarter or 15% of sales, about $10 million higher than last year. Currency movements in Venezuela, Argentina and Brazil significantly impacted the comparison, lowering sales by $51 million.
This headwind was more than offset by improved commercial and light vehicle end-market demand of about $61 million in the quarter. Asia Pacific sales totaled $198 million, about $30 million lower than a year ago and represented about 12% of total sales, reflecting unfavorable currency of about $10 million, principally attributable to the weakening of the India rupee, as well as continued light and commercial vehicle weakness in India.
The chart at the bottom left highlights the change in sales by business segment, while the chart to the right highlights the key drivers of the year-over-year change in sales. Program roll-offs in light -- I'm sorry, currency lowered sales by $46 million, primarily impacting our Light and Commercial Vehicle Driveline businesses, $22 million of which was due to the Venezuela bolivar.
In the current quarter, commercial recoveries related to the first quarter Venezuela devaluation increased sales by about $1 million. Program roll-offs and Light Vehicle Driveline of $24 million and the 2012 divestiture of off-highway of $9 million accounted for $33 million of the year-over-year change in sales.
Volume and mix was positive $17 million in the quarter. Favorable volume comparisons for Light Vehicle Driveline, Commercial Vehicle Driveline and Power Technologies totaling $44 million, were partially offset by weaker mining demand and the impact of a customer in-sourcing action, which lowered off-highway sales by about $27 million in the quarter.
Slide 12 provides a similar comparison of adjusted EBITDA for the quarter, with the year-over-year change by business segment presented at the bottom left and the key drivers of the change presented to the right. Adjusted EBITDA for the quarter was $198 million compared to $190 million a year ago.
Adjusted EBITDA margin in the quarter was 11.9%. In the third quarter, we recovered an additional $3 million of the first quarter Venezuela currency devaluation impact of $11 million.
Year-to-date, we recovered about $9 million of the devaluation impact via both commercial actions, as well as government authorized settlement of transactions at the exchange rate prior to the February devaluation. While higher volume and mix increased sales by $17 million year-over-year, as highlighted on the previous slide, the adjusted EBITDA impact was lower by $2 million, reflecting a relative high contribution margin of our off-highway mining and related aftermarket business.
Performance, which includes the impact of our pricing, cost performance and recovery actions, improved adjusted EBITDA by $12 million compared to a year ago. The next 2 slides highlight the sales and segment EBITDA performance of each of our businesses.
Slide 13 highlights sales and segment EBITDA performance for Light Vehicle Driveline and Commercial Vehicle Driveline. Light Vehicle Driveline sales were lower by $30 million or about 5% compared to a year ago.
Currency and program roll-offs lowered sales by $41 million and $24 million, respectively. Improved North America and Europe production volumes, as well as pricing actions principally related to recovery of inflation provided a partial offset.
Segment EBITDA was $67 million in the quarter, slightly lower than a year ago. Segment EBITDA margin for the quarter was 10.7% compared to 10.3% in 2012, providing a 40 basis point improvement.
The margin impact from volume and mix was impacted by production shutdowns, arising from OEM labor strikes in South Africa in August and walking into September, lowering sales by about $9 million in segment EBITDA by about $3 million in the quarter. As Roger stated, we do expect to recover the majority of the sales shortfall in the coming quarter.
Lastly, on the performance line, pricing and other actions increased sales by about $24 million, of which, almost $20 million related to the recovery of significant inflation in our South American operations. Commercial Vehicle Driveline sales of $465 million were lower by $6 million or by 1% compared to a year ago.
Currency lowered sales by $16 million in the quarter, principally attributable to a weakening of the Brazil real and India rupee. Stronger volume increased sales by $17 million, largely reflecting improved demand in South America of about $30 million, partially offset by lower demand in North America, Europe and India.
Segment EBITDA was $52 million in the quarter, $7 million higher than last year, driven by both cost improvement actions, as well as a favorable impact of a tax recovery in the current quarter. Segment EBITDA margin was 11.2% for the quarter, 160 basis points better than last year.
Turning to Slide 14. Off-Highway Driveline third quarter sales of $318 million were lower than last year by $25 million.
Volume and mix was lower $27 million, principally driven by lower mining equipment and related aftermarket demand and the impact of an in-sourcing action by a customer that we highlighted last quarter. Off-highway posted segment EBITDA of $40 million in the quarter or a margin of 12.6%, about 140 basis points lower than a year ago.
While continued cost actions provided a benefit of $3 million on the performance line, these actions were more than offset by the margin impact of lower demand in the quarter. Turning to Power Technologies.
Third quarter sales of $257 million were higher than a year ago by $15 million, driven by increased volume in North America and Europe. Segment EBITDA of $39 million was $10 million higher than a year ago, reflecting the impact of higher volumes and improved cost performance.
Segment EBITDA was 15.2% in the quarter, a 320 basis point improvement compared to a year ago. Similar to the year-over-year comparisons just discussed, Slide 15 presents the key drivers of Dana's year-to-date sales and adjusted EBITDA performance compared to last year.
On a year-to-date basis, 2013 sales of $5.145 billion were lower by $470 million compared to last year. As highlighted on the lower left of this slide, unfavorable currency, Light Vehicle Driveline program roll-offs and the 2012 off-highway divestiture accounted for $332 million or 71% of the comparison.
Volume and mix accounted for $185 million, principally attributable to lower off-highway and commercial vehicle end market demand. Pricing and recovery actions continue to be accretive through the year-to-date.
Adjusted EBITDA of $571 million in 2013 was lower than a year ago by $56 million, reflecting lower production volumes and currency impacts. As highlighted on the lower right of the slide, despite a lower volume environment in several of our key end markets, our year-to-date adjusted EBITDA margin performance, 11.1%, is equal to last year, reflecting the impact of our cost performance and recovery actions.
Slide 16 highlights free cash flow for the quarter. Free cash flow was $54 million in the quarter compared to $88 million in the third quarter last year, a decrease of $34 million, principally due to slightly higher capital spending, estimated tax payments and our planned pension contributions.
Working capital generated $28 million in the quarter compared and largely even to last year. Capital spending was $52 million, $10 million higher than a year ago, as we continue investment to support new programs and add gear manufacturing capability and capacity in Asia.
Net cash interest was $29 million in the quarter, equal to last year, reflecting interest payments on our unsecured debt. While we issued $750 million of new senior unsecured notes in the third quarter, semiannual interest payments on this issuance does not commence until March of 2014.
Cash taxes were $39 million, $10 million higher than a year ago, largely reflecting the timing of estimated tax payments and jurisdictional profitability. Restructuring cash flows totaled $9 million in the quarter, about even with last year.
Pension contributions for the quarter were $36 million compared with $24 million in the third quarter of last year. Of this quarter's contribution, $30 million were voluntary contributions we directed to our U.S.
plans. And at the end of September, the funded status of our U.S.
pension plans stood at about 90%. On a year-to-date basis, free cash flow was $170 million.
And for comparative purposes, we have adjusted last year's free cash flow performance for the $150 million voluntary pension contribution we made in the first quarter of 2012. And adjusting for this contribution, Dana's free cash flow performance is ahead of last year's result by about $12 million.
Slide 17 highlights our cash, debt and liquidity positions at the end of September. Cash and marketable securities totaled $1.226 billion, while outstanding debt was $1.632 billion, resulting in a net debt position of about $406 million.
The increase in debt compared to our second quarter results reflects the issuance of $750 million of senior unsecured notes in August. At the end of September, total liquidity stood at about $1.6 billion, including $377 million of availability under our U.S.
and European credit facilities. As highlighted here as well, through the end of September, we have returned a significant amount of capital to our shareholders, a total of $810 million in combined dividends and share repurchases.
We had a very productive quarter on the capital structure front, and Slide 18 summarizes the actions we have completed to date. It has been about a year since we announced our initial $250 million share repurchase program, which was increased to $1 billion in June of this year.
In August, we successfully completed a $750 million senior unsecured note issuance at attractive rates and redeemed our outstanding Series A preferred shares, representing the equivalent of almost 21 million common shares. Post these actions, we executed a $200 million accelerated share repurchase program and received an initial delivery of 7.3 million of common shares equivalent to 80% of the total transaction value.
We expect to receive additional shares upon the completion of this program no later than this coming December. Commencing in the fourth quarter of 2012 to date, we have returned $780 million to shareholders and have repurchased the equivalent of 34 million common shares.
There is about $220 million remaining on our share repurchase authorization, and we expect to continue to execute the program on an opportunistic basis during the course of the coming calendar year. With respect to our outstanding Series B preferred shares, since the end of 2012, holders have voluntarily converted about 893,000 shares into common, resulting in a little more than 4.3 million shares outstanding at the end of September.
As a result of these actions to date, we expect our diluted share count to be about 180 million shares at the end of 2013. All in all, these actions evidence our strong and continued commitment to deliver value to our shareholders, as well as maintaining a strong balance sheet position to provide both future flexibility, as well as growth capital.
Now as we look forward to the rest of the year, let's turn to the next slide. Our full year targets are outlined on Slide 19.
We are lowering our full year sales and adjusted EBITDA targets to reflect both the impact of currency and weaker demand in several of our end markets. We expect sales to be about $6.7 billion for 2013, about $300 million lower than our previous estimate, in light of weaker demand impacting our Off-Highway business, persistent economic pressures in India and South America, impacting principally our Light Vehicle Driveline business, and certainly tempered expectations for the commercial vehicle market.
We expect adjusted EBITDA to be about $750 million for the full year 2013, providing a margin of about 11.1%. While our operations have performed well and adjusting cost structure is in line with production around the world, we expect top line weakness driving lower sales of about $100 million sequentially from the third quarter to the fourth quarter of this year to further weigh on our earnings performance.
However, compared to our 2012 full year results, our 2013 estimated adjusted EBITDA margin performance provides a 30 basis point improvement on significantly lower volumes. We expect diluted adjusted EPS to be about $1.76 for full year 2013.
We expect the number of weighted average shares used to calculate full year EPS will be about 200 million, and this, of course, excludes the impact of any future exercise of our share repurchase program. Capital spending is unchanged and expected to be about $190 million.
The midpoint of our previous range, and our free cash flow target is now in the range of $240 million to $260 million for the year. Finally, Slide 20 highlights the progression and key drivers of our full year sales and adjusted EBITDA margin targets from the prior guidance we provided in July compared to our current expectations.
As highlighted, the $300 million decline in our full year sales expectations falls into 2 categories: a further currency impact of about $70 million, split about evenly between our light and commercial vehicle businesses; and volume reductions of about $230 million, impacting all but our Power Technologies business. Compared to our prior guidance, of this change in sales, our third quarter results represent about $140 million of the sales change, with the remainder expected in the current quarter.
Compared to our prior guidance, Light Vehicle Driveline volume is being impacted principally by continued softness in South America, as well as India. We expect Commercial Vehicle will be impacted the most significantly, as we now expect lower orders from our North American customers, as well as continued weakness in India.
And off-highway will be further impacted by lower mining and related aftermarket demand. In comparing adjusted EBITDA margin expectations, currency will still be a slight headwind, but lower volume compared to our previous expectation is the largest contributor to our revised full year margin target.
Continuing cost actions will provide a partial offset as we close out the year. And while currency movements and end market demand are certainly outside of our control, our operations remain focused and diligent in continuing the action cost and investment levers throughout the business.
This concludes our presentation, and we will now turn the call back to the operator for questions. Thank you.
Operator
[Operator Instructions] Your first question is from Joe Spak with RBC Capital Markets.
Joseph Spak - RBC Capital Markets, LLC, Research Division
Just wanted to dive a little bit deeper into some of the margin performance, particularly in commercial vehicle and off-highway, on a year-over-year basis in commercial vehicles, EBITDA is $7 million higher but the top line was $6 million lower. I guess, I'm wondering is that -- is it fair to look at it year-over-year?
Should we look at it more sequentially there? Or what's going on?
And is that sort of performance sustainable amid what looks like it might be some continued weak volume.
William G. Quigley
Yes. Joe, this is Bill Quigley.
On the commercial vehicle front, if you look at Slide 13, I think you're referring to, we do provide the year-over-year comparisons. We think that, obviously, is a good basis for comparison.
On the performance line, you'll note that segment EBITDA was up about $2 million. And in my comments, I did refer to -- that we've been chasing a pretty significant tax recovery in Brazil and we were fortuitous enough to complete that tax recovery in the quarter.
That provided about $2 million or so, if you will, of that segment EBITDA performance. But I think, overall, on a year-over-year basis, we're certainly seeing some pressure as we move into the fourth quarter.
We've lowered our expectations with respect to the North America Class 8 production environment. So certainly, sequentially as we move from the third to the fourth quarter, we're going to see some continued pressure there from a margin perspective.
Joseph Spak - RBC Capital Markets, LLC, Research Division
And then on the Off-Highway business, the $11 million lower EBITDA on $27 million lower sales. I mean, that -- it looks like the decremental margin picked up.
So have you taken out or delayed costs as much as possible? Or was something unusual there?
William G. Quigley
No, what you see there, certainly, is a very high decremental margin of about 40% on that volume and mix, largely driven, quite frankly, by the impact of an underground mining and the related aftermarket sales associated with that segment of the market. Very high contribution margins.
From a cost perspective, they're continuing to take cost out of the business. You can see on the performance line, up or positive improvement $3 million year-over-year.
But again, the contribution margin associated with that particular segment is pretty high and impactful to the off-highway business.
Joseph Spak - RBC Capital Markets, LLC, Research Division
Okay. And any preliminary comments about some of the -- some of these end markets for 2014, particularly in mining.
I mean, you mentioned that it looks like it could be tough still in the fourth quarter. Should that begin to bottom out in '14 in your view?
And then similarly on ag, which has obviously held up, is there the potential for that to roll over next year, particularly in North America, in your view?
Roger J. Wood
Yes. Joe, this is Roger.
For any of our markets, we're not seeing anything fundamentally in the bases of the markets themselves to indicate to us that there's going to be any kind of a real upswing in 2014, particularly the mining segment, maybe the off-highway segment, in general. Now you may have seen some of the previous announcements from some other companies that may have indicated the same thing.
We're not seeing anything different than what those announcements have said.
Operator
Your next question comes from John Lovallo, Merrill Lynch.
John Lovallo - BofA Merrill Lynch, Research Division
The first question is you guys discussed the ability to flex your operations in certain markets. Can you give us an idea where you think the most potential is there?
And how quickly can you guys react to volume?
William G. Quigley
I'll take -- John, I'll take a first shot on that. I think with respect to off-highway, for example, let's just use that, certainly, what we're experiencing from a demand perspective is not positive for the business.
We certainly have capacity and capability in place. The flexing that's going on, for example, is you're employing all the usual tools with respect to agency employees, temporary layoffs, so on and so forth.
But certainly from a capacity perspective, we're not taking capacity out currently in that business. We do expect over the longer term that, that business will come back.
But to Roger's point, the visibility on that from a timing perspective is still pretty muted. So I think from a capacity and capability perspective, we're taking the cost actions across all the business, across all the plants in light of the volume that we're seeing, but we're certainly not looking at capacity reductions.
My only other remark on that front, though, would be we continue to look at our South American operations. Certainly, there's a lot of economic turmoil in a number of the countries in South America.
And from a capacity utilization, that is an area, and from a footprint perspective, that we're continuing to analyze alternatives available to us.
Roger J. Wood
Yes. John, and maybe -- this is Roger.
And maybe I could just complement what Bill is saying about the off-highway sector. The off-highway sector is the business unit that we see the most sudden or short-term changes, if you will, in the schedule, both up and down.
So while we can react in every single one of our businesses, we want to be sure to be prepared for, when we do see an uptick, to be able to take care of our customers in that event. And the off-highway sector is probably the more difficult one to do that with.
Commercial vehicle is not that far behind it. But the other 2 businesses, I think, we can have ample warning to know what's going to unfold.
John Lovallo - BofA Merrill Lynch, Research Division
That's very helpful. If I could just follow up with one question here.
In terms of the off-highway market, can you just remind us how much of that is actually export business? And what are the biggest markets there in terms of exports?
Roger J. Wood
Yes. There's a very large European footprint, John, to you point let's say about 70% to 75% of sales.
And of that, probably 20% to 25% is export. So that export not only to Asia, for example, but also back to North America, as an example.
So basically a manufacturing footprint that exports really around the world, but really the primary export regions being North America and, to a lesser extent, Asia.
Operator
Your next question comes from Brian Johnson with Barclays.
Brian Arthur Johnson - Barclays Capital, Research Division
I just have questions on a couple of categories. Just on your CV guide and then I want to talk about Light Vehicle Driveline.
On CV, it sounds like you're looking for severe sequential decline in -- going into the fourth quarter in Brazil. How do you see that then play -- is that right?
And then how would you see that playing out over the beginning of '14?
William G. Quigley
Brian, it's Bill. We are, obviously, from a sequential perspective, looking at a client CV.
I would say it's both South America, as well as North America. Obviously, North America, being really from our prior expectations with respect to the Class 8 build.
And we talked about this in the second quarter of this year. While the South American market has recovered very nicely in 2013 compared to 2012, we had called that we would see some softness in the fourth quarter, and we're still holding that assumption in place as we move in.
We're seeing a little higher inventory levels being communicated to us in Brazil. So that certainly is tempering the third to fourth quarter sequential in commercial vehicle for South America.
Brian Arthur Johnson - Barclays Capital, Research Division
Okay. And in light vehicle, we've actually had some very positive commentary out of Ford, which is at least one of your customers around the global boom in SUVs.
And is that -- are you participating in that in places like South America and India? And does that offer any offset just to the macro sales environment there?
Mark E. Wallace
Brian, it's Mark Wallace. Just with Ford, primarily both of our business is with the Super Duty platform, but we also take care of Ford's requirements on the T6 platform, which is really in Thailand and South Africa and Argentina as well, but nothing really related to India.
So that's the bulk of our business that we have with Ford from the SUV pickup truck market.
Brian Arthur Johnson - Barclays Capital, Research Division
But with other customers, are there any offsets from growth in SUVs elsewhere?
Mark E. Wallace
Well, actually with Chrysler, we're on the JK platform, which is up significantly on a year-over-year basis, which is very strong. And really with Toyota and Nissan, we're basically on the same style of vehicles, which is mainly pickup trucks around the emerging markets.
Brian Arthur Johnson - Barclays Capital, Research Division
And anything left to go on the Bolivian -- the bolivar, the Venezuelan currency? Is that written down to a point where there's no further impact?
Or it's going to continue to be a drag?
William G. Quigley
Brian, it's Bill. From the first quarter devaluation, which you'll recall, was about $11 million.
Mark's team has done a great job with respect to recovery actions. We've recovered year-to-date about $9 million of that $11 million.
And we do expect into the fourth quarter to recover the remaining piece of the initial or first quarter devaluation. The second piece of the puzzle here with respect to Venezuela is moving forward, given what's going on in that country and with respect to the ability to repatriate cash out of Venezuela and certainly the economic turmoil continuing to swirl in Venezuela.
We're very focused on other actions that may be required, given potentially another devaluation sometime into the near future. But it would be, unfortunately, I guess, the well-worn path that Light Vehicle Driveline has continued to execute upon, much like the current devaluation in the event that, that was to be experienced.
Brian Arthur Johnson - Barclays Capital, Research Division
And then just final housekeeping point. Can you be active in the market hypothetically to buy back your shares even as your ASR program is out there?
Or are you precluded from buying shares until the bank completes its delivery?
William G. Quigley
I mean, hypothetically, we can. But we are completing -- we're awaiting completion of the finalization of the ASR, which -- my comment should be early December.
Operator
Your next question is from Patrick Archambault with Goldman Sachs.
Patrick Archambault - Goldman Sachs Group Inc., Research Division
I guess, maybe I'll start with just a quick housekeeping. So you said sort of unusual -- not unusual, but you've got a tax recovery from Brazil, about $2 million.
And then I think you said you had insurance recoveries in the quarter as well.
William G. Quigley
Yes. Patrick, it's Bill.
We had about -- from one of our subsidiaries, we had about $5 million insurance recovery principally related to the sale or the monetization of claims that we had with insolvent carriers.
Patrick Archambault - Goldman Sachs Group Inc., Research Division
Okay, got it. I guess, my main question is just like if I have the math correctly, I mean, you guys managed to post 80 basis point improvement in margins despite a 3% decline in revenue this quarter, given all the actions you took.
It seems like you've got implied like a similar 3% year-on-year for the fourth quarter given the new guidance, but the increase in margin kind of jumps up to something like 190 basis points, if I'm right. So just wanted to kind of get a sense of what the items were that were helping you, if anything, post a larger margin comp in the fourth quarter despite what, I think, everybody would agree with is fairly challenging volume environment.
William G. Quigley
We certainly share your thoughts on the volume environment. If you take a look at our guide at about $6.7 billion in sales and an EBITDA margin of about 7 50.
And then obviously, we provide also the endpoints or estimates for both sales and margin for our business segments. We would probably look to see some decremental actually in the fourth quarter on the margin front and at a business unit level probably 10.5% margins, obviously moving into the fourth quarter, to derive that 11.1% for the full year.
We posted 11.9% in the second quarter and the third quarter, but I think with respect to some of the volume considerations that we're working through, we are expecting a lower margin performance in the fourth quarter.
Patrick Archambault - Goldman Sachs Group Inc., Research Division
Sorry, that's sequentially. But year-on-year, right, I think you're up, right?
If I'm not mistaken.
William G. Quigley
Yes. Year-on-year, we would be...
Patrick Archambault - Goldman Sachs Group Inc., Research Division
Yes, that's right, my question was year-on-year. I apologize.
William G. Quigley
Yes, year-on-year. And I think, again, it's the move through of the cost actions that we've taken throughout the course of the year when we have improved the business structurally from a cost perspective.
And I think if you look on a year-over-year basis, we're probably up about 140, 150 basis points for the quarter -- for the fourth quarter.
Patrick Archambault - Goldman Sachs Group Inc., Research Division
Yes, that's what I have. So okay.
So I mean, basically, it just a continued rollout, like the volume environment doesn't necessarily get any better but the cost actions that you've put into place to mitigate some of this, I guess, they just gather momentum and deliver better comps on that front? Is that...
William G. Quigley
Yes, exactly. Right, exactly.
And we -- and just briefly, we had talked about that in the first and second quarter that we're doing a very significant work with respect to our material by economics, usage. I think even in the second or third quarter, we're seeing the benefits of that flow through to our results.
So we don't lose that on a year-over-year basis into the fourth quarter. Certainly what the buy is ultimately is going to be predicated on the sales volume.
But the operators across the business have done a great job on focusing on that pretty critical element of our cost structure.
Roger J. Wood
Yes. Patrick, this is Roger.
To complement Bill there, the work that we've been doing over the last few years, as we've previously mentioned in past calls, is to really solidify the base of this business as we prepare for the growth that we'll see coming in the future. We had anticipated a little bit better environment, if you will, in the market at this point in time and going into the fourth quarter and into the next year.
It looks like that's going to be delayed a little bit from what we have seen and talked about here today. But the cost actions continue.
So that when that growth and the tailwind does come, we should see a very favorable incremental margins on that.
Operator
And your next question comes from the line of Colin Langan with UBS.
Colin Langan - UBS Investment Bank, Research Division
Any color on -- I mean, when I look at it and there are some numbers out there saying South America was up over 60% this quarter. And yet, you're kind of were about 20% -- over 20% of your sales in the region.
I would have expected a bit stronger of a mix. I mean, was there a customer mix issue in South America that resulted in some underperformance?
Or did you just not see that kind of year-over-year growth in the region?
William G. Quigley
Colin, it's Bill. Actually, from a -- if we just point to commercial vehicle, we certainly saw a significant recovery in demand in South America out of Brazil, obviously, big market.
What's muting that year-over-year is the corresponding FX impacts that we're seeing as well. So certainly from a demand perspective, I think even my comments, we -- overall, we said South America, from a demand perspective, was up about $61 million.
Yet, currency really masked that by about $51 million in the opposite direction. So currency movements in Brazil -- we talked about Venezuela in the first quarter on a year-over-year basis, certainly a significant impact, as well as Argentina.
Those currencies have certainly moved against us.
Colin Langan - UBS Investment Bank, Research Division
And you're now expecting Brazil truck to come down sequentially? I mean, any color on how that may trend into '14 because that's a pretty volatile market?
William G. Quigley
We are expecting a sequential lowering of production volume in Brazil. And again, to Roger's point with respect to 2014, we're working through our planning assumptions.
But I think that's more driven what our expectation was even a quarter and a half ago on how we saw the fourth quarter kind of lining up, as well as we're seeing some elevated inventories, if you will, with respect to that market in particular. So I think 2014, we don't see anything significantly different in Brazil structurally from an infrastructure perspective.
But I think as we continue through the rest of the year, we'll finalize that and obviously report on it in January.
Colin Langan - UBS Investment Bank, Research Division
And just sometimes there are a lot of restructuring items. I mean, what is -- any color on your tax rate x restructuring in this quarter?
And am I correct that your guidance for the year does include a higher tax rate for the full year now than what you're expecting before?
William G. Quigley
Yes, it does, Colin. We're up at about, I think, 35% to 36% full year.
What we're seeing obviously is in areas that certainly are under pressure, for example, South America, we're operating still under valuation allowances in a number of those countries. So we're not getting the benefit, if you will, from lower earnings or in some cases, loss positions in certain countries.
So that is elevating our effective rate to about 35% or so.
Colin Langan - UBS Investment Bank, Research Division
Is that a cash tax rate? Because I'd like to make sure it's the 28% [ph].
William G. Quigley
No, no, that's the 28% [ph]. Yes, that's the U.S.
GAAP tax provision. So it's the income statement rate.
Operator
Your next question comes from Patrick Nolan with Deutsche Bank.
Patrick Nolan - Deutsche Bank AG, Research Division
I wanted to just dig into a couple of the segments. A lot of my other questions have been answered.
If I dig into the North American CV revenue, it actually looks like it was down year-over-year in the third quarter. And I think industry production was up about 6%.
Is there a customer mix issue or a platform mix issue? Or has there been some programs that are maybe switched hands, and that's part of what's going on?
And I just wanted to look -- think about that in the context of your statement that North American CV would be down sequentially in Q4. Because it looks like overall industry production will be pretty flattish quarter-over-quarter.
Roger J. Wood
Yes. Patrick, this is Roger.
We've been seeing some pretty good volatility in the third quarter, not dissimilar to what we saw in the third quarter of 2012 with the changes, if you will, in the schedules that our customers are showing to us. We had some good confidence going into the quarter as we had talked to you about -- at the end of the second quarter that the volumes were actually going to increase on the path that we had originally anticipated.
And then just recently here, realized that with the volatility that we're seeing, sales for us and production is slightly down from a year-over-year comparison. So it's not as much as any one particular factor.
It's things are moving around pretty quickly, and the visibility that we've seen kind of decreased on us here just recently. And that's why we're anticipating like we did in 2012 third quarter that the fourth quarter isn't going to show us any uptick.
Although I should just mention that sometimes our customers or some of our customers still anticipate maybe seeing some of that. We're not so sure of that anymore.
So we thought it would be prudent to make sure that we go out to you guys and let you know that we're calling it flat with the third quarter.
Patrick Nolan - Deutsche Bank AG, Research Division
Got it, that's helpful. And just quickly, on the off-highway in-sourcing, when do we start to lap that?
And on the light vehicle business that had been rolling off, is that going to be -- are we thought that now once we enter the fourth quarter? Or is there still a headwind in the fourth quarter?
William G. Quigley
Yes, Patrick, it's Bill. On the latter, on the Light Vehicle Driveline, we're through that program roll-off activity or quarter-to-quarter comparisons.
Third quarter was the last of that. With respect to off-highway, we'll see a bit more of that into the fourth quarter.
The fourth quarter will then conclude the in-sourcing action.
Operator
Your next question comes from Brian Sponheimer with Gabelli & Company.
Brian Sponheimer - Gabelli & Company, Inc.
Just one, on your cost structure and given that volumes have gone against you, the execution remains pretty good across all of your businesses. If we were to see any sort of pick up in demand, what would be the type of incremental margin that you'd be hopeful for, let's say, in a 5% or 10% volume growth environment?
William G. Quigley
Well, on the incrementals, Brian, as we've mentioned before, we look for between a 15% and a 20% uptick from an incremental basis. And our operating units have done a very nice job at managing through this volatility, both in the down, as well as the ups that we've seen.
For instance in the second quarter, you saw that we were able to deliver on that, upswing in sales. So we anticipate keeping it in that 15% to 20% range.
That's an average across the organization. There's a few business units that will be north of that.
We expect them to be north of that, and there's a couple that may be slightly under that, but not too dramatically under that. So 15% to 20% for the overall enterprise.
Brian Sponheimer - Gabelli & Company, Inc.
Okay, that's helpful. And then just within the off-highway business, you'd called out on commercial vehicles an inventory slack in South America.
What's your sense in the mining markets that inventory is where it needs to be before you really see a flattening at the bottom here?
Roger J. Wood
Yes. That's an interesting question because, one that we pursue and answer too often and very frequently across our entire customer base around the different regions of the world.
It's pretty cloudy right now. We feel like the inventories are somewhat in line with where the production is right now.
So we think that if there's an uptick in the production in the industry, we should be able to see that because we believe that our customers in the mining sector are being very, very, very prudent with their inventory control. And that's one of the reasons that we've seen the impact, for instance, over in the aftermarket piece of the mining business is that they're being very, very careful and cautious.
Because we think that the outlook is unsure for them as well and a bit cloudy. And so they don't want to be stuck holding a lot of inventory, and we think they've done a good job from everything that we can tell.
So the big question is when that market might uptick again? I think that's one that we're all trying to find an answer to, but we feel fairly good that when it does uptick, we're going to see the orders flowing through because there's not a lot of inventory in the system.
Brian Sponheimer - Gabelli & Company, Inc.
Okay. That's helpful.
And Bill, just one real small housekeeping item. With $220 million left on the share buyback and the ASR being completed by the first week of December or so, did you say that you would expect it to finish the $220 million by year end?
William G. Quigley
Oh, no, no, Brian, I said we would expect to, post the completion of the ASR, look to our opportunistic approach as we've done moving into 2014.
Operator
Your next question comes is from Ryan Brinkman with JPMorgan.
Ryan J. Brinkman - JP Morgan Chase & Co, Research Division
A lot of my questions have been answered. But maybe just one quickly on Light Vehicle Driveline.
I understand the program roll-offs affecting the business in the quarter and also the currency impact in the quarter. But I see that the volume mix line drove about an $11 million increase year-over-year to revenue.
It's about 2% of last year's revenue. I thought maybe it would be just a little bit stronger.
Can you speak to why this might be? I'm sure you're benefiting from pickups in North America.
So I guess, this is the softness in Brazil and India that you alluded to in the release. But can you talk about how material those markets are to Light Vehicle Driveline and what else might have driven the relatively tepid growth relative to global light vehicle in this production of plus 4?
Mark E. Wallace
Yes. Ryan, it's Mark Wallace.
Just globally, we have a fairly strong business in India. So on a year-over-year basis, more than a 20% decline in that business.
And we're still obviously waiting to see when that recovery may occur. So that was definitely an erosion on a year-over-year basis, as well as in Venezuela, as we've talked about, all throughout this year.
In the U.S., actually as I mentioned before, both Super Duty and JK are up significantly on a year-over-year basis and then obviously, there's offset with the roll-offs. And the rest of the markets on the globe are pretty much flat.
We did see improvement in Europe for the Dana portion because of the Jaguar Land Rover business that was launching. But that was also then had some headwinds relative to the strike in South Africa, which impacted several customers in that region as well.
Ryan J. Brinkman - JP Morgan Chase & Co, Research Division
Okay. That makes perfect sense.
And then, I guess, my last question is just, obviously, you're doing a very job containing the decremental margins in the face of the revenue declines. But in off-highway, I think that you reported about $11 million lower EBITDA on $27 million lower sales organically from a volume mix perspective.
So that seems a little high like roughly 40% decremental. Is that a function of like the kind of products that you're producing less of year-over-year or the geography or what -- that's probably not what we should model going forward, right?
Roger J. Wood
Yes. Ryan, your presumption is correct, meaning specifically the mining sector and combine that with the aftermarket in the mining sector, both of those segments for that part of the business are very good and both of those are down.
Operator
And our final question comes from the line of Brett Hoselton with KeyBanc.
Brett D. Hoselton - KeyBanc Capital Markets Inc., Research Division
Just first point of clarification, on the share repurchase, are -- given the ASR program completing by December, does that mean that you are not in the market at this point in time? Or can you be independently in the market with your share repurchase?
William G. Quigley
We can be in the market independently, not with another ASR, obviously. But at the moment, we are not in the market.
We're letting the ASR, Brett, transact out, if you will, and that should be completed early December.
Brett D. Hoselton - KeyBanc Capital Markets Inc., Research Division
Okay. So the expectation should be that you're probably going to remain out of the market until December time frame or something like that, is that correct?
William G. Quigley
Correct, yes.
Brett D. Hoselton - KeyBanc Capital Markets Inc., Research Division
And then as we -- directionally, as we think about 2014 sales, I know you commented earlier that you're not seeing the markets improve and so forth. But I guess, what I'm wondering is, is that an off-highway comment?
Because I think generally speaking, the expectations are that light vehicle production is going to be improving next year and the commercial vehicle production in Class 8, specifically in North America, is going to potentially improve next year. So I was wondering if you could kind of talk directionally about those markets, commercial and light vehicle?
Roger J. Wood
Yes. Thanks, Brett.
This is Roger. In my comment earlier in the call was kind of enterprise-wide across the 4 business segments.
There are some differences between the segments. We anticipate the light vehicle segment to be -- to remain strong, if you will, in North America absent anything that we don't yet see out there.
On the commercial side, though, that's -- we're not sure about that. We don't think it's going to get worse materially.
But as you know, we anticipate a third and fourth quarter where we're going to show quite an uptick in the commercial market. That's not happening, at least from our view, our experience here later in the third quarter and our view of the fourth quarter.
And so going into next year, unless something fundamentally changes in terms of the comfort of the fleet operators being comfortable going ahead and placing those orders and replacing their fleets and some of the things that are holding things back, unless that breaks loose, which we had anticipated to happen here in the latter half of this year, we're not at this point seeing anything fundamentally that's going to improve that through 2014, unless something changes between now and the end of the year. So as Bill mentioned, we're going through all the numbers in every one of the business segments right now, as we speak.
But the off-highway we've talked about, don't see anything fundamentally changing there. CV, we're not sure but we don't see anything dramatically changing there; LV remaining strong; and of course, PT, across all the business units, that's a strong business, anyway.
But that's kind of how we see the individual business segments, Brett.
Brett D. Hoselton - KeyBanc Capital Markets Inc., Research Division
And do you have any expectations for any material incremental new business growth? I know in the past you kind of talked about being twice the market.
Obviously, the markets you're looking directionally may be flat. But that kind of seemed at the time to imply maybe low mid-single digit revenue growth based on new business revenue growth.
What's your expectations into next year?
Roger J. Wood
Yes. That's a great, great question.
And we're really excited about the business that we are winning out there because we're winning it based on the products and the value that we have focused on, the market values drivers, if you will. We're winning the business that we would expect to win out there.
But as you know, in the business that we're in, it takes a few years to get those pieces of business launched. And we're in the midst of some of those launches right now.
Some of them begin in 2014. And so I would anticipate '15 and '16 seeing the real opportunity that we talk about in terms of growing above the market.
As I mentioned in my part of the discussion, on the beginning of the call, the reason we're really excited about that is because we anticipate in the results that we're getting with that will allow us to absorb some of these market fluctuations that we've been experiencing over the last couple of years. And for last year and for this year and possibly in the near-term future, as we experience these market fluctuations, we have to talk to you about them every quarter because these new launches haven't yet taken over to that.
But that's what we anticipate in the future, is we're going to be able to absorb these fluctuations with the above-market growth that we'll see.
Brett D. Hoselton - KeyBanc Capital Markets Inc., Research Division
And then, Bill, again, thinking about 2014 margins, major headwinds or tailwinds. I mean, if revenue is going to be roughly, give or take, flat or something like that next year -- just under that assumption I know that you're not guiding to that.
But under that assumption, let's say, you're not going to necessarily get any leverage, but yet you've got some company-specific initiatives, which have driven margin expansion over the past few years, so on and so forth. What do you see as the general trend for margins next year?
And are there any major headwinds or tailwinds that you think that you're going to see next year?
William G. Quigley
Yes, Brett. I think absent volume, I think the company and certainly in the current volume environment and unfortunately one that's been around us for sometime here now in the last 18 months or so, the company is taking pretty marked steps with respect to cost improvement.
I think to Roger's point, ultimately, a continued margin ladder, if you will, is going to require good volume and is going to require our continued value that we provide to the customers with respect to innovation. There is just a bunch of more spit left in a flat environment.
I think the groups have done or the businesses have done a great job working with what they have through this environment. And I think there's always going to be some opportunity, Brett.
But I wouldn't look at it as a large tailwind available to us. I think the volume environment, certainly, we're working through it very well.
But at the same time, where I think the growth in the margin profile will come from, and we saw this briefly in the second quarter as we walked from the first to the second, is the contribution margin that we can enjoy when we see that volume. So major tailwinds, I don't think so absent a change in volume.
So apples to apples, if you will, major headwinds, I think there's always some headwinds with respect to inflation. But right now, nothing of significance that we're going to have to work through.
Roger J. Wood
So this brings us to the end of the call. This is Roger.
I just want to say thank you very much to you all for joining us in the last hour. Thank you.
Operator
Thank you. This does conclude today's conference call, and you may now disconnect.