Dana Holding Corporation has announced its full-year and fourth-quarter 2011 results. Full-year net income was $219 million, compared to $11 million the previous year. Diluted adjusted earnings per share more than doubled to $1.66 from $0.79 in 2010, and sales increased 24% year-over-year to $7.6 billion.
Stronger sales were primarily driven by higher vehicle production volumes and acquisitions; the latter accounted for more than $400 million in additional sales. Higher sales, significant material cost recovery, and cost reductions boosted the company's earnings in 2011, more than offsetting increased raw material prices.
Dana reported adjusted EBITDA of $765 million last year, up 38% over 2010. Adjusted EBITDA as a percent of sales for the year was 10.1%, compared to 9.1% in 2010 and 6.2% in 2009.
The company generated free cash flow of $174 million in 2011, the third consecutive year of positive results in this area. Dana maintained a strong balance sheet and had $1.4 billion of liquidity at year-end while continuing to invest in its operations, expand its footprint through acquisitions and complete debt refinancing.
"I'm pleased to say the Dana team delivered stronger results in 2011," says company President and Chief Executive Officer Roger J. Wood. "We improved in the key areas of product quality, delivery, and innovation. And, we improved both top- and bottom-line results to position the company to drive shareholder value going forward."
"The net new business of more than $1 billion is especially gratifying, as it illustrates a vote of confidence by customers in the quality, performance and innovation of our products. These new programs awarded in 2011 were from customers in all vehicle markets – light, commercial and off-highway – and in all geographic regions."
Sales for the fourth quarter were $1.9 billion, up $348 million over the same period in 2010. Adjusted EBITDA for the quarter was $183 million, up $40 million over the same period one year ago. Fourth-quarter free cash flow was $115 million.
Greater Presence in Emerging Markets
In 2011, Dana completed three strategic transactions that considerably strengthened the position of its Commercial Vehicle Driveline business in the emerging markets of China, India and Brazil. In China, the company acquired an additional 46% equity interest in Dongfeng Dana Axle Co., Ltd. (DDAC), its joint venture with Dongfeng Motor Co., Ltd., to achieve 50% ownership. DDAC had 2011 sales of $951 million and now represents Dana's largest overseas axle manufacturing base.
In India, Dana acquired the heavy-duty axle business of Axles India Limited, key customers of which are Ashok Leyland and Mahindra & Mahindra. In Brazil, a strategic agreement with SIFCO S.A. positioned Dana as the leading full-line supplier of commercial vehicle drivelines in South America and added approximately $390 million of sales in 2011.
To support its growth in China, Dana also started construction of a technical center in Wuxi, Jiangsu, China. This center will provide advanced product and applications engineering for driveline, sealing and thermal products.
New Product Technologies
Dana introduced several new product technologies in 2011 aimed at helping its original-equipment customers offer more fuel-efficient, better performing and lower-maintenance vehicles. These included:
- Spicer Pro-40 tandem drive axles for heavy-duty trucks, which, combined with Dana's new one-piece aluminum driveshafts, cut vehicle weight by nearly 200 pounds;
- Spicer LMSi hub system, which improves driveline reliability and extends maintenance intervals;
- New off-highway vehicle transmissions – through Dana's Italian-based joint venture with Bosch Rexroth AG – that are expected to produce fuel savings of up to 20%;
- Passive and active warm-up units, which can cut fuel consumption by 5% by improving the cold-start phase of gasoline engines;
- Air-cooled battery technology, which combined with Dana's liquid-cooled solutions, are now part of 20 electric and hybrid-electric platforms; and
- New drive axles and transmissions, respectively, for heavy-vehicle customers in India and Russia, as well as improved axle product solutions for North American truck manufacturers to help meet a new braking-distance regulation.
Aftermarket Growth Steps
To continue growing its aftermarket business, Dana opened a new distribution center in Gyor, Hungary, and further expanded its product offering. The facility in Hungary handles replacement parts for the off-highway market and, later in 2012, will be complemented by additional distribution centers in Mexico and China.
New products for aftermarket customers introduced in 2011 included full Dana axles (crate axles) that include the carrier, housing and gearing, and the new SVL drivetrain product line – tested and validated by Dana – aimed at older, post-warranty vehicles.
Operational Momentum
"Among the lesser known, but just as important results Dana achieved in 2011 were the safety, quality and productivity improvements made by the individuals and teams inside our plants around the world," Wood adds.
For a second consecutive year, the company's global production facilities achieved world-class quality in products delivered to customers – with an aggregate single-digit PPM (defective parts per million) result in 2011. Through the Dana Operating System – and more than 700 continuous-improvement workshops – Dana employees made significant gains in other key areas such as safety, productivity, inventory reduction, and machine changeover time.
2012 Financial Targets
As previously announced, Dana has established the following targets for 2012:
- Sales growth of at least 5%,
- Adjusted EBITDA of $845 million to $865 million,
- Adjusted EBITDA as a percent of sales of 10.5% to 11%,
- Diluted adjusted EPS of $1.95 to $2.05,
- Capital spending of $225 million to $250 million, and
- Free cash flow of more than $200 million, excluding a special one-time pension contribution of $150 million.
"In 2012, we expect to continue generating positive free cash flow while increasing investments in the business and increasing earnings. Our goal remains to consistently generate increased shareholder value every year," Wood says.
