Dana second quarter shows strong operating performance

Dana's second quarter financial results indicate strong operating performance.

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Dana Holding Corporation announces results for the second quarter of 2014 that reflect strong operating performance.

Sales for the quarter were $1.71 billion, compared with $1.80 billion for the same period in 2013. The effects of weaker currencies, principally in South America and Asia, lowered sales by about $28 million. Stronger production levels in the North American light- and commercial-vehicle markets were tempered by slowing demand in South America and India. Weak off-highway market demand, which accelerated in the latter part of 2013, extended into the current quarter.   

Net income for the quarter was $86 million, compared with $92 million for the same period in 2013, reflecting the impact of lower sales in the quarter mitigated by continued favorable cost performance. Diluted adjusted earnings per share (EPS) was $0.58, compared with $0.54 in the second quarter of 2013, largely reflecting execution of the company's share repurchase program.

Adjusted EBITDA for the quarter was $205 million – or 12% – which was 10 basis points higher than the same period in 2013.

Dana generated strong free cash flow of $133 million in the quarter, compared with $160 million in 2013, which benefited from a $26 million receipt of previously accrued interest on a notes receivable payment.

"Despite the challenging economic environment in some of our markets, Dana's second-quarter results came in as we had expected, and we remain on track to deliver our top- and bottom-line targets for the fiscal year," says Wood. "We continue to focus on disciplined cost and investment actions to improve margin performance, as well as our product technology and growth strategy that is positioning us well for the future."

Business Unit Results for the Second Quarter

Light Vehicle Driveline Technologies
Sales were $636 million in the second quarter of 2014, compared with $673 million last year. Similar to last quarter, increased end-market demand for light trucks in North America and Europe was muted by unfavorable currency, principally in South America, as well as weak demand in South AmericaIndia, and Thailand. Segment EBITDA for the quarter was $76 million, or 11.9% of sales, compared with segment EBITDA of $71 million in the second quarter of 2013. Segment EBITDA in the current quarter also reflected a $7 million currency recovery related to Venezuela, partially offsetting the devaluation charge of $17 million that was recognized in the first quarter of this year.

Commercial Vehicle Driveline Technologies
Sales were $463 million in the second quarter of 2014, compared with $498 million last year.  Improved end-market demand in North America was offset by declines in South America, primarily in Brazil.  Segment EBITDA for the second quarter of 2014 was $47 million, or 10.2 percent of sales, compared with last year's segment EBITDA of $61 million.

Off-Highway Driveline Technologies
Sales were $335 million in the second quarter of 2014, compared with $364 million last year. Consistent with the first quarter of this year, favorable currency, reflecting the strength of the Euro, was offset by lower demand, principally in the mining and agricultural equipment markets, when compared with 2013. Segment EBITDA for the second quarter of 2014 was $46 million, or 13.7% of sales, representing a margin improvement of 110 basis points when compared with last year's segment EBITDA of $46 million. Continued execution of strong cost-performance actions in this segment offset the impact of lower sales volumes.

Power Technologies
Sales were $276 million in the second quarter of 2014, compared with $265 million last year, reflecting improved market demand in both North America and Europe. Segment EBITDA for the second quarter of 2014 was $39 million, or 14.1% of sales, in line with last year's performance.

Continued Execution of Common Share Repurchase Program
In the second quarter of 2014, Dana repurchased 2.2 million shares of its common stock, returning $49 million to shareholders. Since the inception of the program in October 2012, Dana has returned $942 million in share repurchase and redemptions under its $1 billion repurchase authorization.

Conversion of Series B Preferred Stock 
In July, the market price of Dana's common shares provided the option to effect the mandatory conversion of the company's outstanding Series B preferred stock. This action further simplifies the company's capital structure and reflects the increase of the company's overall value to shareholders. Conversion of the preferred shares is expected to be completed by the end of the third quarter of this year.

Company Affirms Guidance
Dana has affirmed and refined its financial targets for full-year 2014, in line with guidance provided at the end of the first quarter of this year:

  • Sales of approximately $6.8 billion;
  • Adjusted EBITDA of approximately $760 million;
  • Adjusted EBITDA as a percent of sales of approximately 11.2%;
  • Diluted adjusted EPS of approximately $1.92 to $1.95 (excluding the impact of share repurchases after June 30, 2014);
  • Capital spending of approximately $230 million; and
  • Free cash flow of $275 to $295 million.

"Our sales outlook for 2014 is in line with our first quarter guidance," says Wood. "While we expect market volumes in several of our end-user markets and regions to be stable or up slightly, we anticipate continued weakness in our global off-highway markets and the South American light- and commercial-vehicle markets, which will remain a headwind through the end of this year." 

Dana Secures Replacement Business with Major Customers Globally
By providing technology solutions that target specific market-value drivers for customers, such as fuel economy, emissions control and cost of ownership, Dana has positioned itself as a partner of choice in the industry. The company has secured significant replacement business with major customers, including Deere, Ford, Land Rover, Nissan, PSA Peugeot Citroen, Toyota and Volkswagen. This business represents content supplied to facilities in the U.S., EuropeSouth Africa and South America.

Dana Recognized by Customers around the World
During the quarter, Dana received multiple customer awards highlighting its superior performance in product quality and customer satisfaction. The Sorocaba, Brazil, facility was presented with the Toyota Quality Excellence Performance Award and Dana's Bogota, Colombia, facility was recognized by General Motors Co. as Supplier of the Year in the powertrain and chassis category.

In addition, Hino Trucks recognized Dana with its Excellence in Quality Improvement Award. The company supplies driveshafts to Hino from assembly facilities in Lima, OH, and Jodalli, Karnataka, India, for use on a wide range of Hino medium-duty trucks as well as Toyota Tundra pickup trucks.

PSA Peugeot Citroen, DAF, and Caterpillar also recognized Dana's Power Technologies facilities in Guiscard, France; Neu-Ulm, Germany; and Robinson, IL, respectively.                         

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