Dana Holding Corporation has announced results for the first quarter of 2015.
Sales for the quarter were $1.61 billion, down slightly from the same period in 2014, with unfavorable currency lowering sales by $121 million. Adjusting for the effects of currency and the divestiture of operations in Venezuela, sales increased $68 million, or 4%, driven principally by higher light vehicle end-market demand and new business.
Net income for the quarter improved to $63 million, an increase of 85%, or $29 million higher than the $34 million recorded in the same period in 2014. Higher adjusted EBITDA and lower amortization, income tax and restructuring expenses drove the increase in net income. Diluted adjusted earnings per share (EPS) were $0.50, compared with $0.32 in the first quarter of 2014, driven by higher earnings and a lower share count from the continued execution of the company's share repurchase program.
Adjusted EBITDA for the quarter was $176 million, compared with $165 million for the same period in 2014, while adjusted EBITDA as a percent of sales improved 110 basis points to 10.9%, compared with 9.8% in the first quarter of 2014. The improvement in adjusted EBITDA reflected the benefit of higher sales volume and performance and the impact of the Venezuela divestiture, which was completed in early 2015. These factors increased adjusted EBITDA by $36 million compared with last year. This improvement was partially offset by currency effects of $25 million, reflecting the relative strength of the U.S. dollar against most major currencies, as well as certain currency transaction gains that benefited last year's first quarter.
Free cash flow was a use of $82 million in the quarter, compared with a use of $36 in the same period last year, reflecting higher seasonal working capital and the receipt of a non-recurring interest payment of $40 million on a note receivable in 2014. Higher earnings and lower interest and income tax payments in the current quarter were partial offsets.
"Dana's first-quarter results continue to show improving performance despite ongoing currency headwinds and volume challenges in South America. We executed very well in the quarter, generating strong net income, increased adjusted EBITDA, and improved margins," says President and Chief Executive Officer Roger Wood. "While we expect global currency headwinds and a low- demand environment in Brazil to continue, we remain focused on the successful launches of new customer programs and delivering on the performance of the business."
Share Repurchase Program
During the first quarter of 2015, Dana repurchased an additional $63 million of shares of common stock. Since the inception of Dana's $1.4 billion share repurchase program, the company has repurchased or redeemed the equivalent of 54 million common shares, returning more than $1.15 billion to shareholders. At the end of the first quarter, $248 million of authorization remained under the program.
Business Unit Results for the First Quarter
Light Vehicle Driveline Technologies
Sales were $637 million in the first quarter of 2015, compared with $618 million last year. Higher market demand, new business and recoveries increased sales by $63 million compared with last year. The impact of currency lowered sales by $17 million and the divestiture of the company's Venezuelan operations further reduced sales by $27 million when compared with last year.
Segment EBITDA for the quarter was $64 million, or 10.0% of sales, compared with segment EBITDA of $30 million, or 4.9% of sales, in the first quarter of 2014. Last year's first quarter included a net loss of $18 million related to Venezuela, primarily due to the devaluation of the bolivar. Improved volume and performance further increased adjusted EBITDA by $17 million compared with last year.
Commercial Vehicle Driveline Technologies
Sales were $433 million in the first quarter of 2015, compared with $457 million last year, as strong market demand in North America was offset by significant weakness in South America, primarily in Brazil. Currency headwinds, principally from a weaker Brazilian real and euro, reduced sales by $30 million. This was partially offset by $7 million in improved pricing and recoveries when compared with the same period last year.
Segment EBITDA for the first quarter of 2015 was $35 million, or 8.1% of sales, compared with last year's segment EBITDA of $44 million, or 9.6% of sales. The impact of currency and supply-chain costs were the principal factors for the change. These impacts were partially offset by improved pricing and recoveries. As with sales, weak demand in Brazil offset the benefits of a stronger North America market.
Off-Highway Driveline Technologies
Sales were $284 million in the first quarter of 2015, compared with $341 million last year. Currency, principally a weaker euro, was the primary driver of the change, lowering sales by $46 million compared with last year. Global weakness in demand for agriculture equipment was partially offset by new business and gains in the North American construction equipment market. Segment EBITDA for the first quarter of 2015 was $39 million, or 13.7% of sales, a margin improvement of 140 basis points when compared with last year, reflecting the positive impact of continued material-cost savings and improved operational performance.
Sales were $254 million in the first quarter of 2015, compared with $272 million last year, reflecting $28 million in currency effects from a weaker euro and Canadian dollar. This impact was partially offset by continued strength in North American and European engine production. Segment EBITDA for the first quarter of 2015 was $38 million, or 15.0% of sales, compared with $44 million, or 16.2% of sales, last year. The positive benefit of increased volume in the quarter was offset by currency and higher engineering costs compared with last year.
Company Adjusts 2015 Guidance for Currency Translation, Raises Adjusted EBITDA Margin
In response to the continued strengthening of the U.S. dollar against foreign currencies in regions where the company maintains significant operations, Dana is adjusting its expectation for full-year 2015 sales. While demand in both the light-vehicle and commercial-vehicle markets in South America have continued to decline, increasing volumes in North America, and to some extent Europe and Asia, are offsetting this headwind. Improving market mix on new business and cost performance are partially offsetting the impacts of currency translation on earnings. Accordingly, Dana has tightened the range for full-year adjusted EBITDA and raised the expectation for adjusted EBITDA margin to 11.7% of sales. The expected range for diluted adjusted EPS and free cash flow remain unchanged:
- Sales of $6.3 to 6.4 billion;
- Adjusted EBITDA of $740 to $750 million;
- Adjusted EBITDA as a percent of sales of approximately 11.7%;
- Diluted adjusted EPS of approximately $2.05 to $2.15 (excluding the impact of share repurchases after March 31, 2015);
- Capital spending of $300 to $320 million; and
- Free cash flow of $190 to $220 million.
Dana Earns 2015 Automotive News PACE Innovative Partnership Award, Other Industry Honors
In April, Dana was honored with the 2015 Automotive News PACE Innovative Partnership Award for its collaboration with Audi to develop the valve body separator plate technology for the automaker's cutting-edge transmission, which is featured on Audi A4 through A7 sedans, as well as the Audi Q5 crossover. This prestigious award, presented to OEMs and shared with suppliers, recognizes Dana's ability to strategically partner with its customers to deliver advanced, innovative technologies that address key market drivers, including fuel economy, durability and performance.
In South America, Dana was recognized by John Deere for continued excellence in operational and commercial performance, earning high ratings in quality, delivery and cost management. This is the second year Dana has received this honor from John Deere.
The company's Off-Highway Driveline facility in Como, Italy, was also recognized by AGCO as Supplier of the Year for outstanding quality of products delivered by a supplier.
In addition, Dana's Power Technology facility in Paris, TN, recently received Honda's Excellence in Value award recognizing outstanding efficiency in manufacturing processes, quality, and delivery, including zero downtime.
Company Showcases New Technologies for Commercial Vehicles
At the 2015 Mid-America Trucking Show (MATS), Dana displayed its comprehensive lineup of driveline technologies optimized for engine downspeeding, along with additional innovations engineered to increase efficiency and fuel economy. Most notably, the company's new Spicer AdvanTEK Dual Range Disconnect technologies for tandem axles used in Class 8 linehaul applications enables further engine downspeeding and improves powertrain efficiency from 2 to 5% over conventional tandem axles on the market today offering significant fuel savings without sacrificing performance.
The company also introduced a new family of single-reduction drive axles for North American commercial vehicles that leverages its industry-leading AdvanTEK technology, a common head-assembly architecture, and other proven Spicer axle technologies to reduce weight, improve efficiency, and enhance durability. Lighter weight than competing axles on the market today, these axles are designed with numerous innovations, including increased power density and efficiency in a smaller package; smooth interior surfaces that decrease churning losses; superior machining and castings for extended durability; and an efficient lubrication system that requires 10 percent less lube.