Dana Reports Good Start to 2017 with 17% Sales Increase During First Quarter

Dana Incorporated has announced financial results for the first quarter of 2017.

"Dana is off to a good start this year as we successfully launch new programs across end markets and continue to convert our sales backlog. The results this quarter are further evidence of our ability to successfully operate and leverage our cost base during rapid volume and revenue expansion," says James Kamsickas, Dana President and Chief Executive Officer. "In addition, the targeted and timely acquisitions of Brevini and the U.S. Manufacturing Corporation facility directly align with Dana's enterprise strategy as they both strengthen our technology portfolio and expand our market reach."

First-Quarter Financial Results  

Sales for the first quarter of 2017 totaled $1.70 billion, compared with $1.45 billion in the same period of 2016, representing a 17% increase. The increase was largely due to new business gains, higher end-market demand in global light-truck markets, and improved demand in global off-highway end markets. Currency was a slight headwind of $6 million due to the relative strength of the U.S. dollar against the euro, British pound, and Mexican peso, partially offset by a stronger Brazilian real. The impact of acquisitions added $80 million in sales compared with the prior year.  

Net income attributable to Dana for the first quarter was $75 million, compared with $45 million in the same period last year. Net income benefited from increased adjusted EBITDA of $57 million, which was partially offset by higher transaction costs attributable to acquisitions completed in this year's first quarter, depreciation and amortization expense, and income taxes. Reported diluted earnings per share were $0.51 in the first quarter, compared with $0.30 in 2016.

Adjusted EBITDA of $205 million provided a 12.1% margin, which was a 190-basis-point improvement over the first quarter of 2016. Profit this quarter benefited from higher sales volume, and each of the business units delivered improved cost performance. Foreign currency rate changes reduced earnings by $10 million from combined translation and transaction losses. Incremental profit of $60 million in the first quarter of this year was due to strong cost performance, higher end-market demand, and new customer programs in the Light Vehicle Driveline, Power Technologies, and Off-Highway Drive and Motion businesses. This was somewhat offset by weaker volumes in commercial vehicle markets. The Brevini and U.S. Manufacturing Corporation (USM) acquisitions added $7 million to the comparison.

Diluted adjusted earnings per share in the first quarter of 2017 were $0.63, compared with $0.34 in the same period last year, primarily driven by the year-over-year earnings improvement.

Operating cash flow in the first quarter was $11 million, compared with a use of $27 million in the same period of 2016. Operating cash flow in the first quarter of 2017 includes a use of $25 million to settle trade payables with USM as part of the cash paid at closing to acquire the USM Warren operation. Inclusive of capital spending of $96 million in the first quarter of 2017, free cash flow was a use of $85 million, a $13 million improvement over the same period last year. Higher earnings and lower interest more than offset the higher level of capital spending, restructuring payments, and transaction costs associated with acquisitions. On significantly higher sales, working capital used during the first quarter, exclusive of the USM trade payable settlement, was comparable with last year's first quarter.

2017 Full-Year Financial Targets   

Dana has affirmed key financial guidance. With the completion of the USM acquisition, full-year 2017 results are expected to be at the higher end of the guidance ranges with the exception of cash flow, due to the above-mentioned settlement of trade payables related to the USM acquisition. 

• Sales of $6.2 to $6.4 billion;
• Adjusted EBITDA of $695 to $725 million;
• Adjusted EBITDA as a percent of sales of 11.2-11.4%;
• Diluted adjusted EPS of $1.60-$1.80;
• Cash flow from operations of $410-$450 million;
• Capital spending of $350-$370 million; and
• Free cash flow of $50-$90 million.

Innovation and Technology Driving Exceptional Customer Satisfaction

Dana's strategic commitment to providing its customers with innovative solutions and world-class customer service is evident by the recognition received across each of its businesses during the quarter. In addition to winning the Automotive News PACE Award for its Victor Reinz multi-layer steel transmission pump gasket in April, Dana received multiple awards from major customers, including FCA, General Motors, John Deere, Manitou, Mercedes Benz, and Volvo.

"The positive customer and industry recognition that Dana has received across all of our business units is tangible proof that our customers acknowledge and appreciate Dana's relentless passion to provide exceptional customer satisfaction and cutting-edge solutions, enabling them to win in their respective markets," states Kamsickas. "We are successfully leveraging our 113 years of expertise and collaborative culture to serve our customers in each of our end markets."

Supporting Growth Through Expansion

In addition to the acquisition of Brevini and the USM facility, Dana also celebrated the grand opening of its new Australian manufacturing facility and broke ground on a new gear manufacturing facility in Győr, Hungary. 

Being in close proximity to major customers enables Dana to better support new business growth, strengthen its supply chain, and deliver technologies to its customers more quickly and cost effectively.