Dana Incorporated announces strong preliminary financial results for 2017 and guidance for 2018. Preliminary sales and adjusted EBITDA for 2017 are in line with the company's previous guidance. The 2018 guidance reflects significant sales, earnings, and cash flow growth. The increased outlook for 2019 represents a significant improvement from the prior targets. The company also announced that it will increase its quarterly dividend from $0.06 to $0.10 per share, and its board of directors has authorized the repurchase of up to $100 million of common shares over the next 2 years.
Company Announces Preliminary 2017 Financial Results
- Sales of $7.2 billion, an increase of $1.4 billion or growth of 24%;
- Adjusted EBITDA of $835 million, an increase of $175 million; and
- Margin of 11.6% of sales, an expansion of 30 basis points.
Preliminary sales for the year approximated $7.2 billion, about 24% higher than 2016, primarily due to strong end-market demand, acquisitions, conversion of sales backlog, and favorable currency.
Preliminary adjusted EBITDA for 2017 approximated $835 million, or 11.6% of sales, a 30 basis-point improvement over 2016.
"Over the course of this past year, we made great strides in positioning Dana for long-term success. By delivering profitable organic and inorganic growth in 2017, we have established the foundation for our future as we continue to execute our enterprise strategy," says James Kamsickas, Dana President and Chief Executive Officer.
Company Updates Sales Backlog
Dana's 2018-2020 sales backlog as of Dec. 31, 2017, has improved to $800 million, a 7% increase over the prior three-year backlog. The increase in the backlog is driven by new business wins as currency and market expectations have remained stable.
Company Issues 2018 Guidance
- Sales of $7.5 to $7.7 billion;
- Adjusted EBITDA of $910 to $960 million;
- Adjusted EBITDA as a percent of sales of 12.1-12.5%;
- Diluted adjusted EPS1 of $2.60 to $2.90;
- Operating cash flow of approximately 7.5% of sales;
- Capital spending of approximately 4.0% of sales; and
- Free cash flow of approximately 3.5% of sales.
Strong end-market demand and new-business backlog are driving an expected 6% sales growth in 2018. Continued strong demand for key light-truck programs is expected into 2018, as is higher end-market demand for off-highway equipment and commercial vehicles. Increased sales from the new-business backlog are expected to add approximately $300 million, and improved end-market demand is expected to accrete $100 million.
Adjusted EBITDA in 2018 is expected to improve by approximately $100 million, or 70 basis points of margin improvement. This improvement is driven primarily by higher sales levels, ongoing efficiency improvements, and acquisition synergies.
"The combination of our strong financial performance in 2017 and outlook for the future provides increased confidence in our cash flows, allowing us to increase our quarterly dividends by 67%," says Jonathan Collins, Executive Vice President and Chief Financial Officer of Dana. "Our new share repurchase authorization, which extends through the end of next year, will allow us to mitigate the ambient level of dilution."
Company Updates 2019 Targets
Dana's sales, adjusted EBITDA, and diluted adjusted EPS are expected to increase by $700 million, $90 million, and $0.40, respectively, compared with the prior 2019 target ranges, due to the impact of stronger than expected end-market demand, increased sales backlog, and continued cost discipline. Adjusted EBITDA margin and free cash flow as a percentage of sales are expected to remain in line with prior target ranges at 12.8% and 5.0%.
Share Repurchase Program
Dana announces that its board of directors approved a new share repurchase program, authorizing the purchase of up to $100 million of common shares over the next 2 years. The company expects any shares repurchased to be in the open market or through privately negotiated transactions and expects to have sufficient free cash flow and liquidity during this period to support this initiative. Execution under this program is subject to prevailing market conditions, available growth opportunities, and other considerations.
