Dana Incorporated has announced strong financial results for 2018 and affirmed 2019 guidance.
Full-Year Highlights
- Record sales of $8.143 billion, an increase of $934 million or growth of 13%, compared with 2017
- Net income attributable to Dana of $427 million; diluted EPS of $2.91
- Record adjusted EBITDA of $957 million, an increase of $122 million, or growth of 15%
- Record margin of 11.8% of sales, an expansion of 20 basis points
- Record diluted adjusted EPS of $2.97, an improvement of 18% over 2017
- Operating cash flow of $568 million
- Cash dividends of $0.40 per share declared in 2018, a 67% increase over dividends declared in 2017
- Adjusted free cash flow of $243 million, a 51% improvement over 2017
- Second consecutive year of double-digit sales growth, adjusted EBITDA, and adjusted free cash flow growth
- Company expects to achieve nearly $1 billion in sales growth for third consecutive year in 2019; strong sales backlog of $700 million through 2021
- Acquisition of SME Group enhances electromobility capabilities
- Company expects to complete acquisition of Oerlikon Drive Systems by March 1, 2019
"Dana achieved record annual sales, profit, and profit margin performance in 2018, and we increased adjusted free cash flow by more than 50%. At the same time, we organically and inorganically established complete e-Propulsion capability to support all our end markets," says James Kamsickas, Dana President and Chief Executive Officer. "Through the outstanding efforts and commitment of our associates and the support of our customers, we have achieved exceptional results and expect to continue this strong trajectory in 2019, including increasing sales by nearly one billion dollars for the third consecutive year."
Fourth-quarter 2018 Financial Results
Sales for the fourth quarter of 2018 totaled $1.973 billion, compared with $1.837 billion in the same period of 2017, representing a 7% improvement. The increase was largely attributable to higher end-market demand in all business units, conversion of sales backlog, and favorable currency translation.
Dana reported net income of $100 million for the fourth quarter of 2018, compared with a net loss of $104 million in the same period of 2017. The increase was primarily due to a $186 million charge related to the enactment of U.S. tax reform in the fourth quarter of 2017 and increased operating earnings associated with higher sales in the fourth quarter of 2018.
Reported diluted earnings per share were $0.69, compared with a loss of $0.74 in the fourth quarter of 2017.
Adjusted EBITDA for the fourth quarter of 2018 was $223 million, compared with $197 million for the same period last year. Profit in the fourth quarter of 2018 benefited from higher end-market demand, conversion of the sales backlog, and acquisition synergies, partially offset by higher commodity costs.
Diluted adjusted earnings per share were $0.71 in the fourth quarter of 2018, compared with $0.62 in the same period last year.
Operating cash flow in the fourth quarter of 2018 was $331 million, compared with $193 million in the same period of 2017. Adjusted free cash flow was $241 million, compared with $51 million in the fourth quarter of 2017, driven by higher earnings and lower capital spending, partially offset by higher working capital requirements to support new program launches in 2018.
Full-year 2018 Financial Results
Sales for 2018 were $8.143 billion, $934 million higher than 2017, primarily due to strong end-market demand, conversion of sales backlog, and to a lesser extent, acquisitions and recovery of material inflation.
Net income in 2018 was $427 million, compared with net income of $111 million in 2017, which included the fourth-quarter non-recurring tax item in 2017 referenced above.
Reported diluted earnings per share were $2.91, compared with $0.71 in 2017.
Adjusted EBITDA for 2018 was $957 million, or 11.8% of sales, 20 basis points higher than 2017. Stronger end-market demand more than offset the margin headwind attributable to the effects of higher raw material prices and the associated material recovery reflected in sales.
Diluted adjusted earnings per share for 2018 were $2.97, compared with $2.52 in 2017, an 18% increase, primarily reflecting higher year-over-year earnings improvement.
The company reported operating cash flow of $568 million in 2018, an improvement of $14 million compared with 2017. Adjusted free cash flow was $243 million, or 3% of sales, compared with $161 million, or 2% of sales in 2017. The improvement was driven by higher earnings and lower capital spending, partially offset by higher working capital requirements to support sales growth.
Company Affirms 2019 Full-year Financial Targets
The company affirmed guidance for Dana as currently consolidated, as well as guidance resulting from the completion of the acquisition of the Drive Systems segment of the Oerlikon Group (ODS), which is expected to close by March 1. Guidance ranges are:
- Sales of $8.250 to $8.550 billion; or $8.950 to $9.350 billion including ODS;
- Adjusted EBITDA of $995 million to $1.055 billion, an implied adjusted EBITDA margin of approximately 12.2% at the midpoint of the range; $1.085 billion to $1.165 billion including ODS, an implied adjusted EBITDA margin of approximately 12.3% at the midpoint of the range;
- Diluted adjusted EPS of $2.90 to $3.30; $2.95 to $3.45 including ODS;
- Operating cash flow of approximately 6.5% of sales; 5.5% including ODS; and
- Adjusted free cash flow of approximately 4.0% of sales; 3.0% including ODS.
"Strong customer demand and delivery of our sales backlog, combined with our recent acquisitions, allowed us to achieve a record performance in 2018," says Jonathan Collins, Executive Vice President and Chief Financial Officer of Dana. "We have a positive outlook for 2019 due to stable end markets, our solid sales backlog, and accretive acquisitions, all of which we expect to provide us a third consecutive year of double-digit sales and profit growth."
