Dana Holding Corporation reported its first-quarter 2011 financial results, including adjusted EDITDA of $181 million. The company had a net loss of $30 million in the quarter, which included $53 million of one-time charges associated with the refinancing and restructuring of debt in January. Excluding these charges, Dana posted first-quarter net income of $23 million.
Strong sales of $1.8 billion – up nearly 20% over the first quarter of 2010 – and continued operating improvements enabled the company to achieve an adjusted EBITDA margin of 10.1%. Diluted adjusted earnings per share in the quarter were $0.34, compared to $0.06 in the prior-year period.
"Dana had another strong quarter as we took decisive steps to expand our global footprint and product offerings," says Dana Executive Chairman John Devine. "We have significantly improved the building blocks for continued growth by reaching an early agreement with our labor unions, restructuring our balance sheet, and strategically investing in key markets."
Free cash flow use of $35 million in the quarter was driven by increased working capital requirements associated with the higher level of sales. Global liquidity continues to exceed $1.1 billion. The company's strong balance sheet, cash position, and financial flexibility are supporting its aggressive, long-term growth plans in emerging markets and the development of new drivetrain, sealing, and thermal technologies.
The light and commercial vehicle markets continue to improve. Light vehicle production was up 5% globally and 14% in North America compared to the same period last year. Commercial vehicle production in the quarter was up 41% in North America.
The off-highway market also reflects growth year-over-year. Strength in mining and construction equipment continues, and agriculture equipment production has benefited from strong commodity prices and increasing farm income.
Growing Presence in Emerging Markets
Dana recently announced it has signed a definitive agreement with Axles India, Ltd. (AIL), to acquire select assets of AIL's commercial truck axle business. This $13 million transaction is consistent with the company's growth objectives for Asia, and is expected to generate approximately $50 million in annual revenue in India's commercial vehicle market, which is growing at a compound annual rate of 8%. Key customers of this business are Ashok Leyland and Mahindra & Mahindra.
In January, Dana agreed to increase ownership of its joint venture, Dongfeng Dana Axle Co., Ltd. (DDAC), to 50%, pending government approval, in the rapidly growing Chinese market. In February, Dana completed a strategic agreement with SIFCO S.A., adding front steer axles to its product portfolio in South America, bringing its total annual sales in the region to more than $1 billion.
New Labor Agreements Reached Early
As previously announced, Dana reached new three-year international labor agreements with the United Auto Workers (UAW) and United Steel Workers (USW), effective June 1, 2011. The agreements were ratified in late March by members of both unions at 20 facilities in the United States and support the company's continued drive for leaner, more competitive operations.
Reaching new agreements nearly 10 weeks before the current contracts expire has also enabled the company and its employees to remain focused on the needs of customers.
Product Technology and Quality
Other product-related highlights from the first quarter that support Dana's growth objectives include:
- The company's global production facilities achieved world-class performance in the area of product quality delivered to customers, with an aggregate single-digit PPM (defective parts per million) score – a company best
- Dana introduced two new products to the commercial vehicle market: the Spicer Pro-40 family of tandem drive axles for heavy-duty trucks, which offers fuel efficiency improvements through significant weight reduction and improved power density, and the Spicer LMSi hub system, which improves driveline reliability and maintenance intervals
- Dana and Bosch Rexroth AG introduced a new hydro-mechanical variable powersplit transmission (HVT) system to the off-highway industry, which has demonstrated fuel savings of more than 20% on front-end loaders when compared with the same vehicle outfitted with a conventional torque converter transmission
- Dana's operation in South Africa was honored by Toyota Motor Corporation with a supplier achievement award for improving the manufacture of Spicer axles for the Toyota Hilux pickup truck
New CEO Named
Roger J. Wood joined Dana earlier this month as president and chief executive officer; he has also been elected to the company's board of directors. He had been an executive vice president and group president at BorgWarner Inc., where he worked for 26 years in a wide range of responsibilities and leadership roles in manufacturing, strategy, and operations.
"Dana's global footprint, quality momentum, and growing cadence of product innovations all provide a great foundation on which to keep winning new business – and delivering more value to our customers and shareholders," Wood says.
Increased Sales and Earnings Guidance for 2011
Dana updated its assumptions and earnings guidance for 2011:
- 2011 revenues are now forecast to increase more than 20% over 2010 versus the previous forecast of more than 17 percent growth
- Adjusted EBITDA is now projected to be $755 million to $775 million versus the previous guidance of $740 million to $760 million; adjusted EBITDA as a percent of sales is still forecast to be more than 10%
- Diluted adjusted earnings per share are expected to total $1.55 to $1.65 per share compared to earlier guidance of $1.50 to $1.60 per diluted adjusted share
- Free cash flow for the year is projected at more than $175 million versus the previous guidance of greater than $150 million