Dana Holding Corporation announced its second-quarter 2011 results, including net income of $68 million and adjusted EBITDA of $201 million, which compared to $9 million and $154 million, respectively, for the prior-year period.
Sales for the quarter were $1.9 billion, up more than 25% over the second quarter of 2010. Higher production volumes and ongoing operating improvements enabled Dana to achieve an adjusted EBITDA margin of 10.4%, compared to 10.1% for the previous and prior-year periods. Diluted adjusted earnings per share (EPS) in the quarter were $0.45, compared to $0.24 in the prior-year period.
Dana generated free cash flow of $44 million during the second quarter. While the company made cash investments in the quarter totaling $137 million in China and India, global liquidity remains strong at $1.2 billion.
"Our second-quarter results show continued and overall positive momentum in our business units and our markets," says Dana President and Chief Executive Officer Roger J. Wood. "New business wins demonstrate that our customers see value in our driveline and power technologies, as well as our global footprint. Our focus is clear: We will continue to develop new products and technologies, address growing customer needs in emerging markets, and improve our organizational effectiveness around the world."
Six-Month Results
Net income for the six months ended June 30, 2011, was $91 million, excluding $53 million of one-time charges associated with the refinancing and restructuring of debt in January; this compares with a net loss of $22 million in the first half of 2010.
Adjusted EBITDA for the first six months of the year was $382 million, up $120 million over the same period in 2010. Sales for the six-month period were $3.7 billion, up $700 million over the same period one year ago.
More Growth Steps in Emerging Markets and the Aftermarket
Dana completed two transactions in June that will enhance its position in the emerging markets of China and India. The company increased its stake in Dongfeng Dana Axle Co., Ltd. (DDAC), a commercial-vehicle axle joint venture based in China, to 50%. DDAC is the sole supplier of medium- and heavy-truck axles to Dongfeng Motor Co., Ltd., which is the largest commercial truck manufacturer in China. With four plants and a technical center, DDAC provides Dana with a major operational hub in the Chinese market, which is larger than all other commercial truck markets around the world combined. Dana engineering, manufacturing, and assembly expertise is already being leveraged to help strengthen DDAC's performance. DDAC had sales of approximately $1 billion in 2010.
Dana also completed the acquisition of the axle drive head and final assembly operations of its Indian joint venture, Axles India, Ltd. Key customers of this business are Ashok Leyland and Mahindra & Mahindra.
Additionally, Dana broke ground in May on a new technical center – its fourteenth globally – in Wuxi, Jiangsu, China, to strengthen engineering support for customers in all vehicle markets. It is expected to be fully operational by the end of 2011.
Finally, Dana broke ground on a new aftermarket distribution center in Gyor, Hungary, to serve the European market. The company's focus on the aftermarket also involved the launch of the new SVL line of drivetrain components for automotive, commercial vehicle, and off-highway customers. The SVL line offers quality replacement parts for older, post-warranty vehicles.
Product Technologies
Customer-driven demand to improve fuel efficiency and reduce emissions continues to drive Dana's product development efforts.
"Our driveline and power technologies engineers have developed a strong pipeline of solutions aimed at boosting fuel economy of vehicles powered by gasoline and diesel engines, as well as electric vehicles and, going forward, fuel cell powertrains," says Wood.
Among the products that Dana introduced in the second quarter were:
- Long passive and active warm-up units. Early tests of this thermal-management technology show fuel savings of up to 4% – achieved by reducing the cold-start phase of internal combustion engines;
- Air-cooled battery technology. This new battery cooling product for electric vehicles complements Dana's existing liquid-cooled solutions; its patent pending design helps overcome the challenge of removing heat from tightly packed battery cells through the use of flexible aluminum fins that create a channel for air to reach the surface of each cell module; and
- Spicer TZL-16 powershift transmissions in Russia and the Commonwealth of Independent States. This transmission improves the ride and performance of big front-end loaders while cutting fuel and maintenance costs.
In addition to fuel efficiency and greenhouse gas rules, heavy-duty truck manufacturers have a more imminent requirement taking effect next month – reducing the stopping distance of on-highway trucks by a government mandated 30%. To this end, Dana and one of its joint ventures, Bendix Spicer Foundation Brake LLC, also introduced improved steer axle and brake components.
"We're pleased with the customer interest – and contracts – tied to our new technologies, and are confident that our technical focus on fuel efficiency and 'green power' solutions overall will continue to help customers build better performing, more efficient vehicles," Wood adds.
As announced, Dana has signed definitive agreements to divest interests in two joint ventures to Getrag in return for $136 million in cash. Selling these interests represents a divestiture of non-strategic assets and supports Dana's ongoing focus on its core strategic products, which include proprietary all-wheel-drive technologies.
Increased Guidance for 2011
Dana updated its assumptions and earnings guidance for 2011:
- 2011 revenues are now expected to increase more than 25% over 2010 versus the previous forecast of more than 20% growth;
- Adjusted EBITDA is now projected to be $765 million to $785 million versus the previous guidance of $755 million to $775 million;
- Diluted adjusted earnings per share are expected to total $1.60 to $1.70 compared to earlier guidance of $1.55 to $1.65 per diluted adjusted share; and
- Free cash flow for the year is projected at more than $200 million versus the previous guidance of greater than $175 million.
