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Dana Incorporated Announces Record First-quarter 2019 Financial Results

10th consecutive quarter of year-over-year sales growth

MAUMEE, Ohio, May 2, 2019 /PRNewswire/ --

Dana Incorporated logo. (PRNewsFoto/Dana Incorporated)

First-quarter Highlights

  • Record first-quarter sales of $2.2 billion, an increase of $25 million compared with first-quarter 2018; represents 5 percent growth on a constant-currency basis
  • Net income attributable to Dana of $98 million; diluted EPS of $0.68
  • Record adjusted EBITDA of $257 million, an increase of $9 million
  • Margin of 11.9 percent of sales, an expansion of 30 basis points
  • Record diluted adjusted EPS of $0.78, an improvement of 4 percent over first-quarter 2018
  • Awarded 2019 Automotive News PACE Award
  • Completed purchase of SME Group; Drive Systems segment from Oerlikon Group

Dana Incorporated (DAN) today announced strong financial results for the first quarter of 2019.

"Dana achieved record sales this quarter, which represents our 10th consecutive quarter of year-over-year sales growth," said James Kamsickas, Dana president and chief executive officer.  "We remain focused on strong execution and top-line growth as we work to fully integrate our recent acquisitions, launch new products, and position the company for success as mobility markets transition to electric propulsion."

First-quarter 2019 Financial Results

Sales for the first quarter of 2019 totaled $2.16 billion, compared with $2.14 billion in the same period of 2018, representing a $25 million improvement.  On a constant-currency basis, sales grew 5 percent over the same period last year.  The increase was attributable to conversion of sales backlog, higher end-market demand, and one month of benefit from the ODS acquisition, partially offset by unfavorable currency translation.

Dana reported net income of $98 million for the first quarter of 2019, compared with net income of $108 million in the same period of 2018.  The difference was primarily due to $32 million of one-time costs related to recent acquisitions, including transaction expenses, financing charges, and elevated restructuring expenses to support cost synergies.  Partially offsetting these expenses was lower income tax expense in the first quarter of 2019 due to the release of certain valuation allowances in the U.S.

Reported diluted earnings per share were $0.68, compared with $0.73 in the first quarter of 2018.

Adjusted EBITDA for the first quarter of 2019 was $257 million, compared with $248 million for the same period last year.  Profit in the first quarter of 2019 benefited from both organic and inorganic growth, partially offset by higher commodity costs and the impact of unfavorable currency translation related to the strengthening of the U.S. dollar.

Diluted adjusted earnings per share were $0.78 in the first quarter of 2019, compared with $0.75 in the same period last year.  

Operating cash flow in the first quarter of 2019 was a use of $16 million, compared with a use of $28 million in the same period of 2018.  Adjusted free cash flow was a use of $114 million, compared with a use of $93 million in the first quarter of 2018.  Higher earnings and lower year-over-year working capital requirements were more than offset by increased investment to support new program launches.

The company repurchased 1.4 million shares of common stock in the first quarter of 2019, offsetting the dilutive impact of stock grants.

Company Affirms 2019 Full-year Financial Targets

The company affirmed previously announced guidance ranges of:

  • Sales of $8.950 to $9.350 billion;
  • Adjusted EBITDA of $1.085 billion to $1.165 billion, an implied adjusted EBITDA margin of approximately 12.3 percent at the midpoint of the range;
  • Diluted adjusted EPS1 of $2.95 to $3.45;
  • Operating cash flow of approximately 5.5 percent; and
  • Adjusted free cash flow of approximately 3.0 percent.

1Net income and diluted EPS guidance are not provided, as discussed below in Non-GAAP Financial Information.

"Our strong first quarter supports delivering our full-year guidance and keeps us firmly on the path to achieve our long-term targets," said Jonathan Collins, executive vice president and chief financial officer of Dana.  "Our outlook for 2019 and 2020 continues to be positive due to our robust sales backlog, stable end markets, and accretive acquisitions."

Dana to Host Conference Call at 9 a.m. Today

Dana will discuss its 2019 first-quarter results in a conference call at 9 a.m. EDT today.  Participants may listen to the audio portion of the conference call either through audio streaming online or by telephone.  Slide viewing is available online via a link provided on the Dana investor website: www.dana.com/investors.  U.S. and Canadian locations should dial 1-888-311-4590 and international locations should call 1-706-758-0054.  Please enter conference I.D. 1847959 and ask for the "Dana Incorporated's Financial Webcast and Conference Call."  Phone registration will be available starting at 8:30 a.m. EDT

An audio recording of the webcast will be available after 5 p.m. EDT on May 2 by dialing 1-855-859-2056 (U.S. or Canada) or 1-404-537-3406 (international) and entering conference I.D. 1847959.  A webcast replay will also be available after 5 p.m. EDT and may be accessed via Dana's investor website.

Non-GAAP Financial Information

This release refers to adjusted EBITDA, a non-GAAP financial measure which we have defined as net income before interest, income taxes, depreciation, amortization, equity grant expense, restructuring expense, non-service cost components of pension and other postretirement benefit costs, and other adjustments not related to our core operations (gain/loss on debt extinguishment, pension settlements, divestitures, impairment, etc.). Adjusted EBITDA is a measure of our ability to maintain and continue to invest in our operations and provide shareholder returns. We use adjusted EBITDA in assessing the effectiveness of our business strategies, evaluating and pricing potential acquisitions and as a factor in making incentive compensation decisions. In addition to its use by management, we also believe adjusted EBITDA is a measure widely used by securities analysts, investors and others to evaluate financial performance of our company relative to other Tier 1 automotive suppliers. Adjusted EBITDA should not be considered a substitute for income before income taxes, net income or other results reported in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

Diluted adjusted EPS is a non-GAAP financial measure, which we have defined as adjusted net income divided by adjusted diluted shares.  We define adjusted net income as net income (loss) attributable to the parent company, excluding any nonrecurring income tax items, restructuring charges, amortization expense, and other adjustments not related to our core operations (as used in adjusted EBITDA), net of any associated income tax effects.  We define adjusted diluted shares as diluted shares as determined in accordance with GAAP based on adjusted net income.  This measure is considered useful for purposes of providing investors, analysts, and other interested parties with an indicator of ongoing financial performance that provides enhanced comparability to EPS reported by other companies.  Diluted adjusted EPS is neither intended to represent nor be an alternative measure to diluted EPS reported under GAAP.

Adjusted free cash flow is a non-GAAP financial measure, which we have defined as cash provided by (used in) operating activities excluding voluntary pension contributions, less purchases of property, plant, and equipment.  We believe this measure is useful to investors in evaluating the operational cash flow of the company inclusive of the spending required to maintain the operations.  Adjusted free cash flow is neither intended to represent nor be an alternative to the measure of net cash provided by (used in) operating activities reported under GAAP.  Adjusted free cash flow may not be comparable to similarly titled measures reported by other companies.

We have not provided reconciliations of preliminary and projected adjusted EBITDA and diluted adjusted EPS to the most comparable GAAP measures of net income and diluted EPS. Providing net income and diluted EPS guidance is potentially misleading and not practical given the difficulty of projecting event-driven transactional and other non-core operating items that are included in net income and diluted EPS, including restructuring actions, asset impairments, and income tax valuation adjustments. Reconciliations of these non-GAAP measures with the most comparable GAAP measures for historical periods are indicative of the reconciliations that will be prepared upon completion of the periods covered by the non-GAAP guidance. Please reference the "Non-GAAP Financial Information" accompanying our quarterly earnings conference call presentations on our website at www.dana.com/investors for our GAAP results and the reconciliations of these measures, where used, to the comparable GAAP measures.

Forward-Looking Statements

Certain statements and projections contained in this news release are, by their nature, forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are based on our current expectations, estimates and projections about our industry and business, management's beliefs, and certain assumptions made by us, all of which are subject to change.  Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words.  These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. 

Dana's Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss important risk factors that could affect our business, results of operations and financial condition.  The forward-looking statements in this news release speak only as of this date. Dana does not undertake any obligation to revise or update publicly any forward-looking statement for any reason.

About Dana Incorporated

Dana is a world leader in providing power-conveyance and energy-management solutions for vehicles and machinery.  The company's portfolio improves the efficiency, performance, and sustainability of light vehicles, commercial vehicles, and off-highway equipment.  From axles, driveshafts, and transmissions to electrodynamic, thermal, sealing, and digital solutions, the company enables the propulsion of conventional, hybrid, and electric-powered vehicles by supplying nearly every vehicle and engine manufacturer in the world.  Founded in 1904, Dana employs more than 36,000 people who are committed to delivering long-term value to customers.  Based in Maumee, Ohio, USA, and with locations in 33 countries across six continents, the company reported sales of $8.1 billion in 2018.  Having established a dynamic, high-performance culture, the company has been recognized globally as a top employer, with significant honors in Asia, India, Italy, Mexico, and the United States.  Learn more at www.dana.com.

 

 DANA INCORPORATED 




 Consolidated Statement of Operations (Unaudited) 




 For the Three Months Ended March 31, 2019 and 2018 









Three Months Ended

 (In millions, except per share amounts) 

March 31,


2019


2018

 Net sales 

$      2,163


$      2,138

 Costs and expenses 




     Cost of sales 

1,863


1,831

     Selling, general and administrative expenses 

136


130

     Amortization of intangibles 

2


2

     Restructuring charges, net 

9


1

 Other expense, net 

(13)



 Earnings before interest and income taxes 

140


174

 Interest income 

2


3

 Interest expense 

27


24

 Earnings before income taxes 

115


153

 Income tax expense 

20


48

 Equity in earnings of affiliates 

6


6

 Net income 

101


111

     Less: Noncontrolling interests net income 

4


2

     Less: Redeemable noncontrolling interests net income (loss) 

(1)


1

 Net income attributable to the parent company 

$            98


$         108





 Net income per share available to common stockholders 




    Basic 

$        0.68


$        0.74

    Diluted 

$        0.68


$        0.73





 Weighted-average common shares outstanding - Basic 

143.9


145.6

 Weighted-average common shares outstanding - Diluted 

144.8


147.5


 

 DANA INCORPORATED 

 Consolidated Statement of Comprehensive Income (Unaudited) 

 For the Three Months Ended March 31, 2019 and 2018 








Three Months Ended

 (In millions) 

March 31,



2019


2018

 Net income 

$         101


$         111

 Other comprehensive income (loss), net of tax: 





Currency translation adjustments

27


10


Hedging gains and losses

5


(8)


Defined benefit plans

5


7


Other comprehensive income

37


9

Total comprehensive income

138


120


Less: Comprehensive income attributable to noncontrolling interests

(2)


(2)


Less: Comprehensive income attributable to redeemable noncontrolling interests

(4)


(2)

Comprehensive income attributable to the parent company

$         132


$         116


 

 DANA INCORPORATED 

 Consolidated Balance Sheet (Unaudited) 

 As of March 31, 2019 and December 31, 2018 







 (In millions, except share and per share amounts) 

March 31,


December 31,




2019


2018

 Assets 




 Current assets 




 Cash and cash equivalents 

$            383


$            510

 Marketable securities 

20


21

 Accounts receivable 





 Trade, less allowance for doubtful accounts of $8 in 2019 and $9 in 2018 

1,416


1,065


 Other 

202


178

 Inventories 

1,282


1,031

 Other current assets 

140


102



 Total current assets 

3,443


2,907

 Goodwill 

456


264

 Intangibles 

185


164

 Deferred tax assets 

464


445

 Other noncurrent assets 

87


80

 Investments in affiliates 

226


208

 Operating lease assets 

181



 Property, plant and equipment, net 

2,242


1,850



 Total assets 

$        7,284


$        5,918







 Liabilities and equity 




 Current liabilities 




 Short-term debt 

$              14


$                8

 Current portion of long-term debt 

41


20

 Accounts payable 

1,448


1,217

 Accrued payroll and employee benefits 

207


186

 Taxes on income 

62


47

 Current portion of operating lease liabilities 

39



 Other accrued liabilities 

302


269



 Total current liabilities 

2,113


1,747

 Long-term debt, less debt issuance costs of $29 in 2019 and $18 in 2018 

2,425


1,755

 Noncurrent operating lease liabilities 

147



 Pension and postretirement obligations 

602


561

 Other noncurrent liabilities 

353


313



 Total liabilities 

5,640


4,376

 Commitments and contingencies 




 Redeemable noncontrolling interests 

105


100

 Parent company stockholders' equity 





 Preferred stock, 50,000,000 shares authorized, $0.01 par value, 






 no shares outstanding 

-


-


 Common stock, 450,000,000 shares authorized, $0.01 par value, 






 143,901,808 and 144,663,403 shares outstanding 

2


2


 Additional paid-in capital 

2,372


2,368


 Retained earnings 

538


456


 Treasury stock, at cost (10,095,558 and 8,342,185 shares) 

(150)


(119)


 Accumulated other comprehensive loss 

(1,328)


(1,362)



 Total parent company stockholders' equity 

1,434


1,345

 Noncontrolling interests 

105


97



 Total equity 

1,539


1,442



 Total liabilities and equity 

$        7,284


$        5,918


 

 DANA INCORPORATED 

 Consolidated Statement of Cash Flows (Unaudited) 

 For the Three Months Ended March 31, 2019 and 2018 






Three Months Ended

 (In millions) 

March 31,


2019


2018

 Operating activities 




 Net income 

$         101


$         111

 Depreciation 

73


64

 Amortization 

4


3

 Amortization of deferred financing charges 

1


1

 Earnings of affiliates, net of dividends received 

(5)


(5)

 Stock compensation expense 

5


4

 Deferred income taxes 

(14)


12

 Pension contributions, net 

4



 Change in working capital 

(175)


(216)

 Other, net 

(10)


(2)

 Net cash used in operating activities (1) 

(16)


(28)





 Investing activities 




 Purchases of property, plant and equipment (1) 

(98)


(65)

 Acquisition of businesses, net of cash acquired 

(606)



 Purchases of marketable securities 

(5)


(17)

 Proceeds from sales of marketable securities 



4

 Proceeds from maturities of marketable securities 

6


11

 Settlements of undesignated derivatives 

(20)



 Other, net 

(1)



 Net cash used in investing activities 

(724)


(67)





 Financing activities 




 Net change in short-term debt 

(2)


(7)

 Proceeds from long-term debt 

675



 Repayment of long-term debt 

(9)


(1)

 Deferred financing payments 

(12)



 Dividends paid to common stockholders 

(14)


(15)

 Distributions to noncontrolling interests 

(1)


(1)

 Contributions from noncontrolling interests 

1



 Repurchases of common stock 

(25)



 Other, net 

(3)


(4)

 Net cash provided by (used in) financing activities 

610


(28)





 Net decrease in cash, cash equivalents and restricted cash 

(130)


(123)

 Cash, cash equivalents and restricted cash − beginning of period  

520


610

 Effect of exchange rate changes on cash balances 

5


14

 Less: Cash contributed to disposal group 



(10)

 Cash, cash equivalents and restricted cash − end of period  

$         395


$         491





 Non-cash investing activity 




 Purchases of property, plant and equipment held in accounts payable 

$            84


$            81


 

 DANA INCORPORATED 






 Reconciliation of Net Cash Provided by Operating Activities to 

   Free Cash Flow and Adjusted Free Cash Flow (Unaudited) 








Three Months Ended

 (In millions) 

March 31,


2019


2018

 Net cash used in operating activities 


$        (16)



$        (28)

 Purchase of property, plant and equipment 


(98)



(65)

 Free cash flow 


(114)



(93)

 Discretionary pension contributions 


-



-

 Adjusted free cash flow 


$     (114)



$        (93)








2019





Guidance




 Net cash provided by operating activities 

 ~ 

$       525




 Purchase of property, plant and equipment 

 ~ 

(415)




 Free cash flow 


110




 Discretionary pension contributions 

 ~ 

165




 Adjusted free cash flow 

 ~ 

$       275





 

 DANA INCORPORATED 




 Segment Sales and Segment EBITDA (Unaudited) 

 For the Three Months Ended March 31, 2019 and 2018 







Three Months Ended

 (In millions) 

March 31,


2019


2018

 Sales 




     Light Vehicle

$           906


$           950

     Commercial Vehicle

431


400

     Off-Highway

552


492

     Power Technologies

274


296

 Total Sales 

$        2,163


$        2,138





 Segment EBITDA 




     Light Vehicle

$           102


$           103

     Commercial Vehicle

41


34

     Off-Highway

82


72

     Power Technologies

34


45

 Total Segment EBITDA 

259


254

 Corporate expense and other items, net 

(2)


(6)

 Adjusted EBITDA 

$           257


$           248


 

 DANA INCORPORATED 




 Reconciliation of Segment and Adjusted EBITDA to Net Income (Unaudited) 

 For the Three Months Ended March 31, 2019 and 2018 






Three Months Ended

 (In millions) 

March 31,


2019


2018

 Segment EBITDA 

$           259


$           254

     Corporate expense and other items, net

(2)


(6)

 Adjusted EBITDA 

257


248

     Depreciation

(73)


(64)

     Amortization

(4)


(3)

     Non-service cost components of pension and OPEB costs

(6)


(3)

     Restructuring charges, net

(9)


(1)

     Stock compensation expense

(5)


(4)

     Strategic transaction expenses, net of transaction breakup fee income

(13)


1

     Acquisition related inventory adjustments

(4)



     Non-income tax legal judgment

6



     Other items

(9)



 Earnings before interest and income taxes 

140


174

     Interest expense

27


24

     Interest income

2


3

 Earnings before income taxes 

115


153

 Income tax expense 

20


48

 Equity in earnings of affiliates 

6


6

 Net income 

$           101


$           111


 

 DANA INCORPORATED 


 Diluted Adjusted EPS (Unaudited) 



 For the Three Months Ended March 31, 2019 and 2018 









 (In millions, except per share amounts) 








Three Months Ended




March 31,




2019


2018

 Net income attributable to parent company 


$             98


$           108

 Items impacting income before income taxes: 






 Restructuring charges 


9


1


 Amortization of intangibles 


4


3


 Strategic transaction expenses, net of transaction breakup fee income 


13


1


 Loss on deal contingent forward 


13




 Acquisition related inventory adjustments 


4




 Non-income tax legal judgment 


(6)




 Other items 


(1)


(2)

 Items impacting income taxes: 






 Net income tax expense on items above 


(5)


(1)


 Net tax benefit attributable to valuation allowance adjustments and 






     state tax law changes 


(16)



 Adjusted net income 


$           113


$           110







 Diluted shares - as reported 


144.8


147.5

 Adjusted diluted shares 


144.8


147.5







 Diluted adjusted EPS 


$          0.78


$          0.75


Cision

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