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Dana Incorporated Announces Second-Quarter 2017 Financial Results, Raises Full-Year Guidance

Highlights

  • Full-year guidance raised:
    • Sales guidance increased by 8 percent
    • Adjusted EBITDA guidance increased by 11 percent
    • Margin guidance increased by 30 basis points
    • Diluted adjusted EPS guidance increased by 31 percent
    • Free cash flow guidance increased by 67 percent

Dana Incorporated (NYSE: DAN) today announced financial results for the second quarter of 2017.

"We continue to execute our strategy by expanding our markets and winning new business while converting our sales backlog into profitable growth. This quarter's strong sales, profit, and cash flow are driven by improved market conditions, our recent acquisitions, and a focus on operational execution," said James Kamsickas, Dana president and chief executive officer. "We have raised our financial guidance this year consistent with our continued strong operating performance and improved customer demand. The solid foundation that we have established will serve as an enabler for Dana to continue to deliver on our commitments beyond 2017."

Second-Quarter Financial Results
Sales for the second quarter of 2017 totaled $1.84 billion, compared with $1.55 billion in the same period of 2016, an overall increase of 19 percent. The increase was driven by recent acquisitions that contributed $150 million, new customer programs, higher end-market demand in global light-truck markets, and improved demand in global off-highway end markets. Currency remained a slight headwind to sales of $10 million. Excluding acquisitions and currency effects, stronger market demand and new business generated 11 percent organic sales growth.

Net income attributable to Dana for the second quarter of 2017 was $71 million, compared with $53 million in the same period last year. Net income benefited from increased adjusted EBITDA of $39 million, partially offset by higher depreciation and amortization, acquisition-related costs, restructuring expenses, and income taxes. Costs associated with debt refinancing reduced net income by $6 million in this year's second quarter and by $17 million in 2016. Reported diluted earnings per share were $0.47 in the second quarter of 2017, compared with $0.36 in the same period last year.

Adjusted EBITDA of $217 million provided an 11.8 percent margin, a 30 basis-point improvement over the second quarter of 2016. The year-over-year increase of $39 million was driven by stronger end-market demand and conversion of new business backlog, with higher organic sales volume benefiting adjusted EBITDA by $26 million. The adjusted EBITDA contribution from acquisitions was $17 million, while changes in foreign currency rates reduced earnings by $4 million from combined translation and transaction losses.

Diluted adjusted earnings per share in the second quarter of 2017 were $0.68, compared with $0.53 in the same period last year, primarily driven by the year-over-year earnings improvement.

Operating cash flow in this year's second quarter was $169 million, compared with $167 million in the same period of 2016. Inclusive of capital spending of $73 million in the second quarter of 2017, free cash flow was $96 million, $12 million lower than the same period last year. Higher earnings were offset by increased working capital investment and increased capital spending to support new business launches, as well as higher transaction costs associated with acquisitions.

  • Adjusted EBITDA as a percent of sales of 11.6 to 11.8 percent;

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

Dana Recognized with Multiple Awards for World-Class Innovation, Quality, Service, and Value
Dana continues to be recognized around the world as a company that truly collaborates with its customers to provide industry-leading technology, quality, and service.

This quarter, Dana received several major awards from valued customers. In May, the company was honored by FCA as the 2017 North American Innovation Supplier of the Year. This award recognizes extraordinary commitment to innovation, quality, warranty, cost, and delivery. Specifically, Dana was acknowledged for developing a technologically advanced heat exchanger that boosts engine power for the induction-air system of a future FCA vehicle.

Dana was also recognized by Ford Motor Co. for quality, value, and innovation, receiving a Ford World Excellence Award in the category of "Aligned Business Framework."

Five Dana manufacturing facilities located in Lima, Ohio; Sterling, Illinois; Danville, Kentucky; Wellingborough, U.K.; and Sorocaba, Brazil, were honored by PACCAR for excellent quality and warranty performance in providing products that achieved 10 PPM or better level of quality.

In addition, six of Dana's Power Technologies manufacturing plants received the prestigious General Motors Quality Excellence Award recognizing only top-performing supplier manufacturing facilities that have met or exceeded a very stringent set of quality performance criteria. The Power Technologies business was also a recipient of the GM Supplier Impact Award for outstanding supply-chain performance.

Lastly, the Dana China Technology Center in Wuxi, Jiangsu Province, was recognized for outstanding performance in quality and delivery by Mahindra.

Dana to Host Conference Call at 9 a.m. Today
Dana will discuss its second-quarter results in a conference call at 9 a.m. EDT today. Participants may listen to the conference call via audio streaming online or telephone. Slide viewing is available via Dana's investor website: www.dana.com/investors. U.S. and Canadian locations should dial 1-888-311-4590 and international locations should dial 1-706-758-0054. Please enter conference I.D. 51037995 and ask for the "Dana Incorporated's Financial Webcast and Conference Call." Phone registration will be available starting at 8:30 a.m.

An audio recording of the webcast will be available after 5 p.m. today by dialing 1-855-859-2056 (U.S. or Canada) or 1-404-537-3406 (international) and entering conference I.D. 51037995. A webcast replay will be available after 5 p.m. today 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, taxes, depreciation, amortization, equity grant expense, restructuring expense 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 and impairment expense, 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.

Free cash flow is a non-GAAP financial measure, which we have defined as cash provided by (used in) operating activities, 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. 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. Free cash flow may not be comparable to similarly titled measures reported by other companies.

The accompanying financial information provides...


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