Dana Corporation Reports Preliminary Fourth-Quarter and Full-Year 2005 Results
TOLEDO, Ohio, March 22 -- Dana Corporation (BULLETIN BOARD: DCNAQ) today reported preliminary, unaudited consolidated financial results for the quarter and full year ended Dec. 3, 20051, 2005.
Fourth-Quarter 2005 Results
Sales for the fourth quarter of 2005 were $2,046 million, compared to $1,988 million during the same period in 2004. The company expects to report a net loss of $376 million for the quarter, including a loss from continuing operations of $231 million. This compares to a net loss of $136 million in the fourth quarter of 2004, which included a loss from continuing operations of $72 million.
The fourth-quarter 2005 net loss will include unusual charges expected to total $230 million, after tax. These include:
-- Charges of $123 million related to the previously announced planned
divestitures of the company's non-core engine hard parts, fluid
products, and pump products businesses that are currently held for sale
and will be classified as discontinued operations;
-- Goodwill impairment of $53 million;
-- Realignment charges and related asset impairments of $45 million;
-- A change in accounting related to the recognition of asset retirement
obligations of $2 million; and
-- A loss of $7 million on asset sales.
The balance of the fourth-quarter 2005 loss - expected to total $146 million, after tax - will be from operations. Continuing operations, before unusual items, are expected to generate a loss of $126 million in the fourth quarter of 2005 as compared to income of $54 million for the same period in 2004. Discontinued operations are expected to produce a loss of $20 million, before unusual items, in the fourth quarter of 2005, which compares to a loss of $19 million in the previous year's fourth quarter.
Full-Year 2005 Results
Sales of continuing operations for the full year 2005 were $8,611 million, compared to $7,775 million in 2004. The company expects to report a 2005 net loss of $1,602 million versus net income of $62 million in 2004. Included in the net loss for 2005 is an expected loss from continuing operations of $1,172 million compared to income from continuing operations of $72 million in 2004. In addition to the unusual fourth-quarter 2005 charges totaling $230 million, the year-on-year change in earnings is expected to be driven primarily by unusual items recorded in the third quarter of 2005. These items totaled $1,209 million and included:
-- The provision of a $918 million valuation allowance to reduce Dana's
net U.S. and U.K. deferred tax assets, comprised of $835 million of
deferred tax assets as of Dec. 31, 2004, and additional benefits
recognized between the beginning of the year and June 30, 2005;
-- An impairment charge of $275 million, after tax, to reduce the book
value of certain assets of the non-core businesses that are now held
for sale; and
-- Aggregate charges of approximately $16 million related to the sale of
Dana's domestic fuel rail business and the dissolution of an engine
bearings joint venture.
Adjusted for unusual items, continuing operations are expected to generate an after-tax loss of $215 million in 2005, compared to income of $165 million in 2004. Discontinued operations, on the same basis, are expected to report an after-tax loss of $36 million in 2005, compared to income of $48 million in the prior year. Results from 2004 included income from the automotive aftermarket businesses that were sold in November 2004.
Unusual items of $151 million, after tax, in 2004 included $171 million of charges recorded in the fourth quarter, as well as $20 million of net gains reported earlier in the year. The fourth-quarter 2004 charges included costs associated with completing the divestiture of the company's automotive aftermarket businesses, two facility closures and other manufacturing realignments, and the repurchase of approximately $900 million of long-term debt.
Business Segment Results for Continuing Operations
Sales in the Automotive Systems Group totaled $1,414 million in the fourth quarter of 2005 and $5,941 million for the full year 2005, compared to $1,387 million and $5,384 million respectively during the fourth quarter and full year 2004. On an EBIT basis, the group expects to record income of $6 million during the fourth quarter of 2005 and $187 million for the full year 2005, compared to $49 million and $300 million during the respective periods in 2004.
Sales in the Heavy Vehicle Technologies and Systems Group totaled $626 million in the fourth quarter of 2005 and $2,640 million for the full year 2005, compared to $580 million and $2,299 million respectively during the fourth quarter and full year 2004. On an EBIT basis, the group expects to record a loss of $9 million during the fourth quarter of 2005 and income of $72 million for the full year 2005, compared to earnings of $36 million and $161 million during the respective periods in 2004.
2005 Form 10-K Filing and Investor Communications
Dana will not file its 2005 Form 10-K by the March 31, 2006, extended filing date because of the additional time required to complete its financial statements and the related non-financial disclosures, in light of the company's bankruptcy filing on March 3, 2006, and to complete its assessment of internal control over financial reporting. The company expects to file its 2005 Form 10-K by April 30, 2006. This report will include - in addition to Dana's audited financial statements and management's discussion and analysis of financial condition and results of operations - information generally found in the proxy statement.
The company has suspended its quarterly conference calls and annual shareholder meetings until further notice.
About Dana Corporation
Based in Toledo, Ohio, Dana Corporation is a leading supplier of axle, driveshaft, engine, frame, chassis, and transmission technologies. Dana people design and manufacture products for every major vehicle producer in the world - in the automotive, commercial vehicle, and off-highway markets. The company and certain of its U.S. subsidiaries are operating under Chapter 11 of the U.S. Bankruptcy Code as debtors-in-possession. More information about Dana can be found on the Internet at http://www.dana.com/.
Dana Corporation
Financial Summary (Unaudited)*
(in millions, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Net sales $2,046 $1,988 $8,611 $7,775
Income (loss) from continuing
operations $(231) $(72) $(1,172) $72
Loss from discontinued
operations (143) (64) (434) (10)
Effect of change in accounting (2) 4
Net income (loss) $(376) $(136) $(1,602) $62
Income (loss) from continuing
operations $(231) $(72) $(1,172) $72
Goodwill impairment 53 53
Realignment charges 45 34 45 39
Net (gain) losses on
divestitures, asset impairments
and sales 7 (4) 19 (42)
Valuation allowance against
deferred tax assets 835
Loss on repurchase of notes 96 96
Charge related to Ohio tax
legislation 5
Income (loss) from continuing
operations, excluding unusual
items $(126) $54 $(215) $165
Income (loss) from discontinued
operations $(143) $(64) $(434) $(10)
Provision for loss on sale of
engine hard parts,
fluid routing and pump
businesses 123 398
Impairment and restructuring
charges 15 15
Sale of automotive aftermarket
businesses 30 43
Income (loss) from discontinued
operations, excluding unusual
items $(20) $(19) $(36) $48
Diluted earnings (loss) per
share:
Income (loss) from continuing
operations $(1.54) $(0.48) $(7.84) $0.48
Loss from discontinued
operations (0.95) (0.43) (2.90) (0.07)
Effect of change in accounting (0.01) 0.03
Net income (loss) $(2.50) $(0.91) $(10.71) $0.41
Income (loss) from continuing
operations, excluding unusual
items $(0.83) $0.36 $(1.42) $1.09
Income (loss) from discontinued
operations, excluding unusual
items (0.13) (0.13) (0.24) 0.32
Effect of change in accounting (0.01) 0.03 -
Net income (loss), excluding
unusual items (0.97) 0.23 (1.63) 1.41
Loss from unusual items (1.53) (1.14) (9.08) (1.00)
Net income (loss) $(2.50) $(0.91) $(10.71) $0.41
* Subsequent to Dana's filing under chapter 11 of the U.S. Bankruptcy Code
on March 3, 2006, the company and certain of its U.S. subsidiaries are
operating as debtors-in-possession.
Dana Corporation
Consolidated Statement of Income (Unaudited)*
(in millions, except per share amounts)
Three Months
Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Net sales $2,046 $1,988 $8,611 $7,775
Revenue from lease financing 4 4 15 18
Other income (expense), net 22 (107) 73 (103)
Total revenue 2,072 1,885 8,699 7,690
Costs and expenses
Cost of sales 2,016 1,899 8,192 7,189
Selling, general and
administrative expenses 143 97 500 416
Realignment and impairment
charges 108 44 111 44
Interest expense 44 52 167 206
Total costs and expenses 2,311 2,092 8,970 7,855
Loss before income taxes (239) (207) (271) (165)
Income tax benefit (expense) (5) 118 (935) 205
Minority interest (1) 2 (6) (5)
Equity in earnings of
affiliates 14 15 40 37
Income (loss) from continuing
operations (231) (72) (1,172) 72
Income (loss) from discontinued
operations before income taxes (156) (69) (441) 17
Income tax benefit (expense) of
discontinued operations 13 5 7 (27)
Loss from discontinued
operations (143) (64) (434) (10)
Income before effect of
change in accounting (374) (136) (1,606) 62
Effect of change in accounting (2) 4
Net income (loss) $(376) $(136) $(1,602) $62
Basic earnings (loss) per
common share
Income (loss) from continuing
operations before effect
of change in accounting $(1.54) $(0.48) $(7.84) $0.48
Loss from discontinued
operations (0.95) (0.43) (2.90) (0.07)
Effect of change in accounting (0.01) - 0.03
Net income (loss) $(2.50) $(0.91) $(10.71) $0.41
Diluted earnings (loss) per
common share
Income (loss) from continuing
operations before effect
of change in accounting $(1.54) $(0.48) $(7.84) $0.48
Loss from discontinued
operations (0.95) (0.43) (2.90) (0.07)
Effect of change in accounting (0.01) 0.03
Net income (loss) $(2.50) $(0.91) $(10.71) $0.41
Cash dividends declared and
paid per common share $0.01 $0.12 $0.37 $0.48
Average shares outstanding -
Basic 150 149 150 149
Average shares outstanding -
Diluted 150 151 151 151
* Subsequent to Dana's filing under chapter 11 of the U.S. Bankruptcy Code
on March 3, 2006, the company and certain of its U.S. subsidiaries are
operating as debtors-in-possession.
Dana Corporation
Consolidated Balance Sheet (Unaudited)*
December 31, 2005 and 2004
(in millions)
Assets 2005 2004
Current assets
Cash and cash equivalents $762 $634
Accounts receivable
Trade, less allowance for doubtful
accounts of $36 - 2005 and
$39 - 2004 1,064 1,254
Other 244 437
Inventories 662 898
Assets of discontinued
operations 549
Other current assets 57 185
Total current assets 3,338 3,408
Goodwill 439 593
Investments, deferred taxes
and other assets 1,811 2,566
Investments in leases 186 281
Property, plant and
equipment, net 1,629 2,171
Total assets $7,403 $9,019
Liabilities and
Shareholders' Equity
Current liabilities
Notes payable, including
current portion of
long-term debt (1) $2,580 $155
Accounts payable 948 1,330
Accrued payroll and employee benefits 429 378
Liabilities of discontinued
operations 290
Other accrued liabilities 463 611
Taxes on income 175 199
Total current liabilities 4,885 2,673
Deferred employee benefits
and other noncurrent
liabilities 1,910 1,759
Long-term debt 66 2,054
Minority interest in
consolidated subsidiaries 84 122
Total liabilities 6,945 6,608
Shareholders' equity
Common stock, $1 par
value, shares
authorized, 350;
shares issued, 150
- 2005, 150 - 2004 150 150
Additional paid-in
capital 194 190
Retained earnings 820 2,479
Accumulated other
comprehensive loss (706) (408)
Total shareholders' equity 458 2,411
Total liabilities and
shareholders' equity $7,403 $9,019
* Subsequent to Dana's filing under chapter 11 of the U.S. Bankruptcy Code
on March 3, 2006, the company and certain of its U.S. subsidiaries are
operating as debtors-in-possession.
(1) At December 31, 2005, although we had obtained waivers of certain
financial covenants through May 31, 2006, we had determined that
following expiration of the waivers, it was unlikely that we would be
able to comply with such covenants. As a consequence, under
accounting requirements for debt classification, we classified long-
term debt that is subject to acceleration in the event of non-
compliance with the financial covenants as debt payable within one
year.
Dana Corporation
Consolidated Statement of Cash Flows
(Unaudited)*
(in millions)
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Net income (loss) $(376) $(136) $(1,602) $62
Depreciation and amortization 83 85 310 358
Asset impairments and other
related charges 183 13 473 37
Loss on asset sales 15 75 29 18
Effect of change in
accounting 2 (4)
Working capital decrease
(increase) 67 82 (126) (294)
Deferred taxes 36 (53) 764 (125)
Other 98 64 (36) 17
Net cash flows - operating
activities 108 130 (192) 73
Purchases of property, plant
and equipment (104) (115) (297) (329)
Payments received from leases
and partnerships 91 279 161 289
Proceeds from divestitures
and asset sales 7 650 183 968
Other (93) 10 (66) (12)
Net cash flows - investing
activities (99) 824 (19) 916
Net change in short-term debt - (212) 406 (31)
Payments on long-term debt (1) (1,052) (46) (1,457)
Proceeds from long-term debt - 450 21 455
Dividends paid (1) (20) (55) (73)
Other 25 - 13 16
Net cash flows - financing
activities 23 (834) 339 (1,090)
Net change in cash and cash
equivalents 32 120 128 (101)
Net change in cash -
discontinued operations - 2 - 4
Cash and cash equivalents -
beginning of period 730 512 634 731
Cash and cash equivalents -
end of period $762 $634 $762 $634
* Subsequent to Dana's filing under chapter 11 of the U.S. Bankruptcy Code
on March 3, 2006, the company and certain of its U.S. subsidiaries are
operating as debtors-in-possession.
Dana Corporation
Reconciliation of Earnings Before Interest
and Taxes (EBIT) for the Segments to
Income Before Income Taxes (Unaudited)*
(In millions)
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Segment earnings before interest
and taxes -
ASG $6 $49 $187 $300
HVTSG (9) 36 72 161
Total (3) 85 259 461
Other (91) (61) (290) (238)
Earnings (loss) before interest
and taxes (EBIT),
before unusual items (94) 24 (31) 223
Unusual items (on an EBIT
basis):
Total operations (222) (254) (519) (269)
Discontinued operations 121 51 411 71
Continuing operations (101) (203) (108) (198)
Interest expense, excluding DCC (37) (43) (139) (161)
Interest income, excluding DCC 9 4 35 9
Interest expense, net -
excluding DCC (28) (39) (104) (152)
DCC pre-tax income (loss) (16) 11 (28) (38)
Loss before income taxes $(239) $(207) $(271) $(165)
* Subsequent to Dana's filing under chapter 11 of the U.S. Bankruptcy Code
on March 3, 2006, the company and certain of its U.S. subsidiaries are
operating as debtors-in-possession.