Dana Announces Q2 Sales
20 July 1998
Dana Achieves Record Second-Quarter Sales, Earnings; Completion of Echlin Acquisition Caps Active Quarter
TOLEDO, Ohio, July 20 -- Dana Corporation today
posted record second-quarter sales and earnings, the result of continued
execution of its aggressive acquisition and restructuring plans. The second
quarter, the most active in company history, was capped by Dana's stock-for-
stock acquisition of Echlin Inc. valued at $3.9 billion.
Second-quarter sales of $2.3 billion represented a 9-percent increase over
the same period last year, while net income rose 24 percent to $116 million.
Earnings per diluted share were $1.08, up 21 percent compared with the second
quarter of 1997.
Dana's six-month consolidated sales were $4.7 billion, up 10 percent
compared with the same period last year. Profit for the first two quarters of
1998 was $224 million, an increase of 20 percent over the first six months of
1997 and a record for any six-month period in company history.
Chairman Southwood J. Morcott said the solid quarterly results are a
product of Dana's continued focus on strategic acquisitions and restructuring,
as well as ongoing operational improvements. "Dana's continued growth and
record financial performance validate our strategic direction," Morcott said.
Including the recent Echlin acquisition and the second-quarter acquisition
of Brazilian suspension components producer Nakata, Dana has completed four
acquisitions and joint ventures in 1998. The company also completed its
second divestiture of the year, the sale of its hydraulic cylinder operations,
during the quarter.
"These moves allow Dana to further focus on the core products, systems,
and technologies we consider strategic to our future growth," Morcott said.
"We are seeing a solid contribution to the bottom line resulting from our
aggressive restructuring program taken on in the last 18 months.
"Second-quarter return on sales of 5 percent was squarely on target with
our corporate goal to improve margins," he added. "And thanks to operational
improvements, such as better asset utilization, our operating margin continues
to climb." Dana's operating margin, excluding Dana Credit Corporation,
reached 8.7 percent during the second quarter, as compared with 7.5 percent
during the same period a year ago.
MAJOR TRANSACTIONS ANNOUNCED
Dana Completes Acquisition of Echlin, Creates Leading Global Automotive
Supplier
On July 9, Dana completed its acquisition of Echlin Inc., creating one of
the world's largest independent companies supplying components to both
automotive original equipment manufacturers and the aftermarket. Echlin's
principal products include brakes, fluid-handling systems, and engine
components. The acquisition is the latest in a series of strategic moves
designed to focus on Dana's core strengths and benefit its customers around
the world.
Valued at approximately $3.9 billion, the transaction is the largest in
the history of the automotive components industry, according to data supplied
by Securities Data Co. Added Morcott, "The strategic combination creates a
stronger and more balanced Dana, with the resources to be the worldwide leader
under the vehicle, under the hood, and in the aftermarket."
The combination with Echlin -- which reported sales of $3.6 billion in
1997 -- greatly expands Dana's presence in the global automotive aftermarket
and selected OE segments. The combined company is able to offer more
comprehensive product lines to both OE and aftermarket customers worldwide
than either company could achieve individually. Dana plans to leverage its
market strengths by capitalizing on Echlin's premier position in the
automotive aftermarket to sell Dana's products. At the same time, Dana's
resources and long-standing customer relationships are expected to accelerate
Echlin's efforts to grow with global original-equipment customers where Dana
already has a leadership position.
Hydraulic Cylinder Operations Sold
In June, Dana completed the sale of its hydraulic cylinder business to
Hyco International, Inc., of Atlanta. Dana recorded no gain or loss on the
sale of the business, which accounted for approximately $73 million of the
company's 1997 sales. The operations sold include manufacturing facilities in
Arab, Ala.; Lancaster, Texas; St. Wenceslas, Quebec; and Hausach, Germany.
DCC Considering Strategic Alternatives for Technology Leasing Group
In May, Dana Commercial Credit Corporation (DCC) retained J.P. Morgan &
Co. to advise it on strategic alternatives for its small- and mid-ticket
Technology Leasing Group. The group provides full-service leasing and related
services to the fast-growing micro-computer and office automation markets.
According to Edward Shultz, chairman and chief executive officer of Dana
Commercial Credit, the Technology Leasing Group continues to be a profitable
arm of DCC's leasing activities with solid growth potential. "DCC's
management has concluded, however, that the Technology Leasing Group may be
better served by aligning with a company that has more aggressive growth
expectations in this market, other complementary products, and global
capabilities," Shultz said.
OTHER SECOND-QUARTER NEWS
Rolling Chassis(TM) Module Unveiled in Brazil
On July 7, Dana unveiled its Rolling Chassis(TM) module in conjunction
with Chrysler Corporation's grand opening of its Dodge Dakota pickup truck
assembly plant near Curitiba, Brazil. Designed for Brazilian-made Dakota
pickup trucks, the Rolling Chassis module is the most complex module ever
supplied to Chrysler. Incorporating more than 200 components, the module
includes a full-perimeter frame, rear axle, driveshaft, suspension, steering
system, brakes, fuel tank, electrical circuits, and wheels and tires. The
Rolling Chassis module is the first application of its kind to be used in
volume pickup truck production anywhere in the world. Dana integrates
approximately 70 other suppliers in the production of the Rolling Chassis
module. Assembled at Dana's new, state-of-the-art 76,000 square-foot facility
near Curitiba, Brazil, Dana's chassis are assembled and literally "rolled"
onto Chrysler's assembly line within 1.8 hours of order.
Ground Broken for Heavy Axle & Brake Headquarters, Technology Center
In June, Dana broke ground for its new Spicer Heavy Axle and Brake
headquarters and technology center near Kalamazoo, Mich. The 150,000-square-
foot facility is expected to open in August 1999. The facility initially will
employ approximately 200 people, including people now working in nearby
Galesburg, Mich., and in Ft. Wayne, Ind. As many as 100 additional jobs are
possible through future expansion. Along with furthering Dana's commitment to
new technology and development, the facility will support testing, design, and
prototyping that is vital to maintaining a leadership position in the global
heavy axle market.
NEW BUSINESS
Dana Joint Venture to Supply Modules to Volkswagen in Brazil
Dana's Brazilian joint venture has been selected to supply a variety of
modules to Volkswagen A.G. for its Gol, Santana, and Saveiro passenger cars
built in Sao Bernardo, Brazil. Dana will supply front and rear suspension
modules and engine cradles through Sistemas Modulares Ltda., the Brazilian
joint venture between Dana and Freios Varga, a unit of LucasVarity plc.
Sistemas Modulares will use a regional just-in-time facility in Anchieta,
Brazil, to support the program and expects to begin supplying components to
Volkswagen by late summer. As a result, Dana modules and components will now
be on the majority of Volkswagen passenger cars produced in Brazil. Sistemas
Modulares currently assembles modules for Volkswagen's Gol and Parati models
in Taubate, Brazil. Altogether, Dana's affiliate will supply more than one
half million modules annually to Volkswagen for its Brazilian passenger car
platforms.
BOARD APPROVES QUARTERLY DIVIDEND
Today, Dana's Board of Directors approved a quarterly dividend of
$0.29 per share payable Sept. 15, 1998, to shareholders of record as of
Sept. 1, 1998. This will mark Dana's 243rd consecutive dividend and continue
a more than 60-year succession of dividends paid without a decrease or missed
payment.
One of the world's largest independent suppliers to vehicular, off-
highway, and industrial manufacturers and their related aftermarkets, Dana
produces components used on more than 95 percent of the world's 650 million
motor vehicles. Founded in 1904 and based in Toledo, Ohio, the company
operates 270 major facilities in 33 countries and employs more than
79,000 people. The company had pro forma sales of $11.9 billion in 1997.
Dana's Internet address is: http://www.dana.com.
Dana Corporation
(in millions, except
per share amounts)
Unaudited
Three Months Ended June 30
1997 1998
Sales $2,140.8 $2,340.3
Net Income 93.8 116.0
Net Income Per Common Share
Basic $0.90 $1.10
Diluted 0.89 1.08
Average Shares Outstanding -
For Basic EPS 103.8 105.6
For Diluted EPS 104.9 107.4
Six Months Ended June 30
1997 1998
Sales $4,256.1 $4,690.5
Net Income 186.4 223.6
Net Income Per Common Share
Basic $1.80 $2.12
Diluted 1.78 2.08
Average Shares Outstanding
For Basic EPS 103.8 105.6
For Diluted EPS 104.9 107.4