Dana Corporation Fourth-Quarter Operating Income Jumps 26%
26 January 1999
Dana Corporation Fourth-Quarter Operating Income Jumps 26%
Company Completes Year of Strong Global Growth, Progress on Strategic Plan
TOLEDO, Ohio, Jan. 25 -- Dana Corporation today
announced that operating income for the fourth quarter of 1998 jumped
26 percent to $149 million, and earnings per share rose 25 percent to 89 cents
on a diluted basis, compared with the same period in 1997.
The quarter also included non-recurring charges net of gains in the amount
of $14 million (8 cents per share), compared with $2 million (1 cent per
share) in 1997. Including these non-recurring items, net income for the
quarter rose 16 percent to $135 million, and reported earnings per share
increased 16 percent to 81 cents on a fully diluted basis.
Sales for the quarter were $3 billion, up 2.4 percent compared with the
fourth quarter of 1997, marking the first time the company experienced sales
of more than $3 billion in a fourth quarter.
Due to accounting rules for a pooling of interests, Dana's financial
results include those of the former Echlin Inc. -- which was merged with a
Dana subsidiary in July -- as though Echlin had been a part of Dana for all of
1998 and previous years.
Dana extended its series of record sales and profit announcements by
reporting historic growth for the year. The announcement marked Dana's
seventh consecutive year of record sales and fifth straight year of record
operating profits.
For the year, operating income jumped 26 percent to $591 million, and
earnings per share rose 24 percent to $3.54, compared with 1997.
Reported net income included one-time gains and charges of $57 million
(34 cents per share), compared with $149 million (91 cents per share) in 1997.
With these adjustments, net income jumped 67 percent, to $534 million for the
year, and earnings per share increased 65 percent, to $3.20 on a fully diluted
basis.
Annual sales approached $12.5 billion, up nearly 5 percent over 1997.
Before Echlin and pooling of interests, Dana's 1997 sales were $8.3 billion
for the year and $2 billion for the quarter. Comparing last year's reported
sales on this basis with 1998, sales for the year are up 50 percent, and the
quarter's sales are up 46 percent.
Southwood J. Morcott, Dana's chairman and chief executive officer, hailed
the sales and profit growth as a result of continued strong focus on the
company's strategic plan, "Beyond 2000."
"Dana has grown dramatically over the decade -- from less than $5 billion
in sales in 1990 to revenues that are expected to exceed $13 billion in 1999.
During this time, we have kept tight control of expenses and improved
operating efficiencies, while rapidly integrating acquisitions and moving
aggressively to realize synergies. As a result, we have been able to
capitalize on the robust vehicular markets for outstanding growth in sales and
profits," he said.
Dana's president and chief operating officer, Joseph M. Magliochetti,
said, "1998 was a historic year for Dana in many ways. The record performance
this year and this quarter is a result of the diligent effort and substantial
resolve the company has put forth to improve our global competitive position."
NEW BUSINESS POSITIONS DANA FOR FUTURE GROWTH
Dana is also positioned for future growth, Morcott said, because of new
business the company secured during the fourth quarter.
In October, Dana announced that it was selected to supply 200,000 front
corner modules and 100,000 rear driving modules annually to Holden Limited, a
General Motors Corporation subsidiary, for Commodore passenger cars
manufactured in Australia.
Dana shipped the first corner module Jan. 14, with driving modules
scheduled for delivery in May. The contract represents Dana's first module
business in the Asia Pacific region and is expected to generate sales in
excess of $100 million annually.
Earlier in the year, Dana unveiled its Rolling Chassis(TM) vehicle
component module for DaimlerChrysler AG's Brazilian-made Dodge Dakota pickup
truck. The Rolling Chassis module is the most complex module ever supplied to
DaimlerChrysler. The module includes a full-perimeter frame, rear axle,
driveshaft, suspension, steering system, brakes, fuel tank, electrical
circuits, and wheels and tires. Once full production is achieved, sales are
expected to exceed $125 million annually.
Dana's technology was also present on DaimlerChrysler's 1999 Jeep(R) Grand
Cherokee, which was introduced in July. The Grand Cherokee marks the first
use of Dana-designed Hydra-Lok(TM) axles, which feature progressive, speed-
sensing torque-transfer differentials. The axles are important components of
Jeep's Quadra-Drive(TM) four-wheel-drive system, which provides traction
without driver involvement. The addition of this new technology brings Dana's
total annual sales for the Grand Cherokee to approximately $450 million.
Dana was also selected to produce front pan axles for Land Rover's
redesigned Range Rover luxury sport utility vehicle beginning with the 2001
model year. The innovative axle design allows for more room under the vehicle
without sacrificing 4X4 capability. Dana expects to produce 30,000 such axles
annually.
Earlier in the year, Dana was selected to supply modules to Fiat Auto
Argentina S.A. for its Duna and Uno passenger cars manufactured in Argentina.
Dana expects to supply 22,000 corner modules in 1999. The Fiat modules will
be assembled at Dana's Armetal affiliate in Buenos Aires. 1999 sales are
expected to be $10 million.
Dana also entered into a joint venture with Daewoo-FSO, a unit of Daewoo
Group Korea, to produce rear axles and driveshafts in Warsaw, Poland. The
alliance provides Dana with an important foothold in Eastern Europe.
Finally, Dana's Brazilian joint venture with Freios Varga, a unit of
LucasVarity plc., was selected to supply a variety of modules to Volkswagen AG
for its Gol, Santana, and Saveiro passenger cars built in Sao Bernardo,
Brazil. Dana supplies front and rear suspension modules and engine cradles.
MAJOR TRANSACTIONS COMPLETED
As part of its strategy to be the world's leading producer of components
and systems found under the vehicle and under the hood, Dana completed a
number of major acquisitions and divestitures during the fourth quarter,
including:
* The purchase of the Glacier Vandervell Bearings Group and the AE Clevite
North American aftermarket engine hard parts business from Federal-Mogul
Corporation for $430 million. Sales for the businesses are expected to
approximate $480 million in 1999, with the aftermarket engine hard parts
business accounting for approximately $60 million of that total. The move
helps round out Dana's engine product offering, which now totals more than
$4 billion in annual sales.
* The acquisition of the filtration manufacturing operation of Delphi
Energy & Engine Management Systems U.K. Overseas Corp., located in
Southhampton, England. The group reported sales of approximately $50 million
in 1997, primarily from oil, air, and fuel filtration products. The business
strengthens Dana's European presence.
* The sale of the technology leasing group portfolio of Dana Commercial
Credit Corporation (DCC) to Chicago-based Heller Financial, Inc. The sale
resulted in an after-tax gain of approximately $76 million to Dana. The move
helps DCC focus on growing its other businesses and products.
These moves were part of a total of nine acquisitions and divestitures --
including the three largest in company history -- that were completed in 1998.
Other moves included:
* The merger of a subsidiary with Echlin Inc. to make Dana one of the
world's largest independent companies supplying components to both automotive
original equipment manufacturers and the aftermarket;
* The divestiture of Dana's hydraulic cylinder business to Hyco
International, Inc., of Atlanta;
* Full ownership of SIMESC-Parish, a structural components manufacturing
company, from its joint-venture partner, Wiest, S.A.;
* The sale of its hydraulic brake hose facilities in Columbia City, Ind.,
and Garching, Germany, to CF Gomma, S.p.A. of Passirano, Italy;
* Purchase of a 98-percent share of the capital of Nakata S.A. Industria e
Comercio, a manufacturer of suspension components; and
* Completion of the purchase of the heavy axle and brake business of Eaton
Corporation.
COMPANY RECEIVES HONORS
Dana received a number of honors during the fourth quarter, including
selection by IndustryWeek magazine of its Structural Products facility in
Hopkinsville, Ky., as one of the 10 best plants in North America. The
facility manufactures full frames for the Chevrolet S-10, GMC Sonoma, and
Isuzu Hombre pickup trucks; engine cradles for left- and right-hand-drive
Saturn passenger cars; a new rear axle module for the new Saturn LS; and front
and rear sub-frames for the Mercedes-Benz M-Class sport utility vehicles.
The Hopkinsville plant is Dana's third facility to be selected by
IndustryWeek for its annual listing of Top 10 plants. Dana's Spicer
Driveshaft facility in Bristol, Va., was selected in 1996, and the Gresen
Hydraulics facility in Minneapolis was selected in 1990, the first year for
the IndustryWeek awards.
Additionally, Dana's Board of Directors was selected as one of the five
best in the United States by Chief Executive magazine, which said, "Dana Corp.
does just about everything right in the way of corporate governance."
Finally, Morcott, Dana's chairman and chief executive officer, was named
Industry Leader of the Year by the Automotive Hall of Fame for "image,
foresight, leadership, ingenuity, and purpose contributing most to the
advancement of the automobile industry."
Earlier in the year, Dana was selected as one of the world's 100 best-
managed companies by IndustryWeek magazine. The magazine said it recognized
companies that are positioning themselves for the future by investing heavily
in such areas as change, market development, people, and society.
Dana was also named by CIO magazine as one of the Top 100 companies in
America at managing business relationships. The magazine, in its issue
recognizing excellence in "value-chain management," said that Dana uses
innovative information technology practices to integrate business goals and
corporate vision.
One of the world's largest independent suppliers to vehicular, off-
highway, and industrial manufacturers and their related aftermarkets, Dana
Corporation produces components and systems used on more than 95 percent of
the world's 670 million motor vehicles. Founded in 1904 and based in Toledo,
Ohio, the company operates some 330 major facilities in 32 countries and
employs more than 86,000 people. Dana's Internet address is http://www.dana.com.
Certain statements contained herein constitute "forward-looking"
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements involve assumptions, uncertainties and risks and
Dana's actual future results, performance, or achievements may differ
materially from those expressed or implied in these statements. Among the
factors that could affect Dana's actual results are the ability of its
customers to achieve projected vehicle sales levels, the cyclical nature of
the automotive industry, and international economic conditions in Brazil and
elsewhere. Additional factors are detailed in Dana's public filings with the
Securities and Exchange Commission. Dana does not undertake to update any
forward-looking statements contained herein.
Dana Corporation
(in millions, except
per share amounts)
Unaudited
Unaudited
Three Months Ended December 31
1997 1998
Sales $2,959.7 $3,031.8
Net Income 116.5 135.0
Net Income Per Common Share
Basic $0.72 $0.82
Diluted 0.70 0.81
Average Shares Outstanding -
For Basic EPS 162.7 165.1
For Diluted EPS 164.6 167.0
Audited
Year Ended December 31
1997 1998
Sales $11,911.0 $12,463.6
Net Income 320.1 534.1
Net Income Per Common Share
Basic $1.97 $3.24
Diluted 1.94 3.20
Average Shares Outstanding
For Basic EPS 162.7 165.1
For Diluted EPS 164.6 167.0