Dana Announces Third-Quarter Sales, Earnings
18 October 1999
Dana Announces Third-Quarter Sales, Earnings
Operating Income Increases 27% as Quarterly Revenues Top $3.1 Billion
TOLEDO, Ohio, Oct. 18 -- Dana Corporation announced record third-quarter
sales of $3.1 billion, an increase of nearly 6 percent over the same period
last year. Operating profits after tax for the quarter rose 27 percent to
$172 million, and earnings per share on an operating basis were $1.03, in
line with consensus estimates.
Net income for the quarter was a record $161.5 million, or 97 cents per
share. These figures include non-recurring, after-tax charges of $10.5
million (6 cents per share).
Dana's nine-month consolidated sales were $9.9 billion, up 5 percent over
the same period last year. Operating income after tax for the first three
quarters was $534 million, an increase of 21 percent over the first nine
months of 1998. Earnings per share on a diluted basis before non-recurring
items rose 21 percent for the first three quarters to $3.20. Net income for
this period was $513 million, or $3.07 per share.
Dana Chairman Southwood J. Morcott said, "This was another good quarter
for us in terms of sales volume, net income, and earnings per share, despite
challenging conditions internationally. Profit growth still outpaces sales
growth -- the result of a continued focus on realizing acquisition synergies,
as well as a disciplined pursuit of our Five-Point Plan.
"Operating income after tax for the third quarter, as a percent of sales,
increased to 5.5 percent, compared with 4.6 percent a year ago, and operating
margins improved, as well. In fact, all of our key operating ratios showed
improvement for the quarter.
"Thanks to strong North American light-truck, SUV, and medium- and heavy-
duty truck markets, organic growth was up 10 percent in the Heavy Truck Group
and 6 percent in the Automotive Systems Group.
"In our Automotive Aftermarket Group, sales for the quarter were up 3
percent and 5 percent year-to-date, primarily due to acquisitions. Organic
sales for this group, however, were essentially flat in all regions for the
quarter as weakness in Europe and South America persisted and North American
customers continued to consolidate. Nevertheless, operating profit after tax
for the group was up 35 percent over the third quarter of 1998 on a 200-plus
basis-point improvement in our operating margin, reflecting results from our
aftermarket synergy plan."
Joe Magliochetti, Dana president and CEO, said, "Despite the successes we
have had this year, we are still facing challenging economic conditions in
many regions of the world. Frankly, we had not anticipated the softness we've
seen in Europe this year, particularly in the U.K. and in key industrial and
off-highway markets. We had also planned on a recovery in South America by
now, which has yet to materialize. Europe and South America account for about
20 percent of our revenue year-to-date but have delivered less than 8 percent
of our net profit -- which is well below expectations. We've been fortunate
that strong demand in the North American light- and heavy-truck markets in the
first nine months has allowed us to offset profit shortfalls elsewhere, but
our sense is that this may not be sustainable in the fourth quarter.
"We'll no doubt have a better read on all of this as we move through the
fourth quarter. But, clearly, if current trends continue internationally, and
we continue to feel -- as we do today -- that production may be weakening in
North America, we have to be prepared to take quick, decisive action. As a
result, we are evaluating a number of alternatives aimed at rationalizing our
global operations to be more efficient in the future. The depth of our
actions will, of course, depend on market conditions and the finalization of
our plans but could potentially result in fourth-quarter charges in the range
of $100-$200 million before taxes. We see this rationalization plan as
absolutely consistent with the transformation elements of our Five-Point Plan
that we are institutionalizing at Dana to better our company."
FIVE-POINT PLAN PROGRESSES
During the quarter, Dana continued with implementation of its Five-Point
Plan, which provides a blueprint for continued growth and increased
profitability. The primary element of the plan is to "grow while focusing on
returns and maintaining financial discipline."
Among the plan's other elements is the divestiture of "non-strategic and
non-performing operations." Since April, Dana has announced the divestiture
of businesses with more than $700 million in sales. Several of the
divestitures could result in gains to be realized in the fourth quarter.
Along with previously announced divestiture plans, in the last three
months Dana has closed on the sale of its Special Products facility in
Livonia, Mich., to a private investor and completed the sale of Dana
Commercial Credit's Technology Management Group. Also, the Dana Board of
Directors today approved a definitive agreement to sell the Sierra aftermarket
marine and power equipment operations to Colfax Corporation. The transaction,
which is expected to close in the fourth quarter, is subject to the approval
of appropriate regulatory agencies. Sierra had sales of approximately
$40 million in 1998.
Another element of the plan is to "seek strategic, bolt-on acquisitions at
reasonable valuations." In keeping with the plan, Dana completed the
acquisition of Innovative Manufacturing, Inc., a manufacturer of outdoor power
equipment components, in August. The bolt-on acquisition of Innovative
Manufacturing, a key supplier, will strengthen the operations of Dana's Spicer
Outdoor Power Equipment Components Division, part of the Off-Highway Systems
Group.
The Five-Point Plan also calls for Dana to "repurchase stock as the
company generates cash." During the quarter, Dana continued to repurchase its
stock under a plan approved by the Board of Directors in April. Through the
end of the third quarter, Dana has repurchased more than one million shares of
company stock. The authorization, in effect through October 2000, allows the
company to repurchase up to $350 million of its common stock.
The final element of the plan calls for Dana to "complete integration
efforts and realize synergy savings." Dana's plan for $120 million in new
automotive aftermarket operational and sourcing synergies this year is ahead
of schedule year-to-date and on target for the full year. So far this year,
the company has closed six manufacturing facilities and 13 distribution
centers. In all, Dana plans to close a total of 14 manufacturing facilities
and 29 distribution points as part of its aftermarket synergy plan.
NEW BUSINESS, PRODUCTS ANNOUNCED
During the quarter, Dana announced that its FTE Automotive group was
selected to supply Volkswagen AG with the first hydraulic clutch actuation
system the OEM will use in its compact car models. Along with the hydraulic
system, Dana also will supply brake boosters, wheel cylinders, and brake hoses
for Volkswagen's 2000 through 2003 compact car models.
Additionally, Dana was chosen to supply anti-lock braking systems (ABS)
for all BMW motorcycles, including the new K1200LT luxury motorcycle. The ABS
will feature Dana's Mark II technology and will be manufactured by Dana's FTE
Automotive group.
Also, Dana's Plumley Division recently launched production of seven low-
emission hoses for use in the fuel tank system on the Nissan Altima. Dana
will supply approximately 1.5 million hose components annually to the Nissan
Motor Manufacturing Corp. USA assembly plant in Smyrna, Tenn. The package
could be expanded to include three additional hoses after testing has been
finalized.
COMPANY HONORED FOR MANAGEMENT, MANUFACTURING
For the second straight year, Dana was named one of the "World's 100 Best-
Managed Companies" by IndustryWeek magazine. Dana was recognized for its
emphasis on global growth, decentralization, and employee education programs.
"Dana has long relied on a style of management that emphasizes trust in
people, individual responsibility, education, continuous improvement, and
decentralization in decision making. Receiving this honor for the second year
in a row reaffirms our unique style of management," Morcott said.
Dana was also recognized four times by its peers as one of the "best of
the best" among automotive suppliers in Automotive Industries magazine's
annual "Quest for Excellence" survey. Dana was honored as a top supplier in
the chassis suspension systems, systems integration, transmissions/drivetrain
systems, and sealing/gaskets and packing categories.
Dana Corporation was also recognized for its innovative, magnetic-pulse
welding technology, earning the Automotive Manufacturing Award at Financial
Times Automotive World magazine's 1999 Global Automotive Awards held Sept. 15
at the Frankfurt, Germany, International Motorshow. FT Automotive World
created the award to honor the companies that made the most significant
improvements in manufacturing.
Dana's Syracuse, Ind., Spicer Light Truck Axle Division facility has been
honored with the 1999 State of Indiana Quality Improvement Award. The
Syracuse facility is a repeat winner having also earned the award in 1998.
Additionally, Dana's Spicer Heavy Systems Assembly Division facility in
Lugoff, S.C., was named a South Carolina Chamber of Commerce Manufacturer of
the Year.
QUARTERLY DIVIDEND APPROVED
Dana's Board of Directors today approved a quarterly dividend of $0.31 per
share payable Dec. 15, 1999, to shareholders of record Dec. 1, 1999. This
will mark Dana's 248th consecutive dividend - dating back to 1936 - without a
decreased or missed payment.
Dana Corporation is one of the world's largest independent suppliers to
vehicle manufacturers and their related aftermarkets. 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. The company reported sales of
$12.5 billion in 1998. 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 economic conditions. 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
Statement of Income (Unaudited)
September 30, 1999
(in millions, except per share amounts)
Three Months Ended September 30
1998 1999
Sales $2,962.4 $3,126.9
Net Income 98.3 161.5
Net Income Per Common Share -
Basic $0.59 $0.98
Diluted 0.59 0.97
Average Shares Outstanding -
For Basic EPS 164.9 165.8
For Diluted EPS 166.9 167.2
Nine Months Ended September 30
1998 1999
Sales $9,431.8 $9,915.1
Net Income 399.1 513.2
Net Income Per Common Share
Basic $2.42 $3.10
Diluted 2.39 3.07
Average Shares Outstanding
For Basic EPS 164.9 165.8
For Diluted EPS 166.9 167.2
Dana Corporation
Statement of Income (Unaudited)
September 30, 1999
(in millions, except per share amounts)
Three Months Ended September 30
1998 1999
Net Sales $2,962.4 $3,126.9
Revenue from Lease Financing
and Other Income 63.6 47.1
Total 3,026.0 3,174.0
Costs and Expenses
Cost of Sales 2,479.2 2,564.2
Selling, General and
Administrative Expenses 271.5 288.8
Restructuring and
Integration Charges -- 16.5
Merger Expense 45.5 --
Interest Expense 72.1 69.1
Total 2,868.3 2,938.6
Income Before Income Taxes 157.7 235.4
Estimated Taxes on Income (68.0) (82.0)
Minority Interest (2.6) (3.2)
Equity in Earnings
of Affiliates 11.2 11.3
Net Income $98.3 $161.5
Net Income Per Common Share -
Basic $0.59 $0.98
Diluted $0.59 $0.97
Average Shares Outstanding -
For Basic EPS 164.9 165.8
For Diluted EPS 166.9 167.2
Dana Corporation
Statement of Income (Unaudited)
September 30, 1999
(in millions, except per share amounts)
Nine Months Ended September 30
1998 1999
Net Sales $9,431.8 $9,915.1
Revenue from Lease Financing
and Other Income 175.1 119.4
Total 9,606.9 10,034.5
Costs and Expenses
Cost of Sales 7,859.8 8,176.1
Selling, General and
Administrative Expenses 864.5 874.5
Restructuring and
Integration Charges -- 30.4
Merger Expense 46.5 --
Interest Expense 211.2 206.4
Total 8,982.0 9,287.4
Income Before Income Taxes 624.9 747.1
Estimated Taxes on Income (247.1) (267.0)
Minority Interest (10.6) (9.7)
Equity in Earnings
of Affiliates 31.9 42.8
Net Income $ 399.1 $ 513.2
Net Income Per Common Share -
Basic $2.42 $3.10
Diluted $2.39 $3.07
Average Shares Outstanding -
For Basic EPS 164.9 165.8
For Diluted EPS 166.9 167.2
Dana Corporation
Condensed Balance Sheet (Unaudited)
September 30, 1999
(in millions)
December 31 September 30
Assets 1998 1999
Current Assets
Cash and Marketable
Securities $ 230.2 $ 185.3
Accounts Receivable
Trade 1,616.9 2,035.0
Other 246.7 379.9
Inventories 1,678.7 1,758.1
Other Current Assets 564.5 732.7
Total Current Assets 4,337.0 5,091.0
Property, Plant & Equipment,
Net 3,303.8 3,388.3
Investment in Leases 851.9 952.4
Investments and Other Assets 1,644.8 1,681.4
Total Assets $10,137.5 $11,113.1
Liabilities and Shareholders'
Equity
Accounts Payable and Other
Current Liabilities $2,288.5 $2,479.2
Notes Payable 1,698.1 1,541.5
Total Current Liabilities 3,986.6 4,020.7
Long-Term Debt 1,717.9 2,574.2
Deferred Employee Benefits
and Other Noncurrent
Liabilities 1,337.5 1,286.1
Minority Interest 156.3 138.0
Shareholders' Equity 2,939.2 3,094.1
Total Liabilities and
Shareholders' Equity $10,137.5 $11,113.1
Dana Corporation
(Including Dana Credit Corporation on an Equity Basis)
Statement of Income (Unaudited)
September 30, 1999
(in millions)
Three Months Ended September 30
1998 1999
Net Sales $2,962.4 $3,126.9
Other Income 8.3 11.5
Total 2,970.7 3,138.4
Costs and Expenses
Cost of Sales 2,488.6 2,577.1
Selling, General and
Administrative Expenses 242.0 263.5
Restructuring and
Integration Charges -- 16.5
Merger Expense 45.5 --
Interest Expense 48.2 50.9
Total 2,824.3 2,908.0
Income Before Income Taxes 146.4 230.4
Estimated Taxes on Income (64.8) (83.3)
Minority Interest (2.6) (3.2)
Equity in Earnings
of Affiliates 19.3 17.6
Net Income $98.3 $161.5
Dana Corporation
(Including Dana Credit Corporation on an Equity Basis)
Statement of Income (Unaudited)
September 30, 1999
(in millions)
Nine Months Ended September 30
1998 1999
Net Sales $9,431.8 $9,915.1
Other Income 6.2 19.2
Total 9,438.0 9,934.3
Costs and Expenses
Cost of Sales 7,885.9 8,214.2
Selling, General and
Administrative Expenses 764.7 798.5
Restructuring and
Integration Charges -- 30.4
Merger Expense 46.5 --
Interest Expense 142.0 156.7
Total 8,839.1 9,199.8
Income Before Income Taxes 598.9 734.5
Estimated Taxes on Income (244.4) (274.2)
Minority Interest (10.6) (9.7)
Equity in Earnings
of Affiliates 55.2 62.6
Net Income $399.1 $513.2
Dana Corporation
(Including Dana Credit Corporation on an Equity Basis)
Condensed Balance Sheet (Unaudited)
September 30, 1999
(in millions)
December 31 September 30
Assets 1998 1999
Current Assets
Cash and Marketable Securities $226.6 $183.0
Accounts Receivable
Trade 1,616.9 2,035.0
Other 248.3 372.3
Inventories 1,678.7 1,758.1
Other Current Assets 403.5 504.6
Total Current Assets 4,174.0 4,853.0
Property, Plant & Equipment, Net 3,065.9 3,034.2
Investments and Other Assets 1,811.6 1,796.4
Total Assets $9,051.5 $9,683.6
Liabilities and Shareholders' Equity
Accounts Payable and Other
Current Liabilities $2,237.3 $2,436.4
Notes Payable 1,393.3 965.1
Total Current Liabilities 3,630.6 3,401.5
Long-Term Debt 1,146.9 1,883.8
Deferred Employee Benefits
and Other Noncurrent Liabilities 1,179.8 1,168.4
Minority Interest 155.0 135.8
Shareholders' Equity 2,939.2 3,094.1
Total Liabilities and
Shareholders' Equity $9,051.5 $9,683.6