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23rd February 2005 - Dana Corporation Reports Fourth-Quarter and Full-Year Results Aftermarket Divestiture and Related Actions Improve Balance Sheet, Cost Structure Dana Corporation today announced its fourth-quarter and full-year 2004 results. During the fourth quarter, Dana took a series of actions aimed at strengthening its long-term competitiveness and repositioning the company to better serve its global original equipment customers. These actions, which together resulted in unusual charges of $195 million after tax, included:
“The aftermarket divestiture, our realignment actions, and the debt repurchase significantly improved our balance sheet and financial flexibility. Our efforts were recognized by two leading credit agencies, which returned us to investment grade in December,” said Dana Chairman and CEO Mike Burns. “In addition, year-over-year sales and net income, excluding unusual items, were both up significantly despite a challenging operating environment. “Certainly, we’re not yet where we’d like to be. But the improvements to our balance sheet and operational performance were important steps in the continuing transformation of Dana, and I am proud of what our people accomplished in 2004.” Financial Summary
Fourth-Quarter Results Dana posted fourth-quarter sales of $2.3 billion in 2004, compared to $2.1 billion in the same period of 2003. This increase was primarily due to new business and strong sales to commercial vehicle customers, while favorable currency effects added $73 million. Including unusual charges for the aftermarket divestiture, manufacturing realignments, and debt repurchase, Dana recorded a net loss of $133 million, or 89 cents per share, in the quarter, compared to net income of $68 million, or 45 cents per share, in the same period of 2003. Excluding unusual charges, net income for the quarter was $62 million in 2004, compared to the same amount in the fourth quarter of 2003. Earnings in the fourth quarter were negatively impacted by the continuing effects of higher raw material prices. Net of customer recoveries, the increased cost of steel alone reduced earnings by $31 million after tax, compared to the same period in 2003. Favorably impacting the 2004 results were tax benefits that resulted primarily from the company’s ability to reduce valuation allowances provided against deferred tax assets in prior periods. Dana Vice President and Chief Financial Officer Bob Richter explained, “While reported income was greater than expected, this was largely due to greater than anticipated tax benefits. More important for the long term were the actions taken to strengthen our financial position. We improved our net debt-to-capital ratio, excluding Dana Credit Corporation, from 47 percent at the start of the quarter – and 61 percent less than three years ago – to less than 35 percent. This improvement will be reflected in reduced interest expense going forward. We also made an extra contribution of approximately $200 million to our pension plans, which will reduce future expense and contribution requirements. And, we are no longer limited by high-yield covenants on our debt. All of this will enable us to better capitalize on future growth opportunities.” Full-Year Results Sales increased to $9.1 billion in 2004 from $7.9 billion in 2003, primarily due to net new business of over $400 million, strong commercial and off-highway vehicle markets, and favorable currency effects of $300 million. Full-year net income was $82 million, or 54 cents per share, compared to $222 million, or $1.49 per share, in 2003. Unusual items of $180 million in 2004 included the $195 million of charges recorded in the fourth quarter plus $15 million of net gains reported earlier in the year. Net income in 2003 included $39 million of unusual gains on divestitures and debt repurchases. Excluding unusual items, net income in 2004 was $262 million, or $1.73 per share, compared to $183 million, or $1.23 per share, in 2003. The margin on higher sales and benefits from the company’s cost-reduction initiatives, as well as tax benefits, more than offset the impact of increased raw material costs. “Despite very challenging industry conditions, we made good progress year over year,” said Burns. “We had to contend with increased steel costs, which net of recoveries was $70 million after tax, mostly in the second half of year. We also saw a small decline in North American light vehicle production. Fortunately, we had the benefit of new business, strong commercial and off-highway vehicle markets, and the early returns from our cost-reduction initiatives. In particular, during 2004, we consolidated our light vehicle business units and centralized our purchasing organization for greater buying leverage.” 2005 Outlook “This will be another tough year for the automotive industry as well as Dana,” said Burns. “We believe North American light vehicle production will be flat at 15.8 million units. We expect to see continuing pressure on raw material prices and energy costs, particularly in the first half of the year. And, as a company, we will also face the near-term challenge of replacing the lost earnings from the automotive aftermarket businesses that were sold, as well as the reduced earnings contribution from Dana Credit Corporation as we continue to wind that business down. “On the other hand, we have renewed our focus on our global original equipment manufacturers. In fact, we already have an additional $410 million in net new business, which comes on in 2005. And we’re very optimistic about the outlook for the commercial vehicle and off-highway markets. We’re anticipating a 13 percent increase in North American Class 8 truck production to 293,000 units. The combination of these factors should allow us to increase our 2005 full-year sales to $9.6 billion. “The increased sales alone, however, will not be enough to offset the challenges we face. So we will be relentless in pursuing our cost-reduction objectives. We will continue to deploy lean manufacturing and value engineering throughout the organization and streamline our administrative processes. These efforts, along with better leverage from our consolidated purchasing function, are expected to gain more momentum and therefore provide greater benefit to our bottom line as the year progresses. “We expect Dana’s earnings to be lower in the first half of the year compared to last year mainly due to higher raw material prices. Therefore, we’re anticipating first-quarter earnings of 17 to 23 cents per share. Our ability to achieve higher earnings in the second half of the year is largely dependent on the successful execution of our cost-reduction programs. At this time, our full-year earnings guidance is $1.40 to $1.62 per share,” added Burns. About Dana Corporation Dana people design and manufacture products for every major vehicle producer in the world. Dana is focused on being an essential partner to automotive, commercial, and off-highway vehicle customers, which collectively produce more than 60 million vehicles every year. A leading supplier of axle, driveshaft, engine, frame, chassis, and transmission technologies, Dana employs 46,000 people in 28 countries. The company is based in Toledo, Ohio, and reported sales of $9.1 billion in 2004. Dana’s Internet address is: www.dana.com. Forward-Looking Statements Certain statements contained in this presentation constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements represent Dana’s expectations based on our current information and assumptions. Forward-looking statements are inherently subject to risks and uncertainties. Dana’s actual results could differ materially from those that are anticipated or projected due to a number of factors. These factors include: national and international economic conditions; adverse effects from terrorism or hostilities; the strength of other currencies relative to the U.S. dollar; increases in commodity costs, including steel, that cannot be recouped in product pricing; our ability and that of our customers to achieve projected sales and production levels; the continued availability of necessary goods and services from our suppliers; competitive pressures on our sales and pricing; the continued success of our cost reduction and cash management programs, long-term transformation and U.S. tax loss carryforward utilization strategies; and other factors set out in our public filings with the Securities and Exchange Commission. Dana does not undertake to update any forward-looking statements in this presentation. Source: Dana Corporation Press Release |