20th July 2005 - Dana Corporation Reports Second-Quarter Results

Dana Corporation today reported financial results for the second quarter of 2005, which showed significant improvement over results for the first three months of the year. Second-quarter highlights included:

"In the face of continuing industry-wide challenges, Dana people have made significant progress in strengthening our company," said Dana Chairman and CEO Mike Burns. "Specifically, our lean manufacturing and value engineering programs are delivering tangible results as evidenced by the substantial profit improvement from last quarter.

"Our cost reduction and efficiency programs are essential. But equally important to achieving our goals is our aggressive pursuit of steady top-line growth," Mr. Burns said. "To this end, we are extremely pleased to report that we have added another $215 million in the second quarter to our increasingly strong -- and diverse -- book of new business."

Second-Quarter Results

Second-quarter sales in 2005 were $2.6 billion, compared to $2.3 billion during the same period last year. Earnings from continuing operations for the quarter, excluding unusual items, totaled $53 million, or 35 cents per share, compared to $59 million, or 39 cents per share, on a similar basis during the second quarter of 2004.

Net unusual charges for the second quarter of 2005 totaled $2 million. This amount included a net charge of $5 million resulting from a change in the basis of Ohio corporate taxation enacted on June 30. The accounting treatment of this change impacted the company's deferred tax assets. This charge was partially offset by a $3 million gain from the company's ongoing divestiture of DCC leasing assets.

The second quarter of 2004 included net unusual gains of $33 million associated with the sale of DCC assets and a tax benefit that we expected to realize on the sale of the automotive aftermarket operations that was completed in November 2004. Reported second-quarter 2004 net income, including net unusual gains, totaled $110 million, or 73 cents per share.

Business Unit Performance

The Heavy Vehicle Technologies and Systems Group continued to benefit from the strong commercial and off-highway markets. Its sales grew by 21 percent in the second quarter compared to the same period last year. Currency translation added $11 million to the group's sales for the second quarter of 2005. Automotive Systems Group sales for the second quarter of 2005 were up 10 percent versus the same period last year, with currency translation contributing $62 million.

Heavy Vehicle profits were up 19 percent compared to the second quarter of 2004, while Automotive Systems profits were down 15 percent over the same period. Second-quarter profits - particularly those of the Automotive Systems Group - were negatively impacted by approximately $27 million, after tax and net of customer recoveries, in additional steel costs Dana incurred compared to the second quarter of 2004. Additionally, 2005 profit after tax for the Heavy Vehicle group was favorably impacted by $4 million related to a decrease in the group's liability for warranty to reflect lower average claims costs.

2005 First-Half Results

Dana's six-month consolidated sales for 2005 were $5.1 billion. Income from continuing operations for the first half of 2005, excluding unusual items, was $71 million, or 47 cents per share. Including a net charge of $2 million for unusual items, net income for the six months was $69 million, or 46 cents per share.

In comparison, Dana's six-month consolidated sales for the first half of 2004 totaled $4.6 billion and income from continuing operations, excluding unusual items, was $109 million, or 72 cents per share. In this period, Dana reported income from discontinued operations of $48 million, or 32 cents per share, representing the automotive aftermarket businesses divested in November 2004. The $48 million included a $20 million tax benefit expected to be realized on the divestiture and a $3 million charge for divestiture-related expenses. Also during the first half of 2004, the company reported gains on the sale of DCC assets totaling $18 million. Including unusual items, net income for the first half of 2004 was $175 million.

Looking Ahead

"We are encouraged by the profit improvement we've achieved since last quarter," Mr. Burns said. "And we believe there is considerable opportunity to achieve additional cost savings and process efficiencies as our efforts gain more momentum.

"Production schedules for North American heavy trucks continue to be stronger than expected and, as a result, we are raising our estimate for full- year 2005 production to 310,000 units from 293,000 units. The off-highway market segments we serve are also expected to remain strong for the rest of the year," he said. "We're also expecting to benefit from subsiding steel costs, which will be particularly important to the Automotive Systems Group.

"However," Mr. Burns continued, "given the uncertainty surrounding North American light vehicle production in the second half of the year, we are lowering our 2005 production forecast to 15.5 million units from 15.7 million units. We are also concerned about the possible impact on sales if the dollar continues to gain strength. As a result, our earnings expectations for the full year remain unchanged at a range of $1.30 to $1.45 per share."

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 annually. A leading supplier of axle, driveshaft, engine, frame, chassis, and transmission technologies, Dana employs 46,000 people in 28 countries. Based in Toledo, Ohio, the company reported sales of $9.1 billion in 2004. Dana's Internet address is: www.dana.com

Forward-Looking Statements

Certain statements contained in this release 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 success of our cost reduction, cash management, and long-term transformation programs, and our 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 release.

Source: Dana Corporation Press Release