17th January 2006 - Dana Corporation Reports Third-Quarter 2005 Results

Dana Corporation today reported financial results for both the quarter and nine months ended Sept. 30, 2005, and announced that it will file its Form 10-Q for the third quarter of 2005 later today. The filing and delivery of this report will eliminate any defaults related to late filing of the third-quarter financial statements under the company's financing agreements.

Sales for the third quarter of 2005 were $2,396 million, compared to $2,114 million during the same period in 2004. The company recorded a net loss of $1,272 million, or $8.50 per share, for the quarter, compared to net income of $42 million, or 28 cents per share in the third quarter of 2004. Results for the quarter and nine months ended Sept. 30, 2004 have been restated, as previously disclosed in the 2004 Form 10-K/A filed on Dec. 30, 2005.

The third-quarter 2005 net loss included two significant unusual items that were previously announced. These two non-cash items account for 94 percent of the reported net loss:

In the third quarter of 2005, the company also recorded an aggregate charge of approximately $16 million, or 11 cents per share, related to the sale of its domestic fuel rail business and the dissolution of its engine bearings joint venture with The Daido Metal Company.

The balance of the third-quarter 2005 loss - totaling $63 million - was from operations. The comparable number for the third quarter of 2004 was $39 million after adjusting for unusual charges and results of discontinued operations.

The comparison of quarterly operating income year-on-year was impacted significantly by taxes. The third-quarter 2004 results included a significant tax benefit. By contrast, third-quarter 2005 results reflect tax expense on income of foreign operations, despite the fact that there was a consolidated loss before tax. This is due to the fact that the company no longer provides deferred tax benefits against U.S. losses.

Interest expense was $11 million lower in the third quarter of 2005 than in the comparable period in 2004 due to lower average debt levels.

As disclosed in the company's segment information, on an EBIT basis the Heavy Vehicle Technologies and Systems Group earned $16 million in the third quarter of 2005, compared to $41 million during the same period in 2004. The principal reasons for this decline were substantially higher steel costs and production inefficiencies within the Commercial Vehicle business. Additionally, the Off-Highway business experienced higher costs associated with the ongoing realignment of its manufacturing facilities.

On an EBIT basis, the Automotive Systems Group's earnings declined to $41 million in the third quarter of 2005 from $65 million during the same period last year. In addition to the adverse effects of higher material costs and continuing pricing pressures, results in this business unit were also negatively impacted by start-up losses at a new manufacturing facility in its actuation systems joint venture.

Nine-Month Results

Sales for the nine months ended Sept. 30, 2005 were $7,505 million which compares to $6,755 million for the same period in 2004. For the first nine months of 2005, the company reported a net loss of $1,226 million compared to net income of $200 million for the same period in 2004. The primary reasons for the difference in the year-on-year change in net income were the unusual items that occurred in the third quarter.

On an EBIT basis the Heavy Vehicle Technologies and Systems Group earned $81 million in the first nine months of 2005, compared to $125 million during the same period in 2004. The Automotive Systems Group earnings declined to $179 million in the first nine months of 2005 from $270 million during the same period last year. Material costs were chiefly responsible for the lower income in both business units.

"Obviously, our results are far from acceptable, particularly the operating loss," said Dana Chairman and CEO Mike Burns. "Many of the challenges we are facing on the automotive side, including higher material costs and lower production levels, are industry-wide issues. However, the reduced income in our Heavy Vehicle unit reflects not only material cost increases, but also internal operating inefficiencies, which we are moving aggressively to address.

"Specifically, within our Commercial Vehicle business, we have announced a series of actions to reposition our operations and balance capacity to enhance our efficiency," Mr. Burns added. "I am also confident in the capabilities of our newly appointed Heavy Vehicle Products President, Nick Stanage. Nick's outstanding combination of leadership ability and technical knowledge promises to serve this business and our customers well as we move forward."

Mr. Burns said Dana is continuing to improve focus and increase performance in all of its businesses, as evidenced by recent announcements regarding strategic divestitures, consolidation of facilities, and workforce reductions. "At the same time, we can't just work the cost side," he said. "We must also continue to grow our revenue base. And to this end, we continue to add to our backlog of profitable new business."

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 billion in 2004. Dana's Internet address is: http://www.dana.com.

Use of Non-GAAP Financial Information

This release contains information about Dana's financial results which is not presented in accordance with accounting principles generally accepted in the United States (GAAP). Specifically, the release contains information about Dana's financial results presented on an EBIT basis and includes tables that show the company's results with Dana Credit Corporation (DCC) accounted for on an equity basis, rather than on a consolidated basis. Management believes that the presentation of the EBIT financial measures provides useful information to investors due to the impact of the unusual tax items on the company's three- and nine-month results in 2005. Management also believes that the presentation of results with DCC on an equity basis is useful because that is how management evaluates Dana's operating segments. This is done because DCC is not homogenous with Dana's manufacturing operations, its financing activities do not support the sales of the other operating segments, and its financial and performance measures are inconsistent with those of the other operating segments. Moreover, the financial covenants in Dana's bank facility are measured with DCC accounted for on an equity basis. For the non- GAAP measures presented in this release, there is supplementary information at the end showing the most directly comparable financial measures calculated and presented in accordance with GAAP and a quantitative reconciliation of the differences between the non-GAAP financial measures and the most directly comparable GAAP financial measures.

Forward-Looking Statements

Statements in this release which are not entirely historical 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. However, forward-looking statements are inherently subject to risks and uncertainties and Dana's actual results could differ materially from those that are anticipated or projected due to a number of factors. These factors include the cyclical nature of the vehicular markets we serve, particularly the heavy-duty commercial vehicle market; changes in the competitive environment in our markets due, in part, to outsourcing and consolidation by our customers; changes in national and international economic conditions that affect our markets, such as increased fuel prices and legislation regulating vehicle emissions; potential adverse effects on our operations and business from terrorism or hostilities; the strength of other currencies in the overseas countries in which we do business relative to the U.S. dollar; increases in our commodity costs (including steel, other raw materials, and energy) that we cannot recoup in our product pricing; our success in implementing our cost-savings, lean manufacturing and VA/VE (value added/value engineering) programs; changes in business relationships with our major customers and in the timing, size and continuation of their programs; the ability of our customers to maintain their market positions and achieve their projected sales and production levels; the ability of our suppliers to maintain their projected production levels and furnish critical components for our products, as well as other necessary goods and services; competitive pressures on our sales from other vehicle component suppliers; price reduction pressures from our customers; our ability to negotiate new or modified financing agreements prior to the expiration of the waivers under our existing agreements; our ability to complete our previously announced strategic actions as contemplated (including the divestiture of our non-core engine hard parts, fluid products and pump products businesses; the operational restructuring in our Automotive Systems Group and our Commercial Vehicle business; the dissolution of our Mexican joint venture, Spicer S.A. de C.V.; and the finalization of our Chinese joint venture, Dongfeng Axle Co., Ltd.); and other factors set out in our public filings with the Securities and Exchange Commission. Forward-looking statements in this release speak only as of the date of the release. Dana does not undertake to update such forward- looking statements.

Source: Dana Corporation Press Release