Dana Incorporated Reports Third-quarter 2020 Financial Results; Strong Sequential Sales Increase of 85 percent
MAUMEE, Ohio, Oct. 28, 2020 /PRNewswire/ --
Third-quarter Highlights
-- Sales of $2 billion; up $900 million from the second quarter as global
COVID-19 impacts tempered
-- Net income attributable to Dana of $45 million; diluted EPS of $0.31
-- Adjusted EBITDA of $201 million; margin of 10.1 percent of sales
-- Diluted adjusted EPS of $0.37
-- Strengthens e-Propulsion systems, controls, software, and electronics
engineering expertise with investment in Pi Innovo LLC
Dana Incorporated (NYSE: DAN) today announced financial results for the third quarter of 2020.
"As our multiple end markets rebounded from the unprecedented global COVID-19 pandemic shutdown, I want to commend the Dana team for an outstanding job, first and foremost ensuring the safety of our people, while successfully bringing our global manufacturing operations back on-line to meet growing customer demand," said Jim Kamsickas, Dana chairman and CEO. "Light truck and agriculture demand were especially strong, while many other markets, such as commercial vehicle, realized strengthened production volumes this quarter."
"We remain intensely focused on helping our customers navigate these challenging times all while remaining diligent about safety, cost management, and strengthening our e-Propulsion capabilities," he added.
Third-quarter 2020 Financial Results
Sales for the third quarter of 2020 totaled $1.99 billion, compared with $2.16 billion in the same period of 2019. The decrease is primarily attributable to weaker end-market demand resulting from the global pandemic shutdown and eventual restart in June. On a sequential basis, sales in the third quarter increased $916 million or 85 percent, compared with the second quarter of this year due to increased demand as customers rapidly resumed production after the pandemic related restrictions were lifted.
Dana reported net income of $45 million for the third quarter of 2020, compared with net income of $111 million in the same period of 2019, reflecting the lower operating earnings this year associated with reduced sales due to the COVID-19 pandemic.
Reported diluted earnings per share was $0.31, compared with $0.77 per share in the third quarter of 2019.
Adjusted EBITDA for the third quarter of 2020 was $201 million, compared with $250 million for the same period last year primarily due to lower sales. Targeted cost-management actions and a successful restart of operations helped to mitigate the margin impact from the sales decline and subsequent rapid recovery.
On a sequential basis, adjusted EBITDA in the third quarter was $206 million higher than in the second quarter of this year, generating a 1,060-basis point margin improvement.
Diluted adjusted earnings per share was $0.37 in the third quarter of 2020, compared with earnings of $0.74 in the same period last year. The lower year-over-year comparison was due to lower earnings in this year's third quarter.
Operating cash flow in the third quarter of 2020 was $321 million, compared with $231 million provided in the same period of 2019.
Adjusted free cash flow was $261 million in the third quarter of 2020, compared with $125 million in 2019. The impact of lower profit in this year's third quarter was more than offset by improved working capital efficiency, lower cash taxes and interest, and lower capital expenditures, compared with the same period last year.
The company reported it had total liquidity of approximately $2 billion as of September 30, 2020, including $976 million of available cash and marketable securities and $979 million available on its committed revolving credit facility.
Reinstates 2020 Guidance
"We were very pleased to see such a rapid recovery in global vehicle demand during the third quarter," said Jonathan Collins, Dana's executive vice president and chief financial officer. "The improving business conditions across all of our global end markets have enabled us to reinstate our revised, full-year financial targets. Dana remains financially strong, and we are well-positioned to capitalize on the strengthening of our businesses through the remainder of this year and into next year."
2020 Full-year Financial Targets(1)
-- Sales of $6.650 to $6.950 billion;
-- Adjusted EBITDA of $530 million to $590 million, an implied adjusted
EBITDA margin of approximately 8 percent at the midpoint of the range;
-- Diluted adjusted EPS of $0.35 to $0.55;
-- Operating cash flow of up to 5 percent of sales; and
-- Adjusted free cash flow of up to 1 percent of sales.
(1)Net income and diluted EPS guidance are not provided, as discussed below in Non-GAAP Financial Information.
Strategic Investment in Electric Vehicle Software and Controls
The company also announced today that it has acquired a non-controlling stake in Pi Innovo LLC, a leader in embedded software solutions and electronics control units for the light vehicle, commercial vehicle, and off-highway markets.
Dana to Host Conference Call at 9 a.m. Wednesday, October 28
Participants may listen to the audio portion of the conference call either through audio streaming online or by telephone. Slide viewing is available online via a link provided on the Dana investor website: www.dana.com/investors. U.S. and Canadian locations should dial 1-888-311-4590 and international locations should call 1-706-758-0054. Please enter conference I.D. 1250919 and ask for the "Dana Incorporated's Financial Webcast and Conference Call." Phone registration will be available beginning at 8:30 a.m. EDT.
An audio recording of the webcast will be available after 5 p.m. EDT on October 28 by dialing 1-855-859-2056 (U.S. or Canada) or 1-404-537-3406 (international) and entering conference I.D. 1250919. A webcast replay will also be available after 5 p.m. EDT and may be accessed via Dana's investor website.
Non-GAAP Financial Information
This release refers to adjusted EBITDA, a non-GAAP financial measure which we have defined as net income before interest, income taxes, depreciation, amortization, equity grant expense, restructuring expense, non-service cost components of pension and other postretirement benefit costs, and other adjustments not related to our core operations (gain/loss on debt extinguishment, pension settlements, divestitures, impairment, etc.). Adjusted EBITDA is a measure of our ability to maintain and continue to invest in our operations and provide shareholder returns. We use adjusted EBITDA in assessing the effectiveness of our business strategies, evaluating and pricing potential acquisitions and as a factor in making incentive compensation decisions. In addition to its use by management, we also believe adjusted EBITDA is a measure widely used by securities analysts, investors, and others to evaluate financial performance of our company relative to other Tier 1 automotive suppliers. Adjusted EBITDA should not be considered a substitute for income before income taxes, net income, or other results reported in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
Diluted adjusted EPS is a non-GAAP financial measure, which we have defined as adjusted net income divided by adjusted diluted shares. We define adjusted net income as net income (loss) attributable to the parent company, excluding any nonrecurring income tax items, restructuring charges, amortization expense, and other adjustments not related to our core operations (as used in adjusted EBITDA), net of any associated income tax effects. We define adjusted diluted shares as diluted shares as determined in accordance with GAAP based on adjusted net income. This measure is considered useful for purposes of providing investors, analysts, and other interested parties with an indicator of ongoing financial performance that provides enhanced comparability to EPS reported by other companies. Diluted adjusted EPS is neither intended to represent nor be an alternative measure to diluted EPS reported under GAAP.
Free cash flow is a non-GAAP financial measure which we have defined as net cash provided by (used in) operating activities less purchases of property, plant, and equipment. Adjusted free cash flow is a non-GAAP financial measure which we have defined as net cash provided by (used in) operating activities excluding voluntary pension contributions less purchases of property, plant, and equipment. We believe these measures are useful to investors in evaluating the operational cash flow of the company inclusive of the spending required to maintain the operations. Free cash flow and adjusted free cash flow are not intended to represent nor be an alternative to the measure of net cash provided by (used in) operating activities reported under GAAP. Free cash flow and adjusted free cash flow may not be comparable to similarly titled measures reported by other companies.
We have not provided reconciliations of preliminary and projected adjusted EBITDA and diluted adjusted EPS to the most comparable GAAP measures of net income and diluted EPS. Providing net income and diluted EPS guidance is potentially misleading and not practical given the difficulty of projecting event-driven transactional and other non-core operating items that are included in net income and diluted EPS, including restructuring actions, asset impairments, and income tax valuation adjustments. Reconciliations of these non-GAAP measures with the most comparable GAAP measures for historical periods are indicative of the reconciliations that will be prepared upon completion of the periods covered by the non-GAAP guidance. Please reference the "Non-GAAP Financial Information" accompanying our quarterly earnings conference call presentations on our website at www.dana.com/investors for our GAAP results and the reconciliations of these measures, were used, to the comparable GAAP measures.
Forward-Looking Statements
Certain statements and projections contained in this news release are, by their nature, forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, estimates, and projections about our industry and business, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," and similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties, and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.
Dana's Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss important risk factors that could affect our business, results of operations, and financial condition. The forward-looking statements in this news release speak only as of this date. Dana does not undertake any obligation to revise or update publicly any forward-looking statement for any reason.
About Dana Incorporated
Dana is a world leader in providing power-conveyance and energy-management solutions that are engineered to improve the efficiency, performance, and sustainability of light vehicles, commercial vehicles, and off-highway equipment. Enabling the propulsion of conventional, hybrid, and electric-powered vehicles, Dana equips its customers with critical drive and motion systems; electrodynamic technologies; and thermal, sealing, and digital solutions.
In 2019, the company reported sales of $8.6 billion with 36,000 associates in 34 countries across six continents. Based in Maumee, Ohio, USA, and founded in 1904, Dana has established a high-performance culture that focuses on its people, and the company has earned recognition around the world as a top employer. Learn more at dana.com.
DANA INCORPORATED
Consolidated Statement of Operations (Unaudited)
For the Three Months Ended September 30, 2020 and 2019
Three Months Ended
(In millions, except
per share amounts) September 30,
2020 2019
Net sales $1,994 $2,164
Costs and expenses
Cost of sales 1,780 1,882
Selling, general and
administrative
expenses 111 128
Amortization of
intangibles 4 2
Restructuring charges,
net 2 5
Pension settlement charge (2)
Other income (expense),
net (8) (8)
Earnings before
interest and income
taxes 89 137
Interest income 3 3
Interest expense 38 31
Earnings before income
taxes 54 109
Income tax expense 16 5
Equity in earnings of
affiliates 7 8
Net income 45 112
Less: Noncontrolling
interests net income 4 3
Less: Redeemable
noncontrolling
interests net loss (4) (2)
Net income attributable
to the parent company $45 $111
===
Net income per share available to common
stockholders
Basic $0.31 $0.77
Diluted $0.31 $0.77
Weighted-average
shares outstanding -
Basic 144.5 144.0
Weighted-average
shares outstanding -
Diluted 145.2 144.8
DANA INCORPORATED
Consolidated
Statement of
Operations
(Unaudited)
For the Nine Months
Ended September 30,
2020 and 2019
Nine Months Ended
(In millions, except per
share amounts) September 30,
2020 2019
Net sales $4,998 $6,633
Costs and expenses
Cost of sales 4,588 5,725
Selling, general and
administrative expenses 299 404
Amortization of intangibles 10 8
Restructuring charges, net 21 23
Impairment of goodwill (51)
Pension settlement charge (260)
Other income (expense), net (5) (31)
Earnings before interest and
income taxes 24 182
Write-off deferred financing
costs (5)
Interest income 7 8
Interest expense 99 92
Earnings (loss) before income
taxes (73) 98
Income tax expense (benefit) 34 (27)
Equity in earnings of
affiliates 17 22
Net income (loss) (90) 147
Less: Noncontrolling
interests net income 6 9
Less: Redeemable
noncontrolling interests net
loss (25) (3)
Net income (loss)
attributable to the parent
company $(71) $141
Net income (loss) per share
available to common
stockholders
Basic $(0.49) $0.98
Diluted $(0.49) $0.97
Weighted-average shares
outstanding - Basic 144.4 144.0
Weighted-average shares
outstanding - Diluted 144.4 144.8
DANA INCORPORATED
Consolidated Statement of Comprehensive
Income (Unaudited)
For the Three Months Ended September
30, 2020 and 2019
Three Months Ended
(In millions)
September 30,
2020 2019
Net income $45 $112
Other comprehensive income (loss), net
of tax:
Currency
translation
adjustments 14 (46)
Hedging gains
and losses 1 8
Defined benefit
plans 4 5
Other
comprehensive
income (loss) 19 (33)
Total comprehensive income 64 79
Less:
Comprehensive
(income) loss
attributable
to
noncontrolling
interests (15) 9
Less:
Comprehensive
(income) loss
attributable
to redeemable
noncontrolling
interests 8 (3)
Comprehensive income attributable to
the parent company $57 $85
DANA INCORPORATED
Consolidated Statement of Comprehensive
Income (Unaudited)
For the Nine Months Ended September 30,
2020 and 2019
Nine Months Ended
(In millions)
September 30,
2020 2019
Net income (loss) $(90) $147
Other comprehensive income (loss), net
of tax:
Currency
translation
adjustments (133) (16)
Hedging gains
and losses 40 15
Defined benefit
plans 11 365
Other
comprehensive
income (loss) (82) 364
Total comprehensive income (loss) (172) 511
Less:
Comprehensive
(income) loss
attributable
to
noncontrolling
interests (7) 4
Less:
Comprehensive
(income) loss
attributable
to redeemable
noncontrolling
interests 25 (6)
Comprehensive income (loss)
attributable to the parent company $(154) $509
DANA INCORPORATED
Consolidated Balance Sheet (Unaudited)
As of September 30, 2020 and December 31, 2019
(In millions, except share and per share amounts)
September 30,
December 31,
2020 2019
Assets
Current assets
Cash and cash equivalents $956 $508
Marketable securities 22 19
Accounts receivable
1,239 1,103
Trade, less allowance for doubtful accounts of $7 in 2020 and $9 in 2019
171 202
Other
Inventories 1,087 1,193
Other current assets 129 137
3,604 3,162
Total current assets
Goodwill 458 493
Intangibles 235 240
Deferred tax assets 594 580
Other noncurrent assets 126 120
Investments in affiliates 174 182
Operating lease assets 177 178
Property, plant and equipment, net 2,154 2,265
$7,522 $7,220
Total assets
===
Liabilities and equity
Current liabilities
Short-term debt $12 $14
Current portion of long-term debt 35 20
Accounts payable 1,187 1,255
Accrued payroll and employee benefits 193 206
Taxes on income 59 46
Current portion of operating lease liabilities 43 42
Other accrued liabilities 308 262
1,837 1,845
Total current liabilities
Long-term debt, less debt issuance costs of $31 in 2020 and $28 in 2019 2,839 2,336
Noncurrent operating lease liabilities 141 140
Pension and postretirement obligations 457 459
Other noncurrent liabilities 303 305
5,577 5,085
Total liabilities
Commitments and contingencies
Redeemable noncontrolling interests 152 167
Parent company stockholders' equity
-
Preferred stock, 50,000,000 shares authorized, $0.01 par value, no shares outstanding
2 2
Common stock, 450,000,000 shares authorized, $0.01 par value, 144,491,212 and 143,942,539
shares outstanding
2,392 2,386
Additional paid-in capital
535 622
Retained earnings
(156) (150)
Treasury stock, at cost (10,437,276 and 10,111,191 shares)
(1,070) (987)
Accumulated other comprehensive loss
1,703 1,873
Total parent company stockholders' equity
Noncontrolling interests 90 95
1,793 1,968
Total equity
$7,522 $7,220
Total liabilities and equity
===
DANA INCORPORATED
Consolidated Statement of Cash Flows (Unaudited)
For the Three Months Ended September 30, 2020
and 2019
Three Months Ended
(In millions) September 30,
2020 2019
Operating activities
Net income $45 $112
Depreciation 88 82
Amortization 6 4
Amortization of deferred financing charges 2 2
Earnings of affiliates, net of dividends
received (6) (6)
Stock compensation expense 2 5
Deferred income taxes (20) (15)
Pension expense, net 1
Change in working capital 178 50
Other, net 25 (3)
Net cash provided by operating activities 321 231
Investing activities
Purchases of property, plant and equipment (60) (108)
Acquisition of businesses, net of cash acquired (12)
Purchases of marketable securities (21) (12)
Proceeds from sales and maturities of marketable
securities 19 7
Settlements of undesignated derivatives (1)
Other, net 10 (6)
Net cash used in investing activities (52) (132)
Financing activities
Net change in short-term debt 6 95
Proceeds from long-term debt 2
Repayment of long-term debt (9) (102)
Deferred financing payments (2) (4)
Dividends paid to common stockholders (14)
Distributions to noncontrolling interests (7) (2)
Sale of interest to noncontrolling shareholder 53
Contributions from noncontrolling interests 1 2
Other, net (1)
Net cash provided by (used in) financing
activities (10) 28
Net increase in cash, cash equivalents and
restricted cash 259 127
Cash, cash equivalents and restricted cash -
beginning of period 702 298
Effect of exchange rate changes on cash balances 5 (13)
Cash, cash equivalents and restricted cash - end
of period $966 $412
DANA INCORPORATED
Consolidated Statement of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 2020 and
2019
Nine Months Ended
(In millions) September 30,
2020 2019
Operating activities
Net income (loss) $(90) $147
Depreciation 257 235
Amortization 15 12
Amortization of deferred financing charges 6 5
Write-off of deferred financing costs 5
Earnings of affiliates, net of dividends
received 5 (3)
Stock compensation expense 5 15
Deferred income taxes (28) (120)
Pension expense, net 3 207
Impairment of goodwill 51
Change in working capital (50) (197)
Other, net 16 (13)
Net cash provided by operating activities 195 288
Investing activities
Purchases of property, plant and equipment (181) (298)
Acquisition of businesses, net of cash acquired (6) (666)
Purchases of marketable securities (36) (24)
Proceeds from sales and maturities of marketable
securities 32 25
Settlements of undesignated derivatives (5) (20)
Other, net 3 (12)
Net cash used in investing activities (193) (995)
Financing activities
Net change in short-term debt (2) 92
Proceeds from long-term debt 512 675
Repayment of long-term debt (12) (121)
Deferred financing payments (13) (16)
Dividends paid to common stockholders (15) (43)
Distributions to noncontrolling interests (10) (14)
Sale of interest to noncontrolling shareholder 53
Contributions from noncontrolling interests 10 4
Payments to acquire noncontrolling interests (1)
Repurchases of common stock (25)
Other, net (3)
Net cash provided by financing activities 466 605
Net increase (decrease) in cash, cash
equivalents and restricted cash 468 (102)
Cash, cash equivalents and restricted cash -
beginning of period 518 520
Effect of exchange rate changes on cash balances (20) (6)
Cash, cash equivalents and restricted cash - end
of period $966 $412
DANA INCORPORATED
Reconciliation of Net Cash Provided By (Used In) Operating Activities to
Free Cash Flow and Adjusted Free Cash
Flow (Unaudited)
Three Months Ended
(In millions) September 30,
2020 2019
Net cash provided by operating
activities $321 $231
Purchase of property, plant and
equipment (60) (108)
Free cash flow 261 123
Discretionary pension contributions 2
Adjusted free cash flow $261 $125
Nine Months Ended
(In millions) September 30,
2020 2019
Net cash provided by operating
activities $195 $288
Purchase of property, plant and
equipment (181) (298)
Free cash flow 14 (10)
Discretionary pension contributions 64
Adjusted free cash flow $14 $54
DANA INCORPORATED
Segment Sales and Segment EBITDA (Unaudited)
For the Three Months Ended
September 30, 2020 and
2019
Three Months Ended
(In millions) September 30,
2020 2019
Sales
Light Vehicle $913 $930
Commercial Vehicle 314 398
Off-Highway 507 582
Power Technologies 260 254
Total Sales $1,994 $2,164
Segment EBITDA
Light Vehicle $89 $113
Commercial Vehicle 16 33
Off-Highway 65 79
Power Technologies 34 28
Total Segment EBITDA 204 253
Corporate expense and other
items, net (3) (3)
Adjusted EBITDA $201 $250
DANA INCORPORATED
Segment Sales and Segment EBITDA (Unaudited)
For the Nine Months Ended
September 30, 2020 and 2019
Nine Months Ended
(In millions) September 30,
2020 2019
Sales
Light Vehicle $2,058 $2,763
Commercial Vehicle 847 1,266
Off-Highway 1,440 1,808
Power Technologies 653 796
Total Sales $4,998 $6,633
Segment EBITDA
Light Vehicle $140 $333
Commercial Vehicle 29 115
Off-Highway 175 264
Power Technologies 63 90
Total Segment EBITDA 407 802
Corporate expense and other
items, net (6) (9)
Adjusted EBITDA $401 $793
DANA INCORPORATED
Reconciliation of Segment and Adjusted EBITDA to Net Income (Unaudited)
For the Three Months Ended September
30, 2020 and 2019
Three Months Ended
(In millions) September 30,
2020 2019
Segment EBITDA $204 $253
Corporate expense and other items, net (3) (3)
Adjusted EBITDA 201 250
Depreciation (88) (82)
Amortization (6) (4)
Non-service cost components of pension
and OPEB costs (3) (4)
Restructuring charges, net (2) (5)
Stock compensation expense (2) (5)
Strategic transaction expenses (4) (8)
Acquisition related inventory
adjustments (3)
Pension settlement charges, net (2)
Other items (7)
Earnings before interest and income
taxes 89 137
Interest income 3 3
Interest expense 38 31
Earnings before income taxes 54 109
Income tax expense 16 5
Equity in earnings of affiliates 7 8
Net income $45 $112
DANA INCORPORATED
Reconciliation of Segment and Adjusted EBITDA to Net Income (Loss) (Unaudited)
For the Nine Months Ended September 30,
2020 and 2019
Nine Months Ended
(In millions) September 30,
2020 2019
Segment EBITDA $407 $802
Corporate expense and other items, net (6) (9)
Adjusted EBITDA 401 793
Depreciation (257) (235)
Amortization (15) (12)
Non-service cost components of pension
and OPEB costs (8) (19)
Restructuring charges, net (21) (23)
Stock compensation expense (5) (15)
Strategic transaction expenses (15) (32)
Impairment of goodwill (51)
Acquisition related inventory
adjustments (12)
Non-income tax legal judgment 6
Pension settlement charges, net (260)
Other items (5) (9)
Earnings before interest and income
taxes 24 182
Write-off deferred financing costs (5)
Interest income 7 8
Interest expense 99 92
Earnings (loss) before income taxes (73) 98
Income tax expense (benefit) 34 (27)
Equity in earnings of affiliates 17 22
Net income (loss) $(90) $147
DANA INCORPORATED
Diluted Adjusted EPS (Unaudited)
For the Three Months Ended September
30, 2020 and 2019
(In millions, except per share amounts)
Three Months Ended
September 30,
2020 2019
Net income attributable to parent
company $45 $111
Items impacting income before income
taxes:
Restructuring charges 3 5
Amortization 5 4
Strategic transaction expenses 4 8
Acquisition related inventory
adjustments 3
Pension settlement charges 2
Other items 2
Items impacting income taxes:
Net income tax expense on items above (3) (5)
Tax benefit attributable to
utilization of federal tax credits,
state tax law changes and valuation
allowance adjustments (1) (22)
Adjusted net income $53 $108
Diluted shares -as reported 145.2 144.8
Adjusted diluted shares 145.2 144.8
Diluted adjusted EPS $0.37 $0.74
DANA INCORPORATED
Diluted Adjusted EPS
(Unaudited)
For the Nine Months Ended
September 30, 2020 and 2019
(In millions, except per share
amounts)
Nine Months Ended
September 30,
2020 2019
Net income (loss) attributable
to parent company $(71) $141
Items impacting income before
income taxes:
Restructuring charges 21 23
Amortization 13 12
Strategic transaction expenses 15 32
Acquisition related inventory
adjustments 12
Non-income tax legal judgment (6)
Impairment of goodwill 31
Pension settlement charges 260
Write-off deferred financing costs 5
Loss on deal contingent forward 13
Items impacting income taxes:
Net income tax expense on items above (14) (24)
Tax expense (benefit) attributable to
utilization of federal tax credits,
state tax law changes and valuation
allowance adjustments 22 (116)
Adjusted net income $22 $347
Diluted shares -as reported 144.9 144.8
Adjusted diluted shares 144.9 144.8
Diluted adjusted EPS $0.15 $2.40
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SOURCE Dana Incorporated
