Dana Incorporated (NYSE: DAN) today announced financial results for the second quarter of 2017.
“We continue to execute our strategy by expanding our markets and winning new business while converting our sales backlog into profitable growth. This quarter’s strong sales, profit, and cash flow are driven by improved market conditions, our recent acquisitions, and a focus on operational execution,” said James Kamsickas, Dana president and chief executive officer. “We have raised our financial guidance this year consistent with our continued strong operating performance and improved customer demand. The solid foundation that we have established will serve as an enabler for Dana to continue to deliver on our commitments beyond 2017.”
Second-Quarter Financial Results
Sales for the second quarter of 2017 totaled $1.84 billion, compared with $1.55 billion in the same period of 2016, an overall increase of 19 percent. The increase was driven by recent acquisitions that contributed $150 million, new customer programs, higher end-market demand in global light-truck markets, and improved demand in global off-highway end markets. Currency remained a slight headwind to sales of $10 million. Excluding acquisitions and currency effects, stronger market demand and new business generated 11 percent organic sales growth.
Net income attributable to Dana for the second quarter of 2017 was $71 million, compared with $53 million in the same period last year. Net income benefited from increased adjusted EBITDA of $39 million, partially offset by higher depreciation and amortization, acquisition-related costs, restructuring expenses, and income taxes. Costs associated with debt refinancing reduced net income by $6 million in this year’s second quarter and by $17 million in 2016. Reported diluted earnings per share were $0.47 in the second quarter of 2017, compared with $0.36 in the same period last year.
Adjusted EBITDA of $217 million provided an 11.8 percent margin, a 30 basis-point improvement over the second quarter of 2016. The year-over-year increase of $39 million was driven by stronger end-market demand and conversion of new business backlog, with higher organic sales volume benefiting adjusted EBITDA by $26 million. The adjusted EBITDA contribution from acquisitions was $17 million, while changes in foreign currency rates reduced earnings by $4 million from combined translation and transaction losses.
Diluted adjusted earnings per share in the second quarter of 2017 were $0.68, compared with $0.53 in the same period last year, primarily driven by the year-over-year earnings improvement.
Operating cash flow in this year’s second quarter was $169 million, compared with $167 million in the same period of 2016. Inclusive of capital spending of $73 million in the second quarter of 2017, free cash flow was $96 million, $12 million lower than the same period last year. Higher earnings were offset by increased working capital investment and increased capital spending to support new business launches, as well as higher transaction costs associated with acquisitions.
Updated 2017 Full-Year Financial Targets(1)
Dana has raised key financial guidance across all business units.
Sales of $6.8 to $7.0 billion;
Adjusted EBITDA of $790 to $820 million;
Adjusted EBITDA as a percent of sales of 11.6 to 11.8 percent;
Diluted adjusted EPS of $2.20 to $2.40;
Cash flow from operations of $480 to $520 million;
Capital spending of $380 to $420 million; and
Free cash flow of $80 to $120 million.
1Net income and diluted EPS guidance are not provided, as discussed below in Non-GAAP Financial Information.
Dana Recognized with Multiple Awards for World-Class Innovation, Quality, Service, and Value
Dana continues to be recognized around the world as a company that truly collaborates with its customers to provide industry-leading technology, quality, and service.
This quarter, Dana received several major awards from valued customers. In May, the company was honored by FCA as the 2017 North American Innovation Supplier of the Year. This award recognizes extraordinary commitment to innovation, quality, warranty, cost, and delivery. Specifically, Dana was acknowledged for developing a technologically advanced heat exchanger that boosts engine power for the induction-air system of a future FCA vehicle.
Dana was also recognized by Ford Motor Co. for quality, value, and innovation, receiving a Ford World Excellence Award in the category of “Aligned Business Framework.”
Five Dana manufacturing facilities located in Lima, Ohio; Sterling, Illinois; Danville, Kentucky; Wellingborough, U.K.; and Sorocaba, Brazil, were honored by PACCAR for excellent quality and warranty performance in providing products that achieved 10 PPM or better level of quality.
In addition, six of Dana’s Power Technologies manufacturing plants received the prestigious General Motors Quality Excellence Award recognizing only top-performing supplier manufacturing facilities that have met or exceeded a very stringent set of quality performance criteria. The Power Technologies business was also a recipient of the GM Supplier Impact Award for outstanding supply-chain performance.
Lastly, the Dana China Technology Center in Wuxi, Jiangsu Province, was recognized for outstanding performance in quality and delivery by Mahindra.
