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DANA HOLDING CORP Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: October 27, 2011 02:00PM
DANA HOLDING CORP (DAN) filed Quarterly Report for the period ended 2011-09-30. Dana Holding has a market cap of $2.05 billion; its shares were traded at around $13.93 with a P/E ratio of 13.2 and P/S ratio of 0.3.
Highlight of Business Operations:Other income, net — Other income was $49 for 2011 and $9 for 2010. Year-to-date nine-month 2011 results include a gain of $60 on the sale of our GETRAG joint venture interests, an impairment charge of $5 that was recognized in connection with the expected sale of certain assets and a charge of $53 for the write-off of unamortized original issue discount and debt issuance costs associated with the refinancing and restructuring of certain debt facilities, as more fully described in Notes 2 and 11 of the consolidated financial statements in Item 1 of Part I. Other income in 2011 also included interest income of $20, net foreign exchange gains of $10 and a credit of $6 from settlement of an asbestos-related claim with an insurance company in liquidation proceedings. While the $21 of interest income in the nine-month 2010 period was comparable to 2011, we experienced net foreign exchange losses of $12 in 2010, along with a net loss on extinguishment of debt of $7 and a loss on the divestiture of the Structural Products business of $5.
Non-GAAP financial measures — The table above refers to adjusted EBITDA, a non-GAAP financial measure which we have defined as earnings before interest, taxes, depreciation, amortization, non-cash equity grant expense, restructuring expense and other nonrecurring items (gain/loss on debt extinguishment or divestitures, impairment, etc.). The most significant impact on Dana s ongoing results of operations as a result of applying fresh start accounting following our emergence from bankruptcy was higher depreciation and amortization. By using adjusted EBITDA, a performance measure which excludes depreciation and amortization, the comparability of results is enhanced. Management also believes that adjusted EBITDA is an important measure since the financial covenants in our debt agreements are based, in part, on adjusted EBITDA. Adjusted EBITDA should not be considered a substitute for income (loss) before income taxes, net income (loss) or other results reported in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. LVD segment EBITDA for the third quarter of 2011 was $74 as compared to $63 in the same period of 2010. Stronger production volumes improved segment EBITDA by about $12. Foreign currency translation gain, cost reductions and material recovery provided additional profit improvement; however, the additional earnings from these factors were more than offset by certain pricing actions which favorably impacted last year s third quarter and higher material commodity costs. For the first nine months of 2011, segment EBITDA of $200 improved $31 over the same period of 2010. Nine-month EBITDA as a percent of sales improved to 9.9% of sales in 2011 from 9.5% in 2010. Higher sales volumes, the result of stronger market production levels, increased earnings by about $36 with additional earnings improvement coming from cost reductions and material recovery. Certain pricing actions favorably impacted the first nine months of 2010 but did not continue into 2011, thereby offsetting the 2011 profit improvements from higher sales levels and other factors. In the Power Technologies segment, EBITDA of $31 in the third quarter of 2011 is down from $33 in 2010. Sales levels, adjusted for currency, were relatively comparable in the third quarters of this year and last year. The reduction in earnings from last year s third quarter was principally due to higher material commodity costs. Segment EBITDA for the first nine months of 2011 was $108, an increase of $13 from 2010, with EBITDA as a percent of sales at 13.6% in both periods. Higher sales volumes from increased production levels contributed about $16 of the nine-month increase. Cost reduction and other benefits were more than offset by higher warranty cost of $4.
Year-to-date sales increased $1,135 in 2011 as compared to 2010. The overall strengthening of several international currencies against the U.S. dollar accounted for $207 of the increase. Net acquisition and divestiture activity added $153 to sales, with the strategic agreement with SIFCO completed in February 2011 increasing sales by $291 and the sale of substantially all of our Structural Products business in March 2010 reducing sales by $145. The $775 of organic growth — the change in sales attributable primarily to market volume, pricing and mix — represents an increase of 17% over our 2010 sales. Increased sales in North America during 2011, adjusted for the effects of currency and divestitures, totaled $326 — a 15% increase on 2010 sales. The increase was largely due to increased OEM production levels in the light vehicle and medium/heavy truck markets. Light duty production levels were 7% higher in 2011 as production in the light pickup, van and SUV segment rose 5%. In the medium/heavy truck markets, production was up more than 55%. In the off-highway sector, sales increased more than 20%, primarily due to stronger 2011 demand levels. Excluding currency effects, our year-to-date 2011 sales in Europe were 29% higher than in 2010. Our businesses in Europe benefited from improved medium/heavy vehicle production levels, which were more than 50% higher than in the same period last year, and light vehicle production which was about 8% stronger. Higher demand levels in the off-highway markets helped drive a sales increase of more than 50%.
Third quarter sales increased $436 in 2011 as compared to 2010. The overall strengthening of several international currencies against the U.S. dollar accounted for $72 of the increase. Net acquisition and divestiture activity contributed $122 of the sales increase, principally due to the strategic agreement with SIFCO that was completed in February 2011. The $242 of organic growth — the change in sales attributable primarily to market volume, pricing and mix – is an increase of 16% over third quarter 2010 sales. The increase in sales in North America during 2011, adjusted for the effects of currency, totaled $117 — a 16% increase on 2010 sales. Higher OEM production levels were a significant contributor to the increase. Medium/heavy truck production was more than 65% higher in this year s third quarter than in the same period a year ago. Light duty production levels in 2011 were up about 5%, with production in the light pickup, van and SUV segment being down about 4%. Strong demand in the off-highway sector also contributed, as 2011 third quarter sales were up more than 24% from last year. Excluding currency effects, our third quarter 2011 sales in Europe were 22% higher than in 2010. Our businesses in Europe benefited from medium/heavy vehicle production levels, which were about 28% higher than last year s third quarter, and modest growth in light vehicle production of around 4%. Higher demand levels in the off-highway markets contributed to that segment s sales being up more than 50%. In South America, the increase in sales of $118 resulting from the SIFCO agreement was partially offset by the $3 reported in 2010 by the divested Structural Products business in Venezuela. Exclusive of these effects and currency movement, 2011 sales in South America were up 16% versus the third quarter of 2010, primarily as a result of stronger production levels. Organic sales growth in Asia Pacific was about the same as in 2010 as production levels have only recently begun returning to levels expected prior to the earthquake in Japan earlier this year.
Commercial Vehicle segment EBITDA for the third quarter and first nine months of 2011 was $61 and $159, increases of $20 and $55 over the comparable 2010 periods. Nine-month segment EBITDA as a percent of sales in 2011 was 9.5%, down slightly from 9.6% in 2010. Stronger production levels in this segment's markets added $3 and $16 to the increased third quarter and nine-month segment EBITDA, with the SIFCO transaction adding another $11 and $27. For the comparative three and nine-month periods, pricing and cost reduction actions more than offset higher material commodity costs and higher premium freight costs incurred to satisfy customer requirements. In our Off-Highway segment, third quarter 2011 EBITDA of $42 was up $19 from the corresponding period in 2010. Segment EBITDA of $134 for the first nine months of 2011 was up $65 from 2010. Improving market conditions in this business drove stronger sales volume which increased year-over-year third quarter segment EBITDA by about $12 and nine-month segment EBITDA by about $42. The additional improvement in earnings came principally from pricing actions and cost reductions. With the higher sales and other benefits, segment EBITDA margin improved to 11.4% for the first nine months of 2011 from 8.5% last year.
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