Dana Q1 Net Income Falls, Revenue Slips
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Vehicle component manufacturer Dana Inc. saw net income tumble and revenue decline in the first quarter amid a pileup of weakness in the heavy-duty truck market, curtailed production and the spread of the novel coronavirus.
For the period ended March 31, net income fell 62% to $38 million, or 26 cents per diluted share, compared with $101 million, or 68 cents, a year earlier.
The difference primarily was due to lower market demand and a goodwill impairment charge of $51 million arising from the negative effect of the COVID-19 pandemic. It partially was offset by discrete income tax benefits of $32 million, primarily resulting from recording additional U.S. deferred tax assets related to foreign tax credits, according to the Maumee, Ohio-based company.
Revenue slipped to $1.93 billion compared with $2.16 billion in the same period in 2019.
These declines partially were offset by the conversion of sales backlog and the benefit of recent acquisitions.
Revenue in the commercial vehicle unit dropped to $333 million compared with $431 million a year earlier. Off-highway revenue dropped $20 million to $532 million. In its largest segment, light-duty, revenue fell to $808 million compared with $906 million in the 2019 period.
Dana’s commercial vehicle products include drive axles, steer axles, driveshafts, hub systems and tire pressure-management systems.
“The response to the global pandemic is presenting unprecedented challenges for Dana as well as our people, customers, suppliers and communities,” Chairman and CEO James Kamsickas said in a release. “The rapid onset of containment measures and disruption to production schedules has challenged our organization like never before.
“However, I am very proud of how our people have responded and the decisive actions we have taken to protect our employees, communities, customers and future. As we work toward bringing our operations back on line, we will continue to take appropriate measures to ensure the safety of our people while also serving the needs of our customers.”
Earlier, Dana reported it was adjusting production schedules, idling certain manufacturing facilities (which it did not immediately identify) and managing controllable costs as it took additional safety measures to protect employees against the novel coronavirus.
Dana reported April 30 that over the past week it restarted numerous facilities around the world at various levels of output, “including many facilities in Italy where the pandemic took a terrible toll,” Kamsickas said during an earnings conference call with financial analysts.
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Dana has close to 3,000 suppliers, he said.
“If you don’t have strong diligence and you haven’t had it, but you just started yesterday, in terms of knowing where your supply base is coming from and being out in front of that side of it, you’re going to have some pretty big problems,” Kamsickas said. “I feel good about where we’re at, but you can never feel good enough because it’s just too integrated, too complex to say that you’ve got it all covered. So you just have to stay on top of them.”
The company said it would not issue full-year financial guidance until end-market demand stabilizes.
Dana reported it has total liquidity of more than $1.8 billion, including available cash and marketable securities of $646 million as of March 31. It also has $679 million available on its committed revolving credit facility and $500 million available under its recently announced bridge facility.
“The strength of our balance sheet and capital structure has given us the flexibility to manage through this period of significantly lower production volumes,” Chief Financial Officer Jonathan Collins said. “We are confident that we have ample liquidity and further cost-management actions available as we navigate these uncertain times.”
Asked during the earnings call about future merger and acquisition activity, Collins added: “We’ll certainly look opportunistically. But in this environment, we’re thankful that we’ve collected all of the critical pieces that we need to compete as the market shifts from internal combustion engines to electrified.
“So there’s really nothing that we’ll need to do out of necessity, which gives us the ability to continue to focus any cash that we generate toward continuing to strengthen the quality of our balance sheet.”
Dana has more than 36,000 employees in 34 countries across six continents.
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