USA: Dana improves Q1 operating profit
Dana Corporation has announced an improved first-quarter operating result for 2002, with sales of $2.5 billion and net income, excluding non-recurring charges, of $28 million or 18 cents per share. During the same period last year, the company's sales were $2.7 billion and net income, excluding non-recurring items, was $1 million.
However, after the non-recurring charges of $37 million for restructuring and the $220 million effect of a change in accounting, Dana reported a loss for the first quarter of $229 million, or $1.54 per share. In the first quarter of 2001, the reported net loss was $27 million, or 18 cents per share, including non-recurring charges of $28 million.
Dana chairman and CEO Joe Magliochetti said the improved operating performance was largely attributable to progress made on the company's restructuring initiatives announced in October 2001.
"We are very encouraged by the progress our people have made over the past six months," he said. "Clearly, we are beginning to see the benefits from our restructuring efforts, as well as progress in our broader efforts to transform Dana."
In October 2001, Dana announced a series of restructuring actions, including plans to further decrease its workforce by more than 15 percent and the planned closure or consolidation of more than 30 facilities. The cost of the restructuring actions was expected to total $445 million.
During the quarter, the company recorded charges of $37 million related to its restructuring, bringing to $316 million the total charges recorded to date for the October 2001 restructuring plan.
By March 31, Dana had reduced its workforce by seven percent, closed seven facilities and announced plans to close 21 others. The company expects to record substantially all of the charges and complete most of the actions related to this restructuring plan by the end of 2002.
During the quarter, Dana adopted Statement of Financial Accounting Standards No. 142, a new accounting requirement that changes the way in which companies account for goodwill and other intangible assets. Due to the change in accounting, the company reduced goodwill by $289 million, resulting in an after-tax charge of $220 million during the first quarter. In accordance with the new requirement, the remaining goodwill will no longer be amortised, but will be reviewed annually for potential impairment.
Commenting on the company's outlook for the balance of the year, Magliochetti said, "While we have seen modest improvement in production volumes from the prior quarter, we continue to remain cautious in our market outlook.
“Specifically, we are concerned that recent improvements in production volumes may have been driven by light vehicle incentives and pre-buying of Class 8 trucks in advance of an October change in emission requirements for heavy-duty diesel engines.
"We will be in a much better position to judge the effect of these factors when we have greater visibility of production schedules for the third and fourth quarters," he added.
"Despite our cautious outlook on the markets, we expect to see continued improvement in our performance due to those factors within our control."