Dana Holding Corporation today announced results for the first quarter of 2014. Sales were $1.688 billion, compared with $1.676 billion for the same period in 2013. Favorable end-market demand in most regions provided a benefit of $56 million that was partially offset by unfavorable currency effects, principally in South America. As of March 31, 2014, Dana changed the exchange rate for remeasuring the financial statements of its Venezuela operations from the official rate of 6.3 bolivars per US dollar to the rate determined by an auction process as published by the Central Bank of Venezuela. This rate was 10.7 bolivars per US dollar at March 31, 2014, and resulted in a charge of $17 million in the first quarter of 2014. This charge is reflected in Dana’s net income and adjusted EBITDA. In the first quarter of 2013, the Venezuelan government devalued the official rate from 4.3 to 6.3, resulting in a charge of $6 million. These currency effects impacted Dana’s Light Vehicle Driveline business in both periods.
Net income for the quarter was $34 million, compared with $42 million for the same period in 2013, and diluted adjusted earnings per share (EPS) was $0.32, compared with $0.28 in the first quarter of 2013. Gross profit increased $20 million on higher sales of $12 million, reflecting favorable operating conversion on increased production demand. Increased restructuring charges principally in South America, the impact of Venezuela currency effects, and higher interest and tax expenses were offsetting factors.
Adjusted EBITDA for the quarter was $165 million, compared with $158 million a year ago. Adjusted EBITDA margin of 9.8 percent in the quarter improved 40 basis points when compared with last year. This improvement reflected the benefit of increased production volumes and continued cost discipline despite significant currency headwinds, most notably in Venezuela. As highlighted above, Venezuela currency effects lowered Dana’s adjusted EBITDA by about 100 basis points in the first quarter of this year and about 35 basis points in 2013. Excluding the impact of the Venezuela currency devaluation charge, adjusted EBITDA margin performance in the first quarter of 2014 was 10.8 percent.
Free cash flow was a use of $36 million in the quarter, compared with a use of $44 million a year ago. Seasonal trade working capital requirements, interest payments of $57 million, and capital spending of $36 million were the primary net cash uses in the quarter. Free cash flow in this year’s first quarter included $40 million of proceeds from the sale of a note receivable that represented prior period interest. Total cash used in the first three months of 2014 was $117 million, including $64 million for repurchases of common stock and $22 million for debt retirement.
