Dana Incorporated — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Amounts are in millions of dollars, except per-share data. Dana supplies drivetrain, electrification, sealing and thermal-management products to vehicle and industrial customers through four segments: Light Vehicle, Commercial Vehicle, Off-Highway and Power Technologies.
Financial performance
| Metric | 2021 | 2020 | Change or context |
|---|---|---|---|
| Net sales | $8,945 | $7,106 | Up $1,839, or 26%; organic sales increased 24%, and currency added $138. |
| Gross margin | $837; 9.4% | $621; 8.7% | Margin improved 70 basis points. |
| EBIT | $395 | $124 | Improved $271. |
| Net income attributable to parent | $197; diluted EPS $1.35 | Net loss $31; diluted EPS $(0.21) | Returned to profitability. |
| Adjusted EBITDA | $795 | $593 | Non-GAAP measure; up $202. |
| Cash from operations | $158 | $386 | Down $228, principally reflecting working-capital use. |
| Capital expenditures | $369 | $326 | Free cash flow was $(211), versus $60. |
| Cash and marketable securities | $285 | $580 | Included $268 cash and $17 marketable securities at year-end. |
| Debt and available liquidity | $2,443 debt obligations; $1,413 liquidity | — | Liquidity includes $267 available cash, $17 marketable securities and $1,129 unused revolver capacity. |
Sales increased across all segments: Light Vehicle $3,773; Commercial Vehicle $1,532; Off-Highway $2,593; and Power Technologies $1,047. Segment EBITDA increased in each segment, although Commercial Vehicle and Light Vehicle margins edged down year over year.
Material changes and drivers
- Broad market recovery and conversion of awarded business backlog drove higher sales; semiconductor shortages and customer production downtime constrained results during the year.
- Commodity costs reduced year-over-year earnings by approximately $367. Material recovery and other pricing actions added $223 to earnings, with customer recovery mechanisms generally lagging supplier cost increases.
- Supply-chain disruption, labor shortages, higher freight costs and operating inefficiencies weighed on margins. Higher sales volumes and cost savings partly offset these pressures.
- Operating cash flow fell as working capital used $455, compared with providing $47 in 2020. Inventory absorbed $471 of cash as Dana built stocks to support customers amid supply disruption; receivables used $189.
- Dana refinanced and extended debt: issued notes due 2029, 2030 and 2032, redeemed the 2024 and 2026 notes, and repaid its Term B Facility. The revolving facility was increased to $1,150 and extended to March 2026. Dana reported covenant compliance.
Outlook, risks and unusual items
- For 2022, management forecast sales of $9,625–$10,125 and adjusted EBITDA of $900–$1,000, with adjusted EBITDA margin expected at 9.6%. Adjusted free cash flow was expected to be approximately $310, or 3% of sales; capital spending was expected to be broadly flat with 2021.
- Management cited $400 of net new-business backlog expected to convert to 2022 sales, within an $800 backlog for 2022–2024. The backlog is evenly balanced between electric-vehicle and traditional internal-combustion content; it is not firm customer orders.
- Key risks include ongoing supply-chain and semiconductor constraints, inflation in commodities, labor and freight, limited ability or delays in recovering costs from customers, customer concentration, economic and vehicle-production cyclicality, foreign exchange, and execution of electrification programs. Ford represented 19% and Stellantis 12% of 2021 sales; the ten largest customers represented approximately 56%.
- Unusual items included a $66 gain on a sale-leaseback of three U.S. facilities, a $29 loss on extinguishment of debt, a $20 loss on the Hyliion investment, and a $7 loss on disposal of a China joint-venture business. The sale-leaseback generated $77 proceeds and created a 20-year lease commitment.
- Income tax expense was $72. Dana recorded a $46 U.S. valuation allowance charge, offset by a $46 release of valuation allowances in several foreign jurisdictions, and $18 of expense related to expired federal tax credits.
- Dana reported no net restructuring charges in 2021, though $11 of accrued restructuring costs remained at year-end. It stated that pending legal matters were not expected to have a material adverse effect. The auditor gave unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Whether management’s 2022 revenue, margin and adjusted free-cash-flow outlook was achieved, and how much of the announced backlog actually converted to sales.
- Whether pricing recoveries keep pace with commodity, labor and logistics inflation, and whether semiconductor and supplier constraints continue to limit customer production.
- Whether working-capital investment—especially inventory—reverses into cash generation, given the sharp decline in 2021 operating cash flow and negative free cash flow.
- The debt maturity schedule, refinancing costs, liquidity availability and covenant headroom; also consider cash held at non-U.S. subsidiaries and local repatriation restrictions.
- The recurring earnings impact of the $66 sale-leaseback gain and other non-core items, and the assumptions underpinning adjusted EBITDA and other non-GAAP measures.
- Progress in electrification investment and new program launches, while monitoring customer concentration and the potential for production-cycle downturns.