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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____ FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
____ Of the Securities Exchange Act of 1934
Commission
For the Quarterly Period Ended March 31, 1994 File Number 1-1063
---------------- ------
Dana Corporation
- - ----------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Virginia 34-4361040
- - --------------------------------- ------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
4500 Dorr Street, Toledo, Ohio 43615
- - ---------------------------------------- ------------------------------
(Address of Principal Executive Offices) (Zip Code)
(419) 535-4500
- - ----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1994
------------------------------- -----------------------------
Common stock of $1 par value 49,318,422
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<TABLE>
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
<CAPTION>
Page Number
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<S> <C>
Cover 1
Index 2
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheet
December 31, 1993 and
March 31, 1994 3
Statement of Income
Three Months Ended
March 31, 1993 and 1994 4
Condensed Statement of Cash Flows
Three Months Ended
March 31, 1993 and 1994 5
Notes to Condensed Financial Statements 5 - 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7 - 9
Part II. Other Information
Item 1. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of
Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
</TABLE>
2
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. DANA CORPORATION
- - -------
CONDENSED BALANCE SHEET (Unaudited)
(Dollars in Millions)
<CAPTION>
Assets December 31, 1993 March 31, 1994
------ ----------------- --------------
<S> <C> <C>
Cash $ 49.5 $ 30.0
Marketable Securities, at Cost
Which Approximates Market 28.1 33.2
Accounts Receivable, Less
Allowance for Doubtful Accounts 790.5 923.0
Inventories
Raw Materials 141.8 152.6
Work in Process and Finished Goods 508.1 498.1
Lease Financing 849.3 852.6
Investments and Other Assets 846.3 798.9
Deferred Income Tax Benefits 276.2 271.1
Property, Plant and Equipment 2,529.3 2,565.0
Less - Accumulated Depreciation (1,387.2) (1,406.8)
-------- --------
Total Assets $4,631.9 $4,717.7
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Short-Term Debt $ 474.1 $ 570.0
Accounts Payable 310.6 342.3
Other Liabilities 684.7 694.4
Deferred Employee Benefits 1,011.5 1,023.4
Long-Term Debt 1,207.4 1,109.6
Minority Interest 142.2 142.1
Shareholders' Equity 801.4 835.9
-------- --------
Total Liabilities and
Shareholders' Equity $4,631.9 $4,717.7
======== ========
</TABLE>
3
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<TABLE>
ITEM 1. (Continued)
- - -------
DANA CORPORATION
STATEMENT OF INCOME (Unaudited)
(Dollars in Millions Except Per Share Amounts)
<CAPTION>
Three Months Ended March 31
------------------------------------------------------
1993 1994
------------------------------------------------------
As Reported As Restated
------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 1,323.5 $ 1,323.5 $ 1,596.7
Revenue from Financial Holdings
and Other Income 38.9 38.9 33.8
Foreign Currency Adjustments (7.2) (7.2) (7.7)
--------- --------- ---------
1,355.2 1,355.2 1,622.8
--------- --------- ---------
Cost of Sales 1,135.3 1,135.3 1,359.1
Restructuring Charges 6.9 6.9 3.8
Selling, General and
Administrative Expenses 129.5 129.5 145.6
Interest Expense 36.5 36.5 28.0
--------- --------- ---------
1,308.2 1,308.2 1,536.5
--------- --------- ---------
Income Before Income Taxes 47.0 47.0 86.3
Estimated Taxes on Income 23.5 23.5 40.1
--------- --------- ---------
Income Before Minority Interest
and Equity in Earnings of Affiliates 23.5 23.5 46.2
Minority Interest (2.4) (2.4) (3.2)
Equity in Earnings of Affiliates 2.4 2.4 4.7
--------- --------- ---------
Income Before Effect of a
Change in Accounting Principle 23.5 23.5 47.7
Effect on Prior Years of the
Change in Accounting for
Postemployment Benefits (48.9)
-------- --------- ---------
Net Income (Loss) $ 23.5 $ (25.4) $ 47.7
========= ========= =========
Net Income Per Common Share
Before Effect of a Change
in Accounting Principle $ 0.51 $ 0.51 $ 0.97
Effect on Prior Years of the Change
in Accounting for Postemployment
Benefits (1.06)
------ ------ ------
Net Income (Loss) Per Common Share $ 0.51 $(0.55) $ 0.97
====== ====== ======
Dividends Declared and Paid per
Common Share $ 0.40 $ 0.40 $ 0.40
====== ====== ======
Average Number of Shares Outstanding
(in millions) 46.0 46.0 49.3
</TABLE>
4
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<TABLE>
ITEM 1. (Continued)
- - -------
DANA CORPORATION
CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in Millions)
<CAPTION>
Three Months Ended March 31
--------------------------------
1993 1994
---- ----
<S> <C> <C>
Net Income (Loss) $ (25.4) $ 47.7
Effect on Prior Years of the Change in
Accounting for Postemployment Benefits 48.9
Depreciation and Amortization 48.0 55.4
Net Change in Receivables, Inventory and Payables (9.1) (43.6)
Other 7.0 5.3
-------- --------
Net Cash Flows from Operating Activities 69.4 64.8
-------- --------
Purchases of Property, Plant and Equipment (30.7) (46.1)
Net Cash Flows-Leasing Activities 17.3 (145.1)
Net Cash Flows-Lending Activities (7.9) 3.2
Other 8.8 5.0
-------- --------
Net Cash Flows-Investing Activities (12.5) (183.0)
-------- --------
Net Change in Short-Term Debt (54.9) 78.7
Proceeds from Long-Term Debt 296.2 188.0
Payments on Long-Term Debt (280.0) (146.9)
Dividends Paid (18.4) (19.7)
Other 3.9 3.7
-------- --------
Net Cash Flows-Financing Activities (53.2) 103.8
-------- --------
Net Change in Cash and Cash Equivalents $ 3.7 $ (14.4)
======== ========
</TABLE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Dollars in Millions Except Per Share Amounts)
1. In the opinion of management, all normal recurring adjustments necessary
to a fair presentation of the results for the unaudited interim periods
have been included.
2. In accordance with generally accepted accounting principles, Dana's
wholly-owned financial subsidiary, Diamond Financial Holdings, Inc.
(DFHI) is included in the consolidated financial statements. The
following is a recap of the revenue, net income and total assets, total
liabilities and shareholder's equity of this subsidiary (unaudited):
5
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<TABLE>
ITEM 1. (Continued)
- - -------
NOTE 2. (Continued)
DIAMOND FINANCIAL HOLDINGS, INC.
Three Months Ended March 31
---------------------------
<CAPTION>
1993 1994
---- ----
<S> <C> <C>
Revenue $ 41.0 $ 41.9
Net Income 1.9 3.8
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993 March 31, 1994
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<S> <C> <C>
Total Assets $1,310.3 $1,308.2
Total Liabilities 1,215.3 1,213.6
-------- --------
Shareholder's Equity $ 95.0 $ 94.6
======== ========
</TABLE>
3. In January 1994, Dana announced the adoption of Statement of Financial
Accounting Standards (SFAS) No. 112 "Employers' Accounting for
Postemployment Benefits," effective January 1, 1993. This accounting
change resulted in a one-time charge to first quarter 1993 net income of
$48.9 million ($1.06 per share). First quarter 1993 results of operations
have been restated to reflect adoption of SFAS 112.
4. On April 18, 1994, Dana's Board of Directors approved a two-for-one stock
split effective for stockholders of record on June 1, 1994. Financial
information issued subsequent to the effective date will be adjusted to
reflect the stock split.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- - ------- ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
----------------------------------------------
Liquidity and Capital Resources
- - -------------------------------
(Dollars in Millions)
Expenditures for property, plant and equipment were $46 for the first
three months of 1994, compared to $31 for the first three months of 1993. This
higher level of capital spending is attributable to an increased worldwide
demand for Dana products and the Company's commitment to productivity and
product quality improvements. Capital expenditures for 1994 are currently
projected to be approximately $295 compared to actual expenditures of $178 for
1993.
Dana Corporation and its consolidated subsidiaries' first quarter 1994
short-term debt totaled $570 which is up $96 from year end 1993. This
increase offsets the reduction in long-term debt over the same period as
maturities of the long-term debt were replaced with new short-term borrowings.
Dana, excluding financial holdings subsidiaries Diamond Financial Holdings,
Inc.(DFHI) and Dana Credit Corporation (DCC), funds its corporate short-term
debt through the issuance of commercial paper and bank borrowings. To fund
short-term working capital requirements, Dana arranged $355 in committed credit
facilities to back up commercial paper issuance and $676 in uncommitted lines
available for bank borrowings. At March 31, 1994, Dana's domestic and
international short-term borrowings were $160, compared to $155 at December 31,
1993. DFHI funds short-term debt through bank borrowings. DFHI had bank lines
totaling $135 at March 31, 1994, and $130 was borrowed against these lines.
DCC funds domestic and international debt through commercial paper and bank
borrowings. DCC had committed commercial paper back-up lines amounting to
$250 and uncommitted bank borrowing lines of $225. At March 31, 1994, DCC and
its subsidiaries had a short-term debt position of $278, which was slightly
lower than at year end 1993.
The Company's consolidated long-term debt was reduced to $1,110 at March
31, 1994, from $1,207 at December 31, 1993. This decrease offsets the increase
in short-term debt over the same period as the maturities of the long-term debt
were replaced with short-term borrowings. On March 1, 1994, Dana redeemed at
par the remaining $3 of its 5 7/8% debentures with an effective yield of 12.4%.
The Company's management evaluates its operations on an ongoing basis to
identify non-strategic and under-performing assets. Pursuant to these
evaluations, restructuring plans are developed which may result in abandonment,
consolidation or relocation of operations. Estimated costs incurred in the
implementation of these plans are charged to restructuring expense and include
employee benefits, losses on disposal of assets and other expenses incidental to
the restructuring activities. Restructuring expense for the first quarter of
1994 was $4 compared to $7 for the same period in 1993. Dana's liquidity and
cash flows will not be materially impacted by these actions. It is anticipated
that Dana's operations over the long term will benefit form these realignment
strategies.
Dana's management and legal counsel have reviewed the legal proceedings to
which the Company and its subsidiaries were parties as of March 31,1994
(including, among others, those involving product liability claims and alleged
violations of environmental laws) and concluded that any liabilities that may
result from these proceedings are not likely to have a material effect on the
Company's liquidity, financial condition or results of operations. In
connection with product liability and environmental claims, the Company has
recorded an estimated gross liability of $107 and probable recoveries of $56.
It is not anticipated that the timing of the cash flows for these liabilities
will have a material effect on the liquidity of the Company.
Dana anticipates that net cash flows from operating activities, along with
available short-term and medium-term financing capabilities, will be sufficient
to meet its funding requirements for 1994.
7
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ITEM 2. (Continued)
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Results of Operations (First Quarter 1994 vs First Quarter 1993)
- - ----------------------------------------------------------------
(Dollars in Millions)
Dana's worldwide sales for the quarter ended March 31, 1994, were $1,597,
up 21% over the $1,324 of the same period in 1993. The sales increase was led
by a 24% increase in sales to the original equipment (O.E.) highway vehicular
market where production schedules remained strong, particularly in the U.S.
First quarter 1994 sales of vehicular components and parts for use on
automobiles, trucks and trailers were $1,278, an increase of 22% over 1993's
first quarter. Dana's first quarter sales to the U.S. light truck market,
which consists of pick-up trucks, minivans and sport utility vehicles, rose 25%
above the same period last year. Sales of U.S. heavy truck components rose 28%
over 1993's first quarter level. O.E. vehicular component sales from Dana's
South American and Canadian operations also increased.
Dana's worldwide mobile off-highway O.E. component operations also
experienced sales growth. Sales to that market were up 35% over the same period
in the prior year, reflecting strength in the construction and agricultural
machinery segments.
Consolidated distribution sales were $538, up 15% over first quarter 1993
with auto distribution up 14%, truck parts up 19% and mobile-off
highway/industrial up 14%. Harsh weather conditions in the U.S., infrastructure
rebuilding, strength in the agricultural market and the addition of sales by
the Reinz group of companies which Dana acquired in the third quarter of 1993
contributed to Dana's increase in distribution sales. Industrial OE component
sales were down 6% on a worldwide basis from last year's first quarter, due
primarily to continuing weakness in Europe.
Consolidated international sales for Dana were $361, up 21% over first
quarter 1993. Dana's South American operations experienced strong sales growth
(27%), while Asia Pacific showed an improvement of (12%) over the first
quarter of 1993. Dana's sales in Europe increased 34% over first quarter 1993,
almost exclusively due to the Reinz acquisition.
Revenue from Financial Holdings and other income decreased 13% to $34 in
the first quarter of 1994, in large part due to the first quarter 1993 sales of
certain manufacturing facilities at a gain.
Foreign currency translation losses for the quarter ended March 31, 1994,
were $8, 7% higher than the same period in 1993. The losses in both years were
almost exclusively related to Dana's Brazilian operations.
Dana's gross margin increased from 14% in the first quarter of 1993 to
nearly 15% in the first quarter of 1994. North American margins benefited from
higher sales volumes while all other regions experienced comparable margins to
the first quarter of 1993.
Restructuring charges for the first quarter of 1994 decreased to $4 from
$7 in 1993's first quarter due to lower expenses in the North American region.
8
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ITEM 2. Results of Operations (First Quarter 1994 vs First Quarter 1993)
- - ------- ---------------------------------------------------------------
(continued)
(Dollars in Millions)
Selling, general and administrative expenses (S,G & A) were $146 million
for the quarter ended March 31, 1994, an 8% increase over the same period in
1993 after excluding the effect on S,G & A of acquisitions made in the latter
half of 1993. Higher business levels contributed to the 8% increase, although
the ratio of expense to sales improved due to continued emphasis on
productivity improvement and cost containment.
Interest expense decreased 23% to $28 in the first quarter of 1994 due to
lower overall interest rates and reduced debt levels. The Company has
benefited in 1994 from the redemption of higher interest rate notes and
debentures and replacement with other financing at lower rates during 1993.
Taxes on income increased to $40 in the first quarter of 1994 from $23 in
the same period of 1993, due to a higher level of taxable income. The
effective tax rate for the first quarter 1994 was 46% and is reflective of
higher effective tax rates in Dana's international operations.
Equity in earnings of affiliates increased to $5 from $2 due to an
improved performance by the Company's Korean and Venezuelan affiliates,
partially offset by lower earnings in Dana's affiliate in Mexico. Minority
interest in net income of consolidated subsidiaries increased in 1994 due to
increased earnings in Dana's subsidiary in Canada.
Dana expects the market for its vehicular products to remain strong during
1994 as the original equipment manufacturers continue to meet the high demand
for new vehicles in North and South America. The Company believes economic
conditions in Europe have stabilized but expects sales volume in the region to
remain weak in the near term. Margins should be maintained or improved as a
result of the Company's cost containment and productivity programs.
Dana will continue to monitor the allocation of its assets to pursue
further growth in all of its global markets.
9
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
- - -------
The Company and its consolidated subsidiaries are parties to various
pending judicial and administrative proceedings arising in the ordinary course
of business, including, among others, those involving product liability claims
and those involving alleged violations of various federal, state and local
environmental laws. Management has reviewed with legal counsel the probable
outcome of these pending legal proceedings, the costs and expenses reasonably
expected to be incurred, the availability and limits of the Company's insurance
coverage, and the Company's established reserves for uninsured liabilities.
While the outcome of these proceedings cannot be predicted with certainty,
management believes that the liabilities that may result are not reasonably
likely to have a material effect on the Company's liquidity, financial
condition or results of operations.
Under the rules of the Securities and Exchange Commission, certain
environmental proceedings are not deemed to be ordinary routine proceedings
incidental to the Company's business and are required to be reported. The
Company is a party to one such proceeding, In the Matter of Dana Corporation -
Victor Products Division and BRC Rubber Group, a previously reported
administrative proceeding involving alleged violations of the federal Resource
Conservation and Recovery Act by the Company's former plant in Churubusco,
Indiana. There were no significant developments in this proceeding in the
first quarter.
10
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- - -------
The following are the results of voting by stockholders present or represented
at the Annual Meeting of Stockholders on April 6, 1994:
1. Election of Directors. The following were elected to serve as Directors
of the Company until the next annual meeting of stockholders or until
their successors are elected:
<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
B.F. Bailar 41,337,727 153,456
E.M. Carpenter 41,340,010 151,173
E. Clark 41,323,061 168,122
R.T. Fridholm 41,335,387 155,796
G.H. Hiner 41,321,488 169,695
S.J. Morcott 41,339,221 151,962
J.D. Stevenson 41,320,762 170,421
T.B. Sumner, Jr. 41,325,202 165,981
</TABLE>
2. Adoption of Employees' Stock Purchase Plan: The Company's Amended and
Restated Employees' Stock Purchase Plan was approved and adopted. Under
this Plan, eligible employees (including persons subject to Section 16(a)
of the Securities Exchange Act of 1934) may purchase Company stock by
means of payroll deductions, to a maximum of 15% of their earnings. The
Company will match such deductions to a maximum of 50% over a 5-year
period. There were 38,391,125 votes cast for approval of the Plan;
1,530,179 votes against; 190,327 votes abstaining; and 1,379,552 broker
nonvotes.
ITEM 5. OTHER INFORMATION.
- - -------
On April 18, 1994, the Company's Board of Directors amended Dana's Amended
and Restated Articles of Incorporation to increase the number of authorized
shares of the Company's Common Stock, $1 par value, from 120 million shares to
240 million shares, and announced a two-for-one stock split of the outstanding
shares of Common Stock. The effective date of the amendment and the record
date for the stock split will be June 1, 1994. The distribution date for the
additional shares that are created by the split will be June 15, 1994.
11
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- - -------
a) Exhibits.
The Exhibit listed in the "Exhibit Index" is filed as
a part of this report.
b) Reports on Form 8-K. The Company filed a report on Form
8-K on March 15, 1994, to report that it had signed a
letter of intent with Metallgesellschaft AG to purchase
that company's approximately 47% ownership interest in
Kolbenschmidt AG.
12
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DANA CORPORATION
-------------------------------------
Date: May 10, 1994 /s/ James E. Ayers
------------------------- -------------------------------------
James E. Ayers
Chief Financial Officer
Vice President Finance and Treasurer
Duly Authorized Officer and
Principal Financial Officer.
13
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EXHIBIT INDEX
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<TABLE>
<CAPTION>
Exhibit Page No.
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<S> <C> <C>
10-G(6) Amendment to Retirement Plan, effective 15
January 1, 1994
</TABLE>
14
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Exhibit 10-G(6)
AMENDMENT
In order to ensure that each plan identified in the attached list
(individually, the "Plan," and collectively, the "Plans") remains qualified
under Section 401(a) of the Internal Revenue Code of 1986, and that any related
trust remains tax-exempt under Section 501(a) of the Internal Revenue Code of
1986, each Plan is hereby amended as follows, effective January 1, 1994:
In addition to other applicable limitations that may be set forth in the
Plan and notwithstanding any other contrary provision of the Plan, the
compensation taken into account under the Plan for any participant shall
not exceed the amount specified in Section 401(a)(17) of the Internal
Revenue Code for the plan year, adjusted for changes in the cost of living
as provided in that section. The limit described in the preceding
sentence shall apply only to the extent necessary to satisfy the
requirements of Section 401(a)(17) of the Internal Revenue Code, as
amended from time to time.
If the dollar limit in effect under Section 401(a)(17) of the Internal
Revenue Code for a plan year is lower than the limit (if any) that was in
effect for the immediately preceding plan year, the reduced limit shall be
effective with respect to contributions made or benefits accruing in plan
years beginning after the effective date of the reduced limit; and, with
respect to such contributions or benefits, the limit shall apply to all
compensation, including compensation earned before the effective date of
the reduced limit.
This amendment shall be incorporated in the applicable provisions of the
Plan through appropriate revisions to the Plan document.
IN WITNESS WHEREOF, Dana Corporation has adopted this amendment on this 21st
day of December, 1993. ----
For Dana Corporation
R. C. Richter
Witness: --------------
Mark A. Smith, Jr.
- - ------------------
15
