<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20509
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 September 30, 1996 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 September 30, 1996
----- ---------------------------------
Common stock of $1 par value 101,792,904
<PAGE> 2
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
Page Number
-----------
Cover 1
Index 2
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheet
December 31, 1995 and
September 30, 1996 3
Statement of Income
Three Months and Nine Months Ended
September 30, 1995 and 1996 4
Condensed Statement of Cash Flows
Nine Months Ended
September 30, 1995 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7-11
Part II. Other Information
Item 1. Legal Proceedings 12
Item 2. Exhibits and Reports on Form 8-K 13
Signature 14
Exhibit Index 15
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. DANA CORPORATION
- -------
CONDENSED BALANCE SHEET (Unaudited)
(in Millions)
<TABLE>
<CAPTION>
Assets December 31 September 30
- ------
1995 1996
---- ----
<S> <C> <C>
Cash and Cash Equivalents $ 66.6 $ 116.5
Accounts Receivable, Net 1,081.6 1,160.2
Inventories
Raw Materials 230.1 223.3
Work in Process and Finished Goods 644.7 686.7
Lease Financing 1,004.9 1,082.7
Investments and Other Assets 1,016.7 971.7
Property, Plant and Equipment 3,337.3 3,539.8
Less: Accumulated Depreciation 1,687.8 1,789.8
-------- -------
Total Assets
$ 5,694.1 $ 5,991.1
========== ===========
Liabilities and Shareholders' Equity
- ------------------------------------
Accounts Payable and Other Liabilities $ 1,173.0 $ 1,199.7
Short-Term Debt 791.4 841.0
Long-Term Debt 1,315.1 1,364.9
Deferred Employee Benefits 1,096.2 1,096.2
Minority Interest 153.8 171.1
Shareholders' Equity 1,164.6 1,318.2
--------- -------
Total Liabilities and
Shareholders' Equity $ 5,694.1 $ 5,991.1
========== =========
</TABLE>
3
<PAGE> 4
ITEM 1. (Continued)
- -------
DANA CORPORATION
STATEMENT OF INCOME (Unaudited)
(in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30 September 30
------------ ------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 1,727.1 $ 1,815.8 $ 5,620.3 $ 5,809.0
Revenue from Lease Financing
and Other Income 42.0 48.7 136.6 161.2
--------- --------- --------- ---------
1,769.1 1,864.5 5,756.9 5,970.2
--------- --------- --------- ---------
Cost of Sales 1,458.5 1,536.0 4,746.9 4,913.3
Selling, General and
Administrative Expenses 169.9 179.5 505.9 551.5
Interest Expense 38.4 40.9 107.5 116.4
--------- --------- --------- ---------
1,666.8 1,756.4 5,360.3 5,581.2
--------- --------- --------- ---------
Income Before Income Taxes 102.3 108.1 396.6 389.0
Estimated Taxes on Income (38.0) (36.4) (154.5) (139.8)
Minority Interest (7.2) (10.1) (27.6) (25.1)
Equity in Earnings/(Losses) of Affiliates 3.8 3.6 (5.3) 11.3
--------- --------- --------- ---------
Net Income $ 60.9 $ 65.2 $ 209.2 $ 235.4
========= ========= ========= =========
Net Income Per Common Share $ .60 $ .64 $ 2.07 $ 2.32
========= ========= ========= =========
Dividends Declared and Paid per
Common Share $ .23 $ .25 $ .67 $ .73
Average Number of Shares Outstanding 101.3 101.7 101.3 101.7
</TABLE>
4
<PAGE> 5
ITEM 1. (Continued)
- -------
DANA CORPORATION
CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
(in Millions)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1995 1996
---- ----
<S> <C> <C>
Net Income $209.2 $ 235.4
Depreciation and Amortization 174.8 203.8
Working Capital Change and Other (179.8) (3.5)
------- ----------
Net Cash Flows from Operating Activities 204.2 435.7
------- ----------
Purchases of Property, Plant and Equipment (230.3) (267.0)
Purchases of Assets to be Leased (302.6) (296.9)
Payments Received on Leases and Loans 205.2 212.9
Purchase of Minority Interest of Hayes-Dana Inc. (92.4)
Other 47.7 (34.8)
-------- ----------
Net Cash Flows-Investing Activities (372.4) (385.8)
-------- ----------
Net Change in Short-Term Debt 93.9 41.8
Proceeds from Long-Term Debt 327.4 347.5
Payments on Long-Term Debt (223.0) (319.5)
Dividends Paid (68.0) (74.2)
Other 3.9 4.4
--------- ----------
Net Cash Flows-Financing Activities 134.2 -
--------- ----------
Net Change in Cash and Cash Equivalents (34.0) 49.9
Cash and Cash Equivalents-beginning of year 112.2 66.6
-------- ----------
Cash and Cash Equivalents-end of period $ 78.2 $ 116.5
======== ========
</TABLE>
5
<PAGE> 6
ITEM 1 (Continued)
- ------
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in Millions Except Per Share Amounts)
1. In the opinion of management, all normal recurring adjustments necessary to
a fair presentation of results for the unaudited interim periods have been
included.
2. In accordance with generally accepted accounting principles, Dana's
wholly-owned financial subsidiary, Dana Credit Corporation (DCC), is
included in the consolidated financial statements. The following is a recap
of the revenue, net income, total assets, total liabilities and
shareholder's equity of this subsidiary (unaudited):
<TABLE>
<CAPTION>
DANA CREDIT CORPORATION
-----------------------
Three Months Ended Nine Months Ended
------------------ -----------------
September 30 September 30
------------ ------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 48.0 $ 56.1 $ 141.6 $ 174.3
Net Income 5.0 6.7 16.3 22.6
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 September 30, 1996
----------------- ------------------
<S> <C> <C>
Total Assets $ 1,386.7 $1,536.0
Total Liabilities 1,282.1 1,418.7
--------- --------
Shareholder's Equity $ 104.6 $ 117.3
========= ========
</TABLE>
3. In the first quarter of 1995, Dana recorded a non-operating charge of
approximately $18 (17 cents per share) for its proportionate share of
translation losses incurred by its Mexican affiliate, Spicer S.A. de C.V.,
due to the devaluation of the Mexican peso.
4. In the first quarter of 1995, Dana made a tender offer for all of the
outstanding shares of Hayes-Dana Inc. that it did not own. During the
second quarter of 1995, Dana increased its ownership in Hayes-Dana Inc.
from 57 percent to 100 percent, based on the tender offer.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------- ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
(in Millions)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
CAPITAL EXPENDITURES
- --------------------------------------------------------------
NINE MONTHS YEAR
ENDED ENDED
SEPTEMBER 30 DECEMBER 31
- -------------- ----------------------- -----------------------
<S> <C> <C>
1994 $216 $337
- -------------- ----------------------- -----------------------
1995 230 410
- -------------- ----------------------- -----------------------
1996 267 360*
- -------------- ----------------------- -----------------------
<FN>
*Projected
</TABLE>
Capital expenditures for Dana Corporation and its consolidated subsidiaries
(Dana or the Company) year-to-date for 1996 were $37 higher than for the same
period in 1995 and are projected to be approximately $50 lower for the year than
the record $410 spent in 1995.
<TABLE>
<CAPTION>
- --------------------------------------------
CASH FLOWS FROM OPERATIONS
FOR NINE MONTHS ENDED
SEPTEMBER 30
- --------------------------------------------
<S> <C>
1994 $294
- --------------------------- ----------------
1995 204
- --------------------------- ----------------
1996 436
- --------------------------- ----------------
</TABLE>
Cash flow from operations in 1996 increased $232 over last year. Due to the
pace of strong sales growth in 1995, approximately $180 of cash flow was
required for additional working capital needs to support the increased business.
As a result of the reduction in the sales growth rate in 1996 and the Company's
emphasis on asset utilization, working capital has remained relatively constant.
The Company supplements internal cash flow with the issuance of short-term
and long-term debt. Dana's consolidated debt increased $99 over 1995's year end
position. Dana's total debt, excluding Dana Credit Corporation (DCC), increased
$86 over 1995's year end level, in part due to the financing of capital
expenditures and acquisitions, while DCC's debt increased $13. .
Dana's consolidated short-term debt increased $49 since December 31, 1995.
Dana's debt, excluding DCC, increased $45 and DCC's debt increased $4. Dana's
borrowing lines, excluding DCC, totaled $1.4 billion at September 30, with
outstanding short-term borrowings against these lines of $380. DCC's lines were
in excess of $840, with total outstanding short-term borrowings of $461.
Consolidated long-term debt of the Company increased $50 since year end
1995; Dana, excluding DCC, increased its debt $41 and DCC increased its debt $9.
The Company anticipates that net cash flows from operating activities,
along with currently available financing sources, will be sufficient to meet
Dana's funding requirements for 1996.
7
<PAGE> 8
ITEM 2. Liquidity and Capital Resources (continued)
- ----------------------------------------------------
(in Millions)
Dana's management and legal counsel have reviewed the legal proceedings
to which the Company and its subsidiaries were parties as of September 30, 1996
(including, among others, those involving product liability claims and alleged
violations of environmental laws) and concluded that neither the liabilities
that may result from these legal proceedings nor the timing of the cash flows
for these liabilities is likely to have a material adverse effect on the
Company's liquidity, financial condition or results of operations. The Company
estimates its contingent environmental and product liabilities based upon the
most probable method of remediation or outcome considering currently enacted
laws and regulations and existing technology. Measurement of liabilities is made
on an undiscounted basis and excludes the effects of inflation and other
societal and economic factors. In those cases where there is a range of equally
probable remediation methods or outcomes, the Company accrues at the lower end
of the range. At September 30, 1996, the Company's accruals were $73 for product
liability costs (products) and $56 for environmental liability costs
(environmental), compared to $73 for products and $49 for environmental at
December 31, 1995. The difference between the Company's minimum and maximum
estimates for contingent liabilities, while not considered material, was $4 for
products and $2 for environmental at September 30, 1996, compared to $4 for
products and $3 for environmental at December 31, 1995. Probable recoveries of
$42 for products and $16 for environmental from insurance or third parties have
been recorded as assets at September 30, 1996, compared to $43 for products and
$10 for environmental at December 31, 1995.
8
<PAGE> 9
ITEM 2. (Continued)
- -------
Results of Operations (Third Quarter 1996 vs Third Quarter 1995)
- ----------------------------------------------------------------
(in Millions)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
THIRD QUARTER SALES
- ----------------------------------------------------------
%
1995 1996 CHANGE
- -------------------- ----------- ------------ ------------
<S> <C> <C> <C>
U.S. $1,242 $1,283 3
- -------------------- ----------- ------------ ------------
International 485 533 10
- -------------------- ----------- ------------ ------------
Total $1,727 $1,816 5
- -------------------- ----------- ------------ ------------
</TABLE>
Dana's worldwide sales for the third quarter of 1996 exceeded sales in
the same period in 1995 by 5% and were the highest of any third quarter in the
Company's history. Worldwide unit volume increases of light trucks and sport
utility vehicles and sales from recent acquisitions helped offset weak U.S.
demand for heavy trucks.
<TABLE>
<CAPTION>
- -------------------------------------------------------------
THIRD QUARTER SALES BY REGION
- -------------------------------------------------------------
%
REGION 1995 1996 CHANGE
- ---------------------- ----------- ------------ -------------
<S> <C> <C> <C>
North America $1,345 $1,360 1
- ---------------------- ----------- ------------ -------------
Europe 209 255 22
- ---------------------- ----------- ------------ -------------
South America 122 153 25
- ---------------------- ----------- ------------ -------------
Asia Pacific 51 48 (6)
- ---------------------- ----------- ------------ -------------
</TABLE>
Sales from Dana's international operations increased 10% over 1995, due to the
contribution of recent acquisitions in Europe and South America. U.S. sales
increased 3%, as light truck and sport utility vehicle component sales rose 17%
over a record 1995 third quarter, while sales of heavy truck OE parts decreased
22%, reflecting strong production cuts by Dana's customers. Mobile off-highway
OE sales increased 13%, indicating higher demand from Dana's agricultural and
construction machinery customers. Industrial OE component sales, the Company's
smallest segment, were up 2%, primarily in the U.S. The Company's worldwide
aftermarket sales increased 8% (17% internationally and 4% in the U.S.).
The Company reported net income of $65, the highest for a third quarter
in Dana's history, which represents an increase of 7% over 1995's third quarter
results.
Revenue from lease financing and other income increased $7 over third
quarter 1995 as higher lease and interest income resulted from higher DCC
average asset levels.
Dana's gross margin for the third quarter was 15.4%, comparable to
15.6% for 1995's third quarter. U.S. margins in 1996 and 1995 were comparable
while those of international operations were lower, principally relating to the
Company's operations in Europe and Asia Pacific.
Selling, general and administrative expenses (S,G&A) increased $10 or
6% in 1996, in part due to newly acquired operations.
Dana's third quarter 1996 effective tax rate was 34%, compared to 37%
for 1995's third quarter. The U.S. state and local rate was lower in 1996, as
was the rate for the Company's Brazilian operations.
Minority interest in net income of subsidiaries increased $3, primarily
due to the higher earnings recorded by Dana's majority-owned affiliate in
Brazil.
9
<PAGE> 10
ITEM 2. (Continued)
- -------
Results of Operations (Nine Months 1996 vs Nine Months 1995)
- ------------------------------------------------------------
(in Millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
SALES FOR NINE MONTHS ENDED SEPTEMBER 30
- ------------------------------------------------------------
%
1995 1996 CHANGE
- ------------------ ------------ ------------- --------------
<S> <C> <C> <C>
U.S. $4,138 $4,173 1
- ------------------ ------------ ------------- --------------
International 1,482 1,636 10
- ------------------ ------------ ------------- --------------
Total $5,620 $5,809 3
- ------------------ ------------ ------------- --------------
</TABLE>
Dana's worldwide sales for the first nine months of 1996 totaled
$5,809, an increase of 3% over the same period in 1995. This growth was
primarily the result of U.S. light truck and sport utility unit volume increases
and sales from recent acquisitions, offsetting weakened U.S. demand for heavy
trucks.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
SALES BY REGION FOR NINE MONTHS ENDED
SEPTEMBER 30
- -----------------------------------------------------------
%
1995 1996 CHANGE
- --------------------- ----------- ----------- -------------
<S> <C> <C> <C>
North America $4,473 $4,443 (1)
- --------------------- ----------- ----------- -------------
Europe 636 810 27
- --------------------- ----------- ----------- -------------
South America 366 416 14
- --------------------- ----------- ----------- -------------
Asia Pacific 144 140 (3)
- --------------------- ----------- ----------- -------------
</TABLE>
Sales from Dana's international operations increased 10% over 1995,
primarily due to the contribution of recent acquisitions in Europe and South
America. U.S. sales were slightly higher than in 1995, as the light truck and
sport utility vehicle increase of 8% was partially offset by a decrease of 15%
in sales of heavy truck OE parts, reflecting production cuts from the Company's
customers. Mobile off-highway OE sales were up 10%, due to volume increases from
Dana's agricultural and construction machinery customers. Industrial OE
component sales, Dana's smallest segment, were down 1%, primarily in the U.S.
Dana's worldwide aftermarket sales increased 5% over 1995, 10% internationally
and 2% in the U.S.
The Company reported net income of $235 for the first nine months of
1996, a 13% increase over 1995's results for the same period. The earnings for
1995 included an $18 after tax non-operating charge for translation losses
incurred as a result of the devaluation of the Mexican peso.
Revenue from lease financing and other income increased $25 in 1996.
DCC's lease-related revenue increased $16 due to higher average asset levels,
while sales of an investment and fixed assets within Dana's manufacturing
operations also contributed to the increase.
Dana's gross margin for the first nine months of 1996 was 15.4%,
comparable to 15.5% for 1995. U.S. margins were improved over 1995, while those
of international operations were lower, primarily due to acquisitions and new
plant start-ups.
S,G&A increased $46 or 9% in 1996. The increase is due primarily to
the newly acquired operations.
Interest expense increased $9, as the financing of capital
expenditures, lease financing assets, acquisitions and working capital needs
resulted in higher average debt levels in 1996.
Dana's effective tax rate for the first nine months of 1996 was 36%,
compared to 39% for 1995's first nine months. The U.S. state and local rate was
lower in 1996, as was the rate for the
10
<PAGE> 11
ITEM 2. (Continued)
- -------
Results of Operations (Nine Months 1996 vs Nine Months 1995)
- ------------------------------------------------------------
Company's Brazilian operations. Additionally, the rate is marginally lower due
to utilization of some capital loss carry-forwards during the second quarter in
1996.
Minority interest in net income of subsidiaries decreased $3 in the
first nine months of 1996. This decrease was primarily due to the purchase of
the remaining 43% ownership of Hayes-Dana Inc. in 1995 and lower earnings of the
Company's Taiwanese affiliate.
Equity in earnings of affiliates was higher in 1996 than 1995, due to
the devaluation of the Mexican peso, which resulted in an $18 charge against
earnings in the first quarter of 1995.
Dana's U.S. sales performance is expected to correlate with that of its
major customers supplying the U.S. light and heavy truck markets. U.S. light
truck and sport utility vehicle production schedules are anticipated to remain
strong in the fourth quarter of 1996, with full year volumes expected to be
slightly higher than 1995's record levels. U.S. heavy truck production is
anticipated to remain at lower levels for the fourth quarter. Dana's U.S. sales
of aftermarket (service) parts are expected to finish 1996 slightly above
1995's sales.
Dana's significant international expansion in the past few years is
providing global sales growth of Dana's core products, such as axles,
driveshafts, structural components (frames), sealing products and filtration
products. South America and Europe are experiencing growth based on this
expansion. Dana's consolidated sales for 1996 are expected to equal or
slightly exceed 1995.
11
<PAGE> 12
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. The Company's management and legal counsel have reviewed the
probable outcome of these 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 the pending proceedings cannot be predicted with certainty,
based on its review, management believes that any 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 in the
Company's annual and/or quarterly reports. The Company is not currently a party
to any such proceedings.
12
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -------
a) The Exhibits listed in the "Exhibit Index" are filed
as a part of this report
b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1996
13
<PAGE> 14
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: November 1, 1996 James E. Ayers
- ---------------------- -----------------------
James E. Ayers
Chief Financial Officer
Duly Authorized Officer and
Principal Financial Officer.
14
<PAGE> 15
EXHIBIT INDEX
-------------
Exhibit
- -------
3-B By-Laws of Registrant (adopted October 21, 1996)
27 Financial Data Schedule
15
<PAGE> 1
Exhibit 3(B)
Adopted 10-21-96
BY-LAWS OF DANA CORPORATION
ARTICLE I. EFFECTIVE DATE
SECTION 1.1. EFFECTIVE DATE. These By-Laws are adopted by the Board of Directors
(the "Board") of Dana Corporation ("Dana") on and effective October 21, 1996.
ARTICLE II. OFFICES
SECTION 2.1. REGISTERED OFFICE. Dana's registered office shall be located at
Riverfront Plaza, East Tower, 951 East Byrd Street, Richmond, Virginia 23219.
SECTION 2.2. BUSINESS OFFICE. Dana's principal business office shall be located
at 4500 Dorr Street, Toledo, Ohio 43615, with a mailing address of P.O. Box
1000, Toledo, Ohio 43697.
ARTICLE III. SHAREHOLDER MEETINGS
SECTION 3.1. ANNUAL MEETINGS. Unless the Board fixes a different date, the
annual meeting of shareholders of Dana to elect directors and to transact other
business (if any) shall be held on the first Wednesday of April each year, at
the time and place designated by the Board in the notice of meeting. The Board
may postpone or cancel any annual meeting at any time prior to the designated
meeting date and time by means of (i) a press release reported by the Dow Jones
News, Associated Press or a comparable national news service, or (ii) a document
filed with the Securities and Exchange Commission ("SEC") (in either case, a
"Public Announcement").
SECTION 3.2. SPECIAL MEETINGS. Special meetings of shareholders may be called by
the Board, the Chairman of the Board (the "Chairman"), or the President, to
elect directors and/or transact such other business as is described in the
notice of meeting, at the date, time and place designated therein. Notice of
special meetings shall be given to shareholders in accordance with the Virginia
Stock Corporation Act ("Virginia Law"). The Board may postpone or cancel any
special meeting at any time prior to the designated meeting date and time by
means of a Public Announcement.
SECTION 3.3. SHAREHOLDER NOMINATIONS AND PROPOSALS. In submitting nominations
for persons to be elected as directors of Dana or proposals for other business
to be presented at any shareholder meeting, shareholders shall comply with the
following procedures and such other requirements as are imposed by Virginia Law
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"):
a. DELIVERY. Shareholder notices shall be addressed and delivered to the
Secretary at Dana's principal business office.
16
<PAGE> 2
b. TIMELINESS.
I. ANNUAL MEETINGS. Shareholder notices of nominations to be
voted on at any annual meeting must be delivered not later than the close of
business on the 90th day prior to such meeting, and notices of proposals to be
voted on must be delivered in compliance with the timeliness provisions of SEC
Rule 14a-8(a)(3)(i) or any rule hereafter adopted in its place as though such
rules applied to the proposals, whether or not they actually do so.
II. SPECIAL MEETINGS. Shareholder notices of nominations or of
proposals to be voted on at any special meeting must be delivered (i) not
earlier than the close of business on the 90th day prior to such meeting and
(ii) not later than the close of business on the later of the 70th day prior to
the date of the special meeting or the 3rd day following the date on which Dana
first makes a Public Announcement of the date of the meeting.
III. ADJOURNMENTS AND POSTPONEMENTS. A Public
Announcement of an adjournment or postponement of an annual or special meeting
shall not commence a new time period for the giving of shareholder notices.
c. CONTENTS. Shareholder notices shall contain the names and addresses
(as they appear on the records of Dana's transfer agent) of the shareholder(s)
and all beneficial owners on whose behalf the nomination or proposal is made,
and the class and number of Dana shares which are owned of record and
beneficially by the shareholder(s) and the beneficial owners. The notice shall
also contain, as applicable, (i) the information about director-nominees which
is required to be disclosed in solicitations of proxies for the election of
directors in an election contest or otherwise pursuant to Regulation 14A under
the Exchange Act and Rule 14a-11 thereunder, or any rules hereafter adopted in
their place (including such person's written consent to being named in the proxy
as a nominee and to serving as a director if elected), and (ii) a brief
description of any other proposed business, the reason for presenting such
business at the meeting, and any material interests which the shareholder(s) and
the beneficial owners have in such business.
SECTION 3.4. CONDUCT OF MEETINGS.
SECTION 3.4.1. CHAIRMAN AND PROCEDURES. Shareholder meetings shall be
chaired by the Chairman of the Board or by such person as he or she may
designate. The chairman of the meeting shall determine and announce the rules of
procedure for the meeting and shall rule on all procedural questions during the
meeting.
SECTION 3.4.2. PROPER NOMINATIONS AND BUSINESS. Nominations for
directors and other proposals shall be deemed properly brought before a
shareholder meeting only when brought in accordance with Virginia Law and this
Article III. The chairman of the meeting shall determine whether each nomination
or proposal has been properly brought and shall
17
<PAGE> 3
declare that any improperly brought nomination or proposal be disregarded.
SECTION 3.4.3. ADJOURNMENTS. The chairman of any shareholder meeting,
or the holders of a majority of the shares represented at the meeting (whether
or not constituting a quorum), may adjourn the meeting from time to time. No
further notice need be given if the adjournment is for a period not exceeding
120 days and the new date, time and place are announced at the adjourned
meeting. Otherwise, notice shall be given in accordance with Virginia Law.
ARTICLE IV. BOARD OF DIRECTORS
SECTION 4.1. AUTHORITY. The business and affairs of Dana shall be managed under
the direction of the Board, and all of Dana's corporate powers shall be
exercised by or pursuant to the Board's authority.
SECTION 4.2. NUMBER AND TERM OF DIRECTORS. The number of directors of Dana shall
be nine. Each director shall hold office until the next annual meeting of
shareholders and the election and qualification of his or her successor, or
until his or her earlier retirement, resignation, or removal.
SECTION 4.3. MEETINGS AND NOTICE.
SECTION 4.3.1. REGULAR MEETINGS. The Board shall hold regular meetings
at such dates, times and places as it may determine from time to time, and no
notice thereof need be given other than such determination. However, if the
date, time or place of any regular meeting is changed, notice of the change
shall be given to all directors by means of (i) a written notice mailed at least
5 calendar days before the meeting, (ii) a written notice delivered in person,
by recognized national courier service, or by telecopy at least 1 business day
before the meeting, or (iii) by telephone notification given at least 12 hours
before the meeting.
SECTION 4.3.2. SPECIAL MEETINGS. The Board or the Chairman may call a
special meeting of the Board at any date, time and place by causing the
Secretary to give notice thereof to each director in the manner provided in
Section 4.3.1. Neither the purpose of the meeting nor the business to be
transacted need be specified in the notice of meeting, except for proposed
amendments to these By-Laws.
SECTION 4.3.3. TELEPHONIC MEETINGS. Members of the Board may
participate in any Board meeting by means of conference telephone or similar
communications equipment by means of which all meeting participants can hear
each other, and such participation shall constitute presence in person at such
meeting.
SECTION 4.3.4. WAIVER OF NOTICE. A director may waive any notice of
meeting required under Virginia Law, Dana's Articles of Incorporation ("Dana's
Articles") or these By-Laws, before or after the date and time set out in the
notice, by signed written waiver
18
<PAGE> 4
submitted to the Secretary and filed with the minutes of the meeting. A
director's attendance or participation at any meeting shall constitute a waiver
of notice unless the director objects, at the beginning of the meeting or
promptly upon his or her arrival, to holding the meeting or transacting business
at the meeting, and thereafter does not vote on or assent to actions taken at
the meeting.
SECTION 4.4. ACTION WITHOUT A MEETING. Any action required or permitted to be
taken at a Board meeting may be taken without a meeting if the action is taken
by all members of the Board. The action shall be evidenced by one or more
written consents, signed by each director either before or after the action is
taken. The action shall be effective when the last director signs his or her
consent unless the consent specifies a different effective date, in which event
the action taken will be effective as of the date specified therein provided
that the consent states the date of execution by each director.
SECTION 4.5. QUORUM, BOARD ACTION. A majority of the directors shall constitute
a quorum of the Board. If a quorum is present when a vote is taken, the
affirmative vote of the majority of directors present shall constitute the act
of the Board; provided, that the authorization, approval or ratification of any
transaction in which a director has a direct or indirect personal interest shall
also be subject to the provisions of Virginia Law.
SECTION 4.6. RESIGNATIONS. A director may resign at any time by giving written
notice to the Board, the Chairman, the President or the Secretary. Unless
otherwise specified in the notice, the resignation shall take effect upon
delivery and without Board action. A director's resignation shall not affect any
contractual rights and obligations of Dana or the director, except as specified
in any particular contract.
SECTION 4.7. VACANCIES. The Board shall fill all vacancies, including those
resulting from an increase in the number of directors, by majority vote of the
remaining directors, whether or not such number constitutes a quorum.
ARTICLE V. BOARD COMMITTEES
SECTION 5.1. ESTABLISHMENT OF COMMITTEES. The Board may, by amendment to the
By-Laws, establish and dissolve Board Committees and establish and change the
authority of such Committees; provided, that each Committee shall consist of two
or more directors (who shall serve thereon at the Board's pleasure) and shall
have a chairman who is designated by the Board. Each Committee shall exercise
such of the Board's powers as are authorized by the Board, subject to any
limitations imposed by Virginia Law. The Board may, from time to time and
without amendment to the By-Laws, change the membership or chairmanship of any
Board Committee and fill any vacancies thereon or designate another director to
act in the place of any Committee member who is absent or disqualified from
voting at any meeting of the Committee.
SECTION 5.2. STANDING COMMITTEES. The Board shall have the following Standing
Committees:
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<PAGE> 5
a. ADVISORY COMMITTEE. The Advisory Committee shall make
recommendations to the Board on matters relating to the qualifications of
directors; the selection of nominees for election as directors at annual
shareholder meetings and in filling Board vacancies; the selection and retention
of elected officers and management succession; the cash and non-cash
compensation of directors; the structure of the Board's Committees; the schedule
and agenda for meetings of the Board and its Committees; the criteria for
assessing the performance of the Board, its Committees, and the individual
directors; and other Board governance matters. When the Board is not in session
and when the Advisory Committee is convened by and meeting with the Chairman of
the Board for such purpose, the Advisory Committee shall serve as an "executive
committee" of the Board and shall have the full authority of the Board under
Virginia Law.
b. AUDIT COMMITTEE. The Audit Committee shall periodically meet with
Dana's financial and accounting management and independent auditors and
accountants to review Dana's audit plans, financial reporting, internal
controls, and significant issues relating to Dana's contingent liabilities,
taxes and insurance programs. The Audit Committee shall provide oversight for
Dana's audit programs and shall make recommendations to the Board on matters
relating to the selection and retention of the independent auditors. The members
of the Audit Committee shall not be employees of Dana.
c. COMPENSATION COMMITTEE. The Compensation Committee shall make
recommendations to the Board on matters relating to base salaries and other cash
and non-cash compensation for senior management under those Dana executive
benefit plans in effect from time to time which the Committee interprets and
administers. The Compensation Committee shall maintain familiarity with
generally accepted national and international compensation practices and may
consult with such compensation consultants as it deems appropriate. In making
its recommendations, the Compensation Committee shall endeavor to maintain the
compensation of Dana's senior management at levels appropriate for Dana's size
and business, the responsibilities and performance of the individuals, and
Dana's performance. The members of the Compensation Committee shall qualify as
"outside directors" under Internal Revenue Service Regulation ss.1.162-27 and
shall not be employees of Dana.
d. FINANCE COMMITTEE. The Finance Committee shall review Dana's
financial condition, liquidity (including aggregate corporate borrowings) and
results of operations, and shall recommend to the Board appropriate courses of
action with respect to Dana's financial performance and capital structure.
Within parameters established with the Board, the Finance Committee shall review
and approve management's recommendations on matters relating to major corporate
actions (including fixed capital expenditures; acquisitions, investments, and
divestitures; working capital programs; and issuances of equity and debt
securities) and shall present such recommendations to the Board.
e. FUNDS COMMITTEE. The Funds Committee shall review the structure and
allocation of assets in Dana's pension and other employee benefit funds and the
20
<PAGE> 6
performance of the fund managers, to assure that the funds are managed in
compliance with applicable laws and regulations. In performing these advisory
functions, the Funds Committee shall refrain from making specific investment
recommendations. The Funds Committee shall review and approve management's
recommendations on matters relating to the selection and retention of the
investment managers.
SECTION 5.3. COMMITTEE MEETINGS AND PROCEDURES. Each Committee shall hold
regular meetings at such dates, times and places as it may determine from time
to time, and no notice thereof need be given other than such determination.
Sections 4.3 through 4.5, which govern meetings, notices and waivers of notice,
actions without meeting, and quorum and voting requirements for the Board and
the directors, shall also apply to the Committees and their members. Each
Committee shall keep written records of its proceedings and shall report such
proceedings to the Board from time to time as the Board may require.
SECTION 5.4. RESIGNATIONS. A Committee member may resign at any time by giving
written notice to the Chairman of the Board. Unless otherwise specified in the
notice, the resignation shall take effect upon delivery and without Board
action.
ARTICLE VI. OFFICERS
SECTION 6.1. OFFICES AND ELECTION. The Board shall elect the following officers
annually at the first Board meeting following the annual shareholders meeting:
the Chairman (who shall be a member of the Board), the Chief Executive Officer,
the Chief Operating Officer, the President, the President-Dana International,
the President-Dana North America, the Chief Financial Officer, the Treasurer,
the Secretary, and such other Regional Presidents, Executive Vice Presidents,
Vice Presidents, Assistant Treasurers and Assistant Secretaries as it deems
appropriate. Any person may simultaneously hold more than one office. Each
officer shall hold office until the election and qualification of his or her
successor, or until his or her earlier resignation or removal. Election as an
officer shall not, of itself, create any contractual rights in the officer or in
Dana, including, without limitation, any rights in the officer for compensation
beyond his or her term of office.
SECTION 6.2. REMOVALS AND RESIGNATIONS. Officers shall serve at the pleasure of
the Board and may be removed from office by the Board at any time. An officer
may resign at any time by giving written notice to the Chairman or the
Secretary. Unless otherwise specified in the notice, the resignation shall take
effect upon delivery and without Board action. An officer's resignation shall
not affect any contractual rights and obligations of Dana or the officer, except
as specified in any particular contract.
SECTION 6.3. DUTIES OF OFFICERS. The officers shall perform the following duties
and any others which are assigned by the Board from time to time, are required
by Virginia Law, or are commonly incident to their offices:
a. CHAIRMAN OF THE BOARD. The Chairman shall provide leadership to the
Board in discharging its functions; shall preside at all meetings of the Board;
shall act as a liaison
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<PAGE> 7
between the Board and Dana's management; and, with the Chief Executive Officer,
shall represent Dana to the shareholders, investors and other external groups.
If the Chairman is absent or incapacitated, the Chairman of the Advisory
Committee shall have his or her powers and duties.
b. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be Dana's
principal executive officer, with responsibility for the general management of
Dana's business affairs. The Chief Executive Officer shall develop and recommend
to the Board long-term strategies for Dana, annual business plans and budgets to
support those strategies, and plans for management development and succession
that will provide Dana with an effective management team. He or she shall serve
as Dana's chief spokesperson to internal and external groups. If the Chief
Executive Officer is absent or incapacitated, the President shall have his or
her powers and duties.
c. CHIEF OPERATING OFFICER. The Chief Operating Office shall oversee
the management of Dana's day-to-day business in a manner consistent with Dana's
financial and operating goals and objectives, continuous improvement in Dana's
products and services, and the achievement and maintenance of satisfactory
competitive positions within Dana's industries.
d. PRESIDENT. The President shall have such duties as are assigned
by the Chief Executive Officer. If the President is absent or incapacitated, the
Chairman shall have his or her powers and duties.
e. PRESIDENT - DANA INTERNATIONAL. The President-Dana International
shall have such duties as are assigned by the Chairman.
f. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be
responsible for the overall management of Dana's financial affairs.
g. EXECUTIVE VICE PRESIDENTS AND VICE PRESIDENTS. The Executive Vice
Presidents and the Vice Presidents shall have such duties as are assigned by the
Chairman.
h. REGIONAL PRESIDENTS. The President-Dana North America and such
other regional presidents as the Board may elect shall manage Dana's operations
in the regions assigned to them.
i. TREASURER. The Treasurer shall have charge and custody of Dana's
funds and securities and shall receive monies due and payable to Dana from all
sources and deposit such monies in banks, trust companies, and depositories as
authorized by the Board. If the Treasurer is absent or incapacitated and has not
previously designated in writing another person or persons to have his or her
powers and duties, any Assistant Treasurer shall have such powers and duties.
22
<PAGE> 8
j. SECRETARY. The Secretary shall prepare and maintain minutes of all
meetings of the Board and of Dana's shareholders; shall assure that notices
required by these By-Laws, Dana's Articles, Virginia Law or the Exchange Act are
duly given; shall be custodian of Dana's seal (if any) and affix it as required;
shall authenticate Dana's records as required; shall keep or cause to be kept a
register of the shareholders' names and addresses as furnished by them; and
shall have general charge of Dana's stock transfer books. If the Secretary is
absent or incapacitated and has not previously designated in writing another
person or persons to have his or her powers and duties, any Assistant Secretary
shall have such powers and duties.
k. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant
Treasurers and Assistant Secretaries shall have such duties as are assigned by
the Treasurer and the Secretary, respectively.
SECTION 6.4. CONTRACTS AND INSTRUMENTS. Except as limited in Section 6.5 with
respect to Dana's guarantees of the indebtedness of subsidiaries, affiliates and
third parties, each of the Chairman, the Chief Executive Officer, the Chief
Operating Officer, the President, the President-Dana International, the
President-Dana North America, the Chief Financial Officer, any Executive Vice
President, any Vice President, any other Regional President, and the Treasurer,
shall have the power to enter into, sign (manually or through facsimile),
execute, and deliver contracts (including, without limitation, bonds, deeds and
mortgages) and other instruments evidencing Dana's rights and obligations on
behalf of and in the name of Dana. Except as otherwise provided by law, any of
these officers may delegate the foregoing powers to any other officer, employee
or attorney-in-fact of Dana by written special power of attorney.
SECTION 6.5. GUARANTEES OF INDEBTEDNESS.
SECTION 6.5.1. DEBT OF WHOLLY OWNED SUBSIDIARIES. Within any
limitations set by the Board on total outstanding guarantees for Dana
subsidiaries, each of the Chairman, the Chief Executive Officer, the Chief
Operating Officer, the President, the Chief Financial Officer, and the Treasurer
shall have the power to approve guarantees by Dana of the indebtedness of direct
and indirect wholly owned Dana subsidiaries.
SECTION 6.5.2. DEBT OF NON-WHOLLY OWNED SUBSIDIARIES, AFFILIATES, AND
OTHER ENTITIES. Each of the Chairman, the Chief Executive Officer, the Chief
Operating Officer, the President, the Chief Financial Officer, and the Treasurer
shall have the power to approve guarantees by Dana of the indebtedness of
non-wholly owned Dana subsidiaries, Dana affiliates and third party entities;
provided, that the aggregate amount of such guarantees made by these officers
collectively between Board meetings may not exceed $10 million and that all such
guarantees in the aggregate may not exceed any limitations set by the Board on
total outstanding guarantees for Dana subsidiaries.
SECTION 6.6. STOCK CERTIFICATES. The Chairman, the President, and the Secretary
shall each have the power to sign (manually or through facsimile) certificates
for shares of Dana
23
<PAGE> 9
stock which the Board has authorized for issuance.
SECTION 6.7. SECURITIES OF OTHER ENTITIES. With respect to securities issued by
another entity which are beneficially owned by Dana, each of the Chairman, the
Chief Executive Officer, the Chief Operating Officer, the President, the
President-Dana International, the President-Dana North America, the Chief
Financial Officer, any Executive Vice President, any Vice President, any other
Regional President, the Treasurer and the Secretary shall have the power to
attend any meeting of security holders of the entity and vote thereat; to
execute in the name and on behalf of Dana such written proxies, consents,
waivers or other instruments as they deem necessary or proper to exercise Dana's
rights as a security holder of the entity; and otherwise to exercise all powers
to which Dana is entitled as the beneficial owner of the securities. Except as
otherwise provided by law, any of these officers may delegate any of the
foregoing powers to any other officer, employee or attorney-in-fact of Dana by
written special power of attorney.
ARTICLE VII. INDEMNIFICATION
SECTION 7.1. INDEMNIFICATION. Dana shall indemnify any of the following persons
who was, is or may become a party to any "proceeding" (as such term is defined
in Section 1 of Article SIXTH of Dana's Articles) to the same extent as if such
person were specified as one to whom indemnification is granted in Section 3 of
the foregoing Article SIXTH: (i) any Dana director, officer or employee who was,
is, or may become a party to the proceeding by reason of the fact that he or she
is or was serving at Dana's request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, and (ii) any Dana employee who was, is, or may become a party
to the proceeding by reason of the fact that he or she is or was an employee of
Dana. In all cases, the provisions of Sections 4 through 7 of the foregoing
Article SIXTH shall apply to the indemnification granted hereunder.
ARTICLE VIII. DANA STOCK
SECTION 8.1. LOST CERTIFICATES. A shareholder claiming that any certificate for
Dana stock has been lost or destroyed shall furnish the Secretary with an
affidavit stating the facts relating to such loss or destruction. The
shareholder shall be entitled to have a new certificate issued in the place of
the certificate which is claimed to be lost or destroyed if (i) the affidavit is
satisfactory to the Secretary, and (ii) if requested by the Secretary, the
shareholder gives a bond (in form and amount satisfactory to the Secretary) to
protect Dana and other persons from any liability or expense that might be
incurred upon the issue of a new certificate by reason of the original
certificate remaining outstanding.
SECTION 8.2. RIGHTS AGREEMENT. Any restrictions which are deemed to be imposed
on the transfer of Dana securities by the Rights Agreement dated as of July 14,
1986, as amended, between Dana and Chemical Bank (as successor to Manufacturers
Hanover Trust Company), or by any successor or replacement rights plan or
agreement, are hereby authorized.
24
<PAGE> 10
SECTION 8.3. CONTROL SHARE ACQUISITIONS. Article 14.1 of the
Virginia Stock Corporation Act shall not apply to the acquisition of shares of
Dana's common stock.
ARTICLE IX. AMENDMENT
SECTION 9.1. AMENDMENT. The Board, by resolution, or the shareholders may amend
or repeal these By-Laws, subject to any limitations imposed by Dana's Articles
and Virginia Law.
25
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