<PAGE> 1
[DANA LOGO]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998 Commission file number 1-1063
- ------------------------------------------- ------
DANA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 34-4361040
- -------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4500 Dorr Street, Toledo Ohio 43615
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (419)535-4500
-------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- -------------------------- -----------------------------------------
Common Stock, $1 par value New York, Pacific, London Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act:
None
--------------------------------------------
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
---
The aggregate market value of the voting stock held by non-affiliates of the
registrant at February 19, 1999, was approximately $6,536,842,000.
The number of shares of registrant's Common Stock, $1 Par Value, outstanding at
February 19, 1999, was 165,809,476 shares.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
Document Where Incorporated
---------------------- -------------------------------
<S> <C>
1. Proxy Statement for Annual Meeting of Shareholders to be held on April 7, Part III
1999.
2. Annual Report to Shareholders for year ended December 31, 1998. Parts I, II, IV
</TABLE>
- --------------------------------------------------------------------------------
The Exhibit Index is located at pages 19-21 of the sequential numbering system.
1
<PAGE> 2
INDEX
DANA CORPORATION - FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
10-K Pages
----------
<S> <C>
Cover 1
Index 2
Part I
- ------
Item 1 - Business 3-9
Item 2 - Properties 10
Item 3 - Legal Proceedings 10
Item 4 - Submission of Matters to a Vote of Security Holders 10
Part II
- -------
Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters 11
Item 6 - Selected Financial Data 11
Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 7(A) - Quantitative and Qualitative Disclosures About Market Risk 11
Item 8 - Financial Statements and Supplementary Data 11
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 11
Part III
- --------
Item 10 - Directors and Executive Officers of the Registrant 12
Item 11 - Executive Compensation 12
Item 12 - Security Ownership of Certain Beneficial Owners and Management 12
Item 13 - Certain Relationships and Related Transactions 12
Part IV
- -------
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K 13-21
Signatures 22-23
- ----------
</TABLE>
2
<PAGE> 3
PART I
ITEM 1 - BUSINESS
Dana Corporation was incorporated in 1905. Today, we are one of the
world's largest independent suppliers to original equipment (OE) vehicle
manufacturers and the related aftermarkets. We produce the types of components
and systems used on more than 95% of the world's 700 million motor vehicles. We
also own Dana Credit Corporation (DCC), a leading provider of leasing services
in selected markets.
Our operations are organized into seven market-focused Strategic
Business Units (SBUs) as follows:
o Automotive Systems Group (ASG) -- This group serves the world's
light truck and passenger car markets with light duty axles and
driveshafts, structural products (such as engine cradles and
frames), transfer cases, original equipment brakes and integrated
modules and systems. The group has 82 facilities and 21,100 people
in 20 countries. In 1998, its sales were $4.3 billion and its
three largest customers were DaimlerChrysler AG, Ford Motor
Company and General Motors Corporation.
o Automotive Aftermarket Group (AAG) -- Created in 1998 as one of
our strategic initiatives to realign our operations following our
merger with Echlin, this group sells hydraulic brake components
and disc brakes for light vehicle applications, external engine
components for the vehicle maintenance and repair markets and a
complete line of filtration products for a variety of vehicle and
industrial equipment applications worldwide. In addition, it sells
electrical, brake, power transmission, steering and suspension
system components in the United Kingdom and continental Europe.
The group has 175 facilities and 27,000 people in 24 countries. In
1998, its sales were $2.8 billion and its three largest customers
were National Automotive Parts Association (NAPA), Carquest
Corporation and Pep Boys Manny Moe & Jack.
o Engine Systems Group (ESG) -- This group serves the automotive,
heavy truck, agricultural, construction, mining, aeronautical,
marine, railway, motorcycle and industrial markets (including
nearly every major engine manufacturer in the world and related
aftermarkets) with sealing products, engine parts, piston rings,
cylinder liners and camshafts and fluid system products. The group
has 116 facilities and 20,500 people in 19 countries. In 1998, its
sales were $2.0 billion and its three largest customers were Ford,
GM and DaimlerChrysler.
o Heavy Truck Group (HTG) -- This group, a major global supplier to
the medium and heavy truck markets, produces heavy axles and
brakes, trailer products, medium and heavy duty driveshafts and
power take-off units and commercial vehicle systems. It also
assembles modules and systems for heavy trucks. The group has 47
facilities and 6,500 people in 9 countries. In 1998, its sales
were $1.6 billion and its three largest customers were Mack
Trucks, Inc., PACCAR Inc and Navistar International Transportation
Corp.
o Off-Highway Systems Group (OHSG) -- This group produces axles and
brakes, transaxles, power-shift transmissions, torque converters
and electronic controls and hydraulic pumps, motors, valves,
filters and electronic components for the construction,
agriculture, mining, specialty chassis, outdoor power, materials
handling, forestry and leisure utility equipment markets. The
group has 18 facilities and 4,500 people in 8 countries. In 1998,
its sales were nearly $900 million and its three largest customers
were Agco Corporation, Caterpillar Inc. and Case Corporation.
o Industrial Group (IG) -- Our most diverse core business, this
group sells products and systems that drive and control motion,
including clutches, brakes, linear actuators, motors and controls,
hose products, couplings and a wide range of electric and
electronic sensors. The group serves worldwide markets for
industrial machinery processing equipment, machine tools and
business machines, as well as the communication, information
processing, transportation, agriculture, construction, mining,
chemical, petroleum and automotive industries. The group has 47
facilities and 6,000 people in 16 countries. In 1998, its sales
were over $700 million and its three largest customers were Ford,
NAPA and Motion Industries, Inc.
3
<PAGE> 4
o Leasing Services -- DCC and its subsidiaries provide leasing
services to selected markets in the U.S., Canada, the United
Kingdom and continental Europe. DCC's key products are middle
ticket and capital markets leasing and finance products and asset
and real property management.
In July 1998, we merged one of our subsidiaries with Echlin Inc.,
another worldwide supplier of automotive products. The Echlin merger was one of
a series of steps we have taken in the past two years to focus on and strengthen
our core products and businesses. During that period, we completed strategic
acquisitions of operations with annualized sales of more than $5.3 billion,
including Echlin and:
o the Clark-Hurth Components assets of Ingersoll-Rand Company in
February 1997
o the Sealed Power Division of SPX Corporation in February 1997
o the heavy axle and brake business of Eaton Corporation in January
1998
o the Glacier Vandervell Bearings Group and the AE Clevite North
American aftermarket engine hard parts business from Federal-Mogul
Corporation in December 1998
We also completed significant restructuring and rationalization programs,
including the sale of our European distribution operations, DCC's Technology
Leasing Group portfolio and other operations not core to our business.
You can find more information in "Note 16. Business Segments" on pages
34 - 36, "Note 21. Acquisitions" on page 38 and "Note 22. Divestitures" on page
39 of our 1998 Annual Report.
GEOGRAPHICAL AREAS
We maintain administrative organizations in four regions - North
America, Europe, South America and Asia/Pacific - to facilitate financial and
statutory reporting and tax compliance on a worldwide basis and to support the
seven SBUs.
Our operations are located in the following countries:
<TABLE>
<CAPTION>
North America Europe South America Asia/Pacific
- ------------- ------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Canada Austria Netherlands Argentina Australia South Korea
Mexico Belgium Russia Brazil China Taiwan
United States France Poland Colombia Japan Thailand
Germany Spain South Africa Malaysia New Zealand
India Sweden Uruguay Singapore
Ireland Switzerland Venezuela
Italy United Kingdom
</TABLE>
Our non-U.S. subsidiaries and affiliates manufacture and sell a number
of vehicular and industrial products similar to those produced in the U.S. In
addition to normal business risks, operations outside the U.S. are subject to
others such as changing political, economic and social environments, changing
governmental laws and regulations, currency revaluations and market
fluctuations.
Consolidated non-U.S. sales were $3.7 billion, or 30% of our 1998
sales. Including U.S. exports of $756 million, non-U.S. sales accounted for 36%
of 1998 consolidated sales. Non-U.S. net income was $181 million, or 34% of
consolidated 1998 net income. In addition, there was $30 million of equity in
earnings of non-U.S. affiliates in 1998.
You can find more information in "Note 7. Non-U.S. Operations" on page
29 and "Note 16. Business Segments" on pages 34 - 36 of our 1998 Annual Report.
4
<PAGE> 5
CUSTOMER DEPENDENCE
We have thousands of customers around the world and have developed
long-standing business relationships with many of these customers. Our attention
to quality, delivery and service has been recognized by numerous customers who
have awarded us supplier quality awards. Ford and DaimlerChrysler were the only
customers accounting for more than 10% of our consolidated sales in 1998. We
have been supplying products to these companies and their subsidiaries for many
years. Sales to Ford, as a percentage of sales, were 14%, 15% and 15% in 1996,
1997 and 1998, and sales to DaimlerChrysler were 11%, 11% and 13% in those
years. Loss of all or a substantial portion of our sales to Ford,
DaimlerChrysler or other large volume customers would have a significant adverse
effect on our financial results until this lost sales volume could be replaced.
There would be no assurance, in such event, when or if the lost volume would be
replaced.
PRODUCTS
As a result of our internal development and acquisition activities in
the past several years, we now have ten core products and services. During the
past three years, our sales by core product were as follows:
<TABLE>
<CAPTION>
Percentage of Consolidated Sales
--------------------------------
1996 1997 1998
---- ---- ----
Type of Products
- ----------------
<S> <C> <C> <C>
Axle 24% 25% 32%
Engine 10 10 10
Brake 9 10 10
Driveshaft 9 9 9
Fluid System 6 7 7
Structural 6 7 6
Industrial 7 6 6
Sealing 5 5 5
Filtration 4 4 4
-- -- --
80 83 89
Other Products 20 17 11
-- -- --
100% 100% 100%
=== === ===
</TABLE>
We do not consider our leasing service revenue to be sales and none of our
other products are core or account for 10% of sales.
5
<PAGE> 6
MATERIAL SOURCE AND SUPPLY
Most raw materials (such as steel) and semi-processed or finished items
(such as forgings and castings) are purchased from long-term suppliers located
within the geographic regions of our operating units. Generally, these materials
are available from numerous sources in quantities that we need. Temporary
shortages of a particular material or part occasionally occur, but we do not
consider the overall availability of materials to be a significant risk factor.
SEASONALITY
Our businesses are not seasonal. However, sales to our OE vehicular
customers are closely related to the vehicle manufacturers' production
schedules.
BACKLOG
Generally, our products are not on a backlog status. They are produced
from readily available materials and have a relatively short manufacturing
cycle. Each operating unit maintains its own inventories and production
schedules and many of our products are available from more than one facility. We
believe that our production capacity is adequate to handle current requirements
and we regularly review anticipated growth in our product lines to determine
when additional capacity may be needed.
COMPETITION
We compete worldwide with a number of other manufacturers and
distributors which produce and sell similar products. These competitors include
vertically-integrated units of our major OE customers and a number of
independent U.S. and non-U.S. suppliers. Our traditional U.S. OE customers,
facing substantial foreign competition, have expanded their worldwide sourcing
of components to better compete with lower cost imports. In addition, these
customers have been shifting research and development, design and validation
responsibilities to their Tier 1 suppliers, focusing on stronger relationships
with fewer suppliers. We have established operations throughout the world to
enable us to meet these competitive challenges and be a strong global supplier
of our core products.
In the area of leasing services, we compete in selected markets with
various international, national and regional leasing and finance organizations.
STRATEGY
We are actively pursuing two broad strategies, focused around our seven
customer and market-focused, global SBUs. Both strategies are intended to reduce
the effects of economic and market cyclicality.
The first strategy is to diversify our products and reduce our
dependence on highway vehicle OE production. Our long-term goal is to obtain 50%
of sales from the highway vehicle OE customers and 50% from distribution,
off-highway, service and industrial markets. In 1998, highway vehicle OE sales
were 56% of our total and distribution, off-highway, service and industrial
sales were 44%. We continue to expand our off-highway and distribution
businesses by increasing market penetration and broadening our product offerings
through internal growth and acquisition.
The second strategy is to balance our U.S. and non-U.S. sales,
including sales of our non-consolidated affiliates. We have well-defined
regional organizations in North America, South America, Europe and Asia/Pacific
in support of this initiative. In 1998, non-U.S. sales, including exports from
the U.S. and sales of our non-consolidated affiliates, were 41% of gross
(consolidated and non-consolidated) sales. Our long-term goal is to derive 50%
of our sales (including exports) from customers outside the U.S. To accomplish
this objective, we are focusing on meeting our OE customers' needs in the local
markets in which they operate, through exports and by locating manufacturing or
assembly facilities where key customers have assembly plants.
6
<PAGE> 7
As part of the continuing efforts to focus on our core businesses, in
1998 we announced or completed four divestitures of businesses with annual sales
of nearly $470 million. We also completed the acquisitions of businesses with
annual sales of over $4.7 billion, including those described in Item 1. You can
find more information in "Note 21. Acquisitions" on page 38 and "Note 22.
Divestitures" on page 39 of our 1998 Annual Report.
PATENTS AND TRADEMARKS
Our proprietary drivetrain, engine parts, chassis, structural
components, fluid power systems and industrial power transmission product lines
have strong identities in the vehicular and industrial markets which we serve.
Throughout these product lines, we manufacture and sell our products under a
number of patents and licenses which have been obtained over a period of years
and expire at various times. We consider each of them to be of value and
aggressively protect our rights throughout the world against infringement.
Because we are involved with many product lines, the loss or expiration of any
particular patent or license would not materially affect our sales and profits.
We own numerous trademarks which are registered in many countries,
enabling us to market our products worldwide. Our Spicer(R), Parish(R), Perfect
Circle(R), Victor Reinz(R), Wix(R), Weatherhead(R), Warner Electric(R),
Boston(R), Raybestos(R), Aimco(R), Clevite(R), Glacier(R) and Vandervell(R)
trademarks, among others, are widely recognized in their respective industries.
RESEARCH AND DEVELOPMENT
Our objective is to be the leader in superior quality, technologically
advanced products and systems for our vehicular and industrial customers offered
at competitive prices. To enhance quality and reduce costs, we use statistical
process control, cellular manufacturing, flexible regional production and
assembly, global sourcing and extensive employee training.
In addition, we engage in ongoing engineering, research and development
activities to improve the reliability, performance and cost-effectiveness of
existing products and to design and develop new products for existing and new
applications. Our spending on engineering, research and development and quality
control programs was $212 million in 1996, $248 million in 1997 and $275 million
in 1998.
EMPLOYMENT
Our worldwide employment (including consolidated subsidiaries) was
approximately 86,400 at December 31, 1998.
ENVIRONMENTAL COMPLIANCE
We make capital expenditures in the normal course of business as
necessary to ensure that our facilities are in compliance with applicable
environmental laws and regulations. Costs of environmental compliance did not
have a materially adverse effect on our capital expenditures, earnings or
competitive position in 1998, and we do not anticipate that future environmental
compliance costs will be material. You can find more information in
"Environmental Compliance and Remediation" under "Note 1. Summary of Significant
Accounting Policies" on page 27 of our 1998 Annual Report.
7
<PAGE> 8
EXECUTIVE OFFICERS OF THE REGISTRANT
This table contains information about our current executive officers.
Unless otherwise indicated, all positions are with Dana. The first five officers
listed are members of Dana's Policy Committee.
<TABLE>
<CAPTION>
Name and Age Present Position(s) Other Positions During Past 5 Years
- ------------ -------------------- -----------------------------------
<S> <C> <C>
S. J. Morcott Chairman of the Board of Directors Chief Executive Officer, 1989-99; Chief Operating
(60) since 1990 Officer, 1986-97; President, 1986-95; Chairman of
the Board of Hayes-Dana Inc., 1987-95 (1)
J. M. Magliochetti Chief Executive Officer since President - Dana North American Operations, 1992-95
(56) February 8, 1999; Chief Operating
Officer since 1997; Director and
President since 1996
J. S. Simpson Executive Vice President since Vice President of Finance, 1996-98; Treasurer,
(57) 1998; Chief Financial Officer since 1996-97; President - Dana Asia Pacific Operations,
1997 1992-95
W. J. Carroll President - Automotive Systems President - Diversified Products & Distribution,
(54) Group since 1997 1996-97; President - Dana Distribution Service
Group, 1995-97; President - DTF Trucking, 1985-97;
Chairman of the Board of Dana Canada Inc.,
1995-97(1); President of Dana Canada Inc., 1993-97
M. A. Franklin, III President - Dana International President - Dana Europe, 1993-97
(51) since 1997
R. L. Clayton President - Heavy Truck Group since Vice President - Heavy Truck Group, 1997-98; Vice
(38) 1998 President and General Manager - Spicer Heavy Axle &
Brake Division, 1996-97; General Manager - Spicer
Clutch Division, 1995-96; Director of Planning and
Development - Reinz-Dichtungs GmbH, 1993-95 (2)
B. N. Cole President - Off-Highway Systems President - Structural Components Group, 1995-97;
(56) Group since 1997 Vice President - Heavy Vehicle - Dana North
American Operations, 1991-95
C. F. Heine President - Engine Systems Group President - Dana Asia Pacific, 1996-98; Vice
(46) since 1998 President - Asia Pacific Operations, 1995; General
Manager - Spicer Off-Highway Axle Division, 1993-94
C. W. Hinde Vice President and Chief Accounting
(60) Officer since 1992; Assistant
Treasurer since 1986
L. W. McCurdy President - Automotive Aftermarket Chairman, President and Chief Executive Officer of
(63) Group since 1998 Echlin Inc., 1997-98; Executive Vice President -
Automotive, Cooper Industries, 1994-97
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Name and Age Present Position(s) Other Positions During Past 5 Years
- ------------ -------------------- -----------------------------------
<S> <C> <C>
W. L. Myers President - Automotive Axle President - Spicer Driveshaft Group, 1995-97; Vice
(58) Products since 1997 President and General Manager - Spicer Driveshaft
Division, 1986-95
M. A. Plumley President - Industrial Group since Vice President - Industrial Group, 1997-98; Group
(48) 1998 Vice President - Dana Industrial, 1996-97; General
Manager - Plumley Companies, Inc., 1995-96;
Chairman and Chief Executive Officer - Plumley
Companies, Inc., 1988-95 (3)
R. C. Richter Vice President - Finance and Vice President - Administration, 1997-98; General
(47) Administration since 1998 Manager - Perfect Circle Sealed Power Europe, 1997;
Vice President and General Manager - Perfect Circle
Europe, 1994-97; Dana Corporate Controller,
1989-94; Dana Vice President - Administration,
1987-94
E. J. Shultz Chairman and President - Dana President - Lease Financing, 1994-95; President -
(54) Credit Corporation since 1995 Financial Services, 1990-94
M. J. Strobel Vice President since 1976; General
(58) Counsel since 1970; Secretary since
1982
J. H. Woodward, Jr. Vice President and Corporate Controller - Dana North American Operations,
(46) Controller since 1996 1994-96; Division Controller - Spicer Heavy Axle &
Brake Division, 1992-94
</TABLE>
Notes:
(1) Hayes-Dana Inc., formerly a majority-owned Dana subsidiary located in
Canada, is now a wholly-owned subsidiary and has been renamed Dana
Canada Inc.
(2) Reinz-Dichtungs GmbH is a wholly-owned Dana subsidiary located in
Germany.
(3) Plumley Companies, Inc., formerly a wholly-owned Dana subsidiary
located in the U.S., is now a Dana division.
Those officers who are designated in Dana's By-Laws are elected by the
Board annually at its first meeting after the Annual Meeting of Shareholders.
The others are appointed by the Board from time to time. None of the officers
has a family relationship with any other Dana officer or director or an
arrangement or understanding with any Dana officer or other person pursuant to
which he was elected as an officer.
9
<PAGE> 10
ITEM 2 - PROPERTIES
As shown in the following table, we have over 500 manufacturing,
distribution and service branch or office facilities worldwide. We own the
majority of our manufacturing and larger distribution facilities for our
vehicular and industrial products. We lease a few manufacturing facilities and
most of our smaller distribution outlets and financial services branches and
offices.
<TABLE>
<CAPTION>
Dana Facilities by Geographic Region
------------------------------------
Type of North South Asia/
Facility America Europe America Pacific Total
- -------- ------- ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Manufacturing 189 79 37 7 312
Distribution 59 22 13 20 114
Service Branches, Offices 55 10 6 8 79
--- --- -- --- ---
Total 303 111 56 35 505
=== === == === ===
</TABLE>
ITEM 3 - LEGAL PROCEEDINGS
We are a party to various pending judicial and administrative
proceedings arising in the ordinary course of business. After reviewing the
proceedings that are currently pending (including the probable outcomes,
reasonably anticipated costs and expenses, availability and limits of our
insurance coverage, and our established reserves for uninsured liabilities), we
do not believe that any liabilities that may result from these proceedings are
reasonably likely to have a material effect on our liquidity, financial
condition or results of operations.
The Securities and Exchange Commission requires us to report certain
environmental proceedings involving governmental agencies. There is currently
one such proceeding. In the Matter of Dana Corporation is an Administrative
Complaint brought by the U.S. Environmental Protection Agency, Region V (USEPA)
on September 30, 1998, alleging periodic violations of discharge limits of
certain metals in the waste water at our plant on Sanford Street in Muskegon,
Michigan. The Complaint alleges that such discharges occurred from 1993 to 1995
in violation of the Clean Water Act. USEPA initially proposed a fine of
$125,000, but has now agreed to a fine of $92,000, which will be further reduced
if we complete an acceptable Supplemental Environmental Project at the plant.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- None -
10
<PAGE> 11
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is listed on the New York, Pacific, and London Stock
Exchanges. On February 19, 1999, there were 34,544 shareholders of record.
Dividends have been paid on our common stock every year since 1936.
Quarterly dividends have been paid since 1942.
You can find more information in "Shareholders' Investment" under
"Additional Information" on page 50 of our 1998 Annual Report.
ITEM 6 - SELECTED FINANCIAL DATA
You can find "Financial Highlights" under "Eleven Year History" on page
51 of our 1998 Annual Report.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You can find "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 40 - 46 of our 1998 Annual Report.
ITEM 7(A) - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
You can find information in "Financial Instruments," "Derivative
Financial Instruments" and "Marketable Securities" under "Note 1. Summary of
Significant Accounting Policies" on pages 27 and 28, in "Note 7. Non-U.S.
Operations" on page 29, in "Note 11. Interest Rate Agreements" on page 31 and in
"Note 19. Fair Value of Financial Instruments" on page 37 of our 1998 Annual
Report.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
You can find the financial statements and the report by
PricewaterhouseCoopers LLP dated January 25, 1999, on pages 21 - 39 and
"Unaudited Quarterly Financial Information" under "Shareholders' Investment" on
page 50 of our 1998 Annual Report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- None -
11
<PAGE> 12
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
You can find general information about our directors and executive
officers in Part I, Item 1 of this Form 10-K and under "Election of Directors"
in our 1999 Proxy Statement.
You can find information about the filing of reports by our directors,
officers and 10% stockholders under Section 16(a) of the Securities Exchange Act
of 1934 under "Section 16(a) Beneficial Ownership Reporting Compliance" in our
1999 Proxy Statement.
ITEM 11 - EXECUTIVE COMPENSATION
You can find information about executive compensation in the following
sections of our 1999 Proxy Statement: "Compensation" under "The Board and its
Committees," "Executive Compensation" and "Compensation Committee Report on
Executive Compensation."
You can find information about our stock performance under "Comparison
of Five-Year Cumulative Total Return" in our 1999 Proxy Statement.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
You can find information about the stock ownership of our directors,
officers and 5% stockholders under "Stock Ownership" in our Proxy Statement.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
You can find information about transactions between Dana and our
directors, officers and 5% stockholders under "Other Transactions" and
"Transactions with Management" in our 1999 Proxy Statement.
12
<PAGE> 13
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page in
Annual Report
-------------
<S> <C> <C>
(a) The following documents are
filed as part of this report:
(1) Financial Statements:
Report of Independent Accountants 21
Statement of Income for each of the three years
in the period ended December 31, 1998 22
Balance Sheet at December 31, 1997 and 1998 23
Statement of Cash Flows for each of the three
years in the period ended December 31, 1998 24
Statement of Shareholders' Equity for each of the
three years in the period ended December 31, 1998 25
Notes to Financial Statements 26 - 39
Unaudited Quarterly Financial Information 50
Page in
Form 10-K
(2) Financial Statement Schedules: ---------
Report of Independent Accountants on Financial Statement
Schedule for the three years ended December 31, 1998 14
Valuation and Qualifying Accounts and Reserves (Schedule II) 15 - 17
Supplementary Information - Commitments and Contingencies 18
All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.
(3) Exhibits listed in the "Exhibit Index" 19 - 21
(b) Reports on Form 8-K
None
</TABLE>
13
<PAGE> 14
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of Dana Corporation
Our audits of the consolidated financial statements referred to in our report
dated January 25, 1999 appearing on page 21 of the 1998 Annual Report to
Shareholders of Dana Corporation (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of Financial Statement Schedule II appearing on pages 15
through 17 of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Toledo, Ohio
January 25, 1999
14
<PAGE> 15
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II(a) - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
Adjustment
Trade accounts arising
receivable from change
Balance at Additions "written off" in currency Balance at
beginning charged net of exchange rates end of
of period to income recoveries and other items period
--------- --------- ---------- --------------- ------
<S> <C> <C> <C> <C> <C>
Year ended-
December 31, 1996 $30,018,000 $15,866,000 $(13,930,000) $ 33,000 $31,987,000
December 31, 1997 $31,987,000 $13,880,000 $(12,479,000) $ 554,000 $33,942,000
December 31, 1998 $33,942,000 $20,694,000 $(16,698,000) $ 2,516,000 $40,454,000
</TABLE>
15
<PAGE> 16
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II(b) - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ALLOWANCE FOR CREDIT LOSSES - LEASE FINANCING
<TABLE>
<CAPTION>
Adjustment
Trade accounts arising
receivable from change
Balance at Additions "written off" in currency Balance at
beginning charged net of exchange rates end of
of period to income recoveries and other items(1) period
--------- --------- ---------- ------------------ ------
<S> <C> <C> <C> <C> <C>
Year ended-
December 31, 1996 $47,425,000 $12,349,000 $ (9,299,000) $ 350,000 $50,825,000
December 31, 1997 $50,825,000 $12,141,000 $ (9,851,000) $ (462,000) $52,653,000
December 31, 1998 $52,653,000 $20,117,000 $ (10,561,000) $(29,537,000) $32,672,000
</TABLE>
(1) Other items in 1998 include $(28,889,000) from the sale of the Technology
Leasing Group portfolio.
16
<PAGE> 17
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II(c) - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
VALUATION ALLOWANCE FOR DEFERRED TAX ASSETS
<TABLE>
<CAPTION>
Adjustment
arising
Amounts from change
Balance at Additions "written off" in currency Balance at
beginning charged net of exchange rates end of
of period to income recoveries and other items period
--------- --------- ---------- --------------- ------
<S> <C> <C> <C> <C> <C>
Year ended-
December 31, 1996 --------- $ 4,800,000 ----------- ------------ $ 4,800,000
December 31, 1997 $ 4,800,000 $30,400,000 $ (4,800,000) ------------ $30,400,000
December 31, 1998 $30,400,000 $28,800,000 ----------- ------------ $59,200,000
</TABLE>
17
<PAGE> 18
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTS
COMMITMENTS AND CONTINGENCIES
We are a party to various legal proceedings (judicial and
administrative) arising in the normal course of business, including proceedings
which involve environmental and product liability claims. You can find
additional information in "Note 20. Commitments and Contingencies" on page 38 of
our 1998 Annual Report.
With respect to environmental claims, we are involved in investigative
and/or remedial efforts at a number of locations, including "on-site" activities
at currently or formerly owned facilities and "off-site" activities at
"Superfund" sites where we have been named as a potentially responsible party.
You can find more information in "Environmental Compliance and Remediation"
under "Note 1. Summary of Significant Accounting Policies" on page 27 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 40 - 46 of our 1998 Annual Report.
With respect to product liability claims, from time to time, we are
named in proceedings involving alleged defects in our products. Such proceedings
currently include a large number of claims (most of which are for relatively
small damage amounts) based on alleged asbestos-related personal injuries. At
December 31, 1998, approximately 48,000 such claims were outstanding, of which
approximately 33,000 were subject to pending settlement agreements. We have
agreements with our insurance carriers providing for the payment of
substantially all of the indemnity costs and the legal and administrative
expenses for these claims. We are also a party to a small number of
asbestos-related property damage proceedings. Our insurance carriers are paying
the major portion of the defense costs in connection with these cases and we
have incurred minimal indemnity costs to date.
----------
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Description Method of Filing
- --- ----------- ----------------
<S> <C> <C>
3-A Restated Articles of Incorporation Filed by reference to Exhibit 3-A to Dana's Form 10-
Q for the quarter ended June 30, 1998
3-B By-Laws, effective April 7, 1999 Filed with this Report
4-A Specimen Single Denomination Stock Certificate Filed by reference to Exhibit 4-B to Dana's Registration
Statement No. 333-18403 filed December 20, 1996
4-B Rights Agreement, dated as of April 25, 1996, between Filed by reference to Exhibit 1 to Dana's Form 8-A filed
Dana and ChemicalMellon Shareholder Services, L.L.C., May 1, 1996
Rights Agent
4-C Indenture for Senior Securities between Dana and Filed by reference to Exhibit 4-B of Dana's Registration
Citibank, N.A., Trustee, dated as of December 15, 1997 Statement No. 333-42239 filed December 15, 1997
4-D First Supplemental Indenture between Dana, as Issuer, Filed by reference to Exhibit 4-B-1 to Dana's Report on
and Citibank,N.A., Trustee, dated as of March 11, 1998 Form 8-K dated March 12, 1998
4-E Form of 6.5% Notes due March 15, 2008 and 7.00% Notes Included in Exhibit 4-D and filed by reference to Exhibit
due March 15, 2028 4-C-1 to Dana's Report on Form 8-K dated March 12, 1998
10-A Additional Compensation Plan Filed by reference to Exhibit A to Dana's Proxy
Statement for its Annual Meeting on April 5, 1995
10-A(1) First Amendment to Additional Compensation Plan Filed by reference to Exhibit 10-A(1) to Dana's Form 10-Q
for the quarter ended June 30, 1995
10-A(2) Second Amendment to Additional Compensation Plan Filed by reference to Exhibit 10-A(2) to Dana's Form
10-K for the year ended December 31, 1995
10-A(3) Third Amendment to Additional Compensation Plan Filed by reference to Exhibit 10-A(3) to Dana's Form 10-K
for the year ended December 31, 1996
10-A(4) Fourth Amendment to Additional Compensation Plan Filed by reference to Exhibit 10-A(4) to Dana's Form
10-Q for the quarter ended March 31, 1998
10-E 1997 Stock Option Plan Filed by reference to Exhibit A to Dana's Proxy Statement
for its Annual Meeting on April 2, 1997
10-E(1) First Amendment to 1997 Stock Option Plan Filed by reference to Exhibit 10-E(1) to Dana's Form 10-Q
for the quarter ended June 30, 1997
10-E(2) Second Amendment to 1997 Stock Option Plan Filed by reference to Exhibit 10-E(2) to Dana's Form 10-K
for year ended December 31, 1997
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
<S> <C> <C>
10-E(3) Third Amendment to 1997 Stock Option Plan Filed by reference to Exhibit 10-E(3) to Dana's Form 10-Q
for the quarter ended March 31, 1998
10-E(4) Fourth Amendment to 1997 Stock Option Plan Filed with this Report
10-F Excess Benefits Plan Filed with this Report
10-H Directors Retirement Plan Filed by reference to Exhibit 10-H to Dana's Form
10-Q for the quarter ended June 30, 1998
10-I Director Deferred Fee Plan Filed by reference to Exhibit B to Dana's Proxy
Statement for its Annual Meeting on April 2, 1997
10-I(1) First Amendment to Director Deferred Fee Plan Filed by reference to Exhibit 10-I(1) to Dana's Form 10-Q
for the quarter ended March 31, 1998
10-I(2) Second Amendment to Director Deferred Fee Plan Filed with this Report
10-J(1) Employment Agreement between Dana and S.J. Morcott Filed by reference to Exhibit 10-J(1) to Dana's Form
10-K for the year ended December 31, 1997
10-J(2) Employment Agreement between Dana and J.M. Magliochetti Filed by reference to Exhibit 10-J(2) to Dana's Form
10-K for the year ended December 31, 1997
10-J(3) Employment Agreement between Dana and M.J. Strobel Filed by reference to Exhibit 10-J(3) to Dana's Form
10-K for the year ended December 31, 1997
10-J(4) Change of Control Agreement between Dana and W. J. Filed by reference to Exhibit 10-J(4) to Dana's Form 10-K
Carroll. There are substantially similar agreements for the year ended December 31, 1997
with B.N. Cole, M.A. Franklin, W.L. Myers, R.C.
Richter, E.J. Shultz, and J.S. Simpson
10-J(5) Collateral Assignment Split-Dollar Insurance Agreement Filed by reference to Exhibit 10-J(13) to Dana's Form
for Universal Life Policies between Dana and S.J. 10-K for the year ended December 31, 1992
Morcott. There are substantially similar agreements
with J.M. Magliochetti and M.J. Strobel
10-J(6) Severance and Indemnification Agreement between Dana Filed by reference to Exhibit 13 to Schedule 14D-9
and L.W. McCurdy (Amendment No. 1) filed by Echlin Inc. on May 5, 1998
10-K Supplemental Benefits Plan Filed with this Report
10-L(1) 1989 Restricted Stock Plan Filed by reference to Exhibit A of Dana's Proxy Statement
for its Annual Meeting on April 5, 1989
10-L(2) First Amendment to 1989 Restricted Stock Plan Filed by reference to Exhibit 10-L(2) to Dana's Form 10-K
for the year ended December 31, 1993
10-L(3) Second Amendment to 1989 Restricted Stock Plan Filed by reference to Exhibit 10-L(3) to Dana's Form 10-K
for the year ended December 31, 1993
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
<S> <C> <C>
10-L(4) Third Amendment to 1989 Restricted Stock Plan Filed by reference to Exhibit 10-L(4) to Dana's Form 10-K
for the year ended December 31, 1996
10-L(5) Fourth Amendment to 1989 Restricted Stock Plan Filed by reference to Exhibit 10-L(5) to Dana's Form 10-K
for the year ended December 31, 1997
10-M 1998 Directors' Stock Option Plan Filed by reference to Exhibit A to Dana's Proxy Statement
for its Annual Meeting on April 1, 1998
10-N Supplementary Bonus Plan Filed by reference to Exhibit 10-N to Dana's Form
10-Q for the quarter ended June 30, 1995
13 The following sections of Dana's 1998 Annual Report to Filed with this Report
Shareholders, located on the pages indicated:
"Financial Focus," "Financial Statements" and
"Management and Independent Accountants' Report" on
pages 20 - 39
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 40 - 46
(excluding the charts on these pages)
"Additional Information - Shareholders' Investment" on
page 50
"Unaudited Quarterly Financial Information" on page 50
"Eleven Year History - Financial Highlights" on page 51
21 List of Subsidiaries of Dana Filed with this Report
23 Consent of PricewaterhouseCoopers LLP Filed with this Report
24 Power of Attorney Filed with this Report
27 Financial Data Schedules Filed with this Report
</TABLE>
Note: Exhibit Nos. 10-A through 10-N are exhibits required to be filed pursuant
to Item 14(c) of Form 10-K.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DANA CORPORATION
--------------------------
(Registrant)
Date: February 24, 1999 By: /S/ Martin J. Strobel
---------------------- ---------------------------------
Martin J. Strobel, Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C>
Date: February 24, 1999 /S/ Southwood J. Morcott
---------------------- ----------------------------------------------------
Southwood J. Morcott, Chairman of the Board
Date: February 24, 1999 /S/ Joseph M. Magliochetti
---------------------- ----------------------------------------------------
Joseph M. Magliochetti, Director and Chief
Executive Officer
Date: February 24, 1999 * /S/ John S. Simpson
---------------------- -------------------------------------------
John S. Simpson, Chief Financial Officer
Date: February 24, 1999 /S/ Charles W. Hinde
---------------------- -------------------------------------------
Charles W. Hinde, Chief Accounting Officer
Date: February 24, 1999 * /S/ B.F. Bailar
---------------------- ----------------------------------------------------
B.F. Bailar, Director
Date: February 24, 1999 * /S/ A.C. Baillie
---------------------- ----------------------------------------------------
A.C. Baillie, Director
Date: February 24, 1999 * /S/ E.M. Carpenter
---------------------- ----------------------------------------------------
E.M. Carpenter, Director
Date: February 24, 1999 * /S/ E. Clark
---------------------- -------------------------------------------
E. Clark, Director
Date: February 24, 1999 * /S/ G.H. Hiner
---------------------- ----------------------------------------------------
G.H. Hiner, Director
Date: February 24, 1999 * /S/ M.R. Marks
---------------------- ----------------------------------------------------
M. R. Marks, Director
Date: February 24, 1999 * /S/ R.B. Priory
---------------------- ----------------------------------------------------
R. B. Priory, Director
</TABLE>
22
<PAGE> 23
SIGNATURES (Continued)
Date: February 24, 1999 * /S/ J.D. Stevenson
---------------------- -----------------------------------------
J. D. Stevenson, Director
Date: February 24, 1999 * /S/ T.B. Sumner Jr.
---------------------- -----------------------------------------
T.B. Sumner, Jr., Director
*By: /S/ Martin J. Strobel
----------------------------------------
Martin J. Strobel, Attorney-in-Fact
23
<PAGE> 1
Exhibit 3-B
-----------
Adopted on February 8, 1999
Effective April 7, 1999
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") effective April 7, 1999.
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.
1
<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 declare that any improperly
brought nomination or proposal be disregarded.
2
<PAGE> 3
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 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.
3
<PAGE> 4
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:
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
4
<PAGE> 5
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 sec. 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
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.
5
<PAGE> 6
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 Chief Financial Officer, the Treasurer, the Secretary, and such 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 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
6
<PAGE> 7
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 Officer 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. 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.
i. 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.
j. 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.
7
<PAGE> 8
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 Chief
Financial Officer, any Executive Vice President, any Vice 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 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 Chief Financial Officer, any Executive Vice
President, any Vice 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.
8
<PAGE> 9
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 April 25,
1996, between Dana and Chemical Mellon Shareholder Services, L.L.C., or by any
successor or replacement rights plan or agreement, are hereby authorized.
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.
9
<PAGE> 1
Exhibit 10-E(4)
Fourth Amendment to Dana Corporation 1997 Stock Option Plan
The following language is added to the end of Section 10(a) of the
Plan, effective October 20, 1998:
"Notwithstanding anything contained in this Section 10(a) or elsewhere
in the Plan to the contrary, the Committee can choose, in its absolute
discretion, to permit an Optionee whose employment is involuntarily
terminated (other than for cause) to exercise any then-outstanding
option to purchase shares of Stock or to exercise any then-outstanding
stock appreciation right for up to two years following the Optionee's
termination of employment (but not beyond the ten-year term of the
option). Only those Optionees whose names appear on a listing
maintained by the Secretary to the Committee shall be entitled to have
the exercise period on their options so extended."
<PAGE> 1
Exhibit 10-F
12/14/98
DANA CORPORATION EXCESS BENEFITS PLAN
-------------------------------------
ARTICLE I
---------
DEFINITIONS
-----------
1.1. "Benefit Payment Period" means the one of the following that
applies to the particular Employee or Recipient:
(a) For an Employee or Recipient who is receiving payments for the
remainder of a term certain period, Benefit Payment Period means the
remainder of such term certain period.
(b) For an Employee or Recipient who is receiving payments for his
or her remaining lifetime, the Benefit Payment Period is the Life
Expectancy of the Employee or Recipient.
(c) For an Employee or Recipient who is receiving payments for his
or her remaining lifetime plus payments for the lifetime of a
Contingent Annuitant, the Benefit Payment Period is the Life Expectancy
of the Employee or Recipient plus an additional period to reflect the
Life Expectancy of the Contingent Annuitant after the death of the
Employee or Recipient.
1.2. "Board" means the Board of Directors of the Company.
1.3. "Change in Control" means the occurrence of the event set forth in
any one of the following paragraphs:
(a) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities
acquired directly from the Company or its Affiliates)
representing 20% or more of the combined voting power of the
Company's then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction
described in clause (1) of paragraph (c) below; or
(b) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on December 8, 1997, constitute the Board and any new
director whose
1
<PAGE> 2
appointment or election by the Board or nomination for election
by the Company's stockholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors on December 8, 1997 or whose
appointment, election or nomination for election was previously
so approved or recommended. For purposes of the preceding
sentence, any director whose initial assumption of office is in
connection with an actual or threatened election contest relating
to the election of directors of the Company, shall not be
counted; or
(c) there is consummated a merger of the Company or any direct or
indirect Subsidiary of the Company with any other corporation, or
a statutory share exchange of the Company's voting securities,
other than (1) a merger or statutory share exchange which would
result in the voting securities of the Company outstanding
immediately prior to such merger continuing to represent (either
by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at
least 50% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or
(2) a merger or statutory share exchange effected to implement a
recapitalization of the Company (or similar transaction) in which
no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities
acquired directly from the Company or its Affiliates)
representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 50% of the combined
voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale.
For purposes of this "Change in Control" definition, the following
terms shall have the following meanings:
"Affiliate" shall mean a corporation or other entity which is not a
Subsidiary and which directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common
control with, the Company. For the purpose of this definition, the
terms "control", "controls" and
2
<PAGE> 3
"controlled" mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a
corporation or other entity, whether through the ownership of voting
securities, by contract, or otherwise.
"Beneficial Owner" or "Beneficially Owned" shall have the meaning set
forth in Rule 13d-3 under the Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14 (d)
thereof, except that such term shall not include (i) the Company or
any of its Subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company.
"Subsidiary" shall mean a corporation or other entity, of which 50% or
more of the voting securities or other equity interests is owned
directly, or indirectly through one or more intermediaries, by the
Company.
1.4. "Code" means the Internal Revenue Code of 1986, as amended, or as
it may be amended from time to time.
1.5. "Company" means Dana Corporation, a corporation organized under
the laws of the Commonwealth of Virginia.
1.6. "Contingent Annuitant" means the person designated to receive
retirement benefits under this Plan following the death of the Employee or a
Recipient.
1.7. "Deferred Awards" means deferred awards, earned under the Dana
Corporation Additional Compensation Plan on account of long- or short-term award
periods
(a) ending on or after January 1, 1988, except as provided in
paragraph (b), below, and
(b) ending either before January 1, 1988, or on or after January
1, 1988, solely for purposes of determining the amount of the
Employee's benefit under Section 5 of Part I of Appendix E of the
Retirement Plan.
3
<PAGE> 4
1.8. "Effective Date" means September 1, 1988.
1.9. "Employee" means an individual who is a participant (including a
retired participant) in a funded, defined benefit pension plan maintained by the
Company, or any successor plan that may be adopted or substituted for such plan
if, and only if,
(a) the individual's benefits under such defined benefit plan are
limited by reason of the provisions of such plan that are designed to
comply with the limitations imposed by Section 401(a)(17) or Section
415 of the Code; and/or
(b) the individual is actively employed by the Company on or after
September 1, 1988, and the individual's benefits under such defined
benefit plan are limited by reason of the fact that Deferred Awards are
not recognized as earnings for purposes of determining the individual's
benefits under such defined benefit plan.
1.10. "Life Expectancy" means the expected remaining lifetime based on
the Mortality Table and the age at the nearest birthday of the Employee or
Recipient at the date the Lump Sum Payment is made. If a joint and contingent
survivor annuity has been elected, then Life Expectancy shall reflect the joint
Life Expectancies of the Employee or Recipient and Contingent Annuitant.
1.11. "Lump Sum Payment" shall be determined as set forth in paragraph
(c) of Section 4.7 of the Plan.
1.12. "Mortality Table" shall mean the Unisex Pension 1984 Mortality
Table set forward one year in age (or such other pensioner annuity mortality
table as the Company with the written consent of the Employee or Recipient shall
determine) and the associated Uniform Seniority Table for the determination of
joint life expectancies.
1.13. "Net Specified Rate" shall mean the interest rate which will
produce income on a tax free basis that equals the income produced by the
Specified Rate net of the combined highest rates of Federal, state and local
income taxes that are in effect in the jurisdiction of the Employee or Recipient
on the date of payment of the Lump Sum Payment.
1.14. "Pension Plan" means the funded, defined benefit pension plan in
which an Employee was participating at the time of his termination of employment
(or retirement) from the Company.
1.15. "Plan" means the "Dana Corporation Excess Benefits Plan", as set
forth herein.
1.16. "Plan Administrator" means the Plan Administrator appointed under
the Pension Plan.
4
<PAGE> 5
1.17. "Retirement Plan" means the Dana Corporation Retirement Plan, as
amended from time to time.
1.18. "Specified Rate" shall mean an interest rate equal to 85% of a
composite insurance company annuity rate provided by an actuary designated by
the Plan Administrator (and provided by such actuary as of the last month of the
calendar year next preceding the calendar year in which the distribution is
made), subject to the condition that the interest rate in effect for any such
year may not differ from the rate in effect for the prior year by more than
one-half of one percent, and also subject to the condition that any such rate
shall be rounded to the nearest one-tenth of one percent (and if such rate is
equidistant between the next highest and next lowest one-tenth of one percent,
rounded to the next lowest one-tenth of one percent).
ARTICLE II
----------
PURPOSE OF THE PLAN
-------------------
2.1. Purpose. This Plan as adopted effective September 1, 1988, is
hereby amended effective January 1, 1998 and is intended to continue the excess
benefits plan of the Company that had previously been set forth in a Resolution
of the Board dated June 9, 1975.
ARTICLE III
-----------
ELIGIBILITY
-----------
3.1. Eligibility. All Employees and beneficiaries of Employees eligible
to receive retirement benefits from a funded, defined benefit pension plan
sponsored by the Company shall be eligible to receive benefits under this Plan
in accordance with Article IV, regardless of when the Employee may have
terminated employment or retired (except as otherwise specified by Article IV).
ARTICLE IV
----------
BENEFITS
--------
4.1. Basic Benefit.
(a) An Employee who, on or after September 1, 1988, terminates
active employment or retires from active employment with the Company
shall be entitled to receive a lump sum payment equal to the excess (if
any) of:
5
<PAGE> 6
(i) the total of the lump sum benefits that the Employee would
have received from all Company-sponsored, funded, defined benefit
pension plans in which he was a participant, determined without
regard to the limitations on such benefits imposed by such plans
in order to comply with the limitations imposed by Section
401(a)(17) and Section 415 of the Code and, in the case of an
Employee who is actively employed by the Company on or after
September 1, 1988, and solely for purposes of the benefits payable
from the Retirement Plan (but not for purposes of any benefits
payable pursuant to the second paragraph of Section 14 of Part I
of Appendix E of the Retirement Plan), determined without regard
to the provisions of the Retirement Plan that exclude Deferred
Awards under the Dana Corporation Additional Compensation Plan
from the definition of earnings under the Retirement Plan, and
determined, except as provided in Section 4.1(e) hereof, on the
basis of the Mortality Table and 120 percent of the interest rate
that would be used (as of January 1 of the calendar year in which
the first benefit payment is to be made) by the Pension Benefit
Guaranty Corporation with respect to an immediate annuity for
purposes of determining the present value of a lump sum
distribution on plan termination, over
(ii) the total of the lump sum benefits that he is entitled to
receive from such Company-sponsored, funded, defined benefit
pension plans, determined on the basis of the assumption that the
Employee's benefits under such plans are paid in the form of a
lump sum benefit, payable as of the Employee's date of retirement
under the Pension Plan and determined, except as provided in
Section 4.1(e) hereof, on the basis of the Mortality Table and 120
percent of the interest rate that would be used (as of January 1
of the calendar year in which the first benefit payment is to be
made) by the Pension Benefit Guaranty Corporation with respect to
an immediate annuity for purposes of determining the present value
of a lump sum distribution on plan termination.
(b) Subject to the provisions of Section 4.2 hereof, the benefit
payable pursuant to paragraph (a) of this Section 4.1, shall be paid in
the form of a lump sum payment, payable as of the Employee's date of
retirement under the Pension Plan.
(c) If an Employee eligible for a benefit under the Plan dies
before the date as of which such benefit is scheduled to be paid
hereunder, a lump sum benefit shall be paid to the Employee's surviving
spouse (if any), as of the month (if any) in which the spouse's
benefits commence under the Pension Plan. The amount of such benefit
shall be a lump sum payment equal to the excess (if any) of:
6
<PAGE> 7
(i) the total of the lump sum benefits that the spouse would
have received from all Company-sponsored, funded, defined benefit
pension plans in which the Employee was a participant but for the
limitations on benefits imposed by such plans in order to comply
with the limitations imposed by Section 401(a)(17) and Section 415
of the Code and, in the case of an Employee who is actively
employed by the Company on or after September 1, 1988, and solely
for purposes of the benefits payable from the Retirement Plan (but
not for purposes of any benefits payable pursuant to the second
paragraph of Section 14 of Part I of Appendix E of the Retirement
Plan), determined without regard to the provisions of the
Retirement Plan that exclude Deferred Awards under the Dana
Corporation Additional Compensation Plan from the definition of
earnings under the Retirement Plan, and determined on the basis of
the Mortality Table and 120 percent of the interest rate that
would be used (as of January 1 of the calendar year in which the
first benefit payment is to be made) by the Pension Benefit
Guaranty Corporation with respect to an immediate annuity for
purposes of determining the present value of a lump sum
distribution on plan termination, over
(ii) the total of the lump sum benefits that the spouse is
entitled to receive from such Company-sponsored, funded, defined
benefit pension plans, determined on the basis of the assumption
that the spouse's benefits under such plans are paid in the form
of a lump sum benefit and determined on the basis of the Mortality
Table and 120 percent of the interest rate that would be used (as
of January 1 of the calendar year in which the first benefit
payment is to be made) by the Pension Benefit Guaranty Corporation
with respect to an immediate annuity for purposes of determining
the present value of a lump sum distribution on plan termination.
(d) No benefits shall be paid hereunder with respect to an active
Employee who is not married on the date of his death.
(e) Notwithstanding the foregoing provisions of this Section 4.1,
if an active Employee retires and receives a benefit under any of the
following plan provisions:
(i) Section 3.04D of the Dana Corporation Retirement Income
Plan, as amended by the Second Amendment to that Plan;
(ii) Section 3.6D of the Dana Corporation Spicer Axle Salaried
Pension Plan, as amended by the First Amendment to that Plan;
7
<PAGE> 8
(iii) Section 5.1c.v. of the Retirement Plan for Management
Employees of Racine Hydraulics Division-Dana Corporation, as
amended by the First Amendment to that Plan;
(iv) Section 4.6.5 of the Dana Corporation Weatherhead
Division Pension Plan for Salaried Employees, as amended by the
First Amendment to that Plan;
(v) Section 4.7.1 of the Dana Corporation Gresen Manufacturing
Division Management Pension Plan, as amended by the First
Amendment to that Plan; or
(vi) Option E of Section 6.4 of the Tyrone Salaried Pension
Plan, as amended by the First Amendment to that Plan,
then the benefits described in Section 4.1(a)(i) and (ii), in respect
of the above-described plan benefits, shall be determined on the basis
of the mortality rates, interest assumptions and other factors that
would be applicable to the form of payment selected by the Employee
under such other plan.
(f) Notwithstanding the foregoing provisions of this Section 4.1,
benefits under this Plan shall only be based on that portion of an
Employee's 1994 and subsequent years' Additional Compensation Plan
bonus awards (whether or not deferred) as do not exceed 125% of the
base salary paid to the Employee by the Company for the applicable
year.
4.2. Form of Benefit Payments.
(a) An Employee eligible for a benefit under this Plan shall be
entitled to receive his benefit in the form of an immediate lump sum
payment. However, the Employee may request that his benefit be paid
instead pursuant to an optional form of payment that is used for the
payment of the Employee's retirement benefit under the Pension Plan.
The amount of the benefit payable pursuant to any form of payment under
this paragraph (a) shall be determined by applying the mortality rates,
interest assumptions and other factors prescribed by the Retirement
Plan that would be applicable to the form of payment that the Employee
has requested under this Plan. Any post-retirement increase in the
benefits being paid to an Employee under the Pension Plan shall also be
applied on a comparable basis to any monthly supplemental benefits
being paid under this paragraph (a).
8
<PAGE> 9
(b) In addition to the distribution options available under
paragraph (a) of this Section 4.2, an Employee eligible for a benefit
under this Plan may request to receive his benefit in 120 monthly
installments, regardless of whether the Employee has elected this form
of payment for his retirement benefit under the Pension Plan. An
Employee may elect the 120-month installment benefit only if his
employment with the Company terminates on or after July 1, 1988. The
Employee's lump sum benefit determined under paragraph (a) of Section
4.1 shall be converted to monthly installments using the "applicable
interest rate" under Section 417(e) of the Code for the November
preceding the calendar year in which the payments commence. If the
Employee dies before 120 monthly payments have been made, there shall
be paid to his beneficiary, commencing on the first day of the month
following his death and continuing for the remainder of the 120-month
period, the monthly benefit that had been paid to the Employee. No
payments shall be made either to the Employee or to his beneficiary
after 120 monthly payments have been made.
(c) If the Employee requests the 120-month installment option
under paragraph (b), the Employee shall designate in writing a natural
person (or persons) to be his beneficiary. The Employee may not
designate a trust or his estate to be his beneficiary. If an Employee
designates his spouse as his beneficiary and they thereafter divorce,
such designation shall be automatically revoked. The Employee may
change his beneficiary designation in writing at any time before his
installment payments commence, but he may not change his beneficiary
designation after his payments commence. If the Employee dies after his
installment payments have commenced and he is not survived by a
designated beneficiary, the remaining monthly payments shall be paid to
the Employee's estate. If the Employee is survived by a designated
beneficiary, and the beneficiary dies before the complete disbursement
of the payments due, the remaining monthly payments shall be paid to
the beneficiary's estate.
(d) The Employee's written request to receive an optional form of
payment under paragraph (a) or paragraph (b) instead of an immediate
lump sum must be filed with the Vice President-Administration of the
Company before the Employee's date of retirement under the Pension
Plan. The request shall be granted or denied in the sole discretion of
the Vice President-Administration of the Company. If the Employee is
the Vice President-Administration of the Company, the duties of the
Vice President-Administration of the Company under this Section 4.2
shall be discharged by the President of the Company.
4.3. Time and Duration of Benefit Payments. Benefits due under the Plan
shall be paid in a lump sum, except as otherwise determined by the Vice
President-Administration or the President of the Company pursuant to Section 4.2
hereof.
4.4. Benefits Unfunded. The benefits payable under the Plan shall be
paid by the Company each year out of its general assets and shall not be funded
in any manner. The obligations that the Company incurs under this Plan shall be
subject to the claims of the Company's other creditors having priority as to the
Company's assets.
9
<PAGE> 10
4.5. Nonalienability. The Plan Administrator may recognize the right of
an alternate payee named in a domestic relations order to receive all or a
portion of an Employee's benefit under this Plan, provided that (a) the domestic
relations order would be a "qualified domestic relations order" within the
meaning of Section 414(p) of the Code if Section 414(p) were applicable to the
Plan; (b) the domestic relations order does not purport to give the alternate
payee any right to assets of the Company or its affiliates; and (c) the domestic
relations order does not purport to give the alternate payee any right to
receive payments under the Plan before the Employee is eligible to receive such
payments. If the domestic relations order purports to give the alternate payee a
share of a benefit to which the Employee currently has a contingent or
non-vested right, the alternate payee shall not be entitled to receive any
payment from the Plan with respect to the benefit unless the Employee's right to
the benefit becomes nonforfeitable. Except as set forth in the preceding two
sentences with respect to domestic relations orders, and except as required
under applicable federal, state, or local laws concerning the withholding of
tax, rights to benefits payable under the Plan are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, attachment or
other legal process, or encumbrance of any kind. Any attempt to alienate, sell,
transfer, assign, pledge, or otherwise encumber any such supplemental benefit,
whether currently or thereafter payable, shall be void.
4.6. Successors to the Corporation. This Plan shall be binding upon and
inure to the benefit of any successor or assign of the Company, including,
without limitation, any corporation or corporations acquiring directly or
indirectly all or substantially all of the assets of the Company whether by
merger, consolidation, sale or otherwise (and such successor or assign shall
thereafter be deemed embraced within the term "Company" for the purposes of this
Plan.
4.7. Change in Control. Anything hereinabove in this Article IV or
elsewhere in this Plan to the contrary notwithstanding:
(a) Lump sum payment. Upon the occurrence of a Change in Control,
each Employee and each Employee's spouse or beneficiary following his
death who are receiving benefits under the Plan ("Recipient") shall
receive, on account of future payments of any and all benefits due
under the Plan, a Lump Sum Payment, so that each such Employee or
Recipient will receive substantially the same amount of after-tax
income as before the Change in Control, determined as set forth in
paragraph (c) of this Section 4.7.
(b) Certain matters following a lump sum payment. An Employee who
has received a Lump Sum Payment pursuant to paragraph (a) of this
Section 4.7 shall, thereafter (i) while in the employ of the Company,
continue to accrue benefits under the Plan, and (ii) be eligible to be
paid further benefits under the Plan, after appropriate reduction in
respect of the Lump Sum Payment previously received.
10
<PAGE> 11
For purposes of calculating such reduction, the Lump Sum Payment shall
be accumulated with interest at the Specified Rate in effect from time
to time for the period of time from initial payment date to the next
date on which a computation is to be made (i.e., upon Change in
Control, retirement, or other termination of employment). It shall
then be converted to a straight-life annuity using the current annuity
certain factor. The current annuity certain factor will be determined
on the Net Specified Rate basis if this benefit payment is being made
due to a subsequent Change in Control; otherwise, the Specified Rate
shall be used.
(c) Determination of lump sum payment. The Lump Sum Payment
referred to in paragraph (a) of this Section 4.7 shall be determined by
multiplying the annuity certain factor (for monthly payments at the
beginning of each month) based on the Benefit Payment Period and the
Net Specified Rate by the monthly benefit (adjusted for assumed future
benefit adjustments due to Social Security and Code Section 415 changes
in the Pension Plan) to be paid to the Employee or Recipient under the
Plan.
4.8. Taxation. Notwithstanding anything in the Plan to the contrary, if
the Internal Revenue Service determines that the Employee is subject to Federal
income taxation on an amount in respect of any benefit provided by the Plan
before the distribution of such amount to him, the Company shall forthwith pay
to the Employee all (or the balance) of such amount as is includible in the
Employee's Federal gross income and shall correspondingly reduce future
payments, if any, of the benefit. ). Except as provided in Section 4.7 with
respect to payments after a Change in Control, the Company shall not reimburse
the Employee or any Recipient for any tax, interest, or penalty that the
Employee or Recipient owes with respect to any payment from the Plan.
ARTICLE V
---------
AMENDMENT, TERMINATION AND INTERPRETATION
-----------------------------------------
5.1. Amendment and Termination. The Company reserves the right, by
action of the Board, to amend, modify or terminate, either retroactively or
prospectively, any or all of the provisions of this Plan without the consent of
any Employee or beneficiary; provided, however, that no such action on its part
shall adversely affect the rights of an Employee and his beneficiaries without
the consent of such Employee (or his beneficiaries, if the Employee is deceased)
with respect to any benefits accrued prior to the date of such amendment,
modification, or termination of the Plan if the Employee has at that time a
non-forfeitable right to benefits under a funded, defined benefit pension plan
sponsored by the Company.
5.2. Interpretation. The Plan Administrator shall have the
discretionary authority to interpret the Plan and to decide any and all matters
arising hereunder; including but not limited to the right to remedy possible
ambiguities, inconsistencies or
11
<PAGE> 12
omissions by general rule or particular decision. In addition, any
interpretations and decisions made by the Plan Administrator shall be final,
conclusive and binding upon the persons who have or who claim to have any
interest in or under the Plan.
IN WITNESS WHEREOF, Dana Corporation has executed this restated Plan,
effective as of January 1, 1998.
/s/ Martin J. Strobel
---------------------
DANA CORPORATION
/s/ Mark A. Smith, Jr.
- ----------------------
Attest
12
<PAGE> 1
Exhibit 10-I(2)
12/13/98
SECOND AMENDMENT
TO
THE DANA CORPORATION
DIRECTOR DEFERRED FEE PLAN
--------------------------
Pursuant to resolutions of the Board of Directors adopted on December
14, 1998, the Dana Corporation Director Deferred Fee Plan (the "Plan") is hereby
amended, effective as of December 14, 1998, as set forth below.
1. A new Section 11 is hereby added to the Plan as follows:
"11. Canadian Resident Directors
---------------------------
Notwithstanding anything in the Plan to the contrary,
the Plan, as it applies to a Director who is a
resident of Canada for the purposes of the Income Tax
Act (Canada) at any time that Units are credited to a
Stock Account of that Director, shall be as modified
in Schedule 1 hereto."
IN WITNESS WHEREOF, the undersigned has hereby executed this Second
Amendment on behalf of the Corporation this 21st day of January, 1999.
DANA CORPORATION
By: /s/ Martin J. Strobel
---------------------
ATTEST:
/s/ Mark A. Smith, Jr.
- ----------------------
<PAGE> 2
Schedule 1
----------
DANA CORPORATION
DIRECTOR DEFERRED FEE PLAN
For Directors Resident in Canada
1. Introduction
------------
This Schedule 1 modifies the Dana Corporation Director Deferred Fee
Plan for Directors resident in Canada to provide such Directors with the
opportunity to defer to a future date the receipt of their compensation as
Directors. This Schedule 1 constitutes the entire Plan for such Directors.
2. Definitions
-----------
The following words and phrases shall have the meanings set forth
below:
A. "Account" shall mean a Director's Stock Account.
B. "Committee" shall mean the Compensation Committee of the Board of
Directors of the Corporation.
C. "Corporation" shall mean Dana Corporation.
D. "Director" shall mean a member of the Board of Directors of the
Corporation, who is not a current employee of the Corporation or
any of its Subsidiaries and who is a Canadian resident.
E. "Fees" shall mean any retainer fees or meeting fees that a
Director receives or is entitled to receive in payment for his
service as a Director of the Corporation. "Fees" shall also
include fees that accrue on account of service on any committee
of the Board of Directors, and fees that are payable for services
over and above those normally expected from Directors and
performed at the request of the Chairman of the Board of
Directors.
F. "Grant Date" shall mean the date each year of the annual
organizational meeting of the Board that is held following the
Corporation's annual meeting of stockholders.
G. "Plan" shall mean the Dana Corporation Director Deferred Fee
Plan, as amended by and set out in this Schedule 1 for Directors
resident in Canada, and as thereafter amended from time to time.
H. "Retirement Plan" shall mean the Dana Corporation Directors
Retirement Plan.
I. "Year" shall mean a calendar year.
<PAGE> 3
3. Director's Account
------------------
Each Director may elect to have any portion (or all) of his Fees as a
Director deferred by filing a written election with the Corporation prior to
January 1 of each year for which deferrals are to be made. Any such deferred
Fees are to be credited to a Stock Account. In addition, on each Grant Date
commencing April 21, 1997, each Director shall have his Stock Account credited
with 300 Units. Each person who was a Director on October 1, 1996 shall also
have his Stock Account credited with a one-time allocation of Units equivalent
to the present value of his accrued benefit earned through December 31, 1996
under the Retirement Plan.
For each Director who determines that all or a portion of his deferred
Fees should be converted into Units equal to shares of the Corporation's common
stock, as well as for each Director for whom stock Units are otherwise credited
to a Stock Account, the Corporation shall establish a Stock Account for that
Director and shall credit that Account with any Fees (or Units) deferred at the
time payment would have otherwise have been made to the Director. Any accrued
dollar balance in such Account shall be converted four times each Year,
effective March 31, June 30, September 30, and December 31, into a number of
Units equal to the maximum number of whole shares of the Corporation's common
stock that could have been purchased with the dollar amount credited to the
Account, assuming a purchase price per share equal to the average of the last
reported daily sales prices for shares of such common stock on the New York
Stock Exchange - Composite Transactions on each trading day during the last full
month preceding the date of conversion, and the dollar amount then credited to
such Account shall be appropriately reduced. Any dollar amount not credited to
the Stock Account of a Director as whole Units shall be accrued as a dollar
balance in the Account.
When cash dividends are declared and paid on the Corporation's common
stock, the dollar balance in the Account of each Director shall be credited as
of the dividend payment date with an amount equal to the cash that would have
been paid if each Unit in such Account, as of the dividend record date, had been
one share of the Corporation's outstanding common stock.
If the Corporation increases or decreases the number of shares of its
outstanding common stock as a result of a stock dividend, stock split, or stock
combination, a corresponding proportionate adjustment shall be made in the
number of Units then credited to each Director's Account, as well as in the
number of Units being credited annually to each Director's Account, pursuant to
this Section 3.
No person shall, by virtue of his participation in the Plan, have or
acquire any interest whatsoever in property or assets of the Corporation or in
any share of the Corporation's common stock, or have or acquire any rights
whatsoever as a stockholder of the Corporation.
<PAGE> 4
Following a Director's death, retirement from the Board of Directors,
or termination of service as a Director, amounts held in his Account will be
distributed in accordance with Section 4.
4. Distributions to Directors
--------------------------
A distribution in respect of a Director's Account shall be made on a
date determined by the Committee which is after the time of the Director's
death, retirement from the Board of Directors, or termination of service as a
Director and no later than the end of the first calendar year commencing after
that time. In no event shall a distribution be paid to a Director before the
time of the Director's death, retirement from the Board of Directors, or
termination of service as a Director. Any accrued dollar balance in a Director's
Account shall be converted into Units, in the manner described in Section 3,
prior to the distribution. A distribution shall be subject to withholding of
taxes and other amounts required by any applicable legislation to be withheld.
In the event of the death of a Director either before or after
retirement or termination of services, the amount then credited to his Accounts
shall be paid in cash in such manner as the Committee may determine, regardless
of the manner in which such payments would have been made to the Director had he
lived.
Each distribution in respect of a Director's Account shall be made (in
whole or in part) at the election of the participant, in shares of the
Corporation's common stock, in cash, or in a combination of shares of common
stock and cash. Any stock distribution in respect of Units from a Director's
Account shall be made on the basis of one share of the Corporation's common
stock for each Unit being distributed.
If any distribution in respect of a Director's Account is to be made in
cash, the value of each Unit being distributed from his Account shall be
assumed, for purposes of such distribution, to be equal to the average of the
last reported daily sales prices for shares of the Corporation's common stock on
the New York Stock Exchange-Composite Transactions on each trading day during
the calendar month preceding the month of making such payment.
If any distribution is to be made in shares of the Corporation's common
stock, the Corporation shall take all necessary action to comply with or secure
an exemption from the registration requirements of the Securities Act of 1933,
the requirements of any applicable Canadian securities legislation, and the
listing requirements of the New York Stock Exchange and any other securities
exchange on which the Corporation's common stock may then be listed; provided,
that the Corporation may (i) delay the making of any such distribution in shares
of its common stock for such period as it may deem necessary or advisable to
effect compliance with the requirements above referred to, and (ii) require, as
a condition precedent to the delivery of the certificate(s) representing such
shares, that any recipient thereof execute and deliver such representations,
<PAGE> 5
agreements and/or covenants in favor of the Corporation with respect to the
holding and/or disposition of such shares, and such consent to the mechanics for
enforcement of such representations, agreements and/or covenants, as the
Committee may deem necessary or advisable in order to comply with or obtain
exemption from any of the requirements referred to above, provided that if the
delay referred to in (i) above or if compliance with the condition precedent
referred to in (ii) above would otherwise result in such distribution in shares
being made later than the end of the first calendar year commencing after the
time of the Director's death, retirement from the Board of Directors, or
termination of service as a Director, the Director shall be deemed to have
elected that the distribution be made in cash and the distribution in cash shall
be made before the end of such calendar year.
All distributions under the Plan shall be made to the Director, except
that, in the event of the death of a Director, distributions shall be made to
such person or persons related to or dependent on the Director as such Director
shall have designated by written notice to the Committee prior to his death. In
the event the designated beneficiary fails to survive the Director, or if the
Director fails to designate such a beneficiary in writing, the Corporation shall
distribute the balance in the Director's Account to the legal representative of
such deceased Director.
In the event of any merger, consolidation, sale of substantially all of
the assets of the Corporation or other similar transaction, the sole adjustments
to the Account of each Director shall be those prescribed by the underlying
agreement pursuant to which such transaction is effected; provided, however,
that no such adjustments shall, at the time the adjustments are made, reduce the
value of the Account of any Director below its value immediately prior to such
adjustments.
5. Non-Assignment of Interest
--------------------------
No interest in any undistributed Unit amount shall be transferable or
assignable by any Director, and any purported transfer or assignment of any such
interest, and any purported lien on or pledge of any such interest, made or
created by any Director, shall be void and of no force or effect as against the
Corporation. Any payment due under this Plan shall not, in any manner, be
subject to the debts or liabilities of any Director or beneficiary. Units will
represent shares of the Corporation's common stock for accounting purposes only,
and shall not be convertible to, or considered to be, actual shares of stock for
any reason.
6. Amendment, Termination, and Interpretation of Plan
--------------------------------------------------
The Board of Directors of the Corporation shall have the right at any
time, and from time to time, to modify, amend, suspend, or terminate the Plan;
provided, however, that no such action shall be taken that would affect Fees
deferred (or Units credited) prior to the action taken without the consent of
the affected Director (or his personal representative).
<PAGE> 6
The Committee shall have the power to interpret the Plan and to decide
any and all matters arising hereunder, including, but not limited to, the right
to remedy possible ambiguities, inconsistencies, or omissions by general rule or
particular decision; provided that all such interpretations and decisions shall
be applied in a uniform and nondiscriminatory manner to all participants
similarly situated. In addition, any interpretations and decisions made by the
Committee shall be final, conclusive, and binding upon all persons who have (or
claim to have) any interest in or under the Plan.
7. Information
-----------
Each person entitled to receive a payment under this Plan, whether a
Director, a duly-designated beneficiary of a Director, a guardian, or otherwise,
shall provide the Committee with such information as it may, from time to time,
deem necessary or in its best interests in administering the Plan. Any such
person shall also furnish the Committee with such documents, evidence, data, or
other information as the Committee may, from time to time, deem necessary or
advisable.
8. Governing Law
-------------
The Plan shall be construed, administered, and governed in all respects
under and by the applicable internal laws of the State of Ohio, without giving
effect to the principles of conflicts of laws thereof.
9. Shares Reserved for Plan
------------------------
This Schedule 1 does not modify the total number of shares of the
Corporation's common stock, par value $1 per share, reserved for issue under the
Plan as amended and restated on February 10, 1997, namely 55,000 shares. Such
number of shares is subject to adjustment in the event of a stock dividend,
stock split, stock combination, or similar event.
10. Effective Date
--------------
The Plan, as most recently amended and restated, was adopted by the
Board effective on December 14, 1998. This Schedule 1 was adopted by the Board
on December 14, 1998, and will apply to any Units credited before or after such
effective date to the Stock Account of a Director resident in Canada.
<PAGE> 1
Exhibit 10-K
12/14/98
DANA CORPORATION SUPPLEMENTAL BENEFITS PLAN
-------------------------------------------
ARTICLE I
---------
DEFINITIONS
-----------
1.1. "Benefit Payment Period" means the one of the following that
applies to the particular Employee or Recipient:
(a) For an Employee or Recipient who is receiving payments for
the remainder of a term certain period, Benefit Payment
Period means the remainder of such term certain period.
(b) For an Employee or Recipient who is receiving payments for
his or her remaining lifetime, the Benefit Payment Period is
the Life Expectancy of the Employee or Recipient.
(c) For an Employee or Recipient who is receiving payments for
his or her remaining lifetime plus payments for the lifetime
of a Contingent Annuitant, the Benefit Payment Period is the
Life Expectancy of the Employee or Recipient plus an
additional period to reflect the Life Expectancy of the
Contingent Annuitant after the death of the Employee or
Recipient.
1.2. "Board" means the Board of Directors of the Company.
1.3. "Change in Control" means the occurrence of the event set forth in
any one of the following paragraphs:
(a) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in
the securities Beneficially Owned by such Person any
securities acquired directly from the Company or its
Affiliates) representing 20% or more of the combined voting
power of the Company's then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (1) of
paragraph (c) below; or
(b) the following individuals cease for any reason to constitute
a majority of the number of directors then serving:
individuals who, on December 8, 1997, constitute the Board
and any new director whose appointment or election by the
Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at
least two-thirds (2/3) of the directors
<PAGE> 2
then still in office who either were directors on December
8, 1997 or whose appointment, election or nomination for
election was previously so approved or recommended. For
purposes of the preceding sentence, any director whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of
directors of the Company, shall not be counted; or
(c) there is consummated a merger of the Company or any direct
or indirect Subsidiary of the Company with any other
corporation, or a statutory share exchange of the Company's
voting securities, other than (1) a merger or statutory
share exchange which would result in the voting securities
of the Company outstanding immediately prior to such merger
continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving
entity or any parent thereof) at least 50% of the combined
voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (2) a
merger or statutory share exchange effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including
in the securities Beneficially Owned by such Person any
securities acquired directly from the Company or its
Affiliates) representing 20% or more of the combined voting
power of the Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at
least 50% of the combined voting power of the voting
securities of which are owned by stockholders of the Company
in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
For purposes of this "Change in Control" definition, the
following terms shall have the following meanings:
"Affiliate" shall mean a corporation or other entity which is not
a Subsidiary and which directly, or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under
common control with, the Company. For the purpose of this
definition, the terms "control", "controls" and "controlled" mean
the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a
corporation or other entity, whether through the ownership of
voting securities, by contract, or otherwise.
2
<PAGE> 3
"Beneficial Owner" or "Beneficially Owned" shall have the meaning
set forth in Rule 13d-3 under the Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (a) the Company
or any of its Subsidiaries, (b) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company
or any of its Affiliates, (c) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (d) a
corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their
ownership of stock of the Company.
"Subsidiary" shall mean a corporation or other entity, of which
50% or more of the voting securities or other equity interests is
owned directly, or indirectly through one or more intermediaries,
by the Company.
1.4. "Code" means the Internal Revenue Code of 1986, as amended, or as
it may be amended from time to time.
1.5. "Company" means Dana Corporation, a corporation organized under
the laws of the Commonwealth of Virginia.
1.6. "Contingent Annuitant" means the person designated to receive
retirement benefits under this Plan following the death of the Employee or a
Recipient.
1.7. "Credited Service" means "Credited Service" as that term is
defined in the Retirement Income Plan.
1.8. "Effective Date" means September 1, 1988.
1.9. "Employee" means an individual who is a participant (including a
retired participant) in a funded, defined benefit pension plan maintained by the
Company, or any successor plan that may be adopted or substituted for such plan
if, and only if, (a) the individual is actually employed by the Company on
September 1, 1988, and (b) the individual is a U.S.-based member of the
long-term awards group as of September 1, 1988, under the Dana Corporation
Additional Compensation Plan.
1.10. "Excess Plan" means the Dana Corporation Excess Benefits Plan, as
amended from time to time.
3
<PAGE> 4
1.11. "Highest Average Monthly Earnings" means the sum of:
(a) the Employee's basic salary (before any reduction as a
result of an election to have his pay reduced in accordance
with a "cafeteria plan" or a "cash or deferred arrangement"
pursuant to Section 125 or Section 401(k) of the Code), and
(b) bonuses and incentive payments paid (or that would have been
paid, but for a deferral arrangement) to the Employee
(provided, however, that with respect to 1994 and subsequent
years' bonus awards under the Company's Additional
Compensation Plan, only that portion of the Employee's bonus
award as does not exceed 125% of his base salary will be
considered)
during any 3 calendar years out of the last 10 calendar years of active
employment with the Company prior to retirement in which such sum was the
highest, divided by 36.
1.12. "Life Expectancy" means the expected remaining lifetime based on
the Mortality Table and the age at the nearest birthday of the Employee or
Recipient at the date the Lump Sum Payment is made. If a joint and contingent
survivor annuity has been elected, then Life Expectancy shall reflect the joint
Life Expectancies of the Employee or Recipient and Contingent Annuitant.
1.13. "Lump Sum Payment" shall be determined as set forth in paragraph
(c) of Section 4.7 of the Plan.
1.14. "Mortality Table" shall mean the Unisex Pension 1984 Mortality
Table set forward one year in age (or such other pensioner annuity mortality
table as the Company with the written consent of the Employee or Recipient shall
determine) and the associated Uniform Seniority Table for the determination of
joint life expectancies.
1.15. "Net Specified Rate" shall mean the interest rate which will
produce income on a tax free basis that equals the income produced by the
Specified Rate net of the combined highest rates of Federal, state and local
income taxes that are in effect in the jurisdiction of the Employee or Recipient
on the date of payment of the Lump Sum Payment.
1.16. "Pension Plan" means the funded, defined benefit pension plan in
which an Employee was participating at the time of his termination of employment
(or retirement) from the Company.
1.17. "Plan" means the "Dana Corporation Supplemental Benefits Plan",
as set forth herein.
4
<PAGE> 5
1.18. "Plan Administrator" means the Plan Administrator appointed under
the Pension Plan.
1.19. "Primary Social Security Benefit" means "Primary Social Security
Benefit" as that term is defined by the Retirement Income Plan.
1.20. "Retirement Income Plan" means the Dana Corporation Retirement
Income Plan, as in effect on June 30, 1998.
1.21. "Specified Rate" means an interest rate equal to 85% of a
composite insurance company annuity rate provided by an actuary designated by
the Plan Administrator (and provided by such actuary as of the last month of the
calendar year next preceding the calendar year in which the distribution is
made), subject to the condition that the interest rate in effect for any such
year may not differ from the rate in effect for the prior year by more than
one-half of one percent, and also subject to the condition that any such rate
shall be rounded to the nearest one-tenth of one percent (and if such rate is
equidistant between the next highest and next lowest one-tenth of one percent,
rounded to the next lowest one-tenth of one percent).
1.22. "Temporary Retirement Benefit" means the benefit described in
Section 4.1(b)(i)(B) hereof.
1.23. "Vesting Service" means "Vesting Service" as that term is defined
by the Retirement Income Plan.
ARTICLE II
----------
PURPOSE OF THE PLAN
-------------------
2.1. Purpose. This Plan is adopted effective September 1, 1988, and
amended effective December 14, 1998, and is intended to provide supplemental
benefits to Employees and their beneficiaries in addition to any benefits to
which such Employees and beneficiaries may be entitled under other
Company-sponsored, funded, defined benefit pension plans and the Excess Plan.
ARTICLE III
-----------
ELIGIBILITY
-----------
3.1. Eligibility. All Employees and beneficiaries of Employees eligible
to receive retirement benefits from a Pension Plan shall be eligible to receive
benefits under this Plan in accordance with Article IV, regardless of when the
Employee may have terminated employment or retired (except as otherwise
specified by Article IV).
5
<PAGE> 6
ARTICLE IV
----------
BENEFITS
--------
4.1. Basic Benefits.
(a) An Employee who, on or after September 1, 1988, retires from
active employment with the Company on or after his 65th
birthday, shall be entitled to receive a lump sum benefit
that is the actuarial equivalent (determined in accordance
with Section 4.2 hereof) of a monthly supplemental benefit
equal to the excess (if any) of:
(i) (A) 1.6 percent of the Employee's Highest Average
Monthly Earnings multiplied by the number of years
and fractional parts thereof of his Credited Service
at the time of retirement, less
(B) 2 percent of the Employee's Primary Social Security
Benefit multiplied by the number of years and
fractional parts thereof of his Credited Service but
not more than 50 percent of the Employee's Primary
Social Security Benefit, over
(ii) the sum of the monthly benefits he is entitled to
receive from all Company-sponsored, funded, defined
benefit pension plans, and the Excess Plan, determined
in each case on the basis of the assumption that the
Employee's benefits under such plans are paid in the
form of a single life annuity for the life of the
Employee, commencing as of the Employee's date of
retirement under the Pension Plan.
(b) An Employee who, on or after September 1, 1988, retires from
employment with the Company on or after his 50th birthday,
after completing 10 years of Vesting Service, after the sum
of his age and years of Vesting Service, both calculated to
the nearest month, equal 70 or more, and before his 65th
birthday, shall be entitled to receive a lump sum benefit
that is the actuarial equivalent (determined in accordance
with Section 4.2 hereof) of a monthly supplemental benefit
equal to the excess (if any) of
(i) (A) the retirement benefit described in Section
4.1(a)(i) hereof, plus
(B) a Temporary Retirement Benefit equal to the
Employee's Primary Social Security Benefit, reduced,
if applicable, by the actual amount of any unreduced
Social Security benefit paid to the Employee,
payable
6
<PAGE> 7
through the month in which the Employee attains age
62, provided that if the Employee has less than 25
years of Credited Service, the Temporary Retirement
Benefit shall be prorated based on the proportion of
25 years of Credited Service that has been credited
to the Employee at the time of his retirement; and
provided further that
(C) retirement benefits prescribed by paragraph
(A), above, and Temporary Retirement Benefits
prescribed by paragraph (B), above, shall not exceed
the following limitations:
I. Temporary Retirement Benefits payable to all
Employees, and retirement benefits payable to
all Employees who participated in the Retirement
Income Plan as of December 31, 1983, and who had
attained age 45 as of that date, shall not
exceed the percentage of such benefits
prescribed by the following schedule, based on
the Employee's age on the date of retirement:
Age Percentage
--- ----------
64 100%
63 100%
62 100%
61 95%
60 90%
59 85%
58 80%
57 75%
56 70%
55 65%
54 60%
53 55%
52 50%
51 45%
50 40%
7
<PAGE> 8
II. Retirement benefits payable to all Employees
who did not participate in the Retirement Income
Plan on December 31, 1983, or who had not
attained age 45 as of that date, shall not
exceed the percentage of such benefits
prescribed by the following schedule, based on
the Employee's age on the date of retirement:
Age Percentage
--- ----------
65 100%
64 95%
63 90%
62 85%
61 80%
60 75%
59 70%
58 65%
57 60%
56 55%
55 50%
54 45%
53 40%
52 35%
51 30%
50 25%
over
(ii) the sum of the monthly benefits he is entitled to
receive from all Company-sponsored, funded, defined
benefit pension plans and the Excess Plan, determined
in each case on the basis of the assumption that the
Employee's benefits under such plans are paid in the
form of a single life annuity for the life of the
Employee, commencing as of the Employee's date of
retirement under the Pension Plan.
(c) Subject to the provisions of Section 4.2 hereof, the benefit
payable pursuant to paragraph (a) or (b) of this Section
4.1, shall be paid in the form of a lump sum, payable as of
the Employee's date of retirement under the Pension Plan.
(d) If an Employee dies before the date as of which benefits are
scheduled to be paid or to commence hereunder, the
Employee's surviving spouse (if any) shall be entitled to
receive a lump sum benefit equal to 100 percent of the
benefit to which the Employee would have been entitled under
paragraph (c), above, if the Employee had retired on the
date of his death.
(e) No benefits shall be paid hereunder with respect to an
active Employee who is not married on the date of his death.
8
<PAGE> 9
4.2. Form of Benefit Payments.
(a) An Employee eligible for a benefit under this Plan shall be
entitled to receive his benefit in the form of an immediate
lump sum payment. However, the Employee may request that his
benefit be paid instead, concurrently with any benefit that
the Employee is entitled to receive under the Excess Plan,
pursuant to an optional form of payment that is used for the
payment of the Employee's retirement benefit under the
Pension Plan. The amount of the benefit payable pursuant to
any form of payment under this paragraph (a) shall be
determined by applying the mortality rates, interest
assumptions, and other factors prescribed by the Retirement
Income Plan that would be applicable to the form of payment
that the Employee has requested under this Plan; provided
that if a lump sum distribution is made hereunder, the amount
of the lump sum distribution shall be equal to the excess of
the amount determined under paragraph (i), below, over the
amount determined under paragraph (ii), below:
(i) The total lump sum amount that is actuarially
equivalent to the monthly supplemental benefit
prescribed by Section 4.1(a)(i) or Section 4.1(b)(i),
whichever is applicable, calculated using the basis
described in subparagraph (i) or (ii), below, whichever
produces the larger lump sum amount:
(A) the lump sum amount calculated on the basis of the
"applicable interest rate" (as in effect for the
November preceding the calendar year in which the
calculation is made) and the "applicable mortality
table", both as defined in Section 417(e) of the
Code; or
(B) the lump sum amount calculated on the basis of an
interest rate equal to 85% of a composite insurance
company annuity rate provided by an actuary
designated by the Plan Administrator (and provided
by such actuary as of the December next preceding
the calendar year in which the distribution is
made), subject to the condition that the interest
rate in effect for any such year may not differ from
the rate in effect for the prior year by more than
one-half of one percent, and also subject to the
condition that any such rate shall be rounded to the
nearest one-tenth of one percent (and if such rate
is equidistant between the next highest and next
lowest one-tenth of one
9
<PAGE> 10
percent, rounded to the next lowest one-tenth of one
percent), and on the basis of the applicable
mortality assumption for males under the 1971 Group
Annuity Mortality Table.
(ii) The total lump sum distribution that he is entitled
to receive under all Company-sponsored, funded, defined
benefit pension plans and the Excess Plan, determined on
the basis of the interest rate and mortality assumptions
required by the terms of those plans.
(b) In addition to the distribution options available under
paragraph (a) of this Section 4.2, an Employee eligible for a
benefit under this Plan may request to receive his benefit in
120 monthly installments, regardless of whether the Employee
has elected this form of payment for his retirement benefit
under the Excess Plan or the Pension Plan. An Employee may
elect the 120-month installment benefit only if his employment
with the Company terminates on or after July 1, 1988. The
Employee's lump sum benefit determined under Section 4.1 shall
be converted to monthly installments using the "applicable
interest rate" under Section 417(e) of the Code for the
November preceding the calendar year in which the payments
commence. If the Employee dies before 120 monthly payments
have been made, there shall be paid to his beneficiary,
commencing on the first day of the month following his death
and continuing for the remainder of the 120-month period, the
monthly benefit that had been paid to the Employee. No
payments shall be made either to the Employee or to his
beneficiary after 120 monthly payments have been made.
(c) If the Employee requests the 120-month installment option
under paragraph (b), the Employee shall designate in writing a
natural person (or persons) to be his beneficiary. The
Employee may not designate a trust or his estate to be his
beneficiary. If an Employee designates his spouse as his
beneficiary and they thereafter divorce, such designation
shall be automatically revoked. The Employee may change his
beneficiary designation in writing at anytime before his
installment payments commence, but he may not change his
beneficiary designation after his payments commence. If the
Employee dies after his installment payments have commenced
and he is not survived by a designated beneficiary, the
remaining monthly payments shall be paid to the Employee's
estate. If the Employee is survived by a designated
beneficiary, and the beneficiary dies before the complete
disbursement of the payments due, the remaining monthly
payments shall be paid to the beneficiary's estate.
10
<PAGE> 11
(d) The Employee's written request to receive an optional form
of payment under paragraph (a) or paragraph (b) instead of an
immediate lump sum must be filed with the Vice President -
Administration of the Company before the Employee's date of
retirement under the Pension Plan. The request shall be
granted or denied in the sole discretion of the Vice President
- Administration of the Company. If the Employee is the Vice
President - Administration of the Company, the duties of the
Vice President - Administration of the Company under this
Section 4.2 shall be discharged by the President of the
Company.
Any post-retirement increase in the benefits being paid to an Employee
under the Pension Plan shall also be applied on a comparable basis to any
monthly supplemental benefits under this Plan.
4.3. Time and Duration of Benefit Payments. Benefits due under the Plan
shall be paid coincident with the payment date of benefits under the Pension
Plan, or at such other time or times as the Plan Administrator in his discretion
determines. All supplemental benefits payable under this Plan shall cease as of
the first day of the month following the Employee's death, except that payments
may continue to the Employee's spouse or beneficiary following his death
pursuant to an optional form of payment selected under Section 4.2.
4.4. Benefits Unfunded. The benefits payable under the Plan shall be
paid by the Company each year out of its general assets and shall not be funded
in any manner. The obligations that the Company incurs under this Plan shall be
subject to the claims of the Company's other creditors having priority as to the
Company's assets.
4.5. No Right to Transfer Interest. The Plan Administrator may
recognize the right of an alternate payee named in a domestic relations order to
receive all or a portion of an Employee's benefit under this Plan, provided that
(a) the domestic relations order would be a "qualified domestic relations order"
within the meaning of Section 414(p) of the Code if Section 414(p) were
applicable to the Plan; (b) the domestic relations order does not purport to
give the alternate payee any right to assets of the Company or its affiliates;
and (c) the domestic relations order does not purport to give the alternate
payee any right to receive payments under the Plan before the Employee is
eligible to receive such payments. If the domestic relations order purports to
give the alternate payee a share of a benefit to which the Employee currently
has a contingent or nonvested right, the alternate payee shall not be entitled
to receive any payment from the Plan with respect to the benefit unless the
Employee's right to the benefit becomes nonforfeitable. Except as set forth in
the preceding two sentences with respect to domestic relations orders, and
except as required under applicable Federal, state or local laws concerning the
withholding of tax, rights to benefits payable under the Plan are not subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge,
attachment or other legal process, or encumbrance of any kind. Any attempt to
alienate, sell, transfer, assign, pledge, or otherwise encumber any such
supplemental benefit, whether currently or thereafter payable, shall be void.
11
<PAGE> 12
4.6. Successors to the Corporation. This Plan shall be binding upon and
inure to the benefit of any successor or assign of the Company, including,
without limitation, any corporation or corporations acquiring directly or
indirectly all or substantially all of the assets of the Company whether by
merger, consolidation, sale or otherwise (and such successor or assign shall
thereafter be deemed embraced within the term "Company" for the purposes of this
Plan).
4.7. Change in Control. Anything hereinabove in this Article IV or
elsewhere in this Plan to the contrary notwithstanding:
(a) Lump sum payment. Upon the occurrence of a Change in
Control, each Employee and each Employee's spouse or
beneficiary following his death who are receiving benefits
under the Plan ("Recipient") shall receive, on account of
future payments of any and all benefits due under the Plan,
a Lump Sum Payment, so that each such Employee or Recipient
will receive substantially the same amount of after-tax
income as before the Change in Control, determined as set
forth in paragraph (c) of this Section 4.7.
(b) Certain matters following a lump sum payment. An Employee
who has received a Lump Sum Payment pursuant to paragraph
(a) of this Section 4.7 shall, thereafter (i) while in the
employ of the Company, continue to accrue benefits under the
Plan, and (ii) be eligible to be paid further benefits under
the Plan, after appropriate reduction in respect of the Lump
Sum Payment previously received. For purposes of calculating
such reduction, the Lump Sum Payment shall be accumulated
with interest at the Specified Rate in effect from time to
time for the period of time from initial payment date to the
next date on which a computation is to be made (i.e., upon
Change in Control, retirement, or other termination of
employment). It shall then be converted to a straight-life
annuity using the current annuity certain factor. The
current annuity certain factor will be determined on the Net
Specified Rate basis if this benefit payment is being made
due to a subsequent Change in Control; otherwise, the
Specified Rate shall be used.
(c) Determination of lump sum payment. The Lump Sum Payment
referred to in paragraph (a) of this Section 4.7 shall be
determined by multiplying the annuity certain factor (for
monthly payments at the beginning of each month) based on
the Benefit Payment Period and the Net Specified Rate by the
monthly benefit (adjusted for assumed future benefit
adjustments due to Social Security and Code Section 415
changes in the Pension Plan) to be paid to the Employee or
Recipient under the Plan.
12
<PAGE> 13
4.8. Taxation. Notwithstanding anything in the Plan to the contrary, if
the Internal Revenue Service determines that the Participant is subject to
Federal income taxation on an amount in respect of any benefit provided by the
Plan before the distribution of such amount to him, the Company shall forthwith
pay to the Participant all (or the balance) of such amount as is includible in
the Participant's Federal gross income and shall correspondingly reduce future
payments, if any, of the benefit. Except as provided in Section 4.7 with respect
to payments after a Change in Control, the Company shall not reimburse the
Employee or any Recipient for any tax, interest, or penalty that the Employee or
Recipient owes with respect to any payment from the Plan.
ARTICLE V
---------
AMENDMENT, TERMINATION AND INTERPRETATION
-----------------------------------------
5.1. Amendment and Termination. The Company reserves the right, by
action of the Board, to amend, modify or terminate, either retroactively or
prospectively, any or all of the provisions of this Plan without the consent of
any Employee or beneficiary; provided, however, that no such action on its part
shall adversely affect the rights of an Employee and his beneficiaries without
the consent of such Employee (or his beneficiaries, if the Employee is deceased)
with respect to any benefits accrued prior to the date of such amendment,
modification, or termination of the Plan if the Employee has at that time a
non-forfeitable right to benefits under a funded, defined benefit pension plan
sponsored by the Company.
5.2. Interpretation. The Plan Administrator shall have the
discretionary authority to interpret the Plan and to decide any and all matters
arising hereunder; including but not limited to the right to remedy possible
ambiguities, inconsistencies or omissions by general rule or particular
decision. In addition, any interpretations and decisions made by the Plan
Administrator shall be final, conclusive and binding upon the persons who have
or who claim to have any interest in or under the Plan.
IN WITNESS WHEREOF, Dana Corporation has executed this restated Plan
effective as of December 14, 1998.
/s/ Martin J. Strobel
---------------------
Dana Corporation
/s/ Mark A. Smith, Jr.
- ----------------------
Attest
13
<PAGE> 14
DANA CORPORATION SUPPLEMENTAL BENEFITS PLAN
APPENDIX A
A.1 Purpose. The purpose of this Appendix A is to provide supplemental
benefits to certain individuals who are not otherwise eligible for benefits
under the Plan. Except to the extent that a contrary rule is expressly set forth
below, capitalized terms used in Appendix A shall have the meaning set forth in
Article I of the Plan, and the benefits provided under Appendix A shall be
subject to the administrative provisions set forth in Sections 4.2 through 4.8
of Article IV and Sections 5.1 and 5.2 of Article V (construed as if the term
"Employee" in those sections referred to an individual who is eligible for a
benefit under this Appendix A).
A.2 Eligibility. An individual is eligible for a supplemental
retirement benefit under this Appendix A if the individual meets all of the
following criteria on the date of his retirement from the Company and its
affiliates (or if he meets the criteria in paragraphs (a) through (c) on the
date of a Change in Control, if earlier):
(a) The individual is not eligible for a supplemental retirement
benefit under any provision of the Plan other than this Appendix A.
(b) The individual has reached his 50th birthday and has completed at
least 10 years of Vesting Service; and the sum of the individual's
age and years of Vesting Service, both calculated to the nearest
month, equals 70 or more.
(c) The individual is a U.S.-based member of the "A" Group or the "B"
Group, as defined by the Compensation Committee of the Board, and
is a management employee or a highly-compensated employee.
(d) The individual retires on or after January 1, 1996 and before
January 1, 2010.
A.3 Amount of Benefit. The amount of an individual's supplemental
retirement benefit under Appendix A shall be the initial benefit determined
under paragraph (a), multiplied by the percentage specified in paragraph (b),
and reduced as provided in paragraph (c).
(a) The individual's initial benefit shall be the normal retirement
benefit or early retirement benefit that the individual would have
received under the Retirement Income Plan if the provisions of that
Plan had remained in effect through the individual's retirement
date, with the modification described in the following sentence.
For purposes of
14
<PAGE> 15
applying the Retirement Income Plan formula, the individual's
"Final Monthly Earnings" shall be the average of his Earnings
during the five consecutive calendar years out of the last ten
years of his active employment with the Company in which the
average was the highest.
(b) The percentage applied to the individual's initial benefit shall
be determined according to the calendar year in which the
individual retires, as follows:
Year in Which Individual Retires Applicable Percentage
-------------------------------- ---------------------
1996 - 1999 90%
2000 - 2004 80%
2005 - 2009 70%
After 2009 0%
(c) The benefit determined under this Section A.3 shall be calculated
as a single-life annuity, and shall be reduced by the sum of the
monthly benefits that the individual is entitled to receive from
any source listed in subparagraphs (i), (ii), or (iii), below,
determined in each case on the basis of the assumption that the
individual's benefits under such sources are paid in the form of a
single-life annuity for the life of the individual, commencing as
of the individual's date of retirement under the Pension Plan:
(i) all funded defined benefit pension plans sponsored by the
Company and its affiliates; and
(ii) all unfunded, nonqualified deferred compensation plans
sponsored by the Company and its affiliates (including, but
not limited to, the Excess Plan), with the sole exception of
the Dana Corporation Additional Compensation Plan; and
(iii) any supplemental retirement benefit provided under an
employment contract, or under any other contract or
agreement, between the individual and the Company or any
affiliate.
A.4 Form of Payment.
(a) An individual shall be entitled to receive his benefit under this
Appendix A in the manner provided in Section 4.2 of the Plan. If
the individual elects to receive a lump sum payment, however, the
lump sum payment shall be calculated as provided in paragraph (b),
below, rather than as provided in Section 4.2 of the Plan.
15
<PAGE> 16
(b) The single-life annuity determined under paragraphs (a) and (b)
of Section A.3 shall be converted to a lump sum present value on
the basis of the "applicable interest rate" (as in effect for the
November preceding the calendar year in which the calculation is
made) and the "applicable mortality table", both as defined in
Section 417(e) of the Code. The lump sum determined under the
preceding sentence of this Section A.4 shall be reduced by the
lump sum present value of all benefits that the individual is
entitled to receive from all sources described in paragraph (c) of
Section A.3, determined in each case on the basis of the interest
rate and mortality assumptions required for lump sum calculations
by the terms of those plans or agreements (or, if no such interest
rates or mortality assumptions are specified in the plan or
agreement, on the basis of the interest rate and mortality
assumptions set forth in the first sentence of this paragraph
(b)).
A.5 Pre-retirement Death Benefit. Effective March 1, 1998, if an
individual dies before his benefit under this Appendix A commences or is paid,
the individual's surviving spouse (if any) shall be entitled to receive a
lump-sum benefit equal to 100% of the benefit to which the individual would have
been entitled under paragraph A.3, above, subject to the reductions described in
paragraph A.3(c), as if the individual had retired on the date of his death.
16
<PAGE> 1
Exhibit 13
FINANCIAL FOCUS
Dear Shareholders,
Our company achieved another record year in sales and profit during
1998. This strong performance enabled us to enjoy higher operating margins and
higher net cash flow from operating activities.
We continue to focus on our "Beyond 2000" strategic plan and on
reaching and maintaining "best in class" operating efficiencies and profit
margins. The result is a stronger company with a solid balance sheet, a company
that is very well positioned to reach its growth objectives by investing in its
core products and technologies, and a company able to pursue other strategic
opportunities to sustain profitable growth.
Cash flow is especially important as our industry continues to
consolidate. Dana people have the focus, resolve, and motivation to successfully
execute our global sourcing and synergy plans, to streamline our distribution
operations, to improve our capital efficiency, and to increase cash flow.
<TABLE>
<CAPTION>
NET CASH FLOWS
FROM OPERATING ACTIVITIES*
23% CAGR
<S> <C> <C> <C>
1995 1996 1997 1998
$448 $738 $775 $835
</TABLE>
* Excluding Dana Commercial Credit
Our "Beyond 2000" goals provide a framework for a determined effort to
take advantage of Dana's global opportunities. We have set the bar high--with
aggressive financial performance targets, customer commitments, and growth
goals. Reaching these goals will enable us to achieve the superior returns we
believe are available to all Dana shareholders.
[Picture of John S. Simpson]
Sincerely,
/s/ John S. Simpson
John S. Simpson
Executive Vice President
and Chief Financial Officer
<PAGE> 2
[LOGO]
MANAGEMENT AND INDEPENDENT ACCOUNTANTS' REPORT
- --------------------------------------------------------------------------------
RESPONSIBILITY FOR FINANCIAL STATEMENTS
We have prepared the accompanying consolidated financial statements and
related information included herein for the three years ended December 31, 1998.
The management of Dana Corporation is primarily responsible for the
accuracy of the financial information that is presented in this annual report.
These statements were prepared in accordance with generally accepted accounting
principles and, where appropriate, we used our estimates and judgment with
consideration to materiality.
To meet management's responsibility for financial reporting, we have
established internal control systems which we believe are adequate to provide
reasonable assurance that our assets are protected from loss. These systems
produce data used for the preparation of financial information.
We believe internal control systems should be designed to provide accurate
information at a reasonable cost which is not out of line with the benefits to
be received. These systems and controls are reviewed by our internal auditors in
order to ensure compliance, and by our independent accountants to support their
audit work.
The Audit Committee of the Board of Directors meets regularly with
management, internal auditors and our independent accountants to review
accounting, auditing and financial matters. Our Audit Committee is composed of
only outside directors. This committee and the independent accountants have free
access to each other with or without management being present.
We believe people are Dana's most important asset. The proper selection,
training and development of our people is a means of ensuring that effective
internal controls and fair, uniform reporting are maintained as standard
practice throughout the Corporation.
/s/ James H. Woodward, Jr.
James H. Woodward, Jr.
Vice President and Corporate Controller
/s/ John S. Simpson
John S. Simpson
Executive Vice President
and Chief Financial Officer
- --------------------------------------------------------------------------------
Report Of Independent Accountants
[PRICEWATERHOUSECOOPERS Logo]
To the Board of Directors and Shareholders
of Dana Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of shareholders' equity and of cash flows,
including pages 22 through 39, present fairly, in all material respects, the
financial position of Dana Corporation and its subsidiaries at December 31, 1997
and 1998, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Toledo, Ohio
January 25, 1999
<PAGE> 3
<TABLE>
<CAPTION>
DANA CORPORATION
STATEMENT OF INCOME
in millions except per share amounts
Year Ended December 31
1996 1997 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 10,978.8 $ 11,911.0 $ 12,463.6
Revenue from lease financing 151.0 172.5 172.9
Other income, net 52.6 318.9 202.2
- ------------------------------------------------------------------------------------------------------------------------------------
11,182.4 12,402.4 12,838.7
- ------------------------------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales 9,158.1 10,067.0 10,449.1
Selling, general and administrative expenses 1,112.0 1,152.2 1,122.5
Restructuring and integration charges 327.6 117.7
Merger expenses 49.6
Interest expense 203.5 251.4 279.6
- ------------------------------------------------------------------------------------------------------------------------------------
10,473.6 11,798.2 12,018.5
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 708.8 604.2 820.2
Estimated taxes on income 238.5 293.8 315.6
- ------------------------------------------------------------------------------------------------------------------------------------
Income before minority interest and equity
in earnings of affiliates 470.3 310.4 504.6
Minority interest (32.8) (22.4) (7.9)
Equity in earnings of affiliates 13.4 32.1 37.4
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 450.9 $ 320.1 $ 534.1
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE
Basic income per share $ 2.83 $ 1.97 $ 3.24
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted income per share $ 2.81 $ 1.94 $ 3.20
- ------------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared and paid per common share $ .98 $ 1.04 $ 1.14
- ------------------------------------------------------------------------------------------------------------------------------------
Average shares outstanding - Basic 159.5 162.7 165.1
- ------------------------------------------------------------------------------------------------------------------------------------
Average shares outstanding - Diluted 160.3 164.6 167.0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
LOGO
DANA CORPORATION
BALANCE SHEET
in millions except per share amounts
December 31
1997 1998
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
Current assets
<S> <C> <C>
Cash and cash equivalents $ 422.7 $ 230.2
Accounts receivable
Trade, less allowance for doubtful accounts
of $33.9 - 1997 and $40.5 - 1998 1,439.4 1,616.9
Other 148.5 193.8
Loans receivable, current 89.8 83.9
Investment in leases, current 254.3 16.7
Inventories 1,575.3 1,731.6
Other current assets 355.3 463.9
- ----------------------------------------------------------------------------------------------------------------------------------
Total current assets 4,285.3 4,337.0
Investments and other assets 1,373.3 1,644.8
Investment in leases 1,075.8 851.9
Property, plant and equipment, net 2,776.7 3,303.8
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 9,511.1 $ 10,137.5
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------------
Current liabilities
Notes payable, including current portion
of long-term debt $ 1,693.0 $ 1,698.1
Accounts payable 759.7 995.6
Accrued payroll and employee benefits 357.9 264.9
Other accrued liabilities 924.2 873.4
Taxes on income 59.2 154.6
- ----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,794.0 3,986.6
- ----------------------------------------------------------------------------------------------------------------------------------
Deferred employee benefits and other
noncurrent liabilities 1,171.3 1,337.5
Long-term debt 1,789.8 1,717.9
Minority interest in consolidated subsidiaries 153.6 156.3
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,908.7 7,198.3
- ----------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Common stock, $1 par value, shares authorized, 350.0;
shares issued, 163.8 - 1997 and 165.7 - 1998 163.8 165.7
Additional paid-in capital 539.8 591.0
Retained earnings 2,104.4 2,454.5
Accumulated other comprehensive income (205.6) (272.0)
- ----------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 2,602.4 2,939.2
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 9,511.1 $ 10,137.5
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
DANA CORPORATION
STATEMENT OF CASH FLOWS
in millions
Year Ended December 31
1996 1997 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net cash flows from operating activities $ 902.5 $ 929.1 $ 795.6
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property, plant and equipment (469.0) (579.1) (661.4)
Purchases of assets to be leased (426.3) (452.3) (546.4)
Acquisitions (301.9) (601.0) (829.0)
Divestitures 21.7 490.5 1,039.4
Changes in investments and other assets (35.8) (79.3) (95.7)
Loans made to customers and partnerships (98.5) (115.3) (232.0)
Payments received on leases 209.7 250.4 265.0
Proceeds from sales of certain assets 73.1 33.6 9.5
Proceeds from sales of leased assets 20.3 26.0 90.8
Payments received on loans 20.8 155.0 227.9
Other 32.6 (5.3) (2.3)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash flows - investing activities (953.3) (876.8) (734.2)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in short-term debt (104.2) (247.5) 54.3
Issuance of long-term debt 743.9 939.2 472.5
Payments on long-term debt (372.5) (461.2) (623.7)
Sale of accounts receivable 75.0
Dividends paid (152.9) (164.8) (198.3)
Other 12.9 33.2 41.3
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash flows - financing activities 202.2 98.9 (253.9)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 151.4 151.2 (192.5)
Cash and cash equivalents - beginning of year 120.1 271.5 422.7
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of year $ 271.5 $ 422.7 $ 230.2
- -----------------------------------------------------------------------------------------------------------------------------------
Reconciliation of net income to net cash flows from operating activities:
Net income $ 450.9 $ 320.1 $ 534.1
Depreciation and amortization 376.6 450.3 487.7
Unremitted earnings of affiliates (13.3) (19.0) (33.4)
Deferred income taxes 106.8 2.5 64.6
Minority interest 26.5 14.7 12.4
Change in accounts receivable 1.9 (64.7) (162.4)
Change in inventories (24.9) 74.6 (71.5)
Change in other operating assets 39.4 9.1 16.8
Change in operating liabilities (56.7) 274.9 12.5
Additions to lease and loan loss reserves 11.0 12.3 19.8
Gains on divestitures (7.4) (162.4) (80.0)
Other (8.3) 16.7 (5.0)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ 902.5 $ 929.1 $ 795.6
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 6
DANA CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY
in millions
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE INCOME
--------------------------------------
ADDITIONAL FOREIGN MINIMUM NET UNREALIZED
COMMON PAID-IN RETAINED CURRENCY PENSION INVESTMENT SHAREHOLDERS'
STOCK CAPITAL EARNINGS TRANSLATION LIABILITY GAIN/(LOSS) EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 159.0 $ 420.1 $ 1,649.4 $ (152.0) $ (13.5) $ -- $ 2,063.0
Comprehensive income:
Net income for 1996 450.9
Foreign currency translation 13.4
Minimum pension liability 13.5
Net unrealized investment gains 2.4
Total comprehensive income 480.2
Cash dividends declared (154.4) (154.4)
Issuance of shares for defined
benefit pension plans 1.0 30.1 31.1
Cost of shares reacquired (.2) (5.1) (5.3)
Issuance of shares for director and
employee stock plans .7 14.0 14.7
Issuance of shares in connection
with acquisitions .5 1.0 3.9 5.4
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 161.0 460.1 1,949.8 (138.6) -- 2.4 2,434.7
Comprehensive income:
Net income for 1997 320.1
Foreign currency translation (71.4)
Minimum pension liability (2.3)
Net unrealized investment gains 4.3
Total comprehensive income 250.7
Cash dividends declared (165.2) (165.2)
Issuance of shares for defined
benefit pension plans 1.0 30.8 31.8
Cost of shares reacquired (.4) (13.1) (13.5)
Issuance of shares for
employee stock plans 1.7 44.5 46.2
Issuance of shares in connection
with acquisitions .5 17.5 (.3) 17.7
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 163.8 539.8 2,104.4 (210.0) (2.3) 6.7 2,602.4
COMPREHENSIVE INCOME:
NET INCOME FOR 1998 534.1
FOREIGN CURRENCY TRANSLATION (53.7)
MINIMUM PENSION LIABILITY (8.6)
NET UNREALIZED INVESTMENT LOSSES (4.1)
TOTAL COMPREHENSIVE INCOME 467.7
CASH DIVIDENDS DECLARED (184.0) (184.0)
COST OF SHARES REACQUIRED (.3) (14.3) (14.6)
ISSUANCE OF SHARES FOR DIRECTOR
AND EMPLOYEE STOCK PLANS 2.2 65.5 67.7
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ 165.7 $ 591.0 $ 2,454.5 $ (263.7) $ (10.9) $ 2.6 $ 2,939.2
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 7
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Dana Corporation is a global leader in the engineering, manufacturing and
distribution of components and systems for worldwide vehicular and industrial
manufacturers. Dana also owns Dana Credit Corporation (DCC), a leading provider
of lease financing services in certain markets.
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Some of the more significant estimates include
depreciation and amortization of long-lived assets, deferred tax asset and
inventory valuations, environmental and warranty reserves, postemployment and
postretirement benefits, residual values of leased assets and allowances for
doubtful accounts. Actual results could differ from those estimates.
The following summary of significant accounting policies of Dana
Corporation is presented to assist the reader in evaluating the financial
statements. Where appropriate, certain amounts in 1996 and 1997 have been
reclassified to conform with the 1998 presentation.
PRINCIPLES OF CONSOLIDATION
Dana's financial statements include all significant subsidiaries in which
Dana has the ability to exercise significant influence over operating and
financial policies. The accounts of certain non-U.S. subsidiaries are included
for fiscal years ended November 30. Affiliated companies (20% to 50% ownership)
are generally recorded in the statements using the equity method of accounting.
Operations of affiliates outside North America accounted for on the equity
method of accounting are generally included for periods ended within two months
of Dana's year end. Less than 20%-owned companies are included in the financial
statements at the cost of Dana's investment. Dividends, royalties and fees from
these cost basis affiliates are recorded in Dana's financial statements when
received.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's subsidiaries and equity
affiliates outside the United States (U.S.), located in non-highly inflationary
economies, are measured using the currency of the primary economic environment
in which they operate as the functional currency, which, for the most part, is
the local currency. Income and expense items are translated at average monthly
rates of exchange. Gains and losses from currency transactions of these
affiliates are included in net earnings. Assets and liabilities of these
affiliates are translated at the rates of exchange at the balance sheet date.
The resultant translation adjustments are deferred as a component of accumulated
other comprehensive income in shareholders' equity. For affiliates operating in
highly inflationary economies, non-monetary assets are translated at historical
exchange rates and monetary assets are translated at current exchange rates.
Translation adjustments are included in the determination of income.
INVENTORIES
Inventories are valued at the lower of cost or market. Except for
inventories held by the former Echlin facilities, cost is generally determined
on the last-in, first-out basis for U.S. inventories. The cost of other
inventories, including those held by non-U.S. entities, is determined on the
first-in, first-out or average cost basis.
LEASE FINANCING
Lease financing consists of direct financing leases, leveraged leases and
equipment on operating leases. Income on direct financing leases is recognized
by a method which produces a constant periodic rate of return on the outstanding
investment in the lease. Income on leveraged leases is recognized by a method
which produces a constant rate of return on the outstanding net investment in
the lease, net of the related deferred tax liability, in the years in which the
net investment is positive. Initial direct costs are deferred and amortized
using the interest method over the lease period. Equipment under operating
leases is recorded at cost, net of accumulated depreciation. Income from
operating leases is recognized ratably over the term of the leases.
ALLOWANCE FOR LOSSES ON LEASE FINANCING
Provisions for losses on lease financing receivables are determined on
the basis of loss experience and assessment of inherent risk. Resulting
adjustments to the allowance for losses are made to adjust the net investment in
lease financing to an estimated collectible amount. Income recognition is
generally discontinued on accounts which are contractually past due and where no
payment activity has occurred within 120 days. Accounts are charged against the
allowance for losses when determined to be uncollectible. Accounts for which
equipment repossession has commenced as the primary means of recovery are
classified within other assets at their estimated realizable value.
GOODWILL
Cost in excess of net assets of companies acquired is generally amortized
over the estimated period of expected benefit, ranging from 10 to 40 years.
LOANS RECEIVABLE
Loans receivable consist primarily of loans to partnerships in which DCC
has an interest and loans secured by equipment and first mortgages on real
property. The loans to partnerships are secured by the partnerships' assets.
Income on all loans is recognized using the interest method. Interest income on
impaired loans is recognized either as cash is collected or on a cost recovery
basis as conditions warrant.
ALLOWANCE FOR LOSSES ON LOANS RECEIVABLE
Provisions for losses on loans receivable are determined on the basis of
loss experience and assessment of inherent risk.
<PAGE> 8
LOGO
DANA CORPORATION
- --------------------------------------------------------------------------------
Resulting adjustments to the allowance for losses are made to adjust
loans receivable to an estimated collectible amount. Income recognition is
generally discontinued on accounts which are contractually past due and where no
payment activity has occurred within 120 days. Accounts are charged against the
allowance for losses when determined to be uncollectible.
REVENUE RECOGNITION
The Company recognizes sales when products are shipped. Accruals for
warranty costs, sales returns and other allowances are provided at the time of
shipment based upon experience. Adjustments are made as facts and circumstances
dictate.
INCOME TAXES
Current tax liabilities and assets are recognized for the estimated taxes
payable or refundable on the tax returns for the current year. Deferred tax
liabilities or assets are recognized for the estimated future tax effects
attributable to temporary differences and carryforwards that result from events
that have been recognized differently between the financial statements and the
tax returns. The measurement of current and deferred tax liabilities and assets
is based on provisions of enacted tax laws. Deferred tax assets are reduced, if
necessary, by the amount of any tax benefits that are not expected to be
realized. Dana uses the "flow-through" method of accounting for investment tax
credits, except for investment tax credits arising from leveraged leases and
certain direct financing leases for which the deferred method is used for
financial statement purposes.
PROPERTIES AND DEPRECIATION
Property, plant and equipment are valued at historical costs.
Depreciation is recognized over the estimated useful lives of property, plant
and equipment using primarily the straight-line method for financial reporting
purposes and primarily accelerated depreciation methods for federal income tax
purposes.
FINANCIAL INSTRUMENTS
The reported fair values of financial instruments are based on a variety
of factors. Where available, fair values represent quoted market prices for
identical or comparable instruments. Where quoted market prices are not
available, fair values have been estimated based on assumptions concerning the
amount and timing of estimated future cash flows and assumed discount rates
reflecting varying degrees of credit risk. Accordingly, the fair values may not
represent actual values of the financial instruments that could have been
realized as of December 31, 1997 and 1998, or that will be realized in the
future.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into various types of interest rate and foreign
currency agreements but does not trade in derivative financial instruments.
Gains and losses relating to qualifying hedges of firm commitments or
anticipated transactions are deferred and recognized as adjustments of carrying
amounts when the hedged transaction occurs. Interest rate swaps and caps are
primarily used to manage exposure to fluctuations in interest rates.
Differentials paid or received on interest rate agreements are accrued and
recognized as adjustments to interest expense. Premiums paid on interest rate
caps are amortized to interest expense over the terms of the agreements and
unamortized premiums are included in other assets.
DCC had an interest rate-based option which it marked to market and
included in other liabilities. Changes in the fair value of this instrument were
reported in other income.
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities," was issued in June 1998 and
requires, among other things, that all derivative instruments be recognized on
the balance sheet at fair value. SFAS No. 133 will be adopted in 2000 and is not
expected to have a material effect on the financial statements.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to existing conditions
caused by past operations which do not contribute to current or future revenue
generation are expensed. Liabilities are recorded when environmental assessments
and/or remedial efforts are probable and the costs can be reasonably estimated.
Estimated costs are based upon enacted laws and regulations, existing technology
and the most probable method of remediation. The costs determined are not
discounted and exclude the effects of inflation and other societal and economic
factors. Where the cost estimates result in a range of equally probable amounts,
the lower end of the range is accrued.
PENSION PLANS
Annual net periodic pension costs under the Company's defined benefit
pension plans are determined on an actuarial basis. Dana's policy is to fund
these costs as accrued, including amortization of the initial unrecognized net
obligation over 15 years and obligations arising due to plan amendments over the
period benefited, through deposits with trustees. Benefits are determined based
upon employees' length of service, wages and a combination of length of service
and wages.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Annual net postretirement benefits liability and expense under the
Company's benefit plans are determined on an actuarial basis. Dana's current
policy is to pay these benefits as they become due. Benefits are determined
primarily based upon employees' length of service and include applicable
employee cost sharing.
POSTEMPLOYMENT BENEFITS
Annual net postemployment benefits liability and expense under the
Company's benefit plans are accrued as service is rendered for those obligations
that accumulate or vest and can be reasonably estimated. Obligations that do not
accumulate or vest are recorded when payment of the benefits is probable and the
amounts can be reasonably estimated.
<PAGE> 9
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, the Company considers highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
MARKETABLE SECURITIES
The majority of the Company's marketable securities satisfy the criteria
for cash equivalents and are classified accordingly. The Company classifies the
remainder of its marketable securities as available for sale. Available for sale
securities, which are included in investments and other assets, are carried at
fair value and any unrealized gains or losses, net of income taxes, are reported
as a component of accumulated other comprehensive income in shareholders'
equity.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, no compensation cost for stock options is recorded at the time of
issuance, as the option price is set at the market price of the Company's stock
at the date of grant.
NOTE 2. BUSINESS COMBINATION
- --------------------------------------------------------------------------------
On July 9, 1998, Dana Corporation completed a merger with Echlin Inc. by
exchanging 59.6 million shares of its common stock for all of the common stock
of Echlin. Each share of Echlin was exchanged for .9293 of one share of Dana
common stock. In addition, outstanding Echlin stock options were converted at
the same exchange ratio into options to purchase approximately 1.8 million
shares of Dana common stock.
The merger has been accounted for as a pooling of interests and accordingly
all prior period consolidated financial statements have been restated to include
the combined results of operations, financial position and cash flows of Echlin.
Prior to the merger Echlin's fiscal year ended on August 31. In recording
the business combination, Echlin's prior period financial statements have been
restated to conform with Dana's year end.
The following information presents certain income statement data of the
separate companies for the periods preceding the merger:
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1998
1996 1997 (Unaudited)
- ----------------------------------------------------------------------------------------------------------
Net sales
<S> <C> <C> <C>
Dana $ 7,686.3 $ 8,290.8 $ 4,690.5
Echlin 3,292.5 3,620.2 1,778.9
- ----------------------------------------------------------------------------------------------------------
$ 10,978.8 $ 11,911.0 $ 6,469.4
- ----------------------------------------------------------------------------------------------------------
Net income (loss)
Dana $ 306.0 $ 369.1 $ 223.6
Echlin 144.9 (49.0) 77.2
- ----------------------------------------------------------------------------------------------------------
$ 450.9 $ 320.1 $ 300.8
- ----------------------------------------------------------------------------------------------------------
</TABLE>
There were no material transactions between Dana and Echlin prior to the
merger. The effects of conforming Echlin's accounting policies to those of Dana
were not material.
NOTE 3. COMMON SHARES
- --------------------------------------------------------------------------------
In connection with employee stock plans, Dana reacquired 171,770 shares in
1996, 406,616 in 1997 and 299,082 in 1998.
In 1996 and in 1997, Dana contributed 1,000,000 shares of common stock to
the Dana Corporation Pension Plans Trust.
The following summarizes the common stock transactions for 1996, 1997 and
1998:
<TABLE>
<CAPTION>
1996 1997 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at
beginning of year 159,046,494 161,010,241 163,810,306
Issued for acquisitions 475,126 493,559
Issued for director and
employee stock plans 660,391 1,713,122 2,179,620
Issued for defined benefit
pension plans 1,000,000 1,000,000
Reacquired and retired (171,770) (406,616) (299,082)
- ---------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 161,010,241 163,810,306 165,690,844
- ---------------------------------------------------------------------------------------------------------------------
Average outstanding
for the year (basic) 159,487,978 162,743,602 165,057,443
- ---------------------------------------------------------------------------------------------------------------------
Plus: Incremental shares
from assumed
conversion of -
Deferred
compensation
units 19,971 424,615 476,197
Deferred restricted
stock units 6,357 27,917
Stock options 753,955 1,402,763 1,480,967
- ---------------------------------------------------------------------------------------------------------------------
Potentially dilutive
shares 773,926 1,833,735 1,985,081
- ---------------------------------------------------------------------------------------------------------------------
Adjusted average
shares outstanding
for the year (diluted) 160,261,904 164,577,337 167,042,524
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
There are 10,000,000 common shares reserved for issuance in the event
that the Company issues debt securities with exchange, conversion or redemption
rights under its universal shelf registration statements.
NOTE 4. PREFERRED SHARE PURCHASE RIGHTS
- --------------------------------------------------------------------------------
Under Dana's Preferred Share Purchase Rights Plan (Rights Plan), which is
designed to deter coercive or unfair takeover tactics, one Preferred Share
Purchase Right (Right) has been issued on each share of Dana common stock
outstanding on and after July 25, 1996. Each Right entitles the holder to
purchase 1/1000th of a share of Dana Series A Junior Participating Preferred
Stock, no par value, under certain circumstances. The Rights have no voting
rights and will expire on July 15, 2006, unless exercised, redeemed or exchanged
sooner.
<PAGE> 10
[DANA LOGO]
- --------------------------------------------------------------------------------
Generally, the Rights will not be exercisable (or transferable apart from
the Dana common shares to which they are attached) unless a person or group
(Acquiring Person) becomes the beneficial owner of 15% or more of Dana's
outstanding common shares or commences a tender offer that would result in its
acquisition of a 15% position. In that event, the Rights will become exercisable
(except those owned by the Acquiring Person, which will become void), entitling
the holder of each Right to purchase, for $110 per share (subject to adjustment,
the Purchase Price), a number of Dana common shares having a market value equal
to two times the Purchase Price.
In addition, if Dana engages in certain mergers with or sells 50% or more
of its assets or earning power to an Acquiring Person (or persons acting for or
with an Acquiring Person), or engages in similar transactions, the Rights will
become exercisable (except those owned by the Acquiring Person, which will
become void), entitling the holder of each Right to purchase a number of common
shares of the acquiring or surviving company having a market value (as
determined under the Rights Plan) equal to two times the Purchase Price.
Dana's Board may redeem the Rights at a price of $.01 each at any time
before any person or group acquires 15% or more of Dana's common shares. If any
person or group becomes an Acquiring Person, but acquires less than 50% of
Dana's common shares, the Board may exchange each Right for one share of Dana
common stock.
NOTE 5. PREFERRED SHARES
- --------------------------------------------------------------------------------
Dana has authorized 5,000,000 shares of preferred stock, without par
value, including 1,000,000 shares which have been reserved for issuance under
the Rights Plan. At December 31, 1998, no shares of preferred stock had been
issued.
NOTE 6. INVENTORIES
- --------------------------------------------------------------------------------
The components of inventory are as follows:
<TABLE>
<CAPTION>
December 31
1997 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 420.1 $ 470.6
Work in process and finished goods 1,155.2 1,261.0
- --------------------------------------------------------------------------------
$ 1,575.3 $ 1,731.6
- --------------------------------------------------------------------------------
</TABLE>
Inventories amounting to $467.7 and $579.6 at December 31, 1997 and 1998,
respectively, were valued using the LIFO method. If all inventories were valued
at replacement cost, inventories would be increased by $125.4 and $127.0 at
December 31, 1997 and 1998, respectively.
NOTE 7. NON-U.S. OPERATIONS
- --------------------------------------------------------------------------------
The following is a summary of the significant financial information of
Dana's consolidated non-U.S. subsidiaries:
<TABLE>
<CAPTION>
December 31
1996 1997 1998
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets $ 3,306.2 $ 3,533.6 $ 3,635.2
Liabilities 1,888.8 1,905.0 1,512.5
Net sales 3,158.9 3,498.5 3,679.7
Net income 171.4 159.3 186.3
Dana's equity in:
Net assets 1,245.8 1,394.5 1,974.0
Net income 140.2 140.4 180.5
</TABLE>
Cumulative undistributed earnings of non-U.S. subsidiaries for which
U.S. income taxes, exclusive of foreign tax credits, have not been provided
approximated $903.9 at December 31, 1998. Management intends to permanently
reinvest undistributed earnings of Dana's non-U.S. subsidiaries; accordingly, no
U.S. income taxes have been provided on these undistributed earnings. If the
total undistributed earnings of non-U.S. subsidiaries had been remitted in 1998,
a significant amount of the additional tax provision would have been offset by
foreign tax credits.
Dana's consolidated non-U.S. subsidiaries are located throughout the
world with no individual subsidiary or the aggregate of all subsidiaries within
a given country accounting for more than 10% of consolidated sales or assets.
The functional currency of the Company's non-U.S. subsidiaries is the local
currency. Certain subsidiaries have transactions in currencies other than their
functional currencies and from time to time enter into forward and option
contracts to hedge the purchase of inventory and fixed assets or to sell
nonfunctional currency receipts. Currency forward and option contracts in the
aggregate are not material.
Dana has equity interests in a number of affiliated companies in
Mexico, South America, Asia and Europe. The following is a summary of the
significant financial information of affiliated companies accounted for on the
equity method:
<TABLE>
<CAPTION>
December 31
1996 1997 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets $ 371.4 $ 355.8 $ 375.7
Other assets 272.6 276.4 297.7
Current liabilities 349.3 243.2 216.1
Other liabilities 180.3 132.4 172.5
Shareholders' equity 114.4 256.6 284.8
Net sales 743.1 803.9 889.2
Gross profit 125.2 159.2 181.9
Net income 21.1 56.2 63.8
Dana's equity in:
Net assets 61.1 114.4 128.4
Net income 10.7 26.8 30.4
</TABLE>
<PAGE> 11
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts
NOTE 8. INVESTMENTS IN PARTNERSHIPS
- --------------------------------------------------------------------------------
DCC has ownership interests in several partnerships which are accounted
for under the equity method. In certain of these partnerships, DCC has ownership
interests exceeding 50%; however, they are not consolidated because DCC has no
general partner interest and only limited ability to control the partnerships'
activities. The partnerships are involved primarily in the leasing or financing
of equipment or real estate to commercial entities. DCC's share of earnings of
partnerships is included in income as earned. The investment in partnerships is
reduced as distributions are received.
Summarized financial information of the partnerships on a combined basis
is as follows:
<TABLE>
<CAPTION>
December 31
1996 1997 1998
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets $ 203.0 $ 398.1 $ 460.4
Liabilities 148.9 329.3 379.5
Partners' capital 54.1 68.8 80.9
Revenue 78.0 64.3 101.0
Net income 7.0 11.2 21.9
DCC's investments
in partnerships 25.8 75.1 160.5
DCC's earnings from
investments in partnerships 2.7 3.2 5.7
</TABLE>
The investments in partnerships include $19.2 and $37.1
at December 31, 1997 and 1998, respectively, representing amounts invested in
excess of DCC's share of the partnerships' book basis in net assets, net of
amortization. These amounts are amortized against earnings from partnerships
over the expected investment lives of the partnerships.
NOTE 9. SHORT-TERM DEBT
- --------------------------------------------------------------------------------
Short-term funds for certain U.S. and non-U.S. operations are obtained
through the issuance of commercial paper, short-term notes payable to banks and
bank overdrafts.
At December 31, 1998, Dana, excluding DCC, had $355.0 of commercial
paper outstanding, $115.0 borrowed against uncommitted bank lines, $568.0 of
U.S. notes, $31.7 of non-U.S. notes and $97.8 of notes payable at its non-U.S.
subsidiaries. DCC had $15.2 of commercial paper issued, $128.7 of U.S. notes and
$10.0 of non-U.S. notes.
Dana, excluding DCC, and DCC had committed borrowing lines of $1,250.0
and $412.5, respectively, and uncommitted borrowing lines of $502.0 and $275.0
at December 31, 1998. The banks providing committed lines are compensated with
facility or commitment fees. Amounts paid are not considered to be material and
no fees are required for the uncommitted bank lines.
Selected details of short-term borrowings are as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
INTEREST
AMOUNT RATE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $ 1,255.6 5.5%
Average during 1997 1,236.9 5.6
Maximum during 1997 (month end) 1,501.1 5.8
BALANCE AT DECEMBER 31, 1998 $ 1,321.4 5.8%
AVERAGE DURING 1998 1,368.9 5.8
MAXIMUM DURING 1998 (MONTH END) 1,575.6 5.8
</TABLE>
The Company has an agreement with a financial institution under which it
may sell, without recourse, up to $200 in undivided fractional interests in
designated pools of trade receivables. Accounts receivable at December 31, 1997
and 1998 are presented net of the $200 of trade receivables sold under this
agreement.
NOTE 10. LONG-TERM DEBT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
1997 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dana, excluding consolidated
subsidiaries, indebtedness --
Unsecured notes payable,
fixed rates -
5.44% - 7.04%, due 1999 to 2002 $ 1,120.0 $ 960.0
7.0% notes, due March 15, 2028 200.0
6.5% notes, due March 15, 2008 150.0
Unsecured notes payable, variable rates 60.0
Various industrial revenue bonds and other 7.8 4.5
DCC indebtedness --
Unsecured notes payable,
fixed rates, 5.98% - 8.44%,
due 1999 to 2007 378.6 335.5
Unsecured notes payable,
variable rates, 5.35% - 5.80%,
due 1999 to 2002 525.1 320.0
Nonrecourse notes payable,
fixed rates, 6.80% - 12.05%,
due 1999 to 2010 58.2 66.4
Indebtedness of other consolidated subsidiaries 77.5 58.2
- -----------------------------------------------------------------------------------------------------------------------
Total long-term debt 2,227.2 2,094.6
Less: Current maturities 437.4 376.7
- -----------------------------------------------------------------------------------------------------------------------
$ 1,789.8 $ 1,717.9
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest paid on short-term and long-term debt was $193.6, $236.2 and
$282.6 during 1996, 1997 and 1998, respectively.
The aggregate amounts of maturities of all long-term debt for each of the
five years succeeding December 31, 1998 are as follows: 1999, $376.7; 2000,
$444.5; 2001, $379.7; 2002, $278.3 and 2003, $9.3.
<PAGE> 12
DANA LOGO
- --------------------------------------------------------------------------------
Under universal shelf registration statements filed in December 1997 and
December 1998, the Company was authorized to issue debt or equity securities, or
a combination thereof, in an aggregate amount not to exceed $1,350. In March
1998, the Company issued $200 of 7.0% unsecured notes due March 15, 2028 and
$150 of 6.5% unsecured notes due March 15, 2008.
NOTE 11. INTEREST RATE AGREEMENTS
- --------------------------------------------------------------------------------
The Company enters into interest rate agreements to manage interest rate
risk, thereby reducing exposure to future interest rate movements. Under
interest rate swap agreements, the parties agree to exchange, at specific
intervals, the difference between fixed rate and floating rate interest amounts
calculated by reference to an agreed notional amount. At December 31, 1998, DCC
was committed to receive an average variable rate of 5.24% and pay an average
fixed rate of 7.26% on notional amounts of $250. DCC's notional amounts of
interest rate swaps expire as follows: 1999, $60.0; 2000, $125.0; 2001, $30.0
and 2002, $35.0. Dana, exclusive of DCC, was not a party to any interest swap
agreements at December 31, 1998.
To reduce its interest rate obligations under a swap agreement having a
notional amount of $70.0, DCC had granted the counterparty an option, expiring
in 2000, to extend the original maturity to 2007 at a fixed rate to DCC of 9%.
This option, which had been marked to market, was terminated on June 30, 1998 by
payment of the recorded liability of $11.0 to the counterparty.
NOTE 12. STOCK OPTION PLANS
- --------------------------------------------------------------------------------
The Company's 1992 and 1997 Stock Option Plans provide for the granting
of options to designated employees at prices no less than 100% of the market
value at the date of grant. The options are exercisable for a period not to
exceed ten years from date of grant. The plans provide for the granting of stock
appreciation rights separately or in conjunction with all or any part of an
option, either at the time of grant or at any subsequent time during the term of
the option.
The following summarizes the stock option activity under these plans in
1996, 1997 and 1998:
<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at
December 31, 1995 6,695,544 $ 25.01
Granted - 1996 1,621,079 28.82
Exercised - 1996 (559,211) 19.87
Cancelled - 1996 (33,266) 29.68
- ------------------------------------------------------------------------------------------
Outstanding at
December 31, 1996 7,724,146 $ 26.15
Granted - 1997 2,258,199 37.96
Exercised - 1997 (1,627,188) 22.78
Cancelled - 1997 (127,549) 29.76
- ------------------------------------------------------------------------------------------
Outstanding at
December 31, 1997 8,227,608 $ 30.01
Granted - 1998 2,519,524 48.14
Exercised - 1998 (2,062,466) 25.17
Cancelled - 1998 (174,009) 35.89
- ------------------------------------------------------------------------------------------
Outstanding at
December 31, 1998 8,510,657 $ 36.43
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER OF REMAINING AVERAGE NUMBER OF AVERAGE
EXERCISE OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
PRICES OUTSTANDING LIFE IN YEARS PRICE EXERCISABLE PRICE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$11.02-$27.56 980,084 3.6 $22.37 980,084 $22.37
28.13- 37.52 3,909,864 7.2 31.80 3,326,564 32.45
38.44- 52.56 3,620,709 9.2 45.22 1,101,685 38.55
- -----------------------------------------------------------------------------------------------------------------------------
8,510,657 7.6 $36.43 5,408,333 $31.87
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1998, 637,212 shares were available for future grants.
No expense has been charged to income relating to these stock options.
If the fair value method of accounting for stock options prescribed by SFAS No.
123 had been used, the after-tax expense relating to the stock options would
have been $3.3 in 1996, $5.6 in 1997 and $11.8 in 1998. Pro forma net income and
earnings per share would have been as follows:
<TABLE>
<CAPTION>
1996 1997 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income $ 447.6 $ 314.5 $ 522.3
Basic EPS 2.81 1.93 3.16
Diluted EPS 2.79 1.91 3.13
</TABLE>
The above pro forma effect on net income might not be consistent with the
pro forma effect on net income that will be disclosed for future years because
it does not take into consideration pro forma compensation expense relating to
grants made prior to 1995.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes model with the following assumptions:
<TABLE>
<CAPTION>
1996 1997 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Risk-free interest rate 6.13 - 6.5% 6.1- 6.2% 4.24 - 5.52%
Dividend yield 2.5 - 3.0% 2.6% 2.21 - 2.87%
Expected life 5.4 - 5.5 years 5.3 years 5.4 years
Stock price volatility 20.5 - 27.3% 19.6 - 21.3% 30.1 - 33.7%
</TABLE>
The Company also has a Directors' Stock Option Plan for non-employee
directors. This plan provides for the automatic granting of options at prices
equal to the market value at the date of grant. The options are exercisable
after one year for a period not to exceed ten years from date of grant.
<PAGE> 13
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts
- -------------------------------------------------------------------------------
NOTE 12. STOCK OPTION PLANS (CONTINUED)
- -------------------------------------------------------------------------------
The following summarizes the stock option activity under this plan in
1996, 1997 and 1998:
<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at
December 31, 1995 63,000 $ 26.01
Granted - 1996 21,000 32.25
Exercised - 1996 (6,000) 26.56
Cancelled - 1996 (3,000) 24.81
- -----------------------------------------------------------------------------------------
Outstanding at
December 31, 1996 75,000 $ 27.76
Granted - 1997 24,000 31.81
- -----------------------------------------------------------------------------------------
Outstanding at
December 31, 1997 99,000 28.74
Granted - 1998 24,000 60.09
Exercised - 1998 (3,000) 24.25
- -----------------------------------------------------------------------------------------
Outstanding at
December 31, 1998 120,000 $ 35.12
- -----------------------------------------------------------------------------------------
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER OF REMAINING AVERAGE NUMBER OF AVERAGE
EXERCISE OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
PRICES OUTSTANDING LIFE IN YEARS PRICE EXERCISABLE PRICE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$24.25- $32.25 96,000 6.6 $28.88 96,000 $28.88
60.09- 60.09 24,000 9.3 60.09
- --------------------------------------------------------------------------------------------------------------------
120,000 7.1 $35.12 96,000 $28.88
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1998, 148,000 shares were available for future grants.
The non-employee directors of Echlin participated in the 1996
Non-Executive Director Stock Option Plan under which options for 232,325 shares
were authorized for issuance. Options were granted at market value at the date
of grant, were exercisable after one year and expire ten years from date of
grant, except in the event of the retirement or death of the director. During
1996, options to purchase 73,554 shares at $33.49 were granted at a
weighted-average price of $33.49 per share. Options for 2,974 shares were
cancelled in 1996. During 1997, options were granted to purchase 25,091 shares
at $37.93 per share; no options were exercised or cancelled. During 1998,
options to purchase 17,654 were exercised at $33.49. At December 31, 1998, there
were 78,017 options outstanding and exercisable at exercise prices ranging from
$33.49 to $37.93 per share with a weighted average exercise price of $34.92; the
weighted average remaining contractual life of options outstanding was 8.3
years.
NOTE 13. EMPLOYEES' STOCK PURCHASE PLAN
- --------------------------------------------------------------------------------
The majority of full-time U.S. and certain non-U.S. employees are
eligible to participate in Dana's Amended Employees' Stock Purchase Plan (SPP).
The SPP provides that participants may authorize Dana to withhold up to 15% of
their earnings and deposit such amounts with an independent custodian. The
custodian, as nominee for the participants, causes Dana common stock to be
purchased at prevailing market prices. The shares purchased are allocated to the
participants' accounts and upon request are distributed to the participants.
Under the SPP, Dana contributes on behalf of each participant up to 50%
of the participant's contributions. The Company's contributions will accumulate
over a five-year period, provided that the shares are left in the SPP. If any
shares are withdrawn by a participant before the end of five years, the amount
of the Company match toward those shares will depend on the period of time that
the shares have been in the SPP. The custodian has caused to be purchased
1,069,720 shares in 1996, 947,950 shares in 1997 and 874,272 shares in 1998 of
Dana's common stock on behalf of the employees and the Company's charge to
expense amounted to $6.3 in 1996, $7.4 in 1997 and $9.3 in 1998.
NOTE 14. ADDITIONAL COMPENSATION PLANS
- --------------------------------------------------------------------------------
Dana has numerous additional compensation plans, including gain sharing
and group incentive plans, which provide for payments computed under formulas
which recognize increased productivity and improved performance. The total
amount earned by Dana employees from all such plans amounted to $110.6, $134.9
and $119.2 in 1996, 1997 and 1998, respectively.
Under the Company's Additional Compensation Plan (ACP), in which certain
officers and other key employees participate, a percentage of participants'
compensation is accrued for additional compensation if certain profit levels are
attained. Awards under the ACP are paid in cash immediately or, at the
discretion of the Board's Compensation Committee, are deferred. Deferred awards
may be paid in cash, stock or a combination of both. Dana awarded (based on
prior period performance) $14.2 in 1996, $11.3 in 1997 and $13.5 in 1998; in
addition, 16,438, 7,074 and 1,143 shares of Dana's common stock were issued and
amounts equivalent to dividends and interest of $.7, $.9 and $1.4 were credited
to deferred awards in 1996, 1997 and 1998, respectively. Total charges to
expense relating to the ACP amounted to $13.2 in 1996, $20.4 in 1997 and $8.8 in
1998.
The Company also has the 1989 Restricted Stock Plan (RSP) whereby certain
key employees are granted restricted shares of common stock subject to
forfeiture until the restrictions lapse or terminate. With certain exceptions,
the employee must remain with the Company for a period of years after the date
of grant to receive the full number of shares granted. Shares granted in 1996,
1997 and 1998 were 25,000, 47,245 and 55,100, respectively. In 1997, the RSP was
amended to allow the participants to convert restricted stock into restricted
stock units under certain conditions. During 1997, 27,491 restricted shares were
converted to restricted units. The restricted units are payable in unrestricted
stock upon retirement or termination of employment. Total charges to expense for
the RSP amounted to $.8, $.9 and $1.3 in 1996, 1997 and 1998, respectively. At
December 31, 1998, 502,024 shares were authorized for future issuance under the
RSP.
<PAGE> 14
DANA CORPORATION
LOGO
- --------------------------------------------------------------------------------
NOTE 15. PENSION AND OTHER POSTRETIREMENT BENEFITS
- --------------------------------------------------------------------------------
Dana and certain of its subsidiaries provide defined contribution and
defined benefit, qualified and nonqualified, pension plans for employees. The
Company also provides other postretirement benefits, which include medical and
life insurance for certain employees upon retirement. The following tables
provide a reconciliation of the changes in the defined benefit pension plans'
and other postretirement plans' benefit obligations and fair value of assets
over the two-year period ended December 31, 1998, statements of the funded
status and schedules of the net amounts recognized in the balance sheet at
December 31, 1997 and 1998:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
1997 1998 1997 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reconciliation of benefit
obligation
Obligation at January 1 $ 2,114.8 $ 2,257.3 $ 851.9 $ 992.3
Service cost 60.8 70.7 13.5 17.7
Interest cost 149.4 152.9 66.8 70.0
Employee contributions 2.6 1.8 2.9 3.8
Plan amendments 30.8 17.8 1.6 2.2
Actuarial loss 111.5 78.6 100.9 62.8
Benefit payments (168.1) (177.7) (60.7) (68.0)
Settlement, curtailment
and terminations (20.6) (21.9) (11.9) (15.2)
Acquisitions and
divestitures (3.5) 5.8 28.4 18.4
Translation adjustments (20.4) (3.2) (1.1) (1.5)
- ---------------------------------------------------------------------------------------------------------------------
Obligation
at December 31 $ 2,257.3 $ 2,382.1 $ 992.3 $ 1,082.5
- ---------------------------------------------------------------------------------------------------------------------
Reconciliation of fair value
of plan assets
Fair value at January 1 $ 2,175.0 $ 2,507.0
Actual return
on plan assets 467.5 325.6
Acquisitions and
divestitures (26.1) 9.6
Employer contributions 78.4 50.4
Employee contributions 4.1 3.5
Benefit payments (159.4) (166.8)
Settlements (18.5) (18.2)
Translation adjustments (14.0) (8.2)
- ---------------------------------------------------------------------------------------------------------------------
Fair value
at December 31 $ 2,507.0 $ 2,702.9
- ---------------------------------------------------------------------------------------------------------------------
Funded Status
Balance at December 31 $ 249.7 $ 320.8 $ (992.3) $ (1,082.5)
Unrecognized
transition obligation 8.7 5.8
Unrecognized
prior service cost 80.8 72.0 (51.3) (30.7)
Unrecognized (gain) loss (345.1) (408.2) 154.4 210.8
- ---------------------------------------------------------------------------------------------------------------------
Accrued cost $ (5.9) $ (9.6) $ (889.2) $ (902.4)
- ---------------------------------------------------------------------------------------------------------------------
Amounts recognized in the balance sheet consist of:
Prepaid benefit cost $ 110.6 $ 116.9
Accrued benefit liability (126.1) (151.9) $ (889.2) $ (902.4)
Intangible assets 5.6 6.9
Accumulated other
comprehensive income 4.0 18.5
- ---------------------------------------------------------------------------------------------------------------------
Net amount recognized $ (5.9) $ (9.6) $ (889.2) $ (902.4)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Benefit obligations of the U.S. non-qualified and certain non-U.S. pension
plans, amounting to $81.4 at December 31, 1998, and the other postretirement
benefit plans are not funded.
The following table provides the components of net periodic benefit costs
for the plans for the years 1996, 1997 and 1998:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
1996 1997 1998 1996 1997 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 60.7 $ 60.8 $ 70.7 $ 11.2 $ 13.5 $ 17.7
Interest cost 144.4 149.5 152.9 58.7 66.8 70.0
Expected return
on plan assets (212.6) (190.0) (180.6)
Amortization of
transition obligation 2.6 2.6 3.8
Amortization of
prior service cost 17.1 15.9 16.3 (17.0) (8.1) (8.2)
Recognized net
actuarial (gain) loss 60.3 17.9 (8.5) 3.2 4.8
- -------------------------------------------------------------------------------------------------------------------------------
Net periodic
benefit cost 72.5 56.7 54.6 56.1 72.2 84.3
Curtailment
(gain) loss 3.2 4.0 (8.8) (19.3)
Settlement gain (3.1)
Termination
expenses 1.2 2.2
- -------------------------------------------------------------------------------------------------------------------------------
Net periodic
benefit cost after
curtailments and
settlements $ 72.5 $ 61.1 $ 57.7 $ 56.1 $ 63.4 $ 65.0
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The assumptions used in the measurement of pension benefit obligations
are as follows:
<TABLE>
<CAPTION>
U.S. PLANS
1996 1997 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5 - 8.25% 7 - 8% 6.75%
Expected return
on plan assets 8.5 - 10% 8.75 - 10% 8.75%
Rate of compensation
increase 4.31 - 5% 4.31 - 5% 4.31 - 5%
<CAPTION>
NON-U.S. PLANS
1996 1997 1998
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7 - 8.75% 5 - 8.5% 5 - 8%
Expected return
on plan assets 8 - 9.5% 7.5 - 9% 7.25 - 9%
Rate of compensation
increase 3 - 7.5% 2.5 - 7.5% 3.5 - 5%
</TABLE>
<PAGE> 15
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts
- --------------------------------------------------------------------------------
NOTE 15. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
The assumptions used in the measurement of other postretirement benefit
obligations are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.75% 7% 6.75%
Initial weighted health care
costs trend rate 7.8% 7.8% 7.5%
Ultimate health care
costs trend rate 5% 5% 5%
Years to ultimate 12 11 10
</TABLE>
Assumed health care costs trend rates have a significant effect on the
health care plan. A one-percentage-point change in assumed health care costs
trend rates would have the following effects for 1998:
<TABLE>
<CAPTION>
1% POINT 1% POINT
INCREASE DECREASE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and
interest cost components $ 6.8 $ (7.5)
Effect on postretirement benefit
obligations 79.2 (84.5)
</TABLE>
NOTE 16. BUSINESS SEGMENTS
- --------------------------------------------------------------------------------
Dana is organized into seven Strategic Business Units (SBU)
encompassing the Company's key markets. This structure allows Dana people in
each of these areas to focus their resources to the benefit of Dana and its
global customers.
The Automotive Systems Group (ASG) designs, develops and manufactures
"under the vehicle" products for passenger cars and light trucks. Its global,
full-service engineering provides its customers with complete modules and
systems. In the automotive market, the group is a leader in axles, constant
velocity joints and driveshafts, chassis and structural components and modules
and full Rolling Chassis(TM) systems.
The Automotive Aftermarket Group (AAG) provides more than 300,000 part
numbers to cover a vast array of aftermarket needs for brake and chassis
products, filtration products and engine systems.
The Engine Systems Group (ESG) provides its customers with complete
engine systems for fluid, sealing and power cylinder needs. Its products include
fluid systems, gaskets and other sealing products, piston rings, bearings,
liners and camshafts.
The Off-Highway Systems Group (OHSG) manufactures and markets
off-highway axles, powershift transmissions, transaxles, torque converters and
electronic controls, as well as hydraulic valves, pumps, motors, filters and
electronic components.
The Industrial Group (IG) manufactures a diverse range of components
and systems. Products include electric clutches, brakes, linear actuators,
motors, electronic controls, lighting controls and motion and voltage control
and conditioning products as well as industrial hoses, hydraulic and pneumatic
hoses, hose ends, valves and brass and steel tube fittings.
The Heavy Truck Group (HTG) serves the global market for class 6, 7 and
8 trucks. Products include heavy axles and brakes, drivetrain components, power
take-offs, trailer products and heavy systems modular assemblies.
Dana Commercial Credit (DCC) provides leasing and financing services to
a broad range of customers in selected markets around the world.
<PAGE> 16
DANA CORORATION
LOGO
- --------------------------------------------------------------------------------
Management evaluates the operating segments and regions as if DCC were
accounted for on the equity method of accounting. Information used to evaluate
the SBUs and regions is as follows:
<TABLE>
<CAPTION>
OPERATING NET NET CAPITAL DEPRECIATION/
1996 SALES PAT PROFIT ASSETS SPEND AMORTIZATION
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASG $ 3,706.0 $ 280.7 $ 217.2 $ 1,574.7 $ 164.0 $ 112.5
AAG 2,538.8 146.6 106.1 1,597.1 56.4 60.3
ESG 1,445.2 61.0 38.8 1,098.8 60.5 52.1
OHSG 569.4 10.6 2.0 312.4 20.6 23.4
IG 722.0 31.0 19.7 496.7 24.2 24.3
HTG 726.6 24.1 12.4 223.3 8.8 12.7
DCC 30.5 30.5 123.9
Other 1,270.8 (133.6) 24.2 451.4 53.7 36.3
- ----------------------------------------------------------------------------------------------------------------------------
Consolidated $ 10,978.8 $ 450.9 $ 450.9 $ 5,878.3 $ 388.2 $ 321.6
- ----------------------------------------------------------------------------------------------------------------------------
North America $ 8,340.8 $ 490.5 $ 359.0 $ 4,120.5 $ 233.8 $ 211.4
South America 621.6 39.0 27.7 549.3 55.9 41.2
Europe 1,744.3 58.9 31.3 1,047.4 73.4 58.9
Asia Pacific 245.7 1.8 (6.5) 176.4 11.0 10.1
DCC 30.5 30.5 123.9
Other 26.4 (169.8) 8.9 (139.2) 14.1
- ----------------------------------------------------------------------------------------------------------------------------
Consolidated $ 10,978.8 $ 450.9 $ 450.9 $ 5,878.3 $ 388.2 $ 321.6
- ----------------------------------------------------------------------------------------------------------------------------
1997
- ----------------------------------------------------------------------------------------------------------------------------
ASG $ 3,967.1 $ 293.3 $ 222.1 $ 1,660.7 $ 234.2 $ 121.6
AAG 2,634.6 114.6 70.7 1,612.3 72.6 67.7
ESG 1,960.4 87.9 56.0 1,463.4 103.4 76.4
OHSG 888.9 35.9 20.8 590.9 35.8 39.8
IG 736.2 36.6 24.7 433.3 23.3 23.3
HTG 801.6 30.6 17.3 219.8 17.9 12.8
DCC 31.2 31.2 138.6
Other 922.2 (160.9) 26.4 258.7 37.3 39.7
- ----------------------------------------------------------------------------------------------------------------------------
Total operations 11,911.0 469.2 469.2 6,377.7 524.5 381.3
Restructuring and
nonrecurring items (149.1) (149.1)
- ----------------------------------------------------------------------------------------------------------------------------
Consolidated $ 11,911.0 $ 320.1 $ 320.1 $ 6,377.7 $ 524.5 $ 381.3
- ----------------------------------------------------------------------------------------------------------------------------
North America $ 9,082.9 $ 539.6 $ 390.6 $ 4,402.6 $ 309.0 $ 243.1
South America 733.8 51.1 37.0 646.4 59.0 44.0
Europe 1,832.1 42.3 10.6 1,167.4 126.1 79.6
Asia Pacific 243.9 4.8 (3.8) 148.3 14.5 10.1
DCC 31.2 31.2 138.6
Other 18.3 (199.8) 3.6 (125.6) 15.9 4.5
- ----------------------------------------------------------------------------------------------------------------------------
Total operations 11,911.0 469.2 469.2 6,377.7 524.5 381.3
Restructuring and
nonrecurring items (149.1) (149.1)
- ----------------------------------------------------------------------------------------------------------------------------
Consolidated $ 11,911.0 $ 320.1 $ 320.1 $ 6,377.7 $ 524.5 $ 381.3
- ----------------------------------------------------------------------------------------------------------------------------
1998
- ----------------------------------------------------------------------------------------------------------------------------
ASG $ 4,267.8 $ 328.0 $ 251.6 $ 1,856.7 $ 220.5 $ 131.4
AAG 2,761.5 151.7 108.2 1,592.8 84.2 64.4
ESG 2,013.4 91.1 58.0 1,951.1 106.3 91.5
OHSG 898.3 47.4 31.5 554.3 44.4 36.6
IG 712.0 39.9 28.5 424.7 27.0 24.2
HTG 1,629.0 88.8 62.8 626.2 42.2 36.0
DCC 34.2 34.2 122.2
OTHER 181.6 (190.4) 15.9 (142.2) 29.9 11.8
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATIONS 12,463.6 590.7 590.7 6,985.8 554.5 395.9
RESTRUCTURING AND
NONRECURRING ITEMS (56.6) (56.6)
- ----------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED $ 12,463.6 $ 534.1 $ 534.1 $ 6,985.8 $ 554.5 $ 395.9
- ----------------------------------------------------------------------------------------------------------------------------
NORTH AMERICA $ 9,630.2 $ 642.8 $ 490.6 $ 4,907.5 $ 341.1 $ 259.8
SOUTH AMERICA 779.3 29.7 14.5 776.6 61.1 40.1
EUROPE 1,844.3 66.6 33.2 1,355.2 116.3 85.8
ASIA PACIFIC 183.9 0.7 (7.4) 138.5 12.5 7.7
DCC 34.2 34.2 122.2
OTHER 25.9 (183.3) 25.6 (314.2) 23.5 2.5
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATIONS 12,463.6 590.7 590.7 6,985.8 554.5 395.9
RESTRUCTURING AND
NONRECURRING ITEMS (56.6) (56.6)
- ----------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED $ 12,463.6 $ 534.1 $ 534.1 $ 6,985.8 $ 554.5 $ 395.9
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 17
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts
- --------------------------------------------------------------------------------
NOTE 16. BUSINESS SEGMENTS (CONTINUED)
- --------------------------------------------------------------------------------
With the exception of DCC, operating PAT represents earnings before
interest and taxes (EBIT), tax effected at 41% (Dana's long-term effective
rate), plus equity in earnings of affiliates. The Other category includes
discontinued businesses, trailing liabilities for closed plants, SBU and
regional administrative expenses, interest expense net of interest income and
corporate expenses and adjustments to reflect the effective tax rate. In
arriving at net profit from operating PAT, expenses relating to a specific SBU
or region are allocated directly. Other allocations are based on sales.
Net assets at the SBU and regional level is intended to correlate with
invested capital. It includes accounts receivable, inventories (on a first-in,
first-out basis), net property, plant and equipment, investments in affiliates,
goodwill, trade accounts payable and 2% of annualized sales as an assumption for
cash and prepaid expense. At the total operating level, cash is adjusted to
reflect actual.
DCC is evaluated based upon numerous criteria of which net income and net
equity shown above are the major items.
Restructuring and nonrecurring items consist of the restructuring and
integration charges discussed in Note 23 and gains on sales of business
discussed in Note 22 as well as other nonrecurring charges.
Sales by region are based upon location of the entity recording the sale.
Sales from the U.S. amounted to $7,819.9 in 1996, $8,412.5 in 1997 and $8,783.9
in 1998. No other country's sales exceeded 10% of total sales. U.S long-lived
assets were $1,342.6 in 1996, $1,485.2 in 1997 and $1,712.6 in 1998. No other
country's long-lived assets exceeded 10% of total long-lived assets.
Net operating assets differ from consolidated assets as follows:
<TABLE>
<CAPTION>
1996 1997 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net operating assets $ 5,878.3 $ 6,377.7 $ 6,985.8
Accounts payable 643.1 760.2 989.6
DCC's assets in excess of equity 1,545.3 1,722.3 1,345.0
Non-trade receivables
and other assets 250.2 460.8 598.9
Intangible pension
and other long-term assets 205.5 190.1 218.2
- -------------------------------------------------------------------------------------------------------------
Consolidated assets $ 8,522.4 $ 9,511.1 $ 10,137.5
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The difference between operating capital spend and depreciation shown
above and purchases of property, plant and equipment and depreciation shown on
the cash flow statement represents the method of measuring DCC for operating
purposes. DCC's capital spend and depreciation are not included above. In
addition, DCC purchases equipment and leases the equipment to the operating
SBUs. These operating leases are included in the consolidated statements as
purchases of assets and depreciated over their useful life.
Export sales from the U.S. to customers outside the U.S. amounted to
$736.4 in 1996, $766.2 in 1997 and $756.3 in 1998. Total export sales (including
sales to Dana's non-U.S. subsidiaries which are eliminated for financial
statement presentation) were $957.7, $1,060.3 and $1,000.5 in 1996, 1997 and
1998, respectively.
Worldwide sales to Ford Motor Company and subsidiaries amounted to
$1,528.2, $1,757.1 and $1,910.8 in 1996, 1997 and 1998, respectively, which
represented 14%, 15% and 15% of Dana's consolidated sales. Sales to
DaimlerChrysler AG and subsidiaries in 1996, 1997 and 1998 amounted to $1,161.4,
$1,269.4 and $1,601.5, respectively, representing 11%, 11% and 13% of Dana's
consolidated sales. Sales to Ford were primarily from the Company's ASG and ESG
segments, while sales to DaimlerChrysler were primarily from the ASG, HTG and
ESG segments. No other customer accounted for more than 10% of Dana's
consolidated sales.
NOTE 17. ESTIMATED INCOME TAXES
- -------------------------------------------------------------------------------
Income tax expense (benefit) consists of the following components:
<TABLE>
<CAPTION>
Year Ended December 31
1996 1997 1998
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
U.S. Federal $ 62.0 $ 167.1 $ 140.0
U.S. state and local 30.9 48.0 45.9
Non-U.S 25.7 107.6 73.9
- -------------------------------------------------------------------------------------
118.6 322.7 259.8
- -------------------------------------------------------------------------------------
Deferred
U.S. Federal 99.4 16.9 43.4
Non-U.S 20.5 (45.8) 12.4
- -------------------------------------------------------------------------------------
119.9 (28.9) 55.8
- -------------------------------------------------------------------------------------
Total expense $ 238.5 $ 293.8 $ 315.6
- -------------------------------------------------------------------------------------
</TABLE>
Deferred tax benefits (liabilities) consist of the following:
<TABLE>
<CAPTION>
December 31
1996 1997 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Postretirement benefits
other than pensions $ 362.4 $ 351.4 $ 386.4
Postemployment benefits 47.3 55.2 38.0
Expense accruals 116.1 198.9 144.3
Inventory reserves 24.7 42.0 27.9
Net operating loss carryforwards 39.0 46.3 122.6
Valuation allowances (4.8) (30.4) (59.2)
Other 39.0 58.7 30.1
Other employee benefits 7.2 6.3 16.3
- ----------------------------------------------------------------------------------
Deferred tax benefits 630.9 728.4 706.4
- ----------------------------------------------------------------------------------
Depreciation - non-leasing (233.2) (195.1) (179.0)
Leasing activities (299.0) (357.6) (383.5)
Pension accruals (13.7) (27.5) (22.7)
Other (28.0) (8.7) (11.1)
- ----------------------------------------------------------------------------------
Deferred tax liabilities (573.9) (588.9) (596.3)
- ----------------------------------------------------------------------------------
Net deferred tax benefits $ 57.0 $ 139.5 $ 110.1
- ----------------------------------------------------------------------------------
</TABLE>
<PAGE> 18
DANA CORPORATION
LOGO
Worldwide, Dana has operating loss carryforwards of approximately $357 with
lives ranging from one year to an indefinite period. Valuation allowances are
provided for deferred benefits if the realization of the benefits is uncertain.
In 1997 and 1998, the Company increased the valuation allowance by $25.6 and
$28.8, respectively, to reflect uncertainties related to specific loss
carryforwards. Net benefits recognized for loss carryforwards generally relate
to the U.S., where the Company has traditionally been a taxpayer, and Germany
and Brazil, where operating losses may be carried forward indefinitely.
Income taxes paid during 1996, 1997 and 1998 amounted to $142.9, $264.6 and
$228.1, respectively.
The effective income tax rate differs from the U.S. Federal income tax rate
for the following reasons:
<TABLE>
<CAPTION>
Year Ended December 31
1996 1997 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal income tax rate 35.0% 35.0% 35.0%
Increases (reductions) resulting from:
State and local income taxes, net
of Federal income tax benefit 2.8 4.5 3.6
Non-U.S. income (3.9) 8.1 (1.1)
Capital loss utilization (.2) (.9)
Investment tax credits (.2) (.3) (.4)
Amortization of goodwill .4 3.6 .5
Miscellaneous items (.3) (1.4) .9
- --------------------------------------------------------------------------------------------------------------------------------
Effective income tax rate 33.6% 48.6% 38.5%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 18. COMPOSITION OF CERTAIN BALANCE SHEET AMOUNTS
- --------------------------------------------------------------------------------
The following items comprise the net amounts indicated in the respective
balance sheet captions:
<TABLE>
<CAPTION>
December 31
1997 1998
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS
<S> <C> <C>
Goodwill $ 863.0 $ 1,063.8
Investments at equity 199.8 303.7
Marketable securities, cost of $70.6 - 1997
and $54.5 - 1998 80.9 58.4
Loans receivable 79.0 32.7
Other 150.6 186.2
- --------------------------------------------------------------------------------------------------------------------------------
$ 1,373.3 $ 1,644.8
- --------------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET
Land and improvements to land $ 128.3 $ 163.5
Buildings and building fixtures 1,006.5 1,122.7
Machinery and equipment 4,166.2 4,479.1
- --------------------------------------------------------------------------------------------------------------------------------
5,301.0 5,765.3
Less: Accumulated depreciation 2,524.3 2,461.5
- --------------------------------------------------------------------------------------------------------------------------------
$ 2,776.7 $ 3,303.8
- --------------------------------------------------------------------------------------------------------------------------------
DEFERRED EMPLOYEE BENEFITS
AND OTHER NONCURRENT LIABILITIES
Postretirement other than pension $ 826.7 $ 838.9
Deferred income tax 22.7 137.4
Pension 77.5 91.9
Postemployment 81.9 81.9
Compensation 33.6 50.7
Other noncurrent liabilities 128.9 136.7
- --------------------------------------------------------------------------------------------------------------------------------
$ 1,171.3 $ 1,337.5
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT IN LEASES
Direct financing leases $ 665.8 $ 117.5
Leveraged leases 655.3 702.6
Property on operating leases,
net of accumulated depreciation 61.6 81.2
Allowance for credit losses (52.6) (32.7)
- --------------------------------------------------------------------------------------------------------------------------------
1,330.1 868.6
Less: Current portion 254.3 16.7
- --------------------------------------------------------------------------------------------------------------------------------
$ 1,075.8 $ 851.9
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The components of the net investment in direct financing leases are as
follows:
<TABLE>
<CAPTION>
December 31
1997 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total minimum lease payments $ 743.7 $ 137.7
Residual values 89.5 34.8
Deferred initial direct costs 15.5 2.3
- --------------------------------------------------------------------------------------------------------------------------------
848.7 174.8
Less: Unearned income 182.9 57.3
- --------------------------------------------------------------------------------------------------------------------------------
$ 665.8 $ 117.5
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The components of the net investment in leveraged leases are as follows:
<TABLE>
<CAPTION>
December 31
1997 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Rentals receivable $ 5,280.4 $ 5,464.6
Residual values 865.2 755.3
Nonrecourse debt service (4,629.1) (4,627.2)
Unearned income (849.0) (878.6)
Deferred investment tax credit (12.2) (11.5)
- --------------------------------------------------------------------------------------------------------------------------------
655.3 702.6
Less: Deferred taxes arising
from leveraged leases 303.7 337.3
- --------------------------------------------------------------------------------------------------------------------------------
$ 351.6 $ 365.3
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following is a schedule, by year, of total minimum lease payments
receivable on direct financing leases as of December 31, 1998:
<TABLE>
<CAPTION>
Year Ending December 31:
<S> <C>
1999 $ 23.9
2000 21.8
2001 18.5
2002 14.6
2003 11.5
Later years 47.4
- -----------------------------------------------------------------
Total minimum lease payments receivable $ 137.7
- -----------------------------------------------------------------
</TABLE>
NOTE 19. FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
The estimated fair values of Dana's financial instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1998
Carrying Fair CARRYING FAIR
Amount Value AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets
Cash and
cash equivalents $ 422.7 $ 422.7 $ 230.2 $ 230.2
Loans receivable (net) 168.8 168.9 116.6 118.8
Financial liabilities
Short-term debt 1,255.6 1,255.6 1,321.4 1,321.4
Long-term debt 2,227.2 2,352.8 2,094.6 2,280.9
Security deposits - leases 16.1 14.7 5.6 5.2
Deferred funding commitments
under leveraged leases 4.9 5.0 4.3 4.2
Interest rate-based option 9.9 9.9
Unrecognized financial
instruments, net (9.6) (9.9)
</TABLE>
<PAGE> 19
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts
- --------------------------------------------------------------------------------
NOTE 20. COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
At December 31, 1998, the Company had purchase commitments for property,
plant and equipment aggregating approximately $156.1. Future minimum rental
commitments under operating leases aggregated $337.7 at December 31, 1998, with
rental payments during the five succeeding years of: 1999, $74.7; 2000, $63.0;
2001, $47.6; 2002, $36.5 and 2003, $34.3. Net rental expense amounted to $115.2,
$115.8 and $119.1 for 1996, 1997 and 1998, respectively.
The Company and its consolidated subsidiaries are parties to various
pending judicial and administrative proceedings arising in the ordinary course
of business. These include, among others, proceedings based on product liability
claims and alleged violations of various environmental laws.
Management and its legal counsel periodically review the probable outcome
of pending 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 accruals for uninsured liabilities. While the outcome
of pending proceedings cannot be predicted with certainty, management believes,
based on these reviews and the information currently available, that any
liabilities that may result from these proceedings are not reasonably likely to
have a material effect on the Company's liquidity, financial condition or
results of operations.
NOTE 21. ACQUISITIONS
- --------------------------------------------------------------------------------
During 1996, Dana acquired Thompson Ramco Argentina S.A. (Thompson), J.B.
Morgan and Co. Pty., Ltd. (Morgan), James N. Kirby Pty., Ltd., (Kirby),
Thermoplast+Apparatebau GmbH (Thermoplast), Nobel Plastiques SA (Nobel), Long
Manufacturing Ltd. (Long) and Industrias Orlando Stevaux Ltda. (Stevaux) and a
majority interest in Centrust S.A. (Centrust). Thompson is an Argentine company
which manufactures and distributes chassis parts and piston rings. Morgan and
Kirby are both Australian manufacturers of filters. Morgan produces oil, air and
fuel filters for automobiles while Kirby produces radial and panel air filters
for automobiles and medium-duty trucks. Thermoplast is a German manufacturer of
high-precision injection-molded plastic components and systems for automotive
applications. Nobel, located in France and Spain, manufactures fluid, hydraulic
and pneumatic servo control lines. Long, headquartered in Canada, manufactures
and distributes motor vehicle heat exchange products and air-conditioning
evaporators. Stevaux, a Brazilian company, manufactures gaskets and oil seals.
Centrust, also an Argentine company, manufactures modular systems, brakes and
structural components. Dana acquired a 70% interest in Centrust while 100% of
all other companies was purchased. Also during 1996, Dana completed the
acquisition of the light axle manufacturing business of Rockwell do Brasil, an
indirect subsidiary of Rockwell International.
These acquisitions were accounted for as purchases and the results of
their operations have been included in the consolidated financial statements
since the dates of acquisition. The purchase price and the results of operations
of these companies prior to acquisition were not material to the consolidated
financial statements.
In 1997, Dana acquired the piston ring and cylinder liner operations of
SPX Corporation (SPD), the assets of Clark-Hurth Components (CH) from
Ingersoll-Rand, the North American Aftermarket division of ITT Automotive (ITT),
the Brazilian engine components business of Industria e Commercio Brosol Ltda.
(Brosol), a 75% share of Wix Filtron Sp.zo.o and 50% of the shares of Estampados
Argentina S.A. (EASA), bringing Dana's effective ownership in this affiliate to
85%. SPD manufactures and sells piston rings and cylinder liners primarily for
internal combustion engines. CH manufactures and sells transmissions and axles
for use in off-highway vehicles and equipment. ITT manufactures and distributes
motor vehicle brake system parts. Brosol produces motor-vehicle fuel system
parts. Wix Filtron is a Polish manufacturer of filtration products and EASA is
an Argentine manufacturer of heavy-duty structural components.
These acquisitions were accounted for as purchases and the results of
their operations have been included in the consolidated financial statements
since the dates of acquisition. Sales in 1997 were $704 higher than 1996 as a
result of acquisitions and total assets of companies acquired in 1997 amounted
to $819.
In 1998, Dana acquired the heavy axle and brake business of Eaton
Corporation; General Automotive Specialty Company, Inc. (GAS); a 98-percent
share of the capital of Nakata S.A. Industria e Comercio (Nakata); full
ownership of SIMESC-Parish, its Brazilian structural components manufacturing
company; the Glacier Vandervell Bearings Group and the AE Clevite North American
non-bearing aftermarket engine hard parts business. GAS manufactures motor
switches and locks. SIMESC-Parish, which has been renamed Dana Parish Produtos
Estruturais, S.A., produces a range of structural products, including full
frames and heavy-truck side rails. Nakata and its subsidiaries are the leading
Brazilian manufacturers of suspension components, such as tie rods and ball
joints. Glacier Vandervell produces and distributes products used in passenger
car and light-duty vehicle applications for both original equipment
manufacturers and the aftermarket. The AE Clevite business includes products
such as camshafts, valves and other valvetrain, timing and cylinder components.
These acquisitions were accounted for as purchases and the results of
their operations have been included in the consolidated financial statements
since the dates of acquisition. Sales in 1998 were $784 higher than 1997 as a
result of acquisitions and total assets of companies acquired in 1998 amounted
to $980.
In 1996, Dana acquired Flexon, Inc., a U.S. manufacturer of fuel filters;
Plains Plastics Inc., a custom plastic extruder located in Kansas; Moto Mirror
Inc., a manufacturer of remote-control mirrors for medium and heavy duty trucks
located in Texas; and Iroquois Tool Systems Inc., a brake manufacturer located
in Pennsylvania. All four transactions were accounted for as poolings of
interests. Prior years' financial statements have not been restated since the
amounts are not material to the consolidated financial statements.
As indicated in Note 2, Dana completed a merger with Echlin in July 1998.
The merger was accounted for as a pooling of interests and accordingly all prior
period consolidated financial statements have been restated to reflect the
combined results of operations, financial position and cash flows.
<PAGE> 20
[DANA LOGO]
- --------------------------------------------------------------------------------
NOTE 22. DIVESTITURES
- --------------------------------------------------------------------------------
In October 1996, Dana sold certain assets of Sensor Engineering, a
division that manufactured cards and readers for access control systems,
resulting in a gain of $5.
In March 1997, Dana completed the sale of its automotive warehouse
distribution business in the United Kingdom, the Netherlands and Portugal. In
August 1997, the sales of Dana's worldwide vehicular clutch operations and its
Preferred Plastic Sheet Division were completed. In September 1997, the
automotive transmission operations were sold to a subsidiary of Dana's 49%-owned
Mexican affiliate, Spicer S.A. de C.V, and the sale of Ace Electric, a producer
of starting and charging parts for engine systems, was completed. In October
1997, the Company sold its flat rubber products operations. In November 1997,
Dana completed the sales of its 49% interest in Korea Spicer Corporation and the
assets of automotive parts distributors Echlin Australia Pty. Ltd. and WAWD-EAP.
In December 1997, as part of the rationalization plan announced in the first
quarter, Dana completed the sale of its automotive warehouse distribution
operation in France. Net gains recorded on these sales totaled $147. These
operations contributed sales of $763 in 1996; through the dates of divestiture,
1997 sales for these operations totaled $385.
In February 1998, Dana completed the sale of its hydraulic brake hose
facilities in Columbia City, Ind., and Garching, Germany. In April 1998, the
Company sold its Midland-Grau heavy duty brake operations. In June 1998, Dana
completed the sale of its hydraulic cylinder business. In December 1998, DCC
completed the sale of its Technology Leasing Group portfolio resulting in an
after-tax gain of $76. These operations contributed sales of $471 in 1997;
through the dates of divestiture, 1998 sales for these operations totaled $140.
NOTE 23. RESTRUCTURING OF OPERATIONS
- --------------------------------------------------------------------------------
Dana initiated various restructuring plans in 1997. The cost of these
plans included a charge of $254 at former Echlin facilities. This charge related
to facility realignments and rationalizations associated with closing or
consolidating 14 locations, writing down to net realizable value the assets of
six operations to be divested, writing off goodwill that had no future value and
writing down certain joint venture investments in Europe and Asia. The estimated
workforce reduction was 1,214 people. Other charges taken include a charge of
$36 to initiate a rationalization plan at Dana's Perfect Circle Europe
operations, resulting in a workforce reduction of 368 people; a charge of $39
relating to rationalizing Dana's Reading, Pennsylvania structural components
plant, with an expected workforce reduction of 1,140 people; a charge of $20 to
reduce deferred income tax benefits that were anticipated to be realized from
operating losses in France; a charge of $14 relating to the closure of Dana's
Vimercate, Italy plant, with an anticipated workforce reduction of 120 people;
and $54 relating to downsizing or closing various facilities and exiting several
unprofitable lines of business, with an estimated workforce reduction of 440
people. Of the $417 of charges outlined above, $59 was charged to cost of sales,
$30 to income tax expense and $328 to restructuring.
In the fourth quarter of 1998, Dana finalized its synergy plans for
integrating the operations of Echlin into Dana's businesses and recorded
restructuring and integration charges of $138. Of this amount $118 was charged
to restructuring and $20, for writing down inventory, was charged to cost of
sales. The announced restructuring and integration plans include the closing of
eight facilities (seven in the AAG and one in the ESG) which will result in a
reduction of approximately 2,450 people.
The following summarizes the restructuring charges and activity recorded
in 1997 and 1998:
<TABLE>
<CAPTION>
Charges Activity ACCRUED AT
------- -------- DECEMBER 31,
1997 1998 TOTAL 1997 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Employee termination
benefits $ 96 $ 65 $ 161 $ (8) $ (37) $ 116
Impairment of
long-lived assets 41 40 81 (11) (70)
Impairment of net
investment in
operations to be sold 102 102 (40) (62)
Write-down of goodwill
and intangibles 89 89 (89)
Other 13 13 (2) 11
- ------------------------------------------------------------------------------------------------------------------------------
Total charges $ 328 $ 118 $ 446 $ (148) $ (171) $ 127
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Employee separations related to the 1997 restructuring charges were 711
in 1997 and 2,292 in 1998.
At December 31, 1998, $127 of restructuring charges remained in accrued
liabilities. This balance was comprised of $116 for the reduction of
approximately 2,740 employees to be completed in 1999 and $11 for lease
termination and other exit costs. The estimated annual cash expenditures will be
approximately $103 in 1999, $17 in 2000 and $7 thereafter. 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 from these realignment
strategies.
NOTE 24. NONCASH INVESTING AND FINANCING ACTIVITIES
- --------------------------------------------------------------------------------
In leveraged leases, the issuance of nonrecourse debt financing, and
subsequent repayments thereof, is transacted between the lessees and lending
parties to the transactions. During 1996, 1997 and 1998, $452.9, $388.5 and
$224.8 of nonrecourse debt was issued to finance leveraged leases and $80.9,
$158.4 and $182.0 of nonrecourse debt obligations were repaid, respectively.
In 1996 and in 1997, in addition to cash contributions, 1,000,000 shares
of Dana common stock, with a market value of $31.1 in 1996 and $31.8 in 1997,
were contributed to the Dana Corporation Pension Plans Trust.
<PAGE> 21
DANA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
in millions
- --------------------------------------------------------------------------------
STRATEGIC INITIATIVES
Dana followed 1997 with even more strategic activities in 1998,
completing the three largest acquisitions in its history. These acquisitions
added a seventh Strategic Business Unit and two new core products. Dana also
divested four non-core businesses, continuing its focus on core products.
- - January -- Dana acquired the heavy axle and brake business of Eaton
Corporation and General Automotive Specialty Company, Inc., a manufacturer
of motor vehicle switches and locks.
- - February -- Dana completed the sale of its hydraulic brake hose facilities
and acquired the remaining 40% interest in SIMESC-Parish, its Brazilian
structural components manufacturing company.
- - April -- Dana acquired 98% of the equity of Nakata S.A. Industria e
Comercio and sold its Midland-Grau heavy duty brake operations.
- - June -- Dana completed the sale of its hydraulic cylinder business.
- - July-- The merger with Echlin was completed. The merger was accounted for
as a pooling of interests and the consolidated financial statements for all
prior periods have been restated to show the combined results of
operations, financial position and cash flows of Dana and Echlin.
- - December-- Dana acquired the Glacier Vandervell Bearings Group and AE
Clevite North American aftermarket engine hard parts business from
Federal-Mogul Corporation. Also, Dana Credit Corporation (DCC) completed
the sale of its Technology Leasing Group portfolio.
In addition, Dana finalized and began to implement its synergy plans for
integrating the Echlin operations into Dana's businesses, as discussed below
under "Restructuring and Integration Expenses."
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities in 1998 was $796, $133 below
the record level in 1997. The decrease was attributable to increased working
capital requirements, partially offset by higher net income and depreciation and
amortization expenses.
Net cash used in investing activities in 1998 was $734, $143 less than in
1997. The acquisitions previously described used cash of $829. Divestitures of
non-core businesses provided cash of $1,039, $549 more than 1997.
NET CASH FLOWS
FROM OPERATING
ACTIVITIES
1996 1997 1998
$903 $929 $796
Capital expenditures were a record $661 in 1998, reflecting Dana's growth
strategy in its core businesses and ongoing commitment to product improvement
through research and technology. Capital spending in 1999 is anticipated to be
approximately 10% higher than in 1998. DCC's net purchases of leased assets
(purchases less principal payments) were $54 in 1998, $7 lower than in 1997.
CAPITAL SPENDING
1996 1997 1998
$469 $579 $661
Financing activities in 1998 used net cash of $254. Dana's net debt
position (short- and long-term debt less cash and cash equivalents) on December
31 was $126 more than in 1997. Total consolidated debt decreased $67, while cash
and cash equivalents declined $193. At the end of 1997, cash was held to fund
the January acquisitions previously mentioned. The fourth quarter acquisition of
Glacier Vandervell and AE Clevite increased short-term debt. Proceeds from DCC's
sale of the Technology Leasing Group portfolio were used to pay down short-term
debt.
NET DEBT POSITION
1996 1997 1998
$2,916 $3,060 $3,186
Universal shelf registration statements filed in 1997 and 1998 allow Dana
to issue debt and/or common stock up to an aggregate of $1,350. In March 1998,
Dana issued $200 of 7.0% unsecured notes due March 15, 2028 and $150 of 6.5%
unsecured notes due March 15, 2008. The proceeds were used to pay down existing
short- and medium-term debt. Dana expects to issue additional unsecured senior
debt in the first quarter of 1999. The proceeds will be used to refinance the
bridge financing, which was arranged for the Glacier Vandervell and AE Clevite
acquisitions, as well as pay down short-term debt.
Cash dividends of $198 were paid in 1998. Dividends have been paid for
244 consecutive quarters, with an annualized 1998 year-end dividend rate of
$1.16 per share, a 7% increase over the 1997 year-end rate.
Committed and uncommitted bank lines enable Dana to issue commercial
paper and make direct bank borrowings. Excluding DCC, Dana had committed and
uncommitted borrowing lines of credit totaling approximately $1,752 at year end
1998, while DCC's lines were $688. Dana expects that its strong cash flows from
operations, together with its worldwide credit facilities, will provide adequate
liquidity to meet its debt service obligations, projected capital expenditures,
working capital requirements and potential acquisition obligations.
<PAGE> 22
DANA CORPORATION
LOGO
- --------------------------------------------------------------------------------
Liabilities that may result from the legal proceedings (including those
involving product liability claims and alleged violations of environmental laws)
to which Dana and its subsidiaries were parties as of December 31, 1998 were
reviewed and management does not believe that these liabilities or the related
cash flows are reasonably likely to have a material adverse effect on Dana's
liquidity, financial condition or results of operations. Contingent
environmental and product liabilities were estimated based on the most probable
method of remediation or outcome, current laws and regulations and existing
technology. Estimates were made on an undiscounted basis and exclude the effects
of inflation. When there was a range of equally probable remediation methods or
outcomes, Dana accrued at the lower end of the range. At December 31, 1998:
- - $38 was accrued for contingent product liability costs and $57 for
contingent environmental liability costs, compared to $50 and $61 in 1997,
respectively
- - $17 was recorded (as assets) for probable recoveries from insurance or
third parties for product liability claims and $1 for environmental
liability claims, compared to $29 and $10 in 1997. Lower expenses incurred
in 1998, net of payments received, resulted in the reduction for product
liability claims. Payments from insurance and other third parties in 1998
caused the decrease in the environmental liability claims
- - The difference between the minimum and maximum estimates for contingent
liabilities was $15 for product liability claims and $2 for environmental
liability claims, which was unchanged from 1997 and is not considered
material
RESTRUCTURING AND INTEGRATION EXPENSES
In the fourth quarter of 1998, Dana finalized its synergy plans for
integrating the Echlin operations into Dana's businesses and announced
restructuring and integration plans that include the closing of eight facilities
(seven in the Automotive Aftermarket Group and one in the Engine Systems Group).
These plans will result in a reduction of approximately 2,450 people. Dana
recorded restructuring and integration charges of $138. Of this amount $118 was
charged to restructuring and $20, for writing down inventory, was charged to
cost of sales.
In 1997, Dana initiated various restructuring plans resulting in the
following charges:
- - $254 at former Echlin facilities related to facility realignments and
rationalizations resulting in a workforce reduction of 1,214 people,
writing down to net realizable value the assets of businesses to be
divested, writing off goodwill that had no future value and writing down
certain joint venture investments in Europe and Asia
- - $36 related to the initiation of a rationalization plan at the Perfect
Circle Europe operations, resulting in a workforce reduction of 368 people
- - $39 related to the rationalization of the Reading, Pennsylvania structural
components plant, with an expected workforce reduction of 1,140 people
- - $20 to reduce deferred income tax benefits that were anticipated to be
realized from operating losses in France
- - $14 relating to the closure of the Vimercate, Italy plant, with an
anticipated workforce reduction of 120 people
- - $54 relating to the downsizing or closing of various facilities and exiting
several unprofitable lines of business, with an estimated workforce
reduction of 440 people
These charges totaled $417, of which $328 was charged to restructuring,
$59 to cost of sales and $30 to income tax expense.
It is anticipated that an additional $51 will be charged to restructuring
and integration expense in 1999, including $10 for severance costs for
approximately 550 people due to additional facility closures and rationalization
programs that had not been announced at the end of 1998 and $41 for training,
relocation and other costs relating to the consolidation of operations.
Estimated pre-tax savings from the restructuring and integration charges
recorded in 1997 and 1998 and planned for 1999 will be $216 in 1999 and $378 in
2000.
The following summarizes the restructuring charges and activity recorded
in 1997 and 1998:
<TABLE>
<CAPTION>
Charges Activity ACCRUED AT
------- -------- DECEMBER 31,
1997 1998 TOTAL 1997 1998 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Employee termination
benefits $ 96 $ 65 $ 161 $ (8) $ (37) $ 116
Impairment of
long-lived assets 41 40 81 (11) (70)
Impairment of net
investment in
operations to be sold 102 102 (40) (62)
Write-down of goodwill
and intangibles 89 89 (89)
Other 13 13 (2) 11
- ----------------------------------------------------------------------------------------------------------------------------
Total charges $ 328 $ 118 $ 446 $ (148) $ (171) $ 127
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Employee separations related to the 1997 restructuring charges were 711
in 1997 and 2,292 in 1998.
At December 31, 1998, $127 of restructuring charges remained in accrued
liabilities. This balance was comprised of $116 for the reduction of
approximately 2,740 employees to be
<PAGE> 23
DANA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
in millions
- --------------------------------------------------------------------------------
completed in 1999 and $11 for lease terminations and other exit costs. The
estimated cash expenditures will be approximately $103 in 1999, $17 in 2000 and
$7 thereafter. 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 from these realignment strategies.
IMPACT OF YEAR 2000
Dana has a Year 2000 readiness program for assessing its products and its
critical information technology (IT) and non-IT systems, including those systems
which interface with major customers, suppliers and other third parties. The
program is under the leadership of Dana's Global Year 2000 Readiness Team, which
includes Year 2000 Project Managers for each Strategic Business Unit and
geographic region. PricewaterhouseCoopers LLP has been engaged to assist the
Team with methodology, training and data collection tools. In large part, Dana
is using assessment tools developed by the Automotive Industry Action Group, an
industry trade association.
The Glacier Vandervell and AE Clevite operations that were acquired in
December 1998 are still being reviewed, but Dana expects to incorporate them
into the Year 2000 program schedule without difficulty.
Otherwise, Dana has completed its global product review and not found any
significant readiness problems with respect to its products.
Dana has also completed the inventory and assessment of its internal IT
and non-IT systems (business, operating and factory floor systems) and is
engaged in remediation of those systems where appropriate, including repair,
replacement, upgrading and retirement of systems and components. Priorities have
been established based on Dana's business risk assessment. Dana expects to
complete the remediation activities during the first quarter of 1999.
Post-remediation testing is scheduled for the second quarter of 1999.
Contingency plans, if needed, will be developed before the end of 1999.
Dana is in the process of assessing the Year 2000 readiness of its
critical production and non-production suppliers by means of surveys, visits and
audits. A similar assessment program is in progress for major customers. These
assessments will be completed as quickly as possible during the first half of
1999 and contingency plans will be prepared, as needed, during the second half
of the year.
The most reasonably likely worst case scenario that Dana currently
anticipates with respect to Year 2000 is the failure of some of its suppliers,
including utilities, to be ready. This could cause a temporary interruption of
materials or services that Dana needs to make its products, which could result
in delayed shipments to customers and lost sales and profits for Dana. As the
critical supplier assessments are completed, Dana will develop contingency plans
to address those risks and uncertainties which are identified. These plans may
include resourcing materials and/or building inventory banks. Dana will complete
its contingency planning before the end of 1999.
Dana has spent approximately $42 on Year 2000 activities to date, of
which $29 has been charged to expense and $13 has been capitalized. Based on the
work performed to date and on current information and plans, Dana anticipates
that it will incur additional future costs of $71 in addressing Year 2000
issues, of which $48 will be charged to expense and $23 will be capitalized.
The outcome of Dana's Year 2000 program is subject to a number of risks
and uncertainties, some of which are beyond its control (such as the Year 2000
readiness of third parties, including suppliers, utilities and domestic and
foreign governmental agencies). Therefore, there can be no assurances that Dana
will not incur material remediation costs beyond the above anticipated future
costs, or that its business, financial condition or results of operations will
not be significantly impacted if Year 2000 problems with its systems, or with
the products or systems of other parties with whom it does business, are not
resolved in a timely manner.
IMPACT OF EURO CONVERSION
Dana has a Euro currency program for its European facilities, under the
leadership of the Euro Steering Committee, and has established guidelines and
timetables for compliance with the requirements of the Euro conversion. The
Committee is monitoring progress at all locations. While various operations are
at different stages of readiness, Dana believes that all of its facilities are
capable of complying with the Euro conversion timetable and with customer
requirements for quoting and billing in Euro currency. Preliminary indications
are that the cost to convert to the Euro will not be material.
RESULTS OF OPERATIONS (1998 VS. 1997)
Worldwide sales in 1998 were a record $12,464 (5% above 1997). Excluding
the effect of acquisitions and divestitures, sales increased $428 (up 4%).
Worldwide sales to original equipment (OE) customers were up 9%, based on strong
light, medium and heavy truck production build levels during the year.
Distribution sales declined 3% but increased 1% excluding acquisitions and
divestitures. Export sales from the U.S. decreased 1% in 1998. The impact of
changes in foreign currency exchange rates decreased 1998 sales by approximately
$139.
- - U.S. sales increased $371 (4% above 1997) or $276 (up 4%) excluding
acquisitions/divestitures
- Light truck OE component sales were up 2% (3% excluding
acquisitions/divestitures)
- Passenger car OE sales were up 2% (1% excluding
acquisitions/divestitures)
<PAGE> 24
- Medium and heavy truck OE sales were up 26% (15% excluding
acquisitions/divestitures)
- Automotive distribution sales were down 2% (up 1% excluding
acquisitions/divestitures)
- Off-highway/industrial distribution sales were down 5% (2% excluding
acquisitions/divestitures)
- Truck parts distribution sales increased 5% (7% excluding
acquisitions/divestitures)
- - Non-U.S. sales increased $181 (5% above 1997) or $152 (up 5%) excluding
acquisitions/divestitures
- Light truck OE component sales were up 19% (16% excluding
acquisitions/divestitures)
- Passenger car OE sales were up 8% with little impact from
acquisitions/divestitures
- Medium and heavy truck OE sales increased 33% (5% excluding
acquisitions/divestitures)
- Automotive distribution sales declined 5% (up 6% excluding
acquisitions/divestitures)
- Off-highway/industrial distribution sales decreased 5% (8% excluding
acquisitions/divestitures)
- Truck parts distribution sales were down 3% (9% excluding
acquisitions/divestitures)
Sales by segment are shown in the following table. Sales are shown for
Dana's seven Strategic Business Units (SBUs): Automotive Systems Group (ASG),
Automotive Aftermarket Group (AAG), Engine Systems Group (ESG), Off-Highway
Systems Group (OHSG), Industrial Group (IG), Heavy Truck Group (HTG) and DCC.
The "Other" category represents closed and sold facilities or locations where
the operating responsibility has not been assigned to a specific SBU.
<TABLE>
<CAPTION>
% Change
Excluding
Acquisitions/
1997 1998 % Change Divestitures
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASG $3,967 $4,268 8 6
AAG 2,635 2,762 5 3
ESG 1,960 2,013 3 1
OHSG 889 898 1 (4)
IG 736 712 (3)
HTG 802 1,629 103 18
Other 922 182 (80) (1)
</TABLE>
- - ASG serves the world's passenger car and light-truck markets with axles,
driveshafts, structural components, modules and full rolling chassis
systems. Its 8% increase in sales over 1997 was due to a continuing strong
demand in North America for light trucks and sport utility vehicles.
Worldwide light axle sales increased 9% over 1997. North American sales,
which are 77% of this segment's sales, increased 6% over 1997 with no
acquisition/divestiture impact.
- - AAG is primarily responsible for the distribution side of the automotive
business. Its sales were 5% higher than 1997. North American aftermarket
sales, which are 82% of this segment's sales, were up 6% over 1997 (4%
excluding acquisitions/divestitures).
- - ESG sells engine parts, fluid systems and sealing products. Excluding
acquisitions/divestitures, its sales were slightly higher than 1997 but
sales of fluid system products increased 5% on the strength of the North
American market.
- - OHSG sells off-highway axles, powershift transmissions, transaxles, torque
converters and electronic controls. Its sales were slightly above 1997
levels (4% below last year on a comparable basis due to softness in the
North American market).
- - IG sells components and systems for industrial machinery, motor vehicles,
business machines and other equipment. Its sales fell 3% from 1997.
Excluding acquisitions/divestitures, North American sales increased, but
this was more than offset by weakened sales in Asia Pacific.
- - HTG sells heavy axles and brakes, drivetrain components, power take-offs,
trailer products and heavy systems modular assemblies. Its sales showed a
strong 103% increase over 1997 (18% excluding acquisitions/divestitures).
The acquisition of Eaton's heavy axle and brake business accounted for the
large increase in sales. Excluding this acquisition, North American sales
increased 20% over 1997 on the strength of the heavy truck market.
Sales by region are shown in the following table.
<TABLE>
<CAPTION>
% Change
Excluding
Acquisitions/
1997 1998 % Change Divestitures
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North America $9,083 $9,630 6 5
South America 734 779 6 (7)
Europe 1,832 1,844 1 4
Asia Pacific 244 184 (25) (11)
Other 18 27 50 50
</TABLE>
- - North American sales were up $547 (6% over 1997). Acquisitions, net of
divestitures, accounted for $123 of the increase. Continued demand for
light trucks and sport utility vehicles, as well as strength in the medium
and heavy truck markets, helped fuel the increase.
- - Sales in Europe increased $12 (1% over 1997). The sale of the Midland-Grau
operations in 1998 and the distribution business in 1997 had a negative
impact on reported sales compared to 1997.
- - Economic turmoil in South America and Asia Pacific throughout 1998
negatively impacted sales in these regions.
<PAGE> 25
DANA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
in millions
- --------------------------------------------------------------------------------
Revenue from lease financing and other income decreased $116. Other
income recorded in 1997 included gains of $261 from the sale of:
- - The European warehouse distribution operations ($76)
- - The vehicular clutch operations ($119)
- - The Preferred Plastic Sheet Division ($21)
- - The flat rubber products business ($14)
- - The 49% share of Korea Spicer Corporation ($18)
- - An investment in a leveraged lease by DCC ($13)
In 1998, Dana won a judgment on a patent infringement case recording income of
$27 and DCC recorded a gain of $126 on the sale of its technology asset leasing
group and recorded charges of $34 related to discontinued businesses in commuter
aircraft and vehicle leasing.
Gross margin was 16.2% in 1998, compared to 15.5% in 1997. Gross margin
in 1998 was adversely affected by a charge of $20 to cost of sales to write down
inventory. In 1997, $59 was charged to cost of sales to write down inventory of
discontinued and rationalized product lines. Excluding the non-recurring charges
in both years, gross margin would have been 16.3% in 1998 and 16.0% in 1997.
Selling, general and administrative expenses (SG&A) decreased $30 in
1998. The net impact of acquisitions and divestitures accounted for $8 of the
decrease. Restructuring efforts started in 1997 and ongoing cost control
initiatives had a positive impact. SG&A at DCC were higher than in 1997 due to
the effect of higher start-up and development costs associated with new leasing
programs and the expansion of its lease portfolio. SG&A as a percentage of sales
improved from 9.7% in 1997 to 9.0% in 1998.
Operating income, which excludes restructuring and integration charges
and merger expenses, was $200 higher than 1997. Operating margin was 7.2% in
1998, compared to 5.8% in 1997. Excluding the previously discussed charges to
cost of sales recorded in 1998 and 1997 and the impact of acquisitions, net of
divestitures, Dana's operating margin would have been 7.2% in 1998 and 6.4% in
1997.
Interest expense increased $28 over 1997 primarily due to higher average
debt levels associated with acquisitions.
The effective tax rate was 39% in 1998 compared to 49% for 1997. The rate
was higher in 1997 due to providing valuation reserves for tax benefits
previously recorded in France and for tax benefits associated with the expenses
recorded for the rationalization plan at the Perfect Circle Europe operations
and due to certain portions of the restructuring charge not being deductible for
tax purposes.
Minority interest in net income of consolidated subsidiaries decreased
$15, primarily due to the lower earnings of Albarus S.A. (a Brazilian
subsidiary) and its majority-owned subsidiaries and Automotive Motion Technology
Limited (a European subsidiary).
Equity in earnings of affiliates was higher in 1998 by $5, primarily due
to losses no longer being recorded for Korea Spicer Corporation, which was sold
in November 1997, and to higher earnings of Dana's Venezuelan affiliate and
DCC's leasing affiliates.
Earnings in 1998 were $534 (67% above 1997). Profits for 1998 were
adversely affected by $57 in non-recurring charges net of gains recorded on
divestitures and the patent infringement case. Segments affected by these
charges were AAG $45, ESG $6, OHSG $1, IG $11 and Other $50. DCC had a net gain
of $56. Profits for 1997 were adversely affected by non-recurring charges of
$149 net of gains recorded on divestitures. Segments affected by these charges
were ASG $29, AAG $115, ESG $42, OHSG $12 and HTG $7. IG and Other had net gains
of $6 and $50, respectively.
MARKET TRENDS
Dana's component sales to producers of light truck and sport utility
vehicles (SUVs) continued strong in 1998, especially in the North American
market. The current outlook for 1999 is a small increase in North American light
truck production, mostly in SUVs and standard pickups. Sales to the passenger
car OE and medium and heavy truck markets are expected to continue at 1998
levels with heavy truck production forecast to slow somewhat in the second half
of 1999.
FORWARD LOOKING INFORMATION
Forward-looking statements in this report are indicated by words such as
"anticipates," "expects," "believes," "intends," "plans" and similar
expressions. These statements represent management's current expectations based
on information and assumptions. Forward-looking statements are inherently
subject to risks and uncertainties. Actual results could differ materially from
those which are anticipated or projected due to a number of factors. These
factors include changes in business relationships with Dana's major customers,
work stoppages at major customers, competitive pressures on sales and pricing,
increases in production or material costs that cannot be recouped in product
pricing, the ability of Dana and/or third parties with whom it does business to
resolve Year 2000 problems in a timely manner and international economic
conditions, particularly in South America and Asia Pacific.
<PAGE> 26
DANA LOGO
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS (1997 VS. 1996)
Worldwide sales in 1997 of $11,911 were $932 or 8% over 1996. Excluding
the effect of acquisitions and divestitures, sales were $384 or 4% ahead of
1996. Fueled by Dana's first-quarter acquisition of Clark-Hurth Components (CH),
sales to global manufacturers of off-highway vehicles were up 51%. Worldwide
sales to passenger car makers were up 13% over the comparable prior period.
Excluding the effect of acquisitions, worldwide OE sales to global manufacturers
of off-highway vehicles increased 2% and worldwide sales to passenger car makers
declined 5% from 1996. Exports from the U.S. increased 4% over 1996.
- - U.S. sales increased $593 (8% above 1996) or $306 (up 4%) excluding
acquisitions/divestitures
- Light truck OE component sales were up 7% (6%
excluding acquisitions/divestitures) due to the ongoing
demand for light trucks and sport utility vehicles
- Passenger car OE sales were up 9% due primarily to the acquisition
of the worldwide piston ring and cylinder liner operations of SPX
Corporation (SPD) in early 1997
- Medium and heavy truck OE sales increased 8% (10% excluding
acquisitions/divestitures) as truck production levels rebounded
from 1996
- Distribution sales increased 3% over 1996
- - Non-U.S. sales increased $339 (11% above 1996) or $78 (up 3%) excluding
acquisitions/divestitures
- Light truck OE component sales were up 28% (24%
excluding acquisitions/divestitures) with strong sales in
Europe and South America
- Passenger car OE sales were up 17% (down 13%
excluding acquisitions/divestitures)
- Medium and heavy truck OE sales increased 8% (3%
excluding acquisitions/divestitures)
- Distribution sales declined 4% primarily due to the sale
of the European warehouse distribution business
- - Worldwide distribution sales increased 1% over 1996
- Automotive distribution sales declined 2% due to the
European warehouse distribution business
- Off-highway/industrial distribution sales increased 8%
- Truck parts distribution sales were up 5%
Sales by segment are shown in the following table.
<TABLE>
<CAPTION>
% Change
Excluding
Acquisitions/
1996 1997 % Change Divestitures
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASG $3,706 $3,967 7 6
AAG 2,539 2,635 4
ESG 1,445 1,960 36 4
OHSG 569 889 56
IG 722 736 2 2
HTG 727 802 10 11
Other 1,271 922 (27) (1)
</TABLE>
- - ASG posted a 7% increase in sales over 1996 reflecting continued strong
demand for light trucks and sport utility vehicles. Worldwide light axle
sales increased 5% over 1996. Excluding the net effect of acquisitions and
divestitures, driveshaft and structural component sales increased 7% and
14%, respectively. North American sales, which account for 78% of this
segment's sales, increased 6% over 1996 with no acquisition/divestiture
impact.
- - AAG's sales were 4% higher than 1996. North American aftermarket sales from
this segment (84% of this segment's sales) were up 4% over 1996 or
comparable with 1996 excluding acquisitions, net of divestitures.
- - ESG reported sales 36% higher than 1996 primarily due to the acquisitions
of SPD and Long Manufacturing Ltd. Excluding acquisitions/divestitures,
fluid system sales increased 10% over 1996 on the strength of the North
American and European markets.
- - OHSG's sales were significantly above 1996 levels due to the acquisition of
CH. On a comparable basis, sales were even with 1996 due to softness in
North America and Europe.
- - Sales from the IG segment increased 2% over 1996. North American sales,
which are 82% of this segment's sales, increased 5%. This increase was
partially offset by a decline in sales in Europe and Asia Pacific.
- - HTG posted a strong 10% increase over 1996 (11% increase excluding
acquisitions and divestitures) as heavy truck build levels rebounded from
1996 levels.
The North American, European and South American regions all reported
increased sales over 1996. Asia Pacific, despite financial turmoil in the fourth
quarter, had comparable sales with 1996.
<PAGE> 27
DANA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
in millions
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sales by region are shown in the following table.
% Change
Excluding
Acquisitions/
1996 1997 % Change Divestitures
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North America $8,341 $9,083 9 4
South America 622 734 18 2
Europe 1,744 1,832 5 2
Asia Pacific 246 244 1
Other 26 18 (31) (31)
</TABLE>
- - North American sales were up $742 (9% over 1996). Acquisitions, net of
divestitures, accounted for $394 of the increase. Continued demand for
light trucks and sport utility vehicles helped fuel the increase.
- - European and South American sales continued to grow in 1997 as the Company
concentrated on growth of its core businesses outside the U.S.,
particularly through acquisitions. Excluding the effect of acquisitions and
divestitures, European sales were slightly higher than 1996 while South
America sales were up 2%.
Revenue from lease financing and other income increased $288 over 1996.
Contributing to the increase were gains of $261 from the sale of:
- - The European warehouse distribution operations ($76)
- - The vehicular clutch business ($119)
- - The Preferred Plastic Sheet Division ($21)
- - The flat rubber products business ($14)
- - The 49% share of Korea Spicer Corporation ($18)
- - An investment in a leveraged lease by DCC ($13)
Lease financing revenue at DCC increased 14% over 1996 as a result of continuing
asset growth.
Gross margin was 15.5% in 1997 compared to 16.6% in 1996. Gross margin in
1997 was adversely affected by charges to cost of sales of $59 to write down
inventory of discontinued and rationalized product lines. Excluding these
charges, 1997 gross margin would have been 16.0%.
SG&A increased $40 in 1997. The net impact of acquisitions and
divestitures accounted for $22 of the increase. SG&A at DCC were $22 higher than
in 1996 due to increased asset levels and start-up costs associated with new
product development and market expansion. SG&A as a percentage of sales improved
from 10.1% in 1996 to 9.7% in 1997.
Operating income, which excludes restructuring and integration charges,
was $692 in 1997, $17 lower than 1996. Operating margin was 5.8% in 1997 versus
6.5% in 1996. The previously mentioned charge of $59 to cost of sales had a .5%
negative impact on operating margin in 1997. Acquisitions, net of divestitures,
provided a slight benefit to operating margin in 1997.
Interest expense increased $48 over 1996 primarily due to higher average
debt levels associated with acquisitions.
The effective tax rate was 49% compared to 34% for 1996. The rate was
higher in 1997 due to providing valuation reserves for tax benefits previously
recorded in France and for tax benefits associated with the expenses recorded
for the rationalization plan at the Perfect Circle Europe operations and due to
certain portions of the restructuring charge not being deductible for tax
purposes.
Minority interest in net income of consolidated subsidiaries decreased
$10, primarily due to the lower earnings of Albarus S.A. (a Brazilian
subsidiary) and its majority-owned subsidiaries.
Equity in earnings of affiliates was higher in 1997 by $19, primarily due
to higher earnings of the Company's affiliates in Mexico. Spicer S.A. de C.V.
contributed $14 to the increase while an affiliate of the newly acquired SPD
contributed $5.
Earnings in 1997 were $320 (29% less than 1996). Profits for 1997 were
adversely affected by $149 in charges related to restructuring and
rationalization programs net of gains recorded on divestitures.
<PAGE> 28
DANA CORPORATION
ADDITIONAL INFORMATION
in millions except per share amounts
- --------------------------------------------------------------------------------
SHAREHOLDERS' INVESTMENT
- --------------------------------------------------------------------------------
The following table shows the range of market prices of Dana Corporation
common stock on the New York Stock Exchange and the cash dividends declared and
paid for each quarter during 1997 and 1998. At December 31, 1998, the closing
price of Dana common stock was $40.88.
<TABLE>
<CAPTION>
CASH DIVIDENDS
STOCK PRICE DECLARED AND PAID
- ----------------------------------------------------------------------------------------------------------------------------------
1997 1998 1997 1998
Quarter Ended HI LO CLOSE HI LO CLOSE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31 $ 34.63 $ 30.63 $ 32.88 $ 59.00 $ 48.00 $ 58.06 $ .25 $ .27
June 30 39.50 30.63 38.00 61.50 51.06 53.50 .25 .29
September 30 49.50 36.88 49.38 54.94 35.13 37.31 .27 .29
December 31 54.38 43.00 47.50 44.88 31.31 40.88 .27 .29
</TABLE>
UNAUDITED QUARTERLY FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
The following information has been reviewed by our independent
accountants in accordance with generally accepted auditing standards (GAAS);
however, they have not performed an audit in accordance with GAAS on the
quarterly information to enable them to opine on each quarter.
<TABLE>
<CAPTION>
NET INCOME NET INCOME (LOSS)
PER SHARE PER SHARE
- -----------------------------------------------------------------------------------------------------------------------------
NET SALES GROSS PROFIT NET INCOME (LOSS) BASIC DILUTED BASIC DILUTED
QUARTER ENDED REPORTED RESTATED REPORTED RESTATED REPORTED RESTATED REPORTED RESTATED
- -----------------------------------------------------------------------------------------------------------------------------
For the year ended
December 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31 $2,115 $2,996 $ 294 $ 480 $ 92.6 $ 121.9 $ .90 $ .89 $ .76 $ .75
June 30 2,141 3,090 316 501 93.8 127.1 .90 .89 .78 .77
September 30 1,961 2,865 245 418 98.3 (45.4) .93 .92 (.29) (.28)
December 31 2,074 2,960 255 445 84.4 116.5 .81 .79 .72 .70
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED
DECEMBER 31, 1998
MARCH 31 $2,350 $3,233 $ 365 $ 535 $ 107.6 $ 140.6 $ 1.02 $1.00 $ .86 $ .84
JUNE 30 2,340 3,237 370 555 116.0 160.2 1.10 1.08 .97 .96
SEPTEMBER 30 2,962 483 98.3 .59 .59
DECEMBER 31 3,032 442 135.0 .82 .81
</TABLE>
The information for 1997 and the first two quarters of 1998 has been
restated to reflect the Echlin merger, which has been accounted for as a pooling
of interests.
During the first quarter of 1997, Dana recorded a gain of $45 (28 cents
per share) relating to the sale of its European warehouse operations. In
addition, the Company initiated a rationalization plan at its Perfect Circle
Europe operations resulting in a charge of $36 (22 cents per share).
During the second quarter of 1997, the Company closed its Berwick, Pa.,
facility and sold certain of the operating assets and recorded a charge of $5 (3
cents per share).
In the third quarter of 1997, Dana recorded a gain of $70 (43 cents per
share) on the sale of its worldwide vehicular clutch operations and $13 (8 cents
per share) on the sale of a plastics division. The Company also recorded charges
of $234 ($1.43 per share), including $182 relating to the rationalization
efforts initiated at former Echlin operations, $22 relating to the restructuring
of its Reading, Pa., facility, $20 in deferred tax benefit valuation allowances
for benefits not expected to be utilized in France, $5 to restructure the light
axle operations in England and $4 relating to the closure of two division
offices and the consolidation of filtration operations.
During the fourth quarter of 1997, the Company recorded a gain of $18 (11
cents per share) on the sale of its 49% share of Korea Spicer Corporation and $8
(5 cents per share) relating to the sale of its flat rubber products operations.
Charges of $28 (17 cents per share) were recorded relating to the closure of its
Vimercate, Italy plant, closure of a hydraulic pump facility in Greenville, SC
and exiting several unprofitable lines of business.
Expenses of $38 were incurred in the third quarter of 1998 to effect the
Echlin merger. In the fourth quarter, DCC sold its Technology Leasing Group
portfolio, realizing a gain of $76 (46 cents per share); DCC also incurred a
charge of $20 (12 cents per share) related to exiting certain businesses. In
addition, Dana recorded $73 (44 cents per share) of restructuring charges and
$12 (7 cents per share) of inventory write-offs as part of its plan to integrate
the former Echlin operations.
<PAGE> 29
ELEVEN YEAR HISTORY+
in millions except per share amounts
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $6,230 $6,320 $6,553 $6,084 $6,655 $7,404 $8,843 $10,472 $10,979 $11,911 $12,464
Net Income (Loss) 224 176 123 55 (318) 174 352 443 451 320 534
Net Income (Loss) per
Common Share
Basic 1.69 1.32 .92 .41 (2.27) 1.18 2.29 2.81 2.83 1.97 3.24
Diluted 1.65 1.30 .91 .41 (2.26) 1.17 2.28 2.80 2.81 1.94 3.20
Cash Dividends per
Common Share .77 .80 .80 .80 .80 .80 .83 .90 .98 1.04 1.14
Total Assets 5,873 6,259 5,705 5,371 5,584 5,895 6,701 7,814 8,522 9,511 10,138
Long-Term Debt 1,347 1,542 1,505 1,684 1,608 1,341 1,381 1,325 1,887 1,790 1,718
</TABLE>
+ The information for years prior to 1998 has been restated to reflect the
Echlin merger, which has been accounted for as a pooling of interests.
Echlin amounts included for years prior to 1995 are for fiscal years ended
August 31.
<PAGE> 1
Exhibit 21
DANA CORPORATION
CONSOLIDATED SUBSIDIARIES
AS OF DECEMBER 31, 1998
Dana Corporation
4500 Dorr Street
Toledo, Ohio 43615
<TABLE>
<CAPTION>
UNITED STATES
- -------------
<S> <C>
Dana Distribution, Inc. Delaware
Dana Risk Management Services, Inc. Ohio
Dana World Trade Corporation Delaware
DTF Trucking, Inc. Delaware
Albarus, Inc. Delaware
Precision Specialities, Inc. Delaware
GemStone Gasket Company Delaware
Flight Operations, Inc. Delaware
Results Unlimited, Inc. Delaware
Dana International Finance Inc. Delaware
Dana International Limited Delaware
Warner Sensors Corporation Delaware
(formerly Marengo Corporation)
UnderCar International, Inc. Delaware
Krizman International, Inc. Delaware
McQuay-Norris, Inc. Delaware
Reinz Wisconsin Gasket Co. Delaware
Perfect Circle Valve Seals, L.L.C. Delaware
Wix Filtration Media Specialists, Inc. Delaware
Flexon, Inc. Michigan
Sealed Power Technologies Corporation of Nevada Nevada
Sanford Acquisition Company Michigan
Harvey Two Company Michigan
Dana Transmissions, Inc. Delaware
DSA of America, Inc. Michigan
Spicer Heavy Axle & Brake, Inc. Michigan
Glacier Vandervell, Inc. Michigan
Glacier Daido America, LLC Ohio
Echlin Inc Connecticut
American Electronic Components, Inc. Indiana
Automotive Brake Company Inc. Delaware
Brake Parts Inc. Delaware
Friction Inc. Delaware
Brake Systems, Inc. Delaware
EPE, Inc. California
Prattville Mfg., Inc. (dormant) Delaware
Hydraulics Inc. Delaware
Automotive Controls Corp. Connecticut
Auto Parts Acquisition Inc. (fka WAWD-EAP) (dormant) Delaware
Beck/Arnley Worldparts Corp. Delaware
Blackstone Manufacturing Co., Inc. Delaware
Brake Realty Inc. Delaware
BWD Automotive Corporation Delaware
BWD International Inc. Delaware
Digital Fuel Injection Inc. Delaware
Double Wharf Corporation Delaware
Echlin Asset Funding Corp. Connecticut
Echlin-Ponce, Inc. Delaware
Friction Materials, Inc. Massachusetts
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Integrated Electronics International, Inc. (holding co.) New Jersey
Integrated Technologies Group, Inc. Connecticut
Iroquois Tool Systems, Inc. Pennsylvania
Lipe Corporation (dormant) Delaware
Long USA Inc. Delaware
Long Automotive Inc. Texas
Long Cooling Systems Inc. Delaware
Midland Brake, Inc. (dormant) Delaware
Moto Mirror, Inc. Texas
Road Scan Inc. Texas
Mr. Gasket, Inc. Delaware
Brookpark Leasing Company Delaware
Pacer Industries, Inc. Missouri
PAH Mexico Inc. (holding co.) Delaware
W.M. Holding Company, Inc. (holding co.) Delaware
Preferred Technical Group International, Inc. Delaware
Preferred Technical Group, Inc. Delaware
Multitec-PTG, Inc. Delaware
Ristance Corporation Indiana
Sierra International Inc. Illinois
Sprague Controls Inc. Delaware
Sprague Prutsman, Inc. Delaware
Tekonsha Engineering Company Michigan
Theodore Bargman Company Michigan
United Brake Systems Inc. (dormant) Delaware
Diamond Financial Holdings, Inc. Delaware
Findlay Properties, Inc. Ohio
Ottawa Properties, Inc. Michigan
Shannon Properties, Inc. Delaware
First Shannon Realty of North Carolina, Inc. North Carolina
Summey Building Systems, Inc. North Carolina
Dana Credit Corporation Delaware
Farnborough Properties Partners I Limited Delaware
Farnborough Properties Partners II Limited Delaware
Farnborough Properties Partners III Limited Delaware
Farnborough Properties Partners IV Limited Delaware
DCC Project Finance Nine, Inc. Delaware
Dana Commercial Credit Corporation Delaware
Camotop Two Corporation Delaware
CCD Air Ten, Inc. Delaware
CCD Air Eleven, Inc. Delaware
CCD Air Twelve, Inc. Delaware
CCD Air Thirteen, Inc. Delaware
CCD Air Fourteen, Inc. Delaware
CCD Air Twenty, Inc. Delaware
CCD Air Twenty-One, Inc. Delaware
CCD Air Twenty-Two, Inc. Delaware
CCD Air Twenty-Three, Inc. Delaware
CCD Air Thirty, Inc. Delaware
CCD Air Thirty-Two, Inc. Delaware
CCD Air Thirty-Three, Inc. Delaware
CCD Air Thirty-Four, Inc. Delaware
CCD Air Thirty-Five, Inc. Delaware
CCD Air Thirty-Six, Inc. Delaware
CCD Air Thirty-Seven, Inc. Delaware
CCD Air Thirty-Eight, Inc. Delaware
CCD Air Thirty-Nine, Inc. Delaware
CCD Air Forty, Inc. Delaware
CCD Air Forty-One, Inc. Delaware
CCD Air Forty-Two, Inc. Delaware
CCD Air Forty-Four, Inc. Delaware
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
CCD Air Forty-Six, Inc. Delaware
CCD Airway One, Inc. Delaware
CCD Rail Two, Inc. Delaware
CCD Rail Three, Inc. Delaware
CCD Rail Five, Inc. Delaware
Comprehensive Asset Services, Inc. Delaware
Dana Business Credit Corporation Delaware
Dana Commercial Finance Corporation Delaware
Dana Fleet Leasing, Inc. Delaware
DCC Canada Inc. Delaware
DCC Franchise Services, Inc. Delaware
DCC Project Finance One, Inc. Delaware
DCC Project Finance Two, Inc. Delaware
DCC Project Finance Three, Inc. Delaware
DCC Linden, Inc. Delaware
DCC Project Finance Four, Inc. Delaware
DCC Project Finance Five, Inc. Delaware
DCC Project Finance Six, Inc. Delaware
DCC Project Finance Ten, Inc. Delaware
DCC Project Finance Eleven, Inc. Delaware
Washington 10 Gas Holdings, Inc. Delaware
DCC Project Finance Twelve, Inc. Delaware
DCC Project Finance Thirteen, Inc. Delaware
DCC Project Finance Fourteen, Inc. Delaware
DCC Servicing, Inc. Delaware
Energy Services Credit Corporation Delaware
GSP I Corporation Oregon
Isom & Associates Delaware
Leased Equipment, Inc. Delaware
Lease Recovery, Inc. Delaware
Midwest Housing Investments J.V., Inc. Delaware
Potomac Leasing Company Delaware
REBAC, Inc. Delaware
REBNEC Three, Inc. Delaware
REBNEC Five, Inc. Delaware
REBNEC Nine, Inc. Delaware
REBNEC Eleven, Inc. Delaware
ReDade, Inc. Delaware
REFIRST, Inc. Delaware
REFREEZE, Inc. Delaware
REHAT, Inc. Delaware
RENAT, Inc. Delaware
RENOVO One, Inc. Delaware
RENOVO Three, Inc. Delaware
RENOVO Five, Inc. Delaware
RENOVO Seven, Inc. Delaware
RENOVO Nine, Inc. Delaware
RENOVO Eleven, Inc. Delaware
RENOVO Thirteen, Inc. Delaware
ReSun, Inc. Delaware
RETRAM, Inc. Delaware
Shannon Health Care Realty, Inc. Delaware
Shannon Property Management, Inc. Delaware
Shannon Supermarket Investors, Inc. Delaware
Dana Lease Finance Corporation Delaware
Camotop One Corporation Delaware
CCD Air Four, Inc. Delaware
CCD Air Five, Inc. Delaware
CCD Air Seven, Inc. Delaware
CCD Air Eight, Inc. Delaware
CCD Air Nine, Inc. Delaware
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
CCD Air Forty-Three, Inc. Delaware
CCD Air Forty-Seven, Inc. Delaware
CCD Airway Two, Inc. Delaware
CCD Rail One, Inc. Delaware
CCD Rail Four, Inc. Delaware
DCC Project Finance Seven, Inc. Delaware
DCC Project Finance Eight, Inc. Delaware
DCC Project Finance Fifteen, Inc. Delaware
DCC Spacecom Two, Inc. Delaware
DCC Vendorcom, Inc. Delaware
JVQ Capital One, Inc. Delaware
REBNEC One, Inc. Delaware
REBNEC Two, Inc. Delaware
REBNEC Four, Inc. Delaware
REBNEC Six, Inc. Delaware
REBNEC Ten, Inc. Delaware
REBNEC Twelve, Inc. Delaware
RECONN, Inc. Delaware
RENOVO Two, Inc. Delaware
RENOVO Four, Inc. Delaware
RENOVO Six, Inc. Delaware
RENOVO Eight, Inc. Delaware
RENOVO Ten, Inc. Delaware
RENOVO Twelve, Inc. Delaware
RERSEY, Inc. Delaware
RESAMM, Inc. Delaware
REVA, Inc. Delaware
Letovon Rosehill One Pty Limited Australia
Letovon Rosehill Two Pty Limited Australia
Letovon St. Kilda One Pty Limited Australia
Letovon St. Kilda Two Pty Limited Australia
DCC Canada Inc. Canada
Letovon St. Kilda/Rosehill Co. Cayman Islands
Dana Capital S.A. France
Dana Finance S.A. France
DCC Leasing GmbH Germany
Shannon Properties GmbH Germany
Northavon Investments Limited Jersey
Dana Commercial Credit (UK) Limited United Kingdom
Dana Capital Limited United Kingdom
DCC (June) Limited United Kingdom
DCC (September) Limited United Kingdom
Farnborough Properties Company United Kingdom
Farnborough Airport Properties Company United Kingdom
Farnborough Aerospace Centre Management Limited United Kingdom
Letovon Hammersmith Co. United Kingdom
Letovon Heathrow Co. United Kingdom
Letovon Waterloo Co. United Kingdom
Development, L.L.C.
Tecnologia de Mocion Controlada S.A. de C.V. Mexico
Dana Heavy Axle Mexico S.A. de C.V. Mexico
(f.k.a. Eaton Manufacturera)
Dana Manufacturera S.A. de C.V. (f.k.a. Eaton Ejes) Mexico
Dana Ejes S.A. de C.V. (f.k.a. EMSA S.A. de C.V.) Mexico
Grupo Echlin Automotrices S.A. de C.V. Mexico
Balatas American Brakebloks, S.A. de C.V. Mexico
Producciones Automotrices, S.A. de C.V. Mexico
Echlin Comercial, S.A. de C.V. Mexico
Frenos Lusac, S.A. de C.V. Mexico
Lusac Comfhia de Mexico, S.A. de C.V. Mexico
Itapsa, S.A. de C.V. Mexico
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
FTE Mexicana, S.A. de C.V. Mexico
Inversiones Echlin S.A. de C.V. Mexico
Echlin Mexicana, S.A. de C.V. Mexico
Long de Mexico, S.A. de C.V. Mexico
Candados Universales de Mexico, S.A. de C.V. Mexico
Echlin de Saltillo, S.A. de C.V. Mexico
Echlin Industrias de Mexico, S.a. de C.V. Mexico
Wrenford Insurance Company Limited Bermuda
ROC Spicer Investment Co. British Virgin Islands
Francisco Holdings Limited British Virgin Islands
Dana Canada, Inc. (fka Hayes-Dana Inc.) Canada
3125025 Canada Inc. (federal company) Canada
Echlin Canada Inc. (federal company) Canada
Long Manufacturing Ltd. Canada
Brake Parts Canada Inc. Canada
Echlin Dominicana, S.A. Dominican Republic
Dana Foreign Sales Corporation U.S. Virgin Islands
Echlin International, V.I., Inc. U.S. Virgin Islands
Dana Australia (Holdings) Pty. Ltd. Australia
Dana Australia Pty. Ltd. Australia
Truckline Parts Centres Pty. Ltd. Australia
Dana Australia Trading Pty. Ltd. Australia
(Formerly Spicer Drivetrain Pty. Ltd.)
J.B. Morgan and Co. Pty., Ltd. Australia
Dana Asia Pacific Industrial
(fka Warner Electric Australia Pty. Ltd.) Australia
Echlin Australia Pty. Ltd. (holding co.) Australia
Kelray Australia Pty. Ltd. Australia
P.J. Warneford Components Australia
Warneford & Oldfield Pty. Limited Australia
Fujian Spicer Drivetrain Systems Co., Ltd. China
Dana Asia (Hong Kong) Limited Hong Kong
Kentning Industries Limited (Never Active) Hong Kong
Shui Hing Manufacturing Company Limited Hong Kong
Echlin China Limited (Hong Kong) Hong Kong
P.T. Spicer Indonesia (Never Active) Indonesia
Dana Japan, Ltd. Japan
Dana Korea Co. Ltd. Korea
Dana Asia Pacific (Malaysia) Sdn. Bhd. Malaysia
Spicer Philippines Manufacturing Co. (inactive) Philippines
Dana Asia (Singapore) Pte. Ltd. Singapore
R.O.C. Spicer Ltd. Taiwan
Timing Investments Limited Taiwan
Taiyin Enterprise Ltd. Taiwan
Spicer Asia Engineering Ltd. Taiwan
Dana Asia (Taiwan) Ltd. (Warner Electric Trading Co.) Taiwan
Dana Asia (Taiwan) APD Co., Ltd. Taiwan
Echlin Taiwan Ltd. Taiwan
Dantean Company, Limited. (f.k.a. Spicer Thailand) Thailand
Dana Industrial Co., Limited Thailand
Dana Asia (Thailand) Limited Thailand
Dana Spicer (Thailand) Limited (fka Spicer Asia (Thailand) Thailand
Dana Austria GmbH Austria
Glacier Gleitlager Handelsgesellschaft mbH Austria
Warner Electric SA (Dormant) Belgium
Clark-Hurth Belgium N.V. Belgium
Clark Equipment Belgium N.V. Belgium
Glacier Belgium Belgium
Quinton Hazell Belgium SA Belgium
Stieber Ltd. United Kingdom
Dana Holdings UK Limited United Kingdom
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
Echlin (Southern) Holdings Ltd. (Jersey) United Kingdom
Dana Holdings Limited United Kingdom
Dana Spicer Europe Ltd. United Kingdom
Warner Electric Limited United Kingdom
Dana Interlock Limited (Dormant 1/1/94) United Kingdom
Taylor Industrial Clutches Ltd. United Kingdom
Wichita Company Limited United Kingdom
Dana Limited (formerly Dana (1982) Limited) United Kingdom
Superior Electric Engineering Services, Ltd. United Kingdom
Dana Spicer Limited United Kingdom
Echlin Europe Limited United Kingdom
Quinton Hazell Plc. United Kingdom
Motaproducts Automotive Limited (Dormant) United Kingdom
Supra Group Limited (Dormant) United Kingdom
Commercial Ignition Limited (Dormant) United Kingdom
British Filters Limited (Dormant) United Kingdom
TJ Filters Limited (Dormant) United Kingdom
Quinton Hazell Automotive Limited United Kingdom
Quinton Hazell (Far East) Limited United Kingdom
Whitely Rishworth Exports Ltd. (Dormant) United Kingdom
Preferred Technical Group-CHA Limited United Kingdom
WH Components Limited United Kingdom
Hobourn Automotive Limited United Kingdom
SU Automotive Limited United Kingdom
SU Pension Trustee Limited United Kingdom
Hobourn Group Pension Trust Company Limited United Kingdom
Whitely Rishworth Ltd. United Kingdom
Automotive Motion Technology Limited United Kingdom
Echlin Automotive Systems Limited United Kingdom
Lipe Limited United Kingdom
Driveline Systems Limited United Kingdom
Dana S.A. France
Perfect Circle Europe (fka Floquet Monopole S.A.) France
Societe Industrielle de Precision Marti, S.A. France
Societe de Reconditionnement Industriel de Moteurs S.A. (S.R.I.M.) France
Spicer France SarL France
Warner France, S.A. France
Collins & Tournadre "TOURCO" France
G.I.E. Warner & Tourco France
Sealed Power Europe S.A. France
Dana France SAS France
Glacier Vandervell SAS France
Superior Electric SarL (to be liquidated) France
Stieber SarL France
Clark-Hurth Components S.A.R.L. France
Nobel Plastiques S.A. France
Nobel Plastiques Climatisation S.A. France
Quinton Hazell SarL France
Dana GmbH Germany
Dana Holdings GmbH Germany
Reinz Dichtungs GmbH Germany
Euro Reinz GmbH (dormant) Germany
Warner Electric GmbH Germany
Erwin Hengstler Hydraulic GmbH Germany
The Weatherhead GmbH Germany
M. Friesen GmbH Germany
Horst Riedel GmbH Germany
Stieber Antriebselemente GmbH Germany
Spicer GmbH (f.k.a. Superior Electric GmbH) Germany
Clark-Hurth Components Vertriebs GmbH Germany
DKW Kunststoffwerke GmbH Germany
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
Thermoplast+Apparatebau GmbH Germany
Sealed Power Europe GmbH Germany
Echlin Holding GmbH Germany
FTE Automotive GmbH Germany
Move Brems-Und Kupplungsschlauch Germany
Echlin Grundstucksverwaltung (Deutchland) GmbH Germany
Quinton Hazell Deutschland GmbH Germany
Spicer India Limited India
Stieber Precision Pvt. Ltd. India
Dana Finance (Ireland) Limited Ireland
Quinton Hazell (Ireland) Limited Ireland
Moprod (Ireland) Limited Ireland
Quinton Hazell Limited Ireland
Dana Italia, SpA Italy
Metaltechno SpA Italy
Clark-Hurth Components SpA Italy
Quinton Hazell Italia SpA Italy
D.E.H. Holdings SARL Luxembourg
Dana Europe Holdings B.V. Netherlands
Spicer Netherland B.V. (Dormant) Netherlands
Leguana Participations B.V. (Holding Co.) Netherlands
Warner Electric BV (f.k.a. Maumee Holdings B.V.) Netherlands
Superior Electric Nederland B.V. (shell) Netherlands
Echlin (Investments) Netherlands B.V. Netherlands
Echlin (Properties) Netherlands BV Netherlands
Quinton Hazell Nederland B.V. Netherlands
Wix Filtron Sp. zo.o. Poland
Quinton Hazell Polska Sp. zo.o. Poland
Dana Equipamientos SA (f.k.a. Spicer Espana S.A.) Spain
Sealed Power Europe S.L. Spain
Dana Thermoplast Iberica, S.A. Spain
Industrias Seloc Reinz S.A. (closed) Spain
Industrias Serva S.A. Spain
Glaser Serva S.A. Spain
Quinton Hazel Espana S.A. Spain
Nobel Plastiques Iberica S.A. Spain
Dana AB Sweden
Warner-Tollo AB Sweden
Quinton Hazell Svenska AB Sweden
Warner Electric (International) S.A. Switzerland
(International Headquarters, f.k.a. Warner Electric S.A., locally known as "Swiss Inc.")
T&N Zug AG Switzerland
Glacier Tristar SA Switzerland
Warner Electric S.A. Switzerland
(Operating and local sales company, f.k.a. Societe de Vente Warner Electric S.A., locally known as "Swiss Trade")
Echlin Charger Mfg. Co. (Pty.) Ltd. South Africa
MAG Brakes (Prop.) Limited South Africa
Electron Seventeen (Prop.) Limited South Africa
Insom Investments (Prop.) Limited South Africa
J&H Marcus Manufacturing Company (Prop.) Ltd. South Africa
Miclaric Investments (Prop.) Limited South Africa
South African Engineering Company (Prop.) Limited South Africa
South African Engineering Company (Natal) (Prop.) Limited South Africa
Dana Argentina S.A. Argentina
Dana San Juan S.A. (f.k.a. AROS Daneri, S.A.) Argentina
Dana San Luis S.A. (f.k.a. Trasa San Luis) Argentina
Transmissiones Homocineticas Argentina S.A. (THA) Argentina
Farlock S.A. Argentina
Cerro de los Medanos S.A. Argentina
Spicer Ejes Pesatos S.A. Argentina
Nakata Autoparts S.A. Argentina
</TABLE>
<PAGE> 8
<TABLE>
<S> <C>
Echlin Argentina S.A. (a/k/a Plasbestos) Argentina
Fanacif Products Argentina S.A. Argentina
Dana Equipamentos Ltda. Brazil
Dana-Albarus, S.A. Industrial E Comercio Brazil
Pellegrino Autopecas Industrial e Comerico Ltda. Brazil
CIDAP-Industrial e Distribuidora
de Aurtopecas Ltda. (Dormant) Brazil
Albarus Sistemas Hidraulicos Ltda. Brazil
Albarus S.A. Comercial e Exportadora Brazil
Cirane Industria e Comercio Ltda. Brazil
Previalbarus Societe de Providencia Brazil
Dana Industrial S.A. Brazil
Metalurgica Brasitalia Ltda. Brazil
Suzuki Comercial Ltda. Brazil
Dana Bahia Ltda. Brazil
Warner Electric do Brasil Ltda. Brazil
Dana do Brasil Ltda. Brazil
Dana Industrias Ltda. Brazil
SM-Sistemas Modulares Ltda. Brazil
Glacier do Brasil Limitada Brazil
Glacier Daido do Brasil Limitada Brazil
Echlin Do Brasil S.A. Brazil
Industria De Ejes Y Transmissiones S.A. (Transejes) Colombia
Transejes C.D. Ltda. Colombia
Transcar Ltda. Colombia
Transmotor Ltda. Colombia
Echlin de Colombia Ltda. Colombia
Echlin Del Peru S.R. Ltda. Peru
UBALI S.A. Uruguay
Talesol S.A. Uruguay
Inversora Sabana, S.A. Venezuela
Echlin de Venezuela C.A. Venezuela
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting parts of the Registration Statements on Form S-3 (Nos. 333-67307,
033-58121, 333-00539, 333-22935, 333-23733 and 333-42239) and in the
Registration Statements on Form S-8 (Nos. 333-50919, 333-69449, 033-64198 and
333-37435) of Dana Corporation of our report dated January 25, 1999 appearing on
page 21 of the Annual Report to Shareholders which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference of
our report on the Financial Statement Schedule, which appears on page 14 of this
Form 10-K.
PricewaterhouseCoopers LLP
Toledo, Ohio
February 24, 1999
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
-----------------
The undersigned directors and/or officers of Dana Corporation hereby
constitute and appoint Southwood J. Morcott, John S. Simpson, Charles W. Hinde,
Martin J. Strobel and Sue A. Griffin, and each of them, severally, their true
and lawful attorneys-in-fact with full power for and on their behalf to execute
the Corporation's Annual Report on Form 10-K for the fiscal year ended December
31, 1998, including any and all amendments thereto, in their names, places and
stead in their capacity as directors and/or officers of the Corporation, and to
file the same with the Securities and Exchange Commission on behalf of the
Corporation under the Securities and Exchange Act of 1934, as amended.
This Power of Attorney automatically ends as to each appointee upon the
termination of his or her service with the Corporation.
In witness whereof, the undersigned have executed this instrument
December 14, 1998.
/s/ B. F. Bailar /s/ R. B. Priory
- ----------------------- -----------------------------
B. F. Bailar R. B. Priory
/s/ A. C. Baillie /s/ J. D. Stevenson
- ----------------------- -----------------------------
A. C. Baillie J. D. Stevenson
/s/ E. M. Carpenter /s/ T. B. Sumner, Jr.
- ----------------------- -----------------------------
E. M. Carpenter T. B. Sumner, Jr.
/s/ E. Clark /s/ J. S. Simpson
- ----------------------- -----------------------------
E. Clark J. S. Simpson
/s/ G. H. Hiner /s/ C. W. Hinde
- ----------------------- -----------------------------
G. H. Hiner C. W. Hinde
/s/ J. M. Magliochetti /s/ M. J. Strobel
- ----------------------- -----------------------------
J. M. Magliochetti M. J. Strobel
/s/ M. R. Marks /s/ S. A. Griffin
- ----------------------- -----------------------------
M. R. Marks S. A. Griffin
/s/ S. J. Morcott
- -----------------------
S. J. Morcott
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 230,200
<SECURITIES> 0
<RECEIVABLES> 1,616,900
<ALLOWANCES> 40,500
<INVENTORY> 1,731,600
<CURRENT-ASSETS> 4,337,000
<PP&E> 5,765,300
<DEPRECIATION> 2,461,500
<TOTAL-ASSETS> 10,137,500
<CURRENT-LIABILITIES> 3,986,600
<BONDS> 1,717,900
0
0
<COMMON> 165,700
<OTHER-SE> 2,773,500
<TOTAL-LIABILITY-AND-EQUITY> 10,137,500
<SALES> 12,463,600
<TOTAL-REVENUES> 12,838,700
<CGS> 10,449,100
<TOTAL-COSTS> 10,449,100
<OTHER-EXPENSES> 1,289,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 279,600
<INCOME-PRETAX> 820,200
<INCOME-TAX> 315,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 534,100
<EPS-PRIMARY> 3.24
<EPS-DILUTED> 3.20
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 422,700
<SECURITIES> 0
<RECEIVABLES> 1,439,400
<ALLOWANCES> 33,900
<INVENTORY> 1,575,300
<CURRENT-ASSETS> 4,285,300
<PP&E> 5,301,000
<DEPRECIATION> 2,524,300
<TOTAL-ASSETS> 9,511,100
<CURRENT-LIABILITIES> 3,794,000
<BONDS> 1,789,800
0
0
<COMMON> 163,810
<OTHER-SE> 2,438,590
<TOTAL-LIABILITY-AND-EQUITY> 9,511,100
<SALES> 11,911,000
<TOTAL-REVENUES> 12,402,400
<CGS> 10,067,000
<TOTAL-COSTS> 10,067,000
<OTHER-EXPENSES> 1,479,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 251,400
<INCOME-PRETAX> 604,200
<INCOME-TAX> 293,800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 320,100
<EPS-PRIMARY> 1.97
<EPS-DILUTED> 1.94
</TABLE>
