1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
Commission
For the Quarterly Period Ended June 30.1996 File Number 1-1063
------------ ------
Dana Corporation
- ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Virginia 34-4361040
- ---------------------------------------- ----------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
4500 Dorr Street, Toledo, Ohio 43615
- ---------------------------------------- ----------------------------------
(Address of Principal Executive Offices) (Zip Code)
(419) 535-4500
-------------------------------------------------
(Registrants telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at June 30.1996
-------------------------- ---------------------------
Common stock, $1 par value 101,719,719
2
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
Page Number
-----------
Cover 1
Index 2
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheet
December 31, 1995 and
June 30,1996 3
Statement of Income
Three Months and Six Months Ended
June 30,1995 and 1996 4
Condensed Statement of Cash Flows
Six Months Ended
June 30,1995 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Managemenfs Discussion and Analysis
of Financial Condition and Results
of Operations 7-11
Part II. Other Information
Item 1. Legal Proceedings 12
Item 2. Exhibits and Reports on Form 8-K 13
Signature 14
Exhibit Index 15
2
3
PART I. FINANCIAL INFORMATION
ITEM 1. DANA CORPORATION
- -------
CONDENSED BALANCE SHEET (Unaudited)
(in Millions)
Assets December 31, 1995 June 30, 1996
------ ----------------- -------------
Cash and Cash Equivalents $ 66.6 $ 54.7
Accounts Receivable, Net 1,081.6 1,201.2
Inventories
Raw Materials 230.1 202.0
Work in Process and Finished Goods 644.7 634.8
Lease Financing 1,004.9 1,056.3
Investments and Other Assets 1,016.7 1,000.9
Property, Plant and Equipment 3,337.3 3,448.8
Less: Accumulated Depreciation 1,687.8 1,735.7
------- -------
Total Assets $ 5,694.1 $ 5,863.0
======= =======
Liabilities and Shareholders' Equity
- ------------------------------------
Accounts Payable and Other Liabilities $ 1,173.0 $ 1,214.3
Short-Term Debt 791.4 769.1
Long-Term Debt 1,315.1 1,343.7
Deferred Employee Benefits 1,096.2 1,091.6
Minority Interest 153.8 165.0
Shareholders' Equity 1,164.6 1,279.3
------- -------
Total Liabilities and
Shareholders' Equity $ 5,694.1 $ 5,863.0
======= =======
3
4
ITEM 1. (Continued)
- -------
DANA CORPORATION
STATEMENT OF INCOME (Unaudited)
(in Millions Except Per Share Amounts)
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
1995 1996 1995 1996
---- ---- ---- ----
Net Sales $ 1,968.8 $ 2,020.5 $ 3,893.2 $ 3,993.2
Revenue from Lease Financing
and Other Income 47.0 49.0 94.6 112.5
------- ------- ------- -------
2,015.8 2,069.5 3,987.8 4,105.7
------- ------- ------- -------
Cost of Sales 1,654.2 1,700.0 3,288.4 3,377.3
Selling, General and
Administrative Expenses 173.1 190.2 336.0 372.0
Interest Expense 36.0 37.0 69.1 75.5
------- ------- ------- -------
1,863.3 1,927.2 3,693.5 3,824.8
------- ------- ------- -------
Income Before Income Taxes 152.5 142.3 294.3 280.9
Estimated Taxes on Income (58.0) (49.4) (116.5) (103.4)
Minority Interest (11.0) (7.0) (20.4) (15.0)
Equity in Earnings of Affiliates 5.6 5.6 (9.1) 7.7
------- ------- ------- -------
Net Income $ 89.1 $ 91.5 $ 148.3 $ 170.2
======= ======= ======= =======
Net Income Per Common Share $ .88 $ .90 $ 1.47 $ 1.68
======= ======= ======= =======
Dividends Declared and Paid per
Common Share $ .23 $ .25 $ .44 $ .48
Average Number of Shares Outstanding 101.2 101.6 101.2 101.6
4
5
ITEM 1. (Continued)
- -------
DANA CORPORATION
CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
(in Millions)
Six Months Ended June 30
------------------------
1995 1996
---- ----
Net Income $ 148.3 $ 170.2
Depreciation and Amortization 114.9 131.0
Working Capital Change and Other (184.4) (14.1)
------- -----
Net Cash Flows from Operating Activities 78.8 287.1
------- -----
Purchases of Property, Plant and Equipment (168.2) (160.5)
Purchases of Assets to be Leased (168.8) (206.0)
Payments Received on Leases and Loans 124.6 150.2
Purchase of Minority Interest of Hayes-Dana, Inc. (92.4)
Other 35.0 (26.3)
------- -----
Net Cash Flows-Investing Activities (269.8) (242.6)
------- -----
Net Change in Short-Term Debt 104.5 (28.2)
Proceeds from Long-Term Debt 270.3 220.4
Payments on Long-Term Debt (175.5) (203.0)
Dividends Paid (44.5) (48.8)
Other 1.7 3.2
------- -----
Net Cash Flows-Financing Activities 156.5 (56.4)
------- -----
Net Change in Cash and Cash Equivalents (34.5) (11.9)
Cash and Cash Equivalents-beginning of year 112.2 66.6
------- -----
Cash and Cash Equivalents-end of period $ 77.7 $ 54.7
======= =====
5
6
ITEM 1 (Continued)
- ------
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in Millions Except Per Share Amounts)
1. In the opinion of management, all normal recurring adjustments necessary to
a fair presentation of results for the unaudited interim periods have been
included.
2. In accordance with generally accepted accounting principles, Dana's
wholly-owned financial subsidiary, Dana Credit Corporation (DCC), is
included in the consolidated financial statements. The following is a recap
of the revenue, net income, total assets, total liabilities and
shareholders equity of this subsidiary (unaudited):
DANA CREDIT CORPORATION
-----------------------
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
1995 1996 1995 1996
---- ---- ---- ----
Revenue $ 52.0 $ 58.2 $ 93.6 $118.2
Net Income 6.4 8.4 11.3 15.9
December 31. 1995 June 30, 1996
----------------- -------------
Total Assets $1,386.7 $1,495.6
Total Liabilities 1,282.1 1,380.7
------- -------
Shareholders Equity $ 104.6 $ 114.9
======= =======
3. In the first quarter of 1995, Dana recorded a non-operating charge of
approximately $18 (17 cents per share) for its proportionate share of
translation losses incurred by its Mexican affiliate, Spicer S.A. de C.V.,
due to the devaluation of the Mexican peso.
4. In the first quarter of 1995, Dana made a tender offer for all of the
outstanding shares of Hayes-Dana, Inc. that it did not own. At June
30,1995, Dana had increased its ownership in Hayes-Dana from 57 percent to
100 percent.
6
7
lTEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------- ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
(in Millions)
--------------------------------
Capital Expenditures
--------------------------------
Six Months Year Ended
Ended June 30 December31
--------------------------------
1994 $128 337
--------------------------------
1995 168 410
--------------------------------
1996 161 330*
--------------------------------
*Projected
Capital Expenditures for Dana Corporation and its
consolidated subsidiaries (Dana) year-to-date 1996 were $7 lower
than for the same period in 1995 end are projected to be
approximately $80 lower for the year than the record $410 spent
in 1995. The $330 projected for 1996 is about equal to 1994's
expenditures.
Dana supplements internal cash flow with the issuance of
short and long-term debt. As a result of strong operating cash
flows, Dana's consolidated debt increased only $6 over 1995's
year end position. Dana's, excluding Dana Credit Corporation's
(DCC's), total debt increased $12 over 1995's year end level
while DCC's decreased $6.
------------------------------
Cash Flows From Operations For
Six Months Ended June 30
------------------------------
1994 $144
------------------------------
1995 79
------------------------------
1996 287
------------------------------
Dana's consolidated short-term debt decreased $22 since December 31, 1995,
with Dana's, excluding DCC's, increasing $21 and DCC's decreasing $43. Dana's,
excluding DCC's, borrowing lines totaled $1.4 billion at June 30, with
outstanding short-term borrowings of $355. DCC's lines were in excess of $800,
with outstanding short-term borrowings of $414.
Consolidated long-term debt of the Company increased $28 since year end
1995; Dana, excluding DCC, decreased its debt $9: and DCC increased its debt
$37.
The Company anticipates that net cash flows from operating activities,
along with currently available financing sources, will be sufficient to meet
Dana's funding requirements for 1996.
7
8
ITEM 2. Liquidity and Capital Resources (continued)
- ---------------------------------------------------
(in Millions)
Dana's management and legal counsel have reviewed the legal proceedings to
which the Company and its subsidiaries were parties as of June 30,1996
(including, among others, those involving product liability claims and alleged
violations of environmental laws) and concluded that neither the liabilities
that may result from these legal proceedings nor the timing of the cash flows
for these liabilities is likely to have a material adverse effect on the
Company's liquidity, financial condition or results of operations. The Company
estimates its contingent environmental and product liabilities based upon the
most probable method of remediation or outcome considering currently enacted
laws and regulations and existing technology. Measurement of liabilities is made
on an undiscounted basis and excludes the effects of inflation and other
societal and economic factors. In those cases where there is a range of equally
probable remediation methods or outcomes, the Company accrues at the lower end
of the range. At June 30,1996, the Company's accruals were $73 for product
liability costs (products) and $53 for environmental liability costs
(environmental), compared to $73 for products and $49 for environmental at
December 31,1995. The difference between the Company's minimum and maximum
estimates for contingent liabilities, while not considered material, was $4 for
products and $4 for environmental at June 30,1996, compared to $4 for products
and $3 for environmental at December 31, 1995. Probable recoveries of $53 for
products and $10 for environmental from insurance or third parties have been
recorded as assets at June 30,1996, compared to $43 for products and $10 for
environmental at December 31,1995.
In May 1996, the Company settled all remaining claims in the 1992 lawsuit,
UNITED STATES V. DANA CORPORATION, without any finding of liability or admission
- ---------------------------------
of wrongdoing by Dana. In this suit, the Department of Justice, on behalf of the
United States, had sued the Company, Warner Electric Brake and Clutch Company,
Inc. and Beaver Precision Products, Inc. ("Beaver"), in the U.S. District Court,
Eastern District of Michigan under the federal False Claims Act and various
common law theories. The complaint alleged overcharging on U.S. government
contracts or subcontracts awarded to Beaver in the late 1970s and the 1980s. In
1995, Dana and the Department of Justice settled the claims relating to 16
government contracts included in the complaint without any finding of liability
or admission of wrongdoing by Dana, and the Company paid the government $19.5,
which included payment for the government's alleged damages, interest, and costs
of investigation and litigation with respect to those claims. A tentative
settlement relating to the remaining claims was reached in the fourth quarter of
1995 and final settlement was made in May 1996. Under terms of this settlement,
the Company paid the government $10.175, which included payment for alleged
damages, interest and cost of investigation and litigation with respect to those
claims. The company had accrued for this settlement in the fourth quarter of
1995 and the payment did not have a material adverse effect on its liquidity and
financial condition.
8
9
ITEM 2. (Continued)
- -------
Results of Operations (Second Quarter 1996 vs Second Quarter 1995)
- -------------------------------------------------------------------
(in Millions)
Dana's worldwide quarterly sales topped the two billion
dollar plateau for the first time in the second quarter and
exceeded 1995's second quarter by 3%. Worldwide unit volume
increases of light trucks and sport utility vehicles and
sales from recent acquisitions helped offset weakened U.S.
demand for heavy trucks.
----------------------------------------
Second Quarter Sales
----------------------------------------
%
1995 1996 Change
----------------------------------------
U.S. $1,439 $1,454 1
----------------------------------------
International 530 566 7
----------------------------------------
Total $1,969 $2,020 3
----------------------------------------
- -------------------------------------------
Second Quarter Sales By Region
- -------------------------------------------
%
Region 1995 1996 Change
- -------------------------------------------
North America $1,556 $1,554 --
- -------------------------------------------
Europe 230 269 17
- -------------------------------------------
South America 132 150 14
- -------------------------------------------
Asia Pacific 51 47 (8)
- -------------------------------------------
Sales from Dana's international operations increased 7%
over 1995, primarily due to the contribution of recent
acquisitions in Europe and South America. U.S. sales
increased 1%, as light truck and sport utility vehicle sales
rose 5% over a record 1995 second quarter, while sales to
the heavy truck market decreased 15%. The Company's
worldwide aftermarket sales increased 4%, 5%
internationally and 3% in the U.S.
The Company reported a profit of $91, the highest for any quarter in Dana's
history, which represents an increase of 3% over 1995's second quarter results.
Revenue from lease financing and other income increased $2 over second
quarter 1995 as higher lease income resulted from higher DCC average asset
levels.
Dana's gross margin for the second quarter was 15.9%, comparable to 16.0%
for 1995's second quarter. U.S. margins were improved over 1995 while those of
international operations were lower, principally due to the Company's operations
in South America.
Selling, general and administrative expenses (S,G&A) increased $17 or 10%in
1996, in part due to newly acquired operations.
Dana's second quarter 1996 effective tax rate was 35% compared to 38% for
1995's second quarter. The U.S. state and local rate was lower in 1996, as was
the rate of the Company's Brazilian operations. Additionally, the rate was
marginally lower due to utilization of some capital loss carry-forwards during
the second quarter in 1996.
Minority interest in net income of subsidiaries decreased $4, primarily due
to the lower earnings recorded by Dana's majority-owned affiliates in Brazil and
Taiwan.
9
10
ITEM 2. (Continued)
- -------
Results of Operations (Six Months 1996 vs Six Months 1995)
- ----------------------------------------------------------
(in Millions)
- ----------------------------------
Sales For Six Months Ended June 30
- ----------------------------------
%
1995 1996 Change
- ----------------------------------
U.S. $2,897 $2,889 --
- ----------------------------------
International 996 1,104 11
- ----------------------------------
Total $3,893 $3 993 3
- ----------------------------------
Dana's worldwide sales for the first six 1996 totaled $3,993, an increase
of 3% over the same period in 1995. This growth was primarily the result of
U.S. light truck and sport utility unit volume increases and sales from recent
acquisitions, offsetting weakened U.S. demand for heavy trucks.
Sales from Dana's international operations increased 11% over 1995,
primarily due to the contribution of recent acquisitions in Europe and South
America. U.S. sales were level with 1995, as the light truck and sport utility
vehicle increase of 5% was offset by a decrease of 12% in sales to the heavy
truck market. Dana's worldwide aftermarket sales increased 3% over 1995, 6%
internationally and 1% in the U.S.
The Company reported profits of $170 for the first six months of 1996,
a 15% increase over 1995's results for the same period. The earnings for 1995
included an $18 after tax non-operating charge for translation losses incurred
as result of the devaluation of the Mexican peso.
---------------------------------------
Sales By Region For Six Months Ended
June 30
---------------------------------------
%
Region 1995 1996 Change
---------------------------------------
North America $3,129 $3,083 (1)
---------------------------------------
Europe 427 555 30
---------------------------------------
South America 244 263 8
---------------------------------------
Asia Pacific 93 92 (1)
---------------------------------------
Revenue from lease financing and other income increased $18 in 1996. DCC'S
lease-related revenue increased $11 due to higher average asset levels while
sales of fixed assets and investments within Dana's manufacturing operations
also contributed to the increase.
Dana's gross margin for the first six months of 1996 was 15.4%, comparable
to 15.5% for 1995. U.S. margins were improved over 1995 while those of
international operations were lower, principally due to the Company's operations
in South America.
S,G&A increased $36 or 11% in 1996. The increase is due in part to the
newly acquired operations.
Interest expense increased $5, as the financing of capital expenditures,
lease financing assets, acquisitions and working capital needs resulted in
higher average debt levels, particularly in the first quarter.
Dana's effective tax rate for the first half of 1996 was 37% compared to
40% for 1995's first six months. The U.S. state and local rate was lower in
1996, as was the rate of the Company's Brazilian operations. Additionally, the
rate is marginally lower due to utilization of some capital loss carry-forwards
during the second quarter in 1996.
Minority interest in net income of subsidiaries decreased $5, primarily due
to the lower earnings recorded by Dana's majority owned affiliates in Brazil and
Taiwan.
10
11
ITEM 2. (Continued)
- -------
Results of Operations (Six Months 1996 vs Six Months 1995)
- ----------------------------------------------------------
Equity in earnings of affiliates was higher in 1996 than 1995, due to the
devaluation of the Mexican peso, which resulted in a charge against earnings in
the first quarter of 1995.
Third quarter 1996 production schedules of U.S. light truck and sport
utility vehicles remain strong with the full year expected to approximate 1995's
record levels. Based upon assessment of lower demand and more than adequate
inventory levels, U.S. heavy truck production is anticipated to remain depressed
in the second half of 1996. Dana's U.S. aftermarket sales for the balance of the
year are expected to be at, or slightly above, 1995's sales. Based on these
trends, total U.S. sales are anticipated to be about equal to 1995's. Global
expansion of core products such as axles, driveshafts, gaskets, and filters are
expected to produce more rapid sales growth in other regions of the world and
this should allow Dana's overall growth to continue during the second half of
1996.
11
12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -------
The Company and its consolidated subsidiaries are parties to various
pending judicial and administrative proceedings arising in the ordinary course
of business. The Company's management and legal counsel have reviewed the
probable outcome of these proceedings, the costs and expenses reasonably
expected to be incurred, the availability and limits of the Company's insurance
coverage, and the Company's established reserves for uninsured liabilities.
While the outcome of the pending proceedings cannot be predicted with certainty,
based on its review, management believes that any liabilities that may result
are not reasonably likely to have a material effect on the Company's liquidity,
financial condition or results of operations.
Under the rules of the Securities and Exchange Commission, certain
environmental proceedings are not deemed to be ordinary routine proceedings
incidental to the Company's business and are required to be reported in the
Company's annual and/or quarterly reports. The Company is currently a party to
one such proceeding, which has been reported previously;
1. IN THE MATTER OF DANA CORPORATION, BOSTON WEATHERHEAD DIVISION. In 1994,
--------------------------------------------------------------
the United States Environmental Protection Agency, Region 6 ("USEPA 6") issued
an administrative Complaint, Compliance Order and Notice of Opportunity for
Hearing to the Company in connection with alleged violations of the federal
Resource Conservation and Recovery Act ("RCRA") by the Company's plant in
Vinita, Oklahoma. The alleged violations included, among others, the plant's
failure to manage and maintain hazardous waste containers, tanks and tank
systems in accordance with RCRA requirements and record keeping violations in
connection with the plants Contingency Plan. In the Compliance Order, USEPA 6
sought civil penalties of $576,640. Following negotiations, the Company and
USEPA 6 reached an agreement to settle this case in the first quarter of 1996.
In the second quarter, the settlement was finalized and on May 20,1996, the
Company paid a civil penalty of $124,550.
In May 1996, the Company settled all remaining claims in the 1992 lawsuit,
UNITED STATES V. DANA CORPORATION, without any finding of liability or admission
- ---------------------------------
of wrongdoing by Dana. In this suit, the Department of Justice, on behalf of the
United States, had sued the Company, Warner Electric Brake and Clutch Company,
Inc., and Beaver Precision Products, lnc.("Beaver"), in the U.S. District Court,
Eastern District of Michigan under the federal False Claims Act and various
common law theories. The complaint alleged overcharging on U.S. government
contracts or subcontracts awarded to Beaver in the late 1970s and the 1980s. In
1995, Dana and the Department of Justice settled the claims relating to 16
government contracts included in the complaint without any finding of liability
or admission of wrongdoing by Dana, and the Company paid the government $19.5
million, which included payment for the governments alleged damages, interest,
and costs of investigation and litigation with respect to those claims. A
tentative settlement relating to the remaining claims was reached in the fourth
quarter of 1995 and finalized on May 31, 1996. Under terms of this settlement,
the Company paid the government $10.175 million which included payment for
alleged damages, interest and cost of investigation and litigation with respect
to those claims.
12
13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- -------
a) The Exhibits listed in the "Exhibit Index" are filed as a part of this
report
b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
June 30, 1996.
13
14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DANA CORPORATION
Date: August 8, 1996 /s/ James E. Ayers
- --------------------- ---------------------------
James E. Ayers
Chief Financial Officer
Duly Authorized Officer and
Principal Financial Officer.
14
15
EXHIBIT INDEX
-------------
Exhibit
- -------
10-K Supplemental Benefits Plan, amended effective January 1,1996
27 Financial Data Schedule
15
1
Exhibit 10(k)
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 a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 as in effect from time
to time; provided that, without limitation, such a change in control shall be
deemed to have occurred if and when (a) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or
becomes a beneficial owner, directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the combined voting power of the
Company's then outstanding securities or (b) during any period of 24 consecutive
months, commencing before or after the effective date of this Plan, individuals
who at the beginning of such twenty-four month period were directors of the
Company cease for any reason to constitute at least a majority of the Board of
Directors of the Company. Notwithstanding anything to the contrary in this Plan,
the term "person" referred to in clause (a) above of this Section 1.3 shall not
include within its meaning, and shall not be deemed to include, for any purpose
of this Plan, any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled 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
2
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.
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.
2
3
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.
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, 1988.
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.
3
4
ARTICLE II
----------
PURPOSE OF THE PLAN
-------------------
2.1. PURPOSE. This Plan is adopted effective September 1, 1988, and amended
effective January 1, 1996, 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).
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
4
5
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 4.01(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
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%
5
6
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%
(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
6
7
(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.
4.2. FORM OF BENEFIT PAYMENTS. 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, upon the written request of the Employee, the Treasurer of
the Company may, in his sole discretion, permit such benefit to 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. Any such
written request must be filed by the Employee with the Treasurer of the Company
on or before the Employee's date of retirement under the Pension Plan. If the
Employee is the Treasurer of the Company, the duties of the Treasurer of the
Company under this Section 4.2 shall be discharged by the President of the
Company. The amount of the benefit payable pursuant to any form of payment under
this Plan shall be determined by applying the mortality assumptions, interest
rates, and other factors contained in the Retirement Income Plan that would be
applicable to the form of payment payable 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 (a),
below, over the amount determined under paragraph (b), below.
(a) 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:
(i) 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
(ii)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
7
8
next lowest one-tenth of one 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.
(b) 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.
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 (i) 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; (ii) the domestic relations order does not purport to give the
alternate payee any right to assets of the Company or its affiliates; and (iii)
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.
8
9
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.
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
9
10
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.
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 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 Employees similarly situated. 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.
10
11
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 applying the Retirement Income Plan formula, the
individual's "Final Monthly Earnings" shall be the average of
his Earnings during the five consecutive calendar
11
12
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 subparagraph
(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.
(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
12
13
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 NO PRE-RETIREMENT DEATH BENEFIT. If an individual dies before his benefit
under this Appendix A commences or is paid, no benefit shall be paid to the
individual's surviving spouse or other beneficiary.
13
5
1,000
6-MOS
DEC-31-1996
JAN-01-1996
JUN-30-1996
54,700
0
1,201,200
0
836,800
0
3,448,800
1,735,700
5,863,000
0
1,343,700
101,700
0
0
1,177,600
5,863,00
3,993,200
4,105,700
3,377,300
3,377,300
0
0
75,500
280,900
103,400
0
0
0
0
170,200
1.68
0
