1
[DANA CORP. LOGO]
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, 1996 Commission file number 1-1063
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DANA CORPORATION
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(Exact name of registrant as specified in its charter)
Virginia 34-4361040
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4500 Dorr Street, Toledo Ohio 43615
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (419)535-4500
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock of $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 13, 1997, was approximately $3,261,950,300.
--------------
The number of shares of registrant's Common Stock, $1 Par Value, outstanding at
February 13, 1997, was 103,144,673 shares.
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DOCUMENTS INCORPORATED BY REFERENCE
Document Where Incorporated
- -------------------------------------------- -----------------------------
1. Proxy Statement dated February 28, 1997 Part III (Items 10, 11,12,13)
for Annual Meeting of Shareholders
to be held on April 2, 1997.
Part I (Item 1)
2. Annual Report to Shareholders Part II (Items 5, 6, 7, 8)
for year ended December 31, 1996. Part IV (Item 14)
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The Exhibit Index is located at pages 24-27 of the sequential numbering system.
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2
INDEX
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DANA CORPORATION - FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
10-K Pages
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Cover 1
Index 2
Part I
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Item 1 - Business 3-10
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Geographical Areas, Markets, Customer Dependence,
Products, Material Source and Supply, Seasonality, Backlog,
Competition, Strategy, Patents and Trademarks, Research
and Development, Employment, Environmental
Compliance, Subsequent Events, and Executive Officers
of the Registrant
Item 2 - Properties 11
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Item 3 - Legal Proceedings 11
--------------------------
Item 4 - Submission of Matters to a Vote of
-------------------------------------------
Security Holders 11
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Part II
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Item 5 - Market for Registrant's Common Equity and
--------------------------------------------------
Related Stockholder Matters 12
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Item 6 - Selected Financial Data 12
--------------------------------
Item 7 - Management's Discussion and Analysis of
------------------------------------------------
Financial Condition and Results of Operations 12
---------------------------------------------
Item 8 - Financial Statements and Supplementary Data 12
----------------------------------------------------
Item 9 - Changes in and Disagreements with Accountants on
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Accounting and Financial Disclosure 12
-----------------------------------
Part III
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Item 10 - Directors and Executive Officers of the
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Registrant 13
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Item 11 - Executive Compensation 13
--------------------------------
Item 12 - Security Ownership of Certain Beneficial
--------------------------------------------------
Owners and Management 13
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Item 13 - Certain Relationships and Related Transactions 13
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Part IV
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Item 14 - Exhibits, Financial Statement Schedules,
--------------------------------------------------
and Reports on Form 8-K 14-27
-----------------------
(a)(1) Financial Statements
(2) Financial Statement Schedules
(3) Exhibits
(b) Reports on Form 8-K
Signatures 28-29
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PART I
ITEM 1 - BUSINESS
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Dana Corporation, incorporated in 1905, is a global leader in
engineering, manufacturing and marketing of products and systems for the
worldwide vehicular, industrial and off-highway original equipment (OE) markets
and is a major supplier to the related aftermarkets (also called "distribution,"
"service parts" or "replacement parts" markets). Dana also wholly owns Dana
Credit Corporation (DCC), a provider of lease financing services in certain
markets.
Dana's Vehicular segment is comprised of components and parts used on
light, medium and heavy trucks, sport utility vehicles, trailers, vans and
automobiles. The Company's products include components for drivetrain systems,
such as axles, driveshafts, clutches and transmissions; engine parts, such as
gaskets and sealing systems, piston rings, and filtration products; structural
components, such as vehicular frames, engine cradles and rails; chassis
products, such as steering and suspension components. In 1996, sales from this
segment accounted for 80% of Dana's sales.
The Company's Industrial segment products are used in off-highway
vehicle and stationary equipment applications. These products include components
for industrial power transmission products, such as electrical and mechanical
brakes and clutches, drives and motion control devices; fluid power systems,
such as pumps, cylinders and control valves. Sales from this segment amounted to
20% of the Company's 1996 sales.
Dana's Lease Financing segment is almost exclusively comprised of the
operations of DCC which offer lease financing services in the form of capital
markets specialized lease transactions worldwide and customized equipment
financing programs in the U.S., Canada, the United Kingdom and continental
Europe. The revenue derived from such services is included in Revenue from Lease
Financing and Other Income in Dana's financial statements and is not considered
a component of net sales.
"Note 16. Business Segments" at pages 34 - 36 of Dana's 1996 Annual
Report is incorporated herein by reference.
GEOGRAPHICAL AREAS
- ------------------
To serve its global markets, Dana has established regional operating
organizations in North America, Europe, South America and Asia Pacific, each
with management responsibility for its specific geographic markets. The
Company's operations are located in the following twenty-nine countries:
North America Europe South America Asia Pacific
------------- ------ ------------- ------------
Canada Austria Portugal Argentina Australia Malaysia
Mexico France Spain Brazil China Singapore
United States Germany Sweden Colombia Hong Kong Taiwan
India Switzerland Uruguay Japan Thailand
Italy United Kingdom Venezuela Korea New Zealand
Netherlands
Dana's international subsidiaries and affiliates manufacture and sell a
number of vehicular and industrial products which are similar to those produced
by Dana in the United States (U.S.). In addition to normal business risks,
operations outside the U.S. are subject to other risks including, among others,
changing political, economic and social environments, changing governmental laws
and regulations, and currency revaluations and market fluctuations.
Consolidated international sales were $2.2 billion, or 28% of the
Company's 1996 sales. Including U.S. exports of $676 million, international
sales accounted for 37% of 1996 consolidated sales. International operating
income was $135 million, or 19% of consolidated 1996 operating income. In
addition, there was $11 million of equity in earnings from international
affiliates in 1996.
"Business Segments" by geographic areas at page 36 of Dana's 1996
Annual Report and "Note 6. International Operations" at page 30 of Dana's 1996
Annual Report are incorporated herein by reference.
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MARKETS
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During the past three years, Dana's sales to Vehicular and Industrial
original equipment manufacturers (OEM) and service parts markets were as
follows:
Market Analysis by Business Segment*
Percentage of Consolidated Sales
--------------------------------
1994 1995 1996
---- ---- ----
Vehicular Products -
OE Manufacturers 56% 58% 58%
Service Parts 24% 22% 22%
--- --- ---
Total 80% 80% 80%
Industrial Products -
OE Manufacturers 10% 10% 10%
Service parts 10% 10% 10%
--- --- ---
Total 20% 20% 20%
*Note: End use of products is not always identifiable but these are reasonable estimates derived from expected customer usages.
Sales in the Lease Financing segment consisted of real estate sales and
did not exceed 1% of consolidated sales for 1994, 1995 or 1996. Lease financing
revenues (amounting to less than 5% of Dana's consolidated 1996 total revenues)
have been excluded from this market analysis.
CUSTOMER DEPENDENCE
- -------------------
The Company has thousands of customers around the world and has
developed long-standing business relationships with many of these customers. The
Company's attention to cost, as well as quality, delivery and service, has been
recognized by numerous customers who have awarded the Company supplier quality
awards. Ford Motor Company (Ford) and Chrysler Corporation (Chrysler) were the
only customers accounting for more than 10% of the Company's consolidated sales
in 1996. The Company has been supplying product to Ford, Chrysler and their
subsidiaries for many years. Sales to Ford, as a percentage of the Company's
sales, were 16%, 17% and 16% in 1994, 1995 and 1996, respectively. Sales to
Chrysler, as a percentage of sales, were 12%, 13% and 14% in 1994, 1995 and
1996, respectively. Loss of all or a substantial portion of the Company's sales
to Ford, Chrysler or other large volume customers, would have a significant
adverse effect on the Company's financial results until this lost sales volume
could be replaced. This event is considered unlikely in the ordinary course of
business and would most likely occur only in the event of a major business
interruption such as a prolonged strike at one of the Company's customers.
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PRODUCTS
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The major groups of products within the Vehicular segment are as
follows:
Major Product Groups - Vehicular Segment
Percentage of Consolidated Sales
-----------------------------------------
1994 1995 1996
---- ---- ----
Types of Products
- -----------------
Front and rear axles for highway
vehicles, primarily trucks 29% 30% 30%
Engine parts and accessories for
highway vehicles, primarily trucks, such
as gaskets,seals, piston rings and filters 14% 13% 12%
Driveshafts and universal joints for
highway vehicles, primarily trucks 11% 10% 11%
Frames and other structural components
for highway vehicles, primarily trucks 8% 8% 9%
Other Vehicular products 18% 19% 18%
--- --- ---
Total 80% 80% 80%
No product or product group within the Industrial or Lease Financing
segments exceeded 10% of consolidated sales during these periods.
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MATERIAL SOURCE AND SUPPLY
- --------------------------
Most raw materials (such as steel) and semi-processed or finished items
(such as forgings and castings) are purchased from capable long-term suppliers
within the geographic regions of the Dana operating units. Generally, the
Company does not rely on any one supplier for these materials, which are for the
most part available from numerous sources in quantities need by the Company.
Temporary shortages of a particular material or part occasionally occur, but the
overall availability of materials is not considered to be a problem by the
Company.
SEASONALITY
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Dana's businesses are not considered to be seasonal, but the OE
vehicular businesses are closely related to the vehicle manufacturers'
production schedules.
BACKLOG
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The majority of Dana's products are not on a backlog status. They are
produced from readily available materials such as steel and have a relatively
short manufacturing cycle. Each operating unit of the company maintains its own
inventories and production schedules. Many of Dana's products are available from
more than one facility. Production capacity is adequate to handle current
requirements and will be expanded to handle anticipated growth in certain
product lines.
COMPETITION
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In its Vehicular and Industrial segments, the Company competes
worldwide with a number of other manufacturers and distributors which produce
and sell similar products. These competitors include vertically-integrated units
of the Company's major vehicular OE customers and a number of independent U.S.
and international suppliers. The Company's traditional U.S. OE customers, in
response to substantial international competition in the past few years, have
expanded their worldwide sourcing of components while reducing their overall
number of suppliers. The Company has established operations in several regions
of the world to enable Dana to be a strong global supplier of its core products.
In the Lease Financing segment, the Company's primary focus is on
leasing activities. The Company's competitors include national and regional
leasing and finance organizations.
STRATEGY
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The Company is actively pursuing two broad strategies, focused around
Dana's eight core businesses: axles, driveshafts, structural components, sealing
products, filtration products, engine products, industrial products and leasing.
The first strategy is to significantly reduce the effects of the
economic cycle by diversifying the Company's products and reducing its
dependence on highway vehicle OE production. Dana's long-term goal is to obtain
50% of sales from highway vehicle OEM customers and 50% from distribution,
off-highway, service and industrial markets. In 1996, sales from highway vehicle
OEM customers were 58% of Dana's total, while distribution, off-highway, service
and industrial sales were 42%. The Company continues to seek expansion in its
off-highway and distribution businesses by increasing market penetration and
broadening its product offerings through internal growth and acquisition.
The second strategy focuses on the Company obtaining a balance between
U.S. and international sales. Dana has well-defined regional organizations in
North America, South America, Europe and Asia Pacific in support of this
initiative to effectively compete in world markets. In 1996, international
sales, including exports from the U.S., totaled 37% of consolidated sales. The
Company's long-term goal is to derive 50% of its sales (including exports) from
customers outside the U.S. Although this strategy is subject to certain risks,
the Company believes broadening its sales base will enable it to offset effects
of economic downturns in specific countries, source materials from the areas of
the world which offer the lowest cost, and provide access to markets which have
the greatest growth potential. To accomplish this objective, the Company is
focusing on meeting OE customers' needs in each of the local markets in which
those customers operate, both through exports and by locating manufacturing or
assembly facilities in markets where key OE customers have assembly plants.
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PATENTS AND TRADEMARKS
- ----------------------
Dana's 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 Dana
serves. Throughout these product lines, Dana also owns or is licensed to
manufacture and sell its products under a number of patents and licenses. These
patents and licenses have been obtained over a period of years and expire at
various times. Dana considers each of them to be of value and aggressively
protects its rights throughout the world against infringement. Because the
Company is involved with many product lines, the loss or expiration of any
particular patent or license would not materially affect the sales and profits
of the company.
Dana owns numerous trademarks which are registered in many countries
enabling Dana to market its products worldwide. The "Dana," "Spicer," "Parish,"
"Perfect Circle," Victor Reinz," "Wix," "Weatherhead," "Warner Electric" and
"Gresen" trademarks, among others, are widely recognized in their respective
industries.
RESEARCH AND DEVELOPMENT
- ------------------------
Dana's facilities engage in engineering, research and development, and
quality control activities to improve the reliability, performance and
cost-effectiveness of Dana's existing Vehicular and Industrial products and to
design and develop new products for both existing and anticipated applications.
The Company employs advanced technology and methods to achieve these
improvements. To promote efficiency and reduce development costs, Dana's
research and engineering people work closely with OE manufacturing customers on
special product and systems designs. Dana's consolidated worldwide expenditures
for engineering, research and development, and quality control programs were
$138 million in 1994, $149 million in 1995 and $164 million in 1996.
EMPLOYMENT
- ----------
Dana's worldwide employment (including consolidated subsidiaries) was
approximately 46,100 at December 31, 1996.
ENVIRONMENTAL COMPLIANCE
- ------------------------
The Company makes capital expenditures in the normal course of
business, as necessary to ensure that its facilities are in compliance with
applicable environmental laws and regulations. Costs of environmental compliance
did not have a materially adverse effect on the Company's capital expenditures,
earnings or competitive position in 1996, and the Company currently does not
anticipate future environmental compliance costs will be material. "Note 1.
Summary of Significant Accounting Policies - Environmental Compliance and
Remediation" on page 28 of Dana's 1996 Annual Report is incorporated herein by
reference.
SUBSEQUENT EVENTS
- -----------------
On February 27, 1997, the Company signed an agreement to sell its
warehouse distribution operations in the United Kingdom, the Netherlands and
Portugal to U.K.-based Partco Group plc for pound sterling 103 million (U.S.
$168 million). The 1996 sales of these operations were $315 million. The
closing, subject to approval of Partco's shareholders, is anticipated by the end
of March. The sale will result in an after-tax gain of approximately $47 million
to Dana (46 cents per share). The operations included in the sale encompass 135
Brown Brothers distribution facilities in the United Kingdom, Dana Distribution
B.V. (Holland), and Europecas S.A. (Portugal).
In February 1997, Dana initiated a rationalization plan at its Perfect
Circle Europe operations in France. Under the plan, the Company expects to sell
its piston manufacturing facility and its owned warehouse operation, reorganize
its piston ring manufacturing operations, and downsize and relocate its division
office. When the rationalization plan has been finalized, the Company expects
the resulting charges to be approximately $36 million (35 cents per share). It
is anticipated that the charges will be recognized during the first and second
quarters of 1997.
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EXECUTIVE OFFICERS OF THE REGISTRANT
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The executive officers of the Company and their ages, present positions
and other positions within the past five years are as follows. Unless otherwise
indicated, all positions are with Dana. Hayes - Dana Inc., formerly a
majority-owned subsidiary of Dana, is now a wholly-owned subsidiary and has been
renamed Dana Canada Inc. Albarus S.A. is a majority owned Brazilian subsidiary
of Dana. Plumley Companies, Inc., formerly a wholly-owned subsidiary of Dana, is
now a Dana division and has been renamed Plumley Division. The first six
executive officers listed below are the members of Dana's Policy Committee.
Present
Name Position(s) with Other Positions During
and Age the Registrant the Past Five Years
- ------- -------------- -------------------
S.J. Morcott Chairman of the Board of President of Dana from 1986-95;
(58) Directors since 1990; Chief Dana Director since 1985;
Executive Officer since 1989 Chairman of the Board of Hayes-
and Chief Operating Officer Dana Inc., 1987-95
since 1986
J.M. Magliochetti Director and President - Dana North American
(54) President since 1996 Operations, 1992-95
C.H. Hirsch President - Dana International None
(62) since 1996; Executive
Vice President since 1991
J.S. Simpson Chief Financial Officer since President - Dana Asia Pacific
(56) January, 1997; Operations, 1992-95
Vice President of Finance and
Treasurer since 1996
W.J. Carroll President - Diversified Products Vice President and
(52) and Distribution since General Manager - Aftermarket
1996; President - Product Division, 1987-93
Dana Distribution Service Group
since 1995; President - DTF
Trucking since 1985; President -
Dana Canada Inc. since 1993 and
Chairman of the Board since 1995
M.A. Franklin, III President - Dana Europe Vice President and General
(49) since 1993 Manager - Spicer Clutch Division,
1991-93
B.N. Cole President - Spicer Off-Highway President - Parish Structural
(54) Components Group since Components Group, 1995-96;
February 1997 Vice President - Heavy Vehicle - Dana
North American Operations, 1991-95
C.J. Eterovic President - Dana South America Vice President - Dana South
(62) since 1993 American Operations, 1992-93
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EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
- ------------------------------------------------
Present
Name Position(s) with Other Positions During
and Age the Registrant the Past Five Years
- ------- -------------- -------------------
H.E. Ferreira Group Vice President - Group Vice President -
(57) Engine Products since 1996 Perfect Circle Engine Products Group,
1995-96; Vice President, Mercosur - Dana
South America, 1994-95; Chairman-
Administration Council of Albarus S.A.,
1992-94
R.B. Forde Group Vice President - Wix Vice President and General Manager -
(60) Filtration Products Group Wix Division, 1987-95
since 1995
M. F. Greene Group Vice President- Vice President and General Manager-
(48) Parish Structural Components Parish Light Vehicle Structures Division,
Group since March 1997 1993-97; Vice President and General
Manager-Parish Division, 1991-93
F. J. Hawes Controller, North American Vice President and Corporate Controller -
(50) Operations since 1996 Dana Canada, Inc., 1995-96; Corporate
Controller - Hayes-Dana, Inc., 1992-95
C.F. Heine President - Dana Asia Pacific Vice President of Asia Pacific
(44) since 1996 Operations, 1995; General Manager -
Spicer Off-Highway Axle Division,
1993-94; Plant Manager - Spicer
Driveshaft Division, 1991-93
C.W. Hinde Vice President and Chief None
(58) Accounting Officer since 1992;
Assistant Treasurer
since 1986
J.M. Laisure Group Vice President - Vice President and General Manager -
(45) Spicer Modular Systems Spicer Transmission Division, 1991-94
Group since 1994
C.J. McNamara President - Victor Reinz Sealing Vice President - Automotive -
(58) Products Group since 1995 Dana North American Operations,
1993-95
E. Mendoza Chairman - Spicer S.A. General Director - Spicer S.A., 1981-93
(59) since 1994
W.L. Myers President - Spicer Driveshaft Vice President and General Manager-
(56) Group since 1995 Spicer Driveshaft Division, 1986-95
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EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
- ------------------------------------------------
Present
Name Position(s) with Other Positions During
and Age the Registrant the Past Five Years
- ------- -------------- -------------------
M.A. Plumley Group Vice President - Dana General Manager - Plumley Companies,
(46) Industrial since 1996 1995-96; Chairman and Chief Executive
Officer - Plumley Companies, 1988-95
J.H. Reed President - Spicer Axle Group President - Light Truck - Dana North
(64) since 1995 American Operations, 1995;
Vice President - Light Vehicle -
Dana North American Operations,
1992-95; President and General
Manager - Spicer Axle Division, 1991-95
A.J. Shelbourn Group Vice President - Dana Vice President and General Manager-
(51) Distribution, North American Dana Distribution U.K., 1994-96;
Operations since 1996 General Manager - Dana Distribution
U.K., 1991-94
E.J. Shultz Chairman and President - Dana President - Lease Financing, 1994-95;
(52) Credit Corporation since 1995 President - Financial Services, 1990-94
M.J. Strobel Vice President since 1976; None
(56) General Counsel since 1970;
and Secretary since 1982
J.H. Woodward, Jr. Vice President and Corporate Controller - Dana North American
(44) Controller since 1996 Operations, 1994-96;
Division Controller - Spicer Heavy
Axle and Brake Division, 1992-94
None of the above officers has a family relationship with any other
officer or with any director of Dana. There are no arrangements or
understandings between any of the above officers and any other person pursuant
to which he was elected an officer of Dana. Officers are elected annually at the
first meeting of the Board of Directors after the Annual Meeting of
Shareholders.
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ITEM 2 - PROPERTIES
- -------------------
Dana owns the majority of the manufacturing facilities and the larger
distribution facilities for its Vehicular and Industrial products. Several
manufacturing facilities and many of the Company's smaller distribution outlets,
service branches, and offices are leased. The facilities, in general, are
well-maintained and adapted to the operations for which they are being used, and
their productive capacity is adjusted and expanded as required by market and
customer growth.
On a geographic basis, Dana's facilities (including those of
consolidated subsidiaries and affiliates) are located as follows:
Dana Facilities by Geographic Region
------------------------------------
Type of North South Asia
Facility America Europe America Pacific Total
- -------- ------- ------ ------- ------- -----
Manufacturing 110 52 18 6 186
Distribution 46 161 14 35 256
Service Branches, Offices 56 8 3 12 79
--- --- -- -- ---
Total 212 221 35 53 521
=== === == == ===
ITEM 3 - LEGAL PROCEEDINGS
- --------------------------
The Company and its consolidated subsidiaries are parties to various
pending judicial and administrative proceedings arising in the ordinary course
of business. The Company's management and legal counsel have reviewed the
probable outcome of these proceedings, the costs and expenses reasonably
expected to be incurred, the availability and limits of the Company's insurance
coverage, and the Company's established reserves for uninsured liabilities.
While the outcome of the pending proceedings cannot be predicted with certainty,
based on its review, management believes that any liabilities that may result
are not reasonably likely to have a material effect on the Company's liquidity,
financial condition or results of operations.
Under the rules of the Securities and Exchange Commission, certain
environmental proceedings are not deemed to be ordinary routine proceedings
incidental to the Company's business and are required to be reported in the
Company's annual and/or quarterly reports. The Company is not currently a party
to any such proceedings.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
- None -
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PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------------------
Dana's common stock is listed on the New York, Pacific, and London
Stock Exchanges. On February 13, 1997, there were 32,456 shareholders of record.
Dividends have been paid on the common stock every year since 1936.
Quarterly dividends have been paid since 1942.
"Additional Information - Shareholders' Investment" at page 50 of
Dana's 1996 Annual Report is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
- --------------------------------
"Eleven Year History - Financial Highlights" at page 51 of Dana's 1996
Annual Report is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
"Management's Discussion and Analysis of Results" at pages 40-44 of
Dana's 1996 Annual Report is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The financial statements, together with the report thereon of Price
Waterhouse LLP dated January 21, 1997, at pages 22-40 of Dana's 1996 Annual
Report and "Unaudited Quarterly Financial Information" at page 50 of Dana's 1996
Annual Report are incorporated herein by reference.
On February 27, 1997, the Company announced that it had agreed to sell
its European distribution operations and initiated a rationalization plan at its
Perfect Circle Europe operations in France. See page 7 "Subsequent Events" for
additional comments.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
- None -
12
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PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Information regarding Dana's directors and executive officers is set
out in Part I, Item 1 of this Form 10-K and in Dana's Proxy Statement dated
February 28, 1997, for the Annual Meeting of Shareholders to be held on April 2,
1997 (the "1997 Proxy Statement"). "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" from the 1997 Proxy Statement are
incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
- --------------------------------
"The Board and its Committees - Compensation," "Executive
Compensation," "Compensation Committee Report on Executive Compensation," and
"Comparison of Five-Year Cumulative Total Return" from Dana's 1997 Proxy
Statement are incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
"Stock Ownership" from Dana's 1997 Proxy Statement is incorporated
herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
"Other Transactions" and "Transactions With Management" from Dana's
1997 Proxy Statement are incorporated herein by reference.
13
14
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
Page in
(a) The following documents are incorporated by reference and Annual Report
filed as part of this report: -------------
(1) Financial Statements:
--------------------
Report of Independent Accountants 22
Consolidated Statement of Income for each of the three years 23
in the period ended December 31, 1996
Consolidated Balance Sheet at December 31, 1995 and 1996 24
Consolidated Statement of Cash Flows for each of the three
years in the period ended December 31, 1996 25
Consolidated Statement of Shareholders' Equity for each of the
three years in the period ended December 31, 1996 26
Notes to Financial Statements 27 - 40
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, 1996 15
Valuation and Qualifying Accounts and Reserves (Schedule II) 16 - 19
Supplementary Information - Stock Plans 20 - 22
Supplementary Information - Commitments and Contingencies 23
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 - The Exhibits listed in the "Exhibit Index" are
filed as part of this report. 24 - 27
(b) Reports on Form 8-K
-------------------
The Company filed a Current Report on Form 8-K on December 23,
1996, to report that it had signed an agreement to acquire the
business of Clark-Hurth Components, a unit of Ingersoll-Rand
Company.
14
15
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 21, 1997 appearing on page 22 of the 1996 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 16
through 19 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.
PRICE WATERHOUSE LLP
Toledo, Ohio
January 21, 1997
15
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DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
----------------------------------------------
SCHEDULE II(a) - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
---------------------------------------------------------------
ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
------------------------------------------
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
--------- --------- ---------- --------------- ------
Year ended-
December 31, 1994 $16,828,000 $4,099,000 $(1,252,000) $ (29,000) $19,646,000
December 31, 1995 $19,646,000 $9,281,000 $(5,322,000) $ (64,000) $23,541,000
December 31, 1996 $23,541,000 $8,900,000 $(6,315,000) $(151,000) $25,975,000
16
17
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
----------------------------------------------
SCHEDULE II(b) - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
---------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES - LEASE FINANCING
---------------------------------------------
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
--------- --------- ---------- --------------- ------
Year ended-
December 31, 1994 $38,240,000 $13,895,000 $(11,421,000) $ 75,000 $40,789,000
December 31, 1995 $40,789,000 $15,578,000 $ (9,000,000) $ 58,000 $47,425,000
December 31, 1996 $47,425,000 $12,349,000 $ (9,299,000) $350,000 $50,825,000
17
18
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
----------------------------------------------
SCHEDULE II(c) - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
---------------------------------------------------------------
ALLOWANCE FOR LOAN LOSSES
-------------------------
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
--------- --------- ---------- --------------- ------
Year ended-
December 31, 1994 $14,522,000 $(2,548,000)(1) $(6,088,000) $(247,000) $5,639,000
December 31, 1995 $ 5,639,000 $ 1,551,000 $(3,265,000) $(548,000) $3,377,000
December 31, 1996 $ 3,377,000 $ 994,000 $(3,161,000) ------- $1,210,000
(1) Includes reversal of reserves provided in prior years.
18
19
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
----------------------------------------------
SCHEDULE II(d) - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
---------------------------------------------------------------
VALUATION ALLOWANCE - REAL ESTATE
---------------------------------
Amounts
Balance at Additions "written off" Balance at
beginning charged net of Acquisitions end of
of period to income recoveries and other items period
--------- --------- ---------- --------------- ------
Year ended-
December 31, 1994 $41,054,000 $10,337,000 $(12,669,000) $ 226,000 $38,918,000
December 31, 1995 $38,918,000 $ 292,000 $ (9,291,000) $(507,000) $29,412,000
December 31, 1996 $29,412,000 $ 63,000 $(24,984,000) $ (71,000) $ 4,420,000
19
20
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
----------------------------------------------
SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTS
-------------------------------------------------
EMPLOYEE STOCK OPTION PLANS
- ---------------------------
The Company has two stock option plans for employees which were
approved by the shareholders in 1977 and 1982. The 1977 Plan was amended in
1981, 1986, 1990, 1994 and 1995. The 1982 Plan was amended with shareholder
approval in 1988 and 1993. These plans authorize the grant of options and /or
stock appreciation rights ("SARs") to key employees to purchase 6,000,000 and
11,900,000 shares, respectively, of common stock at exercise prices no less than
85% of the market value of such stock at date of grant; the exercise periods may
extend for no more than ten years from date of grant. All options and SARs
granted to date under these two plans have been granted at 100% of the market
value of the Company's common stock at the date of grant.
The number of shares above and all references below to the number of
shares and per share prices have been adjusted for all stock dividends and
distributions subsequent to the dates the plans were approved by the date of
grant.
The number of shares subject to options (by year of grant) at December
31, 1996, and the exercise prices per share were as follows:
Number of Average Price
Shares Per Share Total
--------- ------------- -----
Year granted-
1987 34,200 $ 23.44 $ 801,600
1988 115,208 18.75 2,160,200
1989 133,050 21.06 2,801,400
1990 268,963 18.25 4,908,600
1991 231,000 16.38 3,782,600
1992 932,992 20.16 18,805,700
1993 702,750 27.56 19,369,500
1994 1,033,575 29.06 30,038,300
1995 991,000 31.06 30,778,500
1,394,550 28.13 39,221,700
---------- ------------
5,837,288 $152,668,100
========== ============
At December 31, 1996, there were 3,179,731 shares available for future
grants under the 1982 Plan, as amended. No shares have been available for grants
under the 1977 Plan since 1987 and there were no SARs outstanding at December
31, 1996.
20
21
Options becoming exercisable and options exercised, their exercise
prices and their market prices during three years ended December 31, 1996, under
these plans were as follows:
Exercise Price Market Price
-------------------------- --------------------
No. Of Avg. Per Avg. Per
Shares Share Aggregate Share Aggregate
------ ----- --------- ----- ---------
Options becoming
exercisable
(Market prices
at dates
exercisable):
Year ended
December 31,
1994 668,968 $ 21.28 $ 14,236,000 $ 28.89 $ 19,329,000
1995 814,971 24.32 19,822,000 29.78 24,266,000
1996 1,070,901 27.09 29,016,000 29.08 31,141,000
Options exercised
(Market prices
at dates
exercised):
Year ended
December 31,
1994 309,915 $ 17.13 $ 5,309,000 $ 28.74 $ 8,906,000
1995 223,430 17.93 4,005,000 28.74 6,422,000
1996 417,260 19.46 8,119,000 31.53 13,158,000
The amount by which proceeds exceeded the par value of shares issued
under options was credited to additional paid-in capital. No amounts were
charged against income either at the time of granting options or issuing shares.
21
22
The following table sets forth (1) the aggregate number of shares of the
Company's common stock subject at December 31, 1996, to outstanding options, (2)
the average exercise prices per share of such options, (3) the aggregate
exercise prices of such options, (4) the ranges of expiration dates of such
options, and (5) the aggregate market values of such shares at February 13,
1997, based on $ 31.625 per share, the closing sales price in the New York Stock
Exchange Composite Transactions Index as reported in THE WALL STREET JOURNAL:
Aggregate Aggregate
No. of Shares Average Market
Covered By Exercise Aggregate Range of Value at
Outstanding Price Exercise Expiration February 13,
Options Per Share Price Dates 1997
--------------- ---------- -------------- ----------- ------------
1977 Plan 34,200 $23.44 $ 801,600 7/13/97 $ 1,081,575
1982 Plan 5,803,088 $26.17 $151,869,000 7/11/98 $183,522,658
to
7/15/06
At December 31, 1996, 1,004 employees of the Company and its
subsidiaries and affiliates held exercisable options under the Company's stock
option plans, consisting of 154 employees under the 1977 Plan and 981 employees
(some of whom also held options under the 1977 Plan) under the 1982 Plan.
EMPLOYEES' STOCK PURCHASE PLAN
- ------------------------------
The Company has an employees' Stock Purchase Plan which was approved by
the shareholders in 1994. As of December 31, 1996, 37,600 employees of the
Company and its subsidiaries were eligible to participate. Of such employees,
12,300 were participating at December 31, 1996.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
- -----------------------------------------
The Company has a stock option plan for non-employee Directors of the
Company which was approved by the shareholders in 1993. The plan provides for
the granting of options to purchase the Company's common stock at prices equal
to the market value of the stock at the date of grant. The options are
exercisable after one year for a period not to exceed ten years from the date of
grant. In 1994, 1995 and 1996, options were granted for 21,000, 24,000 and
21,000 shares, respectively, at per share exercise prices of $28.88 in 1994,
$24.81 in 1995 and $32.25 in 1996. These options expire between 4/19/03 and
4/15/06. At December 31, 1996, 75,000 options were outstanding, 54,000 options
were exercisable and there were 46,000 options available for future grant.
24,000 options became exercisable during 1996 having an aggregate exercise price
of $595,400 and an aggregate market price at date of exercisability of $787,100.
As of February 13, 1996, the aggregate exercise price of the 75,000 options
outstanding under the Plan was $2,081,800 and the aggregate market value of
those options was $2,371,875.
22
23
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
----------------------------------------------
SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTS
-------------------------------------------------
COMMITMENTS AND CONTINGENCIES
- -----------------------------
As discussed in "Note 20. Commitments and Contingencies" on pages 38
and 39 of the 1996 Annual Report the Company and its consolidated subsidiaries
are parties to various legal proceedings (judicial and administrative) arising
in the normal course of business, including proceedings which involve
environmental and product liability claims.
With respect to environmental claims, the Company is 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 the Company has been named as a
potentially responsible party. "Note 1. Summary of Accounting Policies -
Environmental Compliance and Remediation" at page 28 of Dana's 1996 Annual
Report and "Management's Discussion and Analysis of Results" at page 41 of
Dana's 1996 Annual Report are incorporated herein by reference.
With respect to product liability claims, from time to time the Company
is named in proceedings involving alleged defects in its products. Currently
included in such proceedings are a large number of claims (most of which are
relatively small) based on alleged asbestos-related personal injuries. At
December 31, 1996, approximately 36,000 such claims were outstanding, of which
approximately 5,000 were subject to pending settlement agreements. The Company
has agreements with its insurance carriers providing for the payment of
substantially all of the indemnity costs and the legal and administrative
expenses for these claims. The Company is also a party to a small number of
asbestos-related property damage proceedings. The Company's insurance carriers
are paying the major portion of the defense costs in connection with such cases,
and the Company has incurred no indemnity costs to date.
The Company signed agreements in December 1996 to acquire certain
operations of SPX Corporation and the assets of Clark-Hurth Components, a unit
of Ingersoll-Rand Company. These acquisitions were completed in February 1997.
In the aggregate, these operations do not constitute a significant subsidiary.
23
24
EXHIBIT INDEX
- -------------
EXHIBIT
- -------
3-A Restated Articles of Incorporation, amended effective June 1, 1994
(filed by reference to Exhibit 4 to Registrant's Form 8 - A/A,
Amendment No. 3, filed on October 4, 1994)
3-B Restated By-Laws of Registrant, effective December 9, 1996
4-A Specimen Single Denomination Stock Certificate of Registrant (filed
by reference to Exhibit 4-B to Registrant's Form S-3, Registration
No. 333-18403, filed on December 20, 1996)
No class of long-term debt of Registrant exceeds 10%
of Registrant's total assets. Registrant agrees to
furnish copies of agreements defining the rights of
debt holders to the Securities and Exchange
Commission upon request.
4-B Rights Agreement, dated as of April 25, 1996, between Registrant
and ChemicalMellon Shareholder Services, L.L.C., Rights Agent
(filed by reference to Exhibit 1 to Registrant's Form 8-A, filed
May 1, 1986)
10-A Additional Compensation Plan, amended effective January 1, 1995
(filed by reference to Exhibit A to Registrant's Proxy Statement
for its Annual Meeting of Shareholders held on April 5, 1995)
10-A(1) First Amendment to the Additional Compensation Plan, dated July 17,
1995 (filed by reference to Exhibit 10-A(1) to Registrant's
Quarterly Report for the fiscal quarter ended June 30, 1995)
10-A(2) Second Amendment to the Additional Compensation Plan, effective
January 1, 1996 (filed by reference to Exhibit 10-A(2) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995)
10-A(3) Third Amendment to the Additional Compensation Plan, effective
October 20, 1996
10-D(1) 1977 Incentive Stock Option Plan, as amended (filed by reference to
Exhibit 1-D to Registration Statement No. 2-60466 filed December
13, 1977 and to Registrant's Proxy Statement for its Annual Meeting
of Shareholders held on December 3, 1980)
10-D(2) Amendment to 1977 Incentive Stock Option Plan, dated December 15,
1986 (filed by reference to Exhibit 10-D(2) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1986)
10-D(3) Amendment to 1977 Incentive Stock Option Plan, dated December 10,
1990 (filed by reference to Exhibit 10-D(3) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1991)
24
25
EXHIBIT INDEX (Continued)
-------------------------
EXHIBIT
- -------
10-D(4) Fourth Amendment to 1977 Incentive Stock Option Plan, dated
December 12, 1994 (filed by reference to Exhibit 10-D(4) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995)
10-D(5) Fifth Amendment to 1977 Incentive Stock Option Plan, dated December
11, 1995 (filed by reference to Exhibit 10-D(5) to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995)
10-D(6) Sixth Amendment to 1977 Incentive Stock Option Plan, effective
October 20, 1996
10-E 1982 Amended Stock Option Plan (filed by reference to Exhibit A to
Registrant's Proxy Statement for its Annual Meeting of Shareholders
held on April 7, 1993)
10-E(1) First Amendment to 1982 Amended Stock Option Plan, effective
October 20, 1996
10-F Excess Benefits Plan, amended February 13, 1995 (filed by reference
to Exhibit 10-F to Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995)
10-G Dana Corporation Retirement Plan, amended and restated as of
December 13, 1994 (filed by reference to Exhibit 10-G to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995)
10-G(1) First Amendment to the Dana Corporation Retirement Plan, adopted on
December 19, 1996
10-H Directors Retirement Plan, amended effective January 26, 1993
(filed by reference to Exhibit 10-H to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992)
10-I Dana Corporation Director Deferred Fee Plan effective February 13,
1995 (filed by reference to Exhibit 10-I(1) to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995)
10-I(1) First Amendment to Director Deferred Fee Plan, effective October
20, 1996
10-J(1) Employment Agreement between Registrant and Southwood J. Morcott,
dated December 14, 1992 (filed by reference to Exhibit 10-J(6) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992)
10-J(2) Employment Agreement between Registrant and Martin J. Strobel,
dated December 14, 1992 (filed by reference to Exhibit 10-J(7) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992)
10-J(3) Employment Agreement between Registrant and Carl H. Hirsch, dated
December 14, 1992 (filed by reference to Exhibit 10-J(8) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992.
10-J(4) Employment Agreement between Registrant and Joseph M. Magliochetti,
dated December 14, 1992 (filed by reference to Exhibit 10-J(12) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992)
25
26
EXHIBIT INDEX (Continued)
-------------------------
EXHIBIT
- -------
10-J(5) Amendment No. 1 dated February 13, 1995, to the Employment
Agreement between Registrant and Southwood J. Morcott (filed by
reference to Exhibit 10-J(14) to Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended on June 30, 1995).
Substantially similar amendments were made to the Employment
Agreements of Messrs. Hirsch, Magliochetti and Strobel.
10-J(6) Collateral Assignment Split-Dollar Insurance Agreement for
Universal Life Policies between Registrant and Southwood J.
Morcott, dated April 18, 1989 (filed by reference to Exhibit
10-J(13) to Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992). Messrs. Hirsch, Magliochetti and
Strobel have substantially identical agreements.
10-J(7) Amendment No. 2 dated February 12, 1996, to the Employment
Agreement between Registrant and Southwood J. Morcott.
Substantially similar amendments were made to the Employment
Agreements of Messrs. Hirsch, Magliochetti and Strobel.
10-K Supplemental Benefits Plan, as amended and restated effective
January 1, 1996
10-L(1) 1989 Restricted Stock Plan (filed by reference to Exhibit A of the
Registrant's Proxy Statement for its Annual Meeting of Shareholders
held on April 5, 1989)
10-L(2) First Amendment to 1989 Restricted Stock Plan, adopted December 10,
1990 (filed by reference to Exhibit 10-L(2) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993)
10-L(3) Second Amendment to 1989 Restricted Stock Plan, adopted October 18,
1993 (filed by reference to Exhibit 10-3) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993)
10-L(4) Third Amendment to 1989 Restricted Stock Plan, effective October
20, 1996
10-M Directors' Stock Option Plan (filed by reference to Exhibit B to
Registrant's Proxy Statement for its Annual meeting of Shareholders
held on April 7, 1993)
10-M(1) First Amendment to Directors' Stock Option Plan, adopted April 18,
1994 (filed by reference to Exhibit 10-M(1) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995)
10-M(2) Second Amendment to the Directors Stock Option Plan, effective
October 20, 1996
10-N Supplementary Bonus Plan, effective December 12, 1994 (filed by
reference to Exhibit 10-N to Registrant's Quarterly Report for the
fiscal quarter ended June 30, 1995)
26
27
EXHIBIT INDEX (Continued)
-------------------------
EXHIBIT
- -------
13 The following sections of the 1996 Annual Report to Shareholders:
Note 16. Business Segments (at pages 34-36 of the Annual
Report)
Statement of Cash Flows (at page 25 of the Annual Report)
Note 1. Summary of Significant Accounting Policies -
Environmental Compliance and Remediation (at page 28 of
the Annual Report)
Additional Information - Shareholders' Investment (at page
50 of the Annual Report)
Eleven Year History - Financial Highlights (at page 51 of
the Annual Report)
Management's Discussion and Analysis of Results
(at pages 40-44 of the Annual Report but excluding charts
on these pages)
Introduction to Financial Section, Financial Statements
and Independent Accountants' Report (at pages 22-40 of
the Annual Report)
Unaudited Quarterly Financial Information (at page 50 of
the Annual Report)
21 List of Subsidiaries of Registrant
23 Consent of Price Waterhouse LLP
24 Power of Attorney
27 Financial Data Schedule
Note: Exhibits 10-A through 10-N are management contracts or compensatory
plans required to be filed as exhibits to this Form 10-K pursuant
to Item 14(c) of this report.
27
28
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: March 5, 1997 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.
Date: March 5, 1997 /s/ Southwood J. Morcott
------------- ------------------------------------
Southwood J. Morcott, Chairman of
the Board of Directors and Chief
Executive Officer
Date: March 5, 1997 /s/ John S. Simpson
------------- ------------------------------------
John S. Simpson, Chief Financial
Officer
Date: March 5, 1997 /s/ Charles W. Hinde
------------- ------------------------------------
Charles W. Hinde, Chief Accounting
Officer
Date: March 5, 1997 * /s/ B.F. Bailar
------------- ------------------------------------
B.F. Bailar, Director
Date: March 5, 1997 * /s/ E.M. Carpenter
------------- ------------------------------------
E.M. Carpenter, Director
Date: March 5, 1997 * /s/ E. Clark
------------- ------------------------------------
E. Clark, Director
Date: March 5, 1997 * /s/ G.H. Hiner
------------- ------------------------------------
G.H. Hiner, Director
Date: March 5, 1997 * /s/ J.M. Magliochetti
------------- ------------------------------------
J.M. Magliochetti, Director
28
29
SIGNATURES (Continued)
Date: March 5, 1997 * /s/ M. R. Marks
------------- ----------------------------------------
M. R. Marks, Director
Date: March 5, 1997 * /s/ R. B. Priory
------------- ----------------------------------------
R. B. Priory, Director
Date: March 5, 1997 * /s/ J. D. Stevenson
------------- ----------------------------------------
J. D. Stevenson, Director
Date: March 5, 1997 * /s/ T.B. Sumner, Jr.
------------- ----------------------------------------
T.B. Sumner, Jr., Director
*By: /s/ Martin J. Strobel
------------------------------------
Martin J. Strobel, Attorney-in-Fact
29
1
Adopted 12-9-96 Exhibit 3.B
BY-LAWS OF DANA CORPORATION
ARTICLE I. EFFECTIVE DATE
SECTION 1.1. EFFECTIVE DATE. These By-Laws are adopted by the Board of
Directors (the "Board") of Dana Corporation ("Dana") on and effective December
9, 1996
ARTICLE II. OFFICES
SECTION 2.1. REGISTERED OFFICE. Dana's registered office shall be located at
Riverfront Plaza, East Tower, 951 East Byrd Street, Richmond, Virginia 23219.
SECTION 2.2. BUSINESS OFFICE. Dana's principal business office shall be
located at 4500 Dorr Street, Toledo, Ohio 43615, with a mailing address of
P.O. Box 1000, Toledo, Ohio 43697.
ARTICLE III. SHAREHOLDER MEETINGS
SECTION 3.1. ANNUAL MEETINGS. Unless the Board fixes a different date, the
annual meeting of shareholders of Dana to elect directors and to transact other
business (if any) shall be held on the first Wednesday of April each year, at
the time and place designated by the Board in the notice of meeting. The Board
may postpone or cancel any annual meeting at any time prior to the designated
meeting date and time by means of (i) a press release reported by the Dow Jones
News, Associated Press or a comparable national news service, or (ii) a document
filed with the Securities and Exchange Commission ("SEC") (in either case, a
"Public Announcement").
SECTION 3.2. SPECIAL MEETINGS. Special meetings of shareholders may be called by
the Board, the Chairman of the Board (the "Chairman"), or the President, to
elect directors and/or transact such other business as is described in the
notice of meeting, at the date, time and place designated therein. Notice of
special meetings shall be given to shareholders in accordance with the Virginia
Stock Corporation Act ("Virginia Law"). The Board may postpone or cancel any
special meeting at any time prior to the designated meeting date and time by
means of a Public Announcement.
SECTION 3.3. SHAREHOLDER NOMINATIONS AND PROPOSALS. In submitting nominations
for persons to be elected as directors of Dana or proposals for other business
to be presented at any shareholder meeting, shareholders shall comply with the
following procedures and such other requirements as are imposed by Virginia Law
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"):
A. DELIVERY. Shareholder notices shall be addressed and delivered to
the Secretary at Dana's principal business office.
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.
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 ten. 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.
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
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 ss.1.162-27 and
shall not be employees of Dana.
D. FINANCE COMMITTEE. The Finance Committee shall review Dana's
financial condition, liquidity (including aggregate corporate borrowings) and
results of operations, and shall recommend to the Board appropriate courses of
action with respect to Dana's financial performance and capital structure.
Within parameters established with the Board, the Finance Committee shall review
and approve management's recommendations on matters relating to major corporate
actions (including fixed capital expenditures; acquisitions, investments, and
divestitures; working capital programs; and issuances of equity and debt
securities) and shall present such recommendations to the Board.
E. FUNDS COMMITTEE. The Funds Committee shall review the structure and
allocation of assets in Dana's pension and other employee benefit funds and the
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.
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 President-Dana North America, the Chief Financial Officer, the Treasurer,
the Secretary, and such other Regional Presidents, Executive Vice Presidents,
Vice Presidents, Assistant Treasurers and Assistant Secretaries as it deems
appropriate. Any person may simultaneously hold more than one office. Each
officer shall hold office until the election and qualification of his or her
successor, or until his or her earlier resignation or removal. Election as an
officer shall not, of itself, create any contractual rights in the officer or in
Dana, including, without limitation, any rights in the officer for compensation
beyond his or her term of office.
SECTION 6.2. REMOVALS AND RESIGNATIONS. Officers shall serve at the pleasure of
the Board and may be removed from office by the Board at any time. An officer
may resign at any time by giving written notice to the Chairman or the
Secretary. Unless otherwise specified in the notice, the resignation shall take
effect upon delivery and without Board action. An officer's resignation shall
not affect any contractual rights and obligations of Dana or the officer, except
as specified in any particular contract.
SECTION 6.3. DUTIES OF OFFICERS. The officers shall perform the following duties
and any others which are assigned by the Board from time to time, are required
by Virginia Law, or are commonly incident to their offices:
A. CHAIRMAN OF THE BOARD. The Chairman shall provide leadership to the
Board in discharging its functions; shall preside at all meetings of the Board;
shall act as a liaison 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
7
principal executive officer, with responsibility for the general management of
Dana's business affairs. The Chief Executive Officer shall develop and recommend
to the Board long-term strategies for Dana, annual business plans and budgets to
support those strategies, and plans for management development and succession
that will provide Dana with an effective management team. He or she shall serve
as Dana's chief spokesperson to internal and external groups. If the Chief
Executive Officer is absent or incapacitated, the President shall have his or
her powers and duties.
C. CHIEF OPERATING OFFICER. The Chief Operating Office shall oversee
the management of Dana's day-to-day business in a manner consistent with Dana's
financial and operating goals and objectives, continuous improvement in Dana's
products and services, and the achievement and maintenance of satisfactory
competitive positions within Dana's industries.
D. PRESIDENT. The President shall have such duties as are assigned by
the Chief Executive Officer. If the President is absent or incapacitated, the
Chairman shall have his or her powers and duties.
E. PRESIDENT - DANA INTERNATIONAL. The President-Dana
International shall have such duties as are assigned by the Chairman.
F. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be
responsible for the overall management of Dana's financial affairs.
G. EXECUTIVE VICE PRESIDENTS AND VICE PRESIDENTS. The Executive Vice
Presidents and the Vice Presidents shall have such duties as are assigned by the
Chairman.
H. REGIONAL PRESIDENTS. The President-Dana North America and such
other regional presidents as the Board may elect shall manage Dana's operations
in the regions assigned to them.
I. TREASURER. The Treasurer shall have charge and custody of Dana's
funds and securities and shall receive monies due and payable to Dana from all
sources and deposit such monies in banks, trust companies, and depositories as
authorized by the Board. If the Treasurer is absent or incapacitated and has not
previously designated in writing another person or persons to have his or her
powers and duties, any Assistant Treasurer shall have such powers and duties.
J. SECRETARY. The Secretary shall prepare and maintain minutes of all
meetings of the Board and of Dana's shareholders; shall assure that notices
required by these By-Laws, Dana's Articles, Virginia Law or the Exchange Act are
duly given; shall be custodian of Dana's seal (if any) and affix it as required;
shall authenticate Dana's records as required; shall keep or cause to be kept a
register of the shareholders' names and addresses as furnished by them; and
shall have general charge of Dana's stock transfer books. If the Secretary is
absent or incapacitated and has not previously designated in writing another
person or persons to have his or her powers and duties, any Assistant Secretary
shall have such powers and duties.
8
K. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant
Treasurers and Assistant Secretaries shall have such duties as are assigned by
the Treasurer and the Secretary, respectively.
SECTION 6.4. CONTRACTS AND INSTRUMENTS. Except as limited in Section 6.5 with
respect to Dana's guarantees of the indebtedness of subsidiaries, affiliates and
third parties, each of the Chairman, the Chief Executive Officer, the Chief
Operating Officer, the President, the President-Dana International, the
President-Dana North America, the Chief Financial Officer, any Executive Vice
President, any Vice President, any other Regional President, and the Treasurer,
shall have the power to enter into, sign (manually or through facsimile),
execute, and deliver contracts (including, without limitation, bonds, deeds and
mortgages) and other instruments evidencing Dana's rights and obligations on
behalf of and in the name of Dana. Except as otherwise provided by law, any of
these officers may delegate the foregoing powers to any other officer, employee
or attorney-in-fact of Dana by written special power of attorney.
SECTION 6.5. GUARANTEES OF INDEBTEDNESS.
SECTION 6.5.1. DEBT OF WHOLLY OWNED SUBSIDIARIES. Within any
limitations set by the Board on total outstanding guarantees for Dana
subsidiaries, each of the Chairman, the Chief Executive Officer, the Chief
Operating Officer, the President, the Chief Financial Officer, and the Treasurer
shall have the power to approve guarantees by Dana of the indebtedness of direct
and indirect wholly owned Dana subsidiaries.
SECTION 6.5.2. DEBT OF NON-WHOLLY OWNED SUBSIDIARIES, AFFILIATES, AND
OTHER ENTITIES. Each of the Chairman, the Chief Executive Officer, the Chief
Operating Officer, the President, the Chief Financial Officer, and the Treasurer
shall have the power to approve guarantees by Dana of the indebtedness of
non-wholly owned Dana subsidiaries, Dana affiliates and third party entities;
provided, that the aggregate amount of such guarantees made by these officers
collectively between Board meetings may not exceed $10 million and that all such
guarantees in the aggregate may not exceed any limitations set by the Board on
total outstanding guarantees for Dana subsidiaries.
SECTION 6.6. STOCK CERTIFICATES. The Chairman, the President, and the Secretary
shall each have the power to sign (manually or through facsimile) certificates
for shares of Dana stock which the Board has authorized for issuance.
SECTION 6.7. SECURITIES OF OTHER ENTITIES. With respect to securities issued by
another entity which are beneficially owned by Dana, each of the Chairman, the
Chief Executive Officer, the Chief Operating Officer, the President, the
President-Dana International, the President-Dana North America, the Chief
Financial Officer, any Executive Vice President, any Vice President, any other
Regional President, the Treasurer and the Secretary shall have the power to
attend any meeting of security holders of the entity and vote thereat; to
execute in the name and on behalf of Dana such written proxies, consents,
waivers or other instruments as they deem necessary or proper to exercise Dana's
rights as a security holder of the entity; and otherwise to
9
exercise all powers to which Dana is entitled as the beneficial owner of the
securities. Except as otherwise provided by law, any of these officers may
delegate any of the foregoing powers to any other officer, employee or
attorney-in-fact of Dana by written special power of attorney.
ARTICLE VII. INDEMNIFICATION
SECTION 7.1. INDEMNIFICATION. Dana shall indemnify any of the following persons
who was, is or may become a party to any "proceeding" (as such term is defined
in Section 1 of Article SIXTH of Dana's Articles) to the same extent as if such
person were specified as one to whom indemnification is granted in Section 3 of
the foregoing Article SIXTH: (i) any Dana director, officer or employee who was,
is, or may become a party to the proceeding by reason of the fact that he or she
is or was serving at Dana's request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, and (ii) any Dana employee who was, is, or may become a party
to the proceeding by reason of the fact that he or she is or was an employee of
Dana. In all cases, the provisions of Sections 4 through 7 of the foregoing
Article SIXTH shall apply to the indemnification granted hereunder.
ARTICLE VIII. DANA STOCK
SECTION 8.1. LOST CERTIFICATES. A shareholder claiming that any certificate for
Dana stock has been lost or destroyed shall furnish the Secretary with an
affidavit stating the facts relating to such loss or destruction. The
shareholder shall be entitled to have a new certificate issued in the place of
the certificate which is claimed to be lost or destroyed if (i) the affidavit is
satisfactory to the Secretary, and (ii) if requested by the Secretary, the
shareholder gives a bond (in form and amount satisfactory to the Secretary) to
protect Dana and other persons from any liability or expense that might be
incurred upon the issue of a new certificate by reason of the original
certificate remaining outstanding.
SECTION 8.2. RIGHTS AGREEMENT. Any restrictions which are deemed to be imposed
on the transfer of Dana securities by the Rights Agreement dated as of July 14,
1986, as amended, between Dana and Chemical Bank (as successor to Manufacturers
Hanover Trust Company), or by any successor or replacement rights plan or
agreement, are hereby authorized.
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.
1
Exhibit 10-A(3)
THIRD AMENDMENT
TO
THE DANA CORPORATION
ADDITIONAL COMPENSATION PLAN
Pursuant to resolutions of the Board of Directors adopted on
October 21, 1996, the Dana Corporation Additional Compensation Plan (the "ACP")
is hereby amended, effective as of October 20, 1996 (unless otherwise provided
herein), as set forth below.
FIRST
Section 5 of the "ACP" is hereby amended by deleting the first
sentence that ends with the word "binding:" and replacing such sentence in its
entirety with the following:
On or before December 31 of the Year on behalf of which awards
are to be made, the Committee may determine to defer payment of any or
all amounts awarded to a person named on the Corporate Award List. Each
such person for whom the Committee determines that all or a portion of
his award should be deferred may elect to have such award credited to
(i) a Stock Account (as described in Section 5A hereof), (ii) an
Interest Equivalent Account (as described in Section 5B hereof) or
(iii) some combination thereof, in accordance with procedures
established by the Committee.
SECOND
Section 5A of the ACP is hereby amended by deleting the first
two sentences thereof and replacing such sentences in their entirety with the
following:
The Corporation shall establish a Stock Account on its books
for each person who elects to convert all or a portion of his deferred
award into Units equal to shares of the Corporation's common stock, and
shall credit to such Account a number of Units equal to the maximum
number of whole shares of the Corporation's common stock which could
have been purchased with the amount of the award so deferred, 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
preceding month of November.
2
THIRD
Section 5B of the ACP is hereby amended by deleting the first
two sentences (as amended by the First Amendment to the ACP) thereof and
replacing such sentences in their entirety with the following:
The Corporation shall establish an Interest Equivalent Account
on its books for each person who elects to convert all or a portion of
his deferred award (or his Units pursuant to Section 5A hereof) into
Interest Equivalent amounts. Notwithstanding anything else in this
Section 5B to the contrary, a participant may elect to credit up to
100% of the amount of any deferred award to his Interest Equivalent
Account, provided that the participant has met or exceeded his stock
ownership target as established by the Committee on December 12, 1994
(or as such target may be changed from time to time). If the
participant has not met his stock ownership target, the participant may
only elect to credit up to 50% of the amount of his deferred award to
an Interest Equivalent Account.
FOURTH
Section 6 of the ACP is hereby amended by deleting the third
and fourth paragraphs thereof and replacing such paragraphs in their entirety
with the following, such amendment to be effective upon shareholder approval, at
the Corporation's 1997 Annual Meeting of Shareholders, of amendments to the
Corporation's 1982 Amended Stock Option Plan which permit shares of the
Corporation's common stock reserved for issuance under such plan to be used in
satisfaction of obligations under the ACP:
Each distribution in respect of a participant's Accounts 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 both common
stock and cash. To the extent that payment is to be made in common
stock of the Corporation, the number of shares of such stock to be
distributed shall equal the maximum number of whole shares of the
Corporation's common stock which could have been purchased with the
Interest Equivalent Account amount being distributed, assuming a
purchase price per share of common stock equal to the average of the
last reported daily sales prices for shares of such stock on the New
York Stock Exchange-Composite Transactions on each trading day during
the calendar month preceding the month of making such payment. Any
distribution in respect of Units from a participant's Stock Account
shall be made on the basis of one share of the Corporation's common
stock for each Unit being distributed. Any dollar balance in a
participant's Stock Account at the time of each distribution shall be
carried forward until the final distribution.
3
If any distribution in respect of a participant's Accounts is
to be made in cash, the value of each Unit being distributed from his
Stock 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. A cash distribution
may also be made from a participant's Interest Equivalent Account, in
which case a corresponding reduction in the balance of that Account
will be made.
If any distribution is 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, 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, 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 above referred to.
IN WITNESS WHEREOF, the undersigned has hereby executed this
Third Amendment on behalf of the Corporation this 21st day of October 1996.
DANA CORPORATION
/s/ Martin J. Strobel
---------------------------------
ATTEST:
/s/ Mark A. Smith, Jr.
- --------------------------------------
1
Exhibit 10-D(6)
SIXTH AMENDMENT
TO
THE DANA CORPORATION
1977 INCENTIVE STOCK OPTION PLAN
--------------------------------
Pursuant to resolutions of the Board of Directors adopted on October 21,
1996, the Dana Corporation 1977 Incentive Stock Option Plan (the "1977 Plan") is
hereby amended, effective as of October 20, 1996, as set forth below,
FIRST
Section 2 of the 1977 Plan is hereby amended by deleting the second
sentence thereof and replacing such sentence in its entirety with the following:
The Committee shall be composed of at least three (3) members of the Board
who shall be (i) "nonemployee directors" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, and (ii)
"outside directors" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended.
SECOND
Section 7 of the 1977 Plan is hereby amended by inserting a period (.)
after the word "specify" in the last sentence thereof and deleting the remainder
of the sentence.
IN WITNESS WHEREOF, the undersigned has hereby executed this Sixth
Amendment on behalf of the Corporation this 21st day of October 1996.
DANA CORPORATION
/s/ Martin J. Strobel
---------------------
ATTEST:
/s/ Mark A. Smith, Jr.
- ----------------------
1
Exhibit 10-E(1)
FIRST AMENDMENT
TO
THE DANA CORPORATION
1982 AMENDED STOCK OPTION PLAN
------------------------------
Pursuant to resolutions of the Board of Directors adopted on
October 21, 1996, the Dana Corporation 1982 Amended Stock Option Plan (the "1982
Plan") is hereby amended, effective as of October 20, 1996, as set forth below.
FIRST
Section 2 of the 1982 Plan is hereby amended by deleting the
definition of "Committee" contained therein and replacing it with the following:
"Committee" shall mean a committee of the Board consisting of
at least three (3) members of the Board who shall be (i) "nonemployee
directors" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, and (ii) "outside
directors" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended.
SECOND
Section 8(c) of the 1982 Plan is hereby amended by inserting a
period (.) after the word "specify" in the last sentence thereof and deleting
the remainder of the sentence.
IN WITNESS WHEREOF, the undersigned has hereby executed this
First Amendment on behalf of the Corporation this 21st day of October 1996.
DANA CORPORATION
/s/ Martin J. Strobel
--------------------------------
ATTEST:
/s/ Mark A. Smith, Jr.
- -------------------------------------------
1
EXHIBIT 10-G(1)
FIRST AMENDMENT TO
THE DANA CORPORATION RETIREMENT PLAN
(January 1, 1994, Restatement)
In order to ensure that the Dana Corporation Retirement Plan (the "Plan")
reflects the resolution of the Board of Directors adopting a minimum benefit
formula; to limit the extent to which bonuses may be taken into account as
earnings; to coordinate with pension coverage provided under other retirement
plans; and to provide for participation by certain employees of the Wix and
Spicer Driveshaft Divisions, it is necessary to amend the Plan as follows,
effective as of the dates specified below:
1. Amend Section 1.10 to read as follows, effective January 1, 1994:
1.10 "EARNINGS" means an Employee's basic salary paid by an
Employer in any Plan Year (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), plus overtime
and incentive payments paid by an Employer in any Plan Year.
"Earnings" shall also include an Employee's bonuses paid by an
Employer in any Plan Year, except that "Earnings" shall not
include the portion of an Employee's bonus for 1994 or
subsequent years that exceeds 125 percent of the Employee's
annual base salary for the year with respect to which the
bonus is earned. "Earnings" shall not include any amount paid
to an Employee by reason of his participation in any employee
benefit plan of the Company. In no event shall an Employee's
"Earnings" exceed the limit in effect for the Plan Year under
Section 401(a)(17) of the Code.
2. Amend Section 1.11 B. to read as follows, effective January 1, 1994:
B. an individual (i) who is eligible to receive
a nonelective employer contribution (other than a
matching contribution) under any tax-qualified
defined contribution plan of an Employer, or (ii)
who is eligible to accrue a benefit under any
other tax-qualified defined benefit plan (or any
comparable retirement plan maintained outside the
United States) of the Company (provided that an
individual shall not be excluded by clause (ii) if
the other plan has a service-based benefit formula
and the formula does not recognize the
individual's current employment as benefit
accrual service); or
2
3. Amend Section 1.11 by adding the following paragraph immediately
after subsection H., effective January 1, 1996:
Effective January 1, 1996, "Employee" also includes (i) any
salaried employee and any Part-Time Employee of the Spicer
Driveshaft Division who is a plant manager or on the plant
manager's staff, and (ii) any salaried employee and any
Part-Time Employee of the Wix Division who reports directly to
the Wix Division General Manager and who is a member of the
Division Operating Committee; provided (in either case) that
the employee is not described in subparagraphs A. through H.,
above.
4. Amend Section 3.01 B. by adding the following paragraph to the end
of that subsection, effective September 1, 1995:
Each Participant who has earned future service credits under
Section 3.01 B. or Appendix E (determined without regard to
this paragraph), and whose employment with the Company
terminates on or after September 1, 1995, shall be entitled to
a minimum Future Service Account calculated as described in
Section 3.10. If the sum of the Participant's minimum future
service credits calculated under Section 3.10 (and the related
interest credits) is greater than the sum of his regular
future service credits calculated under this subsection B.
(and the related interest credits), then the minimum Future
Service Account shall replace the Participant's regular Future
Service Account for all purposes under the Plan.
5. Amend Article III by adding a new Section 3.10 to read as follows,
effective September 1, 1995:
3.10 MINIMUM FUTURE SERVICE ACCOUNT
------------------------------
A. The minimum benefit calculation in this Section 3.10
shall apply only to a Participant who has earned
future service credits under Section 3.01 B. or
Appendix E (determined without regard to this
section), and whose employment with the Company
terminates on or after September 1, 1995. A
Participant who satisfies these requirements shall be
entitled to minimum future service credits
(determined when his employment terminates) based on
his "look-back earnings" calculated under subsection
B., below.
B. A Participant's "look-back earnings" shall be
determined as follows:
3
1. STEP 1: Determine the Participant's
average annual Earnings for the five
consecutive calendar years in which the
Participant's Earnings were the greatest
during the last ten calendar years in
which the Participant is employed by the
Company. (If the Participant has fewer
than five consecutive calendar years of
Earnings, determine the Participant's
average annual Earnings for all such
consecutive years.) For this purpose, a
Participant's "Earnings" shall be
determined as provided in Section 1.10,
except that amounts paid by the Company
shall be taken into account regardless
of whether the business unit making the
payment is an Employer that has adopted
the Plan. The Earnings taken into
account for each year under this
paragraph shall not exceed the limit in
effect for that year under Section
401(a)(17) of the Code. In computing the
Participant's average annual earnings,
calendar years in which the Participant
did not have a full year of Earnings
shall be disregarded; and calendar years
separated by one (or more) years in
which the Participant did not have a
full year of Earnings (including, but
not limited to, years that constitute a
Break in Service) shall be considered
consecutive.
2. STEP 2: Multiply the average annual
Earnings amount determined under Step 1
by the appropriate adjustment factor to
calculate the Participant's adjusted
final earnings. The adjustment factor
shall be 1.09988 if the average
comprises five years of Earnings;
1.07433 if the average comprises four
years of Earnings; 1.04917 if the
average comprises three years of
Earnings; 1.02439 if the average
comprises two years of Earnings; and
1.0000 if only one year of Earnings is
taken into account.
3. STEP 3: Treat the adjusted final earnings
amount determined under Step 2 as the
Participant's look-back earnings for his
final full calendar year of employment with
the Company (his "final-year look-back
earnings"). Calculate the Participant's
look-back earnings for each prior year
(through the year in which he first earned a
future service credit under Section 3.01 B.)
by applying a salary scale of five percent
per year, projected backwards, to the
4
Participant's final-year look-back earnings.
The amount determined under this Step 3 for
each Plan Year shall be the Participant's
look-back earnings for that Plan Year.
C. A Participant shall receive a minimum future service
credit for each Plan Year in which he received a
regular future service credit under Section 3.01 B.
or Appendix E (determined without regard to this
section). The Participant's minimum future service
credit for each Plan Year shall be calculated
under the table in Section 3.01 B. (as modified by
Appendix E) taking into account the actual Social
Security taxable wage base and the Participant's
actual Credited Service for that Plan Year, but
replacing the Participant's actual Earnings with
his look-back earnings for that Plan Year. If the
Participant's actual Earnings were pro-rated to
determine his initial future service credit under
Appendix E, the Participant's look-back earnings
shall be pro-rated to the same extent. If the
Participant's last year of employment with the
Company is not a full calendar year, the
individual's minimum future service credit for
that Plan Year shall be equal to his regular
future service credit under Section 3.01 B. or
Appendix E (determined without regard to this
section) for the Plan Year.
D. The Participant's minimum future service credits
shall be increased as provided in Section 3.01 C. or
Appendix E as if they had been credited to the
Participant in the Plan Year with respect to which
they are determined.
E. The sum of the Participant's minimum future service
credits determined under Section 3.01 B. or Appendix
E and the Participant's percentage increases
determined under Section 3.01 C. or Appendix E shall
be the Participant's minimum Future Service Account.
If the Participant's minimum Future Service Account
is greater than his regular Future Service
Account, the minimum Future Service Account shall
replace the regular Future Service Account for all
purposes under the Plan. However, no Participant
shall be entitled to receive the greater of the
minimum future service credit or the regular
future service credit for each Plan Year,
determined on a year-by-year basis: the minimum
Future Service Account shall be calculated and
compared with the regular Future Service Account
only on an aggregate basis.
5
F. If a Participant's minimum Future Service Account
is greater than his regular Future Service Account,
the Participant shall also receive minimum benefit
accruals under Section 12.01 A. and Appendix E for
each year in which he accrued a regular benefit
under those provisions. The Participant's minimum
benefit accruals shall be calculated under the
table in Section 12.01 A. (as modified by Appendix
E) by replacing the Participant's actual Earnings
with his look-back earnings, and shall be
increased by applying the percentage increase in
Section 12.01 B. and Appendix E to the resulting
accrual, all in accordance with the rules
described above in this Section 3.10 for
calculating minimum future service credits.
6. Amend Section 12.01 A. by adding the following paragraph to the
end of that subsection, effective September 1, 1995:
Each Participant who has accrued benefits after the
Adoption Date under Section 12.01 A. or Appendix E
(determined without regard to this paragraph), and
whose employment with the Company terminates on or
after September 1, 1995, shall be entitled to a
minimum benefit accrual calculated as described in
Section 3.10. If the Participant's minimum benefit
accrual calculated under Section 3.10 is greater than
his regular benefit accrual calculated under this
subsection A., then the minimum benefit accrual shall
replace the Participant's regular benefit accrual for
all purposes under the Plan. However, no Participant
shall be entitled to receive the greater of the
minimum benefit accrual or the regular benefit
accrual for each Plan Year, determined on a
year-by-year basis: the minimum benefit accrual shall
be calculated and compared with the regular benefit
accrual only on an aggregate basis.
IN WITNESS WHEREOF, Dana Corporation has adopted this amendment on this __ day
of December 1996.
For Dana Corporation
_________________
Witness:
____________________
1
Exhibit 10-I(1)
FIRST AMENDMENT
TO
THE DANA CORPORATION
DIRECTOR DEFERRED FEE PLAN
Pursuant to resolutions of the Board of Directors adopted on
October 21, 1996, the Dana Corporation Director Deferred Fee Plan (the "Fee
Plan") is hereby amended, effective as of October 20, 1996, as set forth below.
FIRST
Section 2(B) of the Fee Plan is hereby amended by deleting the
definition of "Committee" contained therein and replacing such definition with
the following:
"Committee" shall mean the Compensation Committee of the
Board of Directors of the Corporation.
SECOND
Section 3A of the Fee Plan is hereby amended by deleting the
first five sentences of the fourth paragraph thereof and replacing such
sentences with the following:
Each Director may convert 25%, 50%, 75% or 100% of the Units
credited to his Stock Account into an equivalent dollar balance in the
Interest Equivalent Account. These election(s) can be made at any time
within five years following the Director's termination of service as a
member of the Corporation's Board of Directors, and shall be effective
on the day the election is received by the Corporation.
THIRD
Section 4 of the Fee Plan is hereby amended by deleting the
third paragraph thereof and replacing such paragraph in its entirety with the
following, such amendment to be effective upon shareholder approval, at the
Corporation's 1997 Annual Meeting of Shareholders, of amendments to the
Corporation's 1982 Amended Stock Option Plan which permit shares of the
Corporation's common stock reserved for issuance under such plan to be used in
satisfaction of obligations under the Fee Plan:
Each distribution in respect of a Director's Accounts 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 both common
stock and cash.
2
To the extent that payment is to be made in common stock of the
Corporation, the number of shares of such stock to be distributed shall
equal the maximum number of whole shares of the Corporation's common
stock which could have been purchased with the Interest Equivalent
Account amount being distributed, assuming a purchase price per share
of common stock 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 calendar
month preceding the month of making such payment. Any stock
distribution in respect of Units from a Director's Stock 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 Accounts is to
be made in cash, the value of each Unit being distributed from his
Stock 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. A cash distribution
may also be made from a Director's Interest Equivalent Account, in
which case a corresponding reduction in the balance of that Account
will be made.
If any distribution is 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, 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, 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 above referred to.
3
FOURTH
Section 4 of the Fee Plan is hereby further amended by
deleting from each of the first two sentences of the fifth paragraph thereof the
phrase "as of April 30, 1991".
IN WITNESS WHEREOF, the undersigned has hereby executed this
First Amendment on behalf of the Corporation this 21st day of October 1996.
DANA CORPORATION
/s/ Martin J. Strobel
----------------------------------
ATTEST:
/s/ Mark A. Smith, Jr.
- ----------------------------------------
1
Exhibit 10-J(7)
2/12/96
Amendment No. 2, Dated February 12, 1996 to
Agreement Dated December 14, 1992 Between
Dana Corporation and Southwood J. Morcott
-----------------------------------------
WHEREAS, the parties have entered into an Agreement dated December 14,
1992 (the "Agreement"); and
WHEREAS, the parties have agreed to make an amendment to the Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration from each party to the other,
it is hereby mutually agreed by the parties that, effective February 12, 1996:
1. The first two paragraphs of Section 2(a) are amended to read
in their entirety, as follows:
"(a) POSITION. It is contemplated that during the Change of
Control Period (as defined in Section 12(d), below), the
Executive will continue to serve as a principal officer of the
Corporation and as a member of its Board of Directors if
serving as a member of the Board of Directors immediately
prior to the Change of Control Date, with the office(s) and
title(s), reporting responsibility, and duties and
responsibilities of the Executive immediately prior to the
Change of Control Date. The Executive hereby agrees that at
any time prior to the Change of Control Date, the Board of
Directors of the Corporation (or the individual to whom the
Executive reports) may, without the Executive's consent,
change the Executive's office(s), title(s), reporting
responsibility, and duties or responsibilities.
The office(s), title(s), reporting responsibility,
duties and responsibilities of the Executive on the date of
this Agreement, as the same may be changed from time to time
after the date of this Agreement in accordance with the
provisions of the previous paragraph, shall be summarized in
Exhibit A to this Agreement, it being understood and agreed
that if, as and when the office(s), title(s), reporting
responsibility, duties or responsibilities of the Executive
2
shall be so changed after the date of this Agreement, Exhibit
A shall be deemed to be, and shall be updated by the parties
to reflect such change; PROVIDED, HOWEVER, that Exhibit A is
intended only as a memorandum for the convenience of the
parties and shall be disregarded if, and to the extent that,
Exhibit A shall fail to reflect accurately the office(s),
title(s), reporting responsibility, duties or responsibilities
of the Executive as so changed after the date of this
Agreement because the parties shall have failed to update
Exhibit A as aforesaid."
2. Amend Section 3(j)(iii) to read, in its entirety, as follows:
"(iii) The Executive may elect to receive payment of the
supplemental retirement annuity provided by this Section 3(j),
under a joint and survivor or any other optional method of
payment available under the Dana Corporation Retirement Plan,
including, without limitation, any deferment in the time of
payment thereof. The amount of the benefit payable pursuant to
any form of payment under this Section 3(j) shall be
determined by applying the mortality assumptions, interest
rates, and other factors contained in the Dana Corporation
Retirement Plan that would be applicable to the form of
payment elected by the Executive (subject, however, to any
actuarial factor that may apply as a result of the operation
of Section 3(i)); PROVIDED THAT, if a lump sum distribution is
made hereunder, the amount of the lump sum distribution shall
be actuarially equivalent to the monthly benefit prescribed by
Section 3(j)(ii), calculated using the basis described in
subparagraph (1) or (2), below, whichever produces the larger
lump sum amount:
(1) 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 Internal Revenue Code;
or
(2) the lump sum amount calculated on the basis of
the actuarial equivalent factor used to convert
the Executive's Earned Benefit Account into a
life annuity under the Dana Corporation
Retirement Plan at the time the calculation is
made, subject to any lump sum discount factor
that might apply as a result of the operation
of Section 3(i) of this Agreement.
3
If it is determined that the Executive is subject to federal
income taxation on an amount in respect of the supplemental
retirement annuity prior to the distribution of all of such
amount to him, the Corporation shall forthwith pay to the
Executive all (or the balance) of such amount as is includable
in the Executive's federal gross income and correspondingly
reduce future payments, if any, of the supplemental retirement
annuity."
Except as hereinabove amended, all provisions of the Agreement shall
continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.
2 as of February 12, 1996.
DANA CORPORATION
By: /s/ Martin J. Strobel
---------------------------------
Secretary
By: /s/ Theodore B. Sumner, Jr.
---------------------------------
Chairman - Compensation Committee
ATTEST:
/s/ Sue A. Griffin /s/ Southwood J. Morcott
------------------------- ---------------------------------
Asst. Secretary Southwood J. Morcott
1
Exhibit 10-K
1/1/96
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
2
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.
1.5. "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 Retiremen IncomePlan.
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
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.
4
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.
5
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).
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
7
(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:
8
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%
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:
9
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
10
(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.
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
11
Income Plan that would be applicable to the form of payment payable
under this lan; 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 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
12
interesdt 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,
13
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. 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
14
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 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.
15
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.
16
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.
17
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 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:
18
(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 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)).
19
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.
1
Exhibit 10-L(4)
THIRD AMENDMENT
TO
THE DANA CORPORATION
1989 RESTRICTED STOCK PLAN
Pursuant to resolutions of the Board of Directors of the
Corporation adopted on October 21, 1996, the Dana Corporation 1989 Restricted
Stock Plan (the "Restricted Stock Plan") is hereby amended, effective as of
October 20, 1996, as set forth below.
FIRST
Section 7 of the Restricted Stock Plan is hereby amended by
inserting a period (.) after the word "specify" in the last sentence thereof and
deleting the remainder of the sentence.
IN WITNESS WHEREOF, the undersigned has hereby executed this
Third Amendment on behalf of the Corporation this 21st day of October 1996.
DANA CORPORATION
/s/ Martin J. Strobel
-----------------------------------------
ATTEST:
/s/ Mark A. Smith, Jr.
- -----------------------------------
1
Exhibit 10-M(2)
SECOND AMENDMENT
TO
THE DANA CORPORATION
DIRECTORS' STOCK OPTION PLAN
Pursuant to resolutions of the Board of Directors adopted on
October 21, 1996, the Dana Corporation Directors' Stock Option Plan (the
"Directors Plan") is hereby amended, effective as of October
20, 1996, as set forth below.
FIRST
Section 2 of the Directors Plan is hereby amended by deleting
the definition of "Committee" contained therein and replacing such definition
with the following:
"Committee" shall mean the Compensation Committee of the
Board.
SECOND
Section 8(d) of the Directors Plan is hereby amended by
inserting a period (.) after the word "specify" in the last sentence thereof and
deleting the remainder of the sentence.
THIRD
Section 13 of the Directors Plan is hereby amended by deleting
the last sentence thereof.
IN WITNESS WHEREOF, the undersigned has hereby executed this
Second Amendment on behalf of the Corporation this 21st day of October 1996.
DANA CORPORATION
/s/ Martin J. Strobel
-------------------------
ATTEST:
/s/ Mark A. Smith, Jr.
- ---------------------------------
1
INTRODUCTION TO FINANCIAL SECTION DANA CORPORATION
EXHIBIT 13
GLOBAL GROWTH AND FINANCIAL PERFORMANCE
During 1996 Dana continued to focus on international growth and aggressively
expanded operations in several countries. These expansions are the result of
global customer demand for some of Dana's leading core products. In addition,
pending acquisitions, such as the Clark-Hurth operations, will expand our sales
in the global off-highway and industrial markets.
As these investments begin to generate earnings and cash flow in future
years, Dana's financial performance should continue to strengthen. These gains
do not come easily or quickly but accumulate over the years as these new units
develop volume and market positions.
LONG-TERM EARNINGS MOMENTUM
Long-term earnings growth is a continuing challenge for all companies and Dana
is no exception. The past several years of solid international growth and
increased earnings provide strong evidence that Dana's people do indeed have the
skills and desire to thrive in global markets. We are truly proud of their
abilities and accomplishments. As we have stated before, the outstanding efforts
of so many of our people are truly creating an exciting future for all of Dana.
/S/ Jim Ayers
[PICTURE]
Jim Ayers
Chief Financial Officer*
*Retires in 1997 After 33 Years of Dana Service.
THREE-YEAR MOVING
AVERAGE EPS
Excluding one-time charges
relating to the adoption of
SFAS 106 and SFAS 112
'92 $ .57
'93 $ .73
'94 $1.45
'94 $2.18
'96 $2.72
DURING THE PAST SEVERAL YEARS, DANA'S THREE-YEAR AVERAGE EPS HAS SHOWN
SIGNIFICANT GROWTH.
2
MANAGEMENT AND INDEPENDENT ACCOUNTANT'S REPORT DANA CORPORATION
- --------------------------------------------------------------------------------
RESPONSIBILITY FOR
FINANCIAL STATEMENTS
- --------------------
We have prepared the accompanying consolidated financial statements and
related information included herein for the three years ended December 31, 1996.
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/ John S. Simpson
John S. Simpson
Chief Financial Officer,*
Vice President - Finance & Treasurer
/s/ James H. Woodward, Jr.
James H. Woodward, Jr.
Vice President and Corporate Controller**
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
[PRICE WATERHOUSE LLP 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 23 through and including note 23 on page 40, present fairly, in
all material respects, the financial position of Dana Corporation and its
subsidiaries at December 31, 1995 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996, 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/ Price Waterhouse LLP
Toledo, Ohio
January 21, 1997
A copy of the Annual Report as filed with the Securities and Exchange
Commission on Form 10-K will be mailed at no charge upon request to the
Secretary, Dana Corporation, P.O. Box 1000, Toledo, Ohio 43697.
*Effective January 1, 1997
**Effective October 1, 1996
3
STATEMENT OF INCOME
in millions except per share amounts DANA CORPORATION
- --------------------------------------------------------------------------------
Year Ended December 31
1994 1995 1996
- --------------------------------------------------------------------------------------------
NET SALES $ 6,613.8 $ 7,597.7 $ 7,686.3
- --------------------------------------------------------------------------------------------
Revenue from lease financing and other income 148.7 189.0 203.2
- --------------------------------------------------------------------------------------------
Foreign currency adjustments (22.0) 7.8 1.2
- --------------------------------------------------------------------------------------------
6,740.5 7,794.5 7,890.7
- --------------------------------------------------------------------------------------------
Costs and expenses
- --------------------------------------------------------------------------------------------
Cost of sales 5,624.0 6,449.7 6,525.2
- --------------------------------------------------------------------------------------------
Selling, general and administrative expenses 611.5 685.2 714.8
- --------------------------------------------------------------------------------------------
Interest expense 113.4 146.4 159.0
- --------------------------------------------------------------------------------------------
6,348.9 7,281.3 7,399.0
- --------------------------------------------------------------------------------------------
Income before income taxes 391.6 513.2 491.7
- --------------------------------------------------------------------------------------------
Estimated taxes on income 157.4 181.2 166.3
- --------------------------------------------------------------------------------------------
Income before minority interest and equity in earnings
(losses) of affiliates 234.2 332.0 325.4
- --------------------------------------------------------------------------------------------
Minority interest (30.2) (40.4) (32.8)
- --------------------------------------------------------------------------------------------
Equity in earnings (losses) of affiliates 24.2 (3.5) 13.4
- --------------------------------------------------------------------------------------------
NET INCOME $ 228.2 $ 288.1 $ 306.0
- --------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE $ 2.31 $ 2.84 $ 3.01
- --------------------------------------------------------------------------------------------
Cash dividends declared and paid per common share $ .83 $ .90 $ .98
- --------------------------------------------------------------------------------------------
Average shares outstanding 98.7 101.3 101.8
- --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
4
BALANCE SHEET
in millions except par value DANA CORPORATION
- --------------------------------------------------------------------------------
December 31
1995 1996
- ----------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------
Cash $ 30.3 $ 105.3
- ----------------------------------------------------------------------------------
Marketable securities, at cost which approximates market 36.3 122.5
- ----------------------------------------------------------------------------------
Accounts receivable, less allowance for doubtful accounts
of $23.5 - 1995 and $26.0 - 1996 1,081.6 1,069.1
- ----------------------------------------------------------------------------------
Inventories 874.8 912.9
- ----------------------------------------------------------------------------------
Lease financing 1,004.9 1,167.3
- ----------------------------------------------------------------------------------
Investments and other assets 810.7 810.6
- ----------------------------------------------------------------------------------
Deferred income tax benefits 225.4 147.5
- ----------------------------------------------------------------------------------
Property, plant and equipment, net 1,649.5 1,824.8
- ----------------------------------------------------------------------------------
Total assets $5,713.5 $6,160.0
- ----------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------
Short-term debt $ 791.4 $ 640.3
- ----------------------------------------------------------------------------------
Accounts payable 430.6 460.3
- ----------------------------------------------------------------------------------
Other liabilities 761.8 736.5
- ----------------------------------------------------------------------------------
Deferred employee benefits 1,096.2 1,025.6
- ----------------------------------------------------------------------------------
Long-term debt 1,315.1 1,697.7
- ----------------------------------------------------------------------------------
Total liabilities 4,395.1 4,560.4
- ----------------------------------------------------------------------------------
Minority interest in consolidated subsidiaries 153.8 170.9
- ----------------------------------------------------------------------------------
Shareholders' equity
- ----------------------------------------------------------------------------------
Common stock, $1 par value, shares authorized, 240.0;
shares issued, 101.5 - 1995 and 103.0 - 1996 101.5 103.0
- ----------------------------------------------------------------------------------
Additional paid-in capital 68.9 106.0
- ----------------------------------------------------------------------------------
Retained earnings 1,096.3 1,304.9
- ----------------------------------------------------------------------------------
Deferred translation adjustments (88.6) (85.2)
- ----------------------------------------------------------------------------------
Deferred pension expense (13.5)
- ----------------------------------------------------------------------------------
Total shareholders' equity 1,164.6 1,428.7
- ----------------------------------------------------------------------------------
Total liabilities and shareholders' equity $5,713.5 $6,160.0
- ----------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
5
STATEMENT OF CASH FLOWS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
Year Ended December 31
1994 1995 1996
- ----------------------------------------------------------------------------------
Net cash flows from operating activities $465.8 $377.8 $696.2
- ----------------------------------------------------------------------------------
Cash flows from investing activities:
- ----------------------------------------------------------------------------------
Purchases of property, plant and equipment (337.2) (409.7) (356.5)
- ----------------------------------------------------------------------------------
Purchases of assets to be leased (373.4) (400.3) (426.3)
- ----------------------------------------------------------------------------------
Purchase of minority interest of Hayes-Dana, Inc. (92.4)
- ----------------------------------------------------------------------------------
Purchase of European axle group (93.0)
- ----------------------------------------------------------------------------------
Other acquisitions, additions to investments
and other assets (22.6) (40.4) (121.5)
- ----------------------------------------------------------------------------------
Loans made to customers and partnership
affiliates (39.3) (25.4) (98.5)
- ----------------------------------------------------------------------------------
Payments received on leases 195.5 201.0 209.7
- ----------------------------------------------------------------------------------
Proceeds from sales of certain assets
and subsidiaries 55.1 93.4 73.1
- ----------------------------------------------------------------------------------
Proceeds from sales of leased assets 37.0 58.9 28.5
- ----------------------------------------------------------------------------------
Payments received on loans 38.7 49.1 39.7
- ----------------------------------------------------------------------------------
Other 23.3 27.2 10.3
- ----------------------------------------------------------------------------------
Net cash flows - investing activities (422.9) (631.6) (641.5)
- ----------------------------------------------------------------------------------
Cash flows from financing activities:
- ----------------------------------------------------------------------------------
Net change in short-term debt 84.2 191.0 (163.6)
- ----------------------------------------------------------------------------------
Issuance of long-term debt 355.4 418.1 734.9
- ----------------------------------------------------------------------------------
Payments on long-term debt (373.2) (314.9) (372.5)
- ----------------------------------------------------------------------------------
Dividends paid (82.0) (91.2) (99.7)
- ----------------------------------------------------------------------------------
Other 7.3 5.2 7.4
- ----------------------------------------------------------------------------------
Net cash flows - financing activities (8.3) 208.2 106.5
- ----------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 34.6 (45.6) 161.2
- ----------------------------------------------------------------------------------
Cash and cash equivalents - beginning of year 77.6 112.2 66.6
- ----------------------------------------------------------------------------------
Cash and cash equivalents - end of year $112.2 $ 66.6 $227.8
- ----------------------------------------------------------------------------------
Reconciliation of net income to net cash flows from
operating activities:
- ----------------------------------------------------------------------------------
Net income $ 228.2 $ 288.1 $306.0
- ----------------------------------------------------------------------------------
Noncash items included in income:
- ----------------------------------------------------------------------------------
Depreciation and amortization 210.6 245.8 278.4
- ----------------------------------------------------------------------------------
Unremitted earnings of affiliates (15.7) 4.3 (13.3)
- ----------------------------------------------------------------------------------
Deferred income taxes 55.2 5.2 63.9
- ----------------------------------------------------------------------------------
Minority interest 12.4 7.0 26.5
- ----------------------------------------------------------------------------------
Change in accounts receivable (106.1) (67.5) 34.2
- ----------------------------------------------------------------------------------
Change in inventories (82.8) (81.8) (16.4)
- ----------------------------------------------------------------------------------
Change in other operating assets (.6) 8.1 49.9
- ----------------------------------------------------------------------------------
Change in operating liabilities 136.4 (27.7) (30.5)
- ----------------------------------------------------------------------------------
Additions to lease and loan loss reserves 25.5 17.2 11.0
- ----------------------------------------------------------------------------------
Other 2.7 (20.9) (13.5)
- ----------------------------------------------------------------------------------
Net cash flows from operating activities $465.8 $377.8 $696.2
- ----------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
6
STATEMENT OF SHAREHOLDERS' EQUITY
in millions except par value DANA CORPORATION
- --------------------------------------------------------------------------------
DEFERRED
PENSION
$1 PAR VALUE ADDITIONAL AND
COMMON STOCK PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
ISSUED TREASURY CAPITAL EARNINGS ADJUSTMENTS EQUITY
- -----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 $ 67.7 $ (611.3) $ 628.3 $ 809.2 $ (92.5) $ 801.4
- -----------------------------------------------------------------------------------------------------------------
Net income for the year
ended December 31, 1994 228.2 228.2
- -----------------------------------------------------------------------------------------------------------------
Cash dividends declared (82.0) (82.0)
- -----------------------------------------------------------------------------------------------------------------
Two-for-one common stock split 67.7 (67.7)
- -----------------------------------------------------------------------------------------------------------------
Issuance of shares for director and
employee stock plans .3 1.6 6.2 8.1
- -----------------------------------------------------------------------------------------------------------------
Deferred translation adjustments 7.6 7.6
- -----------------------------------------------------------------------------------------------------------------
Deferred pension expense adjustments (22.8) (22.8)
- -----------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (.7) (.7)
- -----------------------------------------------------------------------------------------------------------------
Retirement of treasury shares (36.9) 610.4 (573.5)
- -----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 98.8 -- 61.0 887.7 (107.7) 939.8
- -----------------------------------------------------------------------------------------------------------------
Net income for the year
ended December 31, 1995 288.1 288.1
- -----------------------------------------------------------------------------------------------------------------
Cash dividends declared (91.2) (91.2)
- -----------------------------------------------------------------------------------------------------------------
Issuance of shares in connection
with acquisitions 2.5 2.9 11.7 17.1
- -----------------------------------------------------------------------------------------------------------------
Deferred translation adjustments (3.7) (3.7)
- -----------------------------------------------------------------------------------------------------------------
Deferred pension expense adjustments 9.3 9.3
- -----------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (1.0) (1.0)
- -----------------------------------------------------------------------------------------------------------------
Issuance of shares for employee
stock plans .2 6.0 6.2
- -----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 101.5 -- 68.9 1,096.3 (102.1) 1,164.6
- -----------------------------------------------------------------------------------------------------------------
NET INCOME FOR THE YEAR ENDED
DECEMBER 31, 1996 306.0 306.0
- -----------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS DECLARED (99.7) (99.7)
- -----------------------------------------------------------------------------------------------------------------
ISSUANCE OF SHARES FOR DEFINED
BENEFIT PENSION PLANS 1.0 30.1 31.1
- -----------------------------------------------------------------------------------------------------------------
DEFERRED TRANSLATION ADJUSTMENTS 3.4 3.4
- -----------------------------------------------------------------------------------------------------------------
DEFERRED PENSION EXPENSE ADJUSTMENTS 13.5 13.5
- -----------------------------------------------------------------------------------------------------------------
COST OF SHARES REACQUIRED (.2) (5.1) (5.3)
- -----------------------------------------------------------------------------------------------------------------
ISSUANCE OF SHARES FOR DIRECTOR AND
EMPLOYEE STOCK PLANS .5 12.1 12.6
- -----------------------------------------------------------------------------------------------------------------
ISSUANCE OF SHARES IN CONNECTION
WITH ACQUISITIONS .2 2.3 2.5
- -----------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 $ 103.0 $ -- $ 106.0 $1,304.9 $ (85.2) $1,428.7
- -----------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
7
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Dana Corporation is a global leader in the engineering, manufacturing and
distribution of products and systems for the worldwide vehicular, industrial and
mobile off-highway markets. 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 and inventory
valuations, environmental and warranty reserves, post employment and post
retirement 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 1994 and 1995 have been reclassified to conform
with the 1996 presentation.
PRINCIPLES OF CONSOLIDATION
Dana's financial statements include all significant United States (U.S.) and
international subsidiaries, including its indirect wholly-owned leasing
subsidiary, DCC. 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 to ensure preparation of financial statements on a timely basis. Prior
to 1995, subsidiaries outside of North America were generally included for
periods ended within one month of Dana's year end, however, in 1995 the period
was changed to eliminate the one month delay. The effect of this change was not
material to the financial statements. 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 U.S., located in non-highly inflationary economies, are measured
using the local currency as the functional 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 included as
deferred translation adjustments as a component of shareholders' equity. For
affiliates operating in highly inflationary economies, such as Brazil and,
beginning in 1997, Mexico, 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. Cost is determined
generally on the last-in, first-out basis for U.S. inventories and on the
first-in, first-out or average cost basis for international inventories.
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 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 prospective risk. Resulting
adjustments to the allowance for losses are made to adjust 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 partnership affiliates and
loans secured by equipment and first mortgages on real property. The loans to
partnership affiliates are secured by the partnerships' assets. Income on all
loans is recognized on 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 prospective risk. Resulting adjustments to the
allowance for losses are
8
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
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.
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 in either the financial statements or the tax returns,
but not both. 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
computed 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, 1995 and 1996, 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 term of the agreement and unamortized premiums are
included in other assets.
DCC has one interest rate-based option which is marked to market and included
in other liabilities. Changes in the fair value of this instrument are reported
in other income.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
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.
NET INCOME PER COMMON SHARE
Primary earnings per common share is computed on the basis of the weighted
average number of common shares outstanding during each year. Shares reserved
for issuance under the Company's stock option and deferred compensation plans
did not have a material dilutive effect on earnings per share.
9
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts DANA CORPORATION
- --------------------------------------------------------------------------------
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.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require companies to record
compensation for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account 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, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of grant over
the amount an employee must pay to acquire the stock.
NOTE 2. COMMON SHARES
In connection with employee stock plans, Dana reacquired 23,570 shares in
1994, 36,372 in 1995 and 169,981 in 1996.
In April 1994, Dana's Board of Directors approved a two-for-one stock split
effective for shareholders of record on June 1, 1994. Share and per share
amounts have been restated to reflect the stock split.
During 1994, Dana retired all of the common shares held in treasury. The cost
of reacquired shares in excess of par value was charged to additional paid-in
capital.
In 1996, 1,000,000 shares of Dana's common stock were contributed to the Dana
Corporation Pension Plans Trust.
The following summarizes the common stock transactions for 1994, 1995 and
1996:
- -----------------------------------------------------------------------
1994 1995 1996
- -----------------------------------------------------------------------
Outstanding at
January 1, 1994 49,208,825
Two-for-one
stock split 49,208,825
- -----------------------------------------------------------------------
Outstanding at
beginning
of year 98,417,650 98,793,591 101,512,681
Issued for:
Acquisitions 2,456,979 163,370
Employee
stock plans 399,511 298,483 519,695
Defined benefit
pension plans 1,000,000
Reacquired and
retired (23,570) (36,372) (169,981)
- -----------------------------------------------------------------------
Outstanding at
end of year 98,793,591 101,512,681 103,025,765
- -----------------------------------------------------------------------
Average outstanding
for the year 98,688,775 101,296,858 101,799,543
NOTE 3. PREFERRED SHARE PURCHASE RIGHTS
In 1986, Dana's Board adopted a Preferred Share Purchase Rights Plan (Rights
Plan) designed to deter coercive or unfair takeover tactics. The Rights issued
under that Plan expired on July 25, 1996.
In April 1996, the Board adopted a new Rights Plan to replace the old one and
declared a dividend of one Preferred Share Purchase Right (New Right) on each
share of Dana common stock outstanding on and after July 25, 1996. Each New
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 New Rights have no voting rights. They will expire on July 15, 2006, unless
exercised, redeemed or exchanged sooner.
Generally, the New 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 New Rights will become
exercisable (except those owned by the Acquiring Person, which will become
void), entitling the holder of each New 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 New Rights
will become exercisable (except those owned by the Acquiring Person, which will
become void), entitling the holder of each New Right to purchase a number of
common shares of the acquiring or surviving company having a market value (as
determined under the new Plan) equal to two times the Purchase Price.
Dana's Board may redeem the New 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 New Right for one share of
Dana common stock.
NOTE 4. 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, 1996, no shares of preferred stock had been issued.
10
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 5. INVENTORIES
The components of inventory are as follows:
- --------------------------------------------------------
December 31
1995 1996
- --------------------------------------------------------
Raw materials $230.1 $209.9
Work in process and finished goods 644.7 703.0
- --------------------------------------------------------
$874.8 $912.9
- --------------------------------------------------------
Inventories amounting to $445.1 and $437.2 at December 31, 1995 and 1996 were
valued using the LIFO method. If all inventories were valued at replacement
cost, inventories would be increased by $117.5 and $121.4 at December 31, 1995
and 1996, respectively.
NOTE 6. INTERNATIONAL OPERATIONS
The following is a summary of the significant financial information of Dana's
consolidated international subsidiaries:
- -------------------------------------------------------------
December 31
1994 1995 1996
- -------------------------------------------------------------
Assets $1,531.4 $1,948.3 $2,306.7
Liabilities 827.1 1,133.0 1,340.6
Net sales 1,645.5 2,121.9 2,167.1
Net income 68.1 119.5 108.9
Dana's equity in:
Net assets 552.5 662.0 796.7
Net income 38.1 81.7 77.7
Cumulative undistributed earnings of international subsidiaries for which
U.S. income taxes, exclusive of foreign tax credits, have not been provided
approximated $410.2 at December 31, 1996. Management intends to permanently
reinvest undistributed earnings of Dana's international subsidiaries,
accordingly, no U.S. income taxes have been provided on these undistributed
earnings. If the total undistributed earnings of international subsidiaries had
been remitted in 1996, a significant amount of the additional tax provision
would be offset by foreign tax credits.
Dana's consolidated international subsidiaries are located throughout the
world with no individual subsidiary or country accounting for more than 10% of
consolidated sales or assets. With the exception of certain affiliates located
in South America, the functional currency of the Company's international
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 South
America, Asia and other areas of the world. The following is a summary of the
significant financial information of affiliated companies accounted for on the
equity method:
- ---------------------------------------------------------------
December 31
1994 1995 1996
- ---------------------------------------------------------------
Current assets $ 409.6 $ 343.3 $ 371.4
Other assets 356.4 244.2 272.6
Current liabilities 424.7 463.4 349.3
Other liabilities 136.1 54.8 180.3
Shareholders' equity 205.2 69.3 114.4
Net sales 846.8 682.5 743.1
Gross profit 162.3 140.8 125.2
Net income (loss) 40.3 (22.1) 21.1
Dana's equity in:
Net assets 100.5 44.8 61.1
Net income (loss) 18.9 (8.4) 10.7
NOTE 7. INVESTMENTS IN PARTNERSHIPS
Certain DCC subsidiaries have a number of U.S. investments in partnerships
which are accounted for on the equity method. Dana's share of earnings of these
partnerships is included in income as earned. The partnerships are engaged
primarily in the leasing and financing of equipment or real estate to commercial
entities.
Summarized financial information of the partnerships on a combined basis is
as follows:
- ---------------------------------------------------------------
December 31
1994 1995 1996
- ---------------------------------------------------------------
Assets $ 939.5 $ 932.4 $ 900.3
Liabilities 743.7 757.7 797.1
Partners' capital 195.8 174.7 103.2
Revenue 130.1 116.2 78.0
Net income 9.7 9.0 7.0
Dana's share in:
Net assets 58.0 44.5 25.8
Net income 5.3 4.9 2.7
NOTE 8. SHORT-TERM DEBT
Short-term funds for certain U.S. and international operations are obtained
through the issuance of commercial paper, short-term notes payable to banks and
bank overdrafts.
At December 31, 1996, Dana, excluding DCC, had no commercial paper
outstanding, $163.2 borrowed against uncommitted bank lines and $20.7 of bank
overdrafts at its international subsidiaries. DCC had $249.1 of commercial paper
issued and $15.4 and $191.9 borrowed against committed and uncommitted borrowing
lines, respectively.
11
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- -------------------------------------------------------------------------------
Dana and DCC have committed borrowing lines of $455.0 and $400.3,
respectively, and uncommitted borrowing lines of $1,005.0 and $444.6. 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:
- ---------------------------------------------------------
Weighted
average
interest
Amount rate
- ---------------------------------------------------------
Balance at December 31, 1995 $791.4 6.5%
Average during 1995 641.5 6.6
Maximum during 1995 (month end) 791.4 6.5
BALANCE AT DECEMBER 31, 1996 $640.3 5.9%
AVERAGE DURING 1996 777.0 6.0
MAXIMUM DURING 1996 (MONTH END) 891.2 5.9
NOTE 9. LONG-TERM DEBT
- ----------------------------------------------------------------
December 31
1995 1996
- ----------------------------------------------------------------
Corporate indebtedness --
Unsecured notes payable,
fixed rates, 5.29% - 7.95%,
due 1997 to 2001 $ 607.0 $ 875.0
Unsecured notes payable,
variable rates, 6.26% - 6.36%,
due 1998 70.0 60.0
Various industrial revenue
bonds and other 9.2 9.0
DCC indebtedness -
Various notes payable, unsecured,
variable rates, 4.13% - 7.03%,
due 1997 to 2001 331.8 381.5
Various notes payable, unsecured,
fixed rates, 5.52% - 9.99%,
due 1997 to 2001 242.1 303.1
Various notes payable, non-recourse
to issuer, 6.82% - 12.05%,
due 1997 to 2007 26.8 23.7
Indebtedness of other consolidated
subsidiaries 28.2 45.4
- ----------------------------------------------------------------
$1,315.1 $1,697.7
- ----------------------------------------------------------------
Interest paid on short-term and long-term debt was $114.7, $143.0 and $148.8
during 1994, 1995 and 1996, respectively.
The aggregate amounts of maturities of all long-term debt for each of the
five years succeeding December 31, 1996, are as follows: 1997, $406.1; 1998,
$359.9; 1999, $403.5; 2000, $331.9 and 2001, $165.9.
NOTE 10. INTEREST RATE AGREEMENTS
Dana and DCC enter into interest rate agreements to manage interest rate
risk, thereby reducing exposure to future interest rate movements. Under
interest rate swap agreements, Dana agrees with other parties 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,
1996, Dana was committed to pay an average fixed rate of 6.6% and receive a
variable rate of 6.3% on notional amounts of $60.0. The notional amounts of
interest rate swaps expire in 1998.
At December 31, 1996, DCC was committed to pay an average fixed rate of 6.9%
and receive a variable rate of 5.7% on notional amounts of $410.9 and receive an
average fixed rate of 5.2% and pay an average variable rate of 5.6% on notional
amounts of $40.0. DCC's notional amounts of interest rate swaps expire as
follows: 1997, $77.7; 1998, $82.5; 1999, $85.4; 2000, $133.4; 2001, $46.9 and
2002, $25.0.
DCC also utilizes interest rate cap agreements to reduce the impact of
changes in interest rates on its floating rate debt. At December 31, 1996, cap
agreements covering $7.3 of variable rate Canadian dollar debt entitle DCC to
recover from the counterparty the amounts, if any, by which actual three-month
Canadian bankers acceptance rates exceed 9.5% - 10% through June 1997.
To reduce its interest rate obligations under an existing swap agreement
having a notional amount of $70.0, DCC granted the counterparty an option,
expiring in 2000, to extend the original maturity to 2007 at a fixed rate to DCC
of 9.0%. This option has been marked to market.
NOTE 11. STOCK OPTION PLANS
The Company's employee stock option plans provide for the granting of options
at prices no less than 85% of the market value at the date of grant and 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. While the plans provide for
grants of options and stock appreciation rights at 85% of market, to date all
grants have been at market value at date of grant.
12
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 11. STOCK OPTION PLANS (cont.)
The following summarizes the stock option transactions for the years ended
December 31, 1994, 1995 and 1996:
- ---------------------------------------------------------------
Number Weighted-average
of shares exercise price
- ---------------------------------------------------------------
Outstanding at
December 31, 1993 3,394,518 $20.77
Granted - 1994 1,045,950 29.06
Exercised - 1994 (309,915) 17.13
Cancelled - 1994 (19,150) 18.30
---------
Outstanding at
December 31, 1994 4,111,403 $23.17
Granted - 1995 991,000 31.06
Exercised - 1995 (223,430) 17.93
Cancelled - 1995 (10,600) 24.18
---------
Outstanding at
December 31, 1995 4,868,373 $25.01
GRANTED - 1996 1,396,250 28.13
EXERCISED - 1996 (417,260) 19.46
CANCELLED - 1996 (10,075) 24.13
---------
OUTSTANDING AT
DECEMBER 31, 1996 5,837,288 $26.15
---------
EXERCISABLE AT
DECEMBER 31, 1996 3,119,156 $23.68
---------
SHARES AVAILABLE FOR FUTURE
GRANTS AT DECEMBER 31, 1996 3,179,731
---------
The options outstanding at December 31, 1996 have exercise prices between
$16.38 - $31.06 and a weighted-average remaining contractual life of 7.1 years.
No expense has been charged to income relating to stock options. If the fair
value method of accounting for stock options prescribed by SFAS No. 123 had been
used, the expense relating to the stock options would have been $.6 in 1995 and
$1.9 in 1996. Pro forma net income would have been $287.5 in 1995 and $304.1 in
1996. Pro forma earnings per share would have been $2.84 in 1995 and $2.99 in
1996. The pro forma effect on net income is not representative of the pro forma
effect on net income that will be disclosed in 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:
- ------------------------------------------------
1995 1996
- ------------------------------------------------
Risk-free interest rate 6.0% 6.5%
Dividend yield 3.0% 3.0%
Expected life 5.4 years 5.4 years
Stock price volatility 29.3% 27.3%
In 1993, the shareholders approved a stock option plan for non-employee
directors of the Company. The plan provides for the automatic granting of
options at prices equal to the market value at the date of grant and the options
are exercisable after one year for a period not to exceed ten years from date of
grant. In 1994, options were granted under this plan to purchase 21,000 shares
at $28.88 per share and options to purchase 3,000 shares were exercised at
$24.25 per share. During 1995, options were granted to purchase 24,000 at $24.81
per share. No options were exercised under this plan during 1995. During 1996,
options were granted to purchase 21,000 shares at $32.25 per share and options
to purchase 6,000 shares were exercised at $26.56 per share. At December 31,
1996, there were 75,000 options outstanding at exercise prices ranging from
$24.25 to $32.25 per share, options for 54,000 shares were exercisable and there
were 46,000 options available for future grant under this plan.
NOTE 12. STOCK PURCHASE PLAN
All full-time U.S. and certain non-U.S. employees are eligible to participate
in Dana's employee stock purchase plan. The plan provides that participants may
authorize Dana to withhold up to 15% of earnings and deposit such amounts with
an independent custodian. The custodian causes to be purchased, as nominee for
the participants, common stock of Dana at prevailing market prices, allocates
the shares to the participants' accounts and distributes the shares to the
participants upon request.
Under the plan, 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 plan. 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 plan. The custodian has caused to be purchased
782,225 shares in 1994, 1,025,354 shares in 1995 and 1,069,720 in 1996 of Dana's
common stock on behalf of the employees and the Company's charge to expense
amounted to $4.7 in 1994, $5.2 in 1995 and $6.3 in 1996.
NOTE 13. 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 $106.7, $116.7 and
$112.1 in 1994, 1995 and 1996, respectively.
Under one of these plans, in which certain officers and other key employees
participate, a percentage of participants' compensation is accrued for
additional compensation
13
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts DANA CORPORATION
- --------------------------------------------------------------------------------
if certain profit levels are attained. Awards under the plan are paid in cash
and may, at the discretion of the Board's Compensation Committee, be paid
immediately or deferred. Some awards deferred prior to May 1991 may be paid in
shares of the Company's common stock. Dana awarded (based on prior period
performance) $4.5 in 1994, $10.6 in 1995 and $14.2 in 1996; 20,404, 16,891 and
16,438 shares of Dana's common stock were issued and amounts equivalent to
dividends and interest of $.4, $.6 and $.7 were credited to deferred awards in
1994, 1995 and 1996, respectively. Total charges to expense relating to the plan
amounted to $12.1 in 1994, $16.1 in 1995 and $13.2 in 1996.
The Company has a Restricted Stock Plan 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 1994, 1995 and 1996 were
28,000, 24,000 and 25,000, respectively. Total charges to expense for this plan
amounted to $.7, $.6 and $.8, in 1994, 1995 and 1996, respectively. At December
31, 1996, 620,120 shares were authorized for future issuance under this plan.
NOTE 14. PENSIONS
Dana provides retirement benefits for substantially all of its employees
under several defined benefit and defined contribution pension plans. Pension
expense approximated $65.0 in 1994, $62.4 in 1995 and $74.0 in 1996.
In 1996, in addition to cash contributions, 1,000,000 shares of Dana common
stock, with a market value of $31.1, were contributed to the Dana Corporation
Pension Plans Trust.
Net periodic pension cost for defined benefit plans is computed as follows:
- ----------------------------------------------------------------------
Year Ended December 31
1994 1995 1996
- ----------------------------------------------------------------------
Service cost $ 35.6 $ 36.4 $ 48.3
Interest cost 110.0 123.5 127.0
Actual return on
plan assets 45.3 (407.9) (186.0)
Amortization of
unrecognized prior
service cost 14.7 9.0 16.1
Amortization of initial
unrecognized net
obligation 5.7 5.0 4.2
Unrecognized gain (loss) (147.4) 285.0 53.0
- ----------------------------------------------------------------------
Net periodic
pension cost $ 63.9 $ 51.0 $ 62.6
- ----------------------------------------------------------------------
The funded status of defined benefit plans at December 31, 1995 was as
follows:
ACCUMULATED ASSETS
BENEFITS EXCEED
EXCEED ACCUMULATED
ASSETS BENEFITS TOTAL
- ---------------------------------------------------------------------
ACTUARIAL PRESENT
VALUE OF:
VESTED BENEFITS $ 934.2 $ 653.0 $1,587.2
NON-VESTED BENEFITS 87.1 12.7 99.8
- ---------------------------------------------------------------------
ACCUMULATED BENEFIT
OBLIGATION $1,021.3 $ 665.7 $1,687.0
- ---------------------------------------------------------------------
ACTUARIAL PRESENT VALUE
OF PROJECTED BENEFIT
OBLIGATION $(1,038.3) $ (779.8) $(1,818.1)
PLAN ASSETS AT FAIR VALUE 900.8 879.4 1,780.2
- ---------------------------------------------------------------------
FUNDED STATUS $ (137.5) $ 99.6 $ (37.9)
- ---------------------------------------------------------------------
UNRECOGNIZED PRIOR
SERVICE COST $ (14.7) $ (32.1) $ (46.8)
UNRECOGNIZED NET GAIN
(LOSS) (37.7) 120.9 83.2
ACCRUED PENSION COST (37.3) (13.2) (50.5)
UNRECOGNIZED INITIAL
OBLIGATION (47.8) 24.0 (23.8)
- ---------------------------------------------------------------------
$ (137.5) $ 99.6 $ (37.9)
- ---------------------------------------------------------------------
The funded status of defined benefit plans at December 31, 1996 was as
follows:
- ------------------------------------------------------------------
ACCUMULATED ASSETS
BENEFITS EXCEED
EXCEED ACCUMULATED
ASSETS BENEFITS TOTAL
- ------------------------------------------------------------------
ACTUARIAL PRESENT
VALUE OF:
VESTED BENEFITS $ 486.0 $1,103.3 $1,589.3
NON-VESTED BENEFITS 46.0 90.1 136.1
- ------------------------------------------------------------------
ACCUMULATED BENEFIT
OBLIGATION $ 532.0 $1,193.4 $1,725.4
- ------------------------------------------------------------------
ACTUARIAL PRESENT VALUE
OF PROJECTED BENEFIT
OBLIGATION $ (548.8) $(1,286.9) $(1,835.7)
PLAN ASSETS AT FAIR VALUE 442.5 1,492.8 1,935.3
- ------------------------------------------------------------------
FUNDED STATUS $ (106.3) $ 205.9 $ 99.6
- ------------------------------------------------------------------
UNRECOGNIZED PRIOR
SERVICE COST $ (15.7) $ (57.2) $ (72.9)
UNRECOGNIZED NET GAIN
(LOSS) (6.9) 238.3 231.4
ACCRUED PENSION COST (68.0) 26.2 (41.8)
UNRECOGNIZED INITIAL
OBLIGATION (15.7) (1.4) (17.1)
- ------------------------------------------------------------------
$ (106.3) $ 205.9 $ 99.6
- ------------------------------------------------------------------
14
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 14. PENSIONS (cont.)
- --------------------------------------------------------------------------------
The assumptions used to determine pension costs and projected benefit
obligations are as follows:
- -------------------------------------------------------
U.S. Plans
1994 1995 1996
- -------------------------------------------------------
Expected long-term rate
of return on plan assets 8.5% 8.5% 8.5%
Discount rate 8% 6.75% 7.5%
Rate of increase in future
compensation levels 5% 5% 5%
- -------------------------------------------------------
International Plans
1994 1995 1996
- -------------------------------------------------------
Expected long-term rate
of return on plan assets 8 - 9% 8 - 9% 8 - 9%
Discount rate 7 - 9% 7 - 8% 7 - 8%
Rate of increase in future
compensation levels 3 - 7.5% 3 - 7.5% 3 - 7.5%
Plan assets are invested in a diversified portfolio that consists
primarily of equity and debt securities.
NOTE 15. MEDICAL CARE AND OTHER BENEFITS
Dana and certain of its subsidiaries provide medical and life insurance
benefits for certain active and retired employees. These benefits are provided
through various insurance carriers whose charges to Dana are based on the
benefits paid during the year. Substantially all of the retiree medical cost
relates to North American retirees since most international retirees are covered
by government-sponsored programs.
Net annual postretirement benefit cost is computed as follows:
- ----------------------------------------------------------------------
Year Ended December 31
1994 1995 1996
- ----------------------------------------------------------------------
Service cost $13.6 $ 9.2 $11.2
Interest cost 60.2 58.4 58.7
Net amortization and
deferral (12.3) (17.2) (13.8)
- ----------------------------------------------------------------------
Net annual postretire-
ment benefit cost $61.5 $50.4 $56.1
- ----------------------------------------------------------------------
Postretirement benefit obligations, none of which are funded, are summarized
as follows:
- ----------------------------------------------------------
December 31
1995 1996
- ----------------------------------------------------------
Accumulated postretirement benefit
obligations:
Retirees and dependents $608.8 $590.5
Active participants eligible to
retire and receive benefits 107.9 117.5
Active participants not yet fully
eligible 143.5 143.5
- ----------------------------------------------------------
Total accumulated postretirement
benefit obligation 860.2 851.5
Unamortized plan amendments 117.9 59.7
Unamortized net loss (131.8) (67.1)
- ----------------------------------------------------------
Accrued postretirement benefits
other than pensions $846.3 $844.1
- ----------------------------------------------------------
The discount rate used in determining the accumulated postretirement benefit
obligation was 7% in 1995 and 7.75% in 1996. The assumed medical costs trend
rates result in per capita net incurred medical claims increasing 7.9% in 1997.
The rate decreases to 5.1% over a 13 year period. If the assumed medical costs
trend rates were increased by 1%, the accumulated postretirement benefit
obligation as of December 31, 1996, would increase by $64.4 and the aggregate of
the service and interest cost components of the net annual postretirement
benefit cost would be increased by $5.0.
NOTE 16. BUSINESS SEGMENTS
Dana operates principally in three business segments: Vehicular, Industrial
and Lease Financing. The Vehicular segment consists primarily of operations
which manufacture and market axles, structural components, transmissions,
joints and shafts, clutches and engine parts (such as pistons, piston rings,
filters and gaskets). The Industrial segment manufactures and markets various
products, including those for off-highway motor vehicles. The Lease Financing
segment, consists of DCC, whose primary operating subsidiaries are engaged in
leasing and finance operations.
Lease financing revenue includes lease financing income, fees and interest.
Other income includes dividends and interest. Other expense includes interest
and corporate expenses. Corporate assets include cash, marketable securities,
accounts receivable and investments (excluding assets which can be identified to
lease financing).
The "Other International" geographic area is comprised primarily of Brazil
and Canada, neither of which exceeds 10% of the consolidated amounts. Interarea
transfers between countries are transferred at the prevailing market price.
Export sales from the U.S. to customers outside the U.S. amounted to $430.7 in
1994, $554.6 in 1995 and $675.6 in 1996. Total export sales (including sales to
Dana's international subsidiaries which are eliminated for
15
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- -------------------------------------------------------------------------------
financial statement presentation) were $587.5, $735.1 and $847.3 in 1994, 1995
and 1996, respectively.
Worldwide sales to Ford Motor Company and subsidiaries amounted to $1,082.9,
$1,299.3 and $1,263.5 in 1994, 1995 and 1996, respectively, which represented
16%, 17% and 16% of Dana's consolidated sales. Sales to Chrysler Corporation and
subsidiaries in 1994, 1995 and 1996 amounted to $815.7, $968.0 and $1,104.1,
respectively, representing 12%, 13% and 14% of Dana's consolidated sales. Sales
to Ford and Chrysler were primarily from the Company's Vehicular segment. No
other customer accounted for more than 10% of Dana's consolidated sales.
- ----------------------------------------------------------------------------------
Lease
Vehicular Industrial Financing Consolidated
- ----------------------------------------------------------------------------------
Year Ended December 31, 1994
- ----------------------------------------------------------------------------------
Sales to customers $5,298.5 $1,308.9 $ 6.4 $6,613.8
- ----------------------------------------------------------------------------------
Lease financing revenue 139.5 139.5
- ----------------------------------------------------------------------------------
Total revenue $5,298.5 $1,308.9 $ 145.9 $6,753.3
- ----------------------------------------------------------------------------------
Operating income $ 520.1 $ 56.9 $ 11.6 $ 588.6
- ---------------------------------------------------------------------
Other income 9.1
- ----------------------------------------------------------------------------------
Other expense (206.1)
- ----------------------------------------------------------------------------------
Income before income taxes $ 391.6
- ----------------------------------------------------------------------------------
Assets identified to segments $1,661.4 $ 572.8 $1,387.4 $3,621.6
- ---------------------------------------------------------------------
Corporate assets 1,502.1
- ----------------------------------------------------------------------------------
Total assets $5,123.7
- ----------------------------------------------------------------------------------
Depreciation $ 135.7 $ 37.0 $ 3.0
- ----------------------------------------------------------------------------------
Capital expenditures $ 276.0 $ 53.3 $ 3.4
- ----------------------------------------------------------------------------------
Year Ended December 31, 1995
- ----------------------------------------------------------------------------------
Sales to customers $6,069.8 $1,526.5 $ 1.4 $7,597.7
- ----------------------------------------------------------------------------------
Lease financing revenue 155.3 155.3
- ----------------------------------------------------------------------------------
Total revenue $6,069.8 $1,526.5 $ 156.7 $7,753.0
- ----------------------------------------------------------------------------------
Operating income $ 585.9 $ 103.7 $ 22.8 $ 712.4
- ---------------------------------------------------------------------
Other income 33.7
- ----------------------------------------------------------------------------------
Other expense (232.9)
- ----------------------------------------------------------------------------------
Income before income taxes $ 513.2
- ----------------------------------------------------------------------------------
Assets identified to segments $2,077.5 $ 614.8 $1,468.4 $4,160.7
- ---------------------------------------------------------------------
Corporate assets 1,552.8
- ----------------------------------------------------------------------------------
Total assets $5,713.5
- ----------------------------------------------------------------------------------
Depreciation $ 177.0 $ 44.2 $ 2.0
- ----------------------------------------------------------------------------------
Capital expenditures $ 332.9 $ 61.4 $ 10.7
- ----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
- ----------------------------------------------------------------------------------
SALES TO CUSTOMERS $6,130.5 $1,555.8 $7,686.3
- ----------------------------------------------------------------------------------
LEASE FINANCING REVENUE $ 176.5 176.5
- ----------------------------------------------------------------------------------
TOTAL REVENUE $6,130.5 $1,555.8 $ 176.5 $7,862.8
- ----------------------------------------------------------------------------------
OPERATING INCOME $ 574.7 $ 109.9 $ 39.6 $ 724.2
- ---------------------------------------------------------------------
OTHER INCOME 26.7
- ----------------------------------------------------------------------------------
OTHER EXPENSE (259.2)
- ----------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES $ 491.7
- ----------------------------------------------------------------------------------
ASSETS IDENTIFIED TO SEGMENTS $2,255.9 $ 654.0 $ 1,669.1 $4,579.0
- ---------------------------------------------------------------------
CORPORATE ASSETS 1,581.0
- ----------------------------------------------------------------------------------
TOTAL ASSETS $6,160.0
- ----------------------------------------------------------------------------------
DEPRECIATION $ 192.0 $ 54.5 $ 5.8
- ----------------------------------------------------------------------------------
CAPITAL EXPENDITURES $ 262.0 $ 65.8 $ 12.7
- ----------------------------------------------------------------------------------
16
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
NOTE 16. BUSINESS SEGMENTS (Cont.)
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Adjustments
United Other and
States Europe International Eliminations Total
- -------------------------------------------------------------------------------------------------
Year Ended December 31, 1994
- -------------------------------------------------------------------------------------------------
Sales to customers $4,968.3 $ 713.0 $ 932.5 $6,613.8
- -------------------------------------------------------------------------------------------------
Lease financing revenue 104.2 26.7 8.6 139.5
- -------------------------------------------------------------------------------------------------
Interarea transfers 156.8 7.5 104.6 $ (268.9)
- -------------------------------------------------------------------------------------------------
$5,229.3 $ 747.2 $1,045.7 $ (268.9) $6,753.3
- -------------------------------------------------------------------------------------------------
Operating income $ 462.0 $ 14.0 $ 112.6 $ 588.6
- -------------------------------------------------------------------------------------------------
Other income 9.1 9.1
- -------------------------------------------------------------------------------------------------
Other expense (170.6) (13.2) (22.3) (206.1)
- -------------------------------------------------------------------------------------------------
Income before income taxes $ 300.5 $ .8 $ 90.3 $ 391.6
- -------------------------------------------------------------------------------------------------
Assets identified $2,520.3 $ 577.5 $ 523.8 $3,621.6
- -------------------------------------------------------------------------------------------------
Corporate assets 1,108.4 109.4 284.3 1,502.1
- -------------------------------------------------------------------------------------------------
Total assets $3,628.7 $ 686.9 $ 808.1 $5,123.7
- -------------------------------------------------------------------------------------------------
Year Ended December 31, 1995
- -------------------------------------------------------------------------------------------------
Sales to customers $5,475.9 $ 977.0 $1,144.8 $7,597.7
- -------------------------------------------------------------------------------------------------
Lease financing revenue 104.0 37.3 14.0 155.3
- -------------------------------------------------------------------------------------------------
Interarea transfers 180.5 12.6 118.7 $ (311.8)
- -------------------------------------------------------------------------------------------------
$5,760.4 $1,026.9 $1,277.5 $ (311.8) $7,753.0
- -------------------------------------------------------------------------------------------------
Operating income $ 573.7 $ 36.7 $ 102.0 $ 712.4
- -------------------------------------------------------------------------------------------------
Other income 10.3 23.4 33.7
- -------------------------------------------------------------------------------------------------
Other expense (223.8) (9.1) (232.9)
- -------------------------------------------------------------------------------------------------
Income before income taxes $ 360.2 $ 27.6 $ 125.4 $ 513.2
- -------------------------------------------------------------------------------------------------
Assets identified $2,631.3 $ 863.8 $ 665.6 $4,160.7
- -------------------------------------------------------------------------------------------------
Corporate assets 1,244.7 135.4 172.7 1,552.8
- -------------------------------------------------------------------------------------------------
Total assets $3,876.0 $ 999.2 $ 838.3 $5,713.5
- -------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
- -------------------------------------------------------------------------------------------------
SALES TO CUSTOMERS $5,519.2 $1,086.3 $1,080.8 $7,686.3
- -------------------------------------------------------------------------------------------------
LEASE FINANCING REVENUE 122.4 45.2 8.9 176.5
- -------------------------------------------------------------------------------------------------
INTERAREA TRANSFERS 171.7 19.2 128.6 $ (319.5)
- -------------------------------------------------------------------------------------------------
$5,813.3 $1,150.7 $1,218.3 $ (319.5) $7,862.8
- -------------------------------------------------------------------------------------------------
OPERATING INCOME $ 589.4 $ 60.7 $ 74.1 $ 724.2
- -------------------------------------------------------------------------------------------------
OTHER INCOME 26.7 26.7
- -------------------------------------------------------------------------------------------------
OTHER EXPENSE (240.8) (24.2) 5.8 (259.2)
- -------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES $ 375.3 $ 36.5 $ 79.9 $ 491.7
- -------------------------------------------------------------------------------------------------
ASSETS IDENTIFIED $2,824.0 $1,004.0 $ 751.0 $4,579.0
- -------------------------------------------------------------------------------------------------
CORPORATE ASSETS 1,294.4 120.8 165.8 1,581.0
- -------------------------------------------------------------------------------------------------
TOTAL ASSETS $4,118.4 $1,124.8 $ 916.8 $6,160.0
- -------------------------------------------------------------------------------------------------
17
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 17. ESTIMATED INCOME TAXES
Income tax expense (benefit) consisted of the following components:
- ---------------------------------------------------------
Year Ended December 31
1994 1995 1996
- ---------------------------------------------------------
Current
U.S. Federal $ 69.0 $ 68.0 $ 53.7
U.S. State and Local 39.2 32.2 22.5
International 36.6 46.0 16.0
- ---------------------------------------------------------
144.8 146.2 92.2
- ---------------------------------------------------------
Deferred
U.S. Federal 26.3 48.6 80.0
International (13.7) (13.6) (5.9)
- ---------------------------------------------------------
12.6 35.0 74.1
- ---------------------------------------------------------
Total expense $157.4 $181.2 $166.3
- ---------------------------------------------------------
Deferred tax benefits (liabilities) are comprised of the following:
- -------------------------------------------------------------
Year Ended December 31
1994 1995 1996
- -------------------------------------------------------------
Postretirement benefits
other than pensions $360.6 $373.1 $362.4
Postemployment benefits 35.2 44.9 47.3
Expense accruals 120.0 116.2 100.2
Inventory reserves 4.3 4.2 7.0
Pension accruals 19.5 4.9 1.9
Net operating loss
carry forwards 12.9 24.3 34.2
Other 6.8 9.6 26.0
- -------------------------------------------------------------
Deferred tax benefits 559.3 577.2 579.0
- -------------------------------------------------------------
Depreciation -
non-leasing (105.2) (105.6) (129.9)
Leasing activities (211.5) (243.6) (299.0)
Other (3.1) (2.6) (2.6)
- -------------------------------------------------------------
Deferred tax liabilities (319.8) (351.8) (431.5)
- -------------------------------------------------------------
Net deferred tax benefits $239.5 $225.4 $147.5
- -------------------------------------------------------------
The Company has a history of earnings and has traditionally been a taxpayer.
Consequently, the Company expects to realize substantially all of the deferred
tax assets in the future. Except for the $4.8 valuation reserve relating to
capital loss carryforwards, no valuation allowances have been recorded. Income
taxes paid during 1994, 1995 and 1996 amounted to $104.3, $119.5 and $107.6,
respectively.
The effective tax rates differ from the U.S. Federal income tax rate for the
following reasons:
- --------------------------------------------------------------
Year Ended December 31
1994 1995 1996
- --------------------------------------------------------------
U.S. Federal income
tax rate 35.0% 35.0% 35.0%
Increase (reductions) in
taxes resulting from:
International income (1.1) (2.8) (4.3)
Capital loss utilization (1.0) (.3)
Investment tax credits (.3) (.3) (.3)
Amortization of
goodwill .7 .6 .6
State and local income
taxes, net of of Federal
income tax benefit 6.5 4.0 3.0
Miscellaneous items (.6) (.2) .1
- --------------------------------------------------------------
Estimated taxes on income 40.2% 35.3% 33.8%
- --------------------------------------------------------------
NOTE 18. COMPOSITION OF CERTAIN BALANCE SHEET AMOUNTS
The following items comprise the net amounts indicated in the respective
balance sheet captions:
- -------------------------------------------------------------
December 31
1995 1996
- -------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS
- -------------------------------------------------------------
Investments at equity $ 99.1 $ 86.9
Goodwill 269.4 285.3
Intangible pension asset 74.6 35.0
Loans receivable 142.2 208.2
Other 225.4 195.2
- -------------------------------------------------------------
$ 810.7 $ 810.6
- -------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET
- -------------------------------------------------------------
Land and improvements to land $ 79.1 $ 90.4
Buildings and building fixtures 626.5 684.6
Machinery and equipment 2,631.7 2,867.0
- -------------------------------------------------------------
3,337.3 3,642.0
Less: Accumulated depreciation 1,687.8 1,817.2
- -------------------------------------------------------------
$1,649.5 $1,824.8
- -------------------------------------------------------------
LEASE FINANCING
- -------------------------------------------------------------
Direct financing leases $ 538.6 $ 583.4
Leveraged leases 480.4 594.6
Property on operating leases,
net of accumulated depreciation 33.3 40.1
Allowance for credit losses (47.4) (50.8)
- -------------------------------------------------------------
$1,004.9 $1,167.3
- -------------------------------------------------------------
18
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 18. COMPOSITION OF CERTAIN BALANCE SHEET AMOUNTS (cont.)
- -------------------------------------------------------------
December 31
1995 1996
- -------------------------------------------------------------
- -------------------------------------------------------------
DEFERRED EMPLOYEE BENEFITS
- -------------------------------------------------------------
Postretirement other than pension $ 846.3 $ 844.1
Postemployment 84.6 81.9
Pension 146.4 79.4
Compensation 18.9 20.2
- -------------------------------------------------------------
$1,096.2 $1,025.6
- -------------------------------------------------------------
The components of the net investment in direct financing leases are as
follows:
- -------------------------------------------------------------
December 31
1995 1996
- -------------------------------------------------------------
Total minimum lease payments $594.6 $638.1
Residual values 64.6 66.0
Deferred initial direct costs 12.2 14.2
- -------------------------------------------------------------
671.4 718.3
Less: Unearned income 132.8 134.9
- -------------------------------------------------------------
$538.6 $583.4
- -------------------------------------------------------------
The components of the net investment in leveraged leases are as follows:
- -------------------------------------------------------------
December 31
1995 1996
- -------------------------------------------------------------
Rentals receivable $ 4,412.6 $ 4,883.8
Residual values 478.9 698.5
Non recourse debt service (3,657.6) (4,197.4)
Unearned income (740.4) (777.9)
Deferred investment tax credit (13.1) (12.4)
- -------------------------------------------------------------
480.4 594.6
Less: Deferred taxes arising from
leveraged leases 193.3 252.1
- -------------------------------------------------------------
$ 287.1 $ 342.5
- -------------------------------------------------------------
The following is a schedule, by year, of total minimum lease payments
receivable on direct financing leases as of December 31, 1996:
- ------------------------------------------------------------
Year Ending December 31:
1997 $ 279.1
1998 168.2
1999 95.0
2000 49.1
2001 25.2
Later years 21.5
- ------------------------------------------------------------
Total minimum lease payments receivable $ 638.1
- ------------------------------------------------------------
NOTE 19. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of Dana's financial instruments are as follows:
- ---------------------------------------------------------------------------------------
December 31
1995 1996
Carrying Fair CARRYING FAIR
Amount Value AMOUNT VALUE
- ---------------------------------------------------------------------------------------
FINANCIAL ASSETS
Cash and marketable
securities $ 66.6 $ 66.6 $ 227.8 $ 227.8
Loans receivable (net) 142.2 138.8 208.2 207.2
FINANCIAL LIABILITIES
Short-term debt 791.4 791.4 640.3 640.3
Long-term debt 1,315.1 1,347.5 1,697.7 1,754.7
Security deposits -
leases 15.2 14.1 16.8 14.8
Deferred funding
commitments under
leveraged leases 13.0 13.9 5.9 5.9
Interest rate-based option 8.2 8.2 6.5 6.5
UNRECOGNIZED FINANCIAL
INSTRUMENTS
Interest rate
derivatives:
Assets .8 .7
Liabilities (21.0) (19.2)
NOTE 20. COMMITMENTS AND CONTINGENCIES
At December 31, 1996, the Company had purchase commitments for property,
plant and equipment aggregating approximately $136.5. Future minimum rental
commitments under operating leases aggregate $254.8 with rental payments during
the five succeeding years of $47.6, $41.6, $31.2, $23.4 and $21.2, respectively.
Net rental expense amounted to $65.8, $70.4 and $74.8 for 1994, 1995 and 1996,
respectively.
In December of 1996, Dana signed agreements to acquire the cylinder liner and
piston ring operations of SPX Corporation and the assets of Clark-Hurth
Components, a unit of Ingersoll-Rand Company. The closing of these transactions
is subject to regulatory approval and certain other conditions. In the
aggregate, these operations do not constitute a significant subsidiary.
The Company and its consolidated subsidiaries are parties to various pending
judicial and administrative proceedings arising in the ordinary course of
business.
19
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amount DANA CORPORATION
- --------------------------------------------------------------------------------
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 1994, Dana acquired Sige Brevetti Ing., Columbo S.p.A., an Italian
manufacturer of axles for agricultural and construction equipment. In addition,
Dana acquired Stieber Antriebselemente GmbH, a German manufacturer of clutches
for industrial applications and Tece Almere B.V., a Netherlands distributor of
automobile parts.
In 1995, Dana acquired the European axle group of GKN plc., a manufacturer of
axles for cars, light trucks and heavy-duty trucks, along with axles for
agricultural, industrial and construction equipment. Dana also acquired M.
Friesen GmbH in Germany, a supplier of remanufactured rotating electrics, a 70%
share of Industrias Serva S.A. in Spain, a manufacturer and distributor of
vehicular gaskets and Mohawk Plastics, Inc., a manufacturer of custom molded
plastics for the OE market in the United States.
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) and Industrias Orlando Stevaux Ltda.
(Stevaux) and a majority interest in Centrust S.A. (Centrust). Centrust is an
Argentine company whose subsidiaries manuafacture modular systems, brakes and
structural components. Thompson, also an Argentine company, manufactures and
distributes chassis parts and piston rings. Morgan and Kirby are both
Australian manufactures 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. Stevaux, a Brazilian company, manufactures gaskets and oil seals.
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 prices and the results of operations of these
companies prior to acquisition were not material to the consolidated financial
statements.
In addition to the above acquisitions, in 1995 Dana purchased the remaining
shares of Hayes-Dana, a Canadian subsidiary that manufactures new and
replacement parts for trucks, automobiles, off-highway vehicles and industrial
equipment and increased its equity ownership in R.O.C. Spicer from 49% to 51%.
R.O.C. Spicer manufactures axles and driveshafts in Taiwan.
In 1995, Dana acquired Plumley Companies, a U.S. manufacturer and distributor
of extruded and molded rubber and silicone sealing products, primarily for
automotive applications. Dana acquired Flexon, Inc., a U.S. manufacturer of fuel
filters in 1996. Both Plumley and Flexon are being accounted for as pooling of
interests. Prior years' financial statements have not been restated since the
amounts are not material to the consolidated financial statements.
NOTE 22. 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 1994, 1995 and 1996, $498.8, $339.1 and
$452.9 of nonrecourse debt was issued to finance leveraged leases and $59.2,
$164.3 and $80.9 of nonrecourse debt obligations were repaid, respectively.
In 1996, 1,000,000 shares of Dana common stock, with a market value of $31.1,
were contributed to the Dana Corporation Pension Plans Trust.
20
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 23. SIGNIFICANT SUBSIDIARY
DCC is an indirect wholly-owned subsidiary of Dana whose primary operating
subsidiaries are engaged in leasing and finance operations. The following is a
summary of DCC's financial position and results of operations:
- ----------------------------------------------------------------
Year Ended December 31
1994 1995 1996
- ----------------------------------------------------------------
Revenue from products
and services $161.7 $180.4 $229.6
- ----------------------------------------------------------------
Interest expense 51.9 62.8 74.4
General and
administrative expenses 89.7 103.1 115.6
- ----------------------------------------------------------------
141.6 165.9 190.0
- ----------------------------------------------------------------
Income before income
taxes 20.1 14.5 39.6
Estimated income tax
provision (benefit) 5.4 (8.0) 11.8
- ----------------------------------------------------------------
Income before equity
in earnings of affiliates 14.7 22.5 27.8
Equity in earnings of
affiliates 5.3 4.9 2.7
- ----------------------------------------------------------------
Net income $ 20.0 $ 27.4 $ 30.5
- ----------------------------------------------------------------
- ------------------------------------------------------------------
December 31
1995 1996
- ------------------------------------------------------------------
Assets
- ------------------------------------------------------------------
Cash $ 11.5 $ 3.5
Loans receivable 114.4 208.1
Lease financing 1,153.5 1,327.9
Other assets 107.3 129.7
- ------------------------------------------------------------------
Total assets $1,386.7 $1,669.2
- ------------------------------------------------------------------
LIABILITIES AND SHAREHOLDER'S EQUITY
- ------------------------------------------------------------------
Notes payable $ 972.4 $1,164.7
Other liabilities 309.7 380.6
Shareholder's equity 104.6 123.9
- ------------------------------------------------------------------
Total liabilities and shareholder's
equity $1,386.7 $1,669.2
- ------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Historically, Dana's operations have consistently provided strong cash flows
and 1996 was especially strong, with a net cash flow increase of $318 over 1995.
In addition to higher net income and depreciation, the increase reflects the
Company's ongoing emphasis on efficient asset utilization and the effect of
improved working capital performance as compared to 1995.
Net cash flows used for investing activities were $642, primarily related to
capital additions and the purchase of and payments received from lease financing
assets. Spending for property, plant and equipment during 1996 was $53 less than
last year. Management anticipates that 1997 capital expenditures will be
approximately $380 to support the Company's growth strategy in its core
businesses and its ongoing commitment to product improvement through research
and technology. DCC's net purchases of leased assets (purchases less principal
payments received) were $217 in 1996, $18 higher than in 1995. In addition to
investing activities, Dana paid $100 of dividends to shareholders in 1996, a 9%
increase over 1995.
The Company's cash and cash equivalents at the end of 1996 increased by $161
over 1995, in part as Dana began to accumulate cash to purchase the assets of
Clark-Hurth Components and the piston ring and cylinder liner operations of the
SPX Corporation. These transactions are expected to close in the first quarter
of 1997. Dana's net debt position (short- and long-term debt less cash and cash
equivalents) increased $70 over December 31, 1995's position.
As a result of operating and investing cash flows and the cash accumulated
for the above-mentioned acquisitions, Dana's debt increased $231 over 1995.
Dana's (excluding DCC's) total debt was up $126, while DCC's total debt
increased $105.
NET CASH FLOWS FROM OPERATING ACTIVITIES
'94 $466
'95 $378
'96 $696
CAPITAL SPENDING
'94 $337
'95 $410
'96 $357
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
Dana manages its short- and long-term debt position optimally and utilizes
short-term committed and uncommitted bank lines for the issuance of commercial
paper and bank direct borrowings, as required. Dana (excluding DCC) had
committed and uncommitted borrowing lines of credit totaling approximately $1.5
billion at year end 1996 while DCC's lines were $845. Dana's strong cash flows
from operations, together with sufficient worldwide credit facilities, is
expected to provide adequate liquidity to meet the Company's funding
requirements for 1997.
NET DEBT POSITION
'94 $1,657
'95 $2,040
'96 $2,110
- ---------------------------------------------------------------
YEAR END DEBT ANALYSIS Short-Term Long-Term Total
- ---------------------------------------------------------------
DCC
1995 $ 458 $ 601 $ 1,059
1996 456 708 1,164
- ---------------------------------------------------------------
Change $ (2) $ 107 $ 105
- ---------------------------------------------------------------
DANA (EXCLUDING DCC)
1995 $ 334 $ 714 $ 1,048
1996 184 990 1,174
- ---------------------------------------------------------------
Change $ (150) $ 276 $ 126
- ---------------------------------------------------------------
DANA CONSOLIDATED
1995 $ 792 $ 1,315 $ 2,107
1996 640 1,698 2,338
- ---------------------------------------------------------------
Change $ (152) $ 383 $ 231
- ---------------------------------------------------------------
Dana's management and legal counsel have reviewed the legal proceedings
arising in the ordinary course of business to which the Company and its
subsidiaries were parties as of December 31, 1996, including, among others,
those involving product liability claims and alleged violations of environmental
laws. The Company estimates its 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. The accrued liability at the end of 1996 was $65 for product
liability claims costs (products) and $47 for environmental liability costs
(environmental) compared to $73 for products and $49 for environmental at the
end of 1995. The difference between minimum and maximum contingent liabilities,
while not considered material, was $17 for products and $1 for environmental at
the end of 1996 compared to $4 for products and $3 for environmental at the end
of 1995. Probable recoveries of $39 for products and $10 for environmental from
insurance or other third parties have been recorded as assets at the end of
1996, compared to $43 for products and $10 for environmental at the end of 1995.
The Company has concluded that any additional liabilities that may result from
these legal proceedings or the timing of the cash flows for these liabilities
will not have a material adverse effect on its liquidity, financial condition or
results of operations.
RESULTS OF OPERATIONS 1996 VS. 1995
Dana achieved record sales and profits in 1996 for the third consecutive
year. Sales were $7,686, up 1% over 1995, while profits increased to $306 or 6%
over last year. The major factors contributing to the Company's sales increase
were recent acquisitions and higher unit volumes of components for light truck
and sport utility vehicles in North America. These increases were partially
offset by a decline in North American medium and heavy truck production and
inclusion of an additional month's sales ($105) in 1995 for non-North American
operations due to a change in reporting periods. Acquisitions accounted for $322
of the 1996 sales increase, with $317 related to operations outside the U.S.
Sales from U.S. operations increased 1%, while international sales were up
2%, due primarily to acquisitions in South America and Europe. Exports from the
U.S. increased 22% over 1995. In 1996, international sales (including U.S.
exports) represented 37% of Dana's consolidated sales, compared to 35% in 1995.
Dana's worldwide sales from the Vehicular segment, which includes sales of
components and parts used on trucks, sport utility vehicles, trailers, vans and
automobiles, increased 1% over 1995.
- --------------------------------------------------------------
SEGMENT SALES 1995 1996 % Change
- --------------------------------------------------------------
Vehicular $ 6,070 $ 6,130 +1
Industrial 1,527 1,556 +2
- --------------------------------------------------------------
Total $ 7,597 $ 7,686 +1
- --------------------------------------------------------------
The Company's U.S. sales from this segment increased 1%, while international
operations increased 2%. Sales to U.S. light truck manufacturers exceeded 1995
by 9% as light trucks and sport utility vehicles continued to be in demand. This
increase was partially offset by lower U.S. medium and heavy truck production,
compared to 1995's record build levels, resulting in lower Dana sales to those
markets of 8% and 17%, respectively. Heavy truck production in 1996, while below
1995's unusually high level, was still above average levels for the last 15
years. International sales from this segment increased, largely due to the
contribution of Dana's European and South American acquisitions.
Worldwide sales from Dana's Industrial segment, which includes sales to the
mobile off-highway (MOH) equipment market, increased 2% over 1995. Sales of
components to MOH manufacturers, primarily agricultural and construction
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
equipment, increased 6% worldwide, 3% in the U.S. and 10% internationally. The
international increase was principally the result of the acquisition of GKN's
European axle operations in late 1995. MOH and industrial distribution sales
increased 1% over 1995. Those increases were partially offset by a 6% sales
decline of Dana product sold to the Industrial OE market (Dana's smallest
market).
Dana's distribution sales increased 1% on a worldwide basis, with U.S. sales
increasing 3% and international decreasing 1%. Worldwide distribution sales
performances in 1996 versus 1995 by market were as follows: truck parts down 2%,
automotive up 3% and MOH/Industrial up 1%.
Dana's sales, on a regional basis, increased in Europe and South America and
were lower in North America and Asia Pacific.
- --------------------------------------------------------------
SALES BY REGION 1995 1996 % Change
- --------------------------------------------------------------
North America $ 5,917 $ 5,875 -1
Europe 977 1,086 +11
South America 497 536 +8
Asia Pacific 207 189 -9
The European and South American sales continued to grow in 1996 as the Company
concentrated on international growth of its core businesses, particularly
through acquisitions. North American sales were slightly lower, reflecting
decreases in medium and heavy truck production, which were partially offset by
light truck/sport utility vehicle increases. The lower sales in Asia resulted
from the weakness of Dana's markets in Taiwan and Australia.
Revenue from lease financing and other income increased $14 or 8% in 1996.
Leasing-related revenue and interest on loans were above 1995 by $25 as DCC's
average asset levels and gains on sales of leased assets were higher in 1996.
Other income in 1996 included gains of $5 on sales of certain assets and
investments, while a $16 gain was recorded in 1995 due to the sale of equity in
three South American affiliates.
Adjustments for translation of foreign currency resulted in a gain of $1,
compared to a gain of $8 in 1995. The adjustments in both years related almost
exclusively to the translation from local currency to U.S. dollars of the
Company's Brazilian operations.
Dana's gross margin was 15.1% in both 1996 and 1995. Margins for U.S.
operations improved to 14.2% from 13.9% in 1995. Margins of the Company's
international operations declined to 17.4% from 18.1% in 1995, in large part due
to costs related to the integration of operations acquired in late 1995.
Selling, general and administrative expenses (S,G & A) increased $30 or 4% in
1996. Operations acquired in the latter half of 1995 and in 1996 accounted for
$23 of the increase. After adjusting for the effect of those acquisitions,
S,G & A increased 1%.
Dana's operating income increased $12 million in 1996. U.S. operations had a
$16 increase, while international operations were down $4. The international
decrease was comprised of lower operating income at Dana's South American, Asia
Pacific and Canadian operations partially offset by an increase in Europe. The
European increase was primarily due to acquisitions.
Operating income from the Vehicular segment decreased 2%, while the
Industrial segment income increased 6% over 1995. The ratio of operating income
to sales for both segments was comparable in 1996 to 1995. Operating income of
the Lease Financing segment increased $17 over 1995. In 1996, DCC's operating
income increased as a result of higher average lease asset levels outstanding
during the year and improved lease and residual experience.
Interest expense in 1996 was $13 higher than in 1995 due to higher average
debt levels. This higher average debt position resulted from the funding of
acquisitions, capital additions and lease financing assets during 1996.
Equity in earnings of affiliates increased in 1996, primarily due to the
devaluation of the Mexican peso in 1995 which resulted in Dana recording a
non-operating charge of $18 for its proportionate share of translation losses
incurred by the Company's affiliate, Spicer S.A. de C.V.
Minority interest in net income of consolidated subsidiaries decreased $7 in
1996 due to the lower earnings of Albarus (a Brazilian subsidiary) and the
mid-1995 purchase of the minority interest in Hayes-Dana. The earnings of
Albarus were lower in part due to the December 1995 sale of equity in one of its
subsidiaries.
Taxes on income decreased $15 in 1996 due to lower pre-tax profitability of
the Company and lower effective rates of Dana's international operations. The
Company's overall effective rate was 34% in 1996, compared to 35% in 1995.
Current indications are that 1997 production of light truck and sport utility
vehicles in North America (Dana's largest market) will continue with volumes
similar to 1996. Based on this projected demand, Dana expects its 1997 sales to
this market to match or slightly exceed the results achieved in 1996. Based on
market forecasts, Dana's sales to the North American medium and heavy truck
markets in 1997 are expected to be similar to the last half of 1996 but the
Company anticipates a modest upturn in the latter half of the year. The
Company's sales to the U.S. replacement parts and industrial OE markets are
expected to be similar to those of 1996. The U.S. construction and agricultural
market is anticipated to be slightly below 1996 levels, but Dana's sales are
expected to increase due to the effect of acquisitions.
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
Expectations are that economies outside of North America will have mixed
performances in 1997, but growth on an overall basis will be similar to 1996.
Given this overall environment, Dana expects to continue to grow its
international business by expansion of its core businesses through acquisition
and by expanding capacity for new business opportunities in South America,
India, Thailand and other countries.
RESULTS OF OPERATIONS 1995 VS. 1994
1995 was a record year for Dana Corporation. All-time highs in sales and
profits were achieved. Sales were $7,598, up 15% over the previous record
attained in 1994, while profits increased to $288 or 26% over last year's record
results. Dana shareholders benefitted from these record results with return on
average shareholder equity increasing to nearly 28% from 26% in 1994. The major
factors contributing to the Company's sales increase of $984 were higher unit
volumes of original equipment (OE) vehicular products in the U.S., strength in
the U.S. construction equipment and agricultural markets, effects of recent
acquisitions, and overall growth in international sales. Contributing $287 or
30% of the sales increase ($123 in the U.S. and $164 internationally) were
acquisitions and the effect of fully consolidating a Taiwanese subsidiary
(R.O.C. Spicer) which was previously accounted for on an equity basis.
Dana's worldwide sales from the Vehicular segment, which includes sales of
components and parts used on trucks, sport utility vehicles, trailers, vans and
automobiles, increased 15% or $771 over 1994. The OE portion of this increase
was $673 (18% over 1994) while the aftermarket portion increased $98 (6%). Sales
to U.S. light truck manufacturers were up 14% over a strong 1994 due to the
ongoing demand for light trucks and sport utility vehicles. U.S. medium and
heavy truck OE sales increased 19% and 12%, respectively, above 1994, as truck
production levels exceeded already high levels for 1994. Sales to the U.S. OE
passenger car market increased, in large part due to the acquisition of Plumley
in 1995. Other increases in Dana's worldwide OE Vehicular sales were achieved
through the consolidation of R.O.C. Spicer, acquisitions, and higher unit
volumes experienced in Europe, South America and Canada.
Worldwide sales from Dana's Industrial segment, which includes sales to the
mobile off-highway equipment market, rose 17% or $218 over 1994, reflecting
acquisitions as well as strength in the U.S. and European construction and
agricultural markets. Sales to the worldwide mobile off-highway OE market
increased 26%, while industrial OE sales improved 11% worldwide, comprised of
13% U.S. and 8% international. Mobile off-highway and industrial distribution
sales increased 8%, largely due to the acquisition of Sige in the latter half of
1994. After adjusting for Dana's acquisitions, worldwide Industrial segment
sales improved 10% over 1994, with the U.S. up 7% and international up 25%
(almost exclusively in Europe).
The Company's 1995 distribution sales were up 7% over 1994, due in part to
acquisitions and increases in its international aftermarket operations.
International aftermarket sales increased 21% over 1994, while U.S. sales were
level in a weak market. Worldwide distribution sales performances in 1995 versus
1994 by market were as follows: truck parts up 3%, automotive up 8% and mobile
off-highway/industrial up 8%.
Sales from U.S. operations were $5,476 or 10% (8% adjusted for acquisitions)
over 1994, while international sales were $2,122, up 29% (19% adjusted for
acquisitions). Even with Dana's continued growth and expansion in the U.S.,
international sales as a percentage to total sales increased to 28% from 25% in
1994. On a regional basis, the Company's 1995 sales increased 10% in North
America, 16% in South America, 37% in Europe and 119% in Asia Pacific. After
adjusting for the effect on sales of recent acquisitions and the consolidation
of R.O.C. Spicer in 1995, North American sales increased 8%, European 27% and
Asia Pacific 24%. Export sales of U.S. operations increased $124, up 29% over
1994.
VEHICULAR SALES
(In Billions)
1993 1994 1995
Distribution $1.5 $1.6 $1.7
OE $3.0 $3.7 $4.4
---- ---- ----
$4.5 $5.3 $6.1
INDUSTRIAL SALES
(In Billions)
1993 1994 1995
Distribution $ .5 $ .7 $ .7
OE $ .5 $ .6 $ .8
---- ---- ----
$1.0 $1.3 $1.5
INTERNATIONAL AND U.S. EXPORT SALES
(In Billions)
1993 1994 1995
U.S. Exports $ .4 $ .5 $ .6
International $1.3 $1.6 $2.1
---- ---- ----
$1.7 $2.1 $2.7
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
Revenue from lease financing and other income increased $40 or 27% in 1995.
Lease related revenue increased 11% as DCC's average asset levels outstanding
increased, lease and residual experience improved and higher average yields were
achieved. Included in the increase in other income was $16 due to the sale of
equity in certain South American operations.
Adjustments for translation of foreign currency resulted in a gain of $8,
compared to a loss of $22 in 1994. The adjustments in both years related almost
exclusively to the translation from local currency to U.S. dollars of the
Company's Brazilian operations. The new Brazilian currency (real) was introduced
at parity with the U.S. dollar in the third quarter of 1994. The translation of
the real to U.S. dollars resulted in 1995's gain. 1994's loss includes the
effect of translating from the old currency (cruzeiros) to U.S. dollars for the
period of January through July, partially offset by gains for the balance of
1994 in the translation from the real to U.S. dollars.
Dana's gross margin improved to 15.1% from 15.0% in 1994. U.S. operations
improved to 13.6% from 13.3% in 1994, benefitting from the higher sales volumes
experienced in all of the Company's OE markets. Margins of the Company's
Canadian and European operations improved in 1995 as well, due to increased
sales levels, while margins in Asia Pacific were comparable to 1994. Dana's
South American operations' margins were lower in 1995. The comparison was
affected by the currency change in 1994, with 1995's calculation being
negatively affected. After adjusting for the change, 1995's margins in South
America were only slightly lower than 1994's.
Operating income from the Vehicular segment increased $66 or 13%, while the
Industrial segment income increased $47 or 82% over 1994. The Vehicular increase
resulted from higher sales volumes achieved by Dana's U.S. operations supplying
the domestic OE light and heavy-duty truck markets and the effect of the
acquisition of Plumley at the beginning of 1995. The Industrial segment's income
increased as operations in North America and Europe benefitted from strong
demand for the Company's mobile-off highway OE products from its construction
equipment and agricultural machinery customers. Strength in U.S. and European
industrial OE component sales also contributed to the Industrial segment's
income increase.
Operating income of the Lease Financing segment increased $11 over 1994. In
1995, DCC's operating income increased as a result of higher average lease asset
levels outstanding during the year, improved lease and residual experience and
overall higher average yields. This segment also benefitted from a reduction in
costs associated with real estate held for sale and associated loans.
Selling, general and administrative expenses (S,G & A) increased $74 or 12%
in 1995. Operations acquired in the latter half of 1994 and in 1995 accounted
for $21 of the increase. After adjusting for the effect of those acquisitions,
S,G & A increased 9%, primarily to support sales growth and expansion. The ratio
of S,G & A expense to sales continued to improve and was 9.0% compared to 9.2%
in 1994. The improvements in gross margin and S,G & A as a percent of sales
resulted in Dana's operating margin increasing to 6.1% from 5.7% in 1994.
Interest expense increased to $146 from $113 in 1994 due to higher average
debt levels and higher interest rates. Higher debt levels resulted from the
increase in capital spending, acquisition of the European axle group, purchase
of the remaining minority interest of Hayes-Dana, Inc., and the increase in
working capital needs of the Company as a result of continued higher business
levels. The higher average debt levels also resulted from the funding of DCC's
asset growth.
Dana's international operations had operating income of $139, an increase of
10% over 1994. This higher income was largely the result of increased earnings
of the Company's European operations supplying products to the industrial OE
markets of the region. Operating income increases also were achieved by
operations in Canada and Asia Pacific and through European acquisitions made in
the latter half of 1994 and in 1995.
Equity in earnings of affiliates decreased $28 in 1995, primarily due to the
devaluation of the Mexican peso which resulted in losses incurred by Dana's
affiliate, Spicer S.A. de C.V. The decrease was partially offset by the higher
earnings experienced by Dana's affiliates in Korea and Venezuela.
Minority interest in net income of consolidated subsidiaries increased to $40
from $30 in 1994 due to higher earnings of Albarus, a South American subsidiary,
and the consolidation of R.O.C. Spicer. These increases were partially offset by
the purchase of the minority interest in Hayes-Dana.
Taxes on income increased to $181 from $157 in 1994, due to higher pre-tax
profitability of the Company. The effective rate decreased to 35% from 40% in
1994 in part due to the utilization of capital loss carrybacks resulting from
the sale of an insurance subsidiary in Bermuda. The sale resulted in the
recording of a $5 tax benefit in 1995. The remaining differential in rate was
due to lower effective combined state tax rates and international effective
rates.
OPERATING MARGIN
'93 4.8%
'94 5.7%
'95 6.1%
S,G & A EXPENSE AS A % OF SALES
'93 9.6%
'94 9.2%
'95 9.0%
25
ADDITIONAL INFORMATION DANA CORPORATION
- --------------------------------------------------------------------------------
Beginning in 1988, Dana Credit Corporation, our indirect wholly-owned leasing
and finance subsidiary which had previously been accounted for on the equity
method, was fully consolidated to reflect adoption of SFAS No. 94,
"Consolidation of All Majority-owned Subsidiaries." The additional information
on pages 45-47 shows Dana's balance sheet, income statement and cash flows as if
DCC were accounted for on the equity method and DCC (on pages 48-49) on a
stand-alone basis. The Company believes this separate financial data will help
the reader better understand the consolidated statements and related notes on
pages 23-40.
ADDITIONAL INFORMATION--STATEMENT OF INCOME DANA CORPORATION
in millions (including Dana Credit Corporation on an equity basis)
- -------------------------------------------------------------------------------------------------------------
Year Ended December 31
1994 1995 1996
- -------------------------------------------------------------------------------------------------------------
NET SALES $6,607.4 $7,596.3 $7,686.3
- -------------------------------------------------------------------------------------------------------------
Other income 9.2 33.7 26.8
- -------------------------------------------------------------------------------------------------------------
Foreign currency adjustments (22.0) 7.8 1.2
- -------------------------------------------------------------------------------------------------------------
6,594.6 7,637.8 7,714.3
- -------------------------------------------------------------------------------------------------------------
Costs and expenses
- -------------------------------------------------------------------------------------------------------------
Cost of sales 5,630.5 6,469.0 6,549.8
- -------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses 529.8 602.9 627.7
- -------------------------------------------------------------------------------------------------------------
Interest expense 54.3 75.5 84.6
- -------------------------------------------------------------------------------------------------------------
6,214.6 7,147.4 7,262.1
- -------------------------------------------------------------------------------------------------------------
Income before income taxes 380.0 490.4 452.2
- -------------------------------------------------------------------------------------------------------------
Estimated taxes on income 154.9 181.0 154.5
- -------------------------------------------------------------------------------------------------------------
Income before minority interest and equity in earnings of affiliates 225.1 309.4 297.7
- -------------------------------------------------------------------------------------------------------------
Minority interest in net income of consolidated subsidiaries (30.2) (40.4) (32.8)
- -------------------------------------------------------------------------------------------------------------
Equity in earnings of affiliates 33.3 19.1 41.1
- -------------------------------------------------------------------------------------------------------------
Net income $ 228.2 $ 288.1 $ 306.0
- -------------------------------------------------------------------------------------------------------------
26
ADDITIONAL INFORMATION--BALANCE SHEET DANA CORPORATION
in millions (including Dana Credit Corporation on an equity basis)
- -------------------------------------------------------------------------------------
December 31
1995 1996
- -------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------
Current assets
- -------------------------------------------------------------------------------------
Cash $ 18.6 $ 101.8
- -------------------------------------------------------------------------------------
Marketable securities, at cost which approximates market 36.3 122.5
- -------------------------------------------------------------------------------------
Accounts receivable, less allowance for doubtful accounts
of $23.5 - 1995 and $26.0 - 1996 1,098.4 1,087.0
- -------------------------------------------------------------------------------------
Inventories 874.8 912.9
- -------------------------------------------------------------------------------------
Other current assets 132.5 141.4
- -------------------------------------------------------------------------------------
Total current assets 2,160.6 2,365.6
- -------------------------------------------------------------------------------------
Investments and other assets
- -------------------------------------------------------------------------------------
Investments at equity 159.9 184.9
- -------------------------------------------------------------------------------------
Goodwill 269.4 285.3
- -------------------------------------------------------------------------------------
Intangible pension asset 74.6 35.0
- -------------------------------------------------------------------------------------
Other 99.6 86.9
- -------------------------------------------------------------------------------------
Total investments and other assets 603.5 592.1
- -------------------------------------------------------------------------------------
Deferred income tax benefits 356.9 342.1
- -------------------------------------------------------------------------------------
Property, plant and equipment, net 1,486.4 1,637.2
- -------------------------------------------------------------------------------------
Total assets $4,607.4 $4,937.0
- -------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------
Current liabilities
- -------------------------------------------------------------------------------------
Notes payable $ 515.4 $ 362.9
- -------------------------------------------------------------------------------------
Accounts payable 430.0 459.7
- -------------------------------------------------------------------------------------
Accrued payroll and employee benefits 222.1 220.1
- -------------------------------------------------------------------------------------
Other accrued liabilities 277.0 278.5
- -------------------------------------------------------------------------------------
Taxes other than taxes on income 37.2 39.4
- -------------------------------------------------------------------------------------
Taxes on income 146.1 116.5
- -------------------------------------------------------------------------------------
Total current liabilities 1,627.8 1,477.1
- -------------------------------------------------------------------------------------
Deferred employee benefits and other noncurrent liabilities 1,127.5 1,049.9
- -------------------------------------------------------------------------------------
Long-term debt 533.7 810.4
- -------------------------------------------------------------------------------------
Minority interest in consolidated subsidiaries 153.8 170.9
- -------------------------------------------------------------------------------------
Shareholders' equity 1,164.6 1,428.7
- -------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $4,607.4 $4,937.0
- -------------------------------------------------------------------------------------
27
ADDITIONAL INFORMATION -- STATEMENT OF CASH FLOWS DANA CORPORATION
in millions (including Dana Credit Corporation on an equity basis)
- --------------------------------------------------------------------------------
Year Ended December 31
1994 1995 1996
- ------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $435.4 $325.8 $540.4
- ------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
- ------------------------------------------------------------------------------------------------------------
Purchases of property, plant and equipment (278.2) (338.3) (284.0)
- ------------------------------------------------------------------------------------------------------------
Purchase of minority interest of Hayes-Dana, Inc. (92.4)
- ------------------------------------------------------------------------------------------------------------
Purchase of European axle group (93.0)
- ------------------------------------------------------------------------------------------------------------
Other acquisitions and additions to investments (21.6) (37.1) (121.5)
- ------------------------------------------------------------------------------------------------------------
Other 14.8 69.7 32.5
- ------------------------------------------------------------------------------------------------------------
Net cash flows - investing activities (285.0) (491.1) (373.0)
- ------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
- ------------------------------------------------------------------------------------------------------------
Net change in short-term debt 80.8 56.4 (163.2)
- ------------------------------------------------------------------------------------------------------------
Issuance of long-term debt 50.0 310.0 444.6
- ------------------------------------------------------------------------------------------------------------
Payments on long-term debt (166.6) (167.3) (187.0)
- ------------------------------------------------------------------------------------------------------------
Dividends paid (82.0) (91.2) (99.7)
- ------------------------------------------------------------------------------------------------------------
Other 7.4 5.3 7.3
- ------------------------------------------------------------------------------------------------------------
Net cash flows - financing activities (110.4) 113.2 2.0
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 40.0 (52.1) 169.4
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - beginning of year 67.0 107.0 54.9
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of year $107.0 $ 54.9 $224.3
- ------------------------------------------------------------------------------------------------------------
Reconciliation of net income to net cash flows from operating activities:
- ------------------------------------------------------------------------------------------------------------
Net income $228.2 $288.1 $306.0
- ------------------------------------------------------------------------------------------------------------
Noncash items included in income:
- ------------------------------------------------------------------------------------------------------------
Depreciation and amortization 163.6 187.4 216.9
- ------------------------------------------------------------------------------------------------------------
Deferred income taxes 8.8 (29.6) (2.4)
- ------------------------------------------------------------------------------------------------------------
Minority interest 12.3 7.0 26.8
- ------------------------------------------------------------------------------------------------------------
Net change in receivables, inventory and payables 22.2 (112.0) 19.3
- ------------------------------------------------------------------------------------------------------------
Unremitted earnings of affiliates (7.0) (3.4) (27.6)
- ------------------------------------------------------------------------------------------------------------
Other 7.3 (11.7) 1.4
- ------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $435.4 $325.8 $540.4
- ------------------------------------------------------------------------------------------------------------
28
ADDITIONAL INFORMATION -- STATEMENT OF INCOME DANA CREDIT CORPORATION
in millions (an indirect wholly-owned subsidiary of Dana Corporation)
- -------------------------------------------------------------------------------------
Year ended December 31
1994 1995 1996
- -------------------------------------------------------------------------------------
Revenues
- -------------------------------------------------------------------------------------
Lease financing $ 132.4 $ 152.2 $ 170.5
- -------------------------------------------------------------------------------------
Interest and fees on loans 7.6 6.2 14.5
- -------------------------------------------------------------------------------------
Other revenues 21.7 22.0 44.6
- -------------------------------------------------------------------------------------
161.7 180.4 229.6
- -------------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------------
Interest expense 51.9 62.8 74.4
- -------------------------------------------------------------------------------------
General and administrative expenses 89.7 103.1 115.6
- -------------------------------------------------------------------------------------
141.6 165.9 190.0
- -------------------------------------------------------------------------------------
Income before income taxes 20.1 14.5 39.6
- -------------------------------------------------------------------------------------
Estimated income tax provision (benefit) 5.4 (8.0) 11.8
- -------------------------------------------------------------------------------------
Income before equity in earnings of affiliates 14.7 22.5 27.8
- -------------------------------------------------------------------------------------
Equity in earnings of affiliates 5.3 4.9 2.7
- -------------------------------------------------------------------------------------
Net Income $ 20.0 $ 27.4 $ 30.5
- -------------------------------------------------------------------------------------
ADDITIONAL INFORMATION -- BALANCE SHEET DANA CREDIT CORPORATION
in millions (an indirect wholly-owned subsidiary of Dana Corporation)
- -------------------------------------------------------------------------------------
December 31
1995 1996
- -------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------
Cash $ 11.5 $ 3.5
- -------------------------------------------------------------------------------------
Loans receivable 114.4 208.1
- -------------------------------------------------------------------------------------
Lease financing 1,153.5 1,327.9
- -------------------------------------------------------------------------------------
Investments in partnerships 29.1 25.8
- -------------------------------------------------------------------------------------
Other assets 78.2 103.9
- -------------------------------------------------------------------------------------
Total Assets $ 1,386.7 $1,669.2
- -------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDER'S EQUITY
- -------------------------------------------------------------------------------------
Short-term debt $ 371.7 $ 456.4
- -------------------------------------------------------------------------------------
Long-term debt 600.7 708.3
- -------------------------------------------------------------------------------------
Other liabilities 74.3 86.6
- -------------------------------------------------------------------------------------
Deferred income taxes 235.4 294.0
- -------------------------------------------------------------------------------------
Shareholder's equity 104.6 123.9
- -------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $ 1,386.7 $1,669.2
- -------------------------------------------------------------------------------------
29
ADDITIONAL INFORMATION -- STATEMENT OF CASH FLOWS DANA CREDIT CORPORATION
in millions (an indirect wholly-owned subsidiary of Dana Corporation)
- --------------------------------------------------------------------------------------------------------------------------
Year Ended December 31
1994 1995 1996
- --------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ 93.5 $ 107.1 $ 170.0
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
- --------------------------------------------------------------------------------------------------------------------------
Purchases of assets to be leased (402.8) (507.9) (486.2)
- --------------------------------------------------------------------------------------------------------------------------
Loans made to customers and affiliates (30.1) (24.8) (98.5)
- --------------------------------------------------------------------------------------------------------------------------
Payments received on leases 195.5 201.0 209.7
- --------------------------------------------------------------------------------------------------------------------------
Proceeds from sales of leased assets 39.8 60.8 32.2
- --------------------------------------------------------------------------------------------------------------------------
Payments received on loans 102.9 16.6 20.8
- --------------------------------------------------------------------------------------------------------------------------
Purchases of assets from affiliates, less proceeds from subsequent sale (22.1)
- --------------------------------------------------------------------------------------------------------------------------
Other 12.3 13.8 (10.5)
- --------------------------------------------------------------------------------------------------------------------------
Net cash flows - investing activities (82.4) (240.5) (354.6)
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
- --------------------------------------------------------------------------------------------------------------------------
Net change in short-term debt (106.7) 194.5 84.7
- --------------------------------------------------------------------------------------------------------------------------
Issuance of long-term debt 305.4 108.1 290.3
- --------------------------------------------------------------------------------------------------------------------------
Payments on long-term debt (197.3) (147.5) (185.6)
- --------------------------------------------------------------------------------------------------------------------------
Dividends paid (17.7) (12.7) (12.8)
- --------------------------------------------------------------------------------------------------------------------------
Net cash flows - financing activities (16.3) 142.4 176.6
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (5.2) 9.0 (8.0)
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - beginning of year 7.7 2.5 11.5
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of year $ 2.5 $ 11.5 $ 3.5
- --------------------------------------------------------------------------------------------------------------------------
Reconciliation of net income to net cash flows from operating activities:
- --------------------------------------------------------------------------------------------------------------------------
Net income $ 20.0 $ 27.4 $ 30.5
- --------------------------------------------------------------------------------------------------------------------------
Noncash items included in income:
- --------------------------------------------------------------------------------------------------------------------------
Depreciation 38.5 50.0 55.7
- --------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 45.1 26.6 66.3
- --------------------------------------------------------------------------------------------------------------------------
Provision for credit losses 15.9 15.6 13.2
- --------------------------------------------------------------------------------------------------------------------------
Gains from sales of leased assets (2.9) (10.1) (15.0)
- --------------------------------------------------------------------------------------------------------------------------
Unremitted earnings of affiliates (5.3) (4.9) (2.7)
- --------------------------------------------------------------------------------------------------------------------------
Change in other assets, other liabilities and accrued expenses (17.8) 2.5 22.0
- --------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ 93.5 $ 107.1 $ 170.0
- --------------------------------------------------------------------------------------------------------------------------
30
ADDITIONAL INFORMATION
in millions except per share amounts DANA CORPORATION
- --------------------------------------------------------------------------------
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 1995 and 1996. At December 31, 1996, the closing price
of Dana common stock was $32 5/8.
- --------------------------------------------------------------------------------------
CASH DIVIDENDS
STOCK PRICE DECLARED AND PAID
- --------------------------------------------------------------------------------------
1995 1996 1995 1996
- --------------------------------------------------------------------------------------
QUARTER ENDED HI LO CLOSE HI LO CLOSE
- --------------------------------------------------------------------------------------
March 31 $26 $21 3/8 $25 1/2 $34 1/8 $27 3/4 $33 3/8 $.21 $.23
June 30 29 1/2 24 28 5/8 35 1/2 30 1/8 31 .23 .25
September 30 32 5/8 28 28 7/8 31 1/8 27 1/4 30 1/4 .23 .25
December 31 31 25 1/4 29 1/4 33 1/8 29 3/8 32 5/8 .23 .25
- --------------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
NET GROSS NET INCOME
QUARTER ENDED SALES PROFIT NET INCOME PER SHARE
- --------------------------------------------------------------------------------
For the year ended
December 31, 1994
March 31 $1,597 $234 $ 47.7 $ .48
June 30 1,712 281 68.0 .69
September 30 1,610 234 52.9 .54
December 31 1,695 241 59.6 .60
- --------------------------------------------------------------------------------
For the year ended
December 31, 1995
March 31 $1,924 $290 $59.2 $ .59
June 30 1,969 315 89.1 .88
September 30 1,727 268 60.9 .60
December 31 1,978 275 78.9 .77
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED
DECEMBER 31, 1996
MARCH 31 $1,973 $295 $78.7 $ .78
JUNE 30 2,020 321 91.5 .90
SEPTEMBER 30 1,816 280 65.2 .64
DECEMBER 31 1,877 265 70.6 .69
- --------------------------------------------------------------------------------
During the first quarter of 1995, Dana recorded a non-operating charge of $18.0
($.17 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.
In the fourth quarter of 1995, Dana recorded a gain of $12.0 ($.11 per share)
due to the sale of equity in three South American affiliates, a tax benefit of
$5.2 ($.05) due to the sale of an insurance subsidiary in Bermuda and a charge
of $5.8 ($.06) relating to a tentative settlement of a lawsuit filed by the
Department of Justice, which was settled in 1996.
31
ELEVEN YEAR HISTORY
in millions except per share amounts DANA CORPORATION
- --------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------------
For the Years 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------------------------------------------------------
Net Sales $3,738 $4,180 $4,936 $4,865 $4,952 $4,398 $4,872 $5,460 $6,614 $7,598 $7,686
- --------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) 84 142 162 132 76 13 (382) 80 228 288 306
- --------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) per
Common Share .82 1.62 1.99 1.62 .92 .16 (4.35) .86 2.31 2.84 3.01
- --------------------------------------------------------------------------------------------------------------------------------
Cash Dividends per
Common Share .64 .70 .77 .80 .80 .80 .80 .80 .83 .90 .98
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets 4,578 4,914 4,786 5,225 4,513 4,179 4,343 4,632 5,124 5,714 6,160
- --------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt 1,027 1,322 1,324 1,522 1,486 1,541 1,467 1,207 1,187 1,315 1,698
- --------------------------------------------------------------------------------------------------------------------------------
DANA CORPORATION
(including Dana Credit Corporation on an equity basis)
- --------------------------------------------------------------------------------------------------------------------------------
For the Years 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------------------------------------------------------
Net Income per Share of
Common Stock+ $ .82 $ 1.62 $ 1.99 $ 1.62 $ .92 $ .16 $ .64 $ 1.39 $ 2.31 $ 2.84 $ 3.01
- --------------------------------------------------------------------------------------------------------------------------------
Cash Dividends per
Common Share .64 .70 .77 .80 .80 .80 .80 .80 .83 .90 .98
- --------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------------
NET SALES $3,695 $4,142 $4,896 $4,857 $4,948 $4,385 $4,863 $5,457 $6,607 $7,596 $7,686
- --------------------------------------------------------------------------------------------------------------------------------
Cost of Sales 3,075 3,480 4,133 4,104 4,129 3,841 4,282 4,688 5,631 6,469 6,550
- --------------------------------------------------------------------------------------------------------------------------------
Income (Loss) before
Income Taxes 201 203 238 217 187 (24) 48 224 380 490 452
- --------------------------------------------------------------------------------------------------------------------------------
Income Taxes* 96 84 109 95 97 3 26 89 155 181 155
- --------------------------------------------------------------------------------------------------------------------------------
NET INCOME+ 84 142 162 132 76 13 56 129 228 288 306
- --------------------------------------------------------------------------------------------------------------------------------
Net Income for the Year
Retained for Growth 19 81 100 67 10 -- -- 6 146 197 206
- --------------------------------------------------------------------------------------------------------------------------------
Interest Expense 63 91 103 118 120 111 99 83 54 76 85
- --------------------------------------------------------------------------------------------------------------------------------
YEAR END FINANCIAL POSITION
- --------------------------------------------------------------------------------------------------------------------------------
Liquid Assets** $ 563 $ 733 $ 801 $ 763 $ 764 $ 746 $ 837 $ 990 $1,117 $1,153 $1,311
- --------------------------------------------------------------------------------------------------------------------------------
Working Capital 590 484 509 508 487 423 562 569 533 533 889
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of Current Assets to
Current Liabilities 1.8-1 1.5-1 1.5-1 1.5-1 1.5-1 1.4-1 1.6-1 1.5-1 1.4-1 1.3-1 1.6-1
- --------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 944 865 960 1,020 1,049 989 707 801 940 1,165 1,429
- --------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt 618 690 681 759 766 786 687 496 389 534 810
- --------------------------------------------------------------------------------------------------------------------------------
Net Property, Plant and
Equipment 765 820 905 985 1,107 1,077 1,029 1,061 1,210 1,486 1,637
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets 2,514 2,788 2,916 3,102 3,196 2,959 3,349 3,684 4,086 4,607 4,937
- --------------------------------------------------------------------------------------------------------------------------------
Average Number of Shares
Outstanding (in thousands) 102,196 87,430 81,353 81,658 81,954 82,171 87,792 92,533 98,689 101,297 101,800
- --------------------------------------------------------------------------------------------------------------------------------
Stock Price High 18 1/4 27 1/8 20 1/4 21 7/16 19 1/16 18 1/4 24 1/8 30 1/8 30 11/16 32 5/8 35 1/2
-------------------------------------------------------------------------------------------------------------------
Low 12 3/4 13 3/4 16 1/4 16 1/2 9 15/16 12 5/16 13 3/8 22 19 5/8 21 3/8 27 1/4
-------------------------------------------------------------------------------------------------------------------
Close 17 7/16 17 1/16 19 7/16 17 5/16 14 15/16 13 7/8 23 1/2 29 15/16 23 1/2 29 1/4 32 5/8
- --------------------------------------------------------------------------------------------------------------------------------
* Net of the cumulative effect of the change in accounting for income taxes in 1987.
** Cash, Marketable Securities and Accounts Receivable
+ Excludes one-time SFAS No. 106 charge of $438 ($4.99 per share) in 1992 and SFAS No. 112 charge of $49 ($.53 per share) in 1993.
32
DANA INVESTOR RELATIONS
- --------------------------------------------------------------------------------
Dana's Investor Relations group provides information and assistance to Dana
shareholders, including participants in the Employees' Stock Purchase Plan.
Available to help with questions or problems are:
Gutte Carr, Manager Shareholder Relations
(34 years service)
Vicki Shamion, Investor Relations Coordinator
(3 years service)
Steve Superits, Director Investor Relations
(9 years service)
Contact them by writing to Dana Investor Relations, P.O. Box 1000, Toledo, Ohio
43697, via Dana's Internet home page, or call Dial-for-Dana.
DANA ON THE WORLD WIDE WEB
http://www.dana.com
If you have access to the World Wide Web, you can find information on Dana
Corporation under several different headings:
- - Dana's history, philosophy and policies, Beyond 2000, speeches and
presentations by Dana people;
- - Dana's products and services and markets served;
- - A Financial Information Order Form to obtain current financial and
shareholder-related information;
- - Real-time stock price quotes;
- - Copies of press releases;
- - Dana's global operations;
- - News of the Dana-sponsored Super Truck;
- - E-mail access to Dana
DIAL-FOR-DANA
1-800-537-8823 anywhere in the U.S. and Canada. In Ohio, call 1-800-472-8810.
Through this 24-hour toll-free voice-interactive phone service callers may:
- - Obtain current news on Dana including market segment information;
- - Request printed materials such as annual and quarterly reports, Forms 10-K
and l0-Q;
- - Receive answers to shareholder-related and Dana Employees' Stock Purchase
Plan questions;
- - Leave requests for a Dana representative to respond directly to the caller.
COMPANY NEWS ON-CALL (through PR Newswire(R)): 1-800-758-5804.
Faxed news releases issued by Dana are available in the U.S. and Canada by
calling the above number and entering Dana's code: 226839 followed by the
caller's fax number.
SHAREHOLDER SERVICES
Call 1-800-298-6810 or visit http://www.cmssonline.com for information about:
- - An Automatic Dividend Reinvestment Plan where Dana pays all costs
associated with the purchase of shares through the reinvestment of
dividends. This Plan also includes a cash investment option of $25-$2,000
per month and a stock certificate safe-keeping feature;
- - A free Direct Deposit of Dividends service whereby funds are sent
electronically to the shareholder's checking, savings or credit union
account for deposit;
- - Direct access to ChaseMellon, Dana's transfer agent and registrar, for
information on the above services and questions regarding certificate
transfer, lost certificates and/or dividend checks, address changes and
other shareholder-related inquiries.
SHAREHOLDER INFORMATION
- - Dana Common Stock is listed on the New York, Pacific and London Stock
Exchanges. Its trading symbol is DCN.
- - World headquarters: 4500 Dorr Street, P.O. Box 1000, Toledo, Ohio 43697.
Telephone: (419) 535-4500.
- - Registered office: Riverfront Plaza, East Tower, 951 East Byrd Street,
Richmond, Virginia 23219.
- - Dana's Transfer Agents and Registrars:
ChaseMellon Shareholder Services, L.L.C., Overpeck Centre, 85 Challenger
Road, Ridgefield Park, NJ 07660, 1-800-298-6810 or
http://www.cmssonline.com, and National City Bank, P.O. Box 92301,
Cleveland, Ohio 44101, 1-800-622-6757.
- - Dividend Reinvestment/Direct Deposit: Chase Manhattan Bank c/o ChaseMellon
Shareholder Services, L.L.C., P.O. Box 750, Pittsburgh, PA 15230.
1
Exhibit 21
DANA CORPORATION
Subsidiaries and Affiliates
as of December 31, 1996
Dana Corporation
4500 Dorr Street
Toledo, Ohio 43615
UNITED STATES
- -------------
DSA of America, Inc. Delaware
Albarus, Inc. Delaware
DTF Trucking, Inc. Delaware
Dana Distribution, Inc. Delaware
Dana International Finance Inc. Delaware
Dana International Limited Delaware
Dana Risk Management Services, Inc. Delaware
Dana World Trade Corporation Delaware
Flexon, Inc. Michigan
Flight Operations, Inc. Delaware
GemStone Gasket Company Delaware
Precision Specialties Inc. Delaware
Swanton Air Three, Inc. Delaware
Results Unlimited, Inc. Delaware
Warner Sensors Corporation Delaware
(formerly Marengo Corporation) Delaware
UnderCar International, Inc. Delaware
McQuay-Norris, Inc. Delaware
Reinz Wisconsin Gasket Co. Delaware
Perfect Circle Valve Seals, L.L.C. Delaware
Plumley Companies, Inc. Tennessee
Mohawk Plastics, Inc. Michigan
Wix Filtration Media Specialists, Inc. Delaware
Dana Venture Capital Corporation Ohio
Diamond Financial Holdings, Inc. Delaware
Admiral's Harbour, Inc. Ohio
Summey Building Systems, Inc. North Carolina
Dana Credit Corporation Delaware
Dana Commercial Credit Corporation Delaware
Camotop Two Corporation Delaware
Comprehensive Asset Services, Inc. Delaware
Dana Business Credit Corporation Delaware
Dana Commercial Finance Corporation Delaware
Dana Commercial Credit, Canada Inc. Delaware
Dana Fleet Leasing, Inc. Delaware
Isom & Associates, Inc. Delaware
Leased Equipment, Inc. Delaware
Lease Recovery, Inc. Delaware
Midwest Housing Investments J.V., Inc. Delaware
Potomac Leasing Company Delaware
Shannon Energy Services, Inc. Delaware
Shannon Property Management, Inc. Delaware
Shannon Supermarket Investors, Inc. Delaware
CCD Air Ten, Inc. Delaware
CCD Air Eleven, Inc. Delaware
CCD Air Twelve, Inc. Delaware
2
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
CCD Air Forty-Six, Inc. Delaware
CCD Airway One, Inc. Delaware
CCD Airway Three, Inc. Delaware
CCD Airway Five, Inc. Delaware
CCD Rail Two, Inc. Delaware
CCD Rail Three, 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 Servicing, Inc. Delaware
REBAC, Inc. Delaware
REBNEC Three, Inc. Delaware
REBNEC Five, Inc. Delaware
REBNEC Seven, Inc. Delaware
REBNEC Eight, Inc. Delaware
REBNEC Nine, Inc. Delaware
REBNEC Eleven, Inc. Delaware
RECCEG, Inc. Delaware
REFIRST, Inc. Delaware
REHAT, Inc. Delaware
RENOVO One, Inc. Delaware
Letovon Hammersmith Co. Delaware
RENOVO Three, Inc. Delaware
Letovon Heathrow Co. Delaware
RENOVO Five, Inc. Delaware
Letovon Waterloo Co. Delaware
RENOVO Seven, Inc. Delaware
RENOVO Nine, Inc. Delaware
3
RENOVO Eleven, Inc. Delaware
RENOVO Thirteen, Inc. Delaware
RETRAM, Inc. Delaware
Dana Lease Finance Corporation Delaware
Camotop One Corporation Delaware
Dana Leasing, Inc. 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
CCD Air Forty-Three, Inc. Delaware
CCD Air Forty-Seven, Inc. Delaware
CCD Airway Two, Inc. Delaware
CCD Airway Four, 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 Eleven, 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
Letovon Hammersmith Co. Delaware
RENOVO Four, Inc. Delaware
Letovon Heathrow Co. Delaware
RENOVO Six, Inc. Delaware
Letovon Waterloo Co. Delaware
RENOVO Eight, Inc. Delaware
RENOVO Ten, Inc. Delaware
RENOVO Twelve, Inc. Delaware
RERSEY, Inc. Delaware
RESAMM, Inc. Delaware
REVA, Inc. Delaware
DCC Project Finance Nine, Inc. Delaware
Farnborough Properties Partners I Limited Delaware
Farnborough Properties Company Delaware
Farnborough Properties Partners II Limited Delaware
Farnborough Properties Partners III Limited Delaware
Farnborough Airport Properties Company Delaware
Farnborough Properties Partners IV Limited Delaware
Findlay Properties, Inc. Ohio
Ottawa Properties, Inc. Michigan
Shannon Properties, Inc. Delaware
First Shannon Realty of North Carolina, Inc. North Carolina
Lenox I-4 Lakeland Associates Florida
Region Center Associates Florida
4
Dana Austria GmbH Austria
Dana Canada, Inc. (fka Hayes-Dana Inc.) Canada
Hayes-Dana (Quebec) Inc. Canada
Dana Commercial Credit, Canada Inc. Canada
Dana Japan, Ltd. Japan
Spicer Philippines Manufacturing Co. Philippines
(Ceased Operation as of December of 1984 - Inactive)
Dantean Co., Ltd. (f.k.a. Spicer Thailand) Thailand
Dana Industrial Co., Ltd. Thailand
Dana Asia (Thailand) Ltd. Thailand
Spicer Asia (Thailand) Ltd. Thailand
Dana Spicer (Rayong) Ltd. Thailand
Dana Asia (Singapore) Pte. Ltd. Singapore
(f.k.a. Dana World Trade Singapore (Pte.) Ltd.)
(Includes Warner Electric Division and Aftermarket
Distribution Division)
R.O.C. Spicer Ltd. Taiwan
Timing Investments Limited Taiwan
Taiyin Enterprise Ltd. Taiwan
Taiyiu Warner Industrial Ltd. (liquidated 05/31/94) Taiwan
ROC Spicer Investment Co., Ltd. Taiwan
Shenyang Spicer Limited Taiwan
Spicer Asia Engineering Ltd. Taiwan
Dana Asia (Taiwan) Ltd. (Warner Electric Trading Co.) Taiwan
Dana Asia (Taiwan) APD Co., Ltd. Taiwan
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
Dana Europe Holdings B.V. Netherlands
Tece Almere B.V. Netherlands
Dana Distribution (Holland) BV Netherlands
Spicer Netherland B.V. (Dormant) Netherlands
Technisch Bureau Hoevelaken B.V. Netherlands
Leguana Participations B.V.(Holding Co) Netherlands
DKW Kunststoffwerke GmbH(Holding Co) Netherlands
Thermoplast+Apparatebau GmbH(Germany) Netherlands
Warner Electric BV (f.k.a. Maumee Holdings B.V.) Netherlands
(Sales Office-Amsterdam)
Superior Electric Nederland B.V. (shell) Netherlands
5
Europecas S.A. Portugal
Europecas (Porto) Comercio de Pecas Veiculos Lda. Portugal
Warner Electric SA (Dormant) Belgium
Dana Holdings Limited United Kingdom
Dana Limited United Kingdom
Brown Brothers Corporation Ltd. (Dormant) United Kingdom
Brown Brothers Engineering Ltd. (Dormant) United Kingdom
Posidata Ltd. (Dormant) United Kingdom
Stieber Formsprag Ltd. (Dormant) United Kingdom
B. - Equipment Ltd. (Dormant) United Kingdom
Dana (1982) Ltd. (Dormant) United Kingdom
Brown Brothers Ltd. (Dormant) United Kingdom
Needham Collections Ltd. (Dormant) United Kingdom
Brown Brothers Investments Ltd. (Dormant) United Kingdom
V.A. Afif Ltd. (Dormant) United Kingdom
Warner Electric Limited United Kingdom
Dana Interlock Limited (Dormant 1/1/94) United Kingdom
(Trade Transferred to Wichita Co. Ltd)
Taylor Industrial Clutches Ltd. United Kingdom
Wichita Company Limited United Kingdom
Thanet Brake Co. Ltd. United Kingdom
Dana Commercial Credit (UK) Limited United Kingdom
Dana Commercial Credit Limited United Kingdom
DCC (March) Limited United Kingdom
DCC (June) Limited United Kingdom
DCC (September) Limited United Kingdom
Dana Lease Finance Corporation
Letovon Hammersmith Co. United Kingdom
Letovon Heathrow Co. United Kingdom
Letovon Waterloo Co. United kingdom
Farnborough Properties Partners I Limited/
Farnborough Properties Partners II Limited
Farnborough Properties Company United Kingdom
Farnborough Properties Partners III Limited/
Farnborough Properties Partners IV Limited
Farnborough Airport Properties Company United Kingdom
Farnborough Aerospace Centre Management Limited
Dana Spicer Europe Ltd. United Kingdom
Superior Electric Engineering Services, Ltd. United Kingdom
Stieber Ltd. 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 France
de Moteurs S.A. (S.R.I.M.)
6
Spicer France S.A.R.L. France
Warner France, S.A. France
Collins & Tournadre "TOURCO" France
G.I.E. Warner & Tourco France
Superior Electric S.A.R.L. ( to be liquidated) France
Stieber S.A.R.L. France
Dana Finance S.A. France
Spicer India Limited India
Stieber Precision Pvt. Ltd. India
Dana Italia, SpA (Dana Spicer Europe SpA merged 11/96) Italy
Spicer Off-Highway Axle SpA
(fka Sige Brevetti. Ing., Columbo) Italy
Metaltechno SpA Italy
Dana Equipamientos SA (f.k.a. Spicer Espana S.A.) Spain
Industrias Seloc Reinz S.A. (closed) Spain
Industrias Serva S.A. Spain
Glaser Serva S.A. Spain
Dana AB Sweden
Warner-Tollo AB Sweden
Warner Electric (International) S.A. Switzerland
(International Headquarters, f.k.a. Warner
Electric S.A., locally known as "Swiss Inc.")
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")
Dana GmbH Germany
Dana Holdings GmbH
(formerly Erwin Hengstler Hydraulic 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. Freisen GmbH Germany
Horst Riedel GmbH Germany
Spicer GmbH (f.k.a. Superior Electric GmbH) Germany
Dana Capital GmbH Germany
Dana Equipamentos Ltda. Brazil
Albarus, S.A. Industrial E Comercio Brazil
Pellegrino Autopecas Industrial e Comerico Ltda. Brazil
CIDAP-Industrial e Distribuidora
de Aurtopecas Ltda. (Dormant) Brazil
7
Albarus Sistemas Hidraulicos Ltda. Brazil
Albarus S.A. Comercial e Exportadora Brazil
Cirane Industria e Comercio Ltda. Brazil
Previalbarus Societe de Providencia Brazil
SIMESC Brazil
Dana do Brasil Ltda. Brazil
Dana Industrias Ltda. Brazil
Warner Electric do Brasil Ltda. Brazil
Dana Foreign Sales Corporation Virgin Islands
Dana Asia (Hong Kong) Limited Hong Kong
Kentning Industries Limited (Never Active) Hong Kong
Shui Hing Manufacturing Company Limited Hong Kong
Tecnologia de Mocion Controlada S.A. de C.V. Mexico
UBALI S.A. Uruguay
Talesol S.A. Uruguay
E. Daneri, I.C.S.A. Argentina
AROS Daneri, S.A. Argentina
Transmissiones Homocineticas Argentina S.A. (THA) Argentina
Dana Argentina S.A. Argentina
Thompson Ramco-Argentina S.A. Argentina
Centrust S.A. Argentina
Armetal Industria Argentina de Metales Argentina
Farlock S.A. Argentina
Cerro de los Medanos S.A. Argentina
Dana Asia Pacific (Malaysia) Sdn. Bhd. Malaysia
Dana Asia (Korea) Co. Ltd. Korea
Industria De Ejes Y Transmissiones S.A. (Transejes) Colombia
Transejes C.D. Ltda. Colombia
Transcar Ltda. Colombia
Transmotor Ltda. Colombia
1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-64198) of Dana Corporation of our report dated
January 21, 1997 appearing on page 22 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 15 of this Form 10-K.
PRICE WATERHOUSE LLP
Toledo, Ohio
March 3, 1997
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, 1996, 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 the 9th
day of December, 1996.
/s/ B. F. Bailar /s/ R. B. Priory
- --------------------------------- -----------------------------------------
B. F. Bailar R. B. Priory
/s/ E. M. Carpenter /s/ J. D. Stevenson
- --------------------------------- -----------------------------------------
E. M. Carpenter J. D. Stevenson
/s/ E. Clark /s/ T. B. Sumner, Jr.
- --------------------------------- -----------------------------------------
E. Clark T. B. Sumner, Jr.
/s/ G. H. Hiner /s/ J. S. Simpson
- --------------------------------- -----------------------------------------
G. H. Hiner J. S. Simpson
/s/ J. M. Magliochetti /s/ C. W. Hinde
- --------------------------------- -----------------------------------------
J. M. Magliochetti C. W. Hinde
/s/ M. R. Marks /s/ M. J. Strobel
- --------------------------------- -----------------------------------------
M. R. Marks M. J. Strobel
/s/ S. J. Morcott /s/ S. A. Griffin
- --------------------------------- -----------------------------------------
S. J. Morcott S. A. Griffin
5
1,000
YEAR
DEC-31-1996
JAN-01-1996
DEC-31-1996
105,300
122,500
1,069,100
26,000
912,900
0
3,642,000
1,817,200
6,160,000
0
1,697,700
103,000
0
0
1,325,700
6,160,000
7,686,300
7,890,700
6,525,200
6,525,200
0
0
159,000
491,700
166,300
0
0
0
0
306,000
3.01
0
5
1,000
YEAR
DEC-31-1995
JAN-01-1995
DEC-31-1995
30,300
36,300
1,081,600
23,500
874,800
0
3,337,300
1,687,800
5,713,500
0
1,315,100
101,500
0
0
1,063,100
5,713,500
7,597,700
7,794,500
6,449,700
6,449,700
0
0
146,400
513,200
181,200
0
0
0
0
288,100
2.84
0
5
1,000
YEAR
DEC-31-1994
JAN-01-1994
DEC-31-1994
48,200
64,000
960,400
19,600
740,200
0
2,797,000
1,449,800
5,123,700
0
1,186,500
98,800
0
0
841,000
5,123,700
6,613,800
6,740,500
5,624,000
5,624,000
0
0
113,400
391,600
157,400
0
0
0
0
228,200
2.31
0
