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Dana Corporation     Quarterly Report for 03/31/00






TABLE OF CONTENTS








	
	
	
	
	
	
	
	
	



INDEX


PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


CONDENSED BALANCE SHEET


STATEMENT OF INCOME


CONDENSED STATEMENT OF CASH FLOWS


NOTES TO CONDENSED FINANCIAL STATEMENTS


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


PART II. OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


SIGNATURE


EXHIBIT INDEX










UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q








         
         




        [x]
        
Quarterly Report Pursuant to Section 13 or 15(d)

Of the Securities Exchange Act of 1934		












         
         
         




        For the Quarterly Period Ended March 31, 2000
        
        Commission File Number 1-1063












         




        Dana Corporation




        





        (Exact name of Registrant as Specified in its Charter)













         
         
         




        Virginia
        
        34-4361040




        

        
        





        (State or other jurisdiction
        
        (IRS Employer






        of incorporation or organization)
        
        Identification Number)




         




        4500 Dorr Street, Toledo, Ohio
        
        43615




        

        
        





        (Address of Principal Executive Offices)
        
        (Zip Code)












         
         
         
         
         




        
        
        (419) 535-4500
        
        




        
        
        

        
        




        
        
        (Registrant’s telephone number, including area code)







      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.


Yes  X  No___


      Indicate the number of shares outstanding of each of the issuer’s classes
of common stock, as of the latest practicable date.







         
         
         




        Class
        
        Outstanding at April 30, 2000




        

        
        





        Common stock of $1 par value
        
        152,337,572












Table of Contents






DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX







         
         
         
         
         
         
         
         




        
        
        
        
        
        Page Number




        
        
        
        
        
        






        Cover
        
        
        1
        






        Index
        
        
        2
        






        Part I. Financial Information






        
        Item 1. Financial Statements






        
        
        Condensed Balance Sheet December 31, 1999 and March 31, 2000
        
        
        3
        






        
        
        Statement of Income Three Months Ended March 31, 1999 and 2000
        
        
        4
        






        
        
        Condensed Statement of Cash Flows Three Months Ended March 31, 1999 and 2000
        
        
        5
        






        
        
        Notes to Condensed Financial Statements
        
        
        6-8
        






        
        Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
        
        
        9-14
        






        
        Item 3. Quantitative and Qualitative Disclosures About Market Risk
        
        
        14
        






        Part II. Other Information






        
        Item 1. Legal Proceedings
        
        
        15
        






        
        Item 4. Submission of Matters to a Vote of Security Holders
        
        
        15
        






        
        Item 6. Exhibits and Reports on Form 8-K
        
        
        16
        






        Signature
        
        
        17
        






        Exhibit Index
        
        
        18
        








2




Table of Contents








PART I. FINANCIAL INFORMATION











         
         




        ITEM 1.
        DANA CORPORATION












CONDENSED BALANCE SHEET (Unaudited)


(in millions)







         
         
         
         
         
         
         
         
         
         
         
         




        Assets
        
        December 31, 1999
        
        March 31, 2000




        
        
        

        
        






        Current Assets






        
        Cash and marketable securities
        
        $
        111
        
        
        $
        104
        






        
        Accounts receivable






        
        
        Trade
        
        
        1,935
        
        
        
        2,068
        






        
        
        Other
        
        
        411
        
        
        
        438
        






        
        Inventories






        
        
        Raw materials
        
        
        534
        
        
        
        485
        






        
        
        Work in process and finished goods
        
        
        1,250
        
        
        
        1,245
        






        

        Other current assets
        
        
        560
        
        
        
        638
        




        
        
        
        
        

        
        
        
        

        




        
        
        
        Total current assets
        
        
        4,801
        
        
        
        4,978
        




         




        
        Property, plant and equipment
        
        
        6,181
        
        
        
        5,924
        






        
        Less: Accumulated depreciation
        
        
        2,731
        
        
        
        2,594
        






        
        Investments in leases
        
        
        1,014
        
        
        
        1,015
        






        
        Investments and other assets
        
        
        1,858
        
        
        
        1,963
        




        
        
        
        
        

        
        
        
        

        




        
        
        
        Total assets
        
        $
        11,123
        
        
        $
        11,286
        




        
        
        
        
        

        
        
        
        

        




         




        Liabilities and Shareholders’ Equity






        Current Liabilities






        
        Notes payable, including current
portion     of long-term debt
        
        $
        1,418
        
        
        $
        1,605
        






        
        Accounts payable
        
        
        1,129
        
        
        
        1,184
        






        
        Accrued payroll and employee benefits
        
        
        462
        
        
        
        377
        






        
        Other accrued liabilities
        
        
        755
        
        
        
        850
        






        
        Taxes on income
        
        
        124
        
        
        
        328
        




        
        
        
        
        

        
        
        
        

        




        
        
        
        Total current liabilities
        
        
        3,888
        
        
        
        4,344
        




         




        
        Long-term debt
        
        
        2,732
        
        
        
        2,546
        






        
        Deferred employee benefits
and other     noncurrent liabilities
        
        
        1,398
        
        
        
        1,376
        






        
        Minority interest
        
        
        148
        
        
        
        125
        






        
        Shareholders’ equity
        
        
        2,957
        
        
        
        2,895
        




        
        
        
        
        

        
        
        
        

        




        
        
        
        Total liabilities and shareholders’     equity
        
        $
        11,123
        
        
        $
        11,286
        




        
        
        
        
        

        
        
        
        

        







The accompanying notes are an integral part of the financial statements.


3




Table of Contents




ITEM 1. (Continued)


DANA CORPORATION





STATEMENT OF INCOME (Unaudited)


(in millions except per share amounts)







         
         
         
         
         
         
         
         
         
         




        
        
        
        Three Months Ended




        
        
        
        





        
        
        
        March 31




        
        
        
        





        
        
        
        1999
        
        2000




        
        
        
        

        
        






        Net sales
        
        $
        3,381
        
        
        $
        3,459
        






        Revenue from lease financing
and other income
        
        
        39
        
        
        
        217
        




        
        
        
        

        
        
        
        

        




        
        
        
        3,420
        
        
        
        3,676
        




        
        
        
        

        
        
        
        

        




        Costs and expenses
        
        
        
        
        
        
        
        






        
        Cost of sales
        
        
        2,815
        
        
        
        2,888
        






        
        Selling, general and
administrative expenses
        
        
        296
        
        
        
        304
        






        
        Restructuring and integration charges
        
        
        7
        
        
        
        19
        






        
        Interest expense
        
        
        70
        
        
        
        79
        




        
        
        
        

        
        
        
        

        




        
        
        
        3,188
        
        
        
        3,290
        




        
        
        
        

        
        
        
        

        




         




        Income before income taxes
        
        
        232
        
        
        
        386
        






        Estimated taxes on income
        
        
        (83
        )
        
        
        (148
        )






        Minority interest
        
        
        (2
        )
        
        
        (4
        )






        Equity in earnings of affiliates
        
        
        15
        
        
        
        11
        




        
        
        
        

        
        
        
        

        




        Net income
        
        $
        162
        
        
        $
        245
        




        
        
        
        

        
        
        
        

        




         




        Net income per common share
– Basic
        
        $
        .97
        
        
        $
        1.55
        




        
        
        
        

        
        
        
        

        




        Net income per common share
– Diluted
        
        $
        .97
        
        
        $
        1.54
        




        
        
        
        

        
        
        
        

        




         




        Dividends declared and paid per common share
        
        $
        .31
        
        
        $
        .31
        




         




        Average number of shares
outstanding – Basic
        
        
        166
        
        
        
        158
        






        Average number of shares
outstanding – Diluted
        
        
        167
        
        
        
        159
        







The accompanying notes are an integral part of the financial statements.


4




Table of Contents





ITEM 1. (Continued)


DANA CORPORATION





CONDENSED STATEMENT OF CASH FLOWS (Unaudited)


(in millions)







         
         
         
         
         
         
         
         
         
         




        
        
        
        Three Months Ended March 31




        
        
        
        





        
        
        
        1999
        
        2000




        
        
        
        

        
        






        Net income
        
        $
        162
        
        
        $
        245
        






        Depreciation and amortization
        
        
        131
        
        
        
        132
        






        Gain on divestitures and other
        
        
        22
        
        
        
        (134
        )






        Working capital change
        
        
        (461
        )
        
        
        (138
        )




        
        
        
        

        
        
        
        

        




        
        Net cash flows from operating activities
        
        
        (146
        )
        
        
        105
        




        
        
        
        

        
        
        
        

        




         




        Purchases of property, plant and equipment
        
        
        (194
        )
        
        
        (166
        )






        Purchases of assets to be leased
        
        
        (26
        )
        
        
        (12
        )






        Payments received on leases and loans
        
        
        51
        
        
        
        37
        






        Acquisitions
        
        
        
        
        
        
        (205
        )






        Divestitures
        
        
        
        
        
        
        524
        






        Other
        
        
        (84
        )
        
        
        2
        




        
        
        
        

        
        
        
        

        




        
        Net cash flows-investing activities
        
        
        (253
        )
        
        
        180
        




        
        
        
        

        
        
        
        

        




         




        Net change in short-term debt
        
        
        (503
        )
        
        
        237
        






        Proceeds from long-term debt
        
        
        1,043
        






        Payments on long-term debt
        
        
        (116
        )
        
        
        (233
        )






        Dividends paid
        
        
        (51
        )
        
        
        (48
        )






        Shares reacquired
        
        
        
        
        
        
        (250
        )






        Other
        
        
        4
        
        
        
        2
        




        
        
        
        

        
        
        
        

        




        
        Net cash flows-financing activities
        
        
        377
        
        
        
        (292
        )




        
        
        
        

        
        
        
        

        




        
        Net change in cash and cash equivalents
        
        
        (22
        )
        
        
        (7
        )






        
        Cash and cash equivalents-beginning of period
        
        
        230
        
        
        
        111
        




        
        
        
        

        
        
        
        

        




        
        Cash and cash equivalents-end of period
        
        $
        208
        
        
        $
        104
        




        
        
        
        

        
        
        
        

        







The accompanying notes are an integral part of the financial statements.


5




Table of Contents





ITEM 1. (Continued)





NOTES TO CONDENSED FINANCIAL STATEMENTS


(in millions except per share amounts)







        1.
         
        In our opinion, all normal recurring adjustments necessary to a fair
presentation of results for the unaudited interim periods have been
included. Where appropriate, we have reclassified certain amounts in 1999
to conform to the 2000 presentation.




         




        2.
         
        In January 2000, we acquired the cardan-jointed propeller shaft business
of GKN plc. This acquisition has been accounted for as a purchase and its
results of operations have been included since the date of acquisition.
Goodwill relating to the acquisition is included in investments and other
assets.




         




        3.
         
        In January 2000, we sold the Gresen Hydraulics businesses in the United
States (U.S.) and South America to Parker-Hannifin. We also sold certain
portions of our constant velocity joint businesses to GKN plc. In
February, we sold most of the global Warner Electric businesses to Colfax
Corporation, and in March, we sold Commercial Vehicle Cab Systems Group to
an affiliate of Hidden Creek Industries, Inc. Other income includes an
aggregate pre-tax gain of $167 realized on total proceeds from these
divestitures of $524; the after-tax gain approximated $97.




         




        4.
         
        Following is a reconciliation of average shares for purposes of
calculating basic and diluted net income per share.










         
         
         
         
         
         
         
         
         
         
         
         




        
        
        
        
        
        Three Months Ended March 31




        
        
        
        
        
        





        
        
        
        
        
        1999
        
        2000




        
        
        
        
        
        

        
        






        Weighted average common shares outstanding
        
        
        165.8
        
        
        
        158.4
        




        
        
        
        

        
        
        
        

        




        Plus: Incremental shares from
assumed conversion of -






        
        
        Deferred compensation units
        
        
        .5
        
        
        
        .7
        






        
        
        Stock options
        
        
        
        .7
        
        
        
        .1
        




        
        
        
        

        
        
        
        

        




        
        Total potentially dilutive securities
        
        
        1.2
        
        
        
        .8
        




        
        
        
        

        
        
        
        

        




        Adjusted average common shares outstanding
        
        
        167.0
        
        
        
        159.2
        




        
        
        
        

        
        
        
        

        












        5.
         
        On an annual basis, disclosure of comprehensive income is incorporated
into the Statement of Shareholders’ Equity. This statement is not
presented on a quarterly basis. Comprehensive income includes net income
and components of other comprehensive income, such as foreign currency
translation adjustments, unrealized investment gains or losses and minimum
pension liability adjustments. The $15 deferred translation loss in the
first quarter of 2000 is primarily the result of a decline in the value of
the euro relative to the U.S. dollar. The $196 deferred translation loss
in 1999 is primarily due to the devaluation of the Brazilian real and the
strengthening of the U.S. dollar against several European currencies. Our
total comprehensive income/(loss) is as follows:










         
         
         
         
         
         
         
         
         
         
         
         




        
        


        
        Three Months Ended March 31




        
        


        
        





        
        


        
        1999
        
        2000




        
        


        
        

        
        






        Net income
        
        $
        162
        
        
        $
        245
        






        Other comprehensive loss






        
        Deferred translation loss

        
        (196
        )
        
        
        (15
        )




        


        
        
        

        
        
        
        

        




        
        
Total comprehensive income/(loss)
        
        $
        (34
        )
        
        $
        230
        




        


        
        
        

        
        
        
        

        








6




Table of Contents




ITEM 1. (Continued)


NOTES TO CONDENSED FINANCIAL STATEMENTS


(in millions except per share amounts)







        6.
         
        We are organized into seven Strategic Business Units (SBUs) encompassing
our key markets: Automotive Systems Group (ASG), Automotive Aftermarket
Group (AAG), Heavy Truck Group (HTG), Engine Systems Group (ESG), Fluid
Systems Group (FSG), Off-Highway Systems Group (OHSG) and Dana Commercial
Credit (DCC). This structure allows our people in each of these areas to
focus their resources to the benefit of Dana and our global customers.
Management evaluates the operating segments and regions as if DCC were
accounted for on the equity method of accounting rather than on the fully
consolidated basis used for external reporting. With the exception of
DCC, operating profit after tax (PAT) represents earnings before interest
and taxes (EBIT), tax effected at 39% (Dana’s estimated long-term
effective rate), plus equity in earnings of affiliates. Information used
to evaluate the SBUs and regions is as follows:










         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         




        
        
        Three Months Ended March 31




        
        
        





        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Operating
        
        Net




        
        
        Sales
        
        EBIT
        
        PAT
        
        Profit




        
        
        1999
        
        2000
        
        1999
        
        2000
        
        1999
        
        2000
        
        1999
        
        2000




        
        
        

        
        

        
        

        
        

        
        

        
        

        
        

        
        






        ASG
        
        $
        1,156
        
        
        $
        1,261
        
        
        $
        144
        
        
        $
        136
        
        
        $
        92
        
        
        $
        87
        
        
        $
        71
        
        
        $
        65
        






        AAG
        
        
        773
        
        
        
        746
        
        
        
        71
        
        
        
        62
        
        
        
        44
        
        
        
        38
        
        
        
        28
        
        
        
        20
        






        HTG
        
        
        477
        
        
        
        513
        
        
        
        49
        
        
        
        57
        
        
        
        30
        
        
        
        35
        
        
        
        21
        
        
        
        25
        






        ESG
        
        
        342
        
        
        
        360
        
        
        
        32
        
        
        
        29
        
        
        
        21
        
        
        
        19
        
        
        
        15
        
        
        
        13
        






        FSG
        
        
        313
        
        
        
        310
        
        
        
        32
        
        
        
        35
        
        
        
        20
        
        
        
        21
        
        
        
        14
        
        
        
        16
        






        OHSG
        
        
        216
        
        
        
        199
        
        
        
        15
        
        
        
        18
        
        
        
        9
        
        
        
        11
        
        
        
        6
        
        
        
        8
        






        DCC
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        9
        
        
        
        12
        
        
        
        9
        
        
        
        12
        






        Other
        
        
        104
        
        
        
        70
        
        
        
        (64
        )
        
        
        (56
        )
        
        
        (58
        )
        
        
        (63
        )
        
        
        3
        
        
        
        1
        




        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        




        
        
        
        3,381
        
        
        
        3,459
        
        
        
        279
        
        
        
        281
        
        
        
        167
        
        
        
        160
        
        
        
        167
        
        
        
        160
        






        Restructuring and
nonrecurring     items
        
        
        
        
        
        
        
        
        
        
        (7
        )
        
        
        146
        
        
        
        (5
        )
        
        
        85
        
        
        
        (5
        )
        
        
        85
        




        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        




        Consolidated
        
        $
        3,381
        
        
        $
        3,459
        
        
        $
        272
        
        
        $
        427
        
        
        $
        162
        
        
        $
        245
        
        
        $
        162
        
        
        $
        245
        




        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        




        North America
        
        $
        2,616
        
        
        $
        2,708
        
        
        $
        311
        
        
        $
        305
        
        
        $
        197
        
        
        $
        186
        
        
        $
        152
        
        
        $
        141
        






        Europe
        
        
        577
        
        
        
        542
        
        
        
        33
        
        
        
        31
        
        
        
        20
        
        
        
        19
        
        
        
        9
        
        
        
        9
        






        South America
        
        
        131
        
        
        
        129
        
        
        
        (4
        )
        
        
        2
        
        
        
        1
        
        
        
        2
        
        
        
        (2
        )






        Asia Pacific
        
        
        57
        
        
        
        80
        
        
        
        (2
        )
        
        
        1
        
        
        
        (1
        )
        
        
        1
        
        
        
        (3
        )
        
        
        (2
        )






        DCC
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        9
        
        
        
        12
        
        
        
        9
        
        
        
        12
        






        Other
        
        
        
        
        
        
        
        
        
        
        (59
        )
        
        
        (58
        )
        
        
        (59
        )
        
        
        (60
        )
        
        
        2
        




        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        




        
        
        
        3,381
        
        
        
        3,459
        
        
        
        279
        
        
        
        281
        
        
        
        167
        
        
        
        160
        
        
        
        167
        
        
        
        160
        






        Restructuring and
nonrecurring     items
        
        
        
        
        
        
        
        
        
        
        (7
        )
        
        
        146
        
        
        
        (5
        )
        
        
        85
        
        
        
        (5
        )
        
        
        85
        




        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        




        Consolidated
        
        $
        3,381
        
        
        $
        3,459
        
        
        $
        272
        
        
        $
        427
        
        
        $
        162
        
        
        $
        245
        
        
        $
        162
        
        
        $
        245
        




        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        








7




Table of Contents





ITEM 1. (Continued)


NOTES TO CONDENSED FINANCIAL STATEMENTS


(in millions except per share amounts)







        7.
         
        In the first quarter of 2000, we continued our restructuring and
integration efforts, including the consolidation of our distribution
assets in North America. In connection with these efforts, we charged $10
against accrued restructuring, accrued an additional $2 for employee
termination benefits and incurred $17 of integration expenses. This $19 of
restructuring and integration expense had a $12 impact on net income.




         




         
         
        At March 31, 2000, $96 of restructuring charges remained in accrued
liabilities. This balance was comprised of $87 for the reduction of
approximately 1,900 employees planned for 2000 and $9 for lease
terminations and other exit costs. The estimated cash expenditures will
be approximately $44 in the remainder of 2000, $34 in 2001 and $18
thereafter. Our liquidity and cash flows will not be materially impacted
by these actions.




         




        8.
         
        In April 1999, the Board authorized the expenditure of up to $350 to
repurchase shares of our common stock. Through the end of 1999, we had
repurchased nearly 3 million shares at an aggregate cost of $100. In
February 2000, the Board authorized an additional $250 for purchases
through the end of 2000. As of the end of March 2000, the original
authorization had been expended and slightly more than 13,300,000 shares
had been repurchased.





8




Table of Contents









ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


(in millions except per share amounts)


Liquidity and Capital Resources


      Income from operations (net income of $245 less net nonrecurring income of
approximately $85) and depreciation and amortization expense were nearly
unchanged in the first quarter of this year versus 1999. A more moderate
increase in working capital in the first quarter of 2000 caused a positive
swing of $250 from last year, when we terminated a $200 accounts receivable
factoring program that had been maintained by Echlin Inc.






         
         
         
         
         




        Cash Flows From Operations




        For Three Months Ended




        March 31




        





        1998
        
        $
        112
        






        1999
        
        
        (146
        )






        2000
        
        
        105
        








      Net cash from investing activities of $180 was driven by the net effect of
acquisitions and divestitures. We realized $524 of proceeds from divestitures
and spent $205 on acquisitions in the first quarter of 2000; no such activity
occurred in the comparable period in 1999.







         
         
         
         
         
         
         
         
         




        Capital Expenditures




        





        
        
        Year
        
        Three Months




        
        
        Ended
        
        Ended




        
        
        December 31
        
        March 31




        
        



        
        






        1998
        
        $
        661
        
        
        $
        118
        






        1999
        
        
        807
        
        
        
        194
        






        2000
        
        
        680
        *
        
        
        166
        






        
        
        
        
        
        * Projected
        








      Capital expenditures were $28 lower than in the first quarter of 1999.
This decline is a function of the higher spending in 1999 for enterprise
software systems and remediation of Y2K issues. We currently anticipate capital
spending for the full year of 2000 to be more than $100 below the 1999 level.


      Net purchases of leased assets (purchases less principal payments on
leases and loans) provided cash of $25 in 2000 and 1999.


      Common stock repurchases in the amount of $250 were the primary reason
financing activities utilized cash of $292 during the first quarter of 2000.
The repurchases were the culmination of a $350 program authorized by the Board
in April 1999. In the first quarter of 1999 financing activities provided $377
in cash, primarily due to the issuance of $1,000 of notes less the repayment of
short-term and long-term debt.


      Cash dividends paid in the first quarter of 2000 totaled $48 compared to
$51 in the first quarter of last year due to the lower number of shares
outstanding. The quarterly dividend rate of $.31 per share is unchanged and
the reduction in the number of shares outstanding was due to the share
repurchase program. In February of this year the Board authorized an
additional $250 of repurchases to be completed by the end of this year. This
additional amount is expected to be funded through proceeds from additional
divestitures and through cash flow from our global working capital reduction
initiative, which has a stated objective of reducing working capital by $300 in
2000 through reductions of accounts receivable and inventory and improvement in
accounts payable. Our efforts are being directed by representatives from all
regions and SBUs


      Committed and uncommitted bank lines enable us to issue commercial paper and
make direct bank borrowings. Excluding DCC, we had committed and uncommitted
borrowing lines of credit totaling approximately $1,727 at the end of the first
quarter of 2000, while DCC’s credit lines totaled $812. Based on our 2000
budgeting process, we expect our cash flows from operations, combined with
these credit facilities, to provide sufficient liquidity to fund our debt
service obligations and projected working capital requirements, capital
spending, potential acquisitions and share repurchase program for the
foreseeable future.


9




Table of Contents





ITEM 2. (Continued)


(in millions)


Liquidity and Capital Resources


      We have reviewed the liabilities that may result from the legal
proceedings (including those involving product liability claims and alleged
violations of environmental laws) to which we were a party as of March 31,
2000. We do not believe that these liabilities or the related cash flows are
reasonably likely to have a material adverse effect on our liquidity, financial
condition or results of operations. Contingent environmental and product
liabilities were estimated based on the most probable method of remediation or
outcome, current laws and regulations and existing technology. Estimates were
made on an undiscounted basis and exclude the effects of inflation. If there
was a range of equally probable remediation methods or outcomes, we accrued at
the lower end of the range. At March 31, 2000:







         
        •
         
        $84 was accrued for contingent product liability costs
and $43 for contingent environmental liability costs, compared
to $96 and $45 at December 31, 1999




         
        •
         
        $55 was recorded (as assets) for probable recoveries
from insurance or third parties for product liability claims
and $0 for environmental liability claims, compared to $65 and
$1 at December 31, 1999




         
        •
         
        The difference between the minimum and maximum estimates
for contingent liabilities, while not considered material, was
$12 for the product liability claims and $3 for the
environmental liability claims, identical to the ranges that
existed at December 31, 1999





Restructuring and Integration Expenses


      At December 31, 1999 there was $104 remaining in accrued liabilities
relating to restructuring plans announced in 1997, 1998 and 1999. During the
first quarter of 2000, we continued our restructuring and integration efforts,
including the consolidation of our distribution assets in North America.


      The following summarizes the restructuring activity recorded in the first
quarter of 2000 and the change in the accrual:







         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         




        
        
        
        Employee




        
        
        
        Termination
        
        
        
        
        
        Integration




        
        
        
        Benefits
        
        Exit Costs
        
        Expenses
        
        Total




        
        
        
        

        
        

        
        

        
        






        Balance at
December 31, 1999
        
        $
        91
        
        
        $
        13
        
        
        $
        –
        
        
        $
        104
        






        Activity during the quarter




        
        Charged to expense
        
        
        2
        
        
        
        
        
        
        
        17
        
        
        
        19
        






        
        Cash payments
        
        
        (6
        )
        
        
        (4
        )
        
        
        (17
        )
        
        
        (27
        )




        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        




        Balance at March 31, 2000
        
        $
        87
        
        
        $
        9
        
        
        $
        –
        
        
        $
        96
        




        
        
        
        

        
        
        
        

        
        
        
        

        
        
        
        

        







      At March 31, 2000, $96 of restructuring charges remained in accrued
liabilities. This balance was comprised of $87 for the reduction of
approximately 1,900 employees planned for 2000 and $9 for lease terminations
and other exit costs. The estimated cash expenditures will be approximately
$44 in the remainder of 2000, $34 in 2001 and $18 thereafter. Our liquidity
and cash flows will not be materially impacted by these actions.


10




Table of Contents





ITEM 2. (Continued)


(in millions)


Impact of Euro Conversion


      We have a euro currency program for our European facilities, under the
leadership of our Euro Steering Committee, and have established guidelines and
timetables for compliance with the requirements of the euro conversion. The
Committee is monitoring progress at all locations. While various operations
are at different stages of readiness, we believe that all of our facilities are
capable of complying with the euro conversion timetable and with customer
requirements for quoting and billing in euro currency. Certain of our European
locations have converted and all indications are that the cost to convert the
remaining locations to the euro will not be material.


Results of Operations (Three Months 2000 vs Three Months 1999)


      Worldwide sales increased $78 in the first quarter of 2000 to $3,459, a 2%
improvement over the first quarter of 1999. Excluding the net effect of
acquisitions and divestitures, sales increased $123 or 4% during the quarter
with price changes having a minimal effect. Our U.S. sales improved $82 or 3%
over 1999. Excluding the net effect of acquisitions and divestitures,
U.S. sales
rose $132 or 6%.


      Overall sales outside the U.S. were flat but slipped $10 after excluding
the net effect of acquisitions and divestitures. Changes in foreign currency
exchange rates since the first quarter of 1999 added nearly $11 to sales in
Canada and Mexico in 2000 but decreased European sales by $59 with Germany
($21) and Italy ($12) suffering the largest declines.







         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         




        
        
        
        
        
        
        
        
        
        
        
        
        
        
        % Change Excluding




        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Acquisitions &




        
        
        1999
        
        2000
        
        % Change
        
        Divestitures




        

        

        

        

        

        

        

        

        






        North America
        
        $
        2,616
        
        
        $
        2,708
        
        
        
        4
        
        
        
        6
        






        Europe
        
        
        577
        
        
        
        542
        
        
        
        (6
        )
        
        
        (10
        )






        South America
        
        
        131
        
        
        
        129
        
        
        
        (2
        )
        
        
        8
        






        Asia Pacific
        
        
        57
        
        
        
        80
        
        
        
        39
        
        
        
        53
        







      Sales in North America
increased $92 or 4% for the quarter, an improvement
which grows to $142 or 6% when the net effect of acquisitions and divestitures
is excluded. As noted above, the relative strength of the Canadian and Mexican
currencies accounted for nearly $11 of the additional sales. European sales
improved in local currency but conversion to U.S. dollars pared $59 for a net
decline of $35 or 6%. Eliminating the net effect of acquisitions and
divestitures results in a further decline to $59 or 10% versus 1999. South
American sales were down 2%; however, net of the effect of acquisitions and
divestitures, they increased 8%. While not a significant economic recovery,
some of our operations in that region are showing signs of improvement.
Currency impacts experienced in Brazil and Columbia were minor and cancelled
each other on a regional basis. Sales in the Asia Pacific region rose $23 or
39% in the quarter. Excluding acquisitions and divestitures, sales in the
region increased 53% due to increased business and a modest recovery in the
region.


11




Table of Contents





ITEM 2. (Continued)


(in millions)


Results of Operations (Three Months 2000 vs Three Months 1999)


      We are organized into seven Strategic Business Units (SBUs) encompassing
our key markets: Automotive Systems Group (ASG), Automotive Aftermarket Group
(AAG), Heavy Truck Group (HTG), Engine Systems Group (ESG), Fluid Systems Group
(FSG), Off-Highway Systems Group (OHSG) and Dana Commercial Credit (DCC).
Other in the chart below represents closed and sold facilities or locations
where the operating responsibility has not been assigned to a specific SBU.







         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         




        
        
        
        
        
        
        
        
        
        
        
        
        
        
        % Change Excluding




        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Acquisitions &




        
        
        1999
        
        2000
        
        % Change
        
        Divestitures




        

        

        

        

        

        

        

        

        






        ASG
        
        $
        1,156
        
        
        $
        1,261
        
        
        
        9
        
        
        
        7
        






        AAG
        
        
        773
        
        
        
        746
        
        
        
        (3
        )
        
        
        (3
        )






        HTG
        
        
        477
        
        
        
        513
        
        
        
        8
        
        
        
        9
        






        ESG
        
        
        342
        
        
        
        360
        
        
        
        5
        
        
        
        5
        






        FSG
        
        
        313
        
        
        
        310
        
        
        
        (1
        )
        
        
        –
        






        OHSG
        
        
        216
        
        
        
        199
        
        
        
        (8
        )
        
        
        –
        






        Other
        
        
        104
        
        
        
        70
        
        
        
        (33
        )
        
        
        2
        







      ASG, which manufactures axles, driveshafts, structural components,
modules and chassis systems, increased its sales by $105 or 9% in the
first quarter. The largest increase occurred in the U.S. ($69) where
driveshafts and structural products showed significant improvement and
axles continued to be strong. Modular and axle sales were strong in
Asia Pacific where sales increased $28 or 79%. The net effect of
acquisitions helped offset the impact of a weakening euro as Europe
managed an $11 or 8% increase. South America slipped $3 but gained $10
or 8% after excluding the effect of divestitures.


      AAG, which is primarily responsible for the distribution side of
the automotive business, had a difficult quarter. Sales in Europe
declined $26, partly due to currency issues; North American sales were
flat. South America registered a gain as sales increased a modest $4.


      HTG sells heavy axles and brakes, drivetrain components, power
take-offs, trailer products and heavy systems modular assemblies. Its
first quarter sales of $513 were nearly 8% above last year’s level.
North American sales, which comprise 95% of the segment, were up 9% over
1999 on the continued strength of Class 8 production and new business
with Navistar and Western Star.


      ESG sells gaskets and other sealing products and engine parts, such
as piston rings, bearings, liners and camshafts. This segment realized
a sales increase of $18 or 5% over the comparable period in 1999. Sales
improvement was primarily in the U.S. with the Plumley and Perfect
Circle divisions distinguishing themselves with new products and
customers. Sales were generally flat in South America and slipped 3% in
Europe.


      FSG, which manufactures an extensive line of rubber hose, fluid
products and fluid management systems, experienced a sales decrease of
$3 that is nearly equal to the effect of a divestiture made in the
fourth quarter of 1999. Sales increased slightly in North America and
were off by $3 in both Europe and South America.


12




Table of Contents





ITEM 2. (Continued)


(in millions)


Results of Operations (Three Months 2000 vs Three Months 1999)


      OHSG, which sells off-highway axles, powershift transmissions,
transaxles, torque converters and electronic controls, started 2000 down
approximately $17 or 8% versus 1999. The segment realized organic
growth of 5%, but the combination of the Gresen divestiture, which
affected North America and South America, and $15 of currency
devaluation in Europe more than offset that growth.


      Sales in the Other SBU were down compared to 1999 due to the sale
of most of the Warner Electric businesses at the end of February 2000.


      Revenue from lease financing and other income increased $178 in the first
quarter of 2000. Included in the total for 2000 is $167 of gains on the
divestitures of the Gresen Hydraulics businesses, certain portions of our
constant velocity joint business, most of the global Warner Electric businesses
and the Commercial Vehicle Cab Systems Group. Lease financing income in 2000
increased $7 versus 1999 and foreign currency transaction losses were $3 less
than in 1999.


      Gross margin for the first quarter was 16.5%, compared to 16.7% in 1999.
ASG margins were affected due to operating inefficiencies, overtime premiums
and material shortages resulting from high sales demand in North America. ESG
incurred similar inefficiencies on higher demand in the U.S. AAG’s margin also
slipped 70 basis points due to lower demand and currency effects in Europe.
FSG showed improvement that was attributable mainly to product mix while HTG
benefited from improved supply base management. Asia Pacific showed the
largest decline in gross margin percent as a result of start up expenses on
several projects. South America showed improvement in its gross margin percent
after adjusting to reduced production levels resulting from the economic
downturn that began early in 1999.


      Selling, general and administrative expenses (SG&A) increased $8 in the
first quarter of 2000 despite a net reduction of $5 due to acquisitions and
divestitures. ASG was up $6 with start up expenses related to structural
products accounting for half of that amount and DCC increased $3. The other
SBUs experienced modest increases, except AAG which declined $3. The overall
ratio of SG&A expense to sales was unchanged from last year, as only OHSG
changed more than one-half percent. On a regional basis, North America
increased its SG&A; all other regions experienced decreases in absolute
dollars, with currency fluctuations contributing nearly a $6 reduction.


      Operating margin for the first quarter of 2000 was 7.7% compared to 8.0%
in 1999 for the above reasons.


      Interest expense was $9 higher than last year due to higher average debt
levels and an increase in interest rates of nearly 30 basis points in 2000.


      The effective tax rate in the first quarter of 2000 was 37% compared to
36% in 1999. We continue to realize state tax credits related to business
development in several states.


      Equity in earnings of affiliates was $4 lower in 2000, with our affiliates
in Mexico, Venezuela and Brazil sharing nearly equally in the decline.


      Minority interest in net income of consolidated subsidiaries increased $2,
primarily due to the minority share of the Albarus S.A. gain on the sale of 16%
of their Brazilian constant velocity joint


13




Table of Contents





ITEM 2. (Continued)


(in millions)


Results of Operations (Three Months 2000 vs Three Months 1999)


business.


      We reported first quarter earnings in 2000 of $245. This total includes
$160 of operating income and $85 of net nonrecurring income related to the
divestitures and our restructuring and integration activities. In 1999 we
reported earnings of $162 and operating income of $167.


Market Trends


      The North
American heavy truck build rate of 85,000 was at a record level in the first
quarter of 2000 and passenger car and light truck build rates were very strong
at 18,000,000 units on an annualized basis. Our outlook for 2000 is that production will level off to 280,000 units for heavy truck and 16
million units for passenger cars and light trucks. In Europe, the AAG
is experiencing some reduction in market demand. OHSG
seems positioned for some recovery there later this year but the stability of
the euro will be an important factor for the balance of the year. South
American operations appear to be stabilized and showing modest improvement but we do not
expect significant recovery to begin until later in the year.
Operations in our Asia Pacific region are
growing their sales volume but start-up costs will continue to impact
their
earnings.


Forward-Looking Information


      Forward-looking statements in this report are indicated by words such as
“anticipates,” “expects,” “believes,” “intends,” “plans,” and similar
expressions. These statements represent our expectations based on current
information and assumptions. Forward-looking statements are inherently subject
to risks and uncertainties. Our actual results could differ materially from
those which are anticipated or projected due to a number of factors including
changes in business relationships with our major customers, competitive
pressures on sales and pricing, increases in production or material costs that
cannot be recouped in product pricing, failure to attain our working capital
objectives, flattening of demand for SUVs and light, medium and heavy trucks,
softening demand for off-highway agricultural and structural
products, the relative strength of the euro and other currencies and
continued economic weakness in Europe and South America.





ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


      There have been no material changes to our exposures to market risk since
December 31, 1999.


14




Table of Contents








PART II. OTHER INFORMATION





ITEM 1. LEGAL PROCEEDINGS.


      We are a party to various pending judicial and administrative proceedings
arising in the ordinary course of business. After reviewing the proceedings
that are currently pending (including the probable outcomes, reasonably
anticipated costs and expenses, availability and limits of our insurance
coverage, and our established reserves for uninsured liabilities), we do not
believe that any liabilities that may result from these proceedings are
reasonably likely to have a material effect on our liquidity, financial
condition or results of operations.


      We are not currently a party to any of the environmental proceedings
involving governmental agencies which the Securities and Exchange Commission
requires companies to report.





ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


These are the results of voting by stockholders present or represented at our
annual meeting on April 5, 2000:







        1.
         
        Election of Directors. The following were elected to serve as directors
until the next annual meeting or until their successors are elected:










         
         
         
         
         
         
         
         
         




        
        
        Votes For
        
        Votes Withheld




        
        
        

        
        






        B. F. Bailar
        
        
        142,909,146
        
        
        
        1,355,426
        






        A. C. Baillie
        
        
        142,081,071
        
        
        
        2,183,501
        






        E. M. Carpenter
        
        
        142,090,777
        
        
        
        2,173,795
        






        E. Clark
        
        
        142,118,628
        
        
        
        2,145,944
        






        G. H. Hiner
        
        
        142,103,960
        
        
        
        2,160,612
        






        J. M. Magliochetti
        
        
        142,855,158
        
        
        
        1,409,414
        






        M. R. Marks
        
        
        142,142,492
        
        
        
        2,122,080
        






        R. B. Priory
        
        
        142,100,997
        
        
        
        2,163,575
        












        2.
         
        Proposal to Amend the Additional Compensation Plan. The restated and
amended Additional Compensation Plan was approved. There were 136,819,458
votes for approval; 6,180,501 votes against; 1,264,613 votes abstaining;
and no broker nonvotes.




         




        3.
         
        Ratification of PricewaterhouseCoopers LLP. The Board’s selection of
PricewaterhouseCoopers as Dana’s independent auditors for fiscal year 2000
was ratified. There were 143,284,583 votes for ratification; 279,467 votes
against; and 700,522 votes abstaining.




         




        4.
         
        Endorsement of the CERES Principles for Public Environmental
Accountability. Endorsement of the CERES Principles was rejected. There
were 11,319,125 votes for endorsement; 110,632,330 votes against;
8,552,847 votes abstaining; and 13,760,270 broker nonvotes.




         




        5.
         
        Proposal to Establish Special Committee to Evaluate Allocation of
Corporate Resources. A proposal to establish a Special Committee of the
Board to evaluate allocation of corporate resources among the
manufacturing facilities was submitted in person for vote at the meeting
by Jeffrey Hannahoe, Union President, the United Steel Workers Union,
Reading, PA plant. There were 4 votes for adoption; 144,264,568 votes
against; and no votes abstaining.






15




Table of Contents








ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K







        a)
         
        The Exhibits listed in the “Exhibit Index” are filed as part of this report.





16




Table of Contents









SIGNATURE


      Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.







         
         
         




        
        
        DANA CORPORATION




         




        Date: May 15, 2000
        
        /s/ Robert C. Richter




        

        
        





        
        
        Robert C. Richter






        
        
        Chief Financial Officer









17




Table of Contents








EXHIBIT INDEX







         
         
         




        Exhibit




        






        27
        
        
Financial Data Schedules








18



 


 5
 1,000,000

                             
                   3-MOS
                          DEC-31-2000
                             JAN-01-2000
                               MAR-31-2000
                                             104
                                         0
                                    2,506
                                         0
                                      1,730
                                 4,978
                                           5,924
                                   2,594
                                  11,286
                            4,344
                                          2,546
                                0
                                          0
                                           153
                                       2,742
                    11,286
                                          3,459
                                 3,676
                                            2,888
                                    2,888
                                     0
                                     0
                                  79
                                    386
                                       148
                                  0
                                       0
                                      0
                                            0
                                       245
                                       1.55
                                     1.54



 



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