Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 22, 2006
Dana Corporation
(Exact name of registrant as specified in its charter)
| Virginia | 1-1063 | 34-4361040 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification Number) |
| 4500 Dorr Street, Toledo, Ohio | 43615 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (419) 535-4500
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
Table of Contents
Item 2.02. Results of Operations and Financial Condition.
On March 22, 2006, Dana Corporation (Dana) issued a news release reporting its preliminary
unaudited consolidated financial results for the three- and twelve-month periods ended December 31,
2005. A copy of that release is set out in the attached Exhibit 99.1.
The news release contains certain information about Dana’s expected earnings presented on an
earnings before interest and taxes (EBIT) basis. EBIT is not a financial measure accepted under
accounting principles generally accepted in the United States (GAAP).
For the non-GAAP EBIT information, the news release includes an attachment containing (i) a
presentation of the most directly comparable financial measures calculated and presented in
accordance with GAAP and (ii) a quantitative reconciliation of the differences between the non-GAAP
financial measures disclosed and the most directly comparable GAAP financial measures.
Management believes that the presentation of the EBIT financial measures provides useful
information to investors due to the impact of “unusual”
items on the company’s three- and twelve-month results in 2005 and 2004.
Item 7.01. Regulation FD Disclosure.
During a presentation to lenders scheduled to be held at 10:00 a.m. EST on March 22, 2006,
Dana’s management will discuss the company’s chapter 11 bankruptcy filing, business, strategic
initiatives, certain historical financial information, and matters relating to the company’s Credit
Agreement for DIP (debtor-in possession) financing. Copies of the slides for this presentation are
set out in the attached Exhibit 99.2.
Slide 31 in Exhibit 99.2 includes financial measures which are not presented in accordance
with GAAP. These include the segregation of unusual items from Dana’s results with Dana Credit
Corporation (DCC) accounted for on an equity basis, rather than including such charges within the
amounts presented on a consolidated basis which is accepted under GAAP.
Management believes that the presentation of the results with DCC accounted for on an equity
basis provides useful information to investors regarding Dana’s results of
operations because management evaluates Dana’s operating segments as if DCC were accounted for on
this basis. This is done because DCC is not homogenous with Dana’s manufacturing operations, its
financing activities do not support the sales of the other operating segments, and its financial
and performance measures are inconsistent with those of the other operating segments. Moreover,
the financial covenants contained in Dana’s bank facility are measured with DCC accounted for on an
equity basis.
For the non-GAAP financial measures, the presentation also contains slides showing (i) the
most directly comparable financial measures calculated and presented in accordance with GAAP and
(ii) a quantitative reconciliation of the differences between the non-GAAP financial measures
disclosed and the most directly comparable GAAP financial measures.
2
Table of Contents
Item 9.01. Financial Statements and Exhibits.
| (c) | Exhibits |
| 99.1 | News release dated March 22, 2006 (furnished but not filed) | ||
| 99.2 | Slides for March 22, 2006 presentation (furnished but not filed) |
3
Table of Contents
Signatures
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 | ||||||
| (Registrant) | ||||||
Date: March 22, 2006
|
By: | /s/ Michael L. DeBacker
|
||||
| Vice President, General Counsel and Secretary | ||||||
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Table of Contents
Exhibit Index
| 99.1 | Text of Dana Corporation news release dated March 22, 2006 | |
| 99.2 | Slides for Dana Corporation presentation on March 22, 2006 |
5
Exhibit 99.1
Contact:
Michelle Hards
(419) 535-4636
michelle.hards@dana.com
(419) 535-4636
michelle.hards@dana.com
Dana Corporation Reports Preliminary Fourth-Quarter and Full-Year 2005 Results
TOLEDO, Ohio – March 22, 2006 – Dana Corporation (OTCBB: DCNAQ) today reported preliminary,
unaudited consolidated financial results for the quarter and full year ended Dec. 31, 2005.
Fourth-Quarter 2005 Results
Sales for the fourth quarter of 2005 were $2,046 million, compared to $1,988 million during the
same period in 2004. The company expects to report a net loss of $376 million for the quarter,
including a loss from continuing operations of $231 million. This compares to a net loss of $136
million in the fourth quarter of 2004, which included a loss from continuing operations of $72
million.
The fourth-quarter 2005 net loss will include unusual charges expected to total $230 million, after
tax. These include:
| • | Charges of $123 million related to the previously announced planned divestitures of the company’s non-core engine hard parts, fluid products, and pump products businesses that are currently held for sale and will be classified as discontinued operations; | ||
| • | Goodwill impairment of $53 million; | ||
| • | Realignment charges and related asset impairments of $45 million; | ||
| • | A change in accounting related to the recognition of asset retirement obligations of $2 million; and | ||
| • | A loss of $7 million on asset sales. |
The balance of the fourth-quarter 2005 loss – expected to total $146 million, after tax – will be
from operations. Continuing operations, before unusual items, are expected to generate a loss of
$126 million in the fourth quarter of 2005 as compared to income of $54 million for the same period
in 2004. Discontinued operations are expected to produce a loss of $20 million, before unusual
items, in the fourth quarter of 2005, which compares to a loss of $19 million in the previous
year’s fourth quarter.
Full-Year 2005 Results
Sales of continuing operations for the full year 2005 were $8,611 million, compared to $7,775
million in 2004. The company expects to report a 2005 net loss of $1,602 million versus net income
of $62 million in 2004. Included in the net loss for 2005 is an expected loss from continuing
operations of $1,172 million compared to income from continuing operations of $72 million in 2004.
In addition to the unusual fourth-quarter 2005 charges totaling $230 million, the year-on-year
change in earnings is expected to be driven primarily by unusual items recorded in the third
quarter of 2005. These items totaled $1,209 million and included:
| • | The provision of a $918 million valuation allowance to reduce Dana’s net U.S. and U.K. deferred tax assets, comprised of $835 million of deferred tax assets as of Dec. 31, 2004, and additional benefits recognized between the beginning of the year and June 30, 2005; | ||
| • | An impairment charge of $275 million, after tax, to reduce the book value of certain assets of the non-core businesses that are now held for sale; and | ||
| • | Aggregate charges of approximately $16 million related to the sale of Dana’s domestic fuel rail business and the dissolution of an engine bearings joint venture. |
Adjusted for unusual items, continuing operations are expected to generate an after-tax loss of
$215 million in 2005, compared to income of $165 million in 2004. Discontinued operations, on the
same basis, are expected to report an after-tax loss of $36 million in 2005, compared to income of
$48 million in the prior year. Results from 2004 included income from the automotive aftermarket
businesses that were sold in November 2004.
Unusual items of $151 million, after tax, in 2004 included $171 million of charges recorded in the
fourth quarter, as well as $20 million of net gains reported earlier in the year. The
fourth-quarter 2004 charges included costs associated with completing the divestiture of the
company’s automotive aftermarket businesses, two facility closures and other manufacturing
realignments, and the repurchase of approximately $900 million of long-term debt.
Business Segment Results for Continuing Operations
Sales in the Automotive Systems Group totaled $1,414 million in the fourth quarter of 2005 and
$5,941 million for the full year 2005, compared to $1,387 million and $5,384 million respectively
during the fourth quarter and full year 2004. On an EBIT basis, the group expects to record income
of $6 million during the fourth quarter of 2005 and $187 million for the full year 2005, compared
to $49 million and $300 million during the respective periods in 2004.
Sales in the Heavy Vehicle Technologies and Systems Group totaled $626 million in the fourth
quarter of 2005 and $2,640 million for the full year 2005, compared to $580 million and $2,299
million respectively during the fourth quarter and full year 2004. On an EBIT basis, the group
expects to record a loss of $9 million during the fourth quarter of 2005 and income of $72 million
for the full year 2005, compared to earnings of $36 million and $161 million during the respective
periods in 2004.
2
2005 Form 10-K Filing and Investor Communications
Dana will not file its 2005 Form 10-K by the March 31, 2006, extended filing date because of the
additional time required to complete its financial statements and the related non-financial
disclosures, in light of the company’s bankruptcy filing on March 3, 2006, and to complete its
assessment of internal control over financial reporting. The company expects to file its 2005 Form
10-K by April 30, 2006. This report will include – in addition to Dana’s audited financial
statements and management’s discussion and analysis of financial condition and results of
operations – information generally found in the proxy statement.
The company has suspended its quarterly conference calls and annual shareholder meetings until
further notice.
About Dana Corporation
Based in Toledo, Ohio, Dana Corporation is a leading supplier of axle, driveshaft, engine, frame,
chassis, and transmission technologies. Dana people design and manufacture products for every
major vehicle producer in the world – in the automotive, commercial vehicle, and off-highway
markets. The company and certain of its U.S. subsidiaries are operating under Chapter 11 of the
U.S. Bankruptcy Code as debtors-in-possession. More information about Dana can be found on the
Internet at www.dana.com.
Forward-Looking Statements
Statements in this release that are not entirely historical constitute “forward-looking” statements
within the meaning of the Private Securities Litigation Reform Act of 1995. These statements
represent Dana’s expectations based on current information and assumptions. However,
forward-looking statements are inherently subject to risks and uncertainties. There can be no
assurance that the preliminary numbers reported in this release will not change when the audit of
Dana’s financial statements is completed or that Dana will file its 2005 Form 10-K when currently
contemplated. Forward-looking statements in this release speak only as of the date of the release.
Dana does not undertake to update such forward-looking statements.
# # #
3
Dana Corporation
Financial Summary (Unaudited)*
(in millions, except per share amounts)
Financial Summary (Unaudited)*
(in millions, except per share amounts)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Net sales |
$ | 2,046 | $ | 1,988 | $ | 8,611 | $ | 7,775 | ||||||||
Income (loss) from continuing operations |
$ | (231 | ) | $ | (72 | ) | $ | (1,172 | ) | $ | 72 | |||||
Loss from discontinued operations |
(143 | ) | (64 | ) | (434 | ) | (10 | ) | ||||||||
Effect of change in accounting |
(2 | ) | 4 | |||||||||||||
Net income (loss) |
$ | (376 | ) | $ | (136 | ) | $ | (1,602 | ) | $ | 62 | |||||
Income (loss) from continuing operations |
$ | (231 | ) | $ | (72 | ) | $ | (1,172 | ) | $ | 72 | |||||
Goodwill impairment |
53 | 53 | ||||||||||||||
Realignment charges |
45 | 34 | 45 | 39 | ||||||||||||
Net
(gain) losses on divestitures, asset impairments and sales |
7 | (4 | ) | 19 | (42 | ) | ||||||||||
Valuation allowance against deferred tax assets |
835 | |||||||||||||||
Loss on repurchase of notes |
96 | 96 | ||||||||||||||
Charge related to Ohio tax legislation |
5 | |||||||||||||||
Income (loss) from continuing operations,
excluding unusual items |
$ | (126 | ) | $ | 54 | $ | (215 | ) | $ | 165 | ||||||
Income (loss) from discontinued operations |
$ | (143 | ) | $ | (64 | ) | $ | (434 | ) | $ | (10 | ) | ||||
Provision for loss on sale of engine hard parts,
fluid routing and pump businesses |
123 | 398 | ||||||||||||||
Impairment and restructuring charges |
15 | 15 | ||||||||||||||
Sale of automotive aftermarket businesses |
30 | 43 | ||||||||||||||
Income (loss) from discontinued operations,
excluding unusual items |
$ | (20 | ) | $ | (19 | ) | $ | (36 | ) | $ | 48 | |||||
Diluted earnings (loss) per share: |
||||||||||||||||
Income (loss) from continuing operations |
$ | (1.54 | ) | $ | (0.48 | ) | $ | (7.84 | ) | $ | 0.48 | |||||
Loss from discontinued operations |
(0.95 | ) | (0.43 | ) | (2.90 | ) | (0.07 | ) | ||||||||
Effect of change in accounting |
(0.01 | ) | 0.03 | |||||||||||||
Net income (loss) |
$ | (2.50 | ) | $ | (0.91 | ) | $ | (10.71 | ) | $ | 0.41 | |||||
Income (loss) from continuing operations,
excluding unusual items |
$ | (0.83 | ) | $ | 0.36 | $ | (1.42 | ) | $ | 1.09 | ||||||
Income (loss) from discontinued operations,
excluding unusual items |
(0.13 | ) | (0.13 | ) | (0.24 | ) | 0.32 | |||||||||
Effect of change in accounting |
(0.01 | ) | 0.03 | — | ||||||||||||
Net income (loss), excluding unusual items |
(0.97 | ) | 0.23 | (1.63 | ) | 1.41 | ||||||||||
Loss from unusual items |
(1.53 | ) | (1.14 | ) | (9.08 | ) | (1.00 | ) | ||||||||
Net income (loss) |
$ | (2.50 | ) | $ | (0.91 | ) | $ | (10.71 | ) | $ | 0.41 | |||||
| * | Subsequent to Dana’s filing under chapter 11 of the U.S. Bankruptcy Code on March 3, 2006, the company and certain of its U.S. subsidiaries are operating as debtors-in -possession. |
Dana Corporation
Consolidated Statement of Income (Unaudited)*
(in millions, except per share amounts)
Consolidated Statement of Income (Unaudited)*
(in millions, except per share amounts)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Net sales |
$ | 2,046 | $ | 1,988 | $ | 8,611 | $ | 7,775 | ||||||||
Revenue from lease financing |
4 | 4 | 15 | 18 | ||||||||||||
Other income (expense), net |
22 | (107 | ) | 73 | (103 | ) | ||||||||||
Total revenue |
2,072 | 1,885 | 8,699 | 7,690 | ||||||||||||
Costs and expenses |
||||||||||||||||
Cost of sales |
2,016 | 1,899 | 8,192 | 7,189 | ||||||||||||
Selling, general and administrative expenses |
143 | 97 | 500 | 416 | ||||||||||||
Realignment
and impairment charges |
108 | 44 | 111 | 44 | ||||||||||||
Interest expense |
44 | 52 | 167 | 206 | ||||||||||||
Total costs and expenses |
2,311 | 2,092 | 8,970 | 7,855 | ||||||||||||
Loss before income taxes |
(239 | ) | (207 | ) | (271 | ) | (165 | ) | ||||||||
Income tax benefit (expense) |
(5 | ) | 118 | (935 | ) | 205 | ||||||||||
Minority interest |
(1 | ) | 2 | (6 | ) | (5 | ) | |||||||||
Equity in earnings of affiliates |
14 | 15 | 40 | 37 | ||||||||||||
Income (loss) from continuing operations |
(231 | ) | (72 | ) | (1,172 | ) | 72 | |||||||||
Income (loss) from discontinued operations before income taxes |
(156 | ) | (69 | ) | (441 | ) | 17 | |||||||||
Income tax benefit (expense) of discontinued operations |
13 | 5 | 7 | (27 | ) | |||||||||||
Loss from discontinued operations |
(143 | ) | (64 | ) | (434 | ) | (10 | ) | ||||||||
Income before effect of change in accounting |
(374 | ) | (136 | ) | (1,606 | ) | 62 | |||||||||
Effect of change in accounting |
(2 | ) | 4 | |||||||||||||
Net income (loss) |
$ | (376 | ) | $ | (136 | ) | $ | (1,602 | ) | $ | 62 | |||||
Basic earnings (loss) per common share |
||||||||||||||||
Income (loss) from continuing operations
before effect of change in accounting |
$ | (1.54 | ) | $ | (0.48 | ) | $ | (7.84 | ) | $ | 0.48 | |||||
Loss from discontinued operations |
(0.95 | ) | (0.43 | ) | (2.90 | ) | (0.07 | ) | ||||||||
Effect of change in accounting |
(0.01 | ) | — | 0.03 | ||||||||||||
Net income (loss) |
$ | (2.50 | ) | $ | (0.91 | ) | $ | (10.71 | ) | $ | 0.41 | |||||
Diluted earnings (loss) per common share |
||||||||||||||||
Income (loss) from continuing operations
before effect of change in accounting |
$ | (1.54 | ) | $ | (0.48 | ) | $ | (7.84 | ) | $ | 0.48 | |||||
Loss from discontinued operations |
(0.95 | ) | (0.43 | ) | (2.90 | ) | (0.07 | ) | ||||||||
Effect of change in accounting |
(0.01 | ) | 0.03 | |||||||||||||
Net income (loss) |
$ | (2.50 | ) | $ | (0.91 | ) | $ | (10.71 | ) | $ | 0.41 | |||||
Cash dividends declared and paid per common share |
$ | 0.01 | $ | 0.12 | $ | 0.37 | $ | 0.48 | ||||||||
Average shares outstanding — Basic |
150 | 149 | 150 | 149 | ||||||||||||
Average shares outstanding — Diluted |
150 | 151 | 151 | 151 | ||||||||||||
| * | Subsequent to Dana’s filing under chapter 11 of the U.S. Bankruptcy Code on March 3, 2006, the company and certain of its U.S. subsidiaries are operating as debtors-in -possession. |
Dana Corporation
Consolidated Balance Sheet (Unaudited)*
December 31, 2005 and 2004
(in millions)
Consolidated Balance Sheet (Unaudited)*
December 31, 2005 and 2004
(in millions)
| 2005 | 2004 | |||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 762 | $ | 634 | ||||
Accounts receivable |
||||||||
Trade, less allowance for doubtful
accounts of $36 - 2005 and $39 - 2004 |
1,064 | 1,254 | ||||||
Other |
244 | 437 | ||||||
Inventories |
662 | 898 | ||||||
Assets of discontinued operations |
549 | |||||||
Other current assets |
57 | 185 | ||||||
Total current assets |
3,338 | 3,408 | ||||||
Goodwill |
439 | 593 | ||||||
Investments, deferred taxes and other assets |
1,811 | 2,566 | ||||||
Investments in leases |
186 | 281 | ||||||
Property, plant and equipment, net |
1,629 | 2,171 | ||||||
Total assets |
$ | 7,403 | $ | 9,019 | ||||
Liabilities and Shareholders’ Equity |
||||||||
Current liabilities |
||||||||
Notes payable, including current portion
of long-term debt (1) |
$ | 2,580 | $ | 155 | ||||
Accounts payable |
948 | 1,330 | ||||||
Accrued payroll and employee benefits |
429 | 378 | ||||||
Liabilities of discontinued operations |
290 | |||||||
Other accrued liabilities |
463 | 611 | ||||||
Taxes on income |
175 | 199 | ||||||
Total current liabilities |
4,885 | 2,673 | ||||||
Deferred employee benefits and other
noncurrent liabilities |
1,910 | 1,759 | ||||||
Long-term debt |
66 | 2,054 | ||||||
Minority interest in consolidated subsidiaries |
84 | 122 | ||||||
Total liabilities |
6,945 | 6,608 | ||||||
Shareholders’ equity |
||||||||
Common stock, $1 par value, shares authorized, 350;
shares issued, 150 - 2005, 150 - 2004 |
150 | 150 | ||||||
Additional paid-in capital |
194 | 190 | ||||||
Retained earnings |
820 | 2,479 | ||||||
Accumulated other comprehensive loss |
(706 | ) | (408 | ) | ||||
Total shareholders’ equity |
458 | 2,411 | ||||||
Total liabilities and shareholders’ equity |
$ | 7,403 | $ | 9,019 | ||||
| * | Subsequent to Dana’s filing under chapter 11 of the U.S. Bankruptcy Code on March 3, 2006, the company and certain of its U.S. subsidiaries are operating as debtors-in -possession. | |
| (1) | At December 31, 2005, although we had obtained waivers of certain financial covenants through May 31, 2006, we had determined that following expiration of the waivers, it was unlikely that we would be able to comply with such covenants. As a consequence, under accounting requirements for debt classification, we classified long-term debt that is subject to acceleration in the event of non-compliance with the financial covenants as debt payable within one year. |
Dana Corporation
Consolidated Statement of Cash Flows (Unaudited)*
(in millions)
Consolidated Statement of Cash Flows (Unaudited)*
(in millions)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Net income (loss) |
$ | (376 | ) | $ | (136 | ) | $ | (1,602 | ) | $ | 62 | |||||
Depreciation and amortization |
83 | 85 | 310 | 358 | ||||||||||||
Asset impairments and other related charges |
183 | 13 | 473 | 37 | ||||||||||||
Loss on asset sales |
15 | 75 | 29 | 18 | ||||||||||||
Effect of change in accounting |
2 | (4 | ) | |||||||||||||
Working capital decrease (increase) |
67 | 82 | (126 | ) | (294 | ) | ||||||||||
Deferred taxes |
36 | (53 | ) | 764 | (125 | ) | ||||||||||
Other |
98 | 64 | (36 | ) | 17 | |||||||||||
Net cash flows — operating activities |
108 | 130 | (192 | ) | 73 | |||||||||||
Purchases of property, plant and equipment |
(104 | ) | (115 | ) | (297 | ) | (329 | ) | ||||||||
Payments received from leases and partnerships |
91 | 279 | 161 | 289 | ||||||||||||
Proceeds from divestitures and asset sales |
7 | 650 | 183 | 968 | ||||||||||||
Other |
(93 | ) | 10 | (66 | ) | (12 | ) | |||||||||
Net cash flows — investing activities |
(99 | ) | 824 | (19 | ) | 916 | ||||||||||
Net change in short-term debt |
— | (212 | ) | 406 | (31 | ) | ||||||||||
Payments on long-term debt |
(1 | ) | (1,052 | ) | (46 | ) | (1,457 | ) | ||||||||
Proceeds from long-term debt |
— | 450 | 21 | 455 | ||||||||||||
Dividends paid |
(1 | ) | (20 | ) | (55 | ) | (73 | ) | ||||||||
Other |
25 | — | 13 | 16 | ||||||||||||
Net cash flows — financing activities |
23 | (834 | ) | 339 | (1,090 | ) | ||||||||||
Net change in cash and cash equivalents |
32 | 120 | 128 | (101 | ) | |||||||||||
Net change in cash — discontinued operations |
— | 2 | — | 4 | ||||||||||||
Cash and cash equivalents — beginning of period |
730 | 512 | 634 | 731 | ||||||||||||
Cash and cash equivalents — end of period |
$ | 762 | $ | 634 | $ | 762 | $ | 634 | ||||||||
| * | Subsequent to Dana’s filing under chapter 11 of the U.S. Bankruptcy Code on March 3, 2006, the company and certain of its U.S. subsidiaries are operating as debtors-in -possession. |
Dana Corporation
Reconciliation of Earnings Before Interest
and Taxes (EBIT) for the Segments to
Income Before Income Taxes (Unaudited)*
(In millions)
Reconciliation of Earnings Before Interest
and Taxes (EBIT) for the Segments to
Income Before Income Taxes (Unaudited)*
(In millions)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Segment earnings before interest and
taxes - |
||||||||||||||||
ASG |
$ | 6 | $ | 49 | $ | 187 | $ | 300 | ||||||||
HVTSG |
(9 | ) | 36 | 72 | 161 | |||||||||||
Total |
(3 | ) | 85 | 259 | 461 | |||||||||||
Other |
(91 | ) | (61 | ) | (290 | ) | (238 | ) | ||||||||
Earnings (loss) before interest and
taxes (EBIT),
before unusual items |
(94 | ) | 24 | (31 | ) | 223 | ||||||||||
Unusual items (on an EBIT basis): |
||||||||||||||||
Total operations |
(222 | ) | (254 | ) | (519 | ) | (269 | ) | ||||||||
Discontinued operations |
121 | 51 | 411 | 71 | ||||||||||||
Continuing operations |
(101 | ) | (203 | ) | (108 | ) | (198 | ) | ||||||||
Interest expense, excluding DCC |
(37 | ) | (43 | ) | (139 | ) | (161 | ) | ||||||||
Interest income, excluding DCC |
9 | 4 | 35 | 9 | ||||||||||||
Interest expense, net — excluding DCC |
(28 | ) | (39 | ) | (104 | ) | (152 | ) | ||||||||
DCC pre-tax income (loss) |
(16 | ) | 11 | (28 | ) | (38 | ) | |||||||||
Loss before income taxes |
$ | (239 | ) | $ | (207 | ) | $ | (271 | ) | $ | (165 | ) | ||||
| * | Subsequent to Dana’s filing under chapter 11 of the U.S. Bankruptcy Code on March 3, 2006, the company and certain of its U.S. subsidiaries are operating as debtors-in -possession. |
Exhibit 99.2
| Presentation to Lenders March 22, 2006 |
| Forward Looking Statements Statements in this presentation which are not entirely historical constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements represent Dana's expectations based on our current information and assumptions. However, forward-looking statements are inherently subject to risks and uncertainties, and Dana's actual results could differ materially from those that are anticipated or projected due to a number of factors. These factors include the cyclical nature of the vehicular markets we serve, particularly the heavy-duty commercial vehicle market; changes in the competitive environment in our markets due, in part, to outsourcing and consolidation by our customers; changes in national and international economic conditions that affect our markets, such as increased fuel prices and legislation regulating vehicle emissions; potential adverse effects on our operations and business from terrorism or hostilities; the strength of other currencies in the overseas countries in which we do business relative to the U.S. dollar; increases in our commodity costs (including steel, other raw materials, and energy) that we cannot recoup in our product pricing; our success in implementing our cost-savings, lean manufacturing and VA/VE (value added/value engineering) programs; changes in business relationships with our major customers and in the timing, size and continuation of their programs; the ability of our customers to maintain their market positions and achieve their projected sales and production levels; the ability of our suppliers to maintain their projected production levels and furnish critical components for our products, as well as other necessary goods and services; competitive pressures on our sales from other vehicle component suppliers; price reduction pressures from our customers; the impact of our U.S. chapter 11 bankruptcy filing on our operations, financial results and cash flows; and our ability to complete our previously announced strategic actions as contemplated (including the divestiture of our non-core engine hard parts, fluid products and pump products businesses; the operational restructuring in our Automotive Systems Group and our Commercial Vehicle business; the dissolution of our Mexican joint venture, Spicer S.A. de C.V.; the finalization of our Chinese joint venture, Dongfeng Axle Co., Ltd.); and other factors set out in our public filings with the Securities and Exchange Commission. Forward-looking statements in this presentation speak only as of the date of this presentation. Dana does not undertake to update such forward-looking statements. |
| Introduction Dana Corporation ("Dana" or the "Company") is pleased to have the opportunity to meet with [Standard & Poor's] in connection with formally requesting the rating of its $1.45 billion debtor-in- possession financing facility (the "DIP Facility") Presenter Title Michael J. Burns Ken Hiltz Ted Stenger Nick Stanage Teresa Mulawa Shapleigh Smith Chairman of the Board, President, Chief Executive Officer, and Chief Operating Officer Chief Financial Officer Chief Restructuring Officer President, Heavy Vehicle Products Treasurer Managing Director, Citigroup |
| Agenda Situation Overview Business Overview Strategic Initiatives Historical Financial Review Syndication Overview Key Credit Considerations Public Lender Q&A Liquidity and Financial Review Borrowing Base & Collateral Review Private Lender Q&A |
| Situation Overview |
| Introduction On March 3, 2006 (the "Petition Date"), Dana and most of its U.S. subsidiaries filed chapter 11 in the United States Bankruptcy Court for the Southern District of New York None of Dana's non-U.S. subsidiaries nor Dana Credit Corporation have filed chapter 11 or sought relief under any other insolvency laws Dana is comprised of over 300 corporate entities: The debtors consist of Dana Corporation and 40 of its direct and indirect subsidiaries The remaining entities are direct and indirect domestic / foreign subsidiaries of Dana that are not debtors As of the Petition Date, Dana Corporation and its subsidiaries (excluding Dana Credit Corporation) had approximately $2.5 billion in outstanding indebtedness, of which $584 million was secured debt and $1.9 billion was unsecured debt |
| Events Leading to Chapter 11 Filing Dana's chapter 11 filing was driven by several external factors that have severely impacted the Company's operations and financial performance: Continued decline in the market share of Dana's largest customers (e.g., U.S.-based OEMs, including Ford and GM), which has resulted in declining sales to them and increased pricing pressures by the OEMs Continued high commodity prices, including costs for steel and other raw materials Rising energy costs Tightening of available trade debt The factors that led to the chapter 11 filing are a symptom of a much broader downturn in the U.S. auto market, which already has taken its toll on several of the Company's suppliers and competitors including: Delphi Corporation Tower Automotive, Inc. Collins & Aikman Corporation Meridian Automotive Systems, Inc. |
| Chapter 11 Filing Objectives The Company filed chapter 11 with the following primary objectives: Improve its near term U.S. liquidity position through a DIP financing arrangement, allowing it to manufacture and deliver quality products to its customers without interruption Utilize the relief of the automatic stay and other aspects of the Bankruptcy Code to give itself time to conduct a thorough strategic review of the entire business and implement changes to improve the Company's operating and financial profile Modify the Company's capital structure through a plan of reorganization to match the Company's profit and cash generating abilities Ultimately, Dana expects to emerge from these cases as a stronger, more financially sound business with operations that lead the U.S. automotive industry and the worldwide market |
| Chapter 11 Game Plan Continue to stabilize the U.S. operations in the immediate wake of the chapter 11 filing Complete the 2005 audit and release 2005 financial results Manage relationships with customers, suppliers, employees and other stakeholders Communicate openly and frequently Utilize vendor related First Day Orders to maintain vendor support Continue to supply high quality products to our customers Conduct a thorough strategic review of the entire enterprise Develop a business plan based upon the strategic review and implement strategic initiatives Develop a plan of reorganization and emerge from chapter 11 Will be based upon the business plan developed Establish an appropriate capital structure to position the Company for future success Our suppliers and customers remain supportive of our business. |
| DIP Financing Summary On the Petition Date, Dana received Court approval to utilize up to $800 million of the DIP facility on an interim basis pending a final order, expected March 29, approving the full facility The final $1.45 billion DIP facility will consist of: $750 million Revolving Credit Facility governed by a borrowing base $700 million Term Loan In addition, Dana expects to have additional liquidity from a $100 million Canadian Revolver to be made available to Dana Canada The DIP facility will be utilized to: Repay the Company's pre-petition secured debt Issue letters-of-credit to support the Company's domestic and international operations Support working capital requirements and general corporate purposes |
| Business Overview |
| Dana Vision and Strategy Our vision is for Dana to operate efficiently as one integrated company focused on growing our core light- and heavy-drivetrain products, structures, thermal, and sealing businesses. This refocused product array will help us better support our global automotive, commercial vehicle, and off-highway markets. Our vision also includes achieving much stronger cost and operating levels, which will enable us to prosper and grow. This vision is not changed by our chapter 11 proceedings - in fact, we will utilize bankruptcy protection to help us to drive necessary change and achieve our vision. Dana Vision Operating Strategy ASG Increase penetration with select existing customers Diversify customer base and geographic coverage Rationalize products and programs Innovative technology Shifting to low-cost country footprint Grow off-highway share Increase non-NAFTA Commercial Vehicle business "Variablize" fixed costs through outsourcing Rationalize products and programs Shifting to low-cost country footprint HVTSG Aggressively reduce cost and leverage capabilities. |
| Overview of Continuing Business Torque and traction technologies (axles, driveshafts, and drivelines) Structural and chassis technology solutions (structures and steering and suspension components) Systems integration technology (including modular systems) Sealing systems (gaskets, cam covers) Thermal management (thermal acoustical shields, heat exchangers, small radiators) Fuel cell products Commercial Vehicle: front-steer axles, single- and tandem-drive axles, trailer axles, chassis and air-ride suspension modules, brakes, and driveshafts Off-Highway: single-reduction and planetary axles, brakes (dry disc, hub and drum, and wet disc, transaxles, transmissions, electronic controls, driveshafts and end fittings, and modules and systems) Fluid routing (fuel rails, brake lines, HVAC routing) Engine hard parts (piston rings, engine anti-friction bearings) Pumps (OE and aftermarket) Automotive Systems Heavy Vehicle Technologies & Systems Core Products Divestitures |
| Dana's Product Capability |
| Axles Driveshafts Structures Sealing Products Thermal Systems Modules & Systems Dana's Core Competencies |
| Diverse Markets and Customers Diversified by Markets Dana's Customers 2005E Sales: $8.6 billion Note: Based on full-year sales ended Dec. 31, 2005. (1) Next 5 represent PACCAR, Navistar, Renault-Nissan, Volvo Truck, and Toyota. Discontinued Operations have been removed. |
| Automotive Commercial Vehicle & Off-Highway Customer Base |
| Global Footprint 176 major facilities in 28 countries. United Kingdom Belgium France Spain Italy Austria Germany Sweden Slovakia Turkey South Korea India China Japan Taiwan Thailand Mexico Canada United States Venezuela Colombia Brazil Uruguay Argentina South Africa Hungary Australia Switzerland |
| ASG HVTSG Pluses Minuses Net $405M vs. 2005 Net $415M vs. 2006 Net $80M vs. 2007 $900 million in incremental new business Note: Excludes the announced divestitures of engine hard parts, fluid routing and pumps businesses. Estimates based on Dana's review of the projected production schedules of our customers as of February 2006. ($ in millions) Cumulative Net New Business |
| Net New Business Highlights Geographic Diversity (2005 - 2007) Customer Diversity (2005 - 2007) |
| Strategic Initiatives |
| Management Changes Ken Hiltz - Chief Financial Officer CFO at Foster Wheeler Ltd., a global provider of engineering services Chief Restructuring Officer and CFO of Hayes Lemmerz International, Inc., a leading global supplier of automotive and commercial highway wheels and other lightweight components CFO of Joy Global, Inc. (formerly Harnischfeger Industries, Inc.), a global manufacturer of mining equipment Nick Stanage - President of Heavy Vehicle Products Joined Dana in August 2005 Approximately 20 years of experience at Honeywell, Inc., where he most recently served as vice president and general manager of the Engine Systems and Accessories division Ted Stenger - Chief Restructuring Officer Over 20 years of experience assisting major corporations in addressing significant financial and operational changes Most recently served as Chief Restructuring Officer at Fleming Companies, a supplier of consumer packaged goods Previous restructuring assignments included service as Treasurer at Kmart Corporation, restructuring advisor to Allied Holdings, financial advisor to Fruit of the Loom, and restructuring advisor to FINOVA Group Tom Stone - President of Traction Products Joined Dana in June 2005 10 years of experience with GKN in a number of senior global automotive leadership positions Prior to joining GKN, Mr. Stone held senior positions in Varity Corporation and General Electric Significant experience in torque and traction products and a track record of building businesses on a global basis |
| Near-Term Strategic Objectives Continue to stabilize the U.S. operations in the immediate wake of the chapter 11 filing To date there have been minimal customer interruptions Vendor related First Day Orders are being used to maintain vendor support Our suppliers and customers remain supportive of Dana Ongoing commitment to the Global Enterprise Foreign non-debtors are fundamentally sound and generally self-sufficient Complete Mexican JV dissolution (Spicer S.A.), as previously announced Complete asset sales Continue pursuing previously announced divestitures (engine hard parts, fluid routing and pumps) Normal course asset sales Complete the consolidation of various facilities and transition of certain production Identify immediate cost savings opportunities provided by chapter 11 process such as lease and contract rejections |
| Mid-Term Strategic Objectives Focus on core products and competencies Rationalize products and programs to improve efficiency and profitability Decrease dependence on Big 3 customers Realign global footprint to improve labor and logistics costs Reduce material costs Improve sourcing and contractual terms Streamline operating and organizational structure to reduce cost base Consolidate and / or eliminate redundant departments Other costs through chapter 11 opportunities |
| Divest Non-Core Assets Divesting three non-core businesses (engine hard parts, fluid routing, pumps) In aggregate, these businesses employ 9,800 workers, operate 44 facilities and generated $1.3 billion in 2004 sales Dana recorded non-cash charges of $398 million in the second half of 2005 to reduce the net assets of these businesses to recognizable value Other asset realignments |
| Production Rationalization Underway Increasing capacity in Monterrey and Toluca, Mexico Consolidating Commercial Vehicle service parts network Consolidating Buena Vista, VA axle facility into Dry Ridge, KY Transitioning production of Bristol, VA driveshaft facility to Dana Mexico facility Moving steering shaft component and assembly operations from Lima, OH to Dana Mexico facility Consolidating 5 existing facilities into two with closure of Danville, IN, Sheffield, PA and Burlington, Ontario |
| Shift to Low Cost Footprint Mexican Joint Venture (Spicer) serves as a model for similar production shifts Will allow the Company to manage North American business to meet OE customers' requirements Adds manufacturing in a lower cost country to support U.S. customers without dilution from existing JV partner's equity Utilize growing low-cost capability in China, India, Eastern Europe, and South America |
| Diversify Customer Base Diversify customer base and geographic coverage Reduce dependence on Big 3 Identify new markets and / or expand market share in existing international markets Note: Based on full-year sales ended Dec. 31, 1999 and Dec. 31, 2005 50/50 Goal |
| Grow Commercial Vehicle and Off-Highway Share Expand global footprint, including Hungary, China, and India Focused growth strategies Prioritize customer needs and values Grow higher volume markets and protect current lower volume business Align and grow with customers globally Product technology Develop and expand product and system solutions Focused product planning on target markets / customers Consistent delivery and quality performance Commercial Vehicle Off-Highway Target Commercial Vehicle business opportunities consistent with evolving OEM strategies 9 OEM's comprise 80% of medium-duty market 10 OEM's comprise 80% of heavy-duty market Increase global production capabilities Leverage high-volume automotive manufacturing processes and footprint |
| Historical Financial Overview |
| Historical Financials See slides 46-48 for a reconciliation of the above amounts to the consolidated financial statements. |
| 4th Quarter 2005 Charges EBIT Q4'04 to Q4'05 Reduction of $111 million Investigations and other charges relating to restatement: $8 million Pension curtailment charges: $9 million Unusual warranty charge: $8 million Reduced other income: $12 million Adverse impact of production mix and volumes Continuing cost pressure on basic commodities Production inefficiencies "Below the Line" Q4'04 to Q4'05 Goodwill impairment: $53 million Realignment charges and related asset impairments: $45 million Accounting charge: $2 million Loss on asset sales: $7 million Previously announced discontinued operations: $123 million $74 million |
| Transaction Overview |
| Sources and Uses Sources Uses |
| Pro Forma Capitalization |
| Syndication Overview |
| Final DIP Revolving Credit Facility Term Sheet FACILITY: Superpriority Senior Secured Asset Based Revolving Credit Facility AMOUNT: $750 million BORROWER: Dana Corporation GUARANTORS: Domestic debtor subsidiaries ADMINISTRATIVE AGENT: Citicorp North America, Inc. LEAD ARRANGERS: Citigroup Global Markets Inc., JP Morgan Securities Inc., and Banc of America Securities LLC MATURITY: 1.5 years or, if earlier, the date of substantial consummation of a Plan of Reorganization INTEREST RATE: L + 225 bps UNUSED COMMITMENT FEE: 37.5 bps FACILITY AVAILABILITY: Availability governed by a borrowing base equal to the sum of (i) up to 85% of eligible receivables and (ii) 85% of net orderly liquidation value ("NOLV") of eligible inventory SECURITY: Superpriority claim and first lien on all domestic current assets and second lien on assets securing DIP Term Loan B FINANCIAL COVENANTS: (i) Minimum global EBITDAR, (ii) minimum DIP Revolving Credit availability, and (iii) maximum capital expenditures MANDATORY PREPAYMENTS: To the extent assets sold are included in borrowing base |
| Final DIP Term Loan B Term Sheet FACILITY: Superpriority Senior Secured Term Loan AMOUNT: $700 million BORROWER: Dana Corporation GUARANTORS: Domestic debtor subsidiaries ADMINISTRATIVE AGENT: Citicorp North America, Inc. LEAD ARRANGERS: Citigroup Global Markets Inc., JP Morgan Securities Inc., and Banc of America Securities LLC MATURITY: Coterminous with DIP Revolving Credit Facility INTEREST RATE: L + 275 bps SECURITY: Superpriority claim and first lien on all domestic assets (except for current assets), stock of foreign subsidiaries and second lien on assets securing DIP Revolving Credit Facility FINANCIAL COVENANTS: (i) Minimum global EBITDAR, (ii) minimum DIP Revolving Credit availability, and (iii) maximum capital expenditures MANDATORY PREPAYMENTS: 100% of net asset sale proceeds (other than, without limitation, (i) any proceeds from proposed divestitures publicly disclosed as of the Closing Date and certain other permitted divestitures and (ii) any proceeds from an asset sale or series of related asset sales that are less than $5,000,000), subject to certain reinvestment rights and other customary exceptions as agreed |
| Canadian Facility Term Sheet FACILITY: Senior Secured Revolving Credit Facility AMOUNT: $100 million BORROWER: Dana Canada Corporation ADMINISTRATIVE AGENT: Citigroup LEAD ARRANGERS: Citigroup, JP Morgan, and Banc of America MATURITY: Coterminous with DIP Revolving Credit Facility INTEREST RATE: L + 225 bps AMORTIZATION: None FACILITY AVAILABILITY: Availability governed by a borrowing base equal to the sum of (i) up to 85% of eligible receivables, (ii) 85% of net orderly liquidation value of eligible inventory, (iii) 80% of net orderly orderly liquidation value of eligible machinery and equipment, and (iv) 60% of fair market value of real estate SECURITY: First lien on substantially all Canadian assets of the Company FINANCIAL COVENANTS: (i) TBD and (ii) maximum capital expenditures MANDATORY PREPAYMENTS: To the extent assets sold are included in borrowing base |
| Borrowing Base and Collateral Coverage Borrowing Base $750 million DIP Revolver will be governed by a borrowing base consisting of domestic accounts receivable and inventory $100 million Canadian Facility will be governed by a borrowing base consisting of Canadian accounts receivable, inventory, machinery and equipment, and real estate Monthly borrowing base reporting Quarterly field examinations Annual appraisals Term Loan B Collateral US real estate and machinery & equipment with a book value of $730 million as of December 31, 2005 2005 foreign EBITDA of $459.4 million (includes interest income of $20.0 million) Second lien on assets securing DIP Revolving Credit Facility |
| Timetable Event Date March 2006 March 2006 March 2006 March 2006 March 2006 March 2006 March 2006 S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 April 2006 April 2006 April 2006 April 2006 April 2006 April 2006 April 2006 S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Rating Agency Meetings March 21 Lenders meeting March 22 Final Order March 29 Funding of Final DIP March 29 Commitments due from prospective lenders April 5 |
| Key Credit Considerations |
| Key Credit Considerations Leading global automotive supplier of light and heavy-drivetrain products, structures, thermal, and sealing systems Diversified business mix and geographic presence minimizes revenue volatility 48% of 2005 revenue derived from commercial vehicle and off-highway markets Reducing dependence on Big 3 ~ 50% of 2009 light vehicle revenue targeted from non-Big 3 customers Long-standing relationships with leading global OEM's Leading product capabilities across core competencies drives customer retention Sufficient liquidity Attractive collateral coverage with superpriority claim status $750 million DIP Revolver governed by a borrowing base consisting of domestic accounts receivable and inventory Superpriority claim and first lien on all domestic current assets and second lien on assets securing DIP Term Loan B $700 million DIP Term Loan B Superpriority claim and first lien on all domestic assets (except for current assets), stock of foreign subsidiaries and second lien on assets securing DIP Revolver |
| Public Lender Q&A |
| Appendix - Public |
| Reconciliation of Historical Financials |
| 4th Quarter and FY 2004 Reconciliation |
| 4th Quarter and FY 2005 Reconciliation |