Back to GetFilings.com
1
[DANA LOGO]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998 Commission file number 1-1063
- ------------------------------------------- ------
DANA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 34-4361040
- -------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4500 Dorr Street, Toledo Ohio 43615
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (419)535-4500
-------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- -------------------------- -----------------------------------------
Common Stock, $1 par value New York, Pacific, London Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act:
None
--------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
---
The aggregate market value of the voting stock held by non-affiliates of the
registrant at February 19, 1999, was approximately $6,536,842,000.
The number of shares of registrant's Common Stock, $1 Par Value, outstanding at
February 19, 1999, was 165,809,476 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Document Where Incorporated
---------------------- -------------------------------
1. Proxy Statement for Annual Meeting of Shareholders to be held on April 7, Part III
1999.
2. Annual Report to Shareholders for year ended December 31, 1998. Parts I, II, IV
- --------------------------------------------------------------------------------
The Exhibit Index is located at pages 19-21 of the sequential numbering system.
1
2
INDEX
DANA CORPORATION - FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998
10-K Pages
----------
Cover 1
Index 2
Part I
- ------
Item 1 - Business 3-9
Item 2 - Properties 10
Item 3 - Legal Proceedings 10
Item 4 - Submission of Matters to a Vote of Security Holders 10
Part II
- -------
Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters 11
Item 6 - Selected Financial Data 11
Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 7(A) - Quantitative and Qualitative Disclosures About Market Risk 11
Item 8 - Financial Statements and Supplementary Data 11
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 11
Part III
- --------
Item 10 - Directors and Executive Officers of the Registrant 12
Item 11 - Executive Compensation 12
Item 12 - Security Ownership of Certain Beneficial Owners and Management 12
Item 13 - Certain Relationships and Related Transactions 12
Part IV
- -------
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K 13-21
Signatures 22-23
- ----------
2
3
PART I
ITEM 1 - BUSINESS
Dana Corporation was incorporated in 1905. Today, we are one of the
world's largest independent suppliers to original equipment (OE) vehicle
manufacturers and the related aftermarkets. We produce the types of components
and systems used on more than 95% of the world's 700 million motor vehicles. We
also own Dana Credit Corporation (DCC), a leading provider of leasing services
in selected markets.
Our operations are organized into seven market-focused Strategic
Business Units (SBUs) as follows:
o Automotive Systems Group (ASG) -- This group serves the world's
light truck and passenger car markets with light duty axles and
driveshafts, structural products (such as engine cradles and
frames), transfer cases, original equipment brakes and integrated
modules and systems. The group has 82 facilities and 21,100 people
in 20 countries. In 1998, its sales were $4.3 billion and its
three largest customers were DaimlerChrysler AG, Ford Motor
Company and General Motors Corporation.
o Automotive Aftermarket Group (AAG) -- Created in 1998 as one of
our strategic initiatives to realign our operations following our
merger with Echlin, this group sells hydraulic brake components
and disc brakes for light vehicle applications, external engine
components for the vehicle maintenance and repair markets and a
complete line of filtration products for a variety of vehicle and
industrial equipment applications worldwide. In addition, it sells
electrical, brake, power transmission, steering and suspension
system components in the United Kingdom and continental Europe.
The group has 175 facilities and 27,000 people in 24 countries. In
1998, its sales were $2.8 billion and its three largest customers
were National Automotive Parts Association (NAPA), Carquest
Corporation and Pep Boys Manny Moe & Jack.
o Engine Systems Group (ESG) -- This group serves the automotive,
heavy truck, agricultural, construction, mining, aeronautical,
marine, railway, motorcycle and industrial markets (including
nearly every major engine manufacturer in the world and related
aftermarkets) with sealing products, engine parts, piston rings,
cylinder liners and camshafts and fluid system products. The group
has 116 facilities and 20,500 people in 19 countries. In 1998, its
sales were $2.0 billion and its three largest customers were Ford,
GM and DaimlerChrysler.
o Heavy Truck Group (HTG) -- This group, a major global supplier to
the medium and heavy truck markets, produces heavy axles and
brakes, trailer products, medium and heavy duty driveshafts and
power take-off units and commercial vehicle systems. It also
assembles modules and systems for heavy trucks. The group has 47
facilities and 6,500 people in 9 countries. In 1998, its sales
were $1.6 billion and its three largest customers were Mack
Trucks, Inc., PACCAR Inc and Navistar International Transportation
Corp.
o Off-Highway Systems Group (OHSG) -- This group produces axles and
brakes, transaxles, power-shift transmissions, torque converters
and electronic controls and hydraulic pumps, motors, valves,
filters and electronic components for the construction,
agriculture, mining, specialty chassis, outdoor power, materials
handling, forestry and leisure utility equipment markets. The
group has 18 facilities and 4,500 people in 8 countries. In 1998,
its sales were nearly $900 million and its three largest customers
were Agco Corporation, Caterpillar Inc. and Case Corporation.
o Industrial Group (IG) -- Our most diverse core business, this
group sells products and systems that drive and control motion,
including clutches, brakes, linear actuators, motors and controls,
hose products, couplings and a wide range of electric and
electronic sensors. The group serves worldwide markets for
industrial machinery processing equipment, machine tools and
business machines, as well as the communication, information
processing, transportation, agriculture, construction, mining,
chemical, petroleum and automotive industries. The group has 47
facilities and 6,000 people in 16 countries. In 1998, its sales
were over $700 million and its three largest customers were Ford,
NAPA and Motion Industries, Inc.
3
4
o Leasing Services -- DCC and its subsidiaries provide leasing
services to selected markets in the U.S., Canada, the United
Kingdom and continental Europe. DCC's key products are middle
ticket and capital markets leasing and finance products and asset
and real property management.
In July 1998, we merged one of our subsidiaries with Echlin Inc.,
another worldwide supplier of automotive products. The Echlin merger was one of
a series of steps we have taken in the past two years to focus on and strengthen
our core products and businesses. During that period, we completed strategic
acquisitions of operations with annualized sales of more than $5.3 billion,
including Echlin and:
o the Clark-Hurth Components assets of Ingersoll-Rand Company in
February 1997
o the Sealed Power Division of SPX Corporation in February 1997
o the heavy axle and brake business of Eaton Corporation in January
1998
o the Glacier Vandervell Bearings Group and the AE Clevite North
American aftermarket engine hard parts business from Federal-Mogul
Corporation in December 1998
We also completed significant restructuring and rationalization programs,
including the sale of our European distribution operations, DCC's Technology
Leasing Group portfolio and other operations not core to our business.
You can find more information in "Note 16. Business Segments" on pages
34 - 36, "Note 21. Acquisitions" on page 38 and "Note 22. Divestitures" on page
39 of our 1998 Annual Report.
GEOGRAPHICAL AREAS
We maintain administrative organizations in four regions - North
America, Europe, South America and Asia/Pacific - to facilitate financial and
statutory reporting and tax compliance on a worldwide basis and to support the
seven SBUs.
Our operations are located in the following countries:
North America Europe South America Asia/Pacific
- ------------- ------ ------------- ------------
Canada Austria Netherlands Argentina Australia South Korea
Mexico Belgium Russia Brazil China Taiwan
United States France Poland Colombia Japan Thailand
Germany Spain South Africa Malaysia New Zealand
India Sweden Uruguay Singapore
Ireland Switzerland Venezuela
Italy United Kingdom
Our non-U.S. subsidiaries and affiliates manufacture and sell a number
of vehicular and industrial products similar to those produced in the U.S. In
addition to normal business risks, operations outside the U.S. are subject to
others such as changing political, economic and social environments, changing
governmental laws and regulations, currency revaluations and market
fluctuations.
Consolidated non-U.S. sales were $3.7 billion, or 30% of our 1998
sales. Including U.S. exports of $756 million, non-U.S. sales accounted for 36%
of 1998 consolidated sales. Non-U.S. net income was $181 million, or 34% of
consolidated 1998 net income. In addition, there was $30 million of equity in
earnings of non-U.S. affiliates in 1998.
You can find more information in "Note 7. Non-U.S. Operations" on page
29 and "Note 16. Business Segments" on pages 34 - 36 of our 1998 Annual Report.
4
5
CUSTOMER DEPENDENCE
We have thousands of customers around the world and have developed
long-standing business relationships with many of these customers. Our attention
to quality, delivery and service has been recognized by numerous customers who
have awarded us supplier quality awards. Ford and DaimlerChrysler were the only
customers accounting for more than 10% of our consolidated sales in 1998. We
have been supplying products to these companies and their subsidiaries for many
years. Sales to Ford, as a percentage of sales, were 14%, 15% and 15% in 1996,
1997 and 1998, and sales to DaimlerChrysler were 11%, 11% and 13% in those
years. Loss of all or a substantial portion of our sales to Ford,
DaimlerChrysler or other large volume customers would have a significant adverse
effect on our financial results until this lost sales volume could be replaced.
There would be no assurance, in such event, when or if the lost volume would be
replaced.
PRODUCTS
As a result of our internal development and acquisition activities in
the past several years, we now have ten core products and services. During the
past three years, our sales by core product were as follows:
Percentage of Consolidated Sales
--------------------------------
1996 1997 1998
---- ---- ----
Type of Products
- ----------------
Axle 24% 25% 32%
Engine 10 10 10
Brake 9 10 10
Driveshaft 9 9 9
Fluid System 6 7 7
Structural 6 7 6
Industrial 7 6 6
Sealing 5 5 5
Filtration 4 4 4
-- -- --
80 83 89
Other Products 20 17 11
-- -- --
100% 100% 100%
=== === ===
We do not consider our leasing service revenue to be sales and none of our
other products are core or account for 10% of sales.
5
6
MATERIAL SOURCE AND SUPPLY
Most raw materials (such as steel) and semi-processed or finished items
(such as forgings and castings) are purchased from long-term suppliers located
within the geographic regions of our operating units. Generally, these materials
are available from numerous sources in quantities that we need. Temporary
shortages of a particular material or part occasionally occur, but we do not
consider the overall availability of materials to be a significant risk factor.
SEASONALITY
Our businesses are not seasonal. However, sales to our OE vehicular
customers are closely related to the vehicle manufacturers' production
schedules.
BACKLOG
Generally, our products are not on a backlog status. They are produced
from readily available materials and have a relatively short manufacturing
cycle. Each operating unit maintains its own inventories and production
schedules and many of our products are available from more than one facility. We
believe that our production capacity is adequate to handle current requirements
and we regularly review anticipated growth in our product lines to determine
when additional capacity may be needed.
COMPETITION
We compete worldwide with a number of other manufacturers and
distributors which produce and sell similar products. These competitors include
vertically-integrated units of our major OE customers and a number of
independent U.S. and non-U.S. suppliers. Our traditional U.S. OE customers,
facing substantial foreign competition, have expanded their worldwide sourcing
of components to better compete with lower cost imports. In addition, these
customers have been shifting research and development, design and validation
responsibilities to their Tier 1 suppliers, focusing on stronger relationships
with fewer suppliers. We have established operations throughout the world to
enable us to meet these competitive challenges and be a strong global supplier
of our core products.
In the area of leasing services, we compete in selected markets with
various international, national and regional leasing and finance organizations.
STRATEGY
We are actively pursuing two broad strategies, focused around our seven
customer and market-focused, global SBUs. Both strategies are intended to reduce
the effects of economic and market cyclicality.
The first strategy is to diversify our products and reduce our
dependence on highway vehicle OE production. Our long-term goal is to obtain 50%
of sales from the highway vehicle OE customers and 50% from distribution,
off-highway, service and industrial markets. In 1998, highway vehicle OE sales
were 56% of our total and distribution, off-highway, service and industrial
sales were 44%. We continue to expand our off-highway and distribution
businesses by increasing market penetration and broadening our product offerings
through internal growth and acquisition.
The second strategy is to balance our U.S. and non-U.S. sales,
including sales of our non-consolidated affiliates. We have well-defined
regional organizations in North America, South America, Europe and Asia/Pacific
in support of this initiative. In 1998, non-U.S. sales, including exports from
the U.S. and sales of our non-consolidated affiliates, were 41% of gross
(consolidated and non-consolidated) sales. Our long-term goal is to derive 50%
of our sales (including exports) from customers outside the U.S. To accomplish
this objective, we are focusing on meeting our OE customers' needs in the local
markets in which they operate, through exports and by locating manufacturing or
assembly facilities where key customers have assembly plants.
6
7
As part of the continuing efforts to focus on our core businesses, in
1998 we announced or completed four divestitures of businesses with annual sales
of nearly $470 million. We also completed the acquisitions of businesses with
annual sales of over $4.7 billion, including those described in Item 1. You can
find more information in "Note 21. Acquisitions" on page 38 and "Note 22.
Divestitures" on page 39 of our 1998 Annual Report.
PATENTS AND TRADEMARKS
Our proprietary drivetrain, engine parts, chassis, structural
components, fluid power systems and industrial power transmission product lines
have strong identities in the vehicular and industrial markets which we serve.
Throughout these product lines, we manufacture and sell our products under a
number of patents and licenses which have been obtained over a period of years
and expire at various times. We consider each of them to be of value and
aggressively protect our rights throughout the world against infringement.
Because we are involved with many product lines, the loss or expiration of any
particular patent or license would not materially affect our sales and profits.
We own numerous trademarks which are registered in many countries,
enabling us to market our products worldwide. Our Spicer(R), Parish(R), Perfect
Circle(R), Victor Reinz(R), Wix(R), Weatherhead(R), Warner Electric(R),
Boston(R), Raybestos(R), Aimco(R), Clevite(R), Glacier(R) and Vandervell(R)
trademarks, among others, are widely recognized in their respective industries.
RESEARCH AND DEVELOPMENT
Our objective is to be the leader in superior quality, technologically
advanced products and systems for our vehicular and industrial customers offered
at competitive prices. To enhance quality and reduce costs, we use statistical
process control, cellular manufacturing, flexible regional production and
assembly, global sourcing and extensive employee training.
In addition, we engage in ongoing engineering, research and development
activities to improve the reliability, performance and cost-effectiveness of
existing products and to design and develop new products for existing and new
applications. Our spending on engineering, research and development and quality
control programs was $212 million in 1996, $248 million in 1997 and $275 million
in 1998.
EMPLOYMENT
Our worldwide employment (including consolidated subsidiaries) was
approximately 86,400 at December 31, 1998.
ENVIRONMENTAL COMPLIANCE
We make capital expenditures in the normal course of business as
necessary to ensure that our facilities are in compliance with applicable
environmental laws and regulations. Costs of environmental compliance did not
have a materially adverse effect on our capital expenditures, earnings or
competitive position in 1998, and we do not anticipate that future environmental
compliance costs will be material. You can find more information in
"Environmental Compliance and Remediation" under "Note 1. Summary of Significant
Accounting Policies" on page 27 of our 1998 Annual Report.
7
8
EXECUTIVE OFFICERS OF THE REGISTRANT
This table contains information about our current executive officers.
Unless otherwise indicated, all positions are with Dana. The first five officers
listed are members of Dana's Policy Committee.
Name and Age Present Position(s) Other Positions During Past 5 Years
- ------------ -------------------- -----------------------------------
S. J. Morcott Chairman of the Board of Directors Chief Executive Officer, 1989-99; Chief Operating
(60) since 1990 Officer, 1986-97; President, 1986-95; Chairman of
the Board of Hayes-Dana Inc., 1987-95 (1)
J. M. Magliochetti Chief Executive Officer since President - Dana North American Operations, 1992-95
(56) February 8, 1999; Chief Operating
Officer since 1997; Director and
President since 1996
J. S. Simpson Executive Vice President since Vice President of Finance, 1996-98; Treasurer,
(57) 1998; Chief Financial Officer since 1996-97; President - Dana Asia Pacific Operations,
1997 1992-95
W. J. Carroll President - Automotive Systems President - Diversified Products & Distribution,
(54) Group since 1997 1996-97; President - Dana Distribution Service
Group, 1995-97; President - DTF Trucking, 1985-97;
Chairman of the Board of Dana Canada Inc.,
1995-97(1); President of Dana Canada Inc., 1993-97
M. A. Franklin, III President - Dana International President - Dana Europe, 1993-97
(51) since 1997
R. L. Clayton President - Heavy Truck Group since Vice President - Heavy Truck Group, 1997-98; Vice
(38) 1998 President and General Manager - Spicer Heavy Axle &
Brake Division, 1996-97; General Manager - Spicer
Clutch Division, 1995-96; Director of Planning and
Development - Reinz-Dichtungs GmbH, 1993-95 (2)
B. N. Cole President - Off-Highway Systems President - Structural Components Group, 1995-97;
(56) Group since 1997 Vice President - Heavy Vehicle - Dana North
American Operations, 1991-95
C. F. Heine President - Engine Systems Group President - Dana Asia Pacific, 1996-98; Vice
(46) since 1998 President - Asia Pacific Operations, 1995; General
Manager - Spicer Off-Highway Axle Division, 1993-94
C. W. Hinde Vice President and Chief Accounting
(60) Officer since 1992; Assistant
Treasurer since 1986
L. W. McCurdy President - Automotive Aftermarket Chairman, President and Chief Executive Officer of
(63) Group since 1998 Echlin Inc., 1997-98; Executive Vice President -
Automotive, Cooper Industries, 1994-97
8
9
Name and Age Present Position(s) Other Positions During Past 5 Years
- ------------ -------------------- -----------------------------------
W. L. Myers President - Automotive Axle President - Spicer Driveshaft Group, 1995-97; Vice
(58) Products since 1997 President and General Manager - Spicer Driveshaft
Division, 1986-95
M. A. Plumley President - Industrial Group since Vice President - Industrial Group, 1997-98; Group
(48) 1998 Vice President - Dana Industrial, 1996-97; General
Manager - Plumley Companies, Inc., 1995-96;
Chairman and Chief Executive Officer - Plumley
Companies, Inc., 1988-95 (3)
R. C. Richter Vice President - Finance and Vice President - Administration, 1997-98; General
(47) Administration since 1998 Manager - Perfect Circle Sealed Power Europe, 1997;
Vice President and General Manager - Perfect Circle
Europe, 1994-97; Dana Corporate Controller,
1989-94; Dana Vice President - Administration,
1987-94
E. J. Shultz Chairman and President - Dana President - Lease Financing, 1994-95; President -
(54) Credit Corporation since 1995 Financial Services, 1990-94
M. J. Strobel Vice President since 1976; General
(58) Counsel since 1970; Secretary since
1982
J. H. Woodward, Jr. Vice President and Corporate Controller - Dana North American Operations,
(46) Controller since 1996 1994-96; Division Controller - Spicer Heavy Axle &
Brake Division, 1992-94
Notes:
(1) Hayes-Dana Inc., formerly a majority-owned Dana subsidiary located in
Canada, is now a wholly-owned subsidiary and has been renamed Dana
Canada Inc.
(2) Reinz-Dichtungs GmbH is a wholly-owned Dana subsidiary located in
Germany.
(3) Plumley Companies, Inc., formerly a wholly-owned Dana subsidiary
located in the U.S., is now a Dana division.
Those officers who are designated in Dana's By-Laws are elected by the
Board annually at its first meeting after the Annual Meeting of Shareholders.
The others are appointed by the Board from time to time. None of the officers
has a family relationship with any other Dana officer or director or an
arrangement or understanding with any Dana officer or other person pursuant to
which he was elected as an officer.
9
10
ITEM 2 - PROPERTIES
As shown in the following table, we have over 500 manufacturing,
distribution and service branch or office facilities worldwide. We own the
majority of our manufacturing and larger distribution facilities for our
vehicular and industrial products. We lease a few manufacturing facilities and
most of our smaller distribution outlets and financial services branches and
offices.
Dana Facilities by Geographic Region
------------------------------------
Type of North South Asia/
Facility America Europe America Pacific Total
- -------- ------- ------ ------- ------- -----
Manufacturing 189 79 37 7 312
Distribution 59 22 13 20 114
Service Branches, Offices 55 10 6 8 79
--- --- -- --- ---
Total 303 111 56 35 505
=== === == === ===
ITEM 3 - LEGAL PROCEEDINGS
We are a party to various pending judicial and administrative
proceedings arising in the ordinary course of business. After reviewing the
proceedings that are currently pending (including the probable outcomes,
reasonably anticipated costs and expenses, availability and limits of our
insurance coverage, and our established reserves for uninsured liabilities), we
do not believe that any liabilities that may result from these proceedings are
reasonably likely to have a material effect on our liquidity, financial
condition or results of operations.
The Securities and Exchange Commission requires us to report certain
environmental proceedings involving governmental agencies. There is currently
one such proceeding. In the Matter of Dana Corporation is an Administrative
Complaint brought by the U.S. Environmental Protection Agency, Region V (USEPA)
on September 30, 1998, alleging periodic violations of discharge limits of
certain metals in the waste water at our plant on Sanford Street in Muskegon,
Michigan. The Complaint alleges that such discharges occurred from 1993 to 1995
in violation of the Clean Water Act. USEPA initially proposed a fine of
$125,000, but has now agreed to a fine of $92,000, which will be further reduced
if we complete an acceptable Supplemental Environmental Project at the plant.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- None -
10
11
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is listed on the New York, Pacific, and London Stock
Exchanges. On February 19, 1999, there were 34,544 shareholders of record.
Dividends have been paid on our common stock every year since 1936.
Quarterly dividends have been paid since 1942.
You can find more information in "Shareholders' Investment" under
"Additional Information" on page 50 of our 1998 Annual Report.
ITEM 6 - SELECTED FINANCIAL DATA
You can find "Financial Highlights" under "Eleven Year History" on page
51 of our 1998 Annual Report.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You can find "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 40 - 46 of our 1998 Annual Report.
ITEM 7(A) - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
You can find information in "Financial Instruments," "Derivative
Financial Instruments" and "Marketable Securities" under "Note 1. Summary of
Significant Accounting Policies" on pages 27 and 28, in "Note 7. Non-U.S.
Operations" on page 29, in "Note 11. Interest Rate Agreements" on page 31 and in
"Note 19. Fair Value of Financial Instruments" on page 37 of our 1998 Annual
Report.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
You can find the financial statements and the report by
PricewaterhouseCoopers LLP dated January 25, 1999, on pages 21 - 39 and
"Unaudited Quarterly Financial Information" under "Shareholders' Investment" on
page 50 of our 1998 Annual Report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- None -
11
12
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
You can find general information about our directors and executive
officers in Part I, Item 1 of this Form 10-K and under "Election of Directors"
in our 1999 Proxy Statement.
You can find information about the filing of reports by our directors,
officers and 10% stockholders under Section 16(a) of the Securities Exchange Act
of 1934 under "Section 16(a) Beneficial Ownership Reporting Compliance" in our
1999 Proxy Statement.
ITEM 11 - EXECUTIVE COMPENSATION
You can find information about executive compensation in the following
sections of our 1999 Proxy Statement: "Compensation" under "The Board and its
Committees," "Executive Compensation" and "Compensation Committee Report on
Executive Compensation."
You can find information about our stock performance under "Comparison
of Five-Year Cumulative Total Return" in our 1999 Proxy Statement.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
You can find information about the stock ownership of our directors,
officers and 5% stockholders under "Stock Ownership" in our Proxy Statement.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
You can find information about transactions between Dana and our
directors, officers and 5% stockholders under "Other Transactions" and
"Transactions with Management" in our 1999 Proxy Statement.
12
13
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page in
Annual Report
-------------
(a) The following documents are
filed as part of this report:
(1) Financial Statements:
Report of Independent Accountants 21
Statement of Income for each of the three years
in the period ended December 31, 1998 22
Balance Sheet at December 31, 1997 and 1998 23
Statement of Cash Flows for each of the three
years in the period ended December 31, 1998 24
Statement of Shareholders' Equity for each of the
three years in the period ended December 31, 1998 25
Notes to Financial Statements 26 - 39
Unaudited Quarterly Financial Information 50
Page in
Form 10-K
(2) Financial Statement Schedules: ---------
Report of Independent Accountants on Financial Statement
Schedule for the three years ended December 31, 1998 14
Valuation and Qualifying Accounts and Reserves (Schedule II) 15 - 17
Supplementary Information - Commitments and Contingencies 18
All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.
(3) Exhibits listed in the "Exhibit Index" 19 - 21
(b) Reports on Form 8-K
None
13
14
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of Dana Corporation
Our audits of the consolidated financial statements referred to in our report
dated January 25, 1999 appearing on page 21 of the 1998 Annual Report to
Shareholders of Dana Corporation (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of Financial Statement Schedule II appearing on pages 15
through 17 of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Toledo, Ohio
January 25, 1999
14
15
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II(a) - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
Adjustment
Trade accounts arising
receivable from change
Balance at Additions "written off" in currency Balance at
beginning charged net of exchange rates end of
of period to income recoveries and other items period
--------- --------- ---------- --------------- ------
Year ended-
December 31, 1996 $30,018,000 $15,866,000 $(13,930,000) $ 33,000 $31,987,000
December 31, 1997 $31,987,000 $13,880,000 $(12,479,000) $ 554,000 $33,942,000
December 31, 1998 $33,942,000 $20,694,000 $(16,698,000) $ 2,516,000 $40,454,000
15
16
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II(b) - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ALLOWANCE FOR CREDIT LOSSES - LEASE FINANCING
Adjustment
Trade accounts arising
receivable from change
Balance at Additions "written off" in currency Balance at
beginning charged net of exchange rates end of
of period to income recoveries and other items(1) period
--------- --------- ---------- ------------------ ------
Year ended-
December 31, 1996 $47,425,000 $12,349,000 $ (9,299,000) $ 350,000 $50,825,000
December 31, 1997 $50,825,000 $12,141,000 $ (9,851,000) $ (462,000) $52,653,000
December 31, 1998 $52,653,000 $20,117,000 $ (10,561,000) $(29,537,000) $32,672,000
(1) Other items in 1998 include $(28,889,000) from the sale of the Technology
Leasing Group portfolio.
16
17
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II(c) - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
VALUATION ALLOWANCE FOR DEFERRED TAX ASSETS
Adjustment
arising
Amounts from change
Balance at Additions "written off" in currency Balance at
beginning charged net of exchange rates end of
of period to income recoveries and other items period
--------- --------- ---------- --------------- ------
Year ended-
December 31, 1996 --------- $ 4,800,000 ----------- ------------ $ 4,800,000
December 31, 1997 $ 4,800,000 $30,400,000 $ (4,800,000) ------------ $30,400,000
December 31, 1998 $30,400,000 $28,800,000 ----------- ------------ $59,200,000
17
18
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTS
COMMITMENTS AND CONTINGENCIES
We are a party to various legal proceedings (judicial and
administrative) arising in the normal course of business, including proceedings
which involve environmental and product liability claims. You can find
additional information in "Note 20. Commitments and Contingencies" on page 38 of
our 1998 Annual Report.
With respect to environmental claims, we are involved in investigative
and/or remedial efforts at a number of locations, including "on-site" activities
at currently or formerly owned facilities and "off-site" activities at
"Superfund" sites where we have been named as a potentially responsible party.
You can find more information in "Environmental Compliance and Remediation"
under "Note 1. Summary of Significant Accounting Policies" on page 27 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 40 - 46 of our 1998 Annual Report.
With respect to product liability claims, from time to time, we are
named in proceedings involving alleged defects in our products. Such proceedings
currently include a large number of claims (most of which are for relatively
small damage amounts) based on alleged asbestos-related personal injuries. At
December 31, 1998, approximately 48,000 such claims were outstanding, of which
approximately 33,000 were subject to pending settlement agreements. We have
agreements with our insurance carriers providing for the payment of
substantially all of the indemnity costs and the legal and administrative
expenses for these claims. We are also a party to a small number of
asbestos-related property damage proceedings. Our insurance carriers are paying
the major portion of the defense costs in connection with these cases and we
have incurred minimal indemnity costs to date.
----------
18
19
EXHIBIT INDEX
No. Description Method of Filing
- --- ----------- ----------------
3-A Restated Articles of Incorporation Filed by reference to Exhibit 3-A to Dana's Form 10-
Q for the quarter ended June 30, 1998
3-B By-Laws, effective April 7, 1999 Filed with this Report
4-A Specimen Single Denomination Stock Certificate Filed by reference to Exhibit 4-B to Dana's Registration
Statement No. 333-18403 filed December 20, 1996
4-B Rights Agreement, dated as of April 25, 1996, between Filed by reference to Exhibit 1 to Dana's Form 8-A filed
Dana and ChemicalMellon Shareholder Services, L.L.C., May 1, 1996
Rights Agent
4-C Indenture for Senior Securities between Dana and Filed by reference to Exhibit 4-B of Dana's Registration
Citibank, N.A., Trustee, dated as of December 15, 1997 Statement No. 333-42239 filed December 15, 1997
4-D First Supplemental Indenture between Dana, as Issuer, Filed by reference to Exhibit 4-B-1 to Dana's Report on
and Citibank,N.A., Trustee, dated as of March 11, 1998 Form 8-K dated March 12, 1998
4-E Form of 6.5% Notes due March 15, 2008 and 7.00% Notes Included in Exhibit 4-D and filed by reference to Exhibit
due March 15, 2028 4-C-1 to Dana's Report on Form 8-K dated March 12, 1998
10-A Additional Compensation Plan Filed by reference to Exhibit A to Dana's Proxy
Statement for its Annual Meeting on April 5, 1995
10-A(1) First Amendment to Additional Compensation Plan Filed by reference to Exhibit 10-A(1) to Dana's Form 10-Q
for the quarter ended June 30, 1995
10-A(2) Second Amendment to Additional Compensation Plan Filed by reference to Exhibit 10-A(2) to Dana's Form
10-K for the year ended December 31, 1995
10-A(3) Third Amendment to Additional Compensation Plan Filed by reference to Exhibit 10-A(3) to Dana's Form 10-K
for the year ended December 31, 1996
10-A(4) Fourth Amendment to Additional Compensation Plan Filed by reference to Exhibit 10-A(4) to Dana's Form
10-Q for the quarter ended March 31, 1998
10-E 1997 Stock Option Plan Filed by reference to Exhibit A to Dana's Proxy Statement
for its Annual Meeting on April 2, 1997
10-E(1) First Amendment to 1997 Stock Option Plan Filed by reference to Exhibit 10-E(1) to Dana's Form 10-Q
for the quarter ended June 30, 1997
10-E(2) Second Amendment to 1997 Stock Option Plan Filed by reference to Exhibit 10-E(2) to Dana's Form 10-K
for year ended December 31, 1997
19
20
10-E(3) Third Amendment to 1997 Stock Option Plan Filed by reference to Exhibit 10-E(3) to Dana's Form 10-Q
for the quarter ended March 31, 1998
10-E(4) Fourth Amendment to 1997 Stock Option Plan Filed with this Report
10-F Excess Benefits Plan Filed with this Report
10-H Directors Retirement Plan Filed by reference to Exhibit 10-H to Dana's Form
10-Q for the quarter ended June 30, 1998
10-I Director Deferred Fee Plan Filed by reference to Exhibit B to Dana's Proxy
Statement for its Annual Meeting on April 2, 1997
10-I(1) First Amendment to Director Deferred Fee Plan Filed by reference to Exhibit 10-I(1) to Dana's Form 10-Q
for the quarter ended March 31, 1998
10-I(2) Second Amendment to Director Deferred Fee Plan Filed with this Report
10-J(1) Employment Agreement between Dana and S.J. Morcott Filed by reference to Exhibit 10-J(1) to Dana's Form
10-K for the year ended December 31, 1997
10-J(2) Employment Agreement between Dana and J.M. Magliochetti Filed by reference to Exhibit 10-J(2) to Dana's Form
10-K for the year ended December 31, 1997
10-J(3) Employment Agreement between Dana and M.J. Strobel Filed by reference to Exhibit 10-J(3) to Dana's Form
10-K for the year ended December 31, 1997
10-J(4) Change of Control Agreement between Dana and W. J. Filed by reference to Exhibit 10-J(4) to Dana's Form 10-K
Carroll. There are substantially similar agreements for the year ended December 31, 1997
with B.N. Cole, M.A. Franklin, W.L. Myers, R.C.
Richter, E.J. Shultz, and J.S. Simpson
10-J(5) Collateral Assignment Split-Dollar Insurance Agreement Filed by reference to Exhibit 10-J(13) to Dana's Form
for Universal Life Policies between Dana and S.J. 10-K for the year ended December 31, 1992
Morcott. There are substantially similar agreements
with J.M. Magliochetti and M.J. Strobel
10-J(6) Severance and Indemnification Agreement between Dana Filed by reference to Exhibit 13 to Schedule 14D-9
and L.W. McCurdy (Amendment No. 1) filed by Echlin Inc. on May 5, 1998
10-K Supplemental Benefits Plan Filed with this Report
10-L(1) 1989 Restricted Stock Plan Filed by reference to Exhibit A of Dana's Proxy Statement
for its Annual Meeting on April 5, 1989
10-L(2) First Amendment to 1989 Restricted Stock Plan Filed by reference to Exhibit 10-L(2) to Dana's Form 10-K
for the year ended December 31, 1993
10-L(3) Second Amendment to 1989 Restricted Stock Plan Filed by reference to Exhibit 10-L(3) to Dana's Form 10-K
for the year ended December 31, 1993
20
21
10-L(4) Third Amendment to 1989 Restricted Stock Plan Filed by reference to Exhibit 10-L(4) to Dana's Form 10-K
for the year ended December 31, 1996
10-L(5) Fourth Amendment to 1989 Restricted Stock Plan Filed by reference to Exhibit 10-L(5) to Dana's Form 10-K
for the year ended December 31, 1997
10-M 1998 Directors' Stock Option Plan Filed by reference to Exhibit A to Dana's Proxy Statement
for its Annual Meeting on April 1, 1998
10-N Supplementary Bonus Plan Filed by reference to Exhibit 10-N to Dana's Form
10-Q for the quarter ended June 30, 1995
13 The following sections of Dana's 1998 Annual Report to Filed with this Report
Shareholders, located on the pages indicated:
"Financial Focus," "Financial Statements" and
"Management and Independent Accountants' Report" on
pages 20 - 39
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 40 - 46
(excluding the charts on these pages)
"Additional Information - Shareholders' Investment" on
page 50
"Unaudited Quarterly Financial Information" on page 50
"Eleven Year History - Financial Highlights" on page 51
21 List of Subsidiaries of Dana Filed with this Report
23 Consent of PricewaterhouseCoopers LLP Filed with this Report
24 Power of Attorney Filed with this Report
27 Financial Data Schedules Filed with this Report
Note: Exhibit Nos. 10-A through 10-N are exhibits required to be filed pursuant
to Item 14(c) of Form 10-K.
21
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DANA CORPORATION
--------------------------
(Registrant)
Date: February 24, 1999 By: /S/ Martin J. Strobel
---------------------- ---------------------------------
Martin J. Strobel, Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Date: February 24, 1999 /S/ Southwood J. Morcott
---------------------- ----------------------------------------------------
Southwood J. Morcott, Chairman of the Board
Date: February 24, 1999 /S/ Joseph M. Magliochetti
---------------------- ----------------------------------------------------
Joseph M. Magliochetti, Director and Chief
Executive Officer
Date: February 24, 1999 * /S/ John S. Simpson
---------------------- -------------------------------------------
John S. Simpson, Chief Financial Officer
Date: February 24, 1999 /S/ Charles W. Hinde
---------------------- -------------------------------------------
Charles W. Hinde, Chief Accounting Officer
Date: February 24, 1999 * /S/ B.F. Bailar
---------------------- ----------------------------------------------------
B.F. Bailar, Director
Date: February 24, 1999 * /S/ A.C. Baillie
---------------------- ----------------------------------------------------
A.C. Baillie, Director
Date: February 24, 1999 * /S/ E.M. Carpenter
---------------------- ----------------------------------------------------
E.M. Carpenter, Director
Date: February 24, 1999 * /S/ E. Clark
---------------------- -------------------------------------------
E. Clark, Director
Date: February 24, 1999 * /S/ G.H. Hiner
---------------------- ----------------------------------------------------
G.H. Hiner, Director
Date: February 24, 1999 * /S/ M.R. Marks
---------------------- ----------------------------------------------------
M. R. Marks, Director
Date: February 24, 1999 * /S/ R.B. Priory
---------------------- ----------------------------------------------------
R. B. Priory, Director
22
23
SIGNATURES (Continued)
Date: February 24, 1999 * /S/ J.D. Stevenson
---------------------- -----------------------------------------
J. D. Stevenson, Director
Date: February 24, 1999 * /S/ T.B. Sumner Jr.
---------------------- -----------------------------------------
T.B. Sumner, Jr., Director
*By: /S/ Martin J. Strobel
----------------------------------------
Martin J. Strobel, Attorney-in-Fact
23