1
EXHIBIT 13
INTRODUCTION TO FINANCIAL SECTION DANA CORPORATION
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GROWTH AND FINANCIAL PERFORMANCE
At the beginning of this decade, Dana established clear strategic growth
objectives for the 1990's. We believed there was an opportunity for strong
worldwide growth where we had solid technology and leadership in core products
such as axles, driveshafts, gaskets, and other components. We realized this
growth would require expansions of existing capacity, new greenfield plants, and
acquisitions in many different countries. In addition, it would require
extensive training and support from Dana's core business units. Dana's people
accepted this challenge, and sales have grown over 50% since 1990.
Best of all, along with the strong sales growth has come financial
performance. This has been rewarding for the shareholders, as increased earnings
have supported an approximate 100% increase in Dana's stock price since 1990.
CASH FLOWS AND FUTURE OUTLOOK
During the year, $91 million, or 32%, of profits were distributed to
shareholders as we continued Dana's strong historical record of 60 consecutive
years of cash dividends. The balance of $197 million, or 68%, was reinvested in
new facilities and acquisitions for future growth. The total base of
manufacturing assets continues to be realigned, expanded, and aggressively
strengthened with new technology to support these opportunities. Dana's
operating units believe these investments will yield good future growth and
financial performance. We agree and will carefully focus on those with the most
strategic value and highest investment returns.
So, in summary, with product and manufacturing technology leading the way,
Dana's operations are rapidly strengthening their presence in the global
markets. As we stated last year, the ideas and skills of our people are the
engine of this growth. Their efforts and accomplishments are truly creating an
exciting future for all of Dana.
LOGO
/s/ Jim Ayers
Jim Ayers
Chief Financial Officer
2
MANAGEMENT AND INDEPENDENT ACCOUNTANTS' REPORT DANA CORPORATION
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RESPONSIBILITY FOR FINANCIAL STATEMENTS
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We have prepared the accompanying consolidated financial statements and
related information included herein for the three years ended December 31, 1995.
The management of Dana Corporation is primarily responsible for the accuracy
of the financial information that is presented in this annual report. These
statements were prepared in accordance with generally accepted accounting
principles and, where appropriate, we used our estimates and judgment with
consideration to materiality.
To meet management's responsibility for financial reporting, we have
established internal control systems which we believe are adequate to provide
reasonable assurance that our assets are protected from loss. These systems
produce data used for the preparation of financial information.
We believe internal control systems should be designed to provide accurate
information at a reasonable cost which is not out of line with the benefits to
be received. These systems and controls are reviewed by our internal auditors in
order to ensure compliance, and by our independent accountants to support their
audit work.
The Audit Committee of the Board of Directors meets regularly with management,
internal auditors and our independent accountants to review accounting, auditing
and financial matters. Our Audit Committee is composed only of outside
directors. This committee and the independent accountants have free access to
each other with or without management being present.
We believe people are Dana's most important asset. The proper selection,
training and development of our people is a means of ensuring that effective
internal controls and fair, uniform reporting are maintained as standard
practice throughout the Corporation.
/s/ James E. Ayers
James E. Ayers
Chief Financial Officer
/s/ Melvin H. Rothlisberger
Melvin H. Rothlisberger
Vice President and Corporate Controller
REPORT OF INDEPENDENT ACCOUNTANTS
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Price Waterhouse LLP
LOGO
To the Board of Directors and Shareholders
of Dana Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of shareholders' equity and of cash flows,
including pages 23 through 39, present fairly, in all material respects, the
financial position of Dana Corporation and its subsidiaries at December 31, 1994
and 1995, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 15 to the consolidated financial statements, the Company
changed its method of accounting for postemployment benefits effective January
1, 1993.
/s/ Price Waterhouse LLP
Toledo, Ohio
January 25, 1996
A copy of the Annual Report as filed with the Securities and Exchange
Commission on Form 10-K will be mailed at no charge upon request to the
Secretary, Dana Corporation, P.O. Box 1000, Toledo, Ohio 43697.
22
3
BALANCE SHEET
in millions except par value DANA CORPORATION
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December 31
1994 1995
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ASSETS
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Cash $ 48.2 $ 30.3
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Marketable securities, at cost which approximates market 64.0 36.3
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Accounts receivable, less allowance for doubtful accounts of
$19.6 - 1994 and $23.5 - 1995 960.4 1,081.6
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Inventories 740.2 874.8
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Lease financing 931.0 1,004.9
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Investments and other assets 793.2 810.7
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Deferred income tax benefits 226.6 206.0
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Property, plant and equipment, net 1,347.2 1,649.5
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Total Assets $5,110.8 $5,694.1
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Short-term debt $ 583.1 $ 791.4
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Accounts payable 390.2 430.6
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Other liabilities 749.1 742.4
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Deferred employee benefits 1,109.9 1,096.2
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Long-term debt 1,186.5 1,315.1
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Total Liabilities 4,018.8 4,375.7
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Minority interest in consolidated subsidiaries 152.2 153.8
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Shareholders' equity
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Common stock, $1 par value, shares authorized, 240.0;
shares issued, 98.8 - 1994 and 101.5 - 1995 98.8 101.5
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Additional paid-in capital 61.0 68.9
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Retained earnings 887.7 1,096.3
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Deferred translation adjustments (84.9) (88.6)
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Deferred pension expense (22.8) (13.5)
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Total Shareholders' Equity 939.8 1,164.6
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Total Liabilities and Shareholders' Equity $5,110.8 $5,694.1
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The accompanying notes are an integral part of the financial statements.
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4
STATEMENT OF INCOME
in millions except per share amounts DANA CORPORATION
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Year Ended December 31
1993 1994 1995
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NET SALES $5,460.1 $6,613.8 $7,597.7
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Revenue from lease financing and other income 127.4 148.7 189.0
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Foreign currency adjustments (24.2) (22.0) 7.8
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5,563.3 6,740.5 7,794.5
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Costs and expenses
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Cost of sales 4,675.5 5,624.0 6,449.7
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Selling, general and administrative expenses 522.6 611.5 685.2
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Interest expense 137.3 113.4 146.4
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5,335.4 6,348.9 7,281.3
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Income before income taxes 227.9 391.6 513.2
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Estimated taxes on income 89.6 157.4 181.2
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Income before minority interest and equity in earnings (losses)
of affiliates 138.3 234.2 332.0
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Minority interest (26.2) (30.2) (40.4)
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Equity in earnings (losses) of affiliates 16.4 24.2 (3.5)
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Income before the effect of a change in accounting principle 128.5 228.2 288.1
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Effect on prior years of the change in accounting for
postemployment benefits (48.9)
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NET INCOME $ 79.6 $ 228.2 $ 288.1
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Net income per common share before the effect of a change
in accounting principle $1.39 $2.31 $2.84
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Effect on prior years of the change in accounting for
postemployment benefits (.53)
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NET INCOME PER COMMON SHARE $ .86 $2.31 $2.84
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Cash dividends declared and paid per common share $.80 $.83 $.90
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Average shares outstanding 92.5 98.7 101.3
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The accompanying notes are an integral part of the financial statements.
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STATEMENT OF CASH FLOWS
in millions DANA CORPORATION
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Year Ended December 31
1993 1994 1995
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Net cash flows from operating activities $ 484.6 $ 465.8 $ 377.8
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Cash flows from investing activities:
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Purchases of property, plant and equipment (204.0) (337.2) (409.7)
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Purchases of assets to be leased (277.0) (373.4) (400.3)
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Purchase of minority interest of Hayes-Dana, Inc. (92.4)
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Purchase of European axle group (93.0)
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Other acquisitions, additions to investments and other
assets (72.1) (22.6) (40.4)
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Loans made to customers and partnership affiliates (22.8) (39.3) (25.4)
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Payments received on leases 164.1 195.5 201.0
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Proceeds from sales of certain assets and subsidiaries 75.3 55.1 93.4
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Proceeds from sales of leased assets 31.2 37.0 58.9
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Payments received on loans 18.3 38.7 49.1
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Other 20.5 23.3 27.2
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Net cash flows - investing activities (266.5) (422.9) (631.6)
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Cash flows from financing activities:
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Net change in short-term debt 41.5 84.2 191.0
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Issuance of long-term debt 578.3 355.4 418.1
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Payments on long-term debt (776.2) (373.2) (314.9)
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Dividends paid (73.8) (82.0) (91.2)
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Other 14.3 7.3 5.2
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Net cash flows - financing activities (215.9) (8.3) 208.2
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Net increase (decrease) in cash and cash equivalents 2.2 34.6 (45.6)
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Cash and cash equivalents - beginning of year 75.4 77.6 112.2
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Cash and cash equivalents - end of year $ 77.6 $ 112.2 $ 66.6
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Reconciliation of net income to net cash flows from operating
activities:
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Net income $ 79.6 $ 228.2 $ 288.1
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Noncash items included in income:
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Effect on prior years of the change in accounting for
postemployment benefits 48.9
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Depreciation and amortization 195.7 210.6 245.8
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Unremitted earnings of affiliates (1.9) (15.7) 4.3
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Deferred income taxes 31.1 59.4 11.7
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Minority interest 13.4 12.4 7.0
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Change in accounts receivable (98.7) (106.1) (67.5)
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Change in inventories 8.9 (82.8) (81.8)
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Change in other operating assets (27.7) (.6) 8.1
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Change in operating liabilities 211.9 132.2 (34.2)
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Additions to lease and loan loss reserves and adjustment
of real estate to net realizable value 23.3 25.5 17.2
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Other .1 2.7 (20.9)
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Net cash flows from operating activities $ 484.6 $ 465.8 $ 377.8
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The accompanying notes are an integral part of the financial statements.
25
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STATEMENT OF SHAREHOLDERS' EQUITY
in millions except par value DANA CORPORATION
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DEFERRED
$1 PAR VALUE ADDITIONAL PENSION AND
COMMON STOCK PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
ISSUED TREASURY CAPITAL EARNINGS ADJUSTMENTS EQUITY
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Balance, December 31, 1992 $ 64.4 $(611.0) $ 522.1 $ 803.4 $ (71.9) $ 707.0
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Net income for the year ended
December 31, 1993 79.6 79.6
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Cash dividends declared (73.8) (73.8)
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Issuance of shares for employee
stock plans .4 1.5 14.2 16.1
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Deferred translation adjustments (20.6) (20.6)
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Conversion of 5 7/8% debentures to
common stock 2.9 92.0 94.9
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Cost of shares reacquired (1.8) (1.8)
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Balance, December 31, 1993 67.7 (611.3) 628.3 809.2 (92.5) 801.4
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Net income for the year ended
December 31, 1994 228.2 228.2
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Cash dividends declared (82.0) (82.0)
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Two-for-one common stock split 67.7 (67.7)
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Issuance of shares for director and
employee stock plans .3 1.6 6.2 8.1
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Deferred translation adjustments 7.6 7.6
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Deferred pension expense
adjustments (22.8) (22.8)
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Cost of shares reacquired (.7) (.7)
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Retirement of treasury shares (36.9) 610.4 (573.5)
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Balance, December 31, 1994 98.8 -0 - 61.0 887.7 (107.7) 939.8
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NET INCOME FOR THE YEAR ENDED
DECEMBER 31, 1995 288.1 288.1
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CASH DIVIDENDS DECLARED (91.2) (91.2)
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ISSUANCE OF SHARES IN CONNECTION
WITH ACQUISITIONS 2.5 2.9 11.7 17.1
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DEFERRED TRANSLATION ADJUSTMENTS (3.7) (3.7)
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DEFERRED PENSION EXPENSE
ADJUSTMENTS 9.3 9.3
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COST OF SHARES REACQUIRED (1.0) (1.0)
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ISSUANCE OF SHARES FOR EMPLOYEE
STOCK PLANS .2 6.0 6.2
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BALANCE, DECEMBER 31, 1995 $101.5 $ -0- $ 68.9 $1,096.3 $(102.1) $ 1,164.6
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The accompanying notes are an integral part of the financial statements.
26
7
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts DANA CORPORATION
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NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
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Dana Corporation is a global leader in the engineering, manufacturing and
distribution of products and systems for the worldwide vehicular, industrial and
mobile off-highway markets. Dana also owns Dana Credit Corporation (DCC), a
leading provider of lease financing services in certain markets.
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The following summary of significant accounting policies of Dana Corporation
is presented to assist the reader in evaluating the financial statements. Where
appropriate, certain amounts in 1993 and 1994 have been reclassified to conform
with the 1995 presentation.
PRINCIPLES OF CONSOLIDATION
Dana's consolidated financial statements include all significant United States
(U.S.) and international subsidiaries, including its indirect wholly-owned
leasing subsidiary, DCC. Affiliated companies (20% to 50% Dana ownership) are
generally recorded in the consolidated statements using the equity method of
accounting. Operations of affiliates outside North America accounted for on the
equity method of accounting are generally included for periods ended within two
months of Dana's year end to ensure preparation of consolidated financial
statements on a timely basis. Prior to 1995, consolidated subsidiaries outside
of North America were generally included for periods ended within one month of
Dana's year end, however, in 1995 the period was changed to eliminate the one
month delay. The effect of this change was not material to the consolidated
financial statements. Less than 20% owned companies are included in the
consolidated financial statements at the cost of Dana's investment. Dividends,
royalties and fees from these cost basis affiliates are recorded in Dana's
consolidated financial statements when received.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's subsidiaries and equity affiliates
outside the U.S., located in non-highly inflationary economies, are measured
using the local currency as the functional currency. Income and expense items
are translated at average monthly rates of exchange. Gains and losses from
currency transactions of these affiliates are included in net earnings. Assets
and liabilities of these affiliates are translated at the rates of exchange at
the balance sheet date. The resultant translation adjustments are included as
deferred translation adjustments as a component of shareholders' equity. For
affiliates operating in highly inflationary economies, such as Brazil, non-
monetary assets are translated at historical exchange rates and monetary assets
are translated at current exchange rates. Translation adjustments are included
in the determination of income.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
generally on the last-in, first-out basis for U.S. inventories and on the
first-in, first-out or average cost basis for international inventories.
LEASE FINANCING
Lease financing consists of direct financing leases, leveraged leases and
equipment on operating leases. Income on direct financing leases is recognized
by a method which produces a constant periodic rate of return on the outstanding
investment in the lease. Income on leveraged leases is recognized by a method
which produces a constant rate of return on the outstanding investment in the
lease net of the related deferred tax liability in the years in which the net
investment is positive. Initial direct costs are deferred and amortized using
the interest method over the lease period. Equipment under operating leases is
recorded at cost, net of accumulated depreciation. Income from operating leases
is recognized ratably over the term of the leases.
ALLOWANCE FOR LOSSES ON LEASE FINANCING
Provisions for losses on lease financing receivables are determined on the
basis of loss experience and assessment of prospective risk. Resulting
adjustments to the allowance for losses are made to adjust net investment in
lease financing to an estimated collectible amount. Income recognition is
generally discontinued on accounts which are contractually past due and where no
payment activity has occurred within 120 days. Accounts are charged against the
allowance for losses when determined to be uncollectible. Accounts for which
equipment repossession has commenced as the primary means of recovery are
classified within other assets at their estimated realizable value.
GOODWILL
Cost in excess of net assets of companies acquired is generally amortized over
the estimated period of expected benefit, ranging from 10 to 40 years.
LOANS RECEIVABLE
Loans receivable consist primarily of loans to partnership affiliates and
loans secured by first mortgages on real property. The loans to partnership
affiliates are secured by the partnerships' assets.
27
8
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts DANA CORPORATION
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NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT'D.)
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ALLOWANCE FOR LOSSES ON LOANS RECEIVABLE
Provisions for losses on loans receivable are determined on the basis of loss
experience and assessment of prospective risk. Resulting adjustments to the
allowance for losses are made to adjust loans receivable to an estimated
collectible amount. Income recognition is generally discontinued on accounts
which are contractually past due and where no payment activity has occurred
within 120 days. Accounts are charged against the allowance for losses when
determined to be uncollectible.
INCOME TAXES
Current tax liabilities and assets are recognized for the estimated taxes
payable or refundable on the tax returns for the current year. Deferred tax
liabilities or assets are recognized for the estimated future tax effects
attributable to temporary differences and carryforwards that result from events
that have been recognized in either the financial statements or the tax returns,
but not both. The measurement of current and deferred tax liabilities and assets
is based on provisions of enacted tax laws. Deferred tax assets are reduced, if
necessary, by the amount of any tax benefits that are not expected to be
realized. Dana uses the "flow-through" method of accounting for investment tax
credits, except for investment tax credits arising from leveraged leases and
certain direct financing leases for which the deferred method is used for
financial statement purposes.
PROPERTIES AND DEPRECIATION
Property, plant and equipment is valued at historical costs. Depreciation is
computed over the estimated useful lives of property, plant and equipment using
primarily the straight-line method for financial reporting purposes and
primarily accelerated depreciation methods for federal income tax purposes.
FINANCIAL INSTRUMENTS
The reported fair values of financial instruments are based on a variety of
factors. Where available, fair values represent quoted market prices for
identical or comparable instruments. Where quoted market prices are not
available, fair values have been estimated based on assumptions concerning the
amount and timing of estimated future cash flows and assumed discount rates
reflecting varying degrees of credit risk. Accordingly, the fair values may not
represent actual values of the financial instruments that could have been
realized as of December 31, 1994 and 1995, or that will be realized in the
future.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into various types of interest rate and foreign currency
agreements but does not trade in derivative financial instruments. Gains and
losses relating to qualifying hedges of firm commitments or anticipated
transactions are deferred and recognized as adjustments of carrying amounts when
the hedged transaction occurs. Interest rate swaps and caps are primarily used
to manage exposure to fluctuations in interest rates. Differentials paid or
received on interest rate agreements are accrued and recognized as adjustments
to interest expense. Premiums paid on interest rate caps are amortized to
interest expense over the term of the agreement and unamortized premiums are
included in other assets.
DCC has one interest rate-based option which is marked to market and included
in other liabilities. Changes in the fair value of this instrument are reported
in other income.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs can be reasonably
estimated. Estimated costs are based upon enacted laws and regulations, existing
technology and the most probable method of remediation. The costs determined are
not discounted and exclude the effects of inflation and other societal and
economic factors. Where the cost estimates result in a range of equally probable
amounts, the lower end of the range is accrued.
PENSION PLANS
Annual net periodic pension costs under the Company's defined benefit pension
plans are determined on an actuarial basis. Dana's policy is to fund these costs
as accrued, including amortization of the initial unrecognized net obligation
over 15 years and obligations arising due to plan amendments over the period
benefited, through deposits with trustees and purchases of group annuity
contracts. Benefits are determined based upon employees' length of service,
wages and a combination of length of service and wages.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Annual net postretirement benefits liability and expense under the Company's
benefit plans are determined on an actuarial basis. Dana's current policy is to
pay these benefits as they become due. Benefits are determined primarily based
upon employees' length of service and include applicable employee cost sharing.
28
9
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts DANA CORPORATION
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NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT'D.)
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POSTEMPLOYMENT BENEFITS
Annual net postemployment benefits liability and expense under the Company's
benefit plans are accrued as service is rendered for those obligations that
accumulate or vest and can be reasonably estimated. Obligations that do not
accumulate or vest are recorded when payment of the benefits is probable and the
amounts can be reasonably estimated.
NET INCOME PER COMMON SHARE
Primary earnings per common share is computed on the basis of the weighted
average number of common shares outstanding during each year. Shares reserved
for issuance under the Company's stock option and deferred compensation plans
did not have a material dilutive effect on earnings per share. If the 1993
conversion of the 5 7/8% debentures had occurred at the beginning of that year,
it would not have had a material effect on earnings per share.
STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, the Company considers highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
NOTE 2. COMMON SHARES
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In connection with employee stock plans, Dana reacquired 68,246 shares in
1993, 23,570 in 1994 and 36,372 in 1995.
At December 15, 1993, the final day the 5 7/8% debentures could be converted,
holders of $146.7 principal amount of debentures had converted their debentures
into 5,818,624 shares of Dana common stock resulting in a noncash increase to
shareholder's equity of $94.9.
In April 1994, Dana's Board of Directors approved a two-for-one stock split
effective for shareholders of record on June 1, 1994. Share and per share
amounts have been restated to reflect the stock split.
During 1994, Dana retired all of the common shares held in treasury. The cost
of reacquired shares in excess of par value was charged to additional paid-in
capital.
The weighted average number of common shares outstanding was 92,532,938 in
1993, 98,688,775 in 1994 and 101,296,858 in 1995.
NOTE 3. PREFERRED SHARE PURCHASE
RIGHTS
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The Rights Agreement adopted by Dana's Board in 1986 and amended in 1988
provides that one Preferred Share Purchase Right be issued for each share of
Dana common stock outstanding on and after July 25, 1986. In certain
circumstances, the holder of each Right may buy, at an exercise price of $50,
one 1/200th of a share of Junior Participating Preferred Stock. The Rights are
exercisable only if a person or entity acquires, or announces a tender offer
which would result in acquiring, beneficial ownership of 20% of Dana's common
stock. Dana may redeem the Rights at $.025 each before a 20% position has been
acquired. The Rights expire on July 25, 1996, unless redeemed sooner.
If 30% of Dana's common stock is acquired, or certain transactions occur which
increase a 20% holder's ownership by more than 1%, or a 20% holder engages in
certain self-dealing activities, the holder of each Right may purchase a number
of Dana common shares having a market value equal to twice the Right's current
exercise price.
If Dana is acquired in a merger or similar transaction or 50% of its assets or
earning power are transferred, the holder of each Right may purchase a number of
the acquiring company's common shares having a market value equal to twice the
Right's current exercise price.
If 30% (but less than 50%) of Dana's common stock is acquired, the Board may
exchange each Right for one share of Dana's common stock.
In the above situations, the Rights owned by any 20% or more holder become
void and cannot be exercised.
Before a 20% position has been acquired, Dana's Board may reduce the above
percentage thresholds to not less than 15%.
NOTE 4. PREFERRED SHARES
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Dana has authorized 5,000,000 shares of preferred stock, without par value,
including 1,000,000 shares which have been reserved for issuance under the
Rights Agreement. At December 31, 1995, no shares of preferred stock had been
issued.
NOTE 5. INVENTORIES
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The components of inventory are as follows:
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December 31
1994 1995
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Raw materials $186.4 $230.1
Work in process and finished goods 553.8 644.7
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$740.2 $874.8
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Inventories amounting to $431.6 and $445.1 at December 31, 1994 and 1995 were
valued using the LIFO method. If all inventories were valued at replacement
cost, inventories would be increased by $106.5 and $117.5 at December 31, 1994
and 1995, respectively.
29
10
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
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NOTE 6. INTERNATIONAL OPERATIONS
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The following is a summary of the significant financial information of Dana's
consolidated international subsidiaries:
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December 31
1993 1994 1995
- -------------------------------------------------------
Assets $1,167.9 $1,518.5 $1,928.9
Liabilities 577.4 814.2 1,113.6
Net sales 1,327.8 1,645.5 2,121.9
Net income 49.3 68.1 119.5
Dana's equity in:
Net assets 448.7 552.5 662.0
Net income 23.1 38.1 81.7
Cumulative undistributed earnings of international subsidiaries for which U.S.
income taxes, exclusive of foreign tax credits, have not been provided
approximated $331.3 at December 31, 1995. Management intends to permanently
reinvest undistributed earnings of Dana's international subsidiaries,
accordingly, no U.S. income taxes have been provided on these undistributed
earnings. If the total undistributed earnings of international subsidiaries had
been remitted in 1995, a significant amount of the additional tax provision
would be offset by foreign tax credits.
Dana's consolidated international subsidiaries are located throughout the
world with no individual subsidiary or country accounting for more than 10% of
consolidated sales or assets. With the exception of certain affiliates located
in South America, the functional currency of the Company's international
subsidiaries is the local currency. Certain subsidiaries have transactions in
currencies other than their functional currencies and from time to time enter
into forward and option contracts to hedge the purchase of inventory or to sell
nonfunctional currency receipts. Currency forward and option contracts in the
aggregate are not material.
Dana has equity interests (20% to 50% ownership) in a number of affiliated
companies in South America, Asia and other areas of the world. The following is
a summary of the significant financial information of affiliated companies
accounted for on the equity method:
- ----------------------------------------------------------------
December 31
1993 1994 1995
- ------------------------------------------------------
Current assets $629.0 $409.6 $343.3
Other assets 323.4 356.4 244.2
Current liabilities 577.7 424.7 463.4
Other liabilities 147.5 136.1 54.8
Shareholders' equity 227.2 205.2 69.3
Net sales 972.0 846.8 682.5
Gross profit 193.0 162.3 140.8
Net income (loss) 39.6 40.3 (22.1)
Dana's equity in:
Net assets 92.3 100.5 44.8
Net income (loss) 13.2 18.9 (8.4)
NOTE 7. INVESTMENTS IN PARTNERSHIPS
- ----------------------------------------------------------------
Certain DCC subsidiaries have a number of U.S. investments in partnerships
which are accounted for on the equity method. Dana's share of earnings of these
partnerships is included in income as earned. The partnerships are engaged
primarily in the leasing and financing of equipment or real estate to commercial
entities.
Summarized financial information of the partnerships on a combined basis is as
follows:
- ----------------------------------------------------------------
December 31
1993 1994 1995
- ------------------------------------------------------
Assets $956.8 $939.5 $932.4
Liabilities 733.1 743.7 757.7
Partners' capital 223.7 195.8 174.7
Revenue 115.4 130.1 116.2
Net income 6.8 9.7 9.0
Dana's share in:
Net assets 80.0 58.0 44.5
Net income 3.2 5.3 4.9
NOTE 8. SHORT-TERM DEBT
- ----------------------------------------------------------------
Short-term funds for certain U.S. and international operations are obtained
through the issuance of commercial paper, short-term notes payable to banks and
bank overdrafts.
At December 31, 1995, Dana had $30.0 of commercial paper outstanding, $275.8
borrowed against uncommitted bank lines and $28.9 of bank overdrafts at its
international subsidiaries. DCC had $227.3 of commercial paper issued, $15.9 and
$128.5 borrowed against committed and uncommitted borrowing lines, respectively,
and Diamond Financial Holdings, Inc. (DFHI) had $25.0 and $60.0 borrowed against
their committed and uncommitted borrowing lines.
Dana, DCC and DFHI have committed borrowing lines of $405.0, $379.0 and $30.0,
respectively, and uncommitted borrowing lines of $1,024.0, $435.0 and $60.0. The
banks providing committed lines are compensated with facility or commitment
fees. Amounts paid are not considered to be material and no fees are required
for the uncommitted bank lines.
Selected details of short-term borrowings are as follows:
- ----------------------------------------------------------------
Weighted
average
interest
Amount rate
- -----------------------------------------------------
Balance at December 31, 1994 $583.1 6.4%
Average during 1994 585.6 5.2%
Maximum during 1994
(month end) 651.3 5.4%
BALANCE AT DECEMBER 31, 1995 791.4 6.5%
AVERAGE DURING 1995 641.5 6.6%
MAXIMUM DURING 1995
(MONTH END) 791.4 6.5%
30
11
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 9. LONG-TERM DEBT
- ----------------------------------------------------------------
December 31
1994 1995
- ----------------------------------------------------------------
Corporate indebtedness --
Unsecured notes payable,
fixed rates, 4.90% -
8.99%, due 1996 to 2000 $ 447.0 $ 607.0
Unsecured notes payable,
variable rates, 6.41% -
6.69%, due 1996 to 1998 70.0 70.0
Various industrial revenue
bonds and other 7.3 9.2
DCC indebtedness --
Various notes payable,
unsecured, variable
rates, 5.92% - 7.21%, due
1996 to 1998 425.5 331.8
Various notes payable,
unsecured, fixed rates,
5.52% - 9.99%, due 1996
to 2000 187.9 244.4
Various notes payable, non-
recourse to issuer, 7.20%
- 12.05%, due 1996 to
2002 31.6 24.5
Indebtedness of other
consolidated subsidiaries 17.2 28.2
- ----------------------------------------------------------------
$1,186.5 $1,315.1
- ----------------------------------------------------------------
Interest paid on short-term and long-term debt was $134.0, $114.7 and $143.0
during 1993, 1994 and 1995, respectively.
The aggregate amounts of maturities of all long-term debt for each of the five
years succeeding December 31, 1995, are as follows: 1996, $341.3; 1997, $422.2;
1998, $364.2; 1999, $89.3 and 2000, $80.5.
NOTE 10. INTEREST RATE AGREEMENTS
- ----------------------------------------------------------------
Dana and DCC enter into interest rate agreements to manage interest rate risk,
thereby reducing exposure to future interest rate movements. Under interest rate
swap agreements, Dana agrees with other parties to exchange, at specific
intervals, the difference between fixed rate and floating rate interest amounts
calculated by reference to an agreed notional amount. At December 31, 1995, Dana
was committed to pay an average fixed rate of 7.0% and receive a variable rate
of 6.2% on notional amounts of $88.4. The notional amounts of interest rate
swaps expire as follows: 1996, $28.4 and 1998, $60.0.
At December 31, 1995, DCC was committed to pay an average fixed rate of 7.0%
and receive a variable rate of 6.0% on notional amounts of $368.1 and receive an
average fixed rate of 5.2% and pay an average variable rate of 5.8% on notional
amounts of $40.0. DCC's notional amounts of interest rate swaps expire as
follows: 1996, $60.5; 1997, $75.6; 1998, $56.4; 1999, $57.8; 2000, $132.8 and
2002, $25.0.
DCC also utilizes interest rate cap agreements to reduce the impact of changes
in interest rates on its floating rate debt. At December 31, 1995, cap
agreements covering $14.7 of variable rate Canadian dollar debt entitle DCC to
recover from the counterparty the amounts, if any, by which actual three-month
Canadian bankers acceptance rates exceed 9.5% - 10% through June 1997.
To reduce its interest rate obligations under an existing swap agreement
having a notional amount of $70.0, DCC granted the counterparty an option,
expiring in 2000, to extend the original maturity to 2007 at a fixed rate to DCC
of 9.0%. This option has been marked to market.
NOTE 11. STOCK OPTION PLANS
- ----------------------------------------------------------------
The Company's employee stock option plans provide for the granting of options
at prices no less than 85% of the market value at the date of grant and the
options are exercisable for a period not to exceed ten years from date of grant.
The plans provide for the granting of stock appreciation rights separately or in
conjunction with all or any part of an option, either at the time of grant or at
any subsequent time during the term of the option. While the plans provide for
grants of options and stock appreciation rights at 85% of market, to date all
grants have been at market value at date of grant.
The following summarizes the stock option transactions for the years ended
December 31, 1994 and 1995:
- ----------------------------------------------------------------
Number of Per share option
shares price
- ----------------------------------------------------------------
Outstanding at
December 31, 1993 1,697,259 $22.13 - $55.13
Restated for stock
split 3,394,518 11.06 - 27.56
Granted -- 1994 1,045,950 29.06
Exercised -- 1994 (309,915) 11.06 - 23.44
Cancelled -- 1994 (19,150) 11.06 - 23.44
---------
Outstanding at
December 31, 1994 4,111,403 $12.94 - $29.06
GRANTED -- 1995 991,000 31.06
EXERCISED -- 1995 (223,430) 12.94 - 29.06
CANCELLED -- 1995 (11,000) 15.78 - 29.06
---------
OUTSTANDING AT
DECEMBER 31, 1995 4,867,973 $12.94 - $31.06
---------
EXERCISABLE AT
DECEMBER 31, 1995 2,475,190
---------
SHARES AVAILABLE FOR
FUTURE GRANTS AT
DECEMBER 31, 1995 4,568,606
---------
31
12
NOTES TO FINANCIAL STATEMENTS
in millions except share and per share amounts DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 11. STOCK OPTION PLANS (CONT'D.)
- ----------------------------------------------------------------
In 1993, the shareholders approved a stock option plan for non-employee
Directors of the Company. The plan provides for the automatic granting of
options at prices equal to the market value at the date of grant and the options
are exercisable after one year for a period not to exceed ten years from date of
grant. In 1993, options were granted under this plan to purchase 10,500 shares
at $48.50 per share (21,000 shares at $24.25 on a post stock split basis).
During 1994, options were granted to purchase 21,000 at $28.88 per share and
options to purchase 3,000 shares were exercised at $24.25 per share. During
1995, options were granted to purchase 24,000 shares at $24.81 per share. No
options were exercised under this plan during 1995. At December 31, 1995, there
were 63,000 options outstanding at exercise prices ranging from $24.25 to $28.88
per share, options for 39,000 shares were exercisable and there were 64,000
options available for future grants under this plan.
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." This statement sets forth standards for accounting for stock-
based compensation or allows companies to continue to account for stock-based
compensation under the requirements of Accounting Principles Board Opinion No.
25 and make additional disclosure in the notes to the financial statements. It
is Dana's intention to continue to account for stock-based compensation in
accordance with APB Opinion No. 25 and provide the additional disclosure in the
notes to the financial statements in 1996.
NOTE 12. STOCK PURCHASE PLAN
- ----------------------------------------------------------------
All full-time U.S. and certain non-U.S. employees are eligible to participate
in Dana's employee stock purchase plan. The plan provides that participants may
authorize Dana to withhold up to 15% of earnings and deposit such amounts with
an independent custodian. The custodian causes to be purchased, as nominee for
the participants, common stock of Dana at prevailing market prices, allocates
the shares to the participants' accounts and distributes the shares to the
participants upon request.
Under the plan, Dana contributes on behalf of each participant up to 50% of
the participant's contributions. The Company's contributions will accumulate
over a five-year period, provided that the shares are left in the plan. If any
shares are withdrawn by a participant before the end of five years, the amount
of the Company match toward those shares will depend on the period of time that
the shares have been in the plan. The custodian has caused to be purchased
687,800 shares in 1993, 782,225 shares in 1994 and 1,025,354 shares in 1995 of
Dana's common stock on behalf of the employees and the Company's charge to
expense amounted to $4.1 in 1993, $4.7 in 1994 and $5.2 in 1995.
NOTE 13. ADDITIONAL COMPENSATION PLANS
- ----------------------------------------------------------------
Dana has numerous additional compensation plans, including gain sharing and
group incentive plans, which provide for payments computed under formulas which
recognize increased productivity and improved performance. The total amount
earned by Dana employees from all such plans amounted to $81.1, $106.7 and
$116.7 in 1993, 1994 and 1995, respectively.
Under one of these plans, in which certain officers and other key employees
participate, a percentage of participants' compensation is accrued for
additional compensation if certain profit levels are attained. Awards under the
plan are paid in cash and may, at the discretion of the Board's Compensation
Committee, be paid immediately or deferred. Some awards deferred prior to May
1991 may be paid in shares of the Company's common stock. Dana awarded (based on
prior period performance) $4.4 in 1993, $4.5 in 1994 and $10.6 in 1995; 31,646,
20,404 and 16,891 shares of Dana's common stock were issued and amounts
equivalent to dividends and interest of $.4, $.4 and $.6 were credited to
deferred awards in 1993, 1994 and 1995, respectively. Total charges to expense
relating to the plan amounted to $5.6 in 1993, $12.1 in 1994 and $16.1 in 1995.
The Company has a Restricted Stock Plan whereby certain key employees are
granted restricted shares of common stock subject to forfeiture until the
restrictions lapse or terminate. With certain exceptions, the employee must
remain with the Company for a period of years after the date of grant to receive
the full number of shares granted. Shares granted in 1993, 1994 and 1995 were
58,348, 28,000 and 24,000, respectively. Total charges to expense for this plan
amounted to $.6, $.7 and $.6, in 1993, 1994 and 1995, respectively. At December
31, 1995, 655,227 shares were authorized for future issuance under this plan.
32
13
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 14. PENSIONS
- ----------------------------------------------------------------
Dana provides retirement benefits for substantially all of its employees under
several defined benefit and defined contribution pension plans. Pension expense
approximated $60.3 in 1993, $65.0 in 1994 and $62.4 in 1995.
Net periodic pension cost for defined benefit plans is computed as follows:
- ----------------------------------------------------------------
Year Ended December 31
1993 1994 1995
- ----------------------------------------------------------------
Service cost $ 31.3 $ 35.6 $ 36.4
Interest cost 105.1 110.0 123.5
Actual return on plan
assets (219.9) 45.3 (407.9)
Amortization of
unrecognized prior
service cost 16.0 14.7 9.0
Amortization of
initial
unrecognized net
obligation 6.2 5.7 5.0
Unrecognized gain
(loss) 117.7 (147.4) 285.0
- ----------------------------------------------------------------
Net periodic
pension cost $ 56.4 $ 63.9 $ 51.0
- ----------------------------------------------------------------
The funded status of defined benefit plans at
December 31, 1994 was as follows:
- ----------------------------------------------------------------
Accumu- Assets
lated Exceed
Benefits Accumu-
Exceed lated
Assets Benefits Total
- ----------------------------------------------------------------
Actuarial present
value of:
Vested benefits $ 789.6 $ 581.4 $ 1,371.0
Non-vested
benefits 81.5 9.6 91.1
- ----------------------------------------------------------------
Accumulated benefit
obligation $ 871.1 $ 591.0 $ 1,462.1
- ----------------------------------------------------------------
Actuarial present
value of projected
benefit obligation $(883.1) $(629.2) $(1,512.3)
Plan assets at fair
value 712.6 693.1 1,405.7
- ----------------------------------------------------------------
Funded status $(170.5) $ 63.9 $ (106.6)
- ----------------------------------------------------------------
Unrecognized prior
service cost $ (14.7) $ (34.1) $ (48.8)
Unrecognized net gain
(loss) (52.0) 81.6 29.6
Accrued pension cost (44.0) (10.8) (54.8)
Unrecognized initial
obligation (59.8) 27.2 (32.6)
- ----------------------------------------------------------------
$(170.5) $ 63.9 $ (106.6)
- ----------------------------------------------------------------
The funded status of defined benefit plans at
December 31, 1995 was as follows:
- ----------------------------------------------------------------
Accumu- Assets
lated Exceed
Benefits Accumu-
Exceed lated
Assets Benefits Total
- ----------------------------------------------------------------
Actuarial present
value of:
Vested benefits $ 934.2 $ 653.0 $ 1,587.2
Non-vested
benefits 87.1 12.7 99.8
- ----------------------------------------------------------------
Accumulated benefit
obligation $ 1,021.3 $ 665.7 $ 1,687.0
- ----------------------------------------------------------------
Actuarial present
value of projected
benefit obligation $(1,038.3) $(779.8) $(1,818.1)
Plan assets at fair
value 900.8 879.4 1,780.2
- ----------------------------------------------------------------
Funded status $ (137.5) $ 99.6 $ (37.9)
- ----------------------------------------------------------------
Unrecognized prior
service cost $ (14.7) $ (32.1) $ (46.8)
Unrecognized net
gain (loss) (37.7) 120.9 83.2
Accrued pension cost (37.3) (13.2) (50.5)
Unrecognized initial
obligation (47.8) 24.0 (23.8)
- ----------------------------------------------------------------
$ (137.5) $ 99.6 $ (37.9)
- ----------------------------------------------------------------
The assumptions used to determine pension costs and projected benefit
obligations are as follows:
- ----------------------------------------------------------------
U.S. Plans
1993 1994 1995
- ----------------------------------------------------------------
Expected long-term rate
of return on plan
assets 7.75% 8.5% 8.5%
Discount rate 7.25% 8% 6.75%
Rate of increase in
future compensation
levels 5% 5% 5%
- ----------------------------------------------------------------
International Plans
1993 1994 1995
- ----------------------------------------------------------------
Expected long-term rate
of return on plan
assets 8 - 9% 8 - 9% 8 - 9%
Discount rate 7 - 9% 7 - 9% 7 - 8%
Rate of increase in
future compensation
levels 4 - 7.5% 3 - 7.5% 3 - 7.5%
Plan assets are invested in a diversified portfolio that consists primarily of
equity and debt securities.
33
14
NOTES TO FINANCIAL STATEMENTS
in millions except per share amounts DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 15. MEDICAL CARE AND OTHER
BENEFITS
- ----------------------------------------------------------------
Dana and certain of its subsidiaries provide medical and life insurance
benefits for certain active and retired employees. These benefits are provided
through various insurance carriers whose charges to Dana are based on the
benefits paid during the year. Substantially all of the retiree medical cost
relates to North American retirees since most international retirees are covered
by government-sponsored programs.
Net annual postretirement benefit cost is computed as follows:
- ----------------------------------------------------------------
Year Ended December 31
1993 1994 1995
- ------------------------------------------------------
Service cost $ 11.2 $ 13.6 $ 9.2
Interest cost 59.1 60.2 58.4
Net amortization and
deferral (14.0) (12.3) (17.2)
- ------------------------------------------------------
Net annual
postretirement
benefit cost $ 56.3 $ 61.5 $ 50.4
- ------------------------------------------------------
Postretirement benefit obligations, none of which are funded, are summarized
as follows:
- ----------------------------------------------------------------
December 31
1994 1995
- ------------------------------------------------------
Accumulated postretirement
benefit obligations:
Retirees and dependents $490.9 $ 608.8
Active participants eligible
to retire and receive
benefits 89.4 107.9
Active participants not yet
fully eligible 125.2 143.5
- ------------------------------------------------------
Total accumulated postretirement
benefit obligation 705.5 860.2
Unamortized plan amendments 135.2 117.9
Unamortized net gain (loss) 4.8 (131.8)
- ------------------------------------------------------
Accrued postretirement benefits
other than pensions $845.5 $ 846.3
- ------------------------------------------------------
The discount rate used in determining the accumulated postretirement benefit
obligation was 8.25% in 1994 and 7% in 1995. The assumed medical costs trend
rates result in per capita net incurred medical claims increasing 8.4% in 1996.
The rate decreases to 5.3% by the year 2008. If the assumed medical costs trend
rates were increased by 1%, the accumulated postretirement benefit obligation as
of December 31, 1995, would increase by $60.1 and the aggregate of the service
and interest cost components of the net annual postretirement benefit cost would
be increased by $4.6.
Dana adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," effective January 1, 1993. The effect of adopting SFAS No. 112 in
1993 resulted in a $48.9 after-tax charge to income ($.53 per share).
NOTE 16. BUSINESS SEGMENTS
- ----------------------------------------------------------------
Dana operates principally in three business segments: Vehicular, Industrial
and Lease Financing. The Vehicular segment consists primarily of the
manufacturing and marketing of axles, structural components, transmissions,
joints and shafts, clutches and engine parts (such as pistons, piston rings,
filters and gaskets). The Industrial segment manufactures and markets various
products, including those for off-highway motor vehicles. The Lease Financing
segment consists of DCC whose primary operating subsidiaries are engaged in
leasing and finance operations.
Lease financing revenue includes lease financing income, fees and interest.
Other income includes dividends and interest. Other expense includes interest
and corporate expenses. Corporate assets include cash, marketable securities,
accounts receivable and investments (excluding assets which can be identified to
lease financing).
The "Other International" geographic area is comprised primarily of Brazil and
Canada, neither of which exceeds 10% of the consolidated amounts. Interarea
transfers between countries are transferred at the prevailing market price.
Export sales from the U.S. to customers outside the U.S. amounted to $385.4 in
1993, $430.7 in 1994 and $554.6 in 1995. Total export sales (including sales to
Dana's international subsidiaries which are eliminated for financial statement
presentation) were $526.2, $587.6 and $735.1 in 1993, 1994 and 1995,
respectively.
Worldwide sales to Ford Motor Company and subsidiaries amounted to $963.7,
$1,082.9 and $1,299.3 in 1993, 1994 and 1995, respectively, which represented
18%, 16% and 17% of Dana's consolidated sales. Sales to Chrysler Corporation and
subsidiaries in 1993, 1994 and 1995 amounted to $605.9, $815.7 and $968.0,
respectively, representing 11%, 12% and 13% of Dana's consolidated sales. Sales
to Ford and Chrysler were primarily from the Company's Vehicular segment. No
other customer accounted for more than 10% of Dana's consolidated sales.
34
15
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 16. BUSINESS SEGMENTS (CONT'D.)
- --------------------------------------------------------------------------------
LEASE
VEHICULAR INDUSTRIAL FINANCING CONSOLIDATED
- ---------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1993
- ---------------------------------------------------------------------------------------------------------------
Sales to customers $4,499.8 $ 957.1 $ 3.2 $5,460.1
- ---------------------------------------------------------------------------------------------------------------
Lease financing revenue 115.4 115.4
- ---------------------------------------------------------------------------------------------------------------
Total revenue $4,499.8 $ 957.1 $ 118.6 $5,575.5
- ---------------------------------------------------------------------------------------------------------------
Operating income $ 424.0 $ 39.9 $ 4.0 $ 467.9
- ----------------------------------------------------------------------------------------------
Other income 12.0
- ---------------------------------------------------------------------------------------------------------------
Other expense (252.0)
- ---------------------------------------------------------------------------------------------------------------
Income before income taxes $ 227.9
- ---------------------------------------------------------------------------------------------------------------
Assets identified to segments $1,511.4 $ 441.7 $1,310.3 $3,263.4
- ----------------------------------------------------------------------------------------------
Corporate assets 1,368.5
- ---------------------------------------------------------------------------------------------------------------
Total assets $4,631.9
- ---------------------------------------------------------------------------------------------------------------
Depreciation $ 131.4 $ 33.7 $ 3.0
- ---------------------------------------------------------------------------------------------------------------
Capital expenditures $ 166.5 $ 35.9 $ 2.2
- ---------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994
- ---------------------------------------------------------------------------------------------------------------
Sales to customers $5,298.5 $1,308.9 $ 6.4 $6,613.8
- ---------------------------------------------------------------------------------------------------------------
Lease financing revenue 139.5 139.5
- ---------------------------------------------------------------------------------------------------------------
Total revenue $5,298.5 $1,308.9 $ 145.9 $6,753.3
- ---------------------------------------------------------------------------------------------------------------
Operating income $ 520.1 $ 56.9 $ 11.6 $ 588.6
- ----------------------------------------------------------------------------------------------
Other income 9.1
- ---------------------------------------------------------------------------------------------------------------
Other expense (206.1)
- ---------------------------------------------------------------------------------------------------------------
Income before income taxes $ 391.6
- ---------------------------------------------------------------------------------------------------------------
Assets identified to segments $1,661.4 $ 572.8 $1,387.4 $3,621.6
- ----------------------------------------------------------------------------------------------
Corporate assets 1,489.2
- ---------------------------------------------------------------------------------------------------------------
Total assets $5,110.8
- ---------------------------------------------------------------------------------------------------------------
Depreciation $ 135.7 $ 37.0 $ 3.0
- ---------------------------------------------------------------------------------------------------------------
Capital expenditures $ 276.0 $ 53.3 $ 3.4
- ---------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------------------
SALES TO CUSTOMERS $6,069.8 $1,526.5 $ 1.4 $7,597.7
- ---------------------------------------------------------------------------------------------------------------
LEASE FINANCING REVENUE 155.3 155.3
- ---------------------------------------------------------------------------------------------------------------
TOTAL REVENUE $6,069.8 $1,526.5 $ 156.7 $7,753.0
- ---------------------------------------------------------------------------------------------------------------
OPERATING INCOME $ 585.9 $ 103.7 $ 22.8 $ 712.4
- ----------------------------------------------------------------------------------------------
OTHER INCOME 33.7
- ---------------------------------------------------------------------------------------------------------------
OTHER EXPENSE (232.9)
- ---------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES $ 513.2
- ---------------------------------------------------------------------------------------------------------------
ASSETS IDENTIFIED TO SEGMENTS $2,077.5 $ 614.8 $1,468.4 $4,160.7
- ----------------------------------------------------------------------------------------------
CORPORATE ASSETS 1,533.4
- ---------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $5,694.1
- ---------------------------------------------------------------------------------------------------------------
DEPRECIATION $ 177.0 $ 44.2 $ 2.0
- ---------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES $ 332.9 $ 61.4 $ 10.7
- ---------------------------------------------------------------------------------------------------------------
35
16
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 16. BUSINESS SEGMENTS (CONT'D.)
- --------------------------------------------------------------------------------
ADJUSTMENTS
UNITED OTHER AND
STATES EUROPE INTERNATIONAL ELIMINATIONS TOTAL
- ----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1993
- ----------------------------------------------------------------------------------------------------------------------
Sales to customers $4,132.3 $ 511.3 $ 816.5 $5,460.1
- ----------------------------------------------------------------------------------------------------------------------
Lease financing revenue 93.8 16.3 5.3 115.4
- ----------------------------------------------------------------------------------------------------------------------
Interarea transfers 140.8 3.7 81.8 $ (226.3)
- ----------------------------------------------------------------------------------------------------------------------
$4,366.9 $ 531.3 $ 903.6 $ (226.3) $5,575.5
- ----------------------------------------------------------------------------------------------------------------------
Operating income $ 370.9 $ 1.8 $ 95.2 $ 467.9
- ----------------------------------------------------------------------------------------------------------------------
Other income 12.0 12.0
- ----------------------------------------------------------------------------------------------------------------------
Other expense (216.3) (8.7) (27.0) (252.0)
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes $ 166.6 $ (6.9) $ 68.2 $ 227.9
- ----------------------------------------------------------------------------------------------------------------------
Assets identified $2,404.6 $ 403.3 $ 455.5 $3,263.4
- ----------------------------------------------------------------------------------------------------------------------
Corporate assets 1,009.5 140.5 218.5 1,368.5
- ----------------------------------------------------------------------------------------------------------------------
Total assets $3,414.1 $ 543.8 $ 674.0 $4,631.9
- ----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994
- ----------------------------------------------------------------------------------------------------------------------
Sales to customers $4,968.3 $ 713.0 $ 932.5 $6,613.8
- ----------------------------------------------------------------------------------------------------------------------
Lease financing revenue 104.2 26.7 8.6 139.5
- ----------------------------------------------------------------------------------------------------------------------
Interarea transfers 156.8 7.5 104.6 $ (268.9)
- ----------------------------------------------------------------------------------------------------------------------
$5,229.3 $ 747.2 $ 1,045.7 $ (268.9) $6,753.3
- ----------------------------------------------------------------------------------------------------------------------
Operating income $ 462.0 $ 14.0 $ 112.6 $ 588.6
- ----------------------------------------------------------------------------------------------------------------------
Other income 9.1 9.1
- ----------------------------------------------------------------------------------------------------------------------
Other expense (170.6) (13.2) (22.3) (206.1)
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 300.5 $ .8 $ 90.3 $ 391.6
- ----------------------------------------------------------------------------------------------------------------------
Assets identified $2,520.3 $ 577.5 $ 523.8 $3,621.6
- ----------------------------------------------------------------------------------------------------------------------
Corporate assets 1,108.4 96.5 284.3 1,489.2
- ----------------------------------------------------------------------------------------------------------------------
Total assets $3,628.7 $ 674.0 $ 808.1 $5,110.8
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------------------------
SALES TO CUSTOMERS $5,475.9 $ 977.0 $ 1,144.8 $7,597.7
- ----------------------------------------------------------------------------------------------------------------------
LEASE FINANCING REVENUE 104.0 37.3 14.0 155.3
- ----------------------------------------------------------------------------------------------------------------------
INTERAREA TRANSFERS 180.5 12.6 118.7 $ (311.8)
- ----------------------------------------------------------------------------------------------------------------------
$5,760.4 $1,026.9 $ 1,277.5 $ (311.8) $7,753.0
- ----------------------------------------------------------------------------------------------------------------------
OPERATING INCOME $ 573.7 $ 36.7 $ 102.0 $ 712.4
- ----------------------------------------------------------------------------------------------------------------------
OTHER INCOME 10.3 23.4 33.7
- ----------------------------------------------------------------------------------------------------------------------
OTHER EXPENSE (223.8) (9.1) (232.9)
- ----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES $ 360.2 $ 27.6 $ 125.4 $ 513.2
- ----------------------------------------------------------------------------------------------------------------------
ASSETS IDENTIFIED $2,631.3 $ 863.8 $ 665.6 $4,160.7
- ----------------------------------------------------------------------------------------------------------------------
CORPORATE ASSETS 1,244.7 116.0 172.7 1,533.4
- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $3,876.0 $ 979.8 $ 838.3 $5,694.1
- ----------------------------------------------------------------------------------------------------------------------
36
17
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 17. ESTIMATED INCOME TAXES
- ----------------------------------------------------------------
Income tax expense (benefit) consisted of the following components:
- ----------------------------------------------------------------
Year Ended December 31
1993 1994 1995
- ------------------------------------------------------
Current
U.S. Federal $57.2 $ 69.0 $ 68.0
U.S. State and Local 26.5 39.2 32.2
International 14.2 31.5 39.5
- ------------------------------------------------------
97.9 139.7 139.7
- ------------------------------------------------------
Deferred
U.S. Federal (6.7) 26.3 48.6
International (1.6) (8.6) (7.1)
- ------------------------------------------------------
(8.3) 17.7 41.5
- ------------------------------------------------------
Total expense $89.6 $157.4 $181.2
- ------------------------------------------------------
Deferred tax benefits (liabilities) are comprised of the following:
- ----------------------------------------------------------------
Year Ended December 31
1993 1994 1995
- ---------------------------------------------------------
Postretirement benefits
other than pensions $ 367.2 $ 360.6 $ 373.1
Postemployment benefits 36.9 35.2 44.9
Expense accruals 126.8 120.0 116.2
Inventory reserves 1.1 4.3 4.2
Pension accruals 19.5 4.9
Other 22.8 6.8 14.5
- ---------------------------------------------------------
Deferred tax benefits 554.8 546.4 557.8
- ---------------------------------------------------------
Depreciation -- non-leasing (100.1) (105.2) (105.6)
Leasing activities (179.5) (211.5) (243.6)
Pension prepayments (.9)
Other (16.7) (3.1) (2.6)
- ---------------------------------------------------------
Deferred tax liabilities (297.2) (319.8) (351.8)
- ---------------------------------------------------------
Alternative minimum tax
recoverable 18.6
- ---------------------------------------------------------
Net deferred tax benefits $ 276.2 $ 226.6 $ 206.0
- ---------------------------------------------------------
The Company has a history of earnings and has traditionally been a taxpayer.
Consequently, the Company expects to realize substantially all of the deferred
tax assets in the future. Except for the $6.1 valuation reserve relating to
capital loss carryforwards, no valuation allowances have been recorded. As of
December 31, 1995, all available alternative minimum tax recoverable has been
utilized to offset the regular income tax liability. Income taxes paid during
1993, 1994 and 1995 amounted to $46.2, $104.3 and $119.5, respectively.
The effective tax rates differ from the U.S. Federal income tax rate for the
following reasons:
- ----------------------------------------------------------------
Year Ended December 31
1993 1994 1995
- ----------------------------------------------------
U.S. Federal income tax
rate 35.0 % 35.0 % 35.0 %
Increase (reductions)
in taxes resulting
from:
International
income (1.2 ) (1.1 ) (2.8 )
Capital loss
utilization (1.0 )
Investment tax
credits (.7 ) (.3 ) (.3 )
Amortization of
goodwill 1.2 .7 .6
Effect of rate
change on
deferred taxes (2.3 )
State and local
income taxes,
net of Federal
income tax
benefit 7.6 6.5 4.0
Miscellaneous
items (.3 ) (.6 ) (.2 )
- ----------------------------------------------------
Estimated taxes on
income 39.3 % 40.2 % 35.3 %
- ----------------------------------------------------
NOTE 18. COMPOSITION OF CERTAIN
BALANCE SHEET AMOUNTS
- ----------------------------------------------------------------
The following items comprise the net amounts indicated in the respective
balance sheet captions:
- ----------------------------------------------------------------
December 31
1994 1995
- --------------------------------------------------------
INVESTMENTS AND OTHER ASSETS
- --------------------------------------------------------
Investments at equity $ 171.8 $ 99.1
Goodwill 197.0 269.4
Real estate held for sale 49.2 26.7
Intangible pension asset 81.6 74.6
Loans receivable 115.1 142.2
Other 178.5 198.7
- --------------------------------------------------------
$ 793.2 $ 810.7
- --------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET
- --------------------------------------------------------
Land and improvements to land $ 50.4 $ 79.1
Buildings and building fixtures 510.7 626.5
Machinery and equipment 2,235.9 2,631.7
- --------------------------------------------------------
2,797.0 3,337.3
Less: Accumulated depreciation 1,449.8 1,687.8
- --------------------------------------------------------
$1,347.2 $1,649.5
- --------------------------------------------------------
LEASE FINANCING
- --------------------------------------------------------
Direct financing leases $ 544.5 $ 538.6
Leveraged leases 393.9 480.4
Property on operating leases, net
of accumulated depreciation 33.4 33.3
Allowance for credit losses (40.8) (47.4)
- --------------------------------------------------------
$ 931.0 $1,004.9
- --------------------------------------------------------
37
18
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 18. COMPOSITION OF CERTAIN
BALANCE SHEET AMOUNTS (CONT'D.)
- ----------------------------------------------------------------
December 31
1994 1995
- --------------------------------------------------------
DEFERRED EMPLOYEE BENEFITS
- --------------------------------------------------------
Postretirement other than pension $ 845.5 $ 846.3
Postemployment 81.9 84.6
Pension 168.5 146.4
Compensation 14.0 18.9
- --------------------------------------------------------
$1,109.9 $1,096.2
- --------------------------------------------------------
The components of the net investment in direct financing leases are as
follows:
- ----------------------------------------------------------------
December 31
1994 1995
- -------------------------------------------------------
Total minimum lease payments $ 600.7 $ 594.7
Residual values 70.3 64.6
Deferred initial direct costs 10.3 12.2
- -------------------------------------------------------
681.3 671.5
Less: Unearned income 136.8 132.9
- -------------------------------------------------------
$ 544.5 $ 538.6
- -------------------------------------------------------
The components of the net investment in leveraged leases are as follows:
- ----------------------------------------------------------------
December 31
1994 1995
- -------------------------------------------------------
Rentals receivable $4,115.0 $4,412.6
Residual values 301.4 478.9
Non recourse debt service (3,378.9) (3,657.6)
Unearned income (629.9) (740.4)
Deferred investment tax credit (13.7) (13.1)
- -------------------------------------------------------
393.9 480.4
Less: Deferred taxes arising from
leveraged leases 157.6 193.3
- -------------------------------------------------------
$ 236.3 $ 287.1
- -------------------------------------------------------
The following is a schedule, by year, of total minimum lease payments
receivable on direct financing leases as of December 31, 1995:
- ----------------------------------------------------------------
Year Ending December 31:
1996 $ 255.7
1997 151.4
1998 88.5
1999 46.5
2000 19.8
Later years 32.8
- -----------------------------------------------------
Total minimum lease payments receivable $ 594.7
- -----------------------------------------------------
NOTE 19. FAIR VALUE OF FINANCIAL
INSTRUMENTS
- ----------------------------------------------------------------
The estimated fair values of Dana's financial instruments are as follows:
- ----------------------------------------------------------------
1994 December 31 1995
Carrying Fair CARRYING FAIR
Amount Value AMOUNT VALUE
- -----------------------------------------------------------
FINANCIAL ASSETS
- -----------------------------------------------------------
Cash and
marketable
securities $ 112.2 $ 112.2 $ 66.6 $ 66.6
Loans receivable 120.7 145.6
Less: Allowance
for loan losses 5.6 3.4
- -----------------------------------------------------------
Net loans 115.1 114.8 142.2 138.8
- -----------------------------------------------------------
FINANCIAL
LIABILITIES
- -----------------------------------------------------------
Short-term debt 583.1 583.1 791.4 791.4
Long-term debt 1,186.5 1,195.9 1,315.1 1,347.5
Security deposits
- leases 14.8 13.3 15.2 14.1
Deferred funding
commitments
under
leveraged
leases 7.6 7.5 13.0 13.9
Interest
rate-based
option 1.8 1.8 8.2 8.2
- -----------------------------------------------------------
UNRECOGNIZED FINANCIAL
INSTRUMENTS
- -----------------------------------------------------------
Interest rate
derivatives:
- -----------------------------------------------------------
Assets 7.5 .8
Liabilities (5.7) (21.0)
- -----------------------------------------------------------
NOTE 20. COMMITMENTS AND
CONTINGENCIES
- ----------------------------------------------------------------
At December 31, 1995, the Company had purchase commitments for property, plant
and equipment aggregating approximately $128.9. Future minimum rental
commitments under operating leases aggregate $270.0 with rental payments during
the five succeeding years of $49.4, $43.4, $35.1, $25.4 and $19.1, respectively.
Net rental expense amounted to $56.3, $65.8 and $70.4 for 1993, 1994 and 1995,
respectively.
The Company and its consolidated subsidiaries are parties to various pending
judicial and administrative proceedings arising in the ordinary course of
business. These include, among others, proceedings based on product liability
claims and alleged violations of various environmental laws.
The Company is also a defendant in a lawsuit, brought by the U.S. Department
of Justice alleging that a former operation, which was a subsidiary of a company
purchased by Dana in 1985, had overcharged the U.S. government
38
19
NOTES TO FINANCIAL STATEMENTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
NOTE 20. COMMITMENTS AND
CONTINGENCIES (CONT'D.)
- ----------------------------------------------------------------
on contracts or subcontracts awarded during the late 1970's and the 1980's. In
September 1995, Dana and the Department of Justice settled all claims relating
to 16 government contracts included in the complaint without any finding of
liability or admission of wrongdoing by Dana, and Dana paid the government
$19.5, which included payment for the government's alleged damages, interest,
and costs of investigation and litigation. The Company had accrued in prior
periods for this settlement and the payment did not effect current results of
operations. The Company has reached a tentative settlement with the Department
of Justice on the remaining claims and has recorded a $5.8 after-tax charge to
1995 earnings.
Management and its legal counsel periodically review the probable outcome of
pending proceedings, the costs and expenses reasonably expected to be incurred,
the availability and limits of the Company's insurance coverage, and the
Company's established accruals for uninsured liabilities. While the outcome of
pending proceedings cannot be predicted with certainty, management believes,
based on these reviews and the information currently available, that any
liabilities that may result from these proceedings are not
reasonably likely to have a material effect on the Company's
liquidity, financial condition or results of operations.
NOTE 21. ACQUISITIONS
- ----------------------------------------------------------------
In 1993, Dana acquired Reinz-Dichtungs GmbH, Hugo Reinz GmbH, Europecas and
Accam which are manufacturers and distributors of automotive parts. Dana also
increased its ownership from 50% to 100% of TI/Interlock, Ltd. and Wichita
Company, Ltd. which are manufacturers and distributors of industrial products.
During 1994, Dana acquired Sige Brevetti Ing., Columbo S.p.A., an Italian
manufacturer of axles for agricultural and construction equipment. In addition,
Dana acquired Stieber Antribselemente GmbH, a German manufacturer of clutches
for industrial applications and Tece Almere B.V., a Netherlands distributor of
automobile parts.
In 1995, Dana acquired the European axle group of GKN plc., a manufacturer of
axles for cars, light trucks and heavy-duty trucks, along with axles for
agricultural, industrial and construction equipment. Dana also acquired
M. Friesen GmbH in Germany, a supplier of remanufactured
rotating electrics, a 70% share of Industrias Serva S.A. in Spain, a
manufacturer and distributor of vehicular gaskets and Mohawk Plastics, Inc., a
manufacturer of custom molded plastics for the OE market in the United States.
These acquisitions were accounted for as purchases and the results of their
operations have been included in the consolidated financial statements since the
dates of acquisition. The purchase price and the results of operations of these
companies prior to acquisition were not material to the consolidated financial
statements.
In addition to the above acquisitions, in 1995 Dana purchased the remaining
shares of Hayes-Dana, a Canadian subsidiary that manufactures new and
replacement parts for trucks, automobiles, off-highway vehicles and industrial
equipment and increased its equity ownership in R.O.C. Spicer from 49% to 51%.
R.O.C. Spicer manufactures axles and driveshafts in Taiwan.
In 1995, Dana also acquired Plumley Companies, a manufacturer and distributor
of extruded and molded rubber and silicone sealing products, primarily for
automotive applications. Plumley is being accounted for as a pooling of
interests. Prior years' financial statements have not been restated since the
amounts are not material to the consolidated financial statements.
NOTE 22. SIGNIFICANT SUBSIDIARY
- ----------------------------------------------------------------
DCC, an indirect wholly-owned subsidiary of Dana, is a wholly-owned subsidiary
of DFHI, whose primary operating subsidiaries are engaged in leasing and finance
operations. DCC represents substantially all of the operations and assets of
DFHI with the exception of $82.0 of investments and other assets. These
subsidiaries are included in the consolidated financial statements.
A summary of DCC's financial position and results of operations is as follows:
- ----------------------------------------------------------------
December 31
1994 1995
- --------------------------------------------------------
ASSETS
- --------------------------------------------------------
Cash $ 2.5 $ 11.5
Loans receivable 61.4 114.4
Lease financing 1,013.1 1,153.5
Other assets 96.0 107.3
- --------------------------------------------------------
Total Assets $1,173.0 $1,386.7
- --------------------------------------------------------
LIABILITIES AND SHAREHOLDER'S EQUITY
- --------------------------------------------------------
Notes payable $ 817.3 $ 972.4
Other liabilities 266.5 309.7
Shareholder's equity 89.2 104.6
- --------------------------------------------------------
Total Liabilities and
Shareholder's
Equity $1,173.0 $1,386.7
- --------------------------------------------------------
Year Ended December 31
1993 1994 1995
- --------------------------------------------------------
Revenue from products and
services $146.7 $161.7 $180.4
- --------------------------------------------------------
Interest expense 50.7 51.9 62.8
General and administrative
expenses 79.2 89.7 103.1
- --------------------------------------------------------
129.9 141.6 165.9
- --------------------------------------------------------
Income before income taxes 16.8 20.1 14.5
Estimated income tax provision
(benefit) 5.3 5.4 (8.0)
- --------------------------------------------------------
Income before equity in
earnings of affiliates 11.5 14.7 22.5
Equity in earnings of
affiliates 3.2 5.3 4.9
- --------------------------------------------------------
Net income $ 14.7 $ 20.0 $ 27.4
- --------------------------------------------------------
39
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
in millions DANA CORPORATION
---------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Capital spending for property, plant and equipment was $410
in 1995, compared to $337 in 1994. This continued higher
expenditure level is the result of strong customer demand for
Dana's products worldwide and Dana's commitment to quality and
technological innovation. Dana's 1996 capital expenditures, the
majority of which were uncommitted at year end (December 31)
1995, will be approximately $300.
At year end 1995, Dana's debt totaled $2,107, an increase of
$337 from year end 1994. This increase is primarily due to
higher capital expenditures, the purchase of the European axle
group ($93), the acquisition of the remaining minority shares
of Hayes-Dana ($92), as well as the working capital growth in
support of strong sales. DCC's debt increased 19% over 1994,
largely from the use of external borrowing to fund the growth
in its lease financing portfolio.
Dana's short-term debt, financed by the issuance of
commercial paper and bank loans, was $791, compared to $583 at
year end 1994. Dana (excluding DCC and DFHI) had $405 in
committed credit facilities and $1,024 in uncommitted lines in
place with banks, and domestic and international short-term
borrowings of $334, up from $261 at year end 1994. DFHI obtains
its short-term funds through committed and uncommitted bank
line borrowings. DFHI bank lines totaled $90, of which $85 was
outstanding, as compared to bank lines of $145 at year end
1994, all of which was outstanding. DCC finances its short-term
debt requirements through the issuance of commercial paper and
bank direct borrowings. DCC had committed credit lines of $379
and uncommitted lines of $435 at year end 1995 and domestic and
international borrowings of $372 versus $177 at year end 1994.
Consolidated long-term debt for Dana increased to $1,315 from
$1,187 at year end 1994. The long-term debt position of Dana
(excluding DCC and DFHI) was $714, up from $542 at year end
1994. DCC's long-term debt was $601, down from $640 at the end
of 1994. During 1995, DFHI paid down the $5 in long-term debt
that was outstanding at year end 1994.
Dana's management and legal counsel have reviewed the legal
proceedings arising in the ordinary course of business to which
the Company and its subsidiaries were parties as of December
31, 1995, including, among others, those involving product
liability claims and alleged violations of environmental laws.
The Company estimates its contingent environmental and product
liabilities based upon the most probable method of remediation
or outcome considering currently enacted laws and regulations
and existing technology. Measurement of liabilities is made on
an undiscounted basis and excludes the effects of inflation and
other societal and economic factors. In those cases where there
is a range of equally probable remediation methods or outcomes,
the Company accrues at the lower end of the range, which at
year end 1995, was $73 for product liability claims costs
(products) and $49 for environmental liability costs
(environmental) compared to $77 for products and $48 for
environmental at year end 1994. The difference between minimum
and maximum contingent liabilities, while not considered
material, was $4 for products and $3 for environmental at year
end 1995 compared to $11 for products and $5 for environmental
at year end 1994. Probable recoveries of $43 for products and
$10 for environmental from insurance or other third parties
have been recorded as assets at year end 1995, compared to $61
for products and $6 for environmental at year end 1994. The
Company has concluded that any additional liabilities that may
result from these legal proceedings or the timing of the cash
flows for these liabilities will not have a material adverse
effect on its liquidity, financial condition or results of
operations.
The Company is also a defendant in a lawsuit, brought by the
U.S. Department of Justice, alleging that a former operation,
which was a subsidiary of a company purchased by Dana in 1985,
had overcharged the U.S. government on contracts or
subcontracts awarded during the late 1970's and the 1980's. In
September 1995, Dana and the Department of Justice settled all
claims relating to 16 government contracts included in the
complaint without any finding of liability or admission of
wrongdoing by Dana, and Dana paid the government $19.5, which
included payment for the government's alleged damages,
interest, and costs of investigation and litigation. The
Company had accrued in prior periods for this settlement and
the payment did not affect current results of operations. The
Company has reached a tentative settlement with the Department
of Justice on the remaining claims involved in the litigation
and has recorded a $5.8 after-tax charge to 1995 earnings.
40
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
in millions DANA CORPORATION
- ---------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (CONT'D)
Management and its legal counsel periodically review the
probable outcome of pending proceedings, the costs and expenses
reasonably expected to be incurred, the availability and limits
of the Company's insurance coverage, and the Company's
established accruals for uninsured liabilities. While the
outcome of pending proceedings cannot be predicted with
certainty, management believes, based on these reviews and the
information currently available, that any liabilities that may
result from these proceedings are not reasonably likely to have
a material effect on the Company's liquidity, financial
condition or results of operations.
Dana anticipates that net cash flows from operating
activities, along with currently available financing sources,
will be sufficient to meet funding requirements for 1996.
RESULTS OF OPERATIONS 1995 VS 1994
1995 was a record year for Dana Corporation. All time highs
in sales and profits were achieved. Sales were $7,598, up 15%
over the previous record attained in 1994, while profits
increased to $288 or 26% over last year's record results. Dana
shareholders benefitted from these record results with return
on average shareholder equity increasing to nearly 28% from 26%
in 1994. The major factors contributing to the Company's sales
increase of $984 were higher unit volumes of original equipment
(OE) vehicular products in the U.S., strength in the U.S.
construction equipment and agricultural markets, effects of
recent acquisitions, and overall growth in international sales.
Contributing $287 or 30% of the sales increase ($123 in the
U.S. and $164 internationally) were acquisitions and the effect
of fully consolidating a Taiwanese subsidiary (R.O.C. Spicer)
which was previously accounted for on an equity basis.
Dana's worldwide sales from the Vehicular segment, which
includes sales of components and parts used on trucks, sport
utility vehicles, trailers, vans and automobiles, increased 15%
or $771 over 1994. The OE portion of this increase was $673
(18% over 1994) while the aftermarket portion increased $98
(6%). Sales to U.S. light truck manufacturers were up 14% over
a strong 1994 due to the ongoing demand for light trucks and
sport utility vehicles. U.S. medium and heavy truck OE sales
increased 19% and 12%, respectively, above 1994, as truck
production levels exceeded already high levels for 1994. Sales
to the U.S. OE passenger car market increased, in large part
due to the acquisition of Plumley in 1995. Other increases in
Dana's worldwide OE Vehicular sales were achieved through the
consolidation of R.O.C. Spicer, acquisitions, and higher unit
volumes experienced in Europe, South America and Canada.
Worldwide sales from Dana's Industrial segment, which
includes sales to the mobile off-highway equipment market, rose
17% or $218 over 1994, reflecting acquisitions as well as
strength in the U.S. and European construction and agricultural
markets. Sales to the worldwide mobile off-highway OE market
increased 26%, while industrial OE sales improved 11%
worldwide, comprised of 13% U.S. and 8% international. Mobile
off-highway and industrial distribution sales increased 8%,
largely due to the acquisition of Sige in the latter half of
1994. After adjusting for Dana's acquisitions, worldwide
Industrial segment sales improved 10% over 1994, with the U.S.
up 7% and international up 25% (almost exclusively in Europe).
The Company's 1995 distribution sales were up 7% over 1994,
due in part to acquisitions and increases in its international
aftermarket operations. International aftermarket sales
increased 21% over 1994, while U.S. sales were level in a weak
market. Worldwide distribution sales performances in 1995
versus 1994 by market were as follows: truck parts up 3%,
automotive up 8% and mobile off-highway/industrial up 8%.
Sales from U.S. operations were $5,476 or 10% (8% adjusted
for acquisitions) over 1994, while international sales were
$2,122, up 29% (19% adjusted for acquisitions). Even with
Dana's continued growth and expansion in the U.S.,
international sales as a percentage to total sales increased to
28% from 25% in 1994. On a regional basis, the Company's 1995
sales increased 10% in North America, 16% in South America, 37%
in Europe and 119% in Asia Pacific. After adjusting for the
effect on sales of recent acquisitions and the consolidation of
R.O.C. Spicer in 1995, North American sales increased 8%,
European 27% and Asia Pacific 24%. Export sales of U.S.
operations increased $124, up 29% over 1994.
Revenue from lease financing and other income increased $40
or 27% in 1995. Lease related revenue increased 11% as DCC's
average asset levels outstanding increased, lease and residual
41
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
in millions DANA CORPORATION
---------------------------------------------------------------
RESULTS OF OPERATIONS 1995 VS 1994 (CONT'D)
experience improved and higher average yields were achieved.
Included in the increase in other income was $16 due to the
sale of equity in certain South American operations.
Adjustments for translation of foreign currency resulted in a
gain of $8, compared to a loss of $22 in 1994. The adjustments
in both years related almost exclusively to the translation
from local currency to U.S. dollars of the Company's Brazilian
operations. The new Brazilian currency (real) was introduced at
parity with the U.S. dollar in the third quarter of 1994. The
translation of the real to U.S. dollars resulted in 1995's
gain. 1994's loss includes the effect of translating from the
old currency (cruzeiros) to U.S. dollars for the period of
January through July, partially offset by gains for the balance
of 1994 in the translation from the real to U.S. dollars.
Dana's gross margin improved to 15.1% from 15.0% in 1994.
U.S. operations improved to 13.6% from 13.3% in 1994,
benefitting from the higher sales volumes experienced in all of
the Company's OE markets. Margins of the Company's Canadian and
European operations improved in 1995 as well, due to increased
sales levels, while margins in Asia Pacific were comparable to
1994. Dana's South American operations' margins were lower in
1995. The comparison was affected by the currency change in
1994, with 1995's calculation being negatively affected. After
adjusting for the change, 1995's margins in South America were
only slightly lower than 1994's.
Operating income from the Vehicular segment increased $66 or
13%, while the Industrial segment income increased $47 or 82%
over 1994. The Vehicular increase resulted from higher sales
volumes achieved by Dana's U.S. operations supplying the
domestic OE light and heavy-duty truck markets and the effect
of the acquisition of Plumley at the beginning of 1995. The
Industrial segment's income increased as operations in North
America and Europe benefitted from strong demand for the
Company's mobile-off highway OE products from its construction
equipment and agricultural machinery customers. Strength in
U.S. and European industrial OE component sales also
contributed to the Industrial segment's income increase.
Operating income of the Lease Financing segment increased $11
over 1994. In 1995, DCC's operating income increased as a
result of higher average lease asset levels outstanding during
the year, improved lease and residual experience and overall
higher average yields. This segment also benefitted from a
reduction in costs associated with real estate held for sale
and associated loans.
Selling, general and administrative expenses (S,G & A)
increased $74 or 12% in 1995. Operations acquired in the latter
half of 1994 and in 1995 accounted for $21 of the increase.
After adjusting for the effect of those acquisitions, S,G & A
increased 9%, primarily to support sales growth and expansion.
The ratio of S,G & A expense to sales continued to improve and
was 9.0% compared to 9.2% in 1994. The improvements in gross
margin and S,G & A as a percent of sales resulted in Dana's
operating margin increasing to 6.1% from 5.7% in 1994.
Interest expense increased to $146 from $113 in 1994 due to
higher average debt levels and higher interest rates. Higher
debt levels resulted from the increase in capital spending,
acquisition of the European axle group, purchase of the
remaining minority interest of Hayes-Dana, Inc., and the
increase in working capital needs of the Company as a result of
continued higher business levels. The higher average debt
levels also resulted from the funding of DCC's asset growth.
Dana's international operations had operating income of $139,
an increase of 10% over 1994. This higher income was largely
the result of increased earnings of the Company's European
operations supplying products to the industrial OE markets of
the region. Operating income increases also were achieved by
operations in Canada and Asia Pacific and through European
acquisitions made in the latter half of 1994 and in 1995.
Equity in earnings of affiliates decreased $28 in 1995,
primarily due to the devaluation of the Mexican peso which
resulted in losses incurred by Dana's affiliate, Spicer S.A. de
C.V. The decrease was partially offset by the higher earnings
experienced by Dana's affiliates in Korea and Venezuela.
Minority interest in net income of consolidated subsidiaries
increased to $40 from $30 in 1994 due to higher earnings of
Albarus, a South American subsidiary, and the consolidation of
R.O.C. Spicer. These increases were partially offset by the
purchase of the minority interest in Hayes-Dana.
Taxes on income increased to $181 from $157 in 1994, due to
higher pre-tax profitability of the Company. The effective rate
decreased to 35% from 40% in 1994 in part due to the
utilization of capital loss carrybacks resulting from the sale
of an insurance subsidiary in Bermuda. The sale
42
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
in millions DANA CORPORATION
- ---------------------------------------------------------------
RESULTS OF OPERATIONS 1995 VS 1994 (CONT'D)
resulted in the recording of a $5 tax benefit in 1995. The
remaining differential in rate was due to lower effective
combined state tax rates and international effective rates.
In Dana's largest North American market, light trucks and
sport utility vehicles, current orders from the vehicle
manufacturers indicate consumer demand continues to be
generally strong for these popular vehicles. For this reason,
Dana expects 1996 component sales to this market to remain
relatively stable compared to 1995. Current reductions in
orders to the heavy truck manufacturers is expected to reduce
demand for components for these vehicles during 1996. Sales to
Dana's vehicular and industrial replacement or service markets
historically experience slower but more stable growth than the
original equipment markets. Dana expects demand in these
service and distribution markets to continue this historical
pattern in 1996. Dana's international operations in South
America, Europe, and Asia Pacific are forecasting moderate
market growth and increased sales in 1996, based on growing
vehicular demand, new business and several recent acquisitions.
The various global vehicular, industrial and distribution
markets will experience different growth rates in 1996. If the
major economic regions of the world are not severely disrupted,
Dana expects to maintain and even grow its global sales base in
1996.
RESULTS OF OPERATIONS 1994 VS 1993
Dana Corporation achieved record sales of $6,610 in 1994, up
$1,150 compared to $5,460 in 1993. This 21% growth was
primarily the result of unit volume increases experienced
throughout the Company's worldwide markets, particularly from
the strength of its Vehicular segment's original equipment (OE)
markets and the effect of European acquisitions.
Dana's worldwide sales of Vehicular segment components and
parts used on automobiles, trucks, trailers, vans and sport
utility vehicles increased 18% in 1994 compared to 1993. The OE
portion of this increase was $652 (21%) in 1994 over 1993 while
the aftermarket portion increased $147 (10%). Dana's sales to
the light truck OE market (its largest sales contributor)
increased $292 (18%) over 1993 levels primarily due to U.S.
demand for pickup trucks and sport utility vehicles. The
Company's 1994 heavy truck OE component sales rose $225 (36%)
over 1993 sales reflecting higher U.S. production. Acquisitions
made in the latter half of 1993 and early 1994 accounted for
$142 of the sales increase in the Vehicular segment.
Worldwide sales from Dana's Industrial segment, which
includes sales to the mobile off-highway equipment market,
increased 37% in 1994 or $352 over 1993, partially due to
European acquisitions and continued strength in the U.S.
construction and agricultural machinery markets. OE sales from
the mobile off-highway portion of this segment increased 46% or
$141 in 1994 over 1993 with acquisitions accounting for $22.
Industrial OE sales in 1994 improved 4% over 1993 with
increases in the U.S. partially offset by weakness for most of
the year in Europe, although improvements occurred in Europe's
industrial markets in the latter months of 1994. Mobile
off-highway/industrial aftermarket sales increased 12% in 1994
compared to 1993.
Dana sales from U.S. operations were $4,970 in 1994, an
increase of 20% from the $4,130 reported for 1993. The
Company's sales to the U.S. light truck OE market improved 21%
over 1993 levels due to the increased demand for pickup trucks,
vans and sport utility vehicles for which Dana supplies many
key components. Dana's heavy truck component sales to the U.S.
OE market increased 41% in 1994 as North American production
reached its highest level in 15 years. Service parts sales to
the U.S. aftermarket grew 8% in 1994 over 1993 consisting of
increases in auto distribution (5%), truck parts (10%) and
mobile off-highway/industrial distribution (9%).
Dana sales from international operations were $1,640 in 1994,
an increase of 24% over the $1,330 of 1993. The $310 year on
year increase is principally due to the contribution of
European acquisitions and vehicular unit volume improvements in
South America and Canada. Sales from Dana's South American
operations increased 22% in 1994 over 1993 due to higher export
activities and a strong regional (Mercosur) economy. Sales from
the Company's Canadian subsidiary improved 8% over 1993
principally due to the strength of U.S. based OE customers.
European acquisitions accounted for $169 of the sales increase
in 1994 as Dana seeks to achieve 50% of its total sales through
international markets by the year 2000. Exclusive of the effect
of acquisitions, sales from the Company's European operations
increased 6% in 1994 over 1993. International Vehicular
43
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
in millions DANA CORPORATION
---------------------------------------------------------------
RESULTS OF OPERATIONS 1994 VS 1993 (CONT'D)
aftermarket sales increased $135 or 25%, including $73 due to
acquisitions. Industrial OE sales, especially from Dana's
German facilities, decreased $3, or 3% below 1993 levels due in
large part to the weak European economy for most of 1994.
Mobile off-highway OE sales of Dana's international operations
increased $71 over 1993 in part due to acquisitions.
Revenue from lease financing and other income increased $21
in 1994 or 17% over 1993 due to an increase in new business
recorded by DCC in 1994. DCC experienced a 12% growth in its
lease financing assets in 1994. Leveraged lease assets
increased 39% and the direct financing assets of the United
Kingdom operation grew 56%, both of which contributed to the
$18 increase in lease financing revenue during 1994. In 1994,
other income also included an insurance settlement of $4.
Foreign currency translation losses were $22 for 1994 as
compared to $24 in 1993. The losses were almost exclusively
related to the Company's Brazilian operations and the
translation of the cruzeiro to U.S. dollars. A $26 loss was
incurred in the first eight months of the year offset by a gain
of $4 in the final four months as Brazil's new currency (real)
was introduced at parity with the U.S. dollar. To the extent
the value of the real remains at its current rate of exchange
with the U.S. dollar, future foreign currency translation
adjustments relating to Brazil are expected to be minimal.
Despite the anticipated reduction in translation losses, Dana's
overall profit will not be affected due to offsetting effects
on sales and cost of sales.
Dana's consolidated gross margin for 1994 improved to 15.0%
from 14.4% in 1993. The margin improvement is the result of
higher sales volumes being experienced by the Company's U.S.
operations as well as benefits derived through productivity and
cost containment initiatives. U.S. gross margins improved to
13.3% in 1994 compared to 12.5% in 1993. Non U.S. operations'
1994 margins were comparable to 1993. If Dana's 1993 margins
were adjusted for the impact of the Brazilian currency
realignment, making the comparison more meaningful, 1994's
gross margin would show an even greater overall improvement
when compared to 1993. During 1994 and 1993, the Company
recorded $28 and $40 for the downsizing, consolidation and
closure of certain non-strategic and underperforming
operations. Gross margins in 1994 and 1993 were reduced by .4%
and .7%, respectively, due to the recognition of these costs.
It is anticipated that Dana's operations will benefit from
these realignment actions over the long term.
Operating income in the Vehicular segment increased 23% in
1994, while the Industrial segment operating income increased
43%. Both segments benefited from higher sales volume in 1994,
Vehicular principally in the North American light and heavy
truck markets, Industrial in the U.S. construction equipment
and agricultural machinery markets. Operating income of both
segments also benefited from productivity and margin
improvements.
Operating income of the Lease Financing segment increased to
$12 in 1994 from $4 in 1993. This improved operating income
relates almost exclusively to the leasing activities of DCC and
resulted from a reduction in interest expense as a percent of
revenue (31% in 1994, 34% in 1993), an increase in lease
financing and related revenue of 11% in 1994 over 1993 and
income from the receipt of an insurance settlement in 1994.
Selling, general and administrative expenses (SG&A) were $612
in 1994 compared to $523 for 1993, an increase of $89.
Acquisitions made in the latter half of 1993 and early in 1994
accounted for $36 of the increase. After adjusting for the
effect of acquisitions, SG&A increased 10%, primarily due to
higher business levels. The ratio of expense to sales continued
to improve and was 9.2% in 1994 compared to 9.6% in 1993, due
to continuing cost containment and productivity efforts.
Interest expense decreased to $113 in 1994 from $137 in 1993
due to the overall lower average interest rates achieved
through the replacement of higher rate notes and debentures
with lower rate debt and the conversion of the 5 7/8%
convertible debentures to stock. Average debt levels were
comparable in 1994 and 1993.
Dana's international operations had operating income of $127
in 1994, an increase of $30 from the $97 reported in 1993. The
profitability of the Company's operations in Canada and the
Asia Pacific region improved significantly over the prior year.
Additional operating income improvements were contributed by
Dana's European acquisitions as well as DCC's European
operations.
44
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
in millions DANA CORPORATION
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS 1994 VS 1993 (CONT'D)
Equity in earnings of affiliates increased to $24 in 1994 from $16 in 1993 due
to improved performance by Dana's affiliates in Korea and Venezuela and by DCC's
leasing partnerships. The improved performance of the Korean affiliate related
to the turnaround in the local economy, while Dana's affiliate operation in
Venezuela has benefited from strong export sales volume. Certain DCC leasing
partnerships contributed higher earnings in 1994 compared to 1993. Dana's
Mexican affiliate, whose functional currency is the peso, also had an improved
operating performance in 1994 over 1993. Because this affiliate is included in
the consolidated financial statements with a fiscal year end of October 31, the
devaluation of the Mexican peso did not affect Dana's earnings in 1994. The
affiliate has approximately $130 in U.S. dollar denominated debt and it is
estimated that the translation of this debt into pesos will result in Dana
recording a charge to first quarter 1995 earnings of approximately $17, or $.17
per share for its proportionate share of the translation loss. Near term
movement in the value of the Mexican peso is currently difficult to predict and
is partially dependent upon the results of the economic support efforts of the
U.S. and international economic organizations.
Minority interest in net income of consolidated subsidiaries increased in 1994
to $30 from $26 in 1993 due to increased earnings of Dana's subsidiary in
Canada.
Taxes on income increased to $157 in 1994 from $90 in 1993 due to higher
pre-tax income. The effective tax rate increased to 40% in 1994 compared to 39%
in 1993. A $3 reduction in income tax expense in 1993 was recorded to recognize
the effect that the 1% U.S. corporate income tax rate increase had on the
Company's previously recorded income tax benefits.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Beginning in 1988, Dana Credit Corporation, our indirect wholly-owned leasing
and finance subsidiary which had previously been accounted for on the equity
method, was fully consolidated to reflect adoption of SFAS No. 94,
"Consolidation of All Majority-owned Subsidiaries." DCC is a direct subsidiary
of Diamond Financial Holdings, Inc. and represents substantially all of the
operations and assets of DFHI with the exception of $82.0 of investments and
other assets. The additional information on pages 45 - 47 shows Dana's balance
sheet, income statement and cash flows as if DCC and DFHI were accounted for on
the equity method and DCC (on pages 48 - 49) on a stand-alone basis. The Company
believes this separate financial data will help the reader better understand the
consolidated statements and related notes on pages 23 - 39.
ADDITIONAL INFORMATION -- STATEMENT OF INCOME DANA CORPORATION
in millions (including Dana Credit Corporation on an equity basis)
- --------------------------------------------------------------------------------
Year Ended December 31
1993 1994 1995
- -------------------------------------------------------------------------------------------------------------
NET SALES $5,456.9 $6,607.4 $7,596.3
- -------------------------------------------------------------------------------------------------------------
Other income 11.9 9.2 33.7
- -------------------------------------------------------------------------------------------------------------
Foreign currency adjustments (24.2) (22.0) 7.8
- -------------------------------------------------------------------------------------------------------------
5,444.6 6,594.6 7,637.8
- -------------------------------------------------------------------------------------------------------------
Costs and expenses
- -------------------------------------------------------------------------------------------------------------
Cost of sales 4,687.8 5,630.5 6,469.0
- -------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses 449.7 529.8 602.9
- -------------------------------------------------------------------------------------------------------------
Interest expense 83.2 54.3 75.5
- -------------------------------------------------------------------------------------------------------------
5,220.7 6,214.6 7,147.4
- -------------------------------------------------------------------------------------------------------------
Income before income taxes 223.9 380.0 490.4
- -------------------------------------------------------------------------------------------------------------
Estimated taxes on income 89.3 154.9 181.0
- -------------------------------------------------------------------------------------------------------------
Income before minority interest and equity in earnings of affiliates 134.6 225.1 309.4
- -------------------------------------------------------------------------------------------------------------
Minority interest in net income of consolidated subsidiaries (26.2) (30.2) (40.4)
- -------------------------------------------------------------------------------------------------------------
Equity in earnings of affiliates 20.1 33.3 19.1
- -------------------------------------------------------------------------------------------------------------
Income before the effect of a change in accounting principle 128.5 228.2 288.1
- -------------------------------------------------------------------------------------------------------------
Effect on prior years of the change in accounting for postemployment
benefits (48.9)
- -------------------------------------------------------------------------------------------------------------
Net income $ 79.6 $ 228.2 $ 288.1
- -------------------------------------------------------------------------------------------------------------
45
26
ADDITIONAL INFORMATION -- BALANCE SHEET DANA CORPORATION
in millions (including Dana Credit Corporation on an equity basis)
- --------------------------------------------------------------------------------
December 31
1994 1995
- -----------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------
Current assets
- -----------------------------------------------------------------------------------------------------------
Cash $ 43.0 $ 18.6
- -----------------------------------------------------------------------------------------------------------
Marketable securities, at cost which approximates market 64.0 36.3
- -----------------------------------------------------------------------------------------------------------
Accounts receivable, less allowance for doubtful accounts of
$19.6 - 1994 and $23.5 - 1995 1,009.6 1,098.4
- -----------------------------------------------------------------------------------------------------------
Inventories 740.2 874.8
- -----------------------------------------------------------------------------------------------------------
Other current assets 132.3 132.5
- -----------------------------------------------------------------------------------------------------------
Total current assets 1,989.1 2,160.6
- -----------------------------------------------------------------------------------------------------------
Investments and other assets
- -----------------------------------------------------------------------------------------------------------
Investments at equity 205.6 159.9
- -----------------------------------------------------------------------------------------------------------
Goodwill 196.9 269.4
- -----------------------------------------------------------------------------------------------------------
Intangible pension asset 81.6 74.6
- -----------------------------------------------------------------------------------------------------------
Other 86.5 99.6
- -----------------------------------------------------------------------------------------------------------
Total investments and other assets 570.6 603.5
- -----------------------------------------------------------------------------------------------------------
Deferred income tax benefits 316.2 337.5
- -----------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 1,210.4 1,486.4
- -----------------------------------------------------------------------------------------------------------
Total assets $4,086.3 $4,588.0
- -----------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------
Current liabilities
- -----------------------------------------------------------------------------------------------------------
Notes payable $ 413.1 $ 515.4
- -----------------------------------------------------------------------------------------------------------
Accounts payable 387.1 430.0
- -----------------------------------------------------------------------------------------------------------
Accrued payroll and employee benefits 221.8 222.1
- -----------------------------------------------------------------------------------------------------------
Other accrued liabilities 287.9 277.0
- -----------------------------------------------------------------------------------------------------------
Taxes other than taxes on income 38.5 37.2
- -----------------------------------------------------------------------------------------------------------
Taxes on income 107.4 126.7
- -----------------------------------------------------------------------------------------------------------
Total current liabilities 1,455.8 1,608.4
- -----------------------------------------------------------------------------------------------------------
Deferred employee benefits and other noncurrent liabilities 1,149.2 1,127.5
- -----------------------------------------------------------------------------------------------------------
Long-term debt 389.3 533.7
- -----------------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiaries 152.2 153.8
- -----------------------------------------------------------------------------------------------------------
Shareholders' equity 939.8 1,164.6
- -----------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' equity $4,086.3 $4,588.0
- -----------------------------------------------------------------------------------------------------------
46
27
ADDITIONAL INFORMATION -- STATEMENT OF CASH FLOWS DANA CORPORATION
in millions (including Dana Credit Corporation on an equity basis)
- --------------------------------------------------------------------------------
Year Ended December 31
1993 1994 1995
- ----------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ 391.0 $ 435.4 $ 325.8
- ----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
- ----------------------------------------------------------------------------------------------------------------
Purchases of property, plant and equipment (175.8) (278.2) (338.3)
- ----------------------------------------------------------------------------------------------------------------
Purchase of minority interest of Hayes-Dana, Inc. (92.4)
- ----------------------------------------------------------------------------------------------------------------
Purchase of European axle group (93.0)
- ----------------------------------------------------------------------------------------------------------------
Other acquisitions and additions to investments (44.9) (21.6) (37.1)
- ----------------------------------------------------------------------------------------------------------------
Other 40.1 14.8 69.7
- ----------------------------------------------------------------------------------------------------------------
Net cash flows - investing activities (180.6) (285.0) (491.1)
- ----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
- ----------------------------------------------------------------------------------------------------------------
Net change in short-term debt 4.4 80.8 56.4
- ----------------------------------------------------------------------------------------------------------------
Issuance of long-term debt 224.1 50.0 310.0
- ----------------------------------------------------------------------------------------------------------------
Payments on long-term debt (375.0) (166.6) (167.3)
- ----------------------------------------------------------------------------------------------------------------
Dividends paid (73.8) (82.0) (91.2)
- ----------------------------------------------------------------------------------------------------------------
Other 14.3 7.4 5.3
- ----------------------------------------------------------------------------------------------------------------
Net cash flows - financing activities (206.0) (110.4) 113.2
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 4.4 40.0 (52.1)
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - beginning of year 62.6 67.0 107.0
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of year $ 67.0 $ 107.0 $ 54.9
- ----------------------------------------------------------------------------------------------------------------
Reconciliation of net income to net cash flows from operating activities:
- ----------------------------------------------------------------------------------------------------------------
Net income $ 79.6 $ 228.2 $ 288.1
- ----------------------------------------------------------------------------------------------------------------
Noncash items included in income:
- ----------------------------------------------------------------------------------------------------------------
Effect on prior years of the change in accounting for postemployment
benefits 48.9
- ----------------------------------------------------------------------------------------------------------------
Depreciation and amortization 154.3 163.6 187.4
- ----------------------------------------------------------------------------------------------------------------
Deferred income taxes 9.4 13.0 (23.1)
- ----------------------------------------------------------------------------------------------------------------
Minority interest 13.4 12.3 7.0
- ----------------------------------------------------------------------------------------------------------------
Net change in receivables, inventory and payables 67.4 18.0 (118.5)
- ----------------------------------------------------------------------------------------------------------------
Unremitted earnings of affiliates 8.8 (7.0) (3.4)
- ----------------------------------------------------------------------------------------------------------------
Other 9.2 7.3 (11.7)
- ----------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ 391.0 $ 435.4 $ 325.8
- ----------------------------------------------------------------------------------------------------------------
47
28
ADDITIONAL INFORMATION -- BALANCE SHEET DANA CREDIT CORPORATION
in millions (an indirect wholly-owned subsidiary of Dana Corporation)
- --------------------------------------------------------------------------------
December 31
1994 1995
- -----------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------
Cash $ 2.5 $ 11.5
- -----------------------------------------------------------------------------------------------------------
Loans receivable 61.4 114.4
- -----------------------------------------------------------------------------------------------------------
Lease financing 1,013.1 1,153.5
- -----------------------------------------------------------------------------------------------------------
Investments in partnerships 40.7 29.1
- -----------------------------------------------------------------------------------------------------------
Other assets 55.3 78.2
- -----------------------------------------------------------------------------------------------------------
Total Assets $1,173.0 $1,386.7
- -----------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDER'S EQUITY
- -----------------------------------------------------------------------------------------------------------
Short-term debt $ 177.2 $ 371.7
- -----------------------------------------------------------------------------------------------------------
Long-term debt 640.1 600.7
- -----------------------------------------------------------------------------------------------------------
Other liabilities 55.0 74.3
- -----------------------------------------------------------------------------------------------------------
Deferred income taxes 211.5 235.4
- -----------------------------------------------------------------------------------------------------------
Shareholder's equity 89.2 104.6
- -----------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholder's Equity $1,173.0 $1,386.7
- -----------------------------------------------------------------------------------------------------------
ADDITIONAL INFORMATION -- STATEMENT OF INCOME DANA CREDIT CORPORATION
in millions (an indirect wholly-owned subsidiary of Dana Corporation)
- --------------------------------------------------------------------------------
Year Ended December 31
1993 1994 1995
- -------------------------------------------------------------------------------------------------------------
Revenues
- -------------------------------------------------------------------------------------------------------------
Lease financing $ 120.0 $ 132.4 $ 152.2
- -------------------------------------------------------------------------------------------------------------
Interest and fees on loans 8.4 7.6 6.2
- -------------------------------------------------------------------------------------------------------------
Other revenues 18.3 21.7 22.0
- -------------------------------------------------------------------------------------------------------------
146.7 161.7 180.4
- -------------------------------------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------------------------------------
Interest expense 50.7 51.9 62.8
- -------------------------------------------------------------------------------------------------------------
General and administrative expenses 79.2 89.7 103.1
- -------------------------------------------------------------------------------------------------------------
129.9 141.6 165.9
- -------------------------------------------------------------------------------------------------------------
Income before income taxes 16.8 20.1 14.5
- -------------------------------------------------------------------------------------------------------------
Estimated income tax provision (benefit) 5.3 5.4 (8.0)
- -------------------------------------------------------------------------------------------------------------
Income before equity in earnings of affiliates 11.5 14.7 22.5
- -------------------------------------------------------------------------------------------------------------
Equity in earnings of affiliates 3.2 5.3 4.9
- -------------------------------------------------------------------------------------------------------------
Net Income $ 14.7 $ 20.0 $ 27.4
- -------------------------------------------------------------------------------------------------------------
48
29
ADDITIONAL INFORMATION --
STATEMENT OF CASH FLOWS DANA CREDIT CORPORATION
in millions (an indirect wholly-owned subsidiary of Dana Corporation)
- --------------------------------------------------------------------------------
Year Ended December 31
1993 1994 1995
- -------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ 92.9 $ 93.5 $ 107.1
- -------------------------------------------------------------------------------------------------
Cash flows from investing activities:
- -------------------------------------------------------------------------------------------------
Purchases of assets to be leased (298.2) (402.8) (507.9)
- -------------------------------------------------------------------------------------------------
Loans made to customers and affiliates (20.9) (30.1) (24.8)
- -------------------------------------------------------------------------------------------------
Payments received on leases 164.1 195.5 201.0
- -------------------------------------------------------------------------------------------------
Proceeds from sales of leased assets 33.0 39.8 60.8
- -------------------------------------------------------------------------------------------------
Payments received on loans 6.6 102.9 16.6
- -------------------------------------------------------------------------------------------------
Other 20.4 12.3 13.8
- -------------------------------------------------------------------------------------------------
Net cash flows -- investing activities (95.0) (82.4) (240.5)
- -------------------------------------------------------------------------------------------------
Cash flows from financing activities:
- -------------------------------------------------------------------------------------------------
Net change in short-term debt 62.0 (106.7) 194.5
- -------------------------------------------------------------------------------------------------
Issuance of long-term debt 354.3 305.4 108.1
- -------------------------------------------------------------------------------------------------
Payments on long-term debt (399.8) (197.3) (147.5)
- -------------------------------------------------------------------------------------------------
Dividends paid (15.7) (17.7) (12.7)
- -------------------------------------------------------------------------------------------------
Net cash flows -- financing activities .8 (16.3) 142.4
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (1.3) (5.2) 9.0
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents -- beginning of year 9.0 7.7 2.5
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents -- end of year $ 7.7 $ 2.5 $ 11.5
- -------------------------------------------------------------------------------------------------
Reconciliation of net income to net cash flows from
operating activities:
- -------------------------------------------------------------------------------------------------
Net income $ 14.7 $ 20.0 $ 27.4
- -------------------------------------------------------------------------------------------------
Noncash items included in income:
- -------------------------------------------------------------------------------------------------
Depreciation 33.7 38.5 50.0
- -------------------------------------------------------------------------------------------------
Deferred income taxes 20.1 45.1 26.6
- -------------------------------------------------------------------------------------------------
Provision for credit losses 12.1 15.9 15.6
- -------------------------------------------------------------------------------------------------
Gains from sales of leased assets (6.8) (2.9) (10.1)
- -------------------------------------------------------------------------------------------------
Change in income taxes recoverable 6.4 (21.3) (3.2)
- -------------------------------------------------------------------------------------------------
Unremitted earnings of affiliates (3.2) (5.3) (4.9)
- -------------------------------------------------------------------------------------------------
Change in other assets, other liabilities and
accrued expenses 15.9 3.5 5.7
- -------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ 92.9 $ 93.5 $ 107.1
- -------------------------------------------------------------------------------------------------
49
30
ADDITIONAL INFORMATION
in millions except per share amounts DANA CORPORATION
- --------------------------------------------------------------------------------
SHAREHOLDERS' INVESTMENT
- --------------------------------------------------------------------------------
The following table shows the range of market prices of Dana Corporation
common stock on the New York Stock Exchange and the cash dividends declared and
paid for each quarter during 1994 and 1995. At December 31, 1995, the closing
price of Dana common stock was $29 1/4.
- ------------------------------------------------------------------------------------------------------------------------
CASH
DIVIDENDS
DECLARED
STOCK PRICE AND PAID
- ------------------------------------------------------------------------------------------------------------------------
1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
QUARTER ENDED HI LO CLOSE HI LO CLOSE
- ------------------------------------------------------------------------------------------------------------------------
March 31 $ 30 11/16 $ 27 1/4 $ 28 5/8 26 21 3/8 25 1/2 $.20
June 30 30 5/8 25 1/2 28 1/2 29 1/2 24 28 5/8 .21
September 30 29 3/4 26 1/4 27 3/4 32 5/8 28 28 7/8 .21
December 31 27 7/8 19 5/8 23 1/2 31 25 1/4 29 1/4 .21
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
1995
- ------------------------------------------------------------------------------------------------------------------------
QUARTER ENDED
- ------------------------------------------------------------------------------------------------------------------------
March 31 $.21
June 30 .23
September 30 .23
December 31 .23
- ------------------------------------------------------------------------------------------------------------------------
UNAUDITED QUARTERLY FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
The following information has been reviewed by our independent accountants in
accordance with generally accepted auditing standards (GAAS); however, they have
not performed an audit in accordance with GAAS on the quarterly information to
enable them to opine on each quarter. Quarterly per share amounts were computed
using the average number of outstanding shares for each quarter.
- --------------------------------------------------------------------------------
NET INCOME
NET GROSS NET INCOME (LOSS)
QUARTER ENDED SALES PROFIT (LOSS) PER SHARE
- ------------------------------------------------------------------------------------------------------------------------
For the year ended
December 31, 1993
March 31 $1,324 $181 $(25.4)(A) $ (.27)
June 30 1,418 214 36.6 .39
September 30 1,291 194 33.2 .36
December 31 1,427 196 35.2 .38
- ------------------------------------------------------------------------------------------------------------------------
For the year ended
December 31, 1994
March 31 $1,597 $234 $ 47.7 $ .48
June 30 1,712 281 68.0 .69
September 30 1,610 234 52.9 .54
December 31 1,695 241 59.6 .60
- ------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED
DECEMBER 31, 1995
MARCH 31 $1,924 $290 $ 59.2 $ .59
JUNE 30 1,969 315 89.1 .88
SEPTEMBER 30 1,727 268 60.9 .60
DECEMBER 31 1,978 275 78.9 .77
- ------------------------------------------------------------------------------------------------------------------------
(A) Includes the one-time charge of $48.9 reflecting the adoption of SFAS No.
112 effective January 1, 1993.
Dana's third quarter 1993 net income included approximately $3.0 ($.03 per
share) of income tax benefit attributable primarily to the effect of the change
in the U.S. corporate income tax rate on deferred income tax benefits.
During the first quarter of 1995, Dana recorded a non-operating charge of
$18.0 ($.17 per share) for its proportionate share of translation losses
incurred by its Mexican affiliate, Spicer S.A. de C.V., due to the devaluation
of the Mexican peso.
In the fourth quarter, Dana recorded a gain of $12.0 ($.11 per share) due to
the sale of equity in three South American affiliates, a tax benefit of $5.2
($.05) due to the sale of an insurance subsidiary in Bermuda and a charge of
$5.8 ($.06) relating to a tentative settlement of a lawsuit filed by the
Department of Justice.
50
31
ELEVEN YEAR HISTORY
in millions except share and per share amounts DANA CORPORATION
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For the
Years 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Net Sales $3,797 $3,738 $4,180 $4,936 $4,865 $4,952 $4,398 $4,872 $5,460 $6,614 $7,598
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income
(Loss) 165 84 142 162 132 76 13 (382) 80 228 288
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income
(Loss) per
Common
Share 1.48 .82 1.62 1.99 1.62 .92 .16 (4.35) .86 2.31 2.84
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends
Declared
per Common
Share .64 .64 .70 .77 .80 .80 .80 .80 .80 .83 .90
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets 4,174 4,578 4,914 4,786 5,225 4,513 4,179 4,343 4,632 5,111 5,694
- ----------------------------------------------------------------------------------------------------------------------------------
Long-Term
Debt 663 1,027 1,322 1,324 1,522 1,486 1,541 1,467 1,207 1,187 1,315
- ----------------------------------------------------------------------------------------------------------------------------------
DANA CORPORATION
(including Diamond Financial Holdings, Inc. on an equity basis)
- ----------------------------------------------------------------------------------------------------------------------------------
For the
Years 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income
per Share
of Common
Stock+ $ 1.48 $ .82 $ 1.62 $ 1.99 $ 1.62 $ .92 $ .16 $ .64 $ 1.39 $ 2.31 $ 2.84
- ----------------------------------------------------------------------------------------------------------------------------------
Cash
Dividends
per Share
of Common
Stock
Declared
and Paid .64 .64 .70 .77 .80 .80 .80 .80 .80 .83 .90
- ----------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
NET SALES $3,754 $3,695 $4,142 $4,896 $4,857 $4,948 $4,385 $4,863 $5,457 $6,607 $7,596
- ----------------------------------------------------------------------------------------------------------------------------------
Cost of
Sales 3,054 3,075 3,480 4,133 4,104 4,129 3,841 4,282 4,688 5,631 6,469
- ----------------------------------------------------------------------------------------------------------------------------------
Income
(Loss)
before
Income
Taxes 342 201 203 238 217 187 (24) 48 224 380 490
- ----------------------------------------------------------------------------------------------------------------------------------
Income
Taxes* 169 96 84 109 95 97 3 26 89 155 181
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME+ 165 84 142 162 132 76 13 56 129 228 288
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income
for the
Year
Retained
for Growth 93 19 81 100 67 10 -- -- 6 146 197
- ----------------------------------------------------------------------------------------------------------------------------------
Interest
Expense 51 63 91 103 118 120 111 99 83 54 76
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR END FINANCIAL POSITION
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid
Assets** $ 533 $ 563 $ 733 $ 801 $ 763 $ 764 $ 746 $ 837 $ 990 $1,117 $1,153
- ----------------------------------------------------------------------------------------------------------------------------------
Working
Capital 612 590 484 509 508 487 423 562 569 533 552
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of
Current
Assets to
Current
Liabilities 1.9-1 1.8-1 1.5-1 1.5-1 1.5-1 1.5-1 1.4-1 1.6-1 1.5-1 1.4-1 1.3-1
- ----------------------------------------------------------------------------------------------------------------------------------
Total
Shareholders'
Equity 1,195 944 865 960 1,020 1,049 989 707 801 940 1,165
- ----------------------------------------------------------------------------------------------------------------------------------
Long-Term
Debt 354 618 690 681 759 766 786 687 496 389 534
- ----------------------------------------------------------------------------------------------------------------------------------
Net
Property,
Plant and
Equipment 737 765 820 905 985 1,107 1,077 1,029 1,061 1,210 1,486
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets 2,424 2,514 2,788 2,916 3,102 3,196 2,959 3,349 3,684 4,086 4,588
- ----------------------------------------------------------------------------------------------------------------------------------
Average
Number of
Shares
Outstanding
(in
thousands) 112,020 102,196 87,430 81,353 81,658 81,954 82,171 87,792 92,533 98,689 101,297
- ----------------------------------------------------------------------------------------------------------------------------------
Stock Price
High 15 3/16 18 1/4 27 1/8 20 1/4 21 7/16 19 1/16 18 1/4 24 1/8 30 1/8 30 11/16 32 5/8
--------------------------------------------------------------------------------------------------------------------
Low 11 1/8 12 3/4 13 3/4 16 1/4 16 1/2 9 15/16 12 5/16 13 3/8 22 19 5/8 21 3/8
--------------------------------------------------------------------------------------------------------------------
Close 13 5/8 17 7/16 17 1/16 19 7/16 17 5/16 14 15/16 13 7/8 23 1/2 29 15/ 23 1/2 29 1/4
- ----------------------------------------------------------------------------------------------------------------------------------
* Net of the cumulative effect of the change in accounting for income taxes in 1987.
** Cash, Marketable Securities and Accounts Receivable
+ Excludes one-time SFAS No. 106 charge of $438 ($4.99 per share) in 1992 and SFAS No. 112 charge of $49 ($.53 per share) in
1993.
51