AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 2002
REGISTRATION NO. 333-76012
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DANA CORPORATION
(Exact name of Registrant as specified in its charter)
VIRGINIA 3714 34-4361040
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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4500 DORR STREET
TOLEDO, OHIO 43615
(419) 535-4500
(Address and telephone number of registrant's principal executive offices)
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MICHAEL L. DEBACKER, SECRETARY
DANA CORPORATION
4500 DORR STREET
TOLEDO, OHIO 43615
(419) 535-4500
(Name, address and telephone number of agent for service)
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COPY TO:
ROBERT L. KOHL, ESQ.
ROSENMAN & COLIN LLP
575 MADISON AVENUE
NEW YORK, NY 10022
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this registration statement becomes effective.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
------------------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PROSPECTUS
DANA CORPORATION [DANA CORPORATION LOGO]
EXCHANGE OFFER FOR
$575,000,000 PRINCIPAL AMOUNT OF
9% NOTES DUE 2011 AND
E200,000,000 PRINCIPAL AMOUNT OF
9% NOTES DUE 2011
OFFER TO EXCHANGE ALL OUTSTANDING 9% NOTES DUE 2011 FOR 9% NOTES DUE 2011
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THE EXCHANGE OFFER
- We are offering to exchange all of our outstanding 9% Notes due 2011
(outstanding notes) that are validly tendered and not validly withdrawn
for an equal principal amount of exchange notes that are freely tradable
(exchange notes).
- You may withdraw tenders of outstanding notes at any time prior to the
expiration of the exchange offer.
- The exchange offer expires at 5:00 p.m., New York City time, on February
20, 2002, unless extended. We do not currently intend to extend the
expiration date.
THE EXCHANGE NOTES
- The terms of the exchange notes will be substantially identical to those
of the outstanding notes, except that the exchange notes will be
registered under the Securities Act and be freely tradable.
RESALES OF EXCHANGE NOTES
- There is no existing public market for the outstanding notes or the
exchange notes. Application will be made to list the exchange notes on
the Luxembourg Stock Exchange. We do not intend to list the exchange
notes on any other securities exchange or seek approval for quotation
through any automated trading system. The exchange notes may also be sold
in the over-the-counter market, in negotiated transactions or through a
combination of such methods.
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EACH BROKER-DEALER THAT RECEIVES EXCHANGE NOTES FOR ITS OWN ACCOUNT
PURSUANT TO THE EXCHANGE OFFER MUST ACKNOWLEDGE THAT IT WILL DELIVER A
PROSPECTUS IN CONNECTION WITH ANY RESALE OF SUCH EXCHANGE NOTES. THE LETTER OF
TRANSMITTAL STATES THAT BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, A
BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE
MEANING OF THE SECURITIES ACT. THIS PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A BROKER-DEALER IN CONNECTION
WITH RESALES OF EXCHANGE NOTES RECEIVED IN EXCHANGE FOR OUTSTANDING NOTES WHERE
SUCH NOTES WERE ACQUIRED BY SUCH BROKER-DEALER AS A RESULT OF MARKET-MAKING
ACTIVITIES OR OTHER TRADING ACTIVITIES. WE HAVE AGREED THAT, FOR A PERIOD OF 180
DAYS AFTER THE EXPIRATION DATE OF THE EXCHANGE OFFER, WE WILL MAKE THIS
PROSPECTUS AVAILABLE TO ANY BROKER-DEALER FOR USE IN CONNECTION WITH ANY SUCH
RESALE. SEE "PLAN OF DISTRIBUTION."
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 16 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this prospectus is January 18, 2002.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.......................................... 1
Risk Factors................................................ 16
Where You Can Find More Information......................... 20
Exchange Rate Data.......................................... 21
Disclosure Regarding Forward-Looking Statements............. 21
Use of Proceeds............................................. 22
Capitalization.............................................. 23
Selected Consolidated Financial Data........................ 24
Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ 26
Business.................................................... 44
Management.................................................. 51
Description of Certain Indebtedness......................... 54
Exchange Offer.............................................. 59
Description of the Notes.................................... 69
Book-Entry Settlement and Clearance......................... 110
U.S. Federal Income Tax Considerations...................... 114
Plan of Distribution........................................ 118
Legal Matters............................................... 118
Independent Accountants..................................... 118
General Information......................................... 118
Index to Financial Statements............................... F-1
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IMPORTANT TERMS USED IN THIS PROSPECTUS
Unless the context indicates otherwise, in this prospectus, the terms "us,"
"we," "our" and "Dana" refer to Dana Corporation and its subsidiaries. All
references to "dollars" and "$" are to U.S. dollars.
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INCORPORATION BY REFERENCE AND
DELIVERY OF CERTAIN DOCUMENTS
This prospectus incorporates important business and financial information
about Dana that is not included in or delivered with this document, and
documents that we file later with the SEC will automatically update and replace
this information. We incorporate by reference the documents listed below and,
unless otherwise specified therein, any future filings we make with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act until the
termination of the exchange offer:
- Our Annual Report on Form 10-K for the year ended December 31, 2000;
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001,
June 30, 2001 and September 30, 2001;
- Our Current Reports on Form 8-K, dated July 17, 2001, July 18, 2001,
December 20, 2001 and January 9, 2002; and
- Our definitive proxy statement on Schedule 14A filed with the SEC on
March 2, 2001.
The Annual Report on Form 10-K for the year ended December 31, 2000
contains, and future Annual Reports will contain, audited consolidated financial
statements and the Quarterly Reports on Form 10-Q for the quarters ended March
31, 2001, June 30, 2001 and September 30, 2001 contain, and future Quarterly
Reports will contain, unaudited consolidated financial statements for interim
financial periods. All of these
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Reports will be available, at no charge, at the office of the Luxembourg Paying
Agent if the exchange notes are accepted for listing on the Luxembourg Stock
Exchange.
You may request a copy of any or all of the documents incorporated by
reference herein (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents) and certain other
documents referred to herein, at no cost, by writing or telephoning us at our
principal executive offices at the following address:
Michael L. DeBacker
Secretary
Dana Corporation
P.O. Box 1000
Toledo, Ohio 43697
Tel: (419) 535-4500
TO OBTAIN TIMELY DELIVERY OF THESE DOCUMENTS, YOU MUST REQUEST THE
INFORMATION NO LATER THAN FEBRUARY 12, 2002, THE DATE FIVE BUSINESS DAYS BEFORE
THE DATE BY WHICH YOU MUST DECIDE WHETHER TO PARTICIPATE IN THE EXCHANGE OFFER.
You should rely only on the information provided in this prospectus or
incorporated herein by reference. Any statement contained in the documents
incorporated by reference will be deemed to be modified or superseded for
purposes of this prospectus to the extent that it is modified or superseded by a
statement contained herein or in a subsequently dated document incorporated by
reference in this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus or incorporated herein
by reference. Any statement so modified or superseded will not be deemed to
constitute a part of this prospectus, except as so modified or superseded. We
have not authorized anyone else to provide you with different or additional
information. We are not making an offer of these securities in any state or
country where such offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front cover of this document or the documents incorporated herein by
reference.
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PROSPECTUS SUMMARY
This summary highlights the material information about our company and this
exchange offer. This summary does not contain all of the information that may be
important to you in deciding whether to participate in the exchange offer. We
encourage you to read this prospectus in its entirety, including the information
incorporated by reference.
DANA CORPORATION
We were founded in 1904 as the first supplier of universal joints to the
automotive industry. Today, we are one of the world's largest independent
suppliers of components, modules and systems to global vehicle manufacturers and
related aftermarkets. Our products are sold to the automotive, commercial
vehicle, and off-highway markets, and are used in the manufacturing of passenger
cars and vans, light trucks, sport-utility vehicles (SUVs), and medium and heavy
duty vehicles, as well as in a range of off-highway applications. Each of the
markets we serve consists of original equipment (OE) production, OE service, and
aftermarket segments. We have over 430 facilities in 34 countries and employ
approximately 72,000 people. For the year ended December 31, 2000, we generated
consolidated sales of $12.3 billion and net income of $334 million.
Our seven core product segments, or foundation businesses, focus on axles,
driveshafts, brake and chassis products, bearings and sealing products, fluid
systems, structures and filtration products. Each of these businesses has a
strong market position and brand equity and provides our customers with
value-added manufacturing. We have long been a leader in technological
innovation in our industry and many of our products possess features that are
unique and patented. As evidenced by our numerous supplier quality awards, we
are highly focused on product quality, as well as delivery and service. As a
result, we have developed long-standing business relationships with many of the
thousands of customers that we serve worldwide.
OUR STRATEGIC BUSINESS UNITS
In order to optimally align our foundation businesses with the markets they
support, our operations are organized into the following market-focused
strategic business units (SBUs):
- Automotive Systems Group (ASG) -- ASG produces light duty axles,
driveshafts, structural products (such as engine cradles and frames),
transfer cases, original equipment brakes and integrated modules and
systems for the light vehicle market and driveshafts for the heavy truck
market. ASG generated sales of $4.6 billion in 2000.
- Automotive Aftermarket Group (AAG) -- AAG sells primarily hydraulic brake
components and disc brakes for light vehicle applications, internal
engine hard parts, chassis products, and a complete line of filtration
products for a variety of applications. AAG generated sales of $2.9
billion in 2000.
- Commercial Vehicle Systems (CVS) -- CVS is a major supplier of heavy
axles and brakes, drivetrain components, and trailer products to the
medium and heavy truck markets. CVS generated sales of $1.6 billion in
2000.
- Engine and Fluid Management Group (EFMG) -- EFMG serves the automotive,
light to heavy truck, leisure and outdoor power equipment and industrial
markets with sealing products, internal engine hard parts, electronic
modules, sensors, and an extensive line of products for the pumping,
routing and thermal management of fluid systems. EFMG was formed in
December 2001, by combining the former Engine Systems Group (ESG) and
Fluid Systems Group (FSG). In 2000, ESG generated sales of $1.3 billion
and FSG generated sales of $1.2 billion. Segment information for EFMG
will be restated for comparative purposes in our 2001 annual report.
- Off-Highway Systems Group (OHSG) -- OHSG produces axles and brakes,
transaxles, power-shift transmissions, torque converters and electronic
controls for the construction, agriculture, mining, specialty chassis,
outdoor power, material handling, forestry and leisure/utility equipment
markets. OHSG generated sales of $674 million in 2000.
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For some time, we have also been a leading provider of lease financing
services in selected markets through our wholly-owned subsidiary, Dana Credit
Corporation. With an asset base of $2.5 billion at the end of 2000, DCC and its
subsidiaries provide leasing and financing services to selected markets
primarily in the U.S., Canada, the United Kingdom and continental Europe. On
October 17, 2001, we announced plans to pursue the sale of the businesses of
DCC.
OUR COMPETITIVE STRENGTHS
Our key competitive strengths include the following:
Strong Market Positions. We are one of the world's largest independent
suppliers of components, modules and systems for light, medium and heavy duty
vehicle manufacturers and related aftermarkets. Our products, which are focused
on under-the-vehicle and under-the-hood applications, are used in SUVs and other
light vehicles by automotive customers such as Ford Motor Company,
DaimlerChrysler AG, and General Motors Corporation; in medium and heavy
commercial vehicles by customers such as Renault V.I./ Mack Trucks, Inc., PACCAR
Inc, and Navistar International Corporation; and in a variety of off-highway
vehicles and equipment by customers such as Deere & Co., Textron Inc., and
Manitou S.A. We also supply replacement parts to these markets through OE
service organizations and independent aftermarket channels.
Global Presence. We have more than 270 manufacturing facilities, 90
distribution facilities, and 65 research centers, service branches and offices
which are located in 34 countries around the world. We maintain administrative
organizations in North America, Europe, South America and Asia/Pacific which
support the SBUs. In 2000, non-U.S. sales represented 31% of our total
consolidated sales. Our global presence gives us proximity to our customers and
enables us to provide marketing and manufacturing support, meet just-in-time
delivery requirements, and provide engineering solutions around the clock
through our Virtual Time Engineering(TM) program.
Recognized Brand Names. We believe that our OE and aftermarket customers
alike recognize our branded products for quality and reliability. Among our most
significant trademarked products are:
- Spicer(R) axles, transaxles, driveshafts, steering shafts, and universal
joints;
- Victor Reinz(R) gaskets;
- Boston(R) and Everflex(R) hose;
- Weatherhead(R) hose and fittings;
- Wix(R) filters;
- Perfect Circle(R) piston rings and cylinder liners;
- FTE(R) clutch and brake actuation systems; and
- Glacier Vandervell(TM) bearings.
Innovative, Value-Added Products. Since our founder Clarence Spicer
designed the first automotive universal joint, we have been dedicated to the
rapid development of new, value-added products. By continually broadening and
enhancing our product offerings, we are able to attract new customers and
strengthen and expand our existing customer relationships. Recent new products
include temperature-responsive cooling systems with electronic sensors, fluid
steering systems with electronic interfaces, innovative materials that make
components both lighter and stronger, and new traction control products that
improve on-demand, all-wheel drive performance for vehicles, such as our TXT(TM)
torque-management differential. We are also engaged in fuel cell engineering for
alternate-energy systems.
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OUR BUSINESS STRATEGY
Our overall strategic direction is set out in our Transformation 2005
business plan. Our goals under this plan represent an increased emphasis on
anticipating the needs of our markets and serving our customers. The following
are key elements of our plan:
Focus and Expand Foundation Businesses. We believe that our foundation
businesses are the key to the long-term profitable growth of our company. These
businesses have leading market positions and brand equity and provide our
customers with value-added solutions and products. We are accelerating the
alignment of these businesses with the markets they serve. As our OE customers
target improved asset utilization, speed to market, lower cost, lower investment
risk, and greater flexibility, they increasingly look for outsourcing
alternatives. We expect that our global presence and technological and
engineering capabilities, as well as our experience, scale of operations and
long-standing relationships with major OE customers, will enable us to continue
to take advantage of this opportunity. We have been awarded net new business
that is projected, based on our customers' production estimates, to add
approximately $5.9 billion in total revenues from 2001 through 2005. We are
encouraged by the new awards, especially since these sales amounts include
business not only with our traditional North American OE customers, but also
with OEs based outside the United States.
Focus on Capital and Operating Efficiency. We continue to focus on
opportunities to optimize our resources and reduce manufacturing costs. We have
undertaken initiatives to maximize our return on invested capital and to improve
cash flow. For example, rather than investing in single-purpose facilities in
emerging markets, we are working to develop operations that manufacture a
broader range of like products for multiple vehicular market segments. Strategic
alliances have also helped to provide technical capability, while limiting our
investment requirements. On the operational side, we are focused on reducing
working capital, managing for cash and reducing waste.
Evaluate Strategic Alliances, Joint Ventures and Selected Acquisition
Opportunities. Among the keys to our business model is the concept of
capitalizing on strategic alliances and joint ventures. Such relationships offer
opportunities to expand our capabilities with a reduced level of investment and
enhance our ability to provide the full scope of services required by our
customers. We have formed a number of innovative alliances, starting with our
Roadranger(TM) marketing program with Eaton Corporation, which has been highly
successful in leveraging our collective strengths to market Dana and Eaton
products for heavy truck drivetrain systems. We also have strategic alliances
with GETRAG Cie, to strengthen our portfolio of advanced axle technologies;
Motorola Inc., to integrate its electronic expertise into the development of
advanced technology for traditionally mechanical components; and Buhler Motor
Inc., to provide advanced automotive motor-module technologies and manufacturing
expertise to support our product applications. We continue to evaluate potential
strategic alliances and joint ventures in order to gain access to advanced
technology, strengthen our market position and our global presence and reduce
our overall manufacturing costs.
We also evaluate potential acquisition candidates that have product
platforms complementary to our foundation businesses, strong operating potential
and strong existing management teams. We have substantial experience in
completing and integrating acquisitions that have provided us with opportunities
to reduce costs and improve operational efficiency through synergies in
manufacturing processes, coordination of raw material purchases, rationalization
of administrative staff, and technical capabilities.
RECENT DEVELOPMENTS
On October 17, 2001, we announced our intention to accelerate the
restructuring of our operations and to reduce our workforce globally by more
than 15%. More than 30 facilities are being reviewed for consolidation or
closure. Plans identifying the specific actions are being developed and will
determine the timing of expense recognition and cash flows. However, we
currently expect that the restructuring charges will total approximately $445
million after tax and that 62% of the charges will be incurred in the fourth
quarter of 2001, with the balance to be incurred in 2002. We expect that 34% of
the charges will be non-cash; most of the cash portion will be severance costs
related to the workforce reduction. We anticipate that 79% of the charges will
be related to our North American operations. We estimate that 55% of the charges
will be incurred by our
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business units primarily serving the light vehicular OE marketplace and 25% will
be incurred by AAG. We also announced that we will pursue the sale of the
businesses of DCC, which accounted for approximately $1.9 billion of our assets
at September 30, 2001. Although we are presently unable to estimate the proceeds
from this sale, we do not expect to incur a loss.
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Dana Corporation is a Virginia corporation. Our principal executive offices
are located at 4500 Dorr Street, Toledo, Ohio 43615 and our telephone number at
that address is (419) 535-4500. Our website may be accessed at
http://www.dana.com.
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SUMMARY OF THE EXCHANGE OFFER
The Initial Offering of
Outstanding Notes............. We sold the outstanding notes on August 8,
2001, to Deutsche Banc Alex. Brown Inc., J.P.
Morgan Securities Inc., Credit Suisse First
Boston Corporation, Banc of America Securities
LLC, BNY Capital Markets, Inc., HSBC Securities
(USA) Inc., Salomon Smith Barney Inc., BNP
Paribas Securities Corp., Comerica Securities,
Inc., First Union Securities, Inc., McDonald
Investments, Inc., TD Securities (USA) Inc. and
UBS Warburg LLC. We collectively refer to those
parties in this prospectus as the "initial
purchasers." The initial purchasers
subsequently resold the outstanding notes to
qualified institutional buyers pursuant to Rule
144A under the Securities Act and to persons
outside the United States under Regulation S.
Registration Rights
Agreement..................... Contemporaneously with the initial sale of the
outstanding notes, we entered into a
registration rights agreement with the initial
purchasers in which we agreed, among other
things, to use our reasonable best efforts to
file this registration statement with the SEC
and to complete this exchange offer. This
exchange offer is intended to satisfy your
rights under the registration rights agreement.
After the exchange offer is complete, you will
no longer be entitled to any exchange or
registration rights hereunder with respect to
your outstanding notes.
The Exchange Offer............ We are offering to exchange the exchange notes,
which have been registered under the Securities
Act, for your outstanding notes. In order to be
exchanged, an outstanding note must be properly
tendered and accepted. All outstanding notes
that are validly tendered and not validly
withdrawn will be exchanged. We will issue
exchange notes promptly after the expiration of
the exchange offer.
Resales of the Exchange
Notes......................... Except as provided below, we believe that the
exchange notes may be offered for resale,
resold and otherwise transferred by you without
compliance with the registration and prospectus
delivery provisions of the Securities Act
provided that:
- the exchange notes are being acquired in the
ordinary course of your business;
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate,
in the distribution of the exchange notes
issued to you in the exchange offer; and
- you are not an affiliate of ours.
If any of these conditions are not satisfied
and you transfer any exchange notes issued to
you in the exchange offer without delivering a
resale prospectus meeting the requirements of
the Securities Act or without an exemption from
registration of your exchange notes from these
requirements, you may incur liability under the
Securities Act. We will not assume, nor will we
indemnify you against, any such liability.
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Each broker-dealer that is issued exchange
notes in the exchange offer for its own account
in exchange for outstanding notes must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act
in connection with any resale of the exchange
notes. A broker-dealer may use this prospectus
for an offer to resell, resale or other
retransfer of the exchange notes issued to it
in the exchange offer in exchange for
outstanding notes that were acquired by that
broker-dealer as a result of market-making or
other trading activities.
Record Date................... We mailed this prospectus and the related offer
documents to the registered holders of
outstanding notes on January 15, 2002.
Expiration Date............... The exchange offer will expire at 5:00 p.m.,
New York City time, on February 20, 2002,
unless we decide to extend the expiration date.
Conditions to the Exchange
Offer......................... The exchange offer is subject to customary
conditions, including that the exchange offer
not violate applicable law or any applicable
interpretation of the staff of the SEC. This
exchange offer is not conditioned upon any
minimum principal amount of the outstanding
notes being tendered.
Exchange Agent................ Citibank, N.A., London branch, is serving as
the exchange agent in connection with the
exchange offer. The address and telephone
number of the exchange agent are set forth
under "Exchange Offer -- Exchange Agent" at
page 66.
Procedures for Tendering
Outstanding Notes............. If you wish to tender your notes for exchange
in this exchange offer, you must transmit to
the exchange agent on or before 5:00 p.m., New
York City time, on the expiration date either:
- an original or a facsimile of a properly
completed and duly executed copy of the
letter of transmittal which accompanies this
prospectus, together with your outstanding
notes and any other documentation required by
the letter of transmittal, at the address
provided on the cover page of the letter of
transmittal; or
- if the notes you own are held of record by
The Depositary Trust Company (DTC) in
book-entry form and you are making delivery
by book-entry transfer, a computer-generated
message transmitted by means of DTC's
Automated Tender Offer Program System (ATOP)
in which you acknowledge and agree to be
bound by the terms of the letter of
transmittal and which, when received by the
exchange agent, will form a part of a
confirmation of book-entry transfer. As part
of the book-entry transfer, DTC will
facilitate the exchange of your notes and
update your account to reflect the issuance
of the exchange notes to you. ATOP allows you
to electronically transmit your acceptance of
the exchange offer to DTC instead of
physically completing and delivering a letter
of transmittal to the exchange agent.
To tender your book-entry interests in
outstanding euro notes on the records of
Euroclear or Clearstream, Luxembourg
(Clearstream), you must contact Euroclear or
Clearstream, as applicable,
6
to arrange to block your account with the
outstanding euro notes. In lieu of delivering a
letter of transmittal to the exchange agent,
you must notify Euroclear or Clearstream, as
the case may be, to deliver to the exchange
agent prior to 5:00 p.m., New York City time,
on the expiration date, a computer-generated
message, in which you acknowledge and agree to
be bound by the terms of the letter of
transmittal.
In all other cases, a letter of transmittal
must be manually executed and received by the
exchange agent before 5:00 p.m., New York City
time, on the expiration date.
In addition, you must deliver to the exchange
agent on or before 5:00 p.m., New York City
time, on the expiration date:
- if you are effecting delivery by book-entry
transfer, a timely confirmation of book-entry
transfer of your outstanding notes into the
account of the exchange agent at DTC; or
- if necessary, for dollar notes, the documents
required for compliance with the guaranteed
delivery procedures.
Special Procedures for
Beneficial Owners............. If you are the beneficial owner of book-entry
interests and your name does not appear on a
security position listing of DTC as the holder
of the book-entry interests or if you are a
beneficial owner of outstanding notes that are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and you wish to tender the book-entry interest
or outstanding notes in the exchange offer, you
should contact the person in whose name your
book-entry interests or outstanding notes are
registered promptly and instruct that person to
tender on your behalf.
Guaranteed Delivery
Procedures.................... If you wish to tender your outstanding dollar
notes and:
- time will not permit your dollar notes or
other required documents to reach the
exchange agent by the expiration date; or
- the procedure for book-entry transfer cannot
be completed on time;
you may tender your dollar notes by completing
a notice of guaranteed delivery and complying
with the guaranteed delivery procedures.
Guaranteed delivery procedures are not
available for euro notes.
Withdrawal Rights............. You may withdraw the tender of your outstanding
notes at any time prior to 5:00 p.m., New York
City time, on the expiration date.
Effect on Holders of
Outstanding Notes............. As a result of making the exchange offer, and
upon acceptance for exchange of all validly
tendered outstanding notes pursuant to the
terms thereof, we will have fulfilled a
covenant contained in the registration rights
agreement and, accordingly, we will not be
obligated thereunder to pay liquidated damages
for failure to take these actions. If you are a
holder of outstanding notes and you do not
tender them in the exchange offer, you will
continue to hold
7
them and you will be entitled to all the rights
and subject to all the limitations applicable
to the outstanding notes in the indenture,
except for any rights under the registration
rights agreement that by their terms terminate
upon consummation of the exchange offer.
To the extent that outstanding notes are
tendered and accepted in this exchange offer,
the trading market for the outstanding notes
could be adversely affected.
Consequences of Failure to
Exchange...................... All untendered outstanding notes will continue
to be subject to the restrictions on transfer
provided for therein and in the indenture
governing the notes. In general, the
outstanding notes may not be offered or sold,
unless registered under the Securities Act,
except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act
and applicable state securities laws. Other
than in connection with this exchange offer, we
do not currently anticipate that we will
register the outstanding notes under the
Securities Act.
Federal Income Tax
Considerations................ Based upon advice from counsel, we believe that
the exchange of outstanding notes for exchange
notes will not be a taxable event for United
States federal income tax purposes.
Use of Proceeds............... We will not receive any proceeds from the
issuance of exchange notes pursuant to the
exchange offer. We will pay all of our expenses
incident to the exchange offer.
8
SUMMARY OF TERMS OF THE EXCHANGE NOTES
The form and terms of the exchange notes are the same as the form and terms
of the outstanding notes, except that the exchange notes will be registered
under the Securities Act. As a result, the exchange notes will not bear legends
restricting their transfer and will not have the benefit of the registration
rights and liquidated damage provisions contained in the outstanding notes. The
exchange notes represent the same debt as the outstanding notes. Both the
outstanding notes and the exchange notes are governed by the same indenture. We
use the term "notes" in this prospectus to collectively refer to the outstanding
notes and the exchange notes.
Issuer........................ Dana Corporation.
Securities Offered
Dollar Notes................ $575 million aggregate principal amount of 9%
Notes due 2011 (the "dollar notes").
Euro Notes.................. E200 million aggregate principal amount of 9%
Notes due 2011 (the "euro notes").
Dollar Notes
Maturity.................... August 15, 2011
Interest Payment Dates...... February 15 and August 15 of each year,
commencing February 15, 2002.
Euro Notes
Maturity.................... August 15, 2011
Interest Payment Dates...... February 15 and August 15 of each year,
commencing February 15, 2002.
Optional Redemption........... The dollar notes and the euro notes will be
redeemable, at our option, in whole at any time
or in part from time to time, at a redemption
price equal to the greater of (i) 100% of their
principal amount plus accrued and unpaid
interest to the date of redemption and (ii) the
sum of the present values of the remaining
scheduled payments of principal and interest
thereon from the date of redemption to the date
of maturity (except for currently accrued but
unpaid interest) discounted to the date of
redemption, on a semi-annual basis, at the U.S.
Treasury Rate (as defined in the indenture), in
the case of the dollar notes, or the Bund Rate
(as defined in the indenture), in the case of
the euro notes, plus 35 basis points, plus, in
each case, accrued but unpaid interest to the
date of redemption. See "Description of the
Notes -- Optional Redemption -- Make-Whole
Redemption."
Optional Tax Redemption....... In the event of certain changes in withholding
and other taxes, we may redeem the dollar
notes, in whole but not in part, and/or the
euro notes, in whole but not in part, at a
redemption price equal to the principal amount
of such notes, plus accrued and unpaid interest
to the date of redemption. See "Description of
the Notes -- Optional Redemption -- Redemption
for Tax Reasons."
Ranking....................... The notes will be general, unsecured
obligations of Dana Corporation and will rank
equally in right of payment with all of Dana
Corporation's existing and future
unsubordinated debt and senior in right of
payment to all of Dana Corporation's existing
and future
9
subordinated debt, if any. The notes will be
effectively subordinated to all of Dana
Corporation's secured debt, if any, to the
extent of the value of the assets securing such
debt, and structurally subordinated to all of
the existing and future liabilities of Dana
Corporation's subsidiaries. As of September 30,
2001, Dana Corporation had $2,441 million of
total indebtedness outstanding, including the
notes, all of which ranked equally with the
notes and none of which were secured, and Dana
Corporation's subsidiaries had $4,089 million
of liabilities outstanding, including, without
limitation, trade payables. See "Description of
the Notes -- Ranking."
Change of Control............. Upon the occurrence of a Change of Control (as
defined in the indenture), we are required to
make an offer to repurchase each holder's notes
at a price equal to 101% of the principal
amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase. If
the notes receive investment grade ratings by
both Standard and Poor's Ratings Services (S&P)
and Moody's Investors Service, Inc. (Moody's),
subject to certain additional conditions, we
will no longer be required to make repurchases
of the notes upon a Change of Control. See
"Description of the Notes -- Certain
Covenants -- Change of Control."
Certain Covenants............. The indenture contains certain covenants that,
among other things, limit our ability and the
ability of our restricted subsidiaries to:
- incur additional indebtedness and issue
preferred stock;
- pay dividends or make certain other
restricted payments;
- incur liens;
- sell assets;
- enter into agreements that restrict dividends
from restricted subsidiaries;
- enter into sale and leaseback transactions;
- engage in transactions with affiliates; and
- enter into certain mergers and
consolidations.
These covenants are subject to important
exceptions and qualifications, which are
described in the section "Description of the
Notes" under the heading "Certain Covenants" in
this prospectus.
If the notes receive investment grade ratings
by both S&P and Moody's, subject to certain
additional conditions, we will no longer be
required to comply with these covenants, and
substituted forms of negative pledge, sale and
leaseback, and merger and consolidation
covenants will apply to us and our restricted
subsidiaries. See "Description of the
Notes -- Certain Covenants -- Application of
Fall Away Covenants and Covenant Substitution."
Absence of a Public Market for
the Exchange Notes............ The exchange notes generally will be freely
transferable, but they will also be new
securities for which there will be no
established market. Accordingly, we cannot
assure you as to the development
10
or liquidity of any market for the exchange
notes. Application will be made for the
exchange notes to be listed on the Luxembourg
Stock Exchange. Certain of the initial
purchasers, including the joint book-running
managers, have advised us that they intend to
make a market in the exchange notes. However,
they are not obligated to do so, and they may
discontinue any market making in the notes at
any time without notice.
Use of Proceeds............... We will not receive any cash proceeds from the
exchange offer.
RISK FACTORS
You should carefully consider the information under the caption "Risk
Factors" and all other information in this prospectus before making a decision
on whether to participate in the exchange offer.
11
SUMMARY FINANCIAL DATA
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
The following selected historical consolidated financial information for
the five-year period ended December 31, 2000 has been derived from our audited
consolidated financial statements and notes thereto. The selected historical
consolidated financial information for the nine months ended September 30, 2000
and 2001 was derived from our unaudited consolidated financial statements, which
financial statements, in management's opinion, reflect all adjustments,
consisting of only normal and recurring adjustments, necessary for a fair
presentation of such information. Results for the interim periods are not
necessarily indicative of the results that might be expected for any other
interim period or for an entire year. You should read this information in
conjunction with "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Results of Operations and Financial Condition," and
our consolidated financial statements and notes thereto, included elsewhere in
this prospectus.
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- ---------------
1996 1997 1998 1999 2000 2000 2001
------- ------- ------- ------- ------- ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF INCOME DATA:
Net sales................... $10,979 $11,911 $12,464 $13,159 $12,317 $9,629 $7,898
Revenue from lease
financing................. 151 172 173 111 143 100 87
Other income, net........... 52 319 202 83 231 208 62
------- ------- ------- ------- ------- ------ ------
Total revenue.......... 11,182 12,402 12,839 13,353 12,691 9,937 8,047
Cost of sales............... 9,158 10,067 10,449 10,964 10,599 8,161 7,006
Selling, general and
administrative expenses... 1,112 1,152 1,122 1,192 1,132 847 775
Restructuring and
integration charges....... -- 328 118 181 173 103 38
Merger expenses............. -- -- 50 -- -- -- --
Interest expense............ 203 251 280 279 323 238 239
------- ------- ------- ------- ------- ------ ------
Income (loss) before income
taxes..................... 709 604 820 737 464 588 (11)
Estimated taxes on income... 239 294 315 251 171 207 6
------- ------- ------- ------- ------- ------ ------
Income (loss) before
minority interest and
equity in earnings of
affiliates................ 470 310 505 486 293 381 (17)
Minority interest........... (33) (22) (8) (13) (13) (12) (6)
Equity in earnings of
affiliates................ 14 32 37 40 54 49 23
------- ------- ------- ------- ------- ------ ------
Net income.................. $ 451 $ 320 $ 534 $ 513 $ 334 $ 418 $ *
======= ======= ======= ======= ======= ====== ======
NET INCOME PER COMMON SHARE
Basic income per share.... $ 2.83 $ 1.97 $ 3.24 $ 3.10 $ 2.20 $ 2.73 $ *
Diluted income per
share.................. 2.81 1.94 3.20 3.08 2.18 2.71 *
Cash dividends declared and
paid per common share..... 0.98 1.04 1.14 1.24 1.24 0.93 0.93
Average shares outstanding
-- Basic.................. 160 163 165 165 152 153 148
Average shares outstanding
-- Diluted................ 160 165 167 166 153 154 149
---------------
* Amount is less than $.5 and per share amounts are less than one-half cent.
12
AT DECEMBER 31, AT SEPTEMBER 30,
--------------------------------------------- -----------------
1996 1997 1998 1999 2000 2000 2001
------ ------ ------- ------- ------- ------- -------
(IN MILLIONS)
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents... $ 272 $ 423 $ 230 $ 111 $ 179 $ 144 $ 228
Total assets................ 8,522 9,511 10,138 11,123 11,236 11,402 10,809
Total debt.................. 3,188 3,483 3,416 4,150 4,594 4,680 4,450
Deferred employee
benefits.................. 1,048 1,020 1,064 1,068 1,076 1,052 1,126
Shareholders' equity........ 2,435 2,602 2,940 2,957 2,628 2,729 2,367
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ -------------
1996 1997 1998 1999 2000 2000 2001
------ ------ ------ ------ ------ ------ ----
(IN MILLIONS, EXCEPT RATIOS AND PERCENTAGES)
OTHER FINANCIAL DATA:
EBITDA(1).......................... $1,289 $1,305 $1,588 $1,535 $1,310 $1,216 $636
Depreciation and amortization...... 377 450 488 519 523 390 408
Capital expenditures............... 469 579 661 807 662 464 306
Ratio of EBITDA to interest
expense(1)....................... 6.3x 5.2x 5.7x 5.5x 4.1x 5.1x 2.7x
Total debt to EBITDA(1)............ 2.5x 2.7x 2.2x 2.7x 3.5x 3.3x 6.1x
Total debt to total
capitalization(2)................ 57% 57% 54% 58% 64% 63% 65%
Ratio of earnings to fixed
charges(3)....................... 3.9x 3.1x 3.6x 3.4x 2.3x 3.2x 1.1x
---------------
(1) EBITDA represents net income plus interest expense, estimated taxes on
income, minority interest, equity in earnings of affiliates, and
depreciation and amortization, and is not intended to represent an
alternative to operating income or an alternative to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles or GAAP) as a measure of liquidity. We believe that
EBITDA divided by total interest expense and total debt divided by EBITDA
are meaningful measures of performance because they are commonly used in our
industry to analyze operating performance, leverage and liquidity. While
EBITDA is frequently used to analyze companies, EBITDA as presented herein
is not necessarily comparable to what other companies state as "EBITDA"
because of potential inconsistencies in the method of calculation.
(2) Total debt to total capitalization represents (i) total debt, divided by
(ii) total debt plus shareholders' equity.
(3) These ratios were computed by dividing earnings by fixed charges. For this
purpose, "earnings" consist of income from continuing operations before
taxes, distributed income of affiliates accounted for on the equity method
of accounting, fixed charges (excluding capitalized interest) and income of
majority-owned subsidiaries with fixed charges, and "fixed charges" consist
of interest on indebtedness and that portion of rental expense (one-third)
which we believe to be representative of interest.
13
DANA CORPORATION (WITH DANA CREDIT CORPORATION ON THE EQUITY BASIS)
The following table sets forth certain unaudited supplemental financial
data of Dana with DCC set forth on the equity basis of accounting. This
presentation does not conform with GAAP but has been included to assist
prospective investors in evaluating an investment in the exchange notes. This
information should not be considered in isolation or as a substitute for our
financial data that has been prepared in accordance with GAAP. You should read
this information in conjunction with "Selected Consolidated Financial Data,"
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and our consolidated financial statements and the notes thereto,
included elsewhere in this prospectus.
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- ----------------
1996 1997 1998 1999 2000 2000 2001
------- ------- ------- ------- ------- ------ -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF INCOME DATA:
Net sales................... $10,979 $11,911 $12,464 $13,159 $12,317 $9,629 $ 7,898
Other income, net........... 27 298 59 58 190 183 36
------- ------- ------- ------- ------- ------ -------
Total revenue.......... 11,006 12,209 12,523 13,217 12,507 9,812 7,934
Cost of sales............... 9,183 10,099 10,485 11,016 10,662 8,208 7,054
Selling, general and
administrative expenses... 1,025 1,041 984 1,074 1,007 770 698
Restructuring and
integration charges....... -- 328 118 181 173 103 38
Merger expenses............. -- -- 50 -- -- -- --
Interest expense............ 129 172 189 208 218 163 156
------- ------- ------- ------- ------- ------ -------
Income (loss) before income
taxes..................... 669 569 697 738 447 568 (12)
Estimated taxes on income... 226 287 277 273 168 204 7
------- ------- ------- ------- ------- ------ -------
Income (loss) before
minority interest and
equity in earnings of
affiliates................ 443 282 420 465 279 364 (19)
Minority interest........... (33) (22) (8) (13) (13) (12) (6)
Equity in earnings of
Affiliates................ 41 60 122 61 68 66 25
------- ------- ------- ------- ------- ------ -------
Net income.................. $ 451 $ 320 $ 534 $ 513 $ 334 $ 418 $ *
======= ======= ======= ======= ======= ====== =======
---------------
* Amount is less than $.5.
AT DECEMBER 31, AT SEPTEMBER 30,
------------------------------------------ -----------------
1996 1997 1998 1999 2000 2000 2001
------ ------ ------ ------ ------ ------- -------
(IN MILLIONS)
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents........ $ 268 $ 410 $ 227 $ 101 $ 149 $ 136 $ 186
Total assets..................... 7,299 8,147 9,052 9,502 9,166 9,441 8,901
Total debt....................... 2,023 2,196 2,540 2,759 2,881 3,013 2,951
Deferred employee benefits....... 1,045 1,017 1,061 1,064 1,073 1,050 1,124
Shareholders' equity............. 2,435 2,602 2,940 2,957 2,628 2,729 2,367
14
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ -------------
1996 1997 1998 1999 2000 2000 2001
------ ------ ------ ------ ------ ------ ----
(IN MILLIONS, EXCEPT RATIOS AND PERCENTAGES)
OTHER FINANCIAL DATA:
EBITDA(1).......................... $1,113 $1,122 $1,282 $1,375 $1,092 $1,050 $475
Depreciation and amortization...... 315 381 396 429 427 319 331
Capital expenditures............... 397 518 552 547 434 318 219
Ratio of EBITDA to interest
expense(1)....................... 8.6x 6.5x 6.8x 6.6x 5.0x 6.4x 3.0x
Total debt to EBITDA(1)............ 1.8x 2.0x 2.0x 2.0x 2.6x 2.5x 5.7x
Total debt to total
capitalization(2)................ 45% 46% 46% 48% 52% 52% 55%
Ratio of earnings to fixed charges
(3).............................. 3.9x 3.1x 3.6x 3.4x 2.3x 3.6x 1.1x
---------------
Notes (1), (2) and (3) are found on page 13.
15
RISK FACTORS
You should read and consider carefully each of the following factors, as
well as the other information contained in or incorporated by reference into
this prospectus, before making a decision on whether to participate in the
exchange offer.
RISKS ASSOCIATED WITH THE EXCHANGE OFFER
YOUR OUTSTANDING NOTES WILL NOT BE ACCEPTED FOR EXCHANGE IF YOU FAIL TO FOLLOW
THE EXCHANGE OFFER PROCEDURES
We will not accept your outstanding notes for exchange if you do not follow
the exchange offer procedures. We will issue exchange notes as part of this
exchange offer only after a timely receipt of your outstanding notes, a properly
completed and duly executed letter of transmittal and all other required
documents. Therefore, if you want to tender your outstanding notes, please allow
sufficient time to ensure timely delivery. If we do not receive your outstanding
notes, letter of transmittal and other required documents by the expiration date
of the exchange offer or you do not otherwise comply with the guaranteed
delivery procedures for tendering your notes, we will not accept your
outstanding notes for exchange. We are under no duty to give notification of
defects or irregularities with respect to the tenders of outstanding notes for
exchange. If there are defects or irregularities with respect to your tender of
outstanding notes, we will not accept your outstanding notes for exchange unless
we decide in our sole discretion to waive such defects or irregularities.
IF YOU DO NOT EXCHANGE YOUR OUTSTANDING NOTES, THEY WILL CONTINUE TO BE SUBJECT
TO THE EXISTING TRANSFER RESTRICTIONS AND YOU MAY NOT BE ABLE TO SELL THEM
We did not register the outstanding notes, nor do we intend to do so
following the exchange offer. Outstanding notes that are not tendered will
therefore continue to be subject to the existing transfer restrictions and may
be transferred only in limited circumstances under the securities laws. As a
result, if you hold outstanding notes after the exchange offer, you may not be
able to sell them. To the extent any outstanding notes are tendered and accepted
in the exchange offer, the trading market, if any, for the outstanding notes
that remain outstanding after the exchange offer may be adversely affected due
to a reduction in market liquidity.
BECAUSE THERE IS NO PUBLIC MARKET FOR THE EXCHANGE NOTES, YOU MAY NOT BE ABLE TO
RESELL THEM
The exchange notes will be registered under the Securities Act, but will
constitute a new issue of securities with no established trading market, and
there can be no assurance as to:
- the liquidity of any trading market that may develop;
- the ability of holders to sell their exchange notes; or
- the price at which the holders will be able to sell their exchange notes.
Application will be made to list the exchange notes on the Luxembourg Stock
Exchange. However, we do not intend to apply for listing of the exchange notes
on any U.S. securities exchange or for quotation through an automated quotation
system. If a trading market were to develop, the exchange notes might trade at
higher or lower prices than their principal amount or purchase price, depending
on many factors, including prevailing interest rates, the market for similar
debentures, our financial performance and the interest of securities dealers in
making a market in the exchange notes.
We understand that certain of the initial purchasers, including the joint
book-running managers, presently intend to make a market in the exchange notes.
However, they are not obligated to do so, and any market-making activity with
respect to the exchange notes may be discontinued at any time without notice. In
addition, any market-making activity will be subject to the limits imposed by
the Securities Act and the Securities Exchange Act of 1934, and may be limited
during the exchange offer or the pendency of an
16
applicable shelf registration statement. There can be no assurance that an
active market will exist for the exchange notes or that any trading market that
does develop will be liquid.
In addition, any outstanding note holder who tenders in the exchange offer
for the purpose of participating in a distribution of the exchange notes may be
deemed to have received restricted securities, and if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transactions. For a description of
these requirements, see "Exchange Offer."
RISKS RELATING TO DANA AND OUR MARKETS
OUR BUSINESS IS AFFECTED BY THE CYCLICAL NATURE OF THE ORIGINAL EQUIPMENT
VEHICULAR MARKETS THAT WE SERVE
Our financial performance depends, in large part, on the varying conditions
in the global light, medium and heavy vehicle OE markets that we serve. Demand
in these markets fluctuates in response to overall economic conditions and is
particularly sensitive to changes in interest rate levels and fuel costs. Our
sales of vehicular products are also impacted by OE manufacturer (OEM) inventory
levels and production schedules and stoppages. In North America, our largest
market, OE light and heavy vehicle build schedules are currently down
significantly as compared to 2000. We had sought to scale our operations to the
lower production estimates for 2001 which, before the terrorist attacks on
September 11, we expected would be approximately 15.4 million units. In the wake
of those events, we lowered our 2001 production estimate to 15.2 million units
and our estimate for 2002 to 14.5 million units. In response to these lower
projections, on October 17, 2001, we announced our intention to accelerate the
restructuring of our operations and to further reduce our work force by more
than 15% and to review more than 30 facilities for consolidation or closure.
However, these efforts to scale our operations may not be fully successful
and/or actual production may be below estimated levels. In either event, our
results of operations and financial condition would be adversely impacted.
OUR REPLACEMENT PARTS MARKETS ARE DEPRESSED
Approximately 26% of our sales in 2000 were to the global vehicular
replacement parts markets. These markets are depressed due to the general
economic slowdown. In addition, general improvements in the durability of OE
vehicular parts has reduced the demand for replacement parts. We have also been
adversely impacted by higher inventory levels in our distribution system due to
mergers of our aftermarket customers and difficulties in consolidating certain
of our own warehouse operations. We are taking steps to respond to these
factors, but we cannot assure you whether or when we will be successful in
regaining our historical level of profitability in these markets.
TWO CUSTOMERS ACCOUNT FOR A SIGNIFICANT SHARE OF OUR BUSINESS
Sales to Ford and its subsidiaries accounted for approximately 19% of our
consolidated sales in 2000, 16% in 1999, and 15% in 1998, primarily from our ASG
and FSG units. Sales to DaimlerChrysler and its subsidiaries accounted for
approximately 14% of our consolidated sales in 2000 and 1999 and 13% in 1998,
primarily from our ASG and CVS units. Sales to these OE customers are made under
various contracts with differing expiration dates, generally relating to
particular vehicle models. The loss of either Ford or DaimlerChrysler as a
customer, the loss of business with respect to one of more of the vehicle models
that use our products or a decline in the production levels for such vehicles
would have an adverse effect on our business, results of operations and
financial condition.
Ford, DaimlerChrysler and other of our customers have asked us to reduce
the cost of our products to them. We are discussing appropriate cost savings
measures with these customers, but we cannot assure you that we will be able to
improve or maintain our historical level of profitability in light of such
requests.
THE COMPETITIVE ENVIRONMENT IN OUR OE AUTOMOTIVE AND COMMERCIAL VEHICLE SECTORS
IS EVOLVING RAPIDLY
In recent years, the competitive environment among suppliers to the global
OE vehicle manufacturers has changed significantly as these manufacturers have
sought to outsource more vehicular components, modules
17
and systems. In addition, these sectors have experienced substantial
consolidation. We expect to respond to these changes in our markets through
strategic alliances, joint ventures, acquisitions and divestitures, as well as
through other initiatives intended to maintain our competitiveness. However, we
cannot assure you that our efforts will be successful or that new or larger
competitors will not significantly impact our business, results of operations
and financial condition.
THE AMOUNT OF OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
As of September 30, 2001, we had total consolidated indebtedness
outstanding of $4,450 million, including the outstanding notes, and total
shareholders' equity of $2,367 million. We may also incur additional
indebtedness in the future, subject to the satisfaction of certain financial
tests.
This level of indebtedness could:
- make it more difficult for us to satisfy our obligations with respect to
the notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to use operating cash flow in other areas of our
business because we must dedicate a portion of these funds to payments on
our indebtedness;
- limit our ability to obtain other financing to fund future working
capital, acquisitions, capital expenditures, research and development
costs and other general corporate requirements; and
- limit our ability to take advantage of business opportunities as a result
of various restrictive covenants in our indebtedness.
Since we use a portion of our cash flow from operations to satisfy our debt
obligations, a downturn in our business could limit our ability to service these
obligations. Our future financial performance will be affected by a range of
economic, financial and industry factors, many of which are beyond our control,
and we cannot assure you that our business will generate sufficient cash flow
from operations to enable us to service our indebtedness or fund our other
liquidity needs. Nor can we assure you that, if we needed to do so, we would be
able to effect any refinancing, obtain additional financing or sell assets on
terms acceptable to us or at all.
SOURCES OF SHORT-TERM FINANCING MAY BECOME UNAVAILABLE
Until the end of 2000, we had generally relied on the issuance of
commercial paper to satisfy a significant portion of our short-term financing
requirements. However, the debt rating services downgraded our credit ratings in
the first quarter of 2001, primarily due to the significant downturn in our
markets since the fourth quarter of 2000 and its impact on our operations. When,
as a result, the issuance of commercial paper became unavailable to us, we began
borrowing against our committed bank lines (a 364-day facility and a long-term
facility). The accounts receivable securitization program established in March
2001 and the private placement of the outstanding notes allowed us to reduce our
borrowings against the bank lines while extending the overall maturity of our
outstanding debt. On December 19, 2001, we entered into a new 364-day facility
and amended the long-term facility. Under our amended long-term facility, we
have a $500 million committed line, of which $315 million was outstanding as of
December 19, 2001. Under our new 364-day facility, we have a $250 million
committed line, none of which was outstanding as of December 19, 2001. The
364-day facility is subject to termination upon a "Liquidity Event" and subject
to reduction upon receipt of net cash proceeds from certain financings and sales
of assets (as described in greater detail in "Description of Certain
Indebtedness -- Revolving Credit Facilities" below). We expect to be able to
continue to secure short-term financing, but may be forced to adjust our
programs if adequate funds are not available on acceptable terms or at all. In
the event that we are unable to obtain short-term financing or such financing is
not available on acceptable terms, our business, results of operations and
financial condition may be adversely affected.
WE ARE IMPACTED BY ENVIRONMENTAL LAWS AND REGULATIONS
Our operations are subject to U.S. and non-U.S. environmental laws and
regulations governing emissions to air, discharges to water, the generation,
handling, storage, transportation, treatment and disposal of waste
18
materials and the cleanup of contaminated properties. We believe that our
businesses are operating in compliance in all material respects with such laws
and regulations, many of which provide for substantial penalties for violations,
but we cannot assure you that we will not be adversely impacted by costs,
liabilities or claims with respect to existing or subsequently acquired
operations, under either present laws and regulations or those that may be
adopted or imposed in the future.
WE MAY BE ADVERSELY AFFECTED BY PRODUCT LIABILITY CLAIMS
Currently, product liability claims are not material to our financial
condition. However, we have exposure to asbestos litigation because, in the
past, some of our automotive products contained asbestos. As a result, there are
asbestos personal injury claims pending against us. Historically, a significant
majority of the defense and indemnity costs associated with these claims has
been covered by insurance in accordance with agreements with our carriers. A
substantial increase in the number or size of new claims, or changes in the
processing of these claims by our carriers, could adversely affect us.
OUR INTERNATIONAL OPERATIONS EXPOSE US TO RISKS
A substantial portion of our business is conducted outside of the United
States, which exposes us to risks from changes in the political, economic and
financial environments in other countries, including changes in foreign laws and
regulations and in tariffs, taxes and exchange controls, and fluctuations in the
exchange rates between the dollar and the currencies in which our foreign
operations receive revenues and pay expenses. Significant changes in
international conditions could have an adverse effect on our business, results
of operations and financial condition. In addition, our consolidated financial
results are denominated in dollars and require translation adjustments for
purposes of reporting results from, and the financial condition of, our non-U.S.
operations. Such adjustments may be significant from time to time.
RISKS RELATING TO THE NOTES
THE NOTES ARE EFFECTIVELY SUBORDINATED TO OUR SECURED INDEBTEDNESS AND ALL
OBLIGATIONS OF OUR SUBSIDIARIES
The notes are our general, unsecured obligations and will not be guaranteed
by any of our subsidiaries. Therefore, the notes are effectively subordinated to
(1) all of our secured indebtedness, to the extent of the value of the
collateral and (2) all indebtedness and other obligations, including trade
payables, of our subsidiaries. The effect of this subordination is that, in the
event of a bankruptcy, liquidation, dissolution, reorganization or similar
proceeding involving us or a subsidiary, the assets of the affected entity could
not be used to pay you until after:
- all secured claims against the affected entity have been fully paid; and
- if the affected entity is a subsidiary, all other claims against that
subsidiary, including trade payables, have been fully paid.
OUR DEBT INSTRUMENTS CONTAIN RESTRICTIVE COVENANTS THAT COULD LIMIT OUR
FLEXIBILITY
The indenture governing the notes contains covenants with respect to us and
our restricted subsidiaries that restrict, among other things:
- the incurrence of additional indebtedness and the issuance of preferred
stock;
- the payment of dividends on, and the redemptions of, capital stock and
the redemption of indebtedness that is junior in right of payment to the
notes;
- other restricted payments including, without limitation, certain
investments;
- the incurrence of liens;
- sales of assets;
- sale and leaseback transactions;
19
- transactions with affiliates;
- consolidations, mergers and transfers of all or substantially all of our
assets; and
- the creation of restrictions on distributions from restricted
subsidiaries.
In addition, our revolving credit facilities require us to maintain certain
financial ratios and satisfy certain financial condition tests. These
restrictions could also limit our ability to obtain future financings, make
needed capital expenditures, withstand a future downturn in our business or the
economy in general, or otherwise conduct necessary corporate activities.
Our ability to comply with our covenants may be affected by events beyond
our control and we cannot assure you that we will be able to meet them. A breach
of any of our covenants would result in a default under the applicable debt
agreement. A default, if not waived, could result in acceleration of the debt
outstanding under that agreement and in a default with respect to, and
acceleration of, the debt outstanding under the other debt agreements. The
accelerated debt would become immediately due and payable. If that should occur,
we might not be able to pay all such debt or to borrow sufficient funds to
refinance it. Even if new financing were then available, it might not be on
terms acceptable to us. See "Description of Certain Indebtedness" and
"Description of the Notes -- Certain Covenants."
IF WE ATTAIN INVESTMENT GRADE STATUS, WE WILL NO LONGER BE SUBJECT TO MOST OF
THE COVENANTS IN THE INDENTURE GOVERNING THE NOTES
If, at any time, the notes receive an investment grade rating from both S&P
and Moody's, subject to certain additional conditions, we will no longer be
subject to most of the covenants set forth in the indenture. Any covenants that
cease to apply to us as a result of achieving such ratings will not be restored,
even if the notes are later rated below investment grade by either or both of
those rating agencies.
WE MAY NOT BE ABLE TO REPURCHASE THE NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined in the indenture),
we will be required to make an offer in cash to repurchase all or any part of
each holder's notes at a repurchase price equal to 101% of their principal
amount, plus accrued and unpaid interest. This covenant will not apply if the
notes have been rated investment grade by both S&P and Moody's. If a Change of
Control occurs and the covenant is then applicable, we may not have sufficient
funds at that time to make the required repurchases of the notes, and, in that
event, we would require third-party financing to do so. We cannot assure you
that we would be able to obtain this financing on favorable terms, if at all. In
addition, a Change of Control would likely result in, and the required
repurchases of the notes would result in, an event of default under our
revolving credit facilities that would permit the lenders to accelerate the debt
outstanding under those facilities.
YOU MAY FACE FOREIGN EXCHANGE RISKS BY INVESTING IN THE NOTES
If you are an investor whose native currency is not the dollar or the euro,
an investment in the dollar or euro notes, as the case may be, will entail
foreign exchange-related risks due to, among other factors, possible significant
changes in the value of the denominated currency of the notes relative to your
native currency because of economic, political and other factors over which we
have no control. Depreciation of the dollar or euro against your native currency
could cause a decrease in the effective yield of the respective notes and could
result in a loss to you on a native-currency basis.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act of 1933 with respect to the
exchange notes. This prospectus is a part of that registration statement, but
does not contain all of the information set forth therein. For further
information about us and the exchange notes, you should refer to the
registration statement.
20
Dana is subject to the informational requirements of the Exchange Act, and,
in accordance therewith, we file reports and other information with the SEC. You
can inspect and copy these reports and other materials at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. You may also access electronically reports, proxy and
information statements and other information that we file electronically with
the SEC by means of the SEC's home page on the Internet at http://www.sec.gov.
EXCHANGE RATE DATA
The following table sets forth, for the periods indicated, certain exchange
rates based upon the noon buying rate in New York City for cable transfers in
euros for customs purposes by the Federal Reserve Bank of New York (the Noon
Buying Rate). Such rates are set forth as dollars per E1.00.
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED
--------------- SEPTEMBER 30,
1999(1) 2000 2001
------- ----- -------------
Low..................................................... 1.002 0.827 0.837
High.................................................... 1.181 1.034 0.954
Period end.............................................. 1.007 0.939 0.910
Average rate(2)......................................... 1.065 0.923 0.890
---------------
(1) The Noon Buying Rate for the euro was first quoted on January 4, 1999.
(2) The average of the Noon Buying Rate on the last business day of each month
in the period indicated.
On January 15, 2002, the Noon Buying Rate was $0.8913 = E1.00.
We have provided the above-referenced translations solely for your
convenience. We make no representation that any amount of the currencies
specified above has been, or could be, converted into the applicable currency at
the rates indicated or at any other rate.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are subject to
risks and uncertainties. You should not place undue reliance on those statements
because they only speak as of the date of this prospectus. Forward-looking
statements include information concerning our possible or assumed future results
of operations, including descriptions of our business strategy. These statements
often include words such as "believe," "expect," "anticipate," "intend," "plan,"
"estimate," or similar expressions. These statements are based on assumptions
that we have made in light of our experience in the industry as well as our
perceptions of historical trends, current conditions, expected future
developments and other factors we believe are appropriate under the
circumstances. As you read and consider this prospectus, you should understand
that these statements are not guarantees of performance or results. They involve
risks, uncertainties and assumptions. Although we believe that these
forward-looking statements are based on reasonable assumptions, you should be
aware that many factors could affect our actual financial results or results of
operations and could cause actual results to differ materially from those
expressed or implied in the forward-looking statements. These factors include:
- national and international economic and political conditions (including
additional adverse effects from terrorism or hostilities);
- the strength of the euro and other currencies relative to the dollar;
- the cyclical nature of the global vehicular industry;
- the performance of the global vehicular aftermarket sector;
21
- changes in business relationships with our major customers and in the
timing, size and continuation of our customers' programs;
- the ability of our customers and suppliers to achieve their projected
sales and production levels;
- competitive pressures on our sales and pricing;
- increases in production or material costs that cannot be recouped in
product pricing;
- our ability to complete the sale of the businesses of Dana Credit
Corporation as contemplated; and
- the success of our restructuring, cost reduction and cash management
programs and of our long-term transformation strategy.
All future written and oral forward-looking statements by us or persons acting
on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to above. Except for our ongoing obligations to
disclose material information as required by the federal securities laws, we do
not have any obligation or intention to release publicly any revisions to any
forward-looking statements to reflect events or circumstances in the future or
to reflect the occurrence of unanticipated events. YOU SHOULD ALSO READ
CAREFULLY THE FACTORS DESCRIBED IN THE "RISK FACTORS" SECTION OF THIS
PROSPECTUS.
USE OF PROCEEDS
We will receive no proceeds from the exchange of outstanding notes pursuant
to this exchange offer. In consideration for issuing the exchange notes as
contemplated in this prospectus, we will receive in exchange a like principal
amount of outstanding notes, the terms of which are identical in all material
respects to the exchange notes. The outstanding notes surrendered in exchange
for the exchange notes will be retired and cancelled and cannot be reissued.
Accordingly, issuance of the exchange notes will not result in any change in our
capitalization.
Our net proceeds from the offering of the outstanding notes (after
deducting the initial purchasers' discounts and commissions and offering
expenses payable by us) were approximately $736 million. We applied the net
proceeds to repay outstanding indebtedness under our revolving credit
facilities. This indebtedness had a weighted average interest rate of 5.123% at
July 31, 2001. Affiliates of the initial purchasers who are lenders under our
credit facilities received a portion of the net proceeds of the offering applied
as repayment of outstanding indebtedness.
22
CAPITALIZATION
The first table below summarizes our capitalization as of September 30,
2001, which gives effect to the issuance of the outstanding notes and the use of
the proceeds from the offering. The second table presents the same information
with DCC included on the equity basis. The presentation of DCC on the equity
basis is not in conformity with GAAP. You should read this information in
conjunction with "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the financial statements and notes appearing elsewhere in this prospectus or in
the documents that we have incorporated by reference.
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
SEPTEMBER 30,
2001
-------------
(UNAUDITED)
(IN MILLIONS)
Cash and cash equivalents................................... $ 228
======
Notes payable, current:
Current portion of long-term debt......................... 314
Other..................................................... 909
------
Total notes payable, current........................... 1,223
Long-term debt.............................................. 3,227
Shareholders' equity........................................ 2,367
------
Total capitalization................................... $6,817
======
DANA CORPORATION (INCLUDING DANA CREDIT CORPORATION ON THE EQUITY BASIS)
SEPTEMBER 30,
2001
-------------
(UNAUDITED)
(IN MILLIONS)
Cash and cash equivalents................................... $ 186
======
Notes payable, current:
Current portion of long-term debt......................... 230
Other..................................................... 520
------
Total notes payable, current........................... 750
Long-term debt.............................................. 2,201
Shareholders' equity........................................ 2,367
------
Total capitalization................................... $5,318
======
23
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial information for
the five-year period ended December 31, 2000 was derived from our audited
consolidated financial statements and notes thereto. The selected historical
consolidated financial information for the nine months ended September 30, 2000
and 2001 was derived from our unaudited consolidated financial statements, which
financial statements, in the opinion of management reflect all adjustments,
consisting of only normal and recurring adjustments, necessary for a fair
presentation of such information. Results for the interim periods are not
necessarily indicative of the results that might be expected for any other
interim period or for an entire year. You should read this information in
conjunction with "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and our consolidated financial statements and notes
thereto, included elsewhere in this prospectus.
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- ---------------
1996 1997 1998 1999 2000 2000 2001
------- ------- ------- ------- ------- ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF INCOME DATA:
Net sales......................... $10,979 $11,911 $12,464 $13,159 $12,317 $9,629 $7,898
Revenue from lease financing...... 151 172 173 111 143 100 87
Other income, net................. 52 319 202 83 231 208 62
------- ------- ------- ------- ------- ------ ------
Total revenue................ 11,182 12,402 12,839 13,353 12,691 9,937 8,047
Cost of sales..................... 9,158 10,067 10,449 10,964 10,599 8,161 7,006
Selling, general and
administrative expenses......... 1,112 1,152 1,122 1,192 1,132 847 775
Restructuring and integration
charges......................... -- 328 118 181 173 103 38
Merger expenses................... -- -- 50 -- -- -- --
Interest expense.................. 203 251 280 279 323 238 239
------- ------- ------- ------- ------- ------ ------
Income (loss) before income
taxes........................... 709 604 820 737 464 588 (11)
Estimated taxes on income......... 239 294 315 251 171 207 6
------- ------- ------- ------- ------- ------ ------
Income (loss) before minority
interest and equity in earnings
of affiliates................... 470 310 505 486 293 381 (17)
Minority interest................. (33) (22) (8) (13) (13) (12) (6)
Equity in earnings of
affiliates...................... 14 32 37 40 54 49 23
------- ------- ------- ------- ------- ------ ------
Net income........................ $ 451 $ 320 $ 534 $ 513 $ 334 $ 418 $ *
======= ======= ======= ======= ======= ====== ======
NET INCOME PER COMMON SHARE
Basic income per share.......... $ 2.83 $ 1.97 $ 3.24 $ 3.10 $ 2.20 $ 2.73 $ *
Diluted income per share........ 2.81 1.94 3.20 3.08 2.18 2.71 *
Cash dividends declared and paid
per common share................ 0.98 1.04 1.14 1.24 1.24 0.93 0.93
Average shares outstanding --
Basic........................... 160 163 165 165 152 153 148
Average shares outstanding --
Diluted......................... 160 165 167 166 153 154 149
---------------
* Amount is less than $.5 and per share amounts are less than one-half cent.
24
AT DECEMBER 31, AT SEPTEMBER 30,
--------------------------------------------- -----------------
1996 1997 1998 1999 2000 2000 2001
------ ------ ------- ------- ------- ------- -------
(IN MILLIONS)
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents......... $ 272 $ 423 $ 230 $ 111 $ 179 $ 144 $ 228
Total assets...................... 8,522 9,511 10,138 11,123 11,236 11,402 10,809
Total debt........................ 3,188 3,483 3,416 4,150 4,594 4,681 4,450
Deferred employee benefits........ 1,048 1,020 1,064 1,068 1,076 1,052 1,126
Shareholders' equity.............. 2,435 2,602 2,940 2,957 2,628 2,729 2,367
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ ---------------
1996 1997 1998 1999 2000 2000 2001
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT RATIOS AND PERCENTAGES)
OTHER FINANCIAL DATA:
EBITDA(1).............................. $1,289 $1,305 $1,588 $1,535 $1,310 $1,216 $ 636
Depreciation and amortization.......... 377 450 488 519 523 390 408
Capital expenditures................... 469 579 661 807 662 464 306
Ratio of EBITDA to interest
expense(1)........................... 6.3x 5.2x 5.7x 5.5x 4.1x 5.1x 2.7x
Total debt to EBITDA(1)................ 2.5x 2.7x 2.2x 2.7x 3.5x 3.3x 6.1x
Total debt to total
capitalization(2).................... 57% 57% 54% 58% 64% 63% 65%
Ratio of earnings to fixed charges..... 3.9x 3.1x 3.6x 3.4x 2.3x 3.2x 1.1x
---------------
(1) EBITDA represents net income plus interest expense, estimated taxes on
income, minority interest, equity in earnings of affiliates, and
depreciation and amortization, and is not intended to represent an
alternative to operating income or an alternative to cash flows from
operating activities (as determined in accordance with GAAP) as a measure of
liquidity. While EBITDA is frequently used to analyze companies, EBITDA as
presented herein is not necessarily comparable to what other companies state
as "EBITDA" because of potential inconsistencies in the method of
calculation.
(2) These ratios were computed by dividing earnings by fixed charges. For this
purpose, "earnings" consist of income from continuing operations before
taxes, distributed income of affiliates accounted for on the equity method
of accounting, fixed charges (excluding capitalized interest) and income of
majority-owned subsidiaries with fixed charges, and "fixed charges" consist
of interest on indebtedness and that portion of rental expense (one-third)
which we believe to be representative of interest.
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following is a discussion and analysis of our financial condition and
results of operations for the fiscal years ended December 31, 1998, 1999 and
2000, and for the fiscal quarters and nine-month periods ended September 30,
2000 and 2001. You should read this discussion and analysis together with our
consolidated financial statements and related notes included elsewhere in this
prospectus.
OVERVIEW
At September 30, 2001, our operations were organized into the following
strategic business units:
- Automotive Systems Group -- ASG produces light duty axles, driveshafts,
structural products (such as engine cradles and frames), transfer cases,
original equipment brakes and integrated modules and systems for the
light vehicle market and driveshafts for the heavy truck market. ASG
generated sales of $4.6 billion in 2000.
- Automotive Aftermarket Group -- AAG sells primarily hydraulic brake
components and disc brakes for light vehicle applications, internal
engine hard parts, chassis products, and a complete line of filtration
products for a variety of applications. AAG generated sales of $2.9
billion in 2000.
- Commercial Vehicle Systems -- CVS is a major supplier of heavy axles and
brakes, drivetrain components, and trailer products to the medium and
heavy truck markets. CVS generated sales of $1.6 billion in 2000.
- Engine Systems Group -- ESG serves the automotive, light to heavy truck,
leisure and outdoor power equipment and industrial markets with sealing
products, internal engine hard parts, electronic modules and sensors. ESG
generated sales of $1.3 billion in 2000.
- Fluid Systems Group -- FSG manufactures an extensive line of products for
pumping, routing and thermal management of fluid systems for a wide range
of applications, including passenger cars, heavy trucks, sport and
leisure vehicles and off-highway applications. FSG generated sales of
$1.2 billion in 2000.
- Off-Highway Systems Group -- OHSG produces axles and brakes, transaxles,
power-shift transmissions, torque converters and electronic controls for
the construction, agriculture, mining, specialty chassis, outdoor power,
material handling, forestry and leisure/utility equipment markets. OHSG
generated sales of $674 million in 2000.
- Leasing Services -- With an asset base of $2.5 billion at the end of
2000, DCC and its subsidiaries provide leasing and financing services to
selected markets primarily in the U.S., Canada, the United Kingdom and
continental Europe.
On October 17, 2001, we announced plans to pursue the sale of the
businesses of DCC, which accounted for approximately $1.9 billion of Dana's
assets at September 30, 2001. We also announced our intention to accelerate the
restructuring of our operations, including a workforce reduction of more than
15% and the review of more than 30 facilities for consolidation or closure.
On December 3, 2001, we announced the consolidation of our Engine Systems
and Fluid Systems Groups into a new strategic business unit (the Engine and
Fluid Management Group, which will provide strategic components to the light
vehicle market to enhance fuel economy and power generation) and plans to
integrate the axle manufacturing operations of our OHSG into our CVS unit.
Our current estimates of the charges relating to our restructuring plans
are as follows:
- The restructuring charges are expected to total approximately $445
million after tax.
- 34% of the charges will be non-cash, and most of the cash portion will be
severance costs related to the previously announced workforce reduction.
26
- 62% of the charges will be incurred in the fourth quarter of 2001, with
the balance expected to be incurred in 2002.
- 79% of the charges will be related to our North American operations.
- 55% of the charges will be incurred by our business units primarily
serving the light vehicular OE marketplace, and 25% will be incurred by
AAG.
We have faced numerous internal and external challenges in the past two
years, in both the OEM and automotive aftermarket sectors, domestically and
abroad.
North American light vehicle production reached 17.2 million units in 2000,
mainly on the strength of the first half of the year. By the end of 2000, OEM
production schedules were 16% below those of December 1999 and dealer inventory
of light vehicles was approaching a three-month supply for some models, despite
severe production cutbacks by the major OEMs. In the first quarter of 2001,
reductions in production schedules at Ford, General Motors and DaimlerChrysler
ranged from 17% to 27% when compared to the first quarter of 2000. There was
some improvement in production schedules in the second quarter of 2001, but in
the third quarter the number of light vehicle production days lost through plant
shutdowns again increased, to finish nearly even with the first quarter of 2001.
Moreover, dealer inventory levels, especially those of light vehicles with high
Dana content, continued to be a problem. Despite OEM retail incentives, sales of
light vehicles declined, especially following the events of September 11, and
inventories were higher at September 30 than at the end of the prior quarter.
Since then, response to continued and enhanced OEM incentives has driven light
vehicle sales to impressive levels, but we do not expect these sales to
significantly improve OEM production schedules for the remainder of the year,
since the dealers are working down their inventory. We believe that recent
declines in U.S. consumer confidence measures and the effects of military
actions in response to the September 11 terrorist attacks, among other factors,
will continue to impact vehicle demand in 2002, and we currently expect that
North American light vehicle production volume next year will be approximately
14.5 million units.
North American heavy truck production also started 2000 at near-record
volume, only to drop by 40% in the second half of the year in reaction to high
retail inventory and slowing demand. As on the light vehicle side, production
levels were flat in the first quarter of 2001, improved some in the second
quarter, and worsened again in the third quarter, when lost production days
slightly exceeded the first quarter level. In light of the current overall
economic conditions, our production volume estimate for this market for 2002 is
approximately 130,000 units.
As we enter 2002, we expect to continue to face ongoing reductions in
demand from our major light vehicle and heavy truck OEM customers, as they react
to high dealer inventory and lower sales, as well as pricing pressures that will
challenge us to reduce costs through improved capital efficiency, advanced
technology and continued advancement of our global sourcing initiative.
Nonetheless, this year's sales will include approximately $330 million from
net new business and, based on our OEM customers' production estimates, we are
currently projecting approximately $5.9 billion in sales from net new business
in the aggregate from 2001 through 2005. We are encouraged by the new awards,
especially since these sales include business not only with our traditional
North American OEM customers, but also with OEMs based outside the United
States.
The automotive aftermarket has also been relatively flat in 2001. Key
factors in this softness were higher fuel costs early in 2001 (which tended to
reduce the portion of vehicle operating outlays expended on repairs and
maintenance) and general improvement in the quality and durability of automotive
parts (which means they need replacement less often). Although automotive
aftermarket sales were generally relatively strong in the third quarter of 2001,
our sales in this segment declined to levels experienced in the fourth quarter
of 2000 and the first quarter of 2001. This was due to the continued effects of
consolidation within our customer base (which resulted in excess inventory at
certain customers), improvements by our customers in the management of the
supply chain (which reduced the level of inventory necessary to meet retail
demand), and a shift by the retailers of a portion of their inventory
requirements to the manufacturers (which reduced the retailers' inventory needs
far more rapidly than actual inventory was reduced). We believe that the excess
inventory will
27
be eliminated over the next several quarters and that our aftermarket sales will
generally remain flat during that period.
RESULTS OF OPERATIONS (THIRD QUARTER 2001 VERSUS THIRD QUARTER 2000)
Our worldwide sales decreased $466 million in the third quarter of 2001 to
$2,399 million, a 16% decline from the third quarter of 2000. The net effect of
acquisitions, divestitures and price changes was minimal. Our U.S. sales dropped
$360 million or 18% versus the third quarter of 2000. Excluding the net effect
of acquisitions and divestitures, U.S. sales declined $331 million or 16%.
Overall sales outside the U.S. fared better, slipping only $106 million or
10% compared to the third quarter last year. The decline was $122 million or 12%
excluding the net effect of acquisitions and divestitures. Nearly half of this
decline resulted from the strengthening of the U.S. dollar relative to foreign
currencies since the third quarter of 2000. The currencies accounting for the
largest components of the approximately $56 million adverse impact were the
Brazilian real ($29 million), the euro ($7 million), the Australian dollar ($6
million), the Canadian dollar ($6 million) and the British pound ($2 million).
Sales by region for the third quarter are shown in the following table.
% CHANGE EXCLUDING
ACQUISITIONS AND
2000 2001 % CHANGE DIVESTITURES
---- ------ -------- ------------------
(IN MILLIONS)
North America........................... $2,165 $1,787 (17) (16)
Europe.................................. 441 380 (14) (12)
South America........................... 158 154 (3) (22)
Asia/Pacific............................ 101 78 (23) (19)
Sales in North America decreased $378 million or 17% in the third quarter
of 2001. Excluding the effect of divestitures, the decline was $350 million or
16%. As noted above, the relative weakness of the Canadian dollar accounted for
$6 million of the reduction. European sales were down less than 12% in local
currency but conversion to U.S. dollars pared another $10 million for a total
decline of $61 million or 14% including $9 million from divestitures. South
American sales were down $4 million as $32 million of adverse currency effects
offset the $31 million added through acquisitions. Sales in Asia/Pacific were
down 10% in local currency and, similar to the other regions, were affected by
the weakening of local currencies relative to the U.S. dollar as adverse
currency effects totaled more than $8 million. The effect of divestitures was a
$4 million sales decrease, with no acquisition impact.
Sales by SBU for the third quarter are shown in the following table.
% CHANGE EXCLUDING
ACQUISITIONS AND
2000 2001 % CHANGE DIVESTITURES
------ ---- -------- ------------------
(IN MILLIONS)
ASG....................................... $1,062 $831 (22) (24)
AAG....................................... 681 639 (6) (4)
CVS....................................... 346 259 (25) (21)
ESG....................................... 321 273 (15) (13)
FSG....................................... 266 237 (11) (11)
OHSG...................................... 178 141 (21) (21)
Other..................................... 11 19 73 16
The "Other" category in the chart represents closed and sold facilities or
locations where the operating responsibility has not been assigned to a specific
SBU.
ASG, which manufactures axles, driveshafts, structural components, modules
and chassis systems, experienced a sales decline of $231 million or 22% in the
third quarter. The North American region accounted
28
for $191 million of this shortfall. After a slight build rate increase in the
North American light vehicle and heavy truck markets in the second quarter of
2001, third quarter production fell back to the previous declining trend. The
aftermath of the September 11 terrorist attacks accounted for some of the
production decline as Ford, our largest customer, announced production cutbacks
of 110,000 to 120,000 units for the last two weeks of September. Compared to
last year's third quarter, North American light vehicle production was down 12%.
ASG experienced a $183 million drop in North America when compared to its second
quarter 2001 sales total. The disruptions to production schedules of our OE
customers, which had declined somewhat in the second quarter, became a
significant issue again in the third quarter. After September 11, increased
security at international border crossings resulted in shipping delays that were
responsible for creating parts shortages that further impacted production.
Incentives helped boost light vehicle sales but the demand was generally met by
existing dealer inventories, which remain high for certain models with high Dana
content. ASG reported an aggregate sales decrease of $40 million in the other
regions. Sales in Europe were down $18 million, mostly from a decline in volume
as the adverse effect of weaker currencies was minimal. Sales in South America
in the third quarter of 2001 were $5 million below those in the same period of
the prior year, as sales gained via acquisitions were more than offset by $11
million in organic declines and $14 million from the effect of weaker
currencies, especially the Brazilian real. Modular sales in Asia/Pacific
experienced an organic decline of $9 million, which was nearly matched by the $8
million negative impact of foreign currency fluctuations, with no impact from
acquisitions or divestitures.
AAG, which is primarily responsible for the distribution side of our
automotive business, experienced a year-over-year sales decline of $42 million
or 6% in the third quarter of 2001. After showing improvement in the second
quarter of 2001 on a sequential basis, AAG's sales declined again to within 1%
of the sales reported in the final quarter of 2000 and the initial quarter of
the current year. Sales in North America, which represents more than
three-fourths of AAG's market, were down $31 million or 5% when compared to the
same period in 2000. Divestitures accounted for $16 million of the decline.
Sales in Europe declined $3 million due to $1 million in adverse currency
effects and a $2 million decline in organic sales related to softness in the
market. Sales in South America declined by $2 million overall as a $2 million
local currency increase and $3 million of acquisition impact were more than
offset by adverse currency impacts of $7 million.
CVS sells heavy axles and brakes, drivetrain components, trailer products
and heavy systems modular assemblies; its power take-off operations were
divested in July 2001. The decline in its third quarter 2001 sales of $86
million or 25% as compared to the third quarter of 2000 was due to the fact that
North America represents nearly 95% of the CVS market and medium and heavy-duty
vehicle production in North America declined significantly compared to the prior
year. Aggregate sales for the other three regions declined $8 million or 37% in
a year-on-year comparison with no impact from divestitures. Total CVS sales for
the third quarter of 2001 declined 13% from the previous quarter, the second
quarter of decline after increasing 11% in the first quarter of 2001 when
compared to the fourth quarter of 2000.
ESG sells gaskets and other sealing products and engine parts, such as
piston rings, bearings, liners and camshafts. This SBU experienced a sales
decrease of $49 million or 15% in the third quarter of 2001 versus the
comparable period in 2000. Sales followed the overall markets in North America,
down $23 million or 12% with reductions in the automotive, commercial vehicle
and aftermarket sectors. Sales in Europe were down $25 million or 21% due to
organic declines of $13 million, divestitures of $9 million and adverse currency
effects of $3 million. Sales were flat in South America with acquisitions and
organic growth offsetting adverse currency effects of $3 million.
FSG, which manufactures an extensive line of rubber hose, fluid products
and fluid management systems, reported the smallest decline in third quarter
2001 sales of any SBU with a $29 million or 11% decrease when compared to the
third quarter of 2000. Sales here have been nearly flat since the third quarter
of last year, which was the last quarter with a notable decline. FSG benefited
from having content on models that avoided until recently the severe OE customer
production cuts that have affected most of the other SBUs. Currency impact for
the quarter was a negative $8 million. In Europe, currency losses of $1 million
partially offset an $8 million sales gain in local currency. FSG sales in the
South American and Asia/Pacific regions continued to be insignificant.
29
OHSG, which sells off-highway axles, powershift transmissions, transaxles,
torque converters and electronic controls, finished the third quarter of 2001
with sales down $36 million or 21% versus 2000, with no impact from acquisitions
or divestitures. Adverse currency impact accounted for $4 million, and organic
sales declined $20 million in North America and $14 million in Europe. Sales
declined 12% in North America and 16% in Europe when compared to the second
quarter of 2001. Overall markets were depressed in North America while the
agricultural market in Europe continued efforts to recover from the impact of
livestock diseases.
Revenue from lease financing and other income increased $48 million in the
third quarter of 2001 due primarily to non-recurring gains related to the sales
of our industrial polymer bearings businesses and our Chelsea power take-off
operations. Lease financing income in 2001 was flat versus 2000.
Gross margin for the third quarter of 2001 was 10.4% versus 13.4% in 2000.
Margins in all our SBUs were adversely affected as the declines in production
reduced our ability to absorb certain fixed operating expenses.
Selling, general and administrative expenses for the quarter decreased $34
million compared to the same period in 2000. Approximately $25 million of this
decrease was in North America while $5 million was due to currency movements.
Operating margin for the third quarter of 2001 was 0.3% compared to 3.8% in
2000 for the above reasons.
Interest expense for the third quarter of 2001 was $6 million lower than
the comparable period last year, the combined effect of a slightly lower average
debt level and lower interest rates.
Neither the effective tax rate nor the comparison of the effective tax
rates for the third quarters of 2001 and 2000 is meaningful due to the low level
of pre-tax earnings. The rate is impacted by a number of permanent differences
between financial accounting rules and related tax regulations, the impact of
which is magnified due to the reduced level of the pre-tax amounts in both
years. In addition, the realization of pre-tax profits in countries with higher
statutory rates and losses in other countries where benefits are not available
impacted the effective rate.
Equity in earnings of affiliates was $7 million lower in 2001. The most
significant reduction occurred in Mexico. Declines in Brazil were more than
offset by an increase in Europe, which benefited from our new investment in
GETRAG. Earnings from DCC's equity investments were also slightly lower.
We reported net income of $13 million in the third quarter of 2001, the net
result of an $8 million operating loss and $21 million of net non-recurring
income. Non-recurring items included $30 million of gains on divestitures and $9
million of charges related to our restructuring activities. In the third quarter
of 2000 we reported earnings of $29 million, consisting of $61 million of
operating income and $32 million of net non-recurring expense.
RESULTS OF OPERATIONS (NINE MONTHS 2001 VERSUS NINE MONTHS 2000)
Our worldwide sales decreased $1,731 million in the first three quarters of
2001 to $7,898 million, an 18% decline from the first three quarters of 2000.
Excluding the net effect of acquisitions and divestitures, sales decreased
$1,638 million or 17% during the period with price changes having a minimal
effect. Our U.S. sales dropped $1,442 million or 21% versus the prior year.
Excluding the net effect of acquisitions and divestitures, U.S. sales declined
$1,318 million or 19%.
Overall sales outside the U.S. fared better, slipping only $289 million or
9% compared to last year. The decline was $320 million or 10% excluding the net
effect of acquisitions and divestitures. Most of this decline resulted from the
strengthening of the U.S. dollar relative to foreign currencies since September
of 2000. The currencies accounting for the largest components of the
approximately $202 million adverse impact were the Brazilian real ($63 million),
the euro ($52 million), the Canadian dollar ($24 million), the Australian dollar
($22 million) and the British pound ($21 million).
30
Sales by region for the first nine months were as follows:
% CHANGE EXCLUDING
ACQUISITIONS AND
2000 2001 % CHANGE DIVESTITURES
------ ------ -------- ------------------
(IN MILLIONS)
North America........................... $7,435 $5,935 (20) (19)
Europe.................................. 1,504 1,308 (13) (12)
South America........................... 427 414 (3) (13)
Asia/Pacific............................ 263 241 (8) (11)
Sales in North America decreased $1,500 million or 20% for the period.
Excluding the effect of divestitures, the decline was $1,376 million or 19%. As
noted above, the relative weakness of the Canadian dollar accounted for $24
million of the reduction in sales. European sales were down less than 8% in
local currency but conversion to U.S. dollars pared another $77 million for a
total decline of $196 million or 13%. Divestitures exceeded acquisitions by $14
million. South American sales improved 3% in local currencies and net
acquisitions added $40 million, but sales were down $13 million or 3% after
absorbing $72 million of adverse currency effects. Sales in Asia/Pacific were
down $22 million as $31 million of adverse currency impact was partially offset
by a $6 million net effect of acquisitions and divestitures.
Sales by SBU for the first nine months are shown in the following table:
% CHANGE EXCLUDING
ACQUISITIONS AND
2000 2001 % CHANGE DIVESTITURES
------ ------ -------- ------------------
(IN MILLIONS)
ASG..................................... $3,501 $2,824 (19) (21)
AAG..................................... 2,134 1,950 (9) (7)
CVS..................................... 1,312 878 (33) (30)
ESG..................................... 1,070 911 (15) (14)
FSG..................................... 894 800 (11) (10)
OHSG.................................... 627 484 (23) (21)
Other................................... 91 51 (44) 12
ASG incurred a sales decline of $677 million or 19% in the first three
quarters of 2001. The North American region experienced $630 million of this
shortfall. In 2000, North American light vehicle and heavy truck manufacturers
were producing near record levels during the first half of the year. Heavy truck
production began to show signs of slowing by the end of the second quarter of
2000, a trend which worsened significantly in the second half of the year. The
light vehicle manufacturers began a similar slide in the third quarter of 2000
that also worsened in the fourth quarter. Sales in both markets were generally
flat in the first quarter of 2001 when compared to the fourth quarter of last
year, but demand was sporadic and margins were adversely affected by the high
volume of production shifts cancelled by our OE customers. The production
schedules improved in the second quarter of 2001 in terms of volume but still
displayed some of the irregularities of the first quarter. In the third quarter,
the number of production shifts cancelled by our OE customers was nearly
identical to what we experienced in the first quarter of 2001, as our customers
countered excess dealer inventories with incentives and reduced production. SUVs
and light trucks overall maintained their 50% share of the light vehicle market,
but Ford and Chrysler vehicles in general and certain models with high Dana
content in particular have declined more than the light vehicle market overall
in the current year. The other regions reported an aggregate sales decrease of
$48 million. Sales in Europe were down $36 million as an adverse currency impact
of $20 million and $28 million of organic declines more than offset acquisition
benefits of $12 million. Sales in South America were $11 million below the same
period in the prior year, as the $8 million of organic decline and $33 million
of adverse effects of weaker currencies more than offset the net acquisition
impact of $29 million. Modular sales in Asia/Pacific were flat with currency
declines of $25 million offsetting acquisition impact of $21 million and modest
organic growth.
31
AAG also experienced a decline in sales for the first three quarters of
2001. Sales in North America, which represents more than three-fourths of its
global market, were down $145 million or 8%. The reported improvement in the
domestic aftermarket followed the pattern in our other markets, as retailers
generally met the higher demand with existing inventory. Divestitures also
contributed $34 million to the decline. Sales in Europe declined $25 million due
to $9 million in adverse currency effects and a $16 million decline in organic
sales. Sales in South America were down $2 million as a $16 million currency
decrease was partially offset by local growth of $11 million and $3 million of
acquisition impact. Divestitures accounted for $11 million of the $13 million
sales decline reported in Asia/Pacific.
CVS experienced a year-on-year decline in sales in the first nine months of
2001 of $434 million or 33% for the reasons cited in the discussion of ASG
above. The decline in CVS sales included $45 million of divestiture impact, $42
million of which was in North America. Excluding this effect, sales in North
America for the period were 30% below those of the first three quarters of 2000.
Aggregate sales for the other three regions declined $25 million or 35% in a
year-on-year comparison with $6 million due to divestitures and adverse currency
effects.
ESG realized a sales decrease of $159 million or 15% in the first nine
months of 2001 versus the same period of 2000. Sales in North America were down
$99 million or 16% as the automotive, commercial vehicle and aftermarket sectors
all trailed prior year volume. Sales in Europe were down $57 million or 14% with
adverse currency effects of $20 million playing a significant role. Sales were
generally flat in South America before adverse currency effects of $6 million
and a net acquisition impact of $2 million.
FSG reported the lowest drop in sales of any SBU with a $94 million or 11%
decrease. FSG benefited from having content on models that avoided the severe OE
customer production cuts that have affected most of the other SBUs. Currency
impact for the period was a negative $25 million. In Europe, currency losses of
$8 million partially offset a $16 million sales gain in local currency. FSG
sales in the South American and Asia/Pacific regions were insignificant and
uncharged from the prior year, with organic growth of $8 million in South
America offset by adverse currency impact.
OHSG finished the period down $143 million or 23% in sales versus 2000,
with $9 million resulting from divestitures. Currency impact accounted for $20
million, and organic sales declined $81 million in North America, where overall
markets were weak, and $37 million in Europe, where the construction market
softened and agriculture remained weak.
Sales in "Other" decreased $40 million or 44% compared to 2000 reflecting
the sale of most of the Warner Electric businesses at the end of February 2000.
Revenue from lease financing and other income decreased $159 million in the
first three quarters of 2001 when compared to the same period in 2000. In 2001,
other income included a $50 million gain on the divestiture of our Chelsea power
take-off business and of our industrial bearings businesses. Also included in
2001 was a $35 million loss on the sales of our Mr. Gasket subsidiary, our
Marion, Ohio forging facility and the assets of our Dallas, Texas and
Washington, Missouri FSG operations. Included in the total for 2000 was $179
million of gains on the divestitures of the Gresen hydraulics business, certain
portions of our constant velocity joint business, most of the global Warner
Electric businesses and the Commercial Vehicle Cab Systems Group. In addition, a
$10 million net charge related to final settlement of the Midland Grau
divestiture was recorded in the third quarter of 2000, bringing to $169 million
the amount of net non-recurring income included in other income. Lease financing
income in 2001 decreased approximately $12 million versus the total for the
first nine months of 2000.
Gross margin through September of 2001 was 11.3% versus 15.2% in 2000.
Margins in all our SBUs were severely affected as the decline in volume reduced
our ability to absorb certain fixed operating expenses.
Selling, general and administrative expenses decreased $72 million during
the first nine months of 2001 compared to the same period last year. The net
effect of divestitures accounted for $19 million of this change, and currency
exchange caused another $18 million of the decline. The largest changes occurred
in Europe where currency fluctuations caused $8 million of the $18 million
non-divestiture related decrease. Most of the
32
remaining decrease was from the North American region where our operating units
scaled their capacity in reaction to severely reduced customer production
schedules in the light truck and commercial vehicle markets.
Operating margin for the period was 1.5% compared to 6.4% in 2000 for the
above reasons.
Interest expense was $1 million higher as the impact of higher debt was
generally offset by reduced interest rates.
Neither the effective tax rate nor the comparison of the effective tax
rates for the nine months ended September 2001 and 2000 is meaningful due to the
low level of pre-tax earnings. As noted in the discussion of the quarterly
results of operations, the impact of permanent differences between financial
accounting rules and tax regulations is magnified due to the reduced level of
the pre-tax amounts in both years.
Equity in earnings of affiliates through September 2001 was $26 million
lower than in the first nine months of 2000. The reduction in earnings in Mexico
and Venezuela more than offset the inclusion of earnings related to our
investment in GETRAG and a $4 million increase in earnings from DCC's equity
investments.
For the first nine months of 2001, operating income was fully offset by the
$19 million of net non-recurring items. We reported net income of $418 million
for the same period in 2000, which included $43 million of net non-recurring
income related to the divestitures and restructuring activities.
RESULTS OF OPERATIONS (2000 VERSUS 1999)
Our worldwide sales were $12,317 million in 2000, a 6% or $842 million
decline from the $13,159 million recorded in 1999. The divestitures completed in
the first quarter of 2000 were a significant factor. Net of the effect of
acquisitions, these divestitures accounted for a $410 million reduction in sales
for the year. Currency fluctuations accounted for an additional $279 million
decline in sales.
Sales by region for 1999 and 2000 are presented in the following table:
CHANGE
-----------------------
1999 2000 AMOUNT PERCENT
------- ------ ------------- -------
(IN MILLIONS) (IN MILLIONS)
North America.................................. $10,308 $9,449 $(859) (8.3)%
Europe......................................... 2,051 1,947 (104) (5.1)%
South America.................................. 549 563 14 2.6%
Asia/Pacific................................... 251 358 107 42.6%
U.S. sales were $8,552 million, a 9% or $861 million decline from the 1999
level, with divestitures net of acquisitions accounting for $408 million of the
decrease. Exports from the U.S. declined from $939 million in 1999 to $832
million in 2000.
Overall sales outside the United States increased $20 million despite the
$279 million adverse impact of further strengthening of the dollar. Sales for
our operations in Canada and Mexico were flat after considering a $4 million
benefit from currency changes; acquisitions and divestitures were not a factor
in those countries. Sales in Europe benefited from a net $65 million increase
related to acquisitions net of divestitures and organic growth added another $79
million. These positive effects were more than offset by $247 million of adverse
currency impact as the dollar equivalent of sales denominated in euros and
pounds declined $207 million and $32 million, respectively, due to weakness in
those currencies. In South America, where currency weakness resulted in an $11
million sales decline, the effect of divestitures net of acquisitions was a $66
million drop in sales. Continuing recovery in the region was evident however in
the $90 million of organic growth. Organic growth in Asia/Pacific sales totaled
$133 million, more than offsetting the $25 million of adverse currency effects.
Sales due to acquisitions equaled those lost by way of divestitures.
We realigned certain businesses within our SBU structure in 2000. The most
significant change was shifting our fluid handling products operations from ESG
to FSG. Our segment information was restated to reflect these changes.
33
Sales by SBU for 1999 and 2000 are presented in the following table. We do
not consider our leasing service revenues to be sales. The "Other" category in
the table represents facilities that have been closed or sold and operations not
assigned to a specific SBU.
CHANGE
-----------------------
1999 2000 AMOUNT PERCENT
------ ------ ------------- -------
(IN MILLIONS) (IN MILLIONS)
ASG............................................. $4,461 $4,634 $173 3.9%
AAG............................................. 3,039 2,850 (189) (6.2)%
CVS............................................. 1,904 1,598 (306) (16.1)%
ESG............................................. 1,318 1,293 (25) (1.9)%
FSG............................................. 1,238 1,163 (75) (6.1)%
OHSG............................................ 812 674 (138) (17.0)%
Other........................................... 387 105 (282) (72.9)%
ASG's sales in North America decreased $106 million or 3% in 2000 as a
result of light vehicle and heavy truck OEM production cuts intended to reduce
dealer inventory. Light vehicle production in North America started the year
near all-time record levels but declined in the second half of 2000 to end at
17.2 million units. SUVs and light trucks displayed a similar trend line while
maintaining their share of overall production. While sales appeared flat in
South America, internal growth in Brazil across all the ASG product lines was
slightly more than the combined negative effect of currency ($8 million) and net
divestitures ($55 million). Sales in Europe benefited from our acquisition of
the GKN driveshaft business early in 2000, which added sales of $142 million,
but gave back $75 million to currency effects. ASG's internal growth of nearly
$40 million resulted from improvement in both driveshaft and axle sales, the
latter improving 32% in Austria. The acquisition of the automotive axle
manufacturing and stamping business of Invensys plc added $34 million of sales
in Asia/Pacific, more than offsetting the $22 million adverse currency effect
and complementing the $141 million of organic growth resulting mainly from new
modular systems business.
AAG ended 2000 with a $189 million decrease in sales, of which nearly $44
million related to the late 1999 divestiture of Sierra International Inc., a
manufacturer and distributor of marine and power equipment, engine, drive and
hose products. Inefficiencies in consolidating parts of its warehousing
operations and softness in the North American automotive aftermarket were key
factors in the $85 million sales decline at AAG's operating units in this
region. Sales in Europe were marginally higher than in 1999 but the region lost
$40 million to currency movements. Modest sales improvement in South America was
offset by decreases in Asia/Pacific. There were no acquisitions or divestitures
in either region and currency effects were minimal.
CVS continued its success of 1999 during the first half of 2000, growing
sales 4% after excluding the effects of two divestitures in the first quarter of
2000. However, early in the second half of 2000, heavy truck manufacturers
sharply reduced production in response to falling demand and excess inventory.
CVS' sales fell by one-third in the second half and finished the full year $306
million below 1999 results. The divestiture impact for the full year was $106
million and currency losses pared another $9 million, leaving $190 million of
organic sales reductions.
ESG achieved $31 million of organic growth with $23 million emanating from
Europe and $8 million from South America. Similar to the European operations of
our other SBUs, those of ESG lost $56 million in converting their local sales to
dollars. ESG sales in North America edged up $5 million or 1% in 2000.
FSG's sales declined $75 million in 2000 as North America lost $51 million
in its ongoing operations and another $6 million due to a divestiture.
Operations in Europe incurred currency losses of $17 million to account for most
of their $19 million sales decline. Sales in South America were even with the
prior year.
OHSG's sales fell $138 million overall as the divestiture of the Gresen
Hydraulics business in January 2000 resulted in a $97 million decline in sales
and adverse currency impacts accounted for another $49 million. Organic growth
was a modest $8 million. North American sales declined $93 million with $86
million attributable to the Gresen divestiture. In Europe, sales were $41
million lower as weakness in the euro had a
34
$49 million adverse effect. South American sales were down $4 million as $7
million of organic growth was negated by $11 million lost through the Gresen
divestiture.
Revenue from lease financing increased $32 million or 29% in 2000 on a $15
million increase in direct finance lease income and increases of $9 million each
in interest income and income from property rentals recognized by DCC.
"Other" income increased $148 million in 2000, primarily the result of a
$156 million increase in gains on divestitures that was partially offset by a $9
million decrease in interest income (exclusive of DCC's interest income which is
included in lease financing revenue).
Gross margin in 2000 was 13.9%, well below the 16.7% reported in 1999.
Results in all regions reflected lower gross margins, but the declines were most
severe in North America and Asia/Pacific. In North America, ASG and CVS were
both affected by producing above optimum capacity in the first half of the year.
In the second half, these units were impacted by erratic demand from their major
customers and generally fell well below efficient production levels. AAG margins
were impacted by softness in the automotive aftermarket. In Asia/Pacific, ASG
margins were affected by startup costs related to our new modular business in
Australia. We incurred $17 million in 2000 in connection with discontinuing
certain lines of business and $57 million in 1999 related to impairment and
other rationalization adjustments and charged these amounts to cost of sales.
Gross margins excluding these items would have been 14.1% in 2000 and 17.1% in
1999.
Selling, general and administrative expenses decreased $60 million in 2000,
slightly exceeding the $56 million attributed to the net effect of divestitures
and acquisitions. DCC increased its general and administrative expenses by $9
million with higher depreciation on leased assets and expenses related to a real
estate investment being the largest components. SG&A as a percentage of sales
was 9.2% in 2000 and 9.1% in 1999.
Interest expense rose $44 million or nearly 16% in 2000 as overall debt
increased by almost 11%. Average short-term borrowings rose $452 million to
$1,614 million and the average interest rate increased from 5.4% to 6.6%.
Our effective tax rate was 36.8% in 2000. We benefited from tax credits
generated by our leasing operations and from relatively low state and local tax
rates.
Minority interest was unchanged in 2000. The minority interest in the gain
recognized by Albarus S.A on the sale of its interest in one of its affiliates
was generally offset by the absence of the minority interest's participation in
operating earnings.
We recorded $54 million of equity in the earnings of our affiliates in
2000. Increased earnings at our affiliate in Mexico and expansion of the portion
of leasing revenue earned on DCC's equity investments more than offset the $27
million loss recorded in the fourth quarter at our then 49%-owned affiliate in
Venezuela.
Net income was $334 million in 2000 versus $513 million reported in 1999.
Comparisons are made difficult by non-recurring items recorded in both years. In
1999, we recorded $165 million of non-recurring charges net of the gain recorded
in AAG on the sale of Sierra. In 2000, we recorded $43 million of non-recurring
charges net of the gains recorded on several divestitures. Excluding these
items, earnings would have been $377 million in 2000 and $678 million in 1999.
Non-recurring items in 2000 included net charges of $47 million in ASG, $39
million in AAG, $33 million in ESG and $4 million in FSG and net credits of $27
million in CVS and $16 million in OHSG; a net gain of $37 million was reflected
in the "Other" category. In 1999, non-recurring charges were $59 million in ASG,
$41 million in AAG, $3 million in CVS, $31 million in ESG, $3 million in FSG, $1
million in OHSG and $27 million in "Other."
RESULTS OF OPERATIONS (1999 VERSUS 1998)
Our worldwide sales increased by $695 million in 1999 to $13,159 million,
nearly 6% above the record level of 1998. Organic growth accounted for $359
million or 3% while acquisitions, net of divestitures, added
35
$336 million. U.S. sales increased $629 million or 7% with $122 million
attributable to acquisitions net of divestitures. Exports increased 24% to $939
million despite the increasing strength of the dollar.
Sales by region for 1998 and 1999 are presented in the following table:
CHANGE
-----------------------
1998 1999 AMOUNT PERCENT
------ ------- ------------- -------
(IN MILLIONS) (IN MILLIONS)
North America.................................. $9,657 $10,308 $651 6.7%
Europe......................................... 1,844 2,051 207 11.2%
South America.................................. 779 549 (230) (29.5)%
Asia/Pacific................................... 184 251 67 36.4%
Overall sales outside of the U.S. increased 2% in 1999, but declined 4%
when excluding the net effect of acquisitions and divestitures. The increased
strength of the dollar had an adverse impact on sales in all regions except
Asia/Pacific. Mexico and Canada incurred a $24 million negative currency effect
on a combined basis. Europe, which experienced an 11% net increase, benefited by
$194 million from net acquisitions but gave back $47 million in negative
currency impact. South America, struggling to recover from economic downturns in
Brazil and Argentina, incurred a $230 million or 30% decrease in sales. The
devaluation of the Brazilian real accounted for nearly all of the $240 million
in sales lost to currency effects in this region. Asia/Pacific increased sales
by $67 million or 36% with currency changes contributing a $5 million increase.
Sales for 1998 and 1999 by SBU are presented in the table below. The
amounts are presented consistent with the 2000 segment information.
CHANGE
-----------------------
1998 1999 AMOUNT PERCENT
------ ------ ------------- -------
(IN MILLIONS) (IN MILLIONS)
ASG............................................. $4,180 $4,461 $281 6.7%
AAG............................................. 2,888 3,039 151 5.2%
CVS............................................. 1,746 1,904 158 9.0%
ESG............................................. 978 1,318 340 34.8%
FSG............................................. 1,193 1,238 45 3.8%
OHSG............................................ 888 812 (76) (8.6)%
Other........................................... 591 387 (204) (34.5)%
The popularity of SUVs and light trucks continued to push ASG sales to
higher levels. Axle sales experienced most of the growth in this SBU. Driveshaft
sales were up slightly less than 3% and structural product sales were relatively
flat. Sales growth was most significant in North America where sales increased
$354 million. Asia/Pacific experienced a 74% increase and South America was down
36% for the year.
The December 1998 acquisition of AE Clevite, a distributor of camshafts,
valves and engine components, helped AAG grow its North American sales by $131
million in 1999. Our filtration operation in the United Kingdom, acquired early
in 1999, helped Europe register a 7% increase over 1998. Sales were down 4% in
South America and 2% in Asia/Pacific.
CVS continued to benefit from high build rates in medium to heavy trucks
(class 5 through 8) in the United States. Heavy axle and brake operations led
the way to a 12% sales increase in North America where nearly 94% of CVS' sales
occur. Sales were flat in Asia/Pacific, down 13% in Europe and down nearly 50%
in South America.
The acquisition of Glacier Vandervell in December 1998 increased ESG's
sales in 1999. The manufacturer of engine bearings helped ESG increase sales 22%
in North America and 82% in Europe. Sales of the other engine and sealing
products were generally flat for the year.
FSG transacted more than 80% of its business in North America, where
strength in coolant systems carried it to a 4% sales increase in 1999. Sales
increased 13% in Europe but declined 26% in South America.
36
OHSG had a challenging year in 1999. Sales decreased 10% in North America
and 6% in Europe as the depressed agricultural market limited demand for
off-highway axles, power-shift transmissions, hydraulic pumps and auxiliary
equipment.
Revenue from lease financing decreased 36% in 1999 due to the sale of DCC's
Technology Leasing Group portfolio in December 1998. "Other" income in 1998
included a gain of $126 million on this divestiture and $27 million from the
settlement of a lawsuit.
Our gross margin was 16.7% in 1999 compared to 16.2% in 1998. Cost of sales
in 1999 was increased by a charge of $57 million related to impairment and other
rationalization adjustments. In 1998 we charged $20 million of inventory
adjustments to cost of sales. Excluding these non-recurring items, the gross
margins would have been 17.1% in 1999 and 16.3% in 1998.
Selling, general and administrative expenses increased only $70 million in
1999 despite $83 million of expenses at newly acquired businesses. SG&A at our
manufacturing and distribution businesses (including newly acquired businesses)
increased $76 million. DCC realized net savings of $8 million with the reduction
resulting from the December 1998 sale of its Technology Leasing Group portfolio
being partially offset by expenses related to development of a new lease
administration system. On a regional basis, North America increased $25 million
with all of it attributable to the net effect of acquisitions and divestitures.
Europe increased by $78 million including a net acquisition/divestiture impact
of $42 million. Currency devaluation in South America caused SG&A to decline by
nearly $28 million.
Operating income, which excludes restructuring and integration charges and
the 1998 Echlin Inc. merger expenses, increased by $110 million in 1999.
Acquisitions, net of divestitures, added $31 million and DCC contributed $8
million. The vast majority of the improvement was based in North America, as
Europe improved a modest $7 million and South America decreased $14 million.
Excluding the non-recurring items charged to cost of sales, operating margin
would have increased from 7.3% in 1998 to 8.1% in 1999.
Interest expense was virtually unchanged in 1999. DCC lowered its borrowing
costs following the divestiture of its small-ticket leasing operation but the
manufacturing operations incurred greater interest charges due to a higher debt
level.
Our effective tax rate improved from 39% to 34% in 1999. State tax
incentives played a significant role in the change as did general business
credits realized by our leasing operations. Nondeductible merger expenses
adversely affected the 1998 rate.
Minority interest increased by $5 million due to the minority interest
acquired as part of the Glacier Vandervell acquisition and earnings improvement
at Automotive Motion Technology Limited prior to our acquiring the remaining
shares of that subsidiary.
Equity in earnings of affiliates rose $3 million or 8%, including a $16
million decline in our Venezuelan affiliate, a $13 million increase in our
Mexican affiliates and a $7 million increase related to our leasing
partnerships.
Net income for 1999 was $513 million, slipping 4% from the $534 million we
earned in 1998. Both years included non-recurring items that make it difficult
to compare these results. In 1998 we recorded $57 million of non-recurring
charges net of gains on divestitures and the settlement of a patent infringement
case. In 1999, we recorded $165 million of non-recurring charges net of the gain
on the sale of Sierra. With these items excluded from both years, our earnings
would have increased $87 million or 15% to $678 million.
The SBUs affected by the 1999 adjustments were ASG $59 million, AAG $41
million, ESG $31 million, CVS $3 million, FSG $3 million, OHSG $1 million and
"Other" $27 million. In 1998, adverse adjustments were recorded by AAG $45
million, ESG $17 million, OHSG $1 million and "Other" $50 million. DCC recorded
a gain of $56 million.
37
LIQUIDITY AND CAPITAL RESOURCES
Operating activities in the first nine months of 2001 generated $390
million of positive cash flow, a $35 million reduction from the same period in
2000. The decline in net income, after excluding the divestiture gains in both
years, adversely affected the comparison by $318 million. Our focus on reducing
working capital helped limit the increase in working capital over the first nine
months of 2001 to $79 million. This result was achieved despite the repayment of
approximately $100 million financed by a sale of accounts receivable at the end
of 2000 and payment of $104 million representing the final installment of the
purchase price of our investment in GETRAG Cie. In the first nine months of
2000, working capital increased $223 million with changes in accounts receivable
and accounts payable as the primary elements. Depreciation and amortization
increased $18 million in the first nine months of 2001.
CASH FLOWS FROM OPERATIONS
FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------
(IN MILLIONS)
1999........................................................ $302
2000........................................................ 425
2001........................................................ 390
Capital expenditures in the first nine months of 2001 were $306 million,
representing a $158 million reduction over the same period of 2000. We will
further limit capital spending in conjunction with our new cash conservation and
restructuring initiatives announced in October 2001. Capital spending will be
used almost exclusively to support new business in the near term, and our
estimate for all of 2001 is $400 million.
CAPITAL EXPENDITURES
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------ -------------
(IN MILLIONS)
1999........................................................ $807 $562
2000........................................................ 662 464
2001........................................................ 400* 306
---------------
* Estimated
Investing activities provided cash of $39 million in the first nine months
of 2001 versus an outflow of $417 million during the same period in 2000.
Divestiture proceeds were a significant element in the third quarter, as the
closing of two divestitures increased our total proceeds through the first nine
months of 2001 by $206 million. In the first three quarters of 2000, we realized
$562 million of proceeds from divestitures and spent $279 on acquisitions. DCC
continued to maintain its portfolio of leases and loans in 2001, providing net
cash receipts of $7 million through the first nine months; these activities used
cash of $263 million in the comparable period in 2000.
In March 2001, we established a $400 million accounts receivable
securitization program. The initial proceeds were used to reduce debt, including
amounts outstanding under our revolving credit facilities. At September 30,
2001, borrowings of $320 million were outstanding under the program. The amounts
outstanding under the program are reflected as short-term borrowings in the
consolidated financial statements. In August 2001, we completed the private
placement of $575 million and E200 million of 10-year unsecured senior notes. We
used the proceeds from these notes, along with a portion of the divestiture
proceeds, to further reduce borrowings under Dana's revolving credit facilities
and satisfy maturities of existing long-term debt.
38
Our September 2001 year-to-date cash flows related to financing activities
included a $642 million reduction of net short-term borrowings and a net
increase in long-term debt of $413 million. This activity was partially offset
on our balance sheet by the consolidation of approximately $90 million of debt
in the second quarter in connection with our purchase of the remaining 51%
interest in Danaven, a Venezuelan operation in which we previously held a
minority position. The $139 million of dividends paid in the first nine months
of 2001 reflects a $3 million reduction over the same period in 2000 as a result
of the repurchase of shares, as dividend rates in both years were comparable.
Funds expended for stock repurchases in the first nine months of 2000 totaled
$381 million. Stock repurchases were discontinued in September 2000.
Committed and uncommitted bank lines enable us to make direct bank
borrowings. Excluding DCC we had committed and uncommitted borrowing lines of
credit totaling approximately $1.833 billion at September 30, 2001, including
two revolving credit facilities (a 364-day facility and a long-term facility)
with an aggregate maximum capacity of $1 billion. On December 19, 2001, we
entered into a new 364-day facility and amended the long-term facility. The
364-day facility matures on December 18, 2002 and has a maximum borrowing
capacity of $250 million, subject to termination upon the occurrence of a
"Liquidity Event" and to reduction in other circumstances (as described in
greater detail in "Description of Certain Indebtedness -- Revolving Credit
Facilities" below). The long-term facility matures in November 2005 and has a
maximum borrowing capacity of $500 million. We had $315 million outstanding
under these revolving credit facilities at December 19, 2001. DCC had credit
lines totaling $580 million at September 30, 2001, including two revolving
credit facilities with an aggregate maximum capacity of $463 million. The DCC
364-day facility matures in June 2002 and has a maximum borrowing capacity of
$213 million. The DCC long-term facility matures in June 2004 and has a maximum
borrowing capacity of $250 million. At September 30, 2001, approximately $319
million was outstanding under the DCC revolving credit facilities.
Until the end of 2000, we had generally relied on the issuance of
commercial paper to satisfy a significant portion of our short-term financing
requirements. However, the debt rating services downgraded our credit ratings in
the first quarter of 2001, primarily due to the significant downturn in our
markets since the fourth quarter of 2000 and its impact on our operations. When,
as a result, the issuance of commercial paper became unavailable to us, we began
borrowing against our committed bank lines. The accounts receivable
securitization program established in March 2001 and the private placement of
the outstanding notes allowed us to reduce our borrowings against the bank lines
while extending the overall maturity of our outstanding debt. Dana, excluding
DCC, had $435 million of capacity available under the revolving credit
facilities at December 19, 2001.
We expect to be able to continue to secure short-term financing, but if
such financing is not available on acceptable terms, our results of operations
and financial condition may be adversely affected. Based on our rolling
forecast, we expect our cash flows from operations, combined with these credit
facilities and the accounts receivable securitization program to provide
sufficient liquidity to fund our debt service obligations, projected working
capital requirements, restructuring obligations and capital spending for a
period that includes the next twelve months.
We have reviewed the liabilities that may result from the legal proceedings
to which we are currently a party, including those involving product liability
claims and alleged violations of environmental laws. We do not believe that
these liabilities or the related cash requirements are reasonably likely to have
a material adverse effect on our liquidity, financial condition or results of
operations.
We estimate contingent environmental liabilities based on the most probable
method of remediation, current laws and regulations and existing technology.
Estimates are made on an undiscounted basis and exclude the effects of
inflation. If there is a range of equally probable remediation methods or
outcomes, the lower end of the range is accrued. At September 30, 2001, $40
million was accrued for contingent environmental liabilities with no recovery
expected from other parties, unchanged from December 31, 2000.
We estimate contingent non-asbestos product liabilities based on existing
claims plus our estimate of incurred but not reported claims based on historical
experience. At September 30, 2001, $21 million was accrued for contingent
non-asbestos product liability costs and $3 million was recorded as an asset for
probable
39
recoveries, compared to $21 million accrued for liabilities and $2 million
recorded as an asset at the end of 2000.
At September 30, 2001, the difference between our minimum and maximum
estimates for contingent liabilities, while not considered material, was $2
million for the environmental liability claims and $14 million for the
non-asbestos product liability claims, which is unchanged from the end of 2000.
With respect to contingent asbestos-related product liability, we had
approximately 96,000 asbestos-related claims outstanding at September 30, 2001,
including approximately 29,000 claims that were settled pending payment. We have
agreements with our insurance carriers providing for the payment of a
significant majority of the defense and indemnity costs for pending claims as
well as claims which may be filed against us in the future. At September 30,
2001, we had accrued $94 million for contingent asbestos-related product
liability costs and recorded $82 million as an asset for probable recoveries
from insurers for asbestos-related product liability claims, compared to $78
million accrued for liabilities and $67 million recorded as an asset at December
31, 2000.
For some time, the vast majority of our asbestos-related claims were
administered by the Center for Claims Resolution (CCR), which settled claims for
its member companies on a shared settlement cost basis. In February 2001, the
CCR was reorganized and discontinued negotiating shared settlements. The CCR
continued to administer Dana's claims and provide some legal and claims
adjusting support through July 31, 2001. Since February 2001, there has been no
sharing of indemnity costs and we have independently controlled our legal
strategy and settlements. As of August 1, 2001, our claims administration was
moved to a new organization, PACE, which is a subsidiary of Peterson Consulting,
Inc. We do not expect these changes to materially affect our handling of
asbestos claims or the costs thereof. However, there has been a marked increase
in the number of claims filed against Dana since the CCR was reorganized. We
believe that claimants are naming all former members of the CCR in individual
claims, since all members of the CCR had previously participated in claims filed
against any single member. As a result, many of the new claimants have no direct
association with products manufactured by Dana. Since the reorganization of the
CCR, a greater number of claims against Dana are being dismissed and the average
cost of settlement has declined.
At September 30, 2001, $99 million of restructuring charges remained in
accrued liabilities. This balance consisted of $79 million related to the
termination of employees, including the announced termination of approximately
730 employees scheduled for the remainder of 2001, and $20 million for lease
termination and other exit costs. We estimate the related cash expenditures will
be approximately $25 million in the remainder of 2001, $25 million in 2002, $11
million in 2003 and $38 million thereafter.
On October 17, 2001, we announced our intention to accelerate the
restructuring of our operations and to reduce our workforce globally by more
than 15%. More than 30 facilities are being reviewed for consolidation or
closure. Plans identifying the specific actions are being developed and will
determine the timing of expense recognition and cash flows. However, we
currently expect that the restructuring charges will total approximately $445
million after tax and that 62% of the charges will be incurred in the fourth
quarter of 2001, with the balance to be incurred in 2002. We expect that 34% of
the charges will be non-cash; most of the cash portion will be severance costs
related to the workforce reduction. We anticipate that 79% of the charges will
be directly related to our North American operations. We estimate that 55% of
the charges will be incurred by our business units primarily serving the light
vehicular original equipment marketplace and 25% will be incurred by AAG. We
also announced that we will pursue the sale of the businesses of DCC, which
accounted for approximately $1.9 billion of our assets at September 30, 2001.
Although we are presently unable to estimate the proceeds from this sale, we do
not expect to incur a loss.
We believe it is likely that our liquidity and cash flows will be
materially impacted by these restructuring activities through the end of 2001
and during 2002. However, we believe that our cash flows from operations, as
supplemented by our credit facilities and the accounts receivable securitization
program, will provide sufficient liquidity to fund our debt service obligations,
projected working capital requirements, restructuring obligations and capital
spending for a period that includes the next twelve months.
40
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 are estimated based on assumptions concerning the amount
and timing of estimated future cash flows and assumed discount rates reflecting
varying degrees of credit risk. Fair values may not represent actual values of
the financial instruments that could be realized as of the balance sheet date or
that will be realized in the future.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of our financial instruments are as follows:
DECEMBER 31,
--------------------------------------------
1999 2000
------------------------ -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------------- -------- ------
(IN MILLIONS)
Financial assets Cash and cash equivalents.... $ 111 $ 111 $ 179 $ 179
Loans receivable (net)...................... 184 180 219 228
Investment securities....................... 67 67 55 55
Financial liabilities
Short-term debt............................. 968 968 1,526 1,526
Long-term debt.............................. 3,198 3,101 3,068 2,943
Security deposits -- leases................. 4 3 1
Deferred funding commitments under leveraged
leases................................... 4 3 1 1
Unrecognized financial instruments, net....... (4) (1)
DERIVATIVE FINANCIAL INSTRUMENTS
Various types of derivative financial instruments are used primarily to
hedge interest rate and foreign currency effects. Derivatives are not used for
trading or speculative purposes. Interest rate swaps are used to manage exposure
to fluctuations in interest rates and to balance the mix of our fixed and
floating rate debt. Differentials to be paid or received on certain interest
rate agreements are accrued and recognized as adjustments to interest expense.
On January 1, 2001, we adopted Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Transactions." These Statements require, among other things, that all
derivative instruments be recognized on the balance sheet at fair value.
Interest rate swap arrangements have been formally designated as hedges and the
effect of marking these contracts to market has been recorded in other
comprehensive income. Foreign currency forwards and other derivatives have not
been designated as hedges and the effect of marking these instruments to market
has been recognized in the results of operations. The adoption of SFAS Nos. 133
and 138 has not had a material effect on our financial position or results of
operations.
MARKETABLE SECURITIES
The majority of our marketable securities satisfy the criteria for cash
equivalents and are classified accordingly. The remainder of our marketable
securities are classified as available for sale. Available-for-sale securities,
which are included in investments and other assets, are carried at fair value
and any unrealized gains or losses, net of income taxes, are reported as a
component of accumulated other comprehensive income or loss in shareholders'
equity.
41
INTEREST RATE AGREEMENTS
We enter into interest rate agreements to manage our exposure to the
effects of future interest rate movements and to balance the mix of our fixed
and floating rate debt. Under interest rate swap agreements, we agree to
exchange with third parties, at specific intervals, the difference between fixed
rate and floating rate interest amounts calculated by reference to an agreed
notional amount. At December 31, 2000, DCC was committed to receive interest
rates which change periodically in line with prevailing short-term market rates
(the average rate being received at December 31, 2000 was 7.10%) and to pay an
average rate of 7.00% which is fixed over the period of the agreements on
notional amounts of $125 million. DCC's notional amounts of interest rate swaps
expire as follows: 2001, $30 million; 2002, $50 million and 2003, $45 million.
Dana, exclusive of DCC, was not a party to any interest rate swap agreements at
December 31, 2000.
On August 8, 2001, in conjunction with the issuance of the outstanding
notes, we entered into interest rate agreements to swap the 9.00% fixed rate on
the notes for a variable rate equal to the six-month LIBOR (London interbank
offered rates) rate plus 3.045% on the $575 million notes and the six-month
EURIBOR (Euro interbank offered rates) rate plus 3.775% on the E200 million
notes. The average rate to be paid was 5.68% on October 31, 2001.
RESTRUCTURING AND INTEGRATION CHARGES
At December 31, 2000, there was $113 million remaining in accrued
liabilities relating to restructuring plans announced in 1998, 1999 and 2000.
During the first nine months of 2001, we announced the closing of facilities in
ASG, AAG and FSG and continued our other restructuring efforts elsewhere. In
connection with these efforts, we accrued an additional $17 million for employee
termination benefits, $9 million for asset impairments and $12 million for other
exit costs. This $38 million of restructuring expense had a $25 million impact
on net income.
The following summarizes the restructuring activity recorded in the first
nine months of 2001 and the change in the accrual:
EMPLOYEE
TERMINATION
BENEFITS EXIT COSTS ASSET IMPAIRMENT TOTAL
------------- ---------- ---------------- -----
(IN MILLIONS)
Balance at December 31, 2000............ $ 93 $ 20 $ 0 $113
Activity during the first nine months
Charged to expense.................... 17 12 9 38
Cash payments......................... (31) (12) (43)
Write-off of assets................... (9) (9)
---- ---- --- ----
Balance at September 30, 2001........... $ 79 $ 20 $ 0 $ 99
==== ==== === ====
At September 30, 2001, $99 million of restructuring charges remained in
accrued liabilities. This balance consisted of $79 million related to the
termination of employees, including the announced termination of approximately
730 employees scheduled for the remainder of 2001, and $20 million for lease
terminations and other exit costs. We estimate the related cash expenditures
will be approximately $25 million in the remainder of 2001, $25 million in 2002,
$11 million in 2003 and $38 million thereafter.
42
The following table summarizes the restructuring charges and activity
recorded in the last three years and in the nine months ended September 30,
2001:
IMPAIRMENTS
----------------------
EMPLOYEE LONG- INVESTMENTS
TERMINATION LIVED IN OPERATIONS EXIT INTEGRATION
BENEFITS ASSETS TO BE SOLD COSTS EXPENSES TOTAL
----------- ------ ------------- ----- ----------- -----
(IN MILLIONS)
BALANCE AT DECEMBER 31, 1997........ $ 88 $ 30 $ 62 $ -- $ -- $ 180
Activity during the year
Charges to expense................ 65 40 13 118
Cash payments..................... (37) (2) (39)
Write-off of assets............... (70) (62) (132)
---- ---- ---- ---- ---- -----
BALANCE AT DECEMBER 31, 1998........ 116 -- -- 11 -- 127
Activity during the year
Charges to expense................ 60 59 11 51 181
Cash payments..................... (85) (9) (51) (145)
Write-off of assets............... (59) (59)
---- ---- ---- ---- ---- -----
BALANCE AT DECEMBER 31, 1999........ 91 -- -- 13 -- 104
Activity during the year
Charges to expense................ 62 8 27 76 173
Cash payments..................... (60) (20) (76) (156)
Write-off of assets............... (8) (8)
---- ---- ---- ---- ---- -----
BALANCE AT DECEMBER 31, 2000........ 93 -- -- 20 -- 113
Activity during the first nine
months
Charges to expense................ 17 9 12 38
Cash payments..................... (31) (12) (43)
Write-off of assets............... (9) (9)
---- ---- ---- ---- ---- -----
BALANCE AT SEPTEMBER 30, 2001....... $ 79 $ -- $ -- $ 20 $ -- $ 99
==== ==== ==== ==== ==== =====
Employee terminations relating to the restructuring activities were as
follows:
FIRST
NINE MONTHS
1998 1999 2000 2001
------ ----- ----- -----------
Total estimated.......................................... 2,450 1,280 1,020 1,701
Less terminated
1999................................................... (1,123) (595)
2000................................................... (1,230) (615) (765)
2001................................................... (58) (30) (248) (1,054)
------ ----- ----- ------
BALANCE AT SEPTEMBER 30, 2001............................ 39 40 7 647
====== ===== ===== ======
43
BUSINESS
We were founded in 1904 as the first supplier of universal joints to the
automotive industry. Today, we are one of the world's largest independent
suppliers of components, modules and systems to global vehicle manufacturers and
related aftermarkets. Our products are sold to the automotive, commercial
vehicle, and off-highway markets, and are used in the manufacturing of passenger
cars and vans, light trucks, SUVs, and medium and heavy duty vehicles, as well
as in a range of off-highway applications. Each of the markets we serve consists
of OE production, OE service, and aftermarket segments. We have over 430
facilities in 34 countries and employ approximately 72,000 people. For the year
ended December 31, 2000, we generated consolidated sales of $12.3 billion and
net income of $334 million.
Our seven core product segments, or foundation businesses, focus on axles,
driveshafts, brake and chassis products, bearings and sealing products, fluid
systems, structures and filtration products. Each of these businesses has a
strong market position and brand equity and provides our customers with
value-added manufacturing. We have long been a leader in technological
innovation in our industry and many of our products possess features that are
unique and patented. As evidenced by our numerous supplier quality awards, we
are highly focused on product quality, as well as delivery and service. As a
result, we have developed long-standing business relationships with many of the
thousands of customers that we serve worldwide.
In order to optimally align our foundation businesses with the markets they
support, our operations are organized into the following market-focused SBUs:
- Automotive Systems Group -- ASG produces light duty axles, driveshafts,
structural products (such as engine cradles and frames), transfer cases,
original equipment brakes and integrated modules and systems for the
light vehicle market and driveshafts for the heavy truck market. The
group has over 120 facilities and employs over 21,000 people in 23
countries. Its three largest customers, Ford, DaimlerChrysler and General
Motors, helped it attain sales of $4.6 billion in 2000.
- Automotive Aftermarket Group -- AAG sells hydraulic brake components and
disc brakes for light vehicle applications, internal engine hard parts,
chassis products and a complete line of filtration products for a variety
of applications. In addition, it sells electrical, brake, power
transmission, steering and suspension system components in the United
Kingdom and continental Europe. AAG has over 120 facilities and over
19,000 people in 26 countries. In 2000, its sales were $2.9 billion and
its three largest customers were Genuine Parts Company, General Parts,
Inc. and Parts Plus.
- Commercial Vehicle Systems -- CVS is a major supplier of heavy axles and
brakes, drivetrain components and trailer products to the medium and
heavy truck markets. It also assembles modules and systems for heavy
trucks. The group has 20 facilities and over 4,000 people in eight
countries. In 2000, this group recorded sales of $1.6 billion, and its
three largest customers were Renault V.I./Mack Trucks, Inc., PACCAR Inc
and Navistar International Corporation.
- Engine and Fluid Management Group -- Newly formed EFMG serves the
automotive, light to heavy truck, leisure and outdoor power equipment and
industrial markets with sealing products, internal engine hard parts,
electronic modules, sensors, and an extensive line of products for the
pumping, routing and thermal management of fluid systems. The group has
over 120 facilities and over 20,000 people in 17 countries. EFMG was
formed by combining the former ESG, which had sales of $1.3 billion in
2000, and FSG, which had sales of $1.2 billion in 2000. Segment
information for EFMG will be restated for comparative purposes in our
2001 annual report. Its three largest customers are Ford, DaimlerChrysler
and General Motors.
- Off-Highway Systems Group -- OHSG produces axles and brakes, transaxles,
power-shift transmissions, torque converters and electronic controls.
These products serve the construction, agriculture, mining, specialty
chassis, outdoor power, material handling, forestry and leisure/utility
equipment markets. OHSG has 13 facilities and over 3,000 people in seven
countries. Its 2000 sales were nearly $700 million and Deere & Company,
Textron Inc., and Manitou S.A. were its three largest customers.
44
For some time, we have also been a leading provider of lease financing
services in selected markets through our wholly-owned subsidiary, Dana Credit
Corporation (DCC). With an asset base of $2.5 billion at the end of 2000, DCC
and its subsidiaries provide leasing and financing services to selected markets
primarily in the U.S., Canada, the United Kingdom and continental Europe. On
October 17, 2001, we announced plans to pursue the sale of the businesses of
DCC.
OUR COMPETITIVE STRENGTHS
Our key competitive strengths include the following:
Strong Market Positions. We are one of the world's largest independent
suppliers of components, modules and systems for light, medium and heavy duty
vehicle manufacturers and the related aftermarkets. Our products, which are
focused on under-the-vehicle and under-the-hood applications, are used in SUVs
and other light vehicles by automotive customers such as Ford, DaimlerChrysler,
and General Motors; in medium and heavy commercial vehicles by customers such as
Renault/Mack Trucks, PACCAR, and Navistar; and in a variety of off-highway
vehicles and equipment by customers such as Deere, Textron, and Manitou. We
supply service and replacement parts to these markets through OE service
organizations and independent aftermarket channels.
Global Presence. We have more than 270 manufacturing facilities, 90
distribution facilities, and 65 research centers, service branches and offices
which are located in 34 countries around the world. We maintain administrative
organizations in North America, Europe, South America and Asia/Pacific which
support the SBUs. In 2000, non-U.S. sales represented 31% of our total
consolidated sales. Our global presence gives us proximity to our customers and
enables us to provide marketing and manufacturing support, meet just-in-time
delivery requirements, and provide engineering solutions around the clock
through our Virtual Time Engineering(TM) program.
Recognized Brand Names. We believe that our OE and aftermarket customers
alike recognize our branded products for quality and reliability. Among our most
significant trademarked products are:
- Spicer(R) axles, transaxles, driveshafts, steering shafts, and universal
joints;
- Victor Reinz(R) gaskets;
- Boston(R) and Everflex(R) hose;
- Weatherhead(R) hose and fittings;
- Wix(R) filters;
- Perfect Circle(R) piston rings and cylinder liners;
- FTE(R) clutch and brake actuation systems; and
- Glacier Vandervell(TM) bearings.
Innovative, Value-Added Products. Since our founder Clarence Spicer
designed the first automotive universal joint, we have been dedicated to the
rapid development of new, value-added products. By continually broadening and
enhancing our product offerings, we are able to attract new customers and to
strengthen and expand our existing customer relationships. Recent new products
include temperature-responsive cooling systems with electronic sensors, fluid
steering systems with electronic interfaces, innovative materials that make
components both lighter and stronger, and new traction control products that
improve on-demand, all-wheel drive performance for vehicles, such as our TXT(TM)
torque-management differential. We are also engaged in fuel cell engineering for
alternate-energy systems.
45
OUR BUSINESS STRATEGY
Our overall strategic direction is set out in our Transformation 2005
business plan. Our goals under this plan represent an increased emphasis on
anticipating the needs of our markets and serving our customers. The following
are key elements of our plan:
Focus and Expand Foundation Businesses. We believe that our foundation
businesses are the key to the long-term profitable growth of our company. These
businesses have leading market positions and brand equity and provide our
customers with value-added solutions and products. We are accelerating the
alignment of these businesses with the markets they serve. As our OE customers
target improved asset utilization, speed to market, lower cost, lower investment
risk, and greater flexibility, they increasingly look for outsourcing
alternatives. We expect that our global presence and technological and
engineering capabilities, as well as our experience, scale of operations and
long-standing relationships with major OE customers, will enable us to continue
to take advantage of this opportunity. We have been awarded net new business
that is projected, based on our customers' production estimates, to add
approximately $5.9 billion in total revenues from 2001 through 2005. We are
encouraged by the new awards, especially since these sales amounts include
business not only with our traditional North American OE customers, but also
with OEs based outside the United States.
Focus on Capital and Operating Efficiency. We continue to focus on
opportunities to optimize our resources and reduce manufacturing costs. We have
undertaken initiatives to maximize our return on invested capital and to improve
cash flow. For example, rather than investing in single-purpose facilities in
emerging markets, we are working to develop operations that manufacture a
broader range of like products for multiple vehicular market segments. Strategic
alliances have also helped to provide technical capability, while limiting our
investment requirements. On the operational side, we are focused on reducing
working capital, managing for cash and reducing waste.
Evaluate Strategic Alliances, Joint Ventures and Selected Acquisition
Opportunities. Among the keys to our business model is the concept of
capitalizing on strategic alliances and joint ventures. Such relationships offer
opportunities to expand our capabilities with a reduced level of investment and
enhance our ability to provide the full scope of services required by our
customers. We have formed a number of innovative alliances, starting with our
Roadranger(TM) marketing program with Eaton, which has been highly successful in
leveraging our collective strengths to market Dana and Eaton products for heavy
truck drivetrain systems. We also have strategic alliances with GETRAG, to
strengthen our portfolio of advanced axle technologies; Motorola, to integrate
its electronic expertise into the development of advanced technology for
traditionally mechanical components; and Buhler, to provide advanced automotive
motor-module technologies and manufacturing expertise to support our product
applications. We continue to evaluate potential strategic alliances and joint
ventures in order to gain access to advanced technology, strengthen our market
position and our global presence and reduce our overall manufacturing costs.
We also evaluate potential acquisition candidates that have product
platforms complementary to our foundation businesses, strong operating potential
and strong existing management teams. We have substantial experience in
completing and integrating acquisitions that have provided us with opportunities
to reduce costs and improve operational efficiency through synergies in
manufacturing processes, coordination of raw material purchases, rationalization
of administrative staff, and technical capabilities. We also evaluate our
current businesses that we may characterize as non-core and which we may choose
to divest.
46
PRODUCTS, PATENTS AND TRADEMARKS
The following table presents our sales in 2000 by foundation business, net
of intercompany sales:
PERCENTAGE
AMOUNT OF
OF CONSOLIDATED
FOUNDATION BUSINESS SALES SALES
------------------- ------------- ------------
(IN MILLIONS)
Axles....................................................... $ 4,023 33%
Driveshafts................................................. 1,151 9
Brake & chassis products.................................... 1,100 9
Fluid systems............................................... 956 8
Bearings and sealing products............................... 845 7
Structures.................................................. 811 7
Filtration products......................................... 594 5
Other....................................................... 2,837 22
------- ---
$12,317 100%
======= ===
We do not consider our leasing service revenue to be sales.
Throughout these product lines, we manufacture and sell our products under
a number of patents which have been obtained over a period of years and expire
at various times. We consider each of them to be of value and aggressively
protect our rights throughout the world against infringement. Because we are
involved with many product lines, the loss or expiration of any particular
patent would not materially affect our sales and profits.
We own or have licensed numerous trademarks which are registered in many
countries, enabling us to market our products worldwide. Our Spicer(R) (axles,
transaxles, driveshafts, steering shafts and universal joints), Victor Reinz(R)
(gaskets), Boston(R) (hose), Everflex(R) (hose), Weatherhead(R) (hose and
fittings), Wix(R) (filters), Perfect Circle(R) (piston rings and cylinder
liners), FTE(R) (clutch and brake actuation systems), and Glacier Vandervell(TM)
(bearings) trademarks, among others, are widely recognized in their respective
industries.
RESEARCH AND DEVELOPMENT
Our objective is to offer superior quality, technologically advanced
products and systems to our customers at competitive prices. To this end, we
engage in ongoing engineering, research and development activities to improve
the reliability, performance and cost-effectiveness of existing products and to
design and develop new products for existing and new applications. Our spending
on engineering, research and development and quality control programs was $275
million in 1998, $290 million in 1999 and $287 million in 2000. Research and
development activities are concentrated in specialized research and development
centers located around the world. Many of our research and development
activities are performed on a collaborative basis with our OE customers.
CUSTOMERS
We have thousands of customers around the world and have developed
long-standing business relationships with many of them. Our attention to
quality, delivery and service has been recognized by numerous customers who have
presented us with supplier quality awards. Ford and DaimlerChrysler were the
only individual customers accounting for more than 10% of our consolidated sales
in 2000. We have been supplying products to these companies and their
subsidiaries for many years. In 1998, 1999 and 2000, sales to Ford, as a
percentage of total sales, were 15%, 16% and 19%, respectively, and sales to
DaimlerChrysler were 13%, 14% and 14%, respectively.
47
GEOGRAPHICAL AREAS
We maintain administrative organizations in four regions -- North America,
Europe, South America and Asia/Pacific -- to facilitate financial and statutory
reporting and tax compliance on a worldwide basis and to support the SBUs.
Our operations are located in the following countries (shown by the regions
in which we administer them):
NORTH AMERICA EUROPE SOUTH AMERICA ASIA/PACIFIC
------------- --------------------------- ------------- ------------
Canada Austria Poland Argentina Australia
Mexico Belgium Russia Brazil China
United States France Slovakia Colombia Indonesia
Germany Spain South Africa Japan
Hungary Sweden Uruguay Singapore
India Switzerland Venezuela South Korea
Ireland Turkey Taiwan
Italy United Kingdom Thailand
Netherlands
Our non-U.S. subsidiaries and affiliates manufacture and sell a number of
products similar to those produced in the U.S. Consolidated non-U.S. sales were
$3.8 billion, or 31% of our 2000 sales. Including U.S. exports of $832 million,
non-U.S. sales accounted for 37% of 2000 consolidated sales. Non-U.S. net income
was $117 million, or 35% of consolidated 2000 net income. In addition, there was
$32 million of equity in earnings of non-U.S. affiliates in 2000.
PROPERTIES
As shown in the following table, at December 31, 2000, we had more than 450
manufacturing, distribution and service branch or office facilities worldwide.
We own the majority of our manufacturing and larger distribution facilities. We
lease certain manufacturing facilities and most of our smaller distribution
outlets and financial service branches and offices.
FACILITIES BY GEOGRAPHIC REGION
(AS OF DECEMBER 31, 2000)
NORTH SOUTH ASIA/
TYPE OF FACILITY AMERICA EUROPE AMERICA PACIFIC TOTAL
---------------- ------- ------ ------- ------- -----
Manufacturing........................................ 166 70 39 11 286
Distribution......................................... 42 17 39 3 101
Service branches, offices............................ 51 12 5 4 72
--- -- -- -- ---
Total........................................... 259 99 83 18 459
=== == == == ===
In addition to over 20 facilities closed in the first nine months of 2001,
on October 17 we announced our intention to accelerate the restructuring of our
operations and, in connection therewith, are reviewing more than 30 facilities
for consolidation or closure.
MATERIAL SOURCE AND SUPPLY
Most raw materials (such as steel) and semi-processed or finished items
(such as forgings and castings) are purchased from long-term suppliers located
within the geographic regions of our operating units. Generally, these materials
are available from numerous qualified sources in quantities sufficient for our
needs.
48
Temporary shortages of a particular material or part occasionally occur, but we
do not consider the overall availability of materials to be a significant risk
factor for our operations.
SEASONALITY
Our businesses are not highly seasonal. However, sales to our OEM customers
are closely related to the production schedules of those manufacturers and
historically these schedules have been strongest in the first two quarters of
each year.
BACKLOG
Generally, our products are not on a backlog status. They are produced from
readily available materials and have a relatively short manufacturing cycle.
Each operating unit maintains its own inventories and production schedules and
many of our products are available from more than one facility. Our production
capacity is adequate to handle current requirements and we regularly review
anticipated changes in our product lines to determine when modifications of
capacity may be needed.
COMPETITION
We compete worldwide with a number of other manufacturers and distributors
which produce and sell similar products. These competitors include Visteon and
Delphi Automotive Systems Corp., large parts manufacturers that previously were
vertically-integrated units of Ford and General Motors, two of our OE customers,
and a number of other U.S. and non-U.S. suppliers. Our traditional U.S. OE
customers, facing substantial foreign competition, have expanded their worldwide
sourcing of components to better compete with lower cost imports. In addition,
these customers have been shifting research and development, design and
validation responsibilities to their key suppliers, focusing on stronger
relationships with fewer suppliers. We have established operations throughout
the world to enable us to meet these competitive challenges and to be a strong
global supplier of our core products.
EMPLOYMENT
Our worldwide employment (including consolidated subsidiaries) is currently
approximately 72,000. We believe that our relations with our employees are good.
ENVIRONMENTAL COMPLIANCE
We make capital expenditures in the normal course of business as necessary
to ensure that our facilities are in compliance with applicable environmental
laws and regulations. The cost of environmental compliance was not a material
part of our capital expenditures and did not have a material adverse effect on
our earnings or competitive position in 2000. We do not anticipate that future
environmental compliance costs will be material.
ACQUISITION AND DIVESTITURE SUMMARY
We completed several divestitures in 2000. The divested operations included
Gresen Hydraulics and portions of our constant velocity joint business in
January, most of Warner Electric in February and Commercial Vehicle Cab Systems
in March. A number of strategic acquisitions and investments also closed in
2000, including the cardan driveshaft business of GKN plc in January, the
automotive axle manufacturing and stamping operations of Invensys plc in July
and equity interests in GETRAG, a manufacturer of transmissions, transaxles,
axles and other automotive components operating in Europe and North America in
November. We also continued integrating AAG warehouse operations obtained as
part of the Echlin merger.
In the first quarter of 2001, AAG sold Mr. Gasket, Inc., a wholly-owned
subsidiary that distributed performance replacement parts.
In the second quarter of 2001, we divested three operations, including our
Marion, Ohio forging facility and the assets of our Dallas, Texas and
Washington, Missouri FSG operations.
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In the third quarter of 2001, we completed the sale of our Chelsea power
take-off business to Parker Hannifin Corporation and the sale of our Glacier
industrial polymer bearings businesses to Goodrich Corporation.
LEGAL PROCEEDINGS
We are a party to various pending judicial and administrative proceedings
arising in the ordinary course of business. After reviewing the proceedings that
are currently pending (including the probable outcomes, reasonably anticipated
costs and expenses, availability and limits of our insurance coverage, and our
established reserves for uninsured liabilities), we do not believe that any
liabilities that may result from these proceedings are reasonably likely to have
a material adverse effect on our liquidity, financial condition or results of
operations.
We are not currently a party to any of the environmental proceedings
involving governmental agencies which the SEC requires companies to report.
50
MANAGEMENT
The following table sets forth the name, age and position of each of our
directors and executive officers. Our directors are elected by the shareholders
at our annual meeting and serve until the next annual meeting and the election
and qualification of their successors. Certain of our officers are designated in
our by-laws to be elected by the Board annually at its first meeting after the
annual shareholders meeting and others are appointed by the Board from time to
time. The first five persons listed in the table are the members of our Policy
Committee, which is responsible for our corporate strategies and partnership
relations, as well as the development of our people, policies and philosophies.
NAME AGE TITLE
---- --- -----
Joseph M. Magliochetti............... 59 Chairman of the Board, Chief Executive Officer,
President and Chief Operating Officer
Robert C. Richter.................... 50 Vice President and Chief Financial Officer
William J. Carroll................... 57 President -- Automotive Systems Group
Marvin A. Franklin, III.............. 53 President -- Dana International & Global Initiatives
Edward J. Shultz..................... 57 Chairman and President -- Dana Credit Corporation
Richard L. Clayton................... 41 President -- Commercial Vehicle Systems
Bernard N. Cole...................... 59 President -- Off-Highway Systems Group
Michael L. DeBacker.................. 54 Vice President, General Counsel and Secretary
Rodney R. Filcek..................... 48 Vice President -- Finance
Charles F. Heine..................... 49 President -- Technology Development and Diversified
Products
Charles W. Hinde..................... 63 Vice President, Chief Accounting Officer and Assistant
Treasurer
James M. Laisure..................... 49 President -- Engine and Fluid Management Group
Terry R. McCormack................... 51 President -- Automotive Aftermarket Group
J. Ismael Melgar..................... 54 President -- Traction Technologies Group
Kevin P. Moyer....................... 44 Vice President and Director of e-Business
Benjamin F. Bailar................... 67 Director
A. Charles Baillie................... 62 Director
Edmund M. Carpenter.................. 60 Director
Eric Clark........................... 67 Director
Glen H. Hiner........................ 67 Director
Marilyn R. Marks..................... 49 Director
Richard B. Priory.................... 55 Director
Fernando M. Senderos................. 51 Director
Joseph M. Magliochetti has been Chairman of the Board since 2000, Chief
Executive Officer since 1999, President since 1996, Chief Operating Officer
since 1997 and a director since 1996. He is also a director of BellSouth
Corporation and CIGNA Corporation.
Robert C. Richter has been Vice President and Chief Financial Officer since
1999. He was previously Vice President -- Finance and Administration, 1998-99;
Vice President -- Administration, 1997-98; General Manager -- Perfect Circle
Sealed Power Europe, 1997; and Vice President and General Manager -- Perfect
Circle Europe, 1994-97.
William J. Carroll has been President -- Automotive Systems Group and
Chairman of DTF Trucking, Inc. since 1997. He was previously
President -- Diversified Products & Distribution, 1996-97; President -- Dana
Distribution Service Group, 1995-97; President -- DTF Trucking, 1985-97;
Chairman of the Board of Dana Canada Inc. (a Dana subsidiary in Canada),
1995-97, and President, 1993-97.
51
Marvin A. Franklin, III has been President -- Dana International & Global
Initiatives since 2000. He was previously President -- Dana International,
1997-2000, and President -- Dana Europe, 1993-97.
Edward J. Shultz has been Chairman of Dana Credit Corporation since 1986
and President since 1995. He has been Chairman and Chief Executive Officer of
Dana Commercial Credit Corporation (a DCC subsidiary) since 1986.
Richard L. Clayton has been President -- Commercial Vehicle Systems since
1998. He was previously Vice President -- Heavy Truck Components Group, 1997-98;
Vice President and General Manager -- Spicer Heavy Axle & Brake Division,
1996-97; and General Manager -- Spicer Clutch Division, 1995-96.
Bernard N. Cole has been President -- Off-Highway Systems Group since 1997
and Chairman of Dana India Pvt. Ltd. since 2001. He was previously
President -- Structural Components Group, 1995-97.
Michael L. DeBacker has been Vice President, General Counsel and Secretary
since 2001. He was previously Vice President, 1994-2001, and Assistant General
Counsel, 1986-2001.
Rodney R. Filcek has been Vice President -- Finance since 1999. He was
previously Executive Vice President and Chief Financial Officer of Dana Credit
Corporation, 1995-99.
Charles F. Heine has been President -- Technology Development and
Diversified Products since November 2001. He was previously President -- Engine
Systems Group, 1998-2001; and President -- Dana Asia/Pacific, 1996-98.
Charles W. Hinde has been Vice President and Chief Accounting Officer since
1992 and Assistant Treasurer since 1986.
James M. Laisure has been President -- Engine and Fluid Management Group
since November 2001. He was previously President -- Fluid Systems Group,
2000-01; Group Vice President -- Fluid Systems Group, 1999-2000; Vice
President -- Modules and Systems Group, 1996-99; and Group Vice President --
Heavy Truck Group, 1994-96.
Terry R. McCormack has been President -- Automotive Aftermarket Group since
2000. He was previously President of Wix Worldwide Filtration, 2000; Vice
President and General Manager -- Wix Division -- North America, 1998-2000; and
Vice President -- Distribution Services Division, 1996-98, and General Manager,
1995-98.
J. Ismael Melgar has been President -- Traction Technologies Group since
2000. He was previously Vice President -- Automotive Axle Products, 2000; Vice
President -- Driveshaft Products, 1997-2000; Vice President -- Ancom Operations
(Colombia and Venezuela), 1995-97; and Executive President, Metalcon C.A. (now
C.A. Danaven, a Dana subsidiary in Venezuela), 1993-97.
Kevin P. Moyer has been Vice President and Director of e-Business since
2000. He was previously President of Dana Asia/Pacific, 1998-2000, and President
of Capital Group, Dana Credit Corporation, 1995-98.
Benjamin F. Bailar has been a director since 1980. He has been Dean and
Professor of Administration Emeritus, Jesse H. Jones Graduate School of
Administration, Rice University, since 1997, and was Dean and Professor of
Administration from 1987-97. He is also a director of Smith International, Inc.
and Trico Marine Services, Inc.
A. Charles Baillie has been a director since 1998. He has been Chairman and
Chief Executive Officer of The Toronto-Dominion Bank since 1997 and President of
Toronto-Dominion since 1995.
Edmund M. Carpenter has been a director since 1991. He has been President
and Chief Executive Officer of the Barnes Group (a diversified international
company that serves a range of industrial and transportation markets) since
1998. He was previously Senior Managing Director of Clayton, Dubilier & Rice (a
private equity firm specializing in management buyouts) from 1996 to 1998. He is
also a director of Campbell Soup Company.
52
Eric Clark has been a director since 1994 and was a member of the Dana
Europe Advisory Board from 1991 to 1999. He was Director of BICC plc (a United
Kingdom company serving the international market for infrastructure
development), 1985-96, and Chairman and Managing Director of BICC Cables
Limited, 1986-96.
Glen H. Hiner has been a director since 1993. He has been Chairman and
Chief Executive Officer of Owens Corning (a manufacturer of advanced glass and
composite materials) since 1992. In October 2000, Owens Corning filed a
voluntary petition for relief under Chapter 11 of the Bankruptcy Code. He is
also a director of Prudential Financial Inc. and Kohler Company.
Marilyn R. Marks has been a director since 1994. She was Chairman of the
Board of Dorsey Trailers, Inc. (a manufacturer of truck trailers) from 1987 to
2000 and Chief Executive Officer of Dorsey from 1987 to 1999. She was Chairman
and Chief Executive Officer of TruckBay.com, Inc. (an internet source for goods
and services serving the trucking industry) from December 1999 to December 2000.
In December 2000, Dorsey Trailers, Inc. filed a voluntary petition for relief
under Chapter 11 of the Bankruptcy Code. She is also a director of the Eastman
Chemical Company.
Richard B. Priory has been a director since 1996. He has been Chairman,
President and Chief Executive Officer of Duke Energy Corporation (a supplier of
energy and related services) since 1997. He was previously President and Chief
Operating Officer of Duke Power Company, from 1994 to 1997. He is also a
director of U.S. Airways, Inc. and Duke Fluor Daniel Company.
Fernando M. Senderos has been a director since 2000. He has been Chairman
of the Board and Chief Executive Officer of DESC, S.A. de C.V. (a Mexican
diversified holding company engaged in the auto parts, chemical, food and real
estate businesses) since 1989. He has also been Chairman of the Board of the
following wholly-owned subsidiaries of DESC: Unik, S.A. de C.V. (Unik) since
1991, Girsa, S.A. de C.V. since 1989, and Dine, S.A. de C.V. since 1981. He is
also a director of Industrias Penoles, S.A. de C.V. (a Mexican natural resources
industrial group), Televisa, S.A. de C.V. (a Spanish language entertainment
business), Telefonos de Mexico, S.A. de C.V. (a business providing telephone and
internet access services throughout Mexico), Kimberly Clark de Mexico, S.A. de
C.V. (a manufacturer and distributor of consumer, industrial, and institutional
hygiene products), and Alfa, S.A. de C.V. (which, through subsidiaries, operates
petrochemical, steel, synthetic fiber, food, auto parts, and telecommunications
businesses). Unik owns a majority interest in Spicer S.A. de C.V., a Dana
affiliate in Mexico.
53
DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR NOTES
At September 30, 2001, Dana Corporation had issued and there were
outstanding notes in aggregate principal amount of $2,092 million, consisting of
the following series, collectively (other than the 9% Notes due 2011) referred
to as the "Prior Notes":
- 9% Notes due 2011, in aggregate principal amount of $575 million;
- 9% Notes due 2011, in aggregate principal amount of E200 million;
- 6.25% Notes due 2004, in aggregate principal amount of $250 million;
- 6.50% Notes due 2009, in aggregate principal amount of $350 million;
- 6.50% Notes due 2008, in aggregate principal amount of $150 million;
- 7.00% Notes due 2028, in aggregate principal amount of $197 million; and
- 7.00% Notes due 2029, in aggregate principal amount of $375 million.
The Prior Notes were issued pursuant to an indenture dated as of December
15, 1997, between Dana and Citibank, N.A. as Trustee and a First Supplemental
Indenture and a Second Supplemental Indenture dated as of March 11, 1998 and
February 26, 1999, respectively. This indenture and its supplements are referred
to as the "Prior Notes Indenture."
All series of the Prior Notes are unsecured and are ranked pari passu with
one another and with all of our other unsecured and unsubordinated indebtedness,
including the notes. The Prior Notes do not have the benefit of a sinking fund.
We may redeem the Prior Notes pursuant to the Prior Notes Indenture in whole or
in part at any time prior to their maturity under a make-whole provision, with
30 days' notice to the holders thereof.
There are covenants in the Prior Notes Indenture which prohibit us from
engaging in:
- the incurrence or guarantee of debt secured by real property of value in
excess of 2% of our consolidated net tangible assets; and
- certain sale and leaseback transactions of a term longer than three
years.
The foregoing summary of the material provisions of the Prior Notes
Indenture is qualified in its entirety by reference to all the provisions of the
Prior Notes Indenture, which has been filed with the SEC. See "Where You Can
Find More Information."
ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM
In March 2001, we established a $400 million accounts receivable
securitization program which has a term expiring in 2006. Under the program, we
and certain of our subsidiaries either sell or contribute certain accounts
receivable to Dana Asset Funding LLC (DAF), a special purpose entity. DAF funds
its accounts receivable purchases in part by pledging a portion of the
receivables as collateral for short-term loans from participating banks. At
September 30, 2001, DAF had borrowed $320 million under the program and used the
proceeds to fund the purchase of accounts receivable. We used the sale proceeds
received from DAF to reduce other debt.
We own, directly or indirectly, virtually all of the equity interests in
DAF. The securitized accounts receivable are owned in their entirety by DAF and
are not available to satisfy claims of our creditors. However, we are entitled
to any dividends paid by DAF and would be entitled to proceeds from the
liquidation of DAF's assets upon the termination of the securitization program
and the dissolution of DAF. DAF's receivables are included in our consolidated
financial statements solely because DAF does not meet certain technical
accounting requirements for treatment as a "qualifying special purpose entity"
under GAAP. Accordingly, the
54
sales and contributions of the accounts receivable are eliminated in
consolidation and the loans to DAF are reflected as short-term borrowings in our
consolidated financial statements.
Although we are entitled to any dividends paid by DAF, our agreements with
the banks and receivables investors prevent DAF from declaring or making any
distributions of assets or cash. The accounts receivable securitization program
is subject to certain events of termination, including events of termination
based upon tests with respect to our credit rating and the quality of our
receivables.
SHORT-TERM BANK LOANS
As of September 30, 2001, we had an aggregate principal amount of $28
million outstanding under short-term bank loans, pursuant to loan agreements
with three banks dated variously from November 2, 2000 through May 24, 2001.
These loans matured and were paid in October 2001.
MEDIUM-TERM BANK LOANS
As of September 30, 2001, we had an aggregate principal amount of $210
million outstanding under medium-term bank loans (the Medium-Term Loans),
pursuant to loan agreements with nine banks (the Medium-Term Lenders) dated
variously from November 18, 1996 through January 23, 1997. $50 million of these
loans matured and were paid in October and November of 2001. The remaining $160
million of the Medium-Term Loans matures in January 2002.
The Medium-Term Loans are unsecured and are ranked pari passu with each
other and with all of our other unsecured and unsubordinated debt. The
outstanding Medium-Term Loans had a weighted average interest rate as of
December 7, 2001 of 6.978%.
The Medium-Term Loan agreements subject us and certain of our subsidiaries
to certain customary non-financial covenants. In addition, any acquisition of
beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the
Exchange Act) of 20% or more of our common stock by any person(s) may be treated
as an event of default under the Medium-Term Loans.
REVOLVING CREDIT FACILITIES
As of September 30, 2001, Dana Corporation had two revolving credit
facilities (the Revolver Facilities) with an aggregate maximum borrowing
capacity of $1 billion: a 364-day facility maturing on December 20, 2001, and a
long-term facility maturing on November 15, 2005 (the long-term facility). Each
facility had a maximum borrowing capacity of $500 million, and Citibank, N.A.
was the administrative agent, on behalf of itself and 17 other banks (the
Revolver Lenders), for both.
On December 19, 2001, we entered into a new 364-day facility (the 364-day
facility) with the Revolver Lenders and amended the long-term facility. The
364-day facility has a maximum borrowing capacity of $250 million and a maturity
date of December 18, 2002. However, if there is a "Liquidity Event" (that is, if
we have not received net cash proceeds of at least $200 million on or before
April 1, 2002, from either the sale of assets or the issuance of debt in the
capital markets or equity), each participating bank has the option to terminate
its commitment on April 30, 2002. In addition, the maximum borrowing capacity of
the 364-day facility will be reduced by an amount equal to 50% of any net cash
proceeds in excess of $200 million received from our sale of assets or issuance
of debt or equity. Neither the borrowing capacity nor the maturity date of the
long-term facility were changed. Citibank, N.A. continues to be the
administrative agent, on behalf of itself and the other banks, for both
facilities.
Advances under the Revolver Facilities may be made as revolving credit
advances. The interest rates payable upon advances are based on floating
reference rates, either Citibank's base rate or LIBOR, plus a margin based upon
our then-current credit ratings.
Our obligations to the lenders under the Revolver Facilities are currently
unsecured. However, if a Liquidity Event occurs, there are provisions in both
Facilities that require the granting of security interests in
55
our inventory and accounts receivable and the issuance of guarantees by certain
of our subsidiaries, subject to the restrictions set forth in our other debt
facilities.
Both Revolver Facilities require us to maintain financial ratios at fiscal
quarter ends of:
- net senior debt to tangible net worth of not more than: 1.70:1 as of
December 31, 2001, March 31, 2002 and June 30, 2002; 1.40:1 as of
September 30, 2002 and December 31, 2002; and 1.10:1 thereafter;
- EBITDA minus capital expenditures to interest expense of not less than:
1.30:1 as of December 31, 2001 and March 31, 2002; 1.40:1 as of June 30,
2002 and September 30, 2002; and 2.50:1 as of December 31, 2002 and
thereafter; and
- net senior debt to EBITDA of not greater than: 5.00:1 as of December 31,
2001; 4.85:1 as of March 31, 2002; 4.70:1 as of June 30, 2002; 3.75:1 as
of September 30, 2002; 3:00:1 as of December 31, 2002; and 2.50:1 as of
March 31, 2003 and thereafter.
For purposes of these ratios, EBITDA means net income or net loss, plus the sum
of (a) interest expense, (b) income tax expense, (c) depreciation expense, (d)
amortization expense, (e) non-recurring non-cash charges and (f) pre-tax cash
restructuring expenses in an amount up to $500 million from October 1, 2001 and
before March 31, 2003, minus (x) non-cash non-recurring gains, (y) minority
interest in net income of consolidated subsidiaries and (z) equity in earnings
of affiliates, in each case as determined in accordance with GAAP. For purposes
of these ratios, Dana's investment in DCC is accounted for on the equity method
of accounting.
The facilities also subject us and certain of our subsidiaries to various
customary non-financial covenants. In addition, any acquisition of beneficial
ownership (within the meaning of Rule 13d-3 of the SEC under the Exchange Act)
of 20% or more of our common stock by any person(s) may be treated as an event
of default.
As of December 19, 2001, no amount was outstanding under the new 364-day
facility, and $315 million was outstanding under the long-term facility.
DCC OPERATING AGREEMENT
Dana and DCC are parties to an operating agreement (the Operating
Agreement) pursuant to which Dana has agreed, so long as any debt of DCC is
outstanding, to maintain DCC's fixed charge coverage ratio, debt to capital
ratio, ownership and consolidated net worth at certain levels.
DCC MEDIUM-TERM BANK/INSURANCE COMPANY LOANS
As of September 30, 2001, DCC had an aggregate principal amount of $472
million outstanding under medium-term bank loan agreements with seven banks
dated variously from February 14, 1996 to November 6, 2000, and medium-term loan
agreements with 22 insurance companies dated variously from March 20, 1997, to
June 20, 2000 (the DCC Medium-Term Loans).
The DCC Medium-Term Loans mature as follows:
- $30 million in January, 2002;
- $10 million in February, 2002;
- $10 million in March, 2002;
- $8 million in April, 2002;
- $15 million in July, 2002; and
- $399 million from 2003 through 2007.
The DCC Medium-Term Loans are unsecured and are ranked pari passu with each
other and with all of DCC's other unsecured and unsubordinated debt. The DCC
Medium-Term Loans had a weighted average interest rate as of September 30, 2001
of 6.89%.
56
The DCC Medium-Term Loans prohibit any termination or amendment (other than
certain permitted amendments) of the Operating Agreement without the consent of
the DCC Medium-Term lenders. In addition, if the covenants set forth in the
Operating Agreement are not satisfied an event of default may occur under the
DCC Medium-Term Loans.
DCC MEDIUM-TERM NOTES
During 1999, DCC established a $500 million Medium-Term Note Program. Notes
under this program (DCC Medium-Term Notes) are offered on terms determined at
the time of issuance. As of September 30, 2001, the aggregate principal amount
outstanding was $500 million, consisting of the following:
- 7.25% Notes due December 16, 2002, in aggregate principal amount of $175
million;
- 7.95% Notes due September 15, 2003, in aggregate principal amount of $5
million;
- LIBOR based floating rate Notes due September 15, 2003, in aggregate
principal amount of $20 million;
- LIBOR based floating rate Notes due October 2, 2003, in aggregate
principal amount of $25 million; and
- 8.375% Notes due August 15, 2007, in aggregate principal amount of $275
million.
The DCC Medium-Term Notes are unsecured and are ranked pari passu with each
other and with all of DCC's other unsecured and unsubordinated indebtedness.
The DCC Medium-Term Notes contain certain customary non-financial covenants
and a negative pledge covenant. In addition, if there is a failure to comply
with any material provision of the Operating Agreement or the Operating
Agreement ceases to be in full force and effect, an event of default under the
DCC Medium-Term Notes may occur.
DCC REVOLVING CREDIT FACILITIES
DCC is the borrower under two revolving credit facilities (the DCC Revolver
Facilities). The DCC long-term facility has an aggregate maximum borrowing
capacity of $250 million, of which Bank of America, N.A. is administrative agent
on behalf of itself and 13 other banks (the DCC 5-Year Revolver Lenders). The
DCC 364-day facility has an aggregate maximum borrowing capacity of $213
million, of which Bank of America, N.A. is administrative agent on behalf of
itself and 10 other banks (the DCC 364-Day Revolver Lenders). The DCC 364-day
facility matures on June 25, 2002 and the DCC long-term facility matures on June
28, 2004.
Interest rates payable upon advances under each facility are based upon
floating reference rates, plus a margin based in part upon DCC's then-current
credit rating.
Advances under the DCC 364-day facility and the DCC long-term facility may
be made as revolving credit advances (either as base rate advances or LIBOR
based advances) or as competitive bid advances (either as fixed rate advances or
LIBOR based advances).
Obligations to the DCC 364-Day Revolver Lenders and the DCC 5-year Revolver
Lenders are unsecured and are ranked pari passu with each other and with all of
DCC's other unsecured and unsubordinated indebtedness.
As of September 30, 2001, approximately $80 million was outstanding under
the DCC 364-day facility and the weighted average interest rate was 4.14%.
As of September 30, 2001, approximately $239 million was outstanding under
the DCC long-term facility and the weighted average interest rate was 4.04%.
The DCC Revolver Facilities contain certain customary non-financial
covenants, require DCC to maintain the same financial covenants as are set forth
in the Operating Agreement, and prohibit the
57
termination or amendment (other than certain permitted amendments) of the
Operating Agreement without the consent of the lenders. In addition, any
acquisition of beneficial ownership (within the meaning of Rule 13d-3 of the SEC
under the Exchange Act) of 20% or more of Dana's common stock by any person(s)
may be treated as an event of default. The DCC 364-day facility also prohibits
dividend payments and certain other distributions with respect to DCC's capital
stock by DCC without the lenders' consent.
58
EXCHANGE OFFER
REASONS FOR THE EXCHANGE OFFER
Dana and the initial purchasers entered into a registration rights
agreement in connection with the issuance of the outstanding notes. The
registration rights agreement provides that we will take the following actions
at our expense, for the benefit of the holders of the notes:
- we will file the exchange offer registration statement, of which this
prospectus is a part. The exchange notes will have terms substantially
identical in all material respects to the outstanding notes except that
the exchange notes will not contain transfer restrictions;
- we will cause the exchange offer registration statement to be declared
effective under the Securities Act by May 8, 2002; and
- we will keep the exchange offer open for at least 20 business days, or
longer if required by applicable law, after the date on which notice of
the exchange offer is mailed to the holders.
The holder of each outstanding note surrendered in the exchange offer will
receive an exchange note having a principal amount equal to that of the
surrendered note. Interest on each exchange note will accrue from the later of
(1) the last interest payment date on which interest was paid on the outstanding
note surrendered or (2) if no interest has been paid on the outstanding note,
from August 8, 2001.
If:
- we determine that because of any change in law or in applicable
interpretations of the law by the staff of the SEC, we are not permitted
to effect an exchange offer;
- the exchange offer is not consummated by May 8, 2002; or
- the exchange offer has been completed and in the reasonable opinion of
counsel for the initial purchasers a resale registration statement must
be filed and a prospectus must be delivered by the initial purchasers in
connection with any offering or sale of registrable securities,
then we will file as promptly as practicable, but in no event more than 20 days
after so required or requested but not earlier than 90 days after the date of
issuance of the exchange notes, with the SEC, a shelf registration statement to
cover resales of transfer restricted securities by those holders who satisfy
various conditions relating to the provision of information in connection with
the shelf registration statement.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all outstanding notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the expiration date of the exchange offer. We will issue (a) $1,000 principal
amount of exchange notes in exchange for each $1,000 principal amount of
outstanding notes accepted in the exchange offer and (b) E1,000 principal amount
of exchange notes in exchange for each E1,000 principal amount of outstanding
notes accepted in the exchange offer. Any holder may tender some or all of its
outstanding notes pursuant to the exchange offer. However, outstanding notes may
be tendered only in integral multiples of $1,000 or E1,000, as the case may be.
The form and terms of the exchange notes will be the same as the form and
terms of the outstanding notes except that:
(1) the exchange notes will have been registered under the Securities
Act and hence will not bear legends restricting their transfer; and
(2) the holders of the exchange notes will not be entitled to certain
rights under the registration rights agreement, including the provisions
providing for an increase in the interest rate on the outstanding notes in
certain circumstances relating to the timing of the exchange offer, all of
which rights will terminate when the exchange offer is terminated.
59
The exchange notes will evidence the same debt as the outstanding notes and
will be entitled to the benefits of the indenture.
The exchange offer is not conditioned on any minimum aggregate principal
amount of outstanding notes being tendered for exchange.
As of the date of this prospectus, $575 million and E200 million aggregate
principal amount of the outstanding notes were outstanding. We have fixed the
close of business on January 15, 2002 as the record date for the exchange offer
for purposes of determining the persons to whom this prospectus and the letter
of transmittal will be mailed initially.
Holders of outstanding notes do not have any appraisal or dissenters'
rights under the Virginia Stock Corporation Act or the indenture in connection
with the exchange offer. We intend to conduct the exchange offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the SEC.
We will be deemed to have accepted validly tendered outstanding notes when,
as and if we have given oral or written notice of our acceptance to the exchange
agent. The exchange agent will act as agent for the tendering holders for the
purpose of receiving the exchange notes from us.
If any tendered outstanding notes are not accepted for exchange because of
an invalid tender, the occurrence of specified other events set forth in this
prospectus or otherwise, the certificates for such unaccepted outstanding notes
will be returned, without expense, to the tendering holder as promptly as
practicable after the expiration date of the exchange offer.
Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes pursuant to the exchange offer. We will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the exchange offer. See "-- Fees and Expenses" and "-- Transfer Taxes."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" will mean 5:00 p.m., New York City time, on
February 20, 2002, unless we, in our sole discretion, extend the exchange offer,
in which case the term will mean the latest date and time to which the exchange
offer is extended.
In order to extend the exchange offer, we will notify the exchange agent
orally, confirmed in writing, or in writing, of any extension. We will notify
the registered holders of outstanding notes by public announcement of the
extension no later than 9:00 a.m., New York City time, on the business day after
the previously scheduled expiration of the exchange offer.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we will have no obligation to publish, advertise, or
otherwise communicate any public announcement, other than by making a timely
release to a financial news service.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from their date of issuance. Holders
of outstanding notes that are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date of issuance of the
exchange notes. Such interest will be paid with the first interest payment on
the exchange notes on August 15, 2002. Interest on the outstanding notes
accepted for exchange will cease to accrue upon issuance of the exchange notes.
Interest on the exchange notes will be payable semi-annually on each
February 15 and August 15, commencing on August 15, 2002. For more information
regarding the terms of the exchange notes, see "Description of the Notes."
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PROCEDURES FOR TENDERING
We have forwarded to you, along with this prospectus, a letter of
transmittal relating to the exchange offer. Because all of the outstanding notes
are held in book-entry accounts maintained by the exchange agent at DTC,
Euroclear or Clearstream, a holder need not submit a letter of transmittal if
the holder tenders outstanding notes in accordance with the procedures mandated
by DTC's Automated Tender Offer Program (ATOP) or by Euroclear or Clearstream,
as the case may be. To tender outstanding notes without submitting a letter of
transmittal, the electronic instructions sent to DTC, Euroclear or Clearstream
and transmitted to the exchange agent must contain your acknowledgment of
receipt of and your agreement to be bound by and to make all of the
representations contained in the letter of transmittal. In all other cases, a
letter of transmittal must be manually executed and delivered as described in
this prospectus.
Only a holder of record may tender outstanding notes in the exchange offer.
To tender in the exchange offer, a holder must comply with the procedures of DTC
or Euroclear or Clearstream, as applicable, and either:
- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal; have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires; and deliver the
letter of transmittal or facsimile to the exchange agent prior to the
expiration date; or
- in lieu of delivering a letter of transmittal, instruct DTC or Euroclear
or Clearstream, as the case may be, to transmit on behalf of the holder a
computer-generated message to the exchange agent in which the holder of
the outstanding notes acknowledges and agrees to be bound by the terms of
the letter of transmittal, which computer-generated message must be
received by the exchange agent prior to 5:00 p.m., New York City time, on
the expiration date.
In addition, either:
- the exchange agent must receive the outstanding notes along with the
letter of transmittal; or
- with respect to the outstanding dollar notes, the exchange agent must
receive, before expiration of the exchange offer, timely confirmation of
book-entry transfer of the outstanding dollar notes into the exchange
agent's account at DTC, according to the procedure for book-entry
transfer described below; or
- with respect to the outstanding euro notes, the exchange agent must
receive, before the expiration date, timely confirmation from Euroclear
or Clearstream that the securities account to which the outstanding euro
notes are credited has been blocked from and including the day on which
the confirmation is delivered to the exchange agent and that no transfers
will be effected in relation to such outstanding euro notes at any time
after such date; or
- the holder of dollar notes must comply with the guaranteed delivery
procedures described below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at the
address set forth below under the caption "-- Exchange Agent" before expiration
of the exchange offer. To receive confirmation of valid tender of outstanding
notes, a holder should contact the exchange agent at the telephone number listed
under the caption "-- Exchange Agent."
The tender by a holder that is not withdrawn before expiration of the
exchange offer will constitute an agreement between that holder and us in
accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal. If a holder completing a letter of
transmittal tenders less than all of its outstanding notes, the tendering holder
should fill in the applicable box of the letter of transmittal. The amount of
outstanding notes delivered to the exchange agent will be deemed to have been
tendered unless otherwise indicated.
If the outstanding notes, the letter of transmittal or any other required
documents are physically delivered to the exchange agent, the method of delivery
is at the holder's election and risk. Rather than mail these items, we recommend
that holders use an overnight or hand delivery service. In all cases, holders
should allow
61
sufficient time to assure delivery to the exchange agent before expiration of
the exchange offer. Holders should not send the letter of transmittal or
outstanding notes to us. Holders may request their respective brokers, dealers,
commercial banks, trust companies or other nominees to effect the above
transactions for them.
Any beneficial owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct it to
tender on the owner's behalf. If the beneficial owner wishes to tender on its
own behalf, it must, prior to completing and executing the letter of transmittal
and delivering its outstanding notes, either:
- make appropriate arrangements to register ownership of the outstanding
notes in the owner's name; or
- obtain a properly completed bond power from the registered holder of
outstanding notes.
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
If the applicable letter of transmittal is signed by the record holder(s)
of the outstanding notes tendered, the signature must correspond with the
name(s) written on the face of the outstanding notes without alteration,
enlargement or any change whatsoever. If the applicable letter of transmittal is
signed by a participant in DTC or Euroclear or Clearstream, as applicable, the
signature must correspond with the name as it appears on the security position
listing as the holder of the outstanding notes.
A signature on a letter of transmittal or a notice of withdrawal must be
guaranteed by an "eligible institution." Eligible institutions include banks,
brokers, dealers, municipal securities dealers, municipal securities brokers,
government securities dealers, government securities brokers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations. The signature need not be guaranteed by an
eligible institution if the outstanding notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on the
letter of transmittal; or
- for the account of an eligible institution.
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes, the outstanding notes must be
endorsed or accompanied by a properly completed bond power. The bond power must
be signed by the registered holder as the registered holder's name appears on
the outstanding notes and an eligible institution must guarantee the signature
on the bond power.
If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, these persons should so indicate when signing. Unless we waive this
requirement, they should also submit evidence satisfactory to us of their
authority to delivery the letter of transmittal.
We will determine in our sole discretion all questions as to the validity,
form, eligibility, including time of receipt, acceptance and withdrawal of
tendered outstanding notes. Our determination will be final and binding. We
reserve the absolute right to reject any outstanding notes not properly tendered
or any outstanding notes the acceptance of which would, in the opinion of our
counsel, be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular outstanding notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties.
Unless waived, any defects or irregularities in connection with tenders of
outstanding notes must be cured within the time that we determine. Although we
intend to notify holders of defects or irregularities with respect to tenders of
outstanding notes, neither we, the exchange agent nor any other person will
incur any liability for failure to give notification. Tenders of outstanding
notes will not be deemed made until those defects or irregularities have been
cured or waived. Any outstanding notes received by the exchange agent that are
not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned to the exchange agent without cost to the
tendering holder, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.
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In all cases, we will issue dollar exchange notes for outstanding dollar
notes that we have accepted for exchange under the exchange offer only after the
exchange agent timely receives:
- outstanding dollar notes or a timely book-entry confirmation that
outstanding dollar notes have been transferred in the exchange agent's
account at DTC; and
- a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
In all cases, we will issue euro exchange notes for outstanding euro notes
that we have accepted for exchange under the exchange offer only after the
exchange agent timely receives:
- a timely confirmation from Euroclear or Clearstream that the securities
account to which the outstanding euro notes are credited has been
blocked; and
- a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
Holders should receive copies of the applicable letter of transmittal with
the prospectus. A holder may obtain additional copies of the applicable letter
of transmittal for the outstanding notes from the exchange agent at its offices
listed under the caption "-- Exchange Agent". By signing the letter of
transmittal, or causing DTC, Euroclear or Clearstream, as applicable, to
transmit an agent's message to the exchange agent, each tendering holder of
outstanding notes will represent to us that, among other things:
- any exchange notes that the holder receives will be acquired in the
ordinary course of its business;
- the holder has no arrangement or understanding with any person or entity
to participate in the distribution of the exchange notes;
- if the holder is not a broker-dealer, that it is not engaged in and does
not intend to engage in the distribution of the exchange notes;
- if the holder is a broker-dealer that will receive exchange notes for its
own account in exchange for outstanding notes that were acquired as a
result of market-making activities or other trading activities, that it
will deliver a prospectus, as required by law, in connection with any
resale of those exchange notes (see the caption "Plan of Distribution");
and
- the holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of us or, if the holder is an affiliate, it will comply
with any applicable registration and prospectus delivery requirements of
the Securities Act.
DTC BOOK-ENTRY TRANSFER
The exchange agent has established an account with respect to the
outstanding dollar notes at DTC for purposes of the exchange offer.
With respect to the outstanding dollar notes, any participant in DTC may
make book-entry delivery of outstanding dollar notes by causing DTC to transfer
the outstanding dollar notes into the exchange agent's account in accordance
with DTC's ATOP procedures for transfer.
However, the exchange for the outstanding dollar notes so tendered will
only be made after a book-entry confirmation of such book-entry transfer of the
outstanding dollar notes into the exchange agent's account, and timely receipt
by the exchange agent of an agent's message and any other documents required by
the letter of transmittal. For this purpose, "agent's message" means a message,
transmitted by DTC and received by the exchange agent and forming part of a
book-entry confirmation, which states that DTC has received an express
acknowledgment from a participant tendering outstanding dollar notes that are
the subject of the book-entry confirmation that the participant has received and
agrees to be bound by the terms of the letter of transmittal, and that we may
enforce that agreement against the participant.
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EUROCLEAR AND CLEARSTREAM PROCEDURES FOR BLOCKING INSTRUCTIONS
The registered holder of the outstanding euro notes on the records of
Euroclear or Clearstream must instruct Euroclear or Clearstream to block the
securities in the account in Euroclear or Clearstream to which such outstanding
euro notes are credited. In order for the exchange offer to be accepted, the
exchange agent must have received, prior to the expiration date, a confirmation
from Euroclear or Clearstream that the securities account of outstanding euro
notes tendered has been blocked from and including the day on which the
confirmation is delivered to the exchange agent and that no transfers will be
effected in relation to the outstanding euro notes at any time after such date.
The exchange of the outstanding euro notes so tendered will only be made after a
timely receipt by the exchange agent of an agent's message and any other
documents required by the letter of transmittal. For this purpose, "agent's
message" means a message, transmitted by Euroclear or Clearstream and received
by the exchange agent which states that Euroclear or Clearstream has received an
express acknowledgement from a participant tendering outstanding euro notes that
the participant has received and agrees to be bound by the terms of the letter
of transmittal, and that we may enforce that agreement against the participant.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their outstanding dollar notes but whose notes
are not immediately available or who cannot deliver their notes, the letter of
transmittal or any other required documents to the exchange agent or cannot
comply with the applicable procedures described above before expiration of the
exchange offer may tender if:
- the tender is made through an eligible institution;
- before expiration of the exchange offer, the exchange agent receives from
the eligible institution either a properly completed and duly executed
notice of guaranteed delivery, by facsimile transmission, mail or hand
delivery, or a properly transmitted agent's message and notice of
guaranteed delivery:
- setting forth the name and address of the holder and the registered
number(s) and the principal amount of outstanding dollar notes tendered:
- stating that the tender is being made by guaranteed delivery;
- guaranteeing that, within three New York Stock Exchange trading days
after expiration of the exchange offer, the letter of transmittal, or
facsimile thereof, together with the outstanding dollar notes or a
book-entry transfer confirmation, and any other documents required by
the letter of transmittal will be deposited by the eligible institution
with the exchange agent; and
- the exchange agent receives the properly completed and executed letter of
transmittal, or facsimile thereof, as well as all tendered outstanding
dollar notes in proper form for transfer or a book-entry transfer
confirmation, and all other documents required by the letter of
transmittal, within three New York Stock Exchange trading days after
expiration of the exchange offer.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their outstanding dollar notes according to
the guaranteed delivery procedures set forth above. The guaranteed delivery
procedures only apply to the outstanding dollar notes and do not apply to the
outstanding euro notes.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders of outstanding
notes may withdraw their tenders at any time before expiration of the exchange
offer.
For a withdrawal to be effective, the exchange agent must receive a
computer-generated notice of withdrawal transmitted by DTC, Euroclear or
Clearstream on behalf of the holder in accordance with the standard operating
procedures of DTC or Euroclear or Clearstream or a written notice of withdrawal,
which
64
may be by telegram, telex, facsimile transmission or letter, at one of the
addresses set forth below under the caption "-- Exchange Agent".
Any notice of withdrawal must:
- specify the name of the person who tendered the outstanding notes to be
withdrawn;
- identify the outstanding notes to be withdrawn, including the principal
amount of the outstanding notes to be withdrawn; and
- where certificates for outstanding notes have been transmitted, specify
the name in which the outstanding notes were registered, if different
from that of the withdrawing holder.
If certificates for outstanding notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of those
certificates, the withdrawing holder must also submit:
- the serial numbers of the particular certificates to be withdrawn; and
- a signed notice of withdrawal with signatures guaranteed by an eligible
institution, unless the withdrawing holder is an eligible institution.
If outstanding notes have been tendered pursuant to the procedure for
book-entry transfer or the blocking procedures described above, any notice of
withdrawal must specify the name and number of the account at DTC or Euroclear
or Clearstream, as applicable, to be credited with the withdrawn outstanding
notes and otherwise comply with the procedures of the facility.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of notices of withdrawal, and our determination shall
be final and binding on all parties. We will deem any outstanding notes so
withdrawn not to have been validly tendered for exchange for purposes of the
exchange offer. We will return any outstanding notes that have been tendered for
exchange but that are not exchanged for any reason to their holder without cost
to the holder. In the case of outstanding dollar notes tendered by book-entry
transfer into the exchange agent's account at DTC, according to the procedures
described above, those outstanding dollar notes will be credited to an account
maintained with DTC, for outstanding dollar notes, as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. In the
case of outstanding euro notes tendered in accordance with the blocking
procedures of Euroclear or Clearstream, the outstanding euro notes will be
returned to their holder by cancellation of the blocking instruction in
accordance with the standard operating procedures of Euroclear or Clearstream.
You may retender properly withdrawn outstanding notes by following one of the
procedures described under the caption "-- Procedures for Tendering" above at
any time on or before expiration of the exchange offer.
A holder may obtain a form of the notice of withdrawal from the exchange
agent at its offices listed under the caption "-- Exchange Agent".
CONDITIONS
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or exchange notes for, any outstanding notes,
and may terminate or amend the exchange offer as provided in this prospectus
before the acceptance of the outstanding notes, if:
(1) in our reasonable judgment, the exchange notes to be received will
not be tradeable by the holder without restriction under the Securities Act
and the Exchange Act and without material restrictions under the blue sky
or securities laws of substantially all of the states of the United States;
or
(2) any action of proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the exchange offer
which, in our sole judgment, might materially impair our ability to proceed
with the exchange offer or any material adverse development has occurred in
any existing action or proceeding with respect to us or any of our
subsidiaries; or
65
(3) any law, statute, rule, regulation or interpretation by the staff
of the SEC is proposed, adopted or enacted, which, in our sole judgment,
might materially impair our ability to proceed with the exchange offer or
materially impair the contemplated benefits of the exchange offer to us; or
(4) any governmental approval has not been obtained, which approval
we, in our sole discretion, deem necessary for the consummation of the
exchange offer as contemplated by this prospectus.
If we determine in our sole discretion that any of the conditions are not
satisfied, we may (1) refuse to accept any outstanding notes and return all
tendered outstanding notes to the tendering holders, (2) extend the exchange
offer and retain all outstanding notes tendered prior to the expiration of the
exchange offer, subject, however, to the rights of holders to withdraw the
outstanding notes (see "-- Withdrawal of Tenders") or (3) waive the unsatisfied
conditions with respect to the exchange offer and accept all properly tendered
outstanding notes which have not been withdrawn.
EXCHANGE AGENT
Citibank, N.A., London Branch, has been appointed as exchange agent for the
exchange offer. Questions and requests for assistance, requests for additional
copies of this prospectus or of the letter of transmittal and requests for
Notice of Guaranteed Delivery should be directed to the exchange agent addressed
as follows:
By Registered or Certified Mail: By Hand or Overnight Delivery:
Citibank, N.A. Citibank, N.A.
P.O. Box 18055 5 Carmelite Street
5 Carmelite Street London
London EC4Y 0PA
EC4Y 0PA United Kingdom
United Kingdom Attention: Agency and Trust
Attention: Agency and Trust -- Debt Exchanges
-- Debt Exchanges Reference: Dana Corporation
Reference: Dana Corporation
By Facsimile Transmission (for eligible institutions only):
For callers outside of the United Kingdom -- +44 20 7508 3866
For callers within the United Kingdom -- 020 7508 3866
To Confirm by Telephone or for Information Call:
For callers outside of the United Kingdom -- +44 20 7508 3867
For callers within the United Kingdom -- 020 7508 3867
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SHOWN
ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes under the exchange offer. The tendering holder, however, will
be required to pay any transfer taxes, whether imposed on the registered holder
or any other person, if:
- certificates representing outstanding notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
outstanding notes tendered;
- exchange notes are to be delivered to, or issued in the name of, any
person other than the registered holder of the outstanding notes;
- tendered outstanding notes are registered in the name of any person other
than the person signing the letter of transmittal; or
66
- a transfer tax is imposed for any reason other than the exchange of
outstanding notes under the exchange offer.
If satisfactory evidence of payment of transfer taxes is not submitted with
the letter of transmittal, the amount of any transfer taxes will be billed to
the tendering holder.
FEES AND EXPENSES
We will bear the expense of soliciting tenders. The principal solicitation
is being made by mail; however, additional solicitation may be made by
telegraph, telecopy, telephone or in person by our and our affiliates' officers
and employees.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses incurred in connection with these services.
We will pay the cash expenses to be incurred in connection with the
exchange offer. Such expenses include fees and expenses of the exchange agent
and trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
outstanding notes, which is face value, as reflected in our accounting records
on the date of the exchange. Accordingly, we will not recognize any gain or loss
for accounting purposes as a result of the exchange offer. Expenses incurred in
connection with the exchange offer will be deferred and charged to expense over
the term of the exchange notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The outstanding notes that are not exchanged for exchange notes pursuant to
the exchange offer will remain restricted securities. Accordingly, such
outstanding notes may be resold only:
(1) to us upon redemption thereof or otherwise;
(2) so long as the outstanding notes are eligible for resale pursuant
to Rule 144A under the Securities Act, to a person inside the United States
whom the seller reasonably believes is a qualified institutional buyer
within the meaning of Rule 144A in a transaction meeting the requirements
of Rule 144A, in accordance with Rule 144A, or pursuant to another
exemption from the registration requirements of the Securities Act, which
other exemption is based upon an opinion of counsel reasonably acceptable
to us;
(3) outside the United States to a foreign person in a transaction
meeting the requirements of Rule 904 under the Securities Act; or
(4) pursuant to an effective registration statement under the
Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States.
RESALE OF THE EXCHANGE NOTES
Based on existing interpretations of the Securities Act by the staff of the
SEC contained in several no-action letters to third parties, we believe that the
exchange notes will be freely transferable by holders of the notes, except as
set forth below, without further registration under the Securities Act. See
Shearman & Sterling (available July 2, 1993); Morgan Stanley & Co. Incorporated
(available June 5, 1991); and Exxon Capital Holdings Corporation (available May
13, 1989). Holders of outstanding notes, however, who are our affiliates, who
intend to participate in the exchange offer for purposes of distributing the
exchange securities, or who are broker-dealers who purchased the outstanding
notes from us for resale, will not be able to freely offer, sell or transfer the
exchange notes pursuant to this prospectus, and will need to comply with
separate
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(resale) registration and prospectus delivery requirements of the Securities Act
in connection with any offer, sale or transfer of notes.
Each holder who is eligible to and wishes to exchange its outstanding notes
for exchange notes will be required to make the following representations:
- any exchange notes to be received by the holder will be acquired in the
ordinary course of its business;
- the holder has no arrangement or understanding with any person to
participate in the distribution of the exchange notes;
- the holder is not an affiliate as defined in Rule 405 promulgated under
the Securities Act, or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act;
- if the holder is not a broker-dealer, it is not engaged in, and does not
intend to engage in, the distribution of exchange notes;
- if the holder is a broker-dealer that will receive exchange notes for its
own account in exchange for outstanding notes that were acquired as a
result of market-making activities or other trading activities (we refer
to these broker-dealers as participating broker-dealers), the holder will
deliver a prospectus in connection with any resale of the exchange notes;
and
- the holder is not acting on behalf of any person or entity that could not
truthfully make these representations.
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DESCRIPTION OF THE NOTES
GENERAL
The outstanding notes were, and the exchange notes will be, issued under an
indenture dated as of August 8, 2001 (the indenture) among Dana, Citibank, N.A.,
as trustee (the Trustee) and as registrar and a paying agent for the dollar
notes, and Citibank, N.A., London Branch, as registrar and a paying agent for
the euro notes. The outstanding notes were, and the exchange notes will be,
subject to all the terms of the indenture, and holders of notes are referred to
the indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the indenture does not purport to be complete
and is qualified in its entirety by reference to the indenture, including the
definitions therein of certain capitalized terms used below. The definitions of
certain capitalized terms used in the following summary are set forth below
under "-- Certain Definitions" or are otherwise defined in the indenture. Unless
otherwise specifically indicated, all references in this section to "Dana" are
to Dana Corporation and not to any of its subsidiaries.
Dollar Notes. The dollar notes have been issued in an aggregate principal
amount of $575 million and are only issued in denominations of $1,000 and
integral multiples of $1,000. The indenture allows Dana to issue additional
dollar notes, subject to any such additional issuance complying with the
covenant described below under the heading "-- Certain Covenants -- Limitation
on Incurrence of Indebtedness and Issuance of Preferred Stock." Any such
additional notes will be issued with the same terms as the notes offered hereby
so that such additional notes will form a single series with the dollar notes
offered hereby.
The dollar notes will mature on August 15, 2011 and bear interest at the
rate of 9% per annum. Interest is payable semiannually (to holders of record of
notes at the close of business on the February 1 or August 1 immediately
preceding the interest payment date) on February 15 and August 15 of each year,
respectively, commencing August 15, 2002 with respect to the exchange notes.
Interest is computed on the basis of a 360-day year comprised of twelve 30-day
months.
Euro Notes. The euro notes have been issued in an aggregate principal
amount of E200 million and are only issued in denominations of E1,000 and
integral multiples of E1,000. The indenture allows Dana to issue additional euro
notes, subject to any such additional issuance complying with the covenant
described below under the heading "-- Certain Covenants -- Limitation on
Incurrence of Indebtedness and Issuance of Preferred Stock." Any such additional
notes will be issued with the same terms as the notes offered hereby so that
such additional notes will form a single series with the euro notes offered
hereby.
The euro notes will mature on August 15, 2011 and bear interest at the rate
of 9% per annum. Interest is payable semiannually (to holders of record of notes
at the close of business on the February 1 or August 1 immediately preceding the
interest payment date) on February 15 and August 15 of each year, respectively,
commencing August 15, 2002 with respect to the exchange notes. Interest is
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of and premium, if any, and interest on the notes is payable, and
the notes may be presented for registration of transfer and exchange, at the
offices of agencies of Dana maintained for that purpose in each of the Borough
of Manhattan, the City of New York and Luxembourg, in the case of the dollar
notes, and in London and Luxembourg, in the case of the euro notes provided
that, at the option of Dana, payment of interest on the notes may be made by
check mailed to the address of the Person entitled thereto as it appears in the
note registers; and provided further that all payments of principal (and
premium, if any) and interest on notes, the holders of which have given wire
transfer instructions to Dana or its agent at least 10 business days prior to
the applicable payment date will be required to be made by wire transfer of
immediately available funds to the accounts specified by such holders in such
instructions. Until otherwise designated by Dana, such offices or agencies shall
be as set forth on the inside back cover of this prospectus.
The notes may only be issued in fully registered form, without coupons. No
service charge will be made for any registration of transfer or exchange of
notes, but Dana may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
The notes do not have the benefit of any sinking fund.
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RANKING
The notes are general unsecured obligations of Dana and rank pari passu in
right of payment with all existing and future unsubordinated Indebtedness of
Dana and senior in right of payment to all existing and future subordinated
Indebtedness of Dana. The notes are effectively subordinated to all secured
Indebtedness of Dana, if any. In addition, the notes are structurally
subordinated to all of the liabilities of Dana's subsidiaries. As of September
30, 2001:
- Dana had $2,441 million of total indebtedness outstanding (including the
notes), all of which ranked equally with the notes and none of which have
been secured; and
- Dana's subsidiaries had $4,089 million of liabilities, including, without
limitation, trade payables, outstanding.
OPTIONAL REDEMPTION
Make-Whole Redemption. The dollar notes and the euro notes are redeemable,
at the option of Dana, in whole at any time or in part from time to time, on at
least 30 days but not more than 60 days' prior notice mailed to the registered
address of each holder of notes to be so redeemed, at a redemption price equal
to the greater of (i) 100% of their principal amount plus accrued and unpaid
interest to the date of redemption or (ii)(a) the sum of the present values of
the remaining scheduled payments of principal and interest thereon from the date
of redemption to the date of maturity (except for currently accrued and unpaid
interest) discounted to the date of redemption, on a semiannual basis (assuming
a 360-day year consisting of twelve 30-day months), at the Treasury Rate plus 35
basis points, the case of the dollar notes, or at the Bund Rate plus 35 basis
points, in the case of the euro notes, plus, in each case, (b) accrued and
unpaid interest to the date of redemption.
Redemption for Tax Reasons. Dana may redeem the dollar notes, in whole but
not in part, and/or the euro notes, in whole but not in part, at any time at a
redemption price equal to the principal amount thereof, together with accrued
and unpaid interest to the date of redemption, if Dana shall determine, based
upon a written opinion of independent counsel selected by Dana, that as a result
of any change in or amendment to the laws (including any administrative
regulations thereunder) of the United States or of any political subdivision or
taxing authority thereof or therein affecting taxation, which amendment or
change is effective on or after the Issue Date, Dana would be required to pay
Additional Amounts on the occasion of the next payment due with respect to such
notes. No notice of redemption pursuant to this paragraph shall be given earlier
than 90 days prior to the effective date of such change or amendment and at the
time notice of such redemption is given, such obligation to pay such Additional
Amounts must remain in effect and be unavoidable by Dana's taking reasonable
measures available to it.
In the case of any redemption of less than all of the notes, the aggregate
principal amount of the notes to be redeemed may be allocated by Dana between
the dollar notes and the euro notes in Dana's sole discretion. Selection of
notes for any redemption shall be made by the Trustee under the indenture in
accordance with the rules of any securities exchange on which the notes may be
listed or if the notes are not so listed, pro rata or by lot or in such other
manner as the Trustee shall deem appropriate and fair. Notes in denominations
larger than $1,000 or E1,000 may be redeemed in part but only in integral
multiples of $1,000 or E1,000, as the case may be. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the redemption date to
each holder of notes to be redeemed at his or her registered address. On and
after the redemption date, interest will cease to accrue on notes or portions
thereof called for redemption.
ADDITIONAL AMOUNTS
All payments of principal, premium, if any, and interest with respect to
the notes will be made without withholding or deduction at source for, or on
account of, any present or future taxes, fees, duties, assessments or
governmental charges of whatever nature imposed or levied by the United States
or any political subdivision or taxing authority thereof or therein
(collectively, United States Taxes), unless such withholding or deduction is
required by (i) the laws (or any regulations or rulings promulgated thereunder)
of the United
70
States or any political subdivision or taxing authority thereof or therein or
(ii) an official position regarding the application, administration,
interpretation or enforcement of any such laws, regulations or rulings
(including, without limitation, a holding by a court of competent jurisdiction
or by a taxing authority in the United States or any political subdivision
thereof). If a withholding or deduction at source is required on account of
United States Taxes, Dana will, subject to certain limitations and exceptions
(set forth below), pay to a holder of notes on behalf of an owner of a
beneficial interest therein (an Owner) who is a United States Alien (as defined
herein) such additional amounts (Additional Amounts) as may be necessary so that
every net payment of principal, premium, if any, or interest with respect to
such notes after such withholding or deduction on account of United States
Taxes, will not be less than the amount provided for in the notes. However, Dana
shall not be required to make any payment of Additional Amounts for or on
account of:
(a) any tax, fee, duty, assessment or other governmental charge which
would not have been imposed but for (i) the existence of any present or
former connection between such Owner and the United States, including,
without limitation, such Owner being or having been a citizen or resident
thereof or being or having been present or engaged in trade or business
therein or having or having had a permanent establishment therein or any
other activities of such Owner (other than merely holding, disposing of or
receiving any payment with respect to, any note), or (ii) the presentation
of a note for payment on a date more than 15 days after the date on which
such payment became due and payable or the date on which payment thereof is
duly provided for, whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer, personal property
or similar tax, assessment or other governmental charge;
(c) any tax, fee, duty, assessment or other governmental charge
imposed by reason of such Owner's past or present status as a personal
holding company, foreign personal holding company or controlled foreign
corporation with respect to the United States or as a corporation which
accumulates earnings to avoid United States federal income tax;
(d) any tax, fee, duty, assessment or other governmental charge which
is payable otherwise than by withholding from payments of principal or
interest with respect to the notes;
(e) any tax, fee, duty, assessment or other governmental charge
imposed on interest received by anyone who owns (actually or
constructively) 10% or more of the total combined voting power of all
classes of stock of Dana;
(f) any tax, fee, duty, assessment or other governmental charge which
would not have been imposed but for the failure to comply with
certification, information or other reporting requirements concerning the
nationality, residence, identity or connection with the United States of
the Owner of such note, if such compliance is required by the laws
(including any administrative regulations) of the United States or any
political subdivision or taxing authority thereof or therein as a
precondition to maximum relief or exemption legally available to such Owner
from such tax, assessment or other governmental charge; or
(g) any combination of items (a), (b), (c), (d), (e) and (f);
nor shall Additional Amounts be paid to any holder of a note on behalf of any
Owner who is a fiduciary or partnership or other than the sole Owner to the
extent a beneficiary or settlor with respect to such fiduciary or a member of
such partnership or Owner would not have been entitled to payment of the
Additional Amounts had such beneficiary, settlor, member or Owner been the sole
Owner of the note.
The term "United States Alien" means any corporation, individual, fiduciary
or partnership that for United States federal income tax purposes is a foreign
corporation, nonresident alien individual, nonresident alien fiduciary of a
foreign estate or trust, or foreign partnership one or more members of which is
a foreign corporation, nonresident alien individual or nonresident alien
fiduciary of a foreign estate or trust.
Whenever there is mentioned herein, in any context, the payment of the
principal of, or premium, if any, or interest on, or in respect of, a note, such
mention shall be deemed to include mention of the payment of Additional Amounts
to the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof pursuant to the provisions of such note and express
mention of the payment of Additional
71
Amounts (if applicable) in any provisions hereof shall not be construed as
excluding Additional Amounts in those provisions hereof where such express
mention is not made.
CERTAIN COVENANTS
Application of Fall Away Covenants and Covenant Substitution. After such
time as:
(1) the notes have been assigned an Investment Grade rating by both
Rating Agencies;
(2) if the Investment Grade rating is BBB-, in the case of S&P, or
Baa3, in the case of Moody's, it shall not be accompanied by either (i) in
the case of S&P, a negative outlook, creditwatch negative or the equivalent
thereof or (ii) in the case of Moody's, a negative outlook, a review for
possible downgrade or the equivalent thereof; and
(3) no Default under the indenture has occurred and is continuing,
(all such events collectively constituting an "Investment Grade Rating Event")
and notwithstanding that the notes may later cease to have an Investment Grade
rating by either or both Rating Agencies or that the Investment Grade rating may
later be accompanied by either items (i) or (ii) set forth in paragraph (2)
above, Dana and its Restricted Subsidiaries will not be subject to the following
agreements and covenants contained in the indenture:
- "Limitation on Incurrence of Indebtedness and Issuance of Preferred
Stock";
- "Limitation on Certain Asset Dispositions";
- "Limitation on Restricted Payments";
- "Limitation on Transactions with Affiliates";
- "Limitation on Payment Restrictions Affecting Restricted Subsidiaries";
- "Limitation on Guarantees by Restricted Subsidiaries";
- "Change of Control";
- section (a) of "Limitation on Liens";
- section (a) of "Limitation on Sale and Leaseback Transactions"; and
- clause (3) of the first paragraph of "Merger, Consolidation, Etc."
and section (b) of "Limitation on Liens" and section (b) of "Limitation on Sale
and Leaseback Transactions" shall become effective and apply to Dana and its
Restricted Subsidiaries.
A change in the rating on the notes by either Rating Agency shall be deemed
to have occurred on the date that such Rating Agency shall have publicly
announced the change.
Limitation on Liens. (a) The indenture provides that Dana will not, and
will not cause or permit any of its Restricted Subsidiaries to, create, incur,
assume or suffer to exist any Liens upon any of their respective properties or
assets (including, without limitation, any asset in the form of the right to
receive payments, fees or other consideration or benefits) whether owned on the
Issue Date or acquired after the Issue Date, other than:
(1) Liens granted by Dana on property or assets of Dana securing
Indebtedness of Dana that is permitted by the indenture and that is pari
passu with the notes; provided, that the notes are secured on an equal and
ratable basis with such Liens;
(2) Liens granted by Dana on property or assets of Dana securing
Indebtedness of Dana that is permitted by the indenture and that is
subordinated to the notes; provided, that the notes are secured by Liens
ranking prior to such Liens;
(3) Permitted Liens;
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(4) Liens in respect of Acquired Indebtedness permitted by the
indenture; provided, that the Liens in respect of such Acquired
Indebtedness secured such Acquired Indebtedness at the time of the
incurrence of such Acquired Indebtedness and such Liens and the Acquired
Indebtedness were not incurred by Dana or by the Person being acquired or
from whom the assets were acquired in connection with, or in anticipation
of, the incurrence of such Acquired Indebtedness by Dana, and provided,
further that such Liens in respect of such Acquired Indebtedness do not
extend to or cover any property or assets of Dana or of any Restricted
Subsidiary of Dana other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of Dana; and
(5) Liens arising from claims of holders of Indebtedness against funds
held in a defeasance trust for the benefit of such holders.
(b) The indenture provides that, in the event that section (a) of this
covenant no longer applies to Dana and its Restricted Subsidiaries in light of
the circumstances described above under "-- Application of Fall Away Covenants
and Covenant Substitution", except with respect to Indebtedness between Dana and
any Restricted Subsidiaries, Dana will not incur or guarantee (or to permit
Restricted Subsidiaries to incur or guarantee) any Secured Debt other than
Permitted Secured Debt without equally and ratably securing the notes.
Limitation on Incurrence of Indebtedness and Issuance of Preferred
Stock. The indenture provides that Dana will not, and will not cause or permit
any of its Restricted Subsidiaries to incur, directly or indirectly, any
Indebtedness, and Dana will not cause or permit any of its Restricted
Subsidiaries to issue any Preferred Stock, except:
(1) Indebtedness of Dana, if immediately after giving effect to the
incurrence of such Indebtedness and the receipt and application of the net
proceeds thereof, the Consolidated Coverage Ratio of Dana for the four full
fiscal quarters for which quarterly or annual financial statements are
available next preceding the incurrence of such Indebtedness would be
greater than 2.25 to 1.00;
(2) Indebtedness outstanding on the Issue Date;
(3) Indebtedness under the Credit Facilities in an amount not to
exceed $1.65 billion;
(4) Indebtedness owed by Dana to any Restricted Subsidiary of Dana or
Indebtedness owed by a Subsidiary of Dana to Dana or a Restricted
Subsidiary of Dana; provided, that, upon either
(a) the transfer or other disposition by such Restricted Subsidiary
or Dana of any Indebtedness so permitted under this clause (4) to a
Person other than Dana or another Restricted Subsidiary of Dana or
(b) the issuance (other than directors' qualifying shares), sale,
transfer or other disposition of shares of Capital Stock or other
ownership interests (including by consolidation or merger) of such
Restricted Subsidiary to a Person other than Dana or another such
Restricted Subsidiary of Dana as a result of which such Restricted
Subsidiary ceases to be a Restricted Subsidiary of Dana,
the provisions of this clause (4) shall no longer be applicable to such
Indebtedness and such Indebtedness shall be deemed to have been incurred at
the time of any such issuance, sale, transfer or other disposition, as the
case may be;
(5) Indebtedness of Dana or its Restricted Subsidiaries under any
Interest Rate Protection Agreement or Currency Agreement to the extent
entered into to hedge any other Indebtedness permitted under the indenture;
(6) Acquired Indebtedness to the extent Dana could have incurred such
Indebtedness in accordance with clause (1) above on the date such
Indebtedness became Acquired Indebtedness;
(7) Indebtedness incurred by Dana or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including, without
limitation, letters of credit in response to worker's compensation claims
or self-insurance;
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(8) Indebtedness arising from agreements of Dana or a Restricted
Subsidiary of Dana providing for indemnification, adjustment of purchase
price, earn-out or other similar obligations, in each case, incurred or
assumed in connection with the disposition of any business, assets or a
Subsidiary of Dana;
(9) Obligations in respect of performance and surety bonds and
completion guarantees provided by Dana or any Restricted Subsidiary of Dana
in the ordinary course of business;
(10) Indebtedness consisting of notes issued to employees, officers or
directors in connection with the redemption or repurchase of Capital Stock
held by such Persons in an aggregate amount not in excess of $10.0 million
at any time outstanding;
(11) Guarantees by Dana or any of its Restricted Subsidiaries of
Indebtedness of Dana or any Restricted Subsidiary permitted to be incurred
under another provision of the covenant; provided that any Guarantee by a
Restricted Subsidiary is given in compliance with "-- Limitation on
Guarantees by Restricted Subsidiaries;"
(12) Indebtedness of Dana under the outstanding notes and the exchange
notes;
(13) Indebtedness incurred to renew, extend or refinance (collectively
for purposes of this clause (13) to "refinance") any Indebtedness incurred
pursuant to clauses (1), (2) or (12) above; provided, that:
(a) such Indebtedness does not exceed the principal amount (or
accreted amount, if less) of Indebtedness so refinanced plus the amount
of any premium required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness refinanced or the amount of
any premium reasonably determined by Dana to be necessary to accomplish
such refinancing by means of a tender offer, exchange offer, or
privately negotiated repurchase, plus the expenses of Dana or such
Restricted Subsidiary incurred in connection therewith and
(b) (I) in the case of any refinancing of Indebtedness that is pari
passu with the notes such refinancing Indebtedness is made pari passu
with or subordinate in right of payment to such notes, and, in the case
of any refinancing of Indebtedness that is subordinate in right of
payment to the notes, such refinancing Indebtedness is subordinate in
right of payment to such notes on terms no less favorable to the holders
than those contained in the Indebtedness being refinanced,
(II) in either case, the refinancing Indebtedness by its terms, or
by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued does not have an Average Life that is less than
the remaining Average Life of the Indebtedness being refinanced and does
not permit redemption or other retirement (including pursuant to any
required offer to purchase to be made by Dana or any of its Restricted
Subsidiaries) of such Indebtedness at the option of the holder thereof
prior to the final Stated Maturity of the Indebtedness being refinanced,
other than a redemption or other retirement at the option of the holder
of such Indebtedness (including pursuant to a required offer to purchase
made by Dana or any of its Restricted Subsidiaries) which is conditioned
upon a change of control of Dana pursuant to provisions substantially
similar to those contained in the indenture described under "-- Change
of Control" below and
(III) Indebtedness of a Restricted Subsidiary may not be incurred
to refinance any Indebtedness of Dana unless otherwise permitted
pursuant to clause (16) below; and
provided, further, that any Indebtedness incurred pursuant to clauses (1)
or (2) above may be refinanced pursuant to this clause (13) provided that
such refinancing occurs not later than three months after the repayment of
the Indebtedness being refinanced, notwithstanding an initial repayment of
the Indebtedness being refinanced using Dana's available cash resources;
(14) Indebtedness consisting of take-or-pay obligations contained in
supply agreements entered into by Dana or its Restricted Subsidiaries in
the ordinary course of business;
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(15) Preferred Stock of Restricted Subsidiaries issued to Dana or any
of its Restricted Subsidiaries, provided, that, upon either
(a) the transfer or other disposition by such Restricted Subsidiary
or Dana of any Preferred Stock so permitted under this clause (15) to a
Person other than Dana or another Restricted Subsidiary of Dana or
(b) the issuance (other than directors' qualifying shares), sale,
transfer or other disposition of shares of Capital Stock or other
ownership interests (including by consolidation or merger) of such
Restricted Subsidiary to a Person other than Dana or another such
Restricted Subsidiary of Dana as a result of which such Restricted
Subsidiary ceases to be a Subsidiary of Dana,
the provisions of this clause (15) shall no longer be applicable to such
Preferred Stock and such Preferred Stock shall be deemed to have been
issued at the time of any such issuance, sale, transfer or other
disposition, as the case may be;
(16) Indebtedness incurred by Restricted Subsidiaries to Persons other
than Dana and its Restricted Subsidiaries and Preferred Stock of Restricted
Subsidiaries issued to Persons other than Dana and its Restricted
Subsidiaries, provided that (i) the principal amount of such Indebtedness
plus (ii) the stated liquidation preference of such Preferred Stock shall
not exceed in the aggregate $250 million;
(17) the consummation of any Qualified Securitization Transaction; and
(18) Indebtedness of Dana or its Restricted Subsidiaries, not
otherwise permitted to be incurred pursuant to clauses (1) through (17)
above, which, together with any other outstanding Indebtedness incurred
pursuant to this clause (18), has an aggregate principal amount not in
excess of $100 million at any time outstanding.
Accrual of interest, accrual of dividends, the accretion of accreted value,
the payment of interest in the form of additional Indebtedness and the payment
of dividends in the form of additional shares of Preferred Stock will not be
deemed to be an incurrence of Indebtedness for purposes of this covenant. The
amount of any Indebtedness outstanding as of any date shall be (i) the accreted
value of the Indebtedness in the case of any Indebtedness issued with original
issue discount and (ii) the principal amount or liquidation preference thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
For purposes of determining compliance with any U.S. dollar-denominated
restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent
principal amount of Indebtedness denominated in a foreign currency shall be
calculated based on the relevant currency exchange rate in effect on the date
such Indebtedness was incurred, in the case of term Indebtedness, or first
committed, in the case of revolving credit Indebtedness; provided that if such
Indebtedness is incurred to refinance other Indebtedness denominated in a
foreign currency, and such refinancing would cause the applicable U.S.
dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such refinancing, such U.S.
dollar-denominated restriction shall be deemed not to have been exceeded so long
as the principal amount of such refinancing Indebtedness does not exceed the
principal amount of such Indebtedness being refinanced. Notwithstanding any
other provision of this covenant, the maximum amount of Indebtedness that Dana
may incur pursuant to this covenant shall not be deemed to be exceeded solely as
a result of fluctuations in the exchange rate of currencies. The principal
amount of any Indebtedness incurred to refinance other Indebtedness, if incurred
in a different currency from the Indebtedness being refinanced, shall be
calculated based on the currency exchange rate applicable to the currencies in
which such refinancing Indebtedness is denominated that is in effect on the date
of such refinancing.
Limitation on Restricted Payments. The indenture provides that Dana will
not, and will not cause or permit any of its Restricted Subsidiaries to directly
or indirectly:
(A) declare or pay any dividend, or make any distribution of any kind
or character (whether in cash, property or securities), in respect of any
class of its Capital Stock or to the holders thereof in their capacity as
stockholders, excluding any (a) dividend or distributions payable solely in
shares of its
75
Qualified Capital Stock or in options, warrants or other rights to acquire
its Qualified Capital Stock or (b) in the case of any Restricted Subsidiary
of Dana, dividends or distributions payable to Dana or a Restricted
Subsidiary of Dana;
(B) purchase, redeem, or otherwise acquire or retire for value shares
of Capital Stock of Dana or a Restricted Subsidiary of Dana, any securities
convertible or exchangeable into shares of Capital Stock of Dana or a
Restricted Subsidiary of Dana or any options, warrants or rights to
purchase or acquire shares of Capital Stock of Dana or a Restricted
Subsidiary of Dana, excluding any such shares of Capital Stock, options,
warrants, rights or securities which are owned by Dana or a Restricted
Subsidiary of Dana;
(C) make any Investment (other than a Permitted Investment) in any
Person; or
(D) redeem, defease, repurchase, retire or otherwise acquire or retire
for value, prior to any scheduled maturity, repayment or sinking fund
payment, Indebtedness which is subordinate in right of payment to the notes
(each of the transactions described in clauses (A) through (D) (other than
any exception to any such clause) being a "Restricted Payment"),
if at the time thereof:
(1) an Event of Default, or an event that with the passing of time or
giving of notice, or both, would constitute an Event of Default, shall have
occurred and be continuing, or
(2) upon giving effect to such Restricted Payment, Dana could not
incur at least $1.00 of additional Indebtedness pursuant to the terms of
the indenture described in clause (1) of "-- Limitation on Incurrence of
Indebtedness and Issuance of Preferred Stock" above, or
(3) upon giving effect to such Restricted Payment, the aggregate of
all Restricted Payments made on or after the Issue Date exceeds the sum
(without duplication) of:
(a) 50% of Consolidated Net Income of Dana (or, in the case
cumulative Consolidated Net Income of Dana shall be negative, less 100%
of such deficit) for the period (treated as an accounting period) from
the Issue Date through the last day of Dana's most recently ended fiscal
quarter for which financial statements are available; plus
(b) 100% of the aggregate net cash proceeds received after the
Issue Date, including the fair market value of readily marketable
securities from the issuance of Qualified Capital Stock of Dana and
warrants, rights or options on Qualified Capital Stock of Dana (other
than in respect of any such issuance to a Subsidiary of Dana) and the
principal amount of Indebtedness of Dana or a Subsidiary of Dana that
has been converted into or exchanged for Qualified Capital Stock of Dana
which Indebtedness was incurred after the Issue Date; plus
(c) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the Issue Date, an amount
equal to the lesser of the return of capital with respect to such
Investment and the cost of such Investment, in either case, less the
cost of the disposition of such Investment; plus
(d) an amount equal to the sum of (I) the net reduction in
Investments in Unrestricted Subsidiaries resulting from the receipt of
dividends, repayments of loans or advances or other transfers of assets
or proceeds from the disposition of Capital Stock or other distributions
or payments, in each case to Dana or any Restricted Subsidiary from, or
with respect to, interests in Unrestricted Subsidiaries, and (II) the
portion (proportionate to Dana's equity interest in such Subsidiary) of
the fair market value of the net assets of an Unrestricted Subsidiary at
the time such Unrestricted Subsidiary is designated a Restricted
Subsidiary; provided, that the foregoing sum shall not exceed, in the
case of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by Dana or any
Restricted Subsidiary in such Unrestricted Subsidiary subsequent to the
Issue Date; plus
(e) solely in connection with the payment of ordinary quarterly
dividends on Dana's common stock, an aggregate of $270 million.
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For purposes of determining the amount expended for Restricted Payments
under this clause (3), property other than cash shall be valued at its fair
market value.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit:
(1) any dividend on any class of Capital Stock of Dana or any of its
Restricted Subsidiaries paid within 70 days after the declaration thereof
if, on the date when the dividend was declared, Dana or any of its
Restricted Subsidiaries, as the case may be, could have paid such dividend
in accordance with the provisions of the indenture;
(2) the renewal, extension or refinancing of any Indebtedness
otherwise permitted pursuant to the terms of the indenture described in
clause (13) of "-- Limitation on Incurrence of Indebtedness and Issuance of
Preferred Stock" above;
(3) the exchange or conversion of any Indebtedness of Dana or any of
its Restricted Subsidiaries for or into Qualified Capital Stock of Dana;
(4) any Restricted Payments, including loans or other advances made
pursuant to any employee benefit plans (including plans for the benefit of
directors) or employment agreements or other compensation arrangements or
plans, in each case as such agreement, arrangement or plan is approved by
the Board of Directors of Dana in its good faith judgment;
(5) so long as no Default or Event of Default has occurred and is
continuing, any Investment made with the proceeds of a substantially
concurrent sale of Qualified Capital Stock of Dana; provided, that the
proceeds of such sale of Qualified Capital Stock shall not be (and have not
been) included in clause (3) of the preceding paragraph;
(6) the redemption, repurchase, retirement or other acquisition of any
Capital Stock of Dana in exchange for or out of the net cash proceeds of
the substantially concurrent sale (other than to a Restricted Subsidiary of
Dana) of Qualified Capital Stock of Dana; provided, that the proceeds of
such sale of Capital Stock shall not be (and have not been) included in
clause (3) of the preceding paragraph;
(7) so long as no Event of Default has occurred and is continuing, the
redemption, repurchase, retirement or other acquisition of any subordinated
Indebtedness of Dana in exchange for or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of Dana) of
Qualified Capital Stock of Dana; provided, that the proceeds of such sale
of Qualified Capital Stock shall not be (and have not been) included in
clause (3) of the preceding paragraph;
(8) so long as no Event of Default has occurred and is continuing, any
purchase or redemption or other retirement for value of Capital Stock of
Dana required pursuant to any shareholders agreement, management agreement
or employee stock option or restricted stock agreement in accordance with
the provisions of any such arrangement in an amount not to exceed $5
million in the aggregate;
(9) repurchases of Capital Stock deemed to occur upon the exercise of
stock options if such Capital Stock represents a portion of the exercise
price thereof;
(10) so long as no Event of Default has occurred and is continuing,
the redemption of any stock purchase rights under a rights plan in an
aggregate amount not to exceed $5 million;
(11) so long as no Event of Default has occurred and is continuing,
Investments in Permitted Joint Ventures; provided, that after giving pro
forma effect to such Investment, Dana could incur at least $1.00 of
additional Indebtedness pursuant to the terms of the indenture described in
clause (1) of "-- Limitation on Incurrence of Indebtedness and Issuance of
Preferred Stock" above;
(12) Investments by Dana in Dana Credit Corporation made in the
ordinary course of business for periods not exceeding 30 days at any time
and in amounts not exceeding $20 million at any time outstanding; and
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(13) Restricted Payments by Dana or its Restricted Subsidiaries, not
otherwise permitted to be made pursuant to clauses (1) through (12) above,
in an aggregate amount not to exceed $75 million.
Each Restricted Payment described in clauses (1), (4) and (8) of the
previous sentence shall be taken into account (and the Restricted Payments
described in the remaining clauses shall not be taken into account) for purposes
of computing the aggregate amount of all Restricted Payments made pursuant to
clause (3) of the preceding paragraph.
Limitation on Certain Asset Dispositions. The indenture provides that Dana
will not, and will not cause or permit any of its Restricted Subsidiaries to,
directly or indirectly, make one or more Asset Dispositions unless:
(1) Dana or the Restricted Subsidiary, as the case may be, receives
consideration for such Asset Disposition at least equal to the fair market
value of the assets sold or disposed of (as determined in good faith by
Dana);
(2) not less than 75% of the consideration for the disposition
consists of cash or readily marketable Cash Equivalents or the assumption
of Indebtedness (other than non-recourse Indebtedness or any Indebtedness
subordinated to the notes) of Dana or such Restricted Subsidiary or other
obligations relating to such assets (and release of Dana or such Restricted
Subsidiary from all liability on the Indebtedness or other obligations
assumed); and
(3) all Net Available Proceeds, less any amounts invested or committed
to be invested within 360 days of such Asset Disposition in Related
Business Assets (including capital expenditures or the Capital Stock of
another Person (other than Dana); provided, that immediately after giving
effect to any such investment such Person shall be a Restricted Subsidiary
of Dana), are applied, on or prior to the 360th day after such Asset
Disposition (unless and to the extent that Dana shall determine to make an
Offer to Purchase), either to
(a) the permanent reduction and prepayment of any Indebtedness of
Dana (other than Indebtedness which is expressly subordinate to the
notes) then outstanding (including a permanent reduction of commitments
in respect thereof) or
(b) the permanent reduction and repayment of any Indebtedness of
any Restricted Subsidiary of Dana then outstanding (including a
permanent reduction of commitments in respect thereof).
The 361st day after such Asset Disposition shall be deemed to be the "Asset
Sale Offer Trigger Date," and the amount of Net Available Proceeds from Asset
Dispositions otherwise subject to the preceding provisions not so applied or as
to which Dana has determined not to so apply shall be referred to as the
"Unutilized Net Available Proceeds." Within fifteen days after the Asset Sale
Offer Trigger Date, Dana shall make an Offer to Purchase the outstanding notes
in the aggregate amount of the Unutilized Net Available Proceeds at a purchase
price in cash equal to 100% of their principal amount plus any accrued and
unpaid interest thereon to the Purchase Date. Notwithstanding the foregoing,
Dana may defer making any Offer to Purchase outstanding notes until there are
aggregate Unutilized Net Available Proceeds equal to or in excess of $25 million
(at which time, the entire Unutilized Net Available Proceeds, and not just the
amount in excess of $25 million, shall be applied as required pursuant to this
paragraph). Pending application of the Unutilized Net Available Proceeds
pursuant to this covenant, such Unutilized Net Available Proceeds shall be
invested in Permitted Investments of the types described in clauses (1), (2) and
(3) of the definition of "Permitted Investments."
If any Indebtedness of Dana or any of its Restricted Subsidiaries ranking
pari passu with the notes requires that prepayment of, or an offer to prepay,
such Indebtedness be made with any Net Available Proceeds, Dana may apply such
Net Available Proceeds pro rata (based on the aggregate principal amount of the
notes then outstanding and the aggregate principal amount (or accreted value, if
less) of all such other Indebtedness then outstanding) to the making of an Offer
to Purchase the notes in accordance with the foregoing provisions and the
prepayment or the offer to prepay such pari passu Indebtedness. Any remaining
Net Available Proceeds following the completion of the required Offer to
Purchase may be used by Dana for
78
any other purpose (subject to the other provisions of the indenture) and the
amount of Net Available Proceeds then required to be otherwise applied in
accordance with this covenant shall be reset to zero, subject to any subsequent
Asset Disposition. These provisions will not apply to a transaction consummated
in compliance with the provisions of the indenture described under "-- Merger,
Consolidation, Etc." below.
Dana will not, and will not permit any Restricted Subsidiary to, engage in
any Asset Swaps, unless:
(1) at the time of entering into such Asset Swap and immediately after
giving effect to such Asset Swap, no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof;
(2) in the event such Asset Swap involves the transfer by Dana or any
Restricted Subsidiary of assets having an aggregate fair market value, as
determined by the Board of Directors of Dana in good faith, in excess of
$20 million, the terms of such Asset Swap have been approved by a majority
of the members of the Board of Directors of Dana or such Restricted
Subsidiary, as the case may be, as being fair to Dana or such Restricted
Subsidiary, as the case may be, from a financial point of view; and
(3) in the event such Asset Swap involves the transfer by Dana or any
Restricted Subsidiary of assets having an aggregate fair market value, as
determined by the Board of Directors of Dana in good faith, in excess of
$500 million, Dana has received a written opinion from an independent
investment banking firm of nationally recognized standing that such Asset
Swap is fair to Dana or such Restricted Subsidiary, as the case may be,
from a financial point of view.
In the event that Dana makes an Offer to Purchase the notes, Dana shall
comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange
Act and any violation of the provisions of the indenture relating to such Offer
to Purchase occurring as a result of such compliance shall not be deemed an
Event of Default or an event that with the passing of time or giving of notice,
or both, would constitute an Event of Default.
Dana's ability to repurchase the notes may be limited by other
then-existing borrowing agreements of Dana and its Restricted Subsidiaries.
There can be no assurance that Dana will be able to obtain a consent or a waiver
of such limitations. See "-- Limitation on Restricted Payments."
Limitation on Sale and Leaseback Transactions. (a) The indenture provides
that Dana will not, and will not cause or permit any Restricted Subsidiary to,
enter into any Sale and Leaseback Transaction with respect to any property
unless:
(1) Dana or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Sale/Leaseback Transaction at least equal
to the fair market value (as determined by the Board of Directors of Dana
or such Restricted Subsidiary, as the case may be, if the fair market value
exceeds $20.0 million) of the property subject to such transaction;
(2) Dana or such Restricted Subsidiary could have incurred
Indebtedness in an amount equal to the Attributable Indebtedness in respect
of such Sale and Leaseback Transaction pursuant to the covenant described
under "-- Limitation on Incurrence of Indebtedness and Issuance of
Preferred Stock"; and
(3) the Sale and Leaseback Transaction is treated as an Asset
Disposition and all of the conditions of the indenture described under
"-- Limitation on Certain Asset Dispositions" (including the provisions
concerning the application of Net Available Proceeds after the Sale and
Leaseback Transaction) are satisfied at the time required to be satisfied
pursuant to that covenant with respect to such Sale and Leaseback
Transaction, treating all of the cash consideration (with the items
constituting cash consideration to be determined in accordance with
"-- Limitation on Certain Asset Dispositions") received in such Sale and
Leaseback Transaction as Net Available Proceeds for purposes of such
covenant.
For the purposes of this section (a), the term "Sale and Leaseback
Transaction" means an arrangement relating to property now owned or hereafter
acquired whereby Dana or a Restricted Subsidiary transfers such property to a
person and Dana or a Restricted Subsidiary leases it from such Person.
79
(b) The indenture provides that, in the event that that section (a) of this
covenant no longer applies to Dana and its Restricted Subsidiaries in light of
the circumstances described above under "-- Application of Fall Away Covenants
and Covenant Substitution", Dana will not engage in any Sale and Leaseback
Transactions (except leases for a temporary period not exceeding 36 months)
involving any Principal Property, or to permit any of its Restricted
Subsidiaries which has been in operation for more than 180 days to do so, unless
(1) Dana or such Restricted Subsidiary would be entitled to incur
Secured Debt on such Principal Property equal to the amount realizable upon
such sale or transfer as if such amount were secured by a mortgage, without
equally and ratably securing the notes; or
(2) an amount equal to the greater of the net proceeds of the sale or
the fair value of such Principal Property is applied within 180 days either
to (A) the retirement of indebtedness of Dana that was Funded Debt at the
time it was created or (B) the purchase of other Principal Property having
a value at least equal to the greater of such amounts; or
(3) the Sale and Leaseback Transaction involved an industrial revenue
bond, pollution control bond or other similar financing arrangement between
Dana or any Restricted Subsidiary and any federal, state or municipal
government or other governmental body or agency.
For the purposes of this section (b), the term "Sale and Leaseback
Transaction" means any arrangement with any person or entity providing for the
leasing by Dana or any Restricted Subsidiary of any Principal Property whereby
such Principal Property has been or is to be sold or transferred by Dana or a
Restricted Subsidiary to such person or entity; provided, however, that the
foregoing shall not apply to any such arrangement involving a lease for a term,
including renewal rights, of not more than three years.
Limitation on Payment Restrictions Affecting Restricted Subsidiaries. The
indenture provides that Dana will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or suffer to exist or
allow to become effective any consensual encumbrance or restriction of any kind
on the ability of any such Restricted Subsidiary to:
(1) pay dividends, in cash or otherwise, or make other payments or
distributions on its Capital Stock or any other equity interest or
participation in, or measured by, its profits, owned by Dana or by any
Restricted Subsidiary of Dana, or make payments on any Indebtedness owed to
Dana or to any Restricted Subsidiary of Dana;
(2) make loans or advances to Dana or to any Restricted Subsidiary of
Dana; or
(3) transfer any of their respective property or assets to Dana or to
any Restricted Subsidiary of Dana.
The preceding restrictions, however, do not apply to encumbrances or
restrictions existing under or by reason of:
(1) applicable law or regulations;
(2) customary provisions restricting subletting or assignment of any
lease governing a leasehold interest of any Restricted Subsidiary of Dana;
(3) any agreement in effect on the Issue Date as any such agreement is
in effect on such date;
(4) any agreement relating to any Indebtedness incurred by such
Restricted Subsidiary prior to the date on which such Restricted Subsidiary
became a Subsidiary of Dana and outstanding on such date and not incurred
in anticipation or contemplation of becoming a Subsidiary of Dana,
provided, such encumbrance or restriction shall not apply to any assets of
Dana or its Restricted Subsidiaries other than such Restricted Subsidiary;
(5) any agreement effecting a refinancing of Indebtedness incurred
pursuant to an agreement referred to in clause (3) or (4) of this paragraph
or this clause (5) or contained in any amendment to an agreement referred
to in clause (3) or (4) of this paragraph or this clause (5); provided,
however, that
80
the encumbrances and restrictions contained in any such agreement or
amendment are no less favorable in any material respect to the holders of
the notes than the encumbrances and restrictions contained in such
agreements referred to in clauses (3) and (4) of this paragraph;
(6) Indebtedness or any other contractual requirements (including
pursuant to any corporate governance documents in the nature of a charter
or by-laws) of a Securitization Subsidiary arising in connection with a
Qualified Securitization Transaction, provided, that any such encumbrances
and restrictions apply only to such Securitization Subsidiary; or
(7) the indenture.
Limitation on Transactions with Affiliates. The indenture provides that
Dana will not, and will not cause or permit any of its Restricted Subsidiaries
to:
(1) sell, lease, transfer or otherwise dispose of any of its property
or assets to any Affiliate of Dana or of any Subsidiary,
(2) purchase any property or assets from any Affiliate of Dana or of
any Subsidiary,
(3) make any Investment in any Affiliate of Dana or of any Subsidiary,
or
(4) enter into or amend or extend any contract, agreement or
understanding with or for the benefit of, any Affiliate of Dana or of any
Subsidiary (each of (1) through (4) being an Affiliate Transaction),
other than Affiliate Transactions that are on terms that are no less favorable
to Dana or such Restricted Subsidiary of Dana than those that could be obtained
in a comparable arm's length transaction by Dana or such Restricted Subsidiary
of Dana from an unaffiliated party; provided, that if Dana or any Restricted
Subsidiary of Dana enters into an Affiliate Transaction or series of Affiliate
Transactions involving or having an aggregate value of more than $20 million, a
majority of the disinterested members of the Board of Directors of Dana or a
committee thereof shall, prior to the consummation of such Affiliate
Transaction, have determined (as evidenced by a resolution thereof) that such
Affiliate Transaction meets the foregoing standard.
The foregoing restrictions shall not apply to:
(1) any transaction between Restricted Subsidiaries of Dana, or
between Dana and any Restricted Subsidiary of Dana if such transaction is
not otherwise prohibited by the terms of the indenture;
(2) transactions entered into in the ordinary course of business;
(3) reasonable fees and compensation paid to and advances of expenses
to and indemnity provided on behalf of officers, directors, employees or
consultants of Dana or any Subsidiary as determined in good faith by Dana's
Board of Directors or senior management;
(4) any Qualified Securitization Transactions;
(5) any agreement as in effect as of the Issue Date (including,
without limitation, the Operating Agreement, the agreements relating to the
Receivables Facility and the Tax Sharing Agreement between Dana and Dana
Credit Corporation) or any amendment thereto or any transaction
contemplated thereby (including pursuant to any amendment thereto) or in
any replacement agreement thereto so long as any such replacement agreement
is not more disadvantageous to the holders of the notes in any material
respect than the original agreement as in effect on the Issue Date;
(6) Restricted Payments permitted by the indenture;
(7) loans or advances to employees or consultants in the ordinary
course of business;
(8) joint venture partners or purchasers or sellers of goods or
services, in each case in the ordinary course of business (including,
without limitation, pursuant to joint venture agreements) and otherwise in
compliance with the terms of the indenture which are fair to Dana or its
Restricted Subsidiaries, in the
81
reasonable determination of the senior management of Dana, or are on terms
at least as favorable as might reasonably have been obtained at such time
from an unaffiliated party; and
(9) any employment or compensation arrangement entered into by Dana or
any of its Restricted Subsidiaries in the ordinary course of business that
is not otherwise prohibited by the indenture.
Limitation on Guarantees by Restricted Subsidiaries. The indenture
provides that Dana will not cause or permit any of its Restricted Subsidiaries,
directly or indirectly, to guarantee the payment of any Indebtedness of Dana
unless such Restricted Subsidiary of Dana simultaneously executes and delivers a
supplemental indenture to the indenture providing for the guarantee of payment
of the notes (each a Subsidiary Guarantee) by such Restricted Subsidiary of Dana
(a Subsidiary Guarantor); provided, any guarantee by a Subsidiary Guarantor of
such other Indebtedness:
(1) (a) (I) is unsecured or (II) is secured and (A) in the case of any
such guarantee of Indebtedness of Dana ranking pari passu with the notes,
the relevant Subsidiary Guarantees are secured equally and ratably with any
Liens securing such guarantee and (B) in the case of any such guarantee of
Indebtedness of Dana subordinated to the notes, the relevant Subsidiary
Guarantees are secured on a basis ranking prior to the Liens securing such
guarantee and
(b) (I) in the case of any such guarantee of Indebtedness of Dana
subordinated or junior to the notes (whether pursuant to its terms or by
operation of law), such guarantee is subordinated pursuant to a written
agreement to the relevant Subsidiary Guarantees at least to the same extent
and in the same manner as such other Indebtedness is subordinated to the
notes, or (II) the Subsidiary Guarantees are not subordinated or junior to
any Indebtedness of such Subsidiary Guarantor; and
(2) such Subsidiary Guarantor waives, and agrees it will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against Dana or
any other Subsidiary of Dana as a result of any payment by it under such
Subsidiary Guarantees.
Notwithstanding the foregoing, any Subsidiary Guarantee shall provide by
its terms that it shall be automatically and unconditionally released and
discharged upon either (a) the unconditional release or discharge of such
Subsidiary Guarantor's guarantees of all other Indebtedness of Dana (other than
a release resulting from payment under such Subsidiary Guarantor's guarantees)
or (b) any sale, exchange or transfer, to any Person not an Affiliate of Dana,
of all (but not less than all) of the Capital Stock of such Subsidiary
Guarantor, or all or substantially all of the assets of such Subsidiary
Guarantor, pursuant to a transaction which is in compliance with all of the
terms of the indenture.
Notwithstanding the foregoing, the provisions of this "Limitation on
Guarantees by Restricted Subsidiaries" shall not apply with respect to
(1) guarantees by Restricted Subsidiaries outstanding on the Issue
Date;
(2) guarantees of Acquired Indebtedness outstanding at the time that a
Restricted Subsidiary becomes a Subsidiary of Dana; and
(3) guarantees by Restricted Subsidiaries of Indebtedness to the
extent such Indebtedness could have been incurred by such Restricted
Subsidiaries pursuant to clause (16) of "Limitation on Incurrence of
Indebtedness and Issuance of Preferred Stock" (without duplication in the
case of the same Indebtedness being guaranteed by one or more Restricted
Subsidiaries).
Change of Control. Upon the occurrence of a Change of Control (the date of
each such occurrence being the Change of Control Date), Dana will notify the
holders in writing of such occurrence and will commence an Offer to Purchase
(the Change of Control Offer) all notes then outstanding, in each case, at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the Purchase Date. Notice of a Change of Control
will be mailed by Dana to the holders not more than 30 days after any Change of
Control Date.
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None of the provisions relating to a purchase upon a Change of Control is
waivable by the Board of Directors of Dana. Dana could, in the future, enter
into certain transactions, including certain recapitalizations of Dana, that
would not constitute a Change of Control with respect to the Change of Control
purchase feature of the notes, but would increase the amount of Indebtedness
outstanding at such time. If a Change of Control were to occur, there can be no
assurance that Dana would have sufficient funds to pay the redemption price for
all notes that Dana is required to redeem. In the event that Dana were required
to purchase outstanding notes pursuant to a Change of Control Offer, Dana
expects that it would need to seek third-party financing to the extent it did
not have available funds to meet its purchase obligations. However, there can be
no assurance that Dana would be able to obtain such financing.
With respect to the disposition of property or assets, the phrase "all or
substantially all" as used in the indenture (including as set forth under
"-- Merger, Consolidation, Etc." below) varies according to the facts and
circumstances of the subject transaction, has no clearly established meaning
under New York law (which governs the indenture and the notes) and is subject to
judicial interpretation. Accordingly, in certain circumstances there may be a
degree of uncertainty in ascertaining whether a particular transaction would
involve a disposition of "all or substantially all" of the property or assets of
a Person and therefore it may be unclear as to whether a Change of Control has
occurred and whether the holders are subject to a Change of Control Offer.
Dana's ability to repurchase notes may be limited by other then-existing
borrowing agreements of Dana and its Subsidiaries. There can be no assurance
that Dana will be able to obtain a consent or a waiver of such limitations. See
"-- Limitation on Restricted Payments."
If an offer is made to redeem notes as a result of a Change of Control,
Dana will comply with all tender offer rules under state and Federal securities
laws, including, but not limited to, Section 14(e) under the Exchange Act and
Rule 14e-1 thereunder, to the extent applicable to such offer.
The Change of Control redemption feature of the notes may in certain
circumstances make more difficult or discourage a takeover of Dana and, thus,
the removal of incumbent management.
Reports. So long as any note is outstanding, Dana will file with the SEC
and, within 15 days after it files them with the SEC, file with the Trustee and
mail or cause to be mailed, to the holders at their addresses as set forth in
the registers of the notes, copies of the annual reports and of the information,
documents and other reports which Dana is required to file with the SEC pursuant
to Section 13 or 15(d) of the Exchange Act or which Dana would be required to
file with the SEC if Dana then had a class of securities registered under the
Exchange Act. In addition, Dana shall cause its annual report to stockholders
and any quarterly or other financial reports furnished to its stockholders
generally to be filed with the Trustee and mailed no later than the date such
materials are mailed or made available to Dana's stockholders, to the holders at
their addresses as set forth in the registers of notes.
Merger, Consolidation, Etc. Dana will not consolidate with or merge with
or into any other Person, or transfer (by lease, assignment, sale, or otherwise)
all or substantially all of its properties and assets to another Person unless
(1) either (A) Dana shall be the continuing or surviving Person in such a
consolidation or merger or (B) the Person (if other than Dana) formed by such
consolidation or into which Dana is merged or to which all or substantially all
of the properties and assets of Dana are transferred (Dana or such other Person
being referred to as the Surviving Person) shall be a corporation organized and
validly existing under the laws of the United States, any state thereof, or the
District of Columbia, and shall expressly assume, by a supplemental indenture,
all the obligations of Dana under the notes and the indenture, (2) immediately
after the transaction and the incurrence or anticipated incurrence of any
Indebtedness to be incurred in connection therewith, no Event of Default will
exist, (3) immediately after giving effect to such transaction and the
assumption contemplated by clause (1) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction), the Surviving Person could
incur at least $1.00 of additional Indebtedness pursuant to clause (1) of
"-- Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock";
and (4) an officer's certificate has been delivered to the Trustee to the effect
that the conditions set forth in the preceding clauses (1), (2) and, to the
extent then applicable, (3), have been satisfied and an opinion of counsel (from
a counsel who shall not be an
83
employee of Dana) has been delivered to the Trustee to the effect that the
conditions set forth in the preceding clause (1) and, to the extent then
applicable, clause (3), have been satisfied.
Upon any consolidation, merger or transfer in accordance with the
foregoing, the Surviving Person will succeed to and be substituted for Dana with
the same effect as if it had been named herein as a party hereto, and thereafter
the predecessor corporation will be relieved of all obligations and covenants
under the notes and the indenture.
Payments for Consents. Neither Dana nor any of its Restricted Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fees or otherwise, to any holder of any notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the indenture or the notes unless such consideration is offered to be paid or
is paid to all holders of the notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or amendment; provided that such consideration may be paid only with
respect to the dollar notes or the euro notes to the extent that the consent,
waiver or amendment relates only to such series and requires no action by the
other series.
EVENTS OF DEFAULT
The following are Events of Default under the indenture:
(1) default in the payment of principal of, or premium, if any, on any
note when due at maturity, upon repurchase, upon acceleration or otherwise,
including, without limitation, failure of Dana to repurchase any note on
the date required following a Change of Control; or
(2) default in the payment of any installment of interest on any note
(including any additional interest to be paid as required by the
registration rights agreement), when due and continuance of such Default
for 30 days or more; or
(3) failure to observe, perform or comply with any of the applicable
provisions described under "Certain Covenants -- Merger, Consolidation,
Etc." above; or
(4) default (other than a default set forth in clauses (1), (2) and
(3) above) in the performance of, or breach of, any other applicable
covenant or warranty of Dana or of any Restricted Subsidiary in the
indenture and failure to remedy such default or breach within a period of
60 days after written notice from the Trustee or the holders of at least
25% in aggregate principal amount of the then outstanding dollar notes or
euro notes, as the case may be; or
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Dana or any Restricted Subsidiary of
Dana (or the payment of which is guaranteed by Dana or any Restricted
Subsidiary of Dana), which default results in the acceleration of such
Indebtedness prior to its express maturity and the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness the maturity of which has been so accelerated, aggregates $100
million or more and such acceleration has not been rescinded or annulled or
such Indebtedness discharged in full within 30 days; or
(6) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against Dana or any Restricted Subsidiary of
Dana or any of their respective property or assets in an aggregate amount
in excess of $100 million, which judgments, orders or decrees have not been
vacated, discharged, satisfied or stayed pending appeal within 30 days from
the entry thereof and with respect to which legal enforcement proceedings
have been commenced; or
(7) certain events of bankruptcy, insolvency or reorganization
involving Dana or any Material Subsidiary of Dana.
If an Event of Default (other than an Event of Default referred to in
clause (7) above involving Dana) occurs and is continuing, then and in every
such case the Trustee or the holders of not less than 25% in
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aggregate principal amount of the then outstanding dollar notes or euro notes
may, and the relevant Trustee shall upon the request of holders of not less than
25% in aggregate principal amount of the dollar notes or euro notes then
outstanding, declare the unpaid principal of, premium, if any, and accrued and
unpaid interest on all the dollar notes or euro notes, as the case may be, then
outstanding to be due and payable, by a notice in writing to Dana (and to the
relevant Trustee, if given by holders) and upon such declaration such principal
amount, premium, if any, and accrued and unpaid interest will become immediately
due and payable, notwithstanding anything contained in the indenture or the
notes to the contrary. If an Event of Default referred to in clause (7) above
involving Dana occurs, all unpaid principal of, and premium, if any, and accrued
and unpaid interest on the notes then outstanding will ipso facto become due and
payable without any declaration or other act on the part of the Trustee or any
holder.
No holder of any note may enforce the indenture or the notes except as
provided in the indenture. Subject to the provisions of the indenture relating
to the duties of the Trustee, with respect to the indenture the Trustee is under
no obligation to exercise any of its rights or powers under the indenture at the
request, order or direction of any of the holders, unless such holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
indenture and applicable law, the holders of a majority in aggregate principal
amount of the then outstanding dollar notes and euro notes, as the case may be,
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee. The Trustee may withhold from the relevant holders
notice of any continuing Default or Event of Default (except a Default or Event
of Default in the payment of principal of or premium, if any, or interest on the
dollar notes or euro notes, as the case may be, or that resulted from the
failure of Dana to comply with the provisions of "-- Certain Covenants -- Change
of Control" or "-- Merger, Consolidation, Etc." above) if it determines that
withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the dollar notes
then outstanding by notice to the Trustee may rescind an acceleration of such
dollar notes and its consequences if all existing Events of Default (other than
the nonpayment of principal of and premium, if any, and interest on the dollar
notes which has become due solely by virtue of such acceleration) have been
cured or waived and if the rescission would not conflict with any judgment or
decree. The holders of a majority in aggregate principal amount of the euro
notes then outstanding by notice to the Trustee may rescind an acceleration of
such euro notes and its consequences if all existing Events of Default (other
than the non-payment of principal of and premium, if any, and interest on the
euro notes which has become due solely by virtue of such acceleration) have been
cured or waived and if the rescission would not conflict with any judgment or
decree. No such rescission shall affect any subsequent Default or impair any
right consequent thereto.
The holders of a majority in aggregate principal amount of the dollar notes
then outstanding may, on behalf of the holders of all the dollar notes, waive
any past Default or Event of Default under the indenture as it relates to the
dollar notes and its consequences, except a Default in the payment of principal
of or premium, if any, or interest on the dollar notes or in respect of a
covenant or provision of the indenture which cannot be modified or amended
without the consent of all holders. The holders of a majority in aggregate
principal amount of the euro notes then outstanding may on behalf of the holders
of all the euro notes, waive any past Default or Event of Default under the
indenture as it relates to the euro notes and its consequences, except a Default
in the payment of principal of or premium, if any, or interest on, the euro
notes or in respect of a covenant or provision of the indenture which cannot be
modified or amended without the consent of all holders.
Under the indenture, an officer of Dana is required to provide a
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default that has occurred and, if applicable, describe
such Default or Event of Default and the status thereof (provided that an
officer shall certify at least annually whether or not any Default or Event of
Default has occurred).
AMENDMENT, SUPPLEMENT AND WAIVER
From time to time, Dana, when authorized by a resolution of its Board of
Directors, and the Trustee, may, without the consent of the holders, amend,
waive or supplement the indenture and the notes issued
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thereunder for certain specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, qualifying, or maintaining the
qualification of, the relevant indenture under the Trust Indenture Act, or
making any change that does not adversely affect the rights of any holder;
provided that Dana has delivered to the Trustee an opinion of counsel stating
that such change does not adversely affect the rights of any holder. Other
amendments and modifications of the indenture and the dollar notes and euro
notes issued thereunder may be made by Dana, and the Trustee with the consent of
the holders of not less than a majority of the aggregate principal amount of the
dollar notes and/or euro notes then outstanding affected thereby.
Notwithstanding the foregoing, no amendment or modification may, without
the consent of the holder of each outstanding note affected thereby:
(1) change the maturity of the principal of or any installment of
interest on any such note or alter the optional redemption or repurchase
provisions of any such note or the indenture in a manner adverse to the
holders of such notes;
(2) reduce the principal amount of (or the premium) of any such note;
(3) reduce the rate of or extend the time for payment of interest on
any note;
(4) change the place or currency of payment of principal of (or
premium) or interest on any such note or the obligation on the part of Dana
to pay Additional Amounts;
(5) modify any provisions of the indenture relating to the waiver of
past defaults (other than to add sections to the indenture or the notes
subject thereto which do not adversely affect the holders of notes) or the
right of the holders of notes outstanding thereunder to institute suit for
the enforcement of any payment on or with respect to any notes or the
modification and amendment of the indenture and any notes (other than to
add sections to the indenture or the notes which may not be amended,
supplemented or waived without the consent of each holder herein affected);
(6) reduce the percentage of the principal amount of outstanding
dollar notes and euro notes, as the case may be, necessary for amendment to
or waiver of compliance with any provision of the indenture or the dollar
notes and euro notes, as the case may be, outstanding thereunder or for
waiver of any Default in respect thereof;
(7) waive a default in the payment of principal of, interest on, or
redemption payment with respect to, such dollar note or euro note (except a
rescission of acceleration of the relevant notes by the holders thereof as
provided in the indenture and a waiver of the payment default that resulted
from such acceleration);
(8) modify the ranking or priority of the notes; or
(9) modify the provisions relating to any Offer to Purchase required
under the covenants described under "-- Certain Covenants -- Limitation on
Certain Asset Dispositions" or "-- Certain Covenants -- Change of Control"
in a manner materially adverse to the holders of notes affected thereby.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
Dana may, at its option and at any time, terminate the obligations of Dana
with respect to the dollar notes or the euro notes or all of the notes
(defeasance). Such defeasance means that Dana shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding notes so
defeased, except for:
(1) the rights of holders of outstanding notes to receive payment in
respect of the principal of, premium, if any, and interest on such notes
when such payments are due;
(2) Dana's obligations to issue temporary notes, register the transfer
or exchange of any notes, replace mutilated, destroyed, lost or stolen
notes and maintain an office or agency for payments in respect of the
notes;
(3) the rights, powers, trusts, duties and immunities of the Trustee;
and
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(4) the defeasance provisions of the indenture.
In the event that the dollar notes or the euro notes are defeased but not all of
the notes are defeased, Dana's obligations with respect to the notes not
defeased shall be unaffected by the defeasance of the other notes.
In addition, Dana may, at its option and at any time, elect to terminate
its obligations with respect to certain covenants that are set forth in the
indenture with respect to the dollar notes or the euro notes or all of the
notes, some of which are described under "-- Certain Covenants" above, and any
omission to comply with such obligations shall not constitute a Default or an
Event of Default with respect to the notes so defeased (covenant defeasance).
In order to exercise either defeasance or covenant defeasance:
(1) Dana must irrevocably deposit with the Trustee, in trust, for the
benefit of the holders of the notes to be defeased, in the case of the
dollar notes, cash in United States dollars, U.S. government Obligations,
or a combination thereof, or in the case of the euro notes, cash in euros,
in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, and interest on the outstanding notes to be defeased to
redemption or maturity;
(2) Dana shall have delivered to the Trustee an opinion of counsel to
the effect that the holders of the outstanding notes to be defeased will
not recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance or covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if the act of such defeasance or covenant
defeasance had not occurred (in the case of defeasance, such opinion must
refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable Federal income tax laws);
(3) no Default or Event of Default under the indenture shall have
occurred and be continuing immediately after giving effect to such deposit;
(4) such defeasance or covenant defeasance shall not cause the Trustee
to have a conflicting interest with respect to any securities of Dana;
(5) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument to which Dana is a party or by which it is bound;
(6) Dana shall have delivered to the Trustee an opinion of counsel to
the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; and
(7) Dana shall have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent under
the indenture to either defeasance or covenant defeasance, as the case may
be, have been complied with.
Notwithstanding the foregoing, the opinion of counsel required by clause
(2) above need not be delivered if at such time all outstanding dollar notes or
euro notes, as the case may be, have been irrevocably called for redemption.
SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
notes issued thereunder, as expressly provided for in such indenture) as to all
outstanding notes issued thereunder when:
(1) either
(a) all the notes issued thereunder theretofore authenticated and
delivered (except lost, stolen or destroyed notes issued thereunder
which have been replaced or paid and notes issued thereunder for whose
payment money has theretofore been deposited in trust or segregated and
held in trust by
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Dana and thereafter repaid to Dana or discharged from such trust) have
been delivered to the Trustee for cancellation or
(b) all notes issued thereunder not theretofore delivered to the
Trustee for cancellation have become due and payable and Dana has
irrevocably deposited or caused to be deposited with the Trustee funds
in U.S. dollars, in the case of the dollar notes, and euros, in the case
of the euro notes, in an amount sufficient to pay and discharge the
entire Indebtedness on such notes issued thereunder not theretofore
delivered to the Trustee for cancellation, for principal of, premium, if
any, and interest on such notes issued thereunder to the date of deposit
together with irrevocable instructions from Dana directing the Trustee
to apply such funds to the payment thereof at maturity;
(2) Dana has paid all other sums payable under such indenture by Dana;
and
(3) Dana has delivered to the Trustee an officers' certificate and an
opinion of counsel stating that all conditions precedent under the
indenture relating to the satisfaction and discharge of the indenture have
been complied with.
NOTICES
All notices shall be deemed to have been given (i) by the mailing by first
class mail, postage prepaid, of such notices to holders of the notes at their
registered addresses as recorded in the note registers, and (ii) so long as the
notes are listed on the Luxembourg Stock Exchange and it is required by the
rules of the Luxembourg Stock Exchange, by publication of such notice to the
holders of the notes in English in a leading newspaper having general
circulation in Luxembourg (which is expected to be the Luxemburger Wort) or, if
such publication is not practicable, in one other leading English language daily
newspaper with general circulation in Europe, such newspaper being published on
each business day in morning editions, whether or not it shall be published on
Saturday, Sunday or holiday editions.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Dana or any
of its Subsidiaries, as such, shall have any liability for any obligations of
Dana under the notes or the indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each holder by accepting a
note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
GOVERNING LAW
The indenture and the notes are governed by, and construed in accordance
with, the laws of the State of New York.
THE TRUSTEE
The indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the indenture, and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.
The indenture and the provisions of the Trust Indenture Act contain certain
limitations on the rights of the Trustee, should it become a creditor of Dana,
to obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
Trust Indenture Act, the Trustee will be permitted to engage in other
transactions, provided that if the Trustee acquires any conflicting interest as
described in the Trust Indenture Act, it must eliminate such conflict or resign.
88
REGISTRATION RIGHTS
Dana entered into a registration rights agreement with the initial
purchasers in which it agreed to use its reasonable best efforts to file with
the SEC and cause to become effective a registration statement relating to an
offer to exchange the outstanding notes for SEC-registered notes (exchange
notes), with terms identical to the outstanding notes (except that the exchange
notes will not be subject to restrictions on transfer or to any increase in
annual interest rates as described below). This prospectus is part of the
registration statement filed in compliance with these provisions.
When the SEC declares this registration statement effective, Dana will
offer the exchange notes in return for the outstanding notes. The exchange offer
will remain open for at least 20 business days after the date Dana mails notice
of the exchange offer to noteholders. For each note surrendered to Dana under
the exchange offer, the noteholder will receive an exchange note of equal
principal amount. Interest on each exchange note will accrue from the last
interest payment date on which interest was paid on the notes or, if no interest
has been paid on the notes, from the date of issuance of the outstanding notes.
If applicable interpretations of the staff of the SEC do not permit Dana to
effect the exchange offer, Dana will use its reasonable best efforts to cause to
become effective a shelf registration statement relating to resales of the notes
and to keep that shelf registration statement effective until the expiration of
the time period referred to in Rule 144(k) under the Securities Act, or such
shorter period that will terminate when all notes covered by the shelf
registration statement have been sold. Dana will, in the event of such a shelf
registration, provide to each noteholder copies of a prospectus, notify each
noteholder when the shelf registration statement has become effective and take
certain other actions to permit resales of the notes. A noteholder that sells
notes under the shelf registration statement generally will be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with those sales and will be
bound by the provisions of the registration rights agreement that are applicable
to such a noteholder (including certain indemnification obligations).
If the exchange offer is not completed on or before May 8, 2002, the
respective annual interest rates borne by the dollar notes and the euro notes
will be increased by 1.0% per annum until the exchange offer is completed.
Whenever there is mentioned herein, in any context, the payment of interest on a
note, such mention shall be deemed to include mention of the payment of any
additional interest to the extent that, in such context, any such additional
interest is, was or would be payable in respect thereof pursuant to the
provisions of such note, the indenture and the registration rights agreement and
express mention of the payment of additional interest (if applicable) in any
provisions hereof shall not be construed as excluding additional interest in
those provisions hereof where such express mention is not made.
Dana will be entitled to close the exchange offer 20 business days after
its commencement, provided that Dana has accepted all notes validly surrendered
in accordance with the terms of the exchange offer. Notes not tendered in the
exchange offer shall bear interest at the rates set forth on the cover page of
this prospectus and be subject to all the terms and conditions specified in the
indenture, including transfer restrictions.
This summary of the provisions of the registration rights agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the registration rights agreement, a copy
of which is available from Dana upon request.
CERTAIN DEFINITIONS
"Acquired Indebtedness" of any specified Person means Indebtedness of any
other Person and its Restricted Subsidiaries existing at the time such other
Person merged with or into or became a Restricted Subsidiary of such specified
Person or assumed by the specified Person in connection with the acquisition of
assets from such other Person and not incurred by the specified Person in
connection with or in anticipation of (a) such other Person and its Restricted
Subsidiaries being merged with or into or becoming a Restricted Subsidiary of
such specified Person or (b) such acquisition by the specified Person.
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"Affiliate" means, when used with reference to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, the referent Person, as the case may be. For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct or cause the direction of management or policies of
the referent Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
"Asset Disposition" means any sale, transfer or other disposition
(including, without limitation, by merger, consolidation or Sale and Leaseback
Transaction) of:
(1) shares of Capital Stock of a Restricted Subsidiary of Dana (other
than directors' qualifying shares); or
(2) property or assets of Dana or any of its Restricted Subsidiaries.
Notwithstanding the foregoing, an Asset Disposition shall not include:
(1) a disposition by a Restricted Subsidiary to Dana or by Dana or a
Restricted Subsidiary to a Restricted Subsidiary;
(2) the sale of Cash Equivalents in the ordinary course of business;
(3) a disposition of inventory in the ordinary course of business;
(4) a disposition of obsolete or worn out property or property that is
no longer useful in the conduct of the business of Dana and its Restricted
Subsidiaries and that is disposed of in each case in the ordinary course of
business;
(5) transactions permitted under "Certain Covenants -- Merger,
Consolidation, Etc.";
(6) an issuance of Capital Stock by a Restricted Subsidiary of Dana to
Dana or to a Restricted Subsidiary;
(7) for purposes of "Certain Covenants -- Limitation on Certain Asset
Dispositions" only, the making of a Permitted Investment or a disposition
subject to "Certain Covenants -- Limitation on Restricted Payments";
(8) an Asset Swap effected in compliance with "Certain
Covenants -- Limitation on Certain Asset Dispositions";
(9) any sale, transfer or other disposition of defaulted receivables
for collection;
(10) the grant in the ordinary course of business of any license of
patents, trademarks, registrations therefor and other similar intellectual
property;
(11) the granting of any Lien (or foreclosure thereon) securing
Indebtedness to the extent that such Lien is granted in compliance with
"-- Certain Covenants -- Limitation on Liens" above and dispositions in
connection with Permitted Liens;
(12) sales of accounts receivable in connection with the Receivables
Facility;
(13) sales of accounts receivable, equipment and related assets
(including contract rights) of the type specified in the definition of
"Qualified Securitization Transaction" to a Securitization Subsidiary for
the fair market value thereof, including cash in an amount at least equal
to 90% of the fair market value thereof as determined in accordance with
GAAP;
(14) transfers of accounts receivable, equipment and related assets
(including contract rights) of the type specified in the definition of
"Qualified Securitization Transaction" (or a fractional undivided interest
therein) by a Securitization Subsidiary in a Qualified Securitization
Transaction; and
(15) any isolated sale, transfer or other disposition that does not
(together with all related sales, transfers or dispositions) involve
consideration in excess of $10 million.
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"Asset Sale Offer Trigger Date" has the meaning set forth in "-- Certain
Covenants -- Limitation on Certain Asset Dispositions."
"Asset Swap" means concurrent purchase and sale or exchange of Related
Business Assets between Dana or any of its Restricted Subsidiaries and another
Person; provided that any cash received must be applied in accordance with
"Limitation on Certain Asset Dispositions."
"Attributable Indebtedness" in respect of a Sale and Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
lower of the interest rates borne by the notes, compounded annually) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale and Leaseback Transaction (including any period
for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (1) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (2) the sum of all such payments.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Bund Rate" means, with respect to any redemption date for the euro notes,
the five day average of the daily fixing on the Frankfurt Stock Exchange of the
rate for German Bund securities having a constant maturity most nearly equal to
the period from the redemption date to the maturity date; provided, however,
that if the period from the redemption date to the maturity date is not equal to
the constant maturity of a German Bund security for which a weekly average yield
is given, the Bund Rate shall be obtained by linear interpolation (calculated to
the nearest one-twelfth of a year) from the weekly average yields of German Bund
securities for which such yields are given, except that if the period from the
redemption date to the maturity date is less than one year, the weekly average
yield on actually traded German Bund securities adjusted to a constant maturity
of one year shall be used.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participation or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation will be the capitalized amount of such obligation at the time
any determination thereof is to be made as determined in accordance with GAAP,
and the Stated Maturity thereof will be the date of the last payment of rent or
any other amount due under such lease before the first date such lease may be
terminated without penalty.
"Cash Equivalents" means
(1) securities issued or directly and fully guaranteed or insured by
the United States Government or any agency or instrumentality of the United
States (provided that the full faith and credit of the United States is
pledged in support thereof), having maturities of not more than one year
from the date of acquisition;
(2) marketable general obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having a credit rating
of "A" or better from either S&P or Moody's;
(3) certificates of deposit, time deposits, eurodollar time deposits,
overnight bank deposits or bankers' acceptances having maturities of not
more than one year from the date of acquisition thereof issued by any
commercial bank the long-term debt of which is rated at the time of
acquisition thereof at
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least "A" or the equivalent thereof by S&P or "A" or the equivalent thereof
by Moody's, and having combined capital and surplus in excess of $500.0
million;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (1), (2) and (3)
entered into with any bank meeting the qualifications specified in clause
(3) above;
(5) commercial paper rated at the time of acquisition thereof at least
"A-2" or the equivalent thereof by S&P or "P-2" or the equivalent thereof
by Moody's, or carrying an equivalent rating by a nationally recognized
rating agency, if both of the two named rating agencies cease publishing
ratings of investments, and in any case maturing within one year after the
date of acquisition thereof; and
(6) interests in any investment company or money market fund which
invests solely in instruments of the type specified in clauses (1) through
(5) above.
"Change of Control" means the occurrence of one or more of the following
events:
(1) any "person" or "group" (as such terms are used in Section 13(d)
and 14(d) of the Exchange Act), other than employee or retiree benefit
plans or trusts sponsored or established by Dana, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Dana representing 35% or more of
the combined voting power of Dana's then outstanding Voting Stock;
(2) the following individuals cease for any reason to constitute more
than two-thirds of the number of directors then serving on the Board of
Directors of Dana: individuals who, on the Issue Date, constitute the Board
of Directors and any new director (other than a director whose initial
assumption of the office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation,
relating to the election of directors of Dana) whose appointment or
election by the Board of Directors or nomination for election by Dana's
stockholders was approved by the vote of at least a majority of the
directors then still in office or whose appointment, election or nomination
was previously so approved or recommended;
(3) the shareholders of Dana shall approve any Plan of Liquidation
(whether or not otherwise in compliance with the provisions of the
indenture); or
(4) Dana or any Restricted Subsidiary of Dana, directly or indirectly,
sells, assigns, conveys, transfers, leases or otherwise disposes of, in one
transaction or a series of related transactions, all or substantially all
of the property or assets of Dana and the Restricted Subsidiaries of Dana
(determined on a consolidated basis) to any Person; provided, that neither
the merger of a Restricted Subsidiary of Dana into Dana or into any
Restricted Subsidiary of Dana nor a sale, assignment, conveyance, transfer,
lease or other disposition of all or substantially all of the property or
assets of a Restricted Subsidiary of Dana into Dana or into any Restricted
Subsidiary of Dana shall be deemed to be a Change of Control.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of Dana, the Capital Stock of which constitutes all or
substantially all of the properties and assets of Dana, shall be deemed to be
the transfer of all or substantially all of the properties and assets of Dana.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means with respect to any Person, any and all shares,
interest or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of such Person's common stock whether or not
outstanding on the Issue Date, and includes, without limitation, all series and
classes of such common stock.
"Comparable Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing
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to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City
time on the third business day preceding such redemption date.
"Comparable Treasury Issue" means the fixed rate United States Treasury
security selected by an Independent Investment Banker as having a maturity most
comparable to the remaining term of the dollar notes (and which is not callable
prior to maturity) to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practices, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the dollar notes to be redeemed.
"Comparable Treasury Price" means with respect to any redemption date for
the dollar notes: (1) the average of four Comparable Treasury Dealer Quotations
for such redemption date, after excluding the highest and lowest of such
Comparable Treasury Dealer Quotations, or (2) if the Trustee obtains fewer than
four such Comparable Treasury Dealer Quotations, the average of all such
quotations.
"Consolidated Coverage Ratio" means as of any date of determination, with
respect to any Person, the ratio of (x) the aggregate amount of Consolidated
EBITDA of such Person for the period of the most recent four consecutive fiscal
quarters ending prior to the date of such determination for which financial
statements are in existence to (y) Consolidated Interest Expense for such four
fiscal quarters, provided, however, that:
(1) if Dana or any Restricted Subsidiary:
(a) has incurred any Indebtedness since the beginning of such four
fiscal quarters that remains outstanding on such date of determination
or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an incurrence of Indebtedness,
Consolidated EBITDA and Consolidated Interest Expense for such period
will be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day
of such period (except that in making such computation, the amount of
Indebtedness under any revolving credit facility outstanding on the date
of such calculation will be computed based on (i) the average daily
balance of such Indebtedness during such four fiscal quarters or such
shorter period for which such facility was outstanding or (ii) if such
facility was created after the end of such four fiscal quarters, the
average daily balance of such Indebtedness during the period from the
date of creation of such facility to the date of such calculation) and
to the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if
such discharge had occurred on the first day of such period; or
(b) has repaid, repurchased, defeased or otherwise discharged any
Indebtedness since the beginning of the period that is no longer
outstanding on such date of determination or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio involves a
discharge of Indebtedness (in each case other than Indebtedness incurred
under any revolving credit facility unless such Indebtedness has been
permanently repaid and the related commitment terminated), Consolidated
EBITDA and Consolidated Interest Expense for such period will be
calculated after giving effect on a pro forma basis to such discharge of
such Indebtedness, including with the proceeds of such new Indebtedness,
as if such discharge had occurred on the first day of such period;
(2) if since the beginning of such period Dana or any Restricted
Subsidiary will have made any Asset Disposition or if the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio is an
Asset Disposition:
(a) the Consolidated EBITDA for such period will be reduced by an
amount equal to the Consolidated EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset
Disposition for such period or increased by an amount equal to the
Consolidated EBITDA (if negative) directly attributable thereto for such
period; and
(b) Consolidated Interest Expense for such period will be reduced
by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of Dana or any Restricted Subsidiary
repaid, repurchased, defeased or otherwise discharged with respect to
Dana and its continuing Restricted Subsidiaries in connection with such
Asset Disposition for such period (or, if
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the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent Dana and its
continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale);
(3) if since the beginning of such period Dana or any Restricted
Subsidiary (by merger or otherwise) will have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary
or is merged with or into Dana) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially
all of an operating unit, division or line of business, Consolidated EBITDA
and Consolidated Interest Expense for such period will be calculated after
giving pro forma effect thereto (including the incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first
day of such period; and
(4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into Dana
or any Restricted Subsidiary since the beginning of such period) will have
made any Asset Disposition or any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (2) or (3) above if
made by Dana or a Restricted Subsidiary during such period, Consolidated
EBITDA and Consolidated Interest Expense for such period will be calculated
after giving pro forma effect thereto as if such Asset Disposition or
Investment or acquisition of assets occurred on the first day of such
period.
For purposes of this definition, whenever pro forma effect is to be given to any
calculation under this definition, the pro forma calculations will be determined
in good faith by a responsible financial or accounting officer of Dana
(including pro forma expense and cost reductions calculated on a basis
consistent with Regulation S-X under the Securities Act). If any Indebtedness
bears a floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness will be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Protection Agreement applicable to
such Indebtedness if such Interest Rate Protection Agreement has a remaining
term in excess of 12 months).
"Consolidated EBITDA" for any period means, without duplication, the
Consolidated Net Income for such period, plus the following to the extent
deducted in calculating such Consolidated Net Income:
(1) Consolidated Interest Expense;
(2) Consolidated Income Taxes;
(3) consolidated depreciation expense;
(4) consolidated amortization of intangibles; and
(5) other non-cash charges reducing Consolidated Net Income (excluding
any such non-cash charge to the extent it represents an accrual of or
reserve for cash charges in any future period or amortization of a prepaid
cash expense that was paid in a prior period not included in the
calculation).
"Consolidated Income Taxes" means, with respect to any Person for any
period, taxes imposed upon such Person or other payments required to be made by
such Person by any governmental authority which taxes or other payments are
calculated by reference to the income or profits of such Person or such Person
and its Restricted Subsidiaries (to the extent such income or profits were
included in computing Consolidated Net Income for such period), regardless of
whether such taxes or payments are required to be remitted to any governmental
authority.
"Consolidated Interest Expense" means, for any period, the total interest
expense of Dana and its consolidated Restricted Subsidiaries, whether paid or
accrued, plus, to the extent not included in such interest expense:
(1) interest expense attributable to Capitalized Lease Obligations and
the interest portion of rent expense associated with Attributable
Indebtedness in respect of the relevant lease giving rise thereto,
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determined as if such lease were a capitalized lease in accordance with
GAAP and the interest component of any deferred payment obligations;
(2) amortization of debt discount;
(3) non-cash interest expense;
(4) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing;
(5) the interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries;
(6) net costs associated with Hedging Obligations (including
amortization of fees);
(7) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period;
(8) the product of (a) all dividends paid or payable in cash, Cash
Equivalents or Indebtedness or accrued during such period on any series of
Disqualified Stock of such Person or on Preferred Stock of its Restricted
Subsidiaries payable to a party other than Dana or a Restricted Subsidiary,
times (b) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state, provincial and
local statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP; and
(9) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than Dana) in connection
with Indebtedness Incurred by such plan or trust; provided, however, that
there will be excluded therefrom any such interest expense of any
Unrestricted Subsidiary to the extent the related Indebtedness is not
Guaranteed or paid by Dana or any Restricted Subsidiary.
For purposes of the foregoing, total interest expense will be determined after
giving effect to any net payments made or received by Dana and its Subsidiaries
with respect to Interest Rate Protection Agreements.
"Consolidated Net Income" means, for any period, the net income (loss) of
Dana and its consolidated Restricted Subsidiaries determined in accordance with
GAAP; provided, however, that there will not be included in such Consolidated
Net Income:
(1) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that:
(a) subject to the limitations contained in clauses (4), (5) and
(6) below, Dana's equity in the net income of any such Person for such
period will be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such
period to Dana or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution
to a Restricted Subsidiary, to the limitations contained in clause (3)
below); and
(b) Dana's equity in a net loss of any such Person (other than an
Unrestricted Subsidiary) for such period will be included in determining
such Consolidated Net Income to the extent such loss has been funded
with cash from Dana or a Restricted Subsidiary;
(2) any net income (loss) of any Person acquired by Dana or a
Subsidiary in a pooling of interests transaction for any period before the
date of such acquisition;
(3) any net income (but not loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to Dana, except that:
(a) subject to the limitations contained in clauses (4), (5) and
(6) below, Dana's equity in the net income of any such Restricted
Subsidiary for such period will be included in such Consolidated Net
Income up to the aggregate amount of cash that could have been
distributed by such Restricted
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Subsidiary during such period to Dana or another Restricted Subsidiary
as a dividend (subject, in the case of a dividend to another Restricted
Subsidiary, to the limitation contained in this clause); and
(b) Dana's equity in a net loss of any such Restricted Subsidiary
for such period will be included in determining such Consolidated Net
Income;
(4) any gain (loss) realized upon the sale or other disposition of any
property, plant or equipment of Dana or its consolidated Restricted
Subsidiaries (including pursuant to any Sale and Leaseback Transaction)
which is not sold or otherwise disposed of in the ordinary course of
business (provided that sales of equipment and related assets (including
contract rights) or Receivables or interests therein pursuant to Qualified
Securitization Transactions shall be deemed to be in the ordinary course)
and any gain (loss) realized upon the sale or other disposition of any
Capital Stock of any Person;
(5) any extraordinary gain or loss; and
(6) the cumulative effect of a change in accounting principles.
"Consolidated Net Tangible Assets" means the total assets (less applicable
reserved and other properly deductible items) on the balance sheet of Dana and
its consolidated Subsidiaries for the most recent fiscal quarter, less (i) all
current liabilities and (ii) goodwill, trade names, patents, organization
expenses and other like intangibles of Dana and its consolidated Subsidiaries.
"Consolidated Tangible Assets" means the total assets (less applicable
reserved and other properly deductible items) on the balance sheet of Dana and
its consolidated Subsidiaries for the most recent fiscal quarter, less goodwill,
trade names, patents, organization expenses and other like intangibles of Dana
and its consolidated Subsidiaries.
"Credit Facilities" means (i) the 364-Day Credit Agreement dated as of
November 15, 2000 among Dana, as borrower, the initial lenders named therein, as
initial lenders, and Citibank, N.A., as Administrative Agent, Deutsche Bank, AG,
New York Branch and Bank of America, N.A., as Syndication Agents, Bank One, NA,
as Documentation Agent and Salomon Smith Barney Inc., as Lead Arranger and Book
Manager, including any related notes, (ii) the Five-Year Credit Agreement dated
as of November 15, 2000 among Dana, as borrower, the initial lenders named
therein, as initial lenders, and Citibank, N.A., as Administrative Agent,
Deutsche Bank, AG, New York Branch and Bank of America, N.A., as Syndication
Agents, Bank One, NA, as Documentation Agent and Salomon Smith Barney Inc., as
Lead Arranger and Book Manager, including any related notes and (iii) the
Receivables Facility, each as amended to the Issue Date and as such Facilities
may from time to time thereafter be amended, restated, supplemented or otherwise
modified, including any refinancing, refunding, replacement or extension thereof
and whether by the same or any other lender or group of lenders; provided that
no amendment, restatement, supplement or other modification to such facilities
shall permit a Restricted Subsidiary to be a borrower thereunder except to the
extent permitted under clause (16) under "Limitations on Incurrence of
Indebtedness and Issuance of Preferred Stock" or provide for the granting of a
Lien other than as permitted by "Limitations on Liens"; and provided, further,
that in no event shall the amount of Indebtedness which Dana may incur under the
Credit Facilities, including any refinancing, refunding, replacement or
extension thereof, exceed $1.65 billion.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect Dana or
any of its Restricted Subsidiaries against fluctuations in currency values to or
under which Dana or any of its Restricted Subsidiaries is a party or a
beneficiary on the date of the indenture or becomes a party or a beneficiary
thereafter.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default (as defined in the indenture).
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"Disqualified Stock" means, with respect to any Person, any Capital Stock
of such Person which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event:
(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
(2) is convertible or exchangeable for Indebtedness or Disqualified
Stock (excluding Capital Stock which is convertible or exchangeable solely
at the option of Dana or a Restricted Subsidiary); or
(3) is redeemable at the option of the holder of the Capital Stock, in
whole or in part,
in each case on or prior to the date that is 91 days after the date (a) on which
the notes mature or (b) on which there are no notes outstanding, provided that
only the portion of Capital Stock which so matures or is mandatorily redeemable,
is so convertible or exchangeable or is so redeemable at the option of the
holder thereof before such date will be deemed to be Disqualified Stock;
provided, further that any Capital Stock that would constitute Disqualified
Stock solely because the holders thereof have the right to require Dana to
repurchase such Capital Stock upon the occurrence of a change of control or
asset sale (each defined in a substantially identical manner to the
corresponding definitions in the indenture) shall not constitute Disqualified
Stock if the terms of such Capital Stock (and all such securities into which it
is convertible or for which it is redeemable or exchangeable) provide that Dana
may not repurchase or redeem any such Capital Stock (and all such securities
into which it is convertible or for which it is redeemable or exchangeable)
pursuant to such provision prior to compliance by Dana with the provisions of
the indenture described under the captions "Change of Control" and "Certain
Covenants -- Limitation on Certain Asset Dispositions" and such repurchase or
redemption complies with "Certain Covenants -- Limitation on Restricted
Payments."
"Event of Default" has the meaning set forth under "-- Events of Default"
herein.
"Funded Debt" means indebtedness for borrowed money owed or guaranteed by
Dana or any consolidated Restricted Subsidiary, and any other indebtedness which
under GAAP would appear as debt on Dana's consolidated balance sheet, which
matures by its terms more than twelve months from the date as of which Funded
Debt is to be determined or is extendible or renewable at the option of the
obligor to a date more than twelve months from the date as of which Funded Debt
is to be determined.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such other Person (whether arising by
virtue of partnership arrangements, or by agreement to keepwell, to
purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise); or
(2) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part), provided
that the term "guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business. The term "guarantee" used as a
verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Protection Agreement or Currency Agreement.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such
97
Indebtedness or other obligation on the balance sheet of such Person (and
"incurrence," "incurred," "incurable" and "incurring" shall have meanings
correlative to the foregoing), provided that the accrual of interest (whether
such interest is payable in cash or in kind) and the accretion of original issue
discount shall not be deemed an incurrence of Indebtedness, provided, further,
that:
(1) any Indebtedness or Capital Stock of a Person existing at the time
such Person becomes (after the Issue Date) a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) of Dana shall be deemed
to be incurred or issued, as the case may be, by such Restricted Subsidiary
at the time it becomes a Restricted Subsidiary of Dana; and
(2) any amendment, modification or waiver of any document pursuant to
which Indebtedness was previously incurred shall not be deemed to be an
incurrence of Indebtedness unless and then only to the extent such
amendment, modification or waiver increases the principal or premium
thereof or interest rate thereon (including by way of original issue
discount).
"Indebtedness" means, with respect to any Person, at any date, any of the
following, without duplication:
(1) any liability, contingent or otherwise, of such Person (a) for
borrowed money (whether or not the recourse of the lender is to the whole
of the assets of such Person or only to a portion thereof), (b) evidenced
by a note, bond, debenture or similar instrument or letters of credit
(including a purchase money obligation) or (c) for the payment of money
relating to a Capitalized Lease Obligation or other obligation (whether
issued or assumed) relating to the deferred purchase price of property, but
excluding trade accounts payable of such Person arising in the ordinary
course of business;
(2) all conditional sale obligations and all obligations under any
title retention agreement (even if the rights and remedies of the seller
under such agreement in the event of default are limited to repossession or
sale of such property), but excluding trade accounts payable of such Person
arising in the ordinary course of business;
(3) all obligations for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction entered into
in the ordinary course of business;
(4) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on any asset or property (including, without
limitation, leasehold interests and any other tangible or intangible
property) of such Person, whether or not such Indebtedness is assumed by
such Person or is not otherwise such Person's legal liability; provided,
that if the obligations so secured have not been assumed by such Person or
are otherwise not such Person's legal liability, the amount of such
Indebtedness for the purposes of this definition shall be limited to the
lesser of the amount of such Indebtedness secured by such Lien or the fair
market value of the assets or property securing such Lien;
(5) all Indebtedness of others (including all dividends of other
Persons the payment of which is) guaranteed, directly or indirectly, by
such Person or that is otherwise its legal liability or which such Person
has agreed to purchase or repurchase or in respect of which such Person has
agreed continently to supply or advance funds;
(6) all Disqualified Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to
the greater of its voluntary or involuntary liquidation preference and its
maximum fixed repurchase price, but excluding accrued dividends if any;
(7) all obligations under Currency Agreements and Interest Rate
Protection Agreements; and
(8) all Attributable Indebtedness in respect of Sale and Leaseback
Transactions entered into by such person.
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the indenture, and if such price
is based upon, or measured by, the fair
98
market value of such Disqualified Capital Stock, such fair market value shall he
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance without duplication at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date, provided that the amount outstanding at any time of any Indebtedness
issued with original issue discount is the full amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in accordance with GAAP.
For the avoidance of doubt, neither the Operating Agreement nor the
obligations thereunder shall constitute "Indebtedness" for the purposes of the
indenture or the notes.
"Independent Investment Banker" means Deutsche Banc Alex. Brown Inc. or
J.P. Morgan Securities Inc. (and their successors), or, if such firm is
unwilling or unable to select the applicable Comparable Treasury Issue, an
independent investment banking institution selected by Dana.
"Interest Rate Protection Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar agreement or
arrangement designed to protect a Person or any Restricted Subsidiary against
fluctuations in interest rates to or under which such Person or any Restricted
Subsidiary of such Person is a party or a beneficiary on the Issue Date or
becomes a party or a beneficiary thereafter.
"Investment" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of any direct or
indirect advance, loan (other than advances to customers in the ordinary course
of business) or other extension of credit (including by way of guarantee or
similar arrangement, but excluding any debt or extension of credit represented
by a bank deposit other than a time deposit) or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments issued
by, such Person and all other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; provided that
none of the following will be deemed to be an Investment:
(1) Hedging Obligations entered into in the ordinary course of
business and in compliance with the indenture;
(2) endorsements of negotiable instruments and documents in the
ordinary course of business; and
(3) an acquisition of assets, Capital Stock or other securities by
Dana or a Subsidiary for consideration to the extent such consideration
consists of common equity securities of Dana.
For purposes of "Certain Covenants -- Limitation on Restricted Payments",
(1) "Investment" will include the portion (proportionate to Dana's
equity interest in a Restricted Subsidiary to be designated as an
Unrestricted Subsidiary) of the fair market value of the net assets of such
Restricted Subsidiary of Dana at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, Dana will be
deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (a) Dana's "Investment" in
such Subsidiary at the time of such redesignation less (b) the portion
(proportionate to Dana's equity interest in such Subsidiary) of the fair
market value of the net assets (as conclusively determined by the Board of
Directors of Dana in good faith) of such Subsidiary at the time that such
Subsidiary is so re-designated a Restricted Subsidiary; and
(2) any property transferred to or from an Unrestricted Subsidiary
will be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors of Dana. If
Dana or any Restricted Subsidiary of Dana sells or otherwise disposes of
any Voting Stock of any Restricted Subsidiary of Dana such that, after
giving effect to any such sale or disposition, such entity
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is no longer a Subsidiary of Dana, Dana shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair
market value (as conclusively determined by the Board of Directors of Dana
in good faith) of the Capital Stock of such Subsidiary not sold or disposed
of.
"Investment Grade" means:
(1) with respect to S&P, any of the rating categories from and
including AAA to and including BBB-; and
(2) with respect to Moody's, any of the rating categories from and
including Aaa to and including Baa3.
"Issue Date" means the date on which the notes are originally issued under
the indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind, including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction but excluding any such filing or
agreement which reflects ownership by a third party of
(1) property leased to the referent Person or any of its Restricted
Subsidiaries under a lease that is not in the nature of a conditional sale
or title retention agreement or
(2) accounts, general intangibles or chattel paper sold to the
referent Person.
"Material Subsidiary" means, at any date of determination, any Subsidiary
of Dana that, together with its Subsidiaries,
(1) for the most recent fiscal year of Dana accounted for more than 5%
of the consolidated revenues of Dana or
(2) as of the end of such fiscal year, was the owner of more than 5%
of the consolidated assets of Dana, all as set forth on the most recently
available consolidated financial statements of Dana and its consolidated
Subsidiaries for such fiscal year prepared in conformity with GAAP.
"Maturity Date" means August 15, 2011.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" from any Asset Disposition by any Person means
cash or readily marketable Cash Equivalents received (including by way of sale
or discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquirer of Indebtedness or other obligations relating to such properties or
assets or received in any other non-cash form) therefrom by such Person,
including any cash received by way of deferred payment or upon the monetization
or other disposition of any non-cash consideration (including notes or other
securities) received in connection with such Asset Disposition, net of:
(1) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred (including, without limitation, fees and
expenses of accountants, brokers, printers and other similar entities) and
all federal, state, foreign and local taxes required to be accrued as a
liability as a consequence of such Asset Disposition;
(2) all payments made by such Person or its Restricted Subsidiaries on
any Indebtedness which is secured by such assets in accordance with the
terms of any Lien upon or with respect to such assets or which must by the
terms of such Lien, or in order to obtain a necessary consent to such Asset
Disposition or by applicable law, be repaid out of the proceeds from such
Asset Disposition;
(3) all payments made with respect to liabilities associated with the
assets which are the subject of the Asset Disposition, including, without
limitation, trade payables and other accrued liabilities;
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(4) appropriate amounts to be provided by such Person or any
Restricted Subsidiary thereof, as the case may be, as a reserve in
accordance with GAAP against any liabilities associated with such assets
and retained by such Person or any Restricted Subsidiary thereof, as the
case may be, after such Asset Disposition, including, without limitation,
liabilities under any indemnification obligations and severance and other
employee termination costs associated with such Asset Disposition, until
such time as such amounts are no longer reserved or such reserve is no
longer necessary (at which time any remaining amounts will become Net
Available Proceeds to be allocated in accordance with the provisions of
clause (3) of the covenant of the indenture described under "-- Certain
Covenants -- Limitation on Certain Asset Dispositions"); and
(5) all distributions and other payments, made to minority interest
holders, if any, in Restricted Subsidiaries of such Person or joint
ventures as a result of such Asset Disposition.
"Offer to Purchase" means a written offer (the "Offer") sent by Dana by
first class mail, postage prepaid, to each holder at its address appearing in
the register for the dollar notes, or the euro notes, as the case may be, on the
date of the Offer, offering to purchase up to the principal amount of the dollar
notes or the euro notes, as the case may be, in such Offer at the purchase price
specified in such Offer (as determined pursuant to the indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Expiration Date") of the Offer to Purchase which shall be not less than 30
days nor more than 60 days after the date of such Offer and a settlement date
(the "Purchase Date") for purchase of such notes within five Business Days after
the Expiration Date. Dana shall notify the Trustee at least 15 Business Days (or
such shorter period as is acceptable to such Trustee) prior to the mailing of
the Offer of Dana's obligation to make an Offer to Purchase, and the Offer shall
be mailed by Dana or, at Dana's request, by such Trustee in the name and at the
expense of Dana. The Offer shall contain all the information required by
applicable law to be included therein. The Offer shall contain all instructions
and materials necessary to enable such holders to tender such notes pursuant to
the Offer to Purchase. The Offer shall also state:
(1) the Section of the indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding notes offered to
be purchased by Dana pursuant to the Offer to Purchase (including, if less
than 100%, the manner by which such amount has been determined pursuant to
the section of the indenture requiring the Offer to Purchase) (the
"Purchase Amount");
(4) the purchase price to be paid by Dana for each $1,000 aggregate
principal amount of dollar notes and each E1,000 aggregate principal amount
of euro notes accepted for payment (as specified pursuant to the indenture)
(the "Purchase Price");
(5) that the holder may tender all or any portion of the notes
registered in the name of such holder and that any portion of a note
tendered must be tendered in an integral multiple of $1,000 principal
amount in the case of dollar notes and in an integral multiple of E1,000
principal amount in the case of euro notes;
(6) the place or places where notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any note not tendered or tendered but not
purchased by Dana pursuant to the Offer to Purchase will continue to
accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each note being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
(9) that each holder electing to tender all or any portion of a note
pursuant to the Offer to Purchase will be required to surrender such note
at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such note being, if Dana or the Trustee so
requires, duly endorsed by, or
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accompanied by a written instrument of transfer in form satisfactory to
Dana and the Trustee duly executed by the holder thereof or his attorney
duly authorized in writing);
(10) that holders will be entitled to withdraw all or any portion of
notes tendered if Dana (or its Paying Agent) receives, not later than the
close of business on the fifth Business Day next preceding the Expiration
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the holder, the principal amount of the note the holder tendered,
the certificate number of the note the holder tendered and a statement that
such holder is withdrawing all or a portion of his tender;
(11) that (I) if notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, Dana shall purchase all such notes and (II) if
notes in an aggregate principal amount in excess of the Purchase Amount are
tendered and not withdrawn pursuant to the Offer to Purchase, Dana shall
purchase notes having an aggregate principal amount equal to the Purchase
Amount on a pro rata basis (with such adjustments as may be deemed
appropriate so that only dollar notes in denominations of $1,000 or
integral multiples thereof and euro notes in denominations of E1,000 or
integral multiples thereof shall be purchased); and
(12) that in the case of any holder whose note is purchased only in
part, Dana shall execute, and the Trustee shall authenticate and deliver to
the holder of such note without service charge, a new note or notes, of any
authorized denomination as requested by such holder, in all aggregate
principal amount equal to and in exchange for the unpurchased portion of
the note or notes so tendered.
An Offer to Purchase shall be governed by and effected in accordance with the
provisions above pertaining to any Offer.
"Operating Agreement" means the Operating Agreement dated as of May 23,
1995, between Dana and Dana Credit Corporation, as amended.
"Permitted Investments" means:
(1) Investments in marketable, direct obligations issued or guaranteed
by the United States of America, or any governmental entity or agency or
political subdivision thereof (provided, that the good faith and credit of
the United States of America is pledged in support thereof), maturing
within one year of the date of purchase;
(2) Investments in commercial paper issued by corporations or
financial institutions maturing within 180 days from the date of the
original issue thereof, and rated "P-1" or better by Moody's or "A-1" or
better by S&P or an equivalent rating or better by any other nationally
recognized securities rating agency;
(3) Investments in certificates of deposit issued or acceptances
accepted by or guaranteed by any bank or trust company organized under the
laws of the United States of America or any state thereof or the District
of Columbia, in each case having capital, surplus and undivided profits
totaling more than $500,000,000, maturing within one year of the date of
purchase;
(4) deposits, including interest-bearing deposits, maintained in the
ordinary course of business in banks;
(5) any acquisition of the Capital Stock of any Person; provided, that
after giving effect to any such acquisition such Person shall become a
Restricted Subsidiary of Dana;
(6) trade receivables and prepaid expenses, in each case arising in
the ordinary course of business; provided, that such receivables and
prepaid expenses would be recorded as assets of such Person in accordance
with GAAP;
(7) endorsements for collection or deposit in the ordinary course of
business by such Person of bank drafts and similar negotiable instruments
of such other Person received as payment for ordinary course of business
trade receivables;
102
(8) any interest swap or hedging obligation with an unaffiliated
Person otherwise permitted by the indenture (including, without limitation,
any Currency Agreement and any Interest Rate Protection Agreement otherwise
permitted by the indenture);
(9) Investments received as consideration for an Asset Disposition in
compliance with the provisions of the indenture described under "-- Certain
Covenants -- Limitation on Certain Asset Dispositions" above;
(10) Investments for which the sole consideration provided is
Qualified Capital Stock of Dana; provided, that the issuance of such
Qualified Capital Stock is not included in the calculation set forth in
clause (3) of the first paragraph of "-- Certain Covenants -- Limitation on
Restricted Payments";
(11) loans and advances to employees made in the ordinary course of
business;
(12) Investments outstanding on the Issue Date;
(13) Investments in Dana or a Restricted Subsidiary;
(14) Investments in securities of trade creditors, suppliers or
customers received pursuant to any plan of reorganization or similar
arrangement upon bankruptcy or insolvency of such trade creditor, supplier
or customer;
(15) Investments made by Dana in Dana Credit Corporation required
pursuant to the Operating Agreement;
(16) Investments in any Person after the Issue Date in an aggregate
amount not in excess of $150.0 million at any one time outstanding; and
(17) Investments in publicly traded equity or publicly traded
Investment Grade debt obligations issued by a corporation (other than Dana
or an affiliate of Dana) organized under the laws of any State of the
United States of America and subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act in an aggregate amount not in
excess of $10.0 million at any one time outstanding.
"Permitted Joint Venture" means any Person which is not a Restricted
Subsidiary and which is, directly or indirectly, through its subsidiaries or
otherwise, engaged principally in a Related Business, and the Capital Stock of
which is owned by Dana or its Restricted Subsidiaries, on the one hand, and one
or more Persons other than Dana or any Affiliate of Dana, on the other hand.
"Permitted Liens" means:
(1) Liens for taxes, assessments and governmental charges (other than
any Lien imposed by the Employee Retirement Income Security Act of 1974, as
amended) that are not yet delinquent or are being contested in good faith
by appropriate proceedings promptly instituted and diligently conducted and
for which adequate reserves have been established or other provisions have
been made in accordance with generally accepted accounting principles;
(2) statutory mechanics', workmen's, materialmen's, operators' or
similar Liens imposed by law and arising in the ordinary course of business
for sums which are not yet due or are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and
for which adequate reserves have been established or other provisions have
been made in accordance with generally accepted accounting principles;
(3) minor imperfections of, or encumbrances on, title that do not
impair the value of property for its intended use;
(4) Liens (other than any Lien under the Employee Retirement Income
Security Act of 1974, as amended) incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security;
(5) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligations, bankers'
acceptances, surety and appeal bonds, government contracts, perform-
103
ance and return of money bonds and other obligations of a similar nature
incurred in the ordinary course of business (exclusive of obligations for
the payment of borrowed money);
(6) easements, rights-of-way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of Dana or
of any of its Restricted Subsidiaries;
(7) Liens (including extensions and renewals thereof) upon real or
tangible personal property acquired after the Issue Date; provided, that
(a) such Lien is created solely for the purpose of securing
Indebtedness that is incurred in accordance with the indenture to
finance the cost (including the cost of improvement or construction) of
the item of property or assets subject thereto and such Lien is created
prior to, at the time of or within 180 days after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property,
(b) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such cost and
(c) any such Lien shall not extend to or cover any property or
assets of Dana or of any Restricted Subsidiary of Dana other than such
item of property or assets and any improvements on such item;
(8) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of Dana or of any Restricted
Subsidiary of Dana;
(9) any interest or title of a lessor in the property subject to any
Capitalized Lease Obligation, provided that any transaction related thereto
otherwise complies with the indenture;
(10) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(11) Liens arising from the rendering of a final judgment or order
against Dana or any Restricted Subsidiary of Dana that does not give rise
to an Event of Default;
(12) Liens securing reimbursement obligations with respect to letters
of credit incurred in accordance with the indenture that encumber documents
and other property relating to such letters of credit and the products and
proceeds thereof;
(13) Liens in favor of the Trustee arising under the indenture;
(14) any lien existing on property, shares of stock or Indebtedness of
a Person at the time such Person becomes a Restricted Subsidiary of Dana or
is merged with or consolidated into Dana or a Restricted Subsidiary of Dana
or at the time of sale, lease or other disposition of the properties of any
Person as an entirety or substantially as an entirety to Dana or any
Restricted Subsidiary of Dana;
(15) Liens on property of any Subsidiary of Dana to secure
Indebtedness for borrowed money owed to Dana or to another Restricted
Subsidiary of Dana;
(16) Liens in favor of Dana or any Restricted Subsidiary;
(17) Liens existing on the Issue Date;
(18) Liens in favor of custom and revenue authorities arising as a
matter of law to secure payment of nondelinquent customs duties in
connection with the importation of goods;
(19) Liens encumbering customary initial deposits and margin deposits,
and other Liens incurred in the ordinary course of business that are within
the general parameters customary in the industry, in each case securing
Indebtedness under an Interest Rate Protection Agreement;
(20) Liens encumbering deposits made in the ordinary course of
business to secure nondelinquent obligations arising from statutory,
regulatory, contractual or warranty requirements of Dana or its
104
Restricted Subsidiaries for which a reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made;
(21) Liens arising out of consignment or similar arrangements for the
sale of goods entered into by Dana or any Restricted Subsidiary in the
ordinary course of business in accordance with industry practice;
(22) Liens securing Indebtedness which is incurred to refinance
Indebtedness which had been secured by a Lien or Liens permitted under
"Limitation on Liens" and which is incurred in accordance with the
provisions of "Limitations on Incurrence of Indebtedness and Issuance of
Preferred Stock"; provided that such Liens do not extend to or cover any
property or assets of Dana or any of its Restricted Subsidiaries not
securing the Indebtedness so refinanced;
(23) Liens securing the Receivables Facility;
(24) Liens granted in connection with any Qualified Securitization
Transaction;
(25) Liens securing Indebtedness incurred by Restricted Subsidiaries
incurred in accordance with the provisions of "Limitations on Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(26) in addition to the items referred to in clauses (1) through (25)
above, Liens of Dana and its Restricted Subsidiaries in an aggregate amount
which, when taken together with the aggregate amount of all other Liens
incurred pursuant to this clause (26) and then outstanding, will not exceed
5% of Consolidated Tangible Assets.
"Permitted Secured Debt" means (1) Secured Debt existing at the date of the
indenture; (2) liens on real or personal property acquired, constructed or
improved by Dana or a Restricted Subsidiary after the date of the indenture
which are created contemporaneously with, or within 12 months after, the
acquisition, construction or improvement to secure all or any part of the
purchase price of such property or the cost of such construction or improvement;
(3) mortgages on property of Dana or a Restricted Subsidiary created within 12
months of the completion of construction or improvement of any new plant(s) on
such property to secure the cost of such construction or improvement; (4) liens
on property existing at the time the property was acquired by Dana or any
Restricted Subsidiary; (5) liens on the outstanding shares or indebtedness of a
corporation existing at the time such corporation becomes a Subsidiary; (6)
liens on stock (except stock of Subsidiaries) acquired after the date of the
indenture if the aggregate cost thereof does not exceed 15% of Consolidated Net
Tangible Assets; (7) liens securing indebtedness of a successor corporation to
Dana to the extent permitted by the indenture; (8) liens securing indebtedness
of a Restricted Subsidiary at the time it became such; (9) liens securing
indebtedness of any entity outstanding at the time it merged with, or
substantially all of its properties were acquired by, Dana or any Restricted
Subsidiary; (10) liens created, incurred or assumed in connection with an
industrial revenue bond, pollution control bond or similar financing arrangement
between Dana or any Restricted Subsidiary and any federal, state or municipal
government or other governmental body or quasi-governmental agency; (11) liens
in connection with government or other contracts to secure progress or advance
payments; (12) liens in connection with taxes or legal proceedings to the extent
such taxes or legal proceedings are being contested or appealed in good faith or
are incurred for the purpose of obtaining a stay or discharge in the course of
such proceedings; (13) liens consisting of mechanics' or materialmen's or
similar liens incurred in the ordinary course of business and easements, rights
of way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in title thereto; (14) liens made in connection with
or to secure payment of workers' compensation, unemployment insurance, or social
security obligations; (15) liens in connection with the Sale and Leaseback
Transactions which are not subject to the limitations described below under
"Certain Covenants -- Limitations on Sale and Leaseback Transactions"; (16)
mortgages to secure debt of a Restricted Subsidiary to Dana or to another
Restricted Subsidiary; (17) extensions, renewals or replacements of the
foregoing permitted liens to the extent of the original amounts thereof; and
(18) Secured Debt of Dana and its Restricted Subsidiaries not otherwise
permitted or excepted if the sum of such Secured Debt plus the aggregate value
of Sale and Leaseback Transactions subject to limitation described "Certain
Covenants -- Limitations on Sale and Leaseback Transactions", does not exceed
15% of the Consolidated Net Tangible Assets.
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"Person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan of Liquidation" means, with respect to any Person, a plan (including
by operation of law) that provides for, contemplates or the effectuation of
which is preceded or accompanied by (whether or not substantially
contemporaneously):
(1) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the referent Person; and
(2) the distribution of all or substantially all of the proceeds of
such sale, lease, conveyance or other disposition and all or substantially
all of the remaining assets of the referent Person to holders of Capital
Stock of the referent Person.
"Preferred Stock" means, as applied to the Capital Stock of any Person, the
Capital Stock of such Person (other than the Common Stock of such Person) of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding-up of such Person, to shares of Capital
Stock of any other class of such Person.
"Principal Property" means any real property (including building and other
improvements) of Dana or any Restricted Subsidiary, owned currently or hereafter
acquired (other than any pollution control facility, cogeneration facility or
small power production facility) which has a book value in excess of 2% of
Consolidated Net Tangible Assets.
"Qualified Capital Stock" means, with respect to any Person, any Capital
Stock of such Person that is not Disqualified Capital Stock or convertible into
or exchangeable or exercisable for Disqualified Capital Stock.
"Qualified Securitization Transaction" means any transaction or series of
transactions that have been or may be entered into by any of the Restricted
Subsidiaries of Dana in connection with or reasonably related to a transaction
or series of transactions in which any of the Restricted Subsidiaries of Dana
may sell, convey or otherwise transfer to
(1) a Securitization Subsidiary or
(2) any other Person, or may grant a security interest in, any
equipment and related assets (including contract rights) or Receivables or
interests therein secured by goods or services financed thereby (whether
such Receivables are then existing or arising in the future) of any of the
Restricted Subsidiaries of Dana, and any assets related thereto including,
without limitation, all security or ownership interests in goods or
services financed thereby, the proceeds of such Receivables, and other
assets which are customarily sold or in respect of which security interests
are customarily granted in connection with securitization transactions
involving such assets.
"Rating Agency" means each of (1) S&P and (2) Moody's.
"Receivables" means any right of payment from or on behalf of any obligor,
whether constituting an account, chattel paper, instrument, general intangible
or otherwise, arising from the financing by any Restricted Subsidiary of Dana of
goods or services, and monies due thereunder, security or ownership interests in
the goods and services financed thereby, records related thereto, and the right
to payment of any interest or finance charges and other obligations with respect
thereto, proceeds from claims on insurance policies related thereto, any other
proceeds related thereto, and any other related rights.
"Receivables Facility" means the Receivables Purchase Agreement dated as of
March 29, 2001, among Dana Asset Funding LLC, as the Seller, Corporate
Receivables Corporation, Twin Towers Inc., Falcon Asset Securitization
Corporation and Park Avenue Receivables Corporation, as Investors, Citibank,
N.A., Deutsche Bank AG, New York Branch, Bank One, NA (Main Office Chicago) and
The Chase Manhattan Bank, as Banks, Citicorp North America, Inc., as Program
Agent, Deutsche Bank AG, New York Branch, as Administrative Agent, Citicorp
North America, Inc., Deutsche Bank AG, New York Branch, Bank One, NA (Main
Office Chicago) and The Chase Manhattan Bank, as Investor Agents, Dana
Corporation, as Collection Agent and an Originator and certain subsidiaries of
Dana Corporation parties thereto, as Originators; the
106
Purchase and Contribution Agreement, dated as of March 29, 2001, among Dana
Corporation and certain of its subsidiaries parties thereto, as Sellers, and
Dana Asset Funding LLC, as Purchaser; the Originator Purchase Agreement
Performance Guaranty dated as of March 29, 2001, by Dana Corporation in favor of
Dana Asset Funding LLC; the Seller Purchase Agreement Performance Guaranty dated
as of March 29, 2001, made by Dana Corporation in favor of Citibank North
America, Inc., as Program Agent; and related agreements and instruments, each as
amended to the Issue Date and as such agreements and instruments may from time
to time thereafter be amended, restated, supplemented, or otherwise modified,
including any refinancing, refunding, replacement or extension thereof, whether
by the same or any other group of parties.
"Related Business" means any business which is the same as or related,
ancillary or complementary to any of the businesses of Dana and its Subsidiaries
on the date of the indenture.
"Related Business Assets" means assets used or useful in a Related
Business.
"Restricted Subsidiary" means any Subsidiary of Dana that is not an
Unrestricted Subsidiary.
"Secured Debt" means indebtedness (other than indebtedness among Dana and
Restricted Subsidiaries) for money borrowed, or other indebtedness on which
interest is paid or payable, which is secured by (1) a Lien on any Principal
Property of Dana or a Restricted Subsidiary or on the stock or indebtedness of a
Restricted Subsidiary, or (2) any guarantee of indebtedness of Dana by a
Restricted Subsidiary.
"Securitization Subsidiary" means a Subsidiary of Dana which engages in no
activities other than those reasonably related to or in connection with the
entering into of securitization transactions and which is designated by the
Board of Directors of Dana (as provided below) as a Securitization Subsidiary:
(1) no portion of the Indebtedness or any other obligations (contingent or
otherwise) of which (a) is guaranteed by Dana or any Restricted Subsidiary of
Dana, (b) is recourse to or obligates Dana or any Restricted Subsidiary of Dana
in any way other than pursuant to representations, warranties and covenants
(including those related to servicing) entered into in the ordinary course of
business in connection with a Qualified Securitization Transaction or (c)
subjects any property or asset of Dana or any Restricted Subsidiary of Dana
(other than those of a Securitization Subsidiary), directly or indirectly,
continently or otherwise, to any Lien or to the satisfaction thereof, other than
pursuant to representations, warranties and covenants (including those related
to servicing) entered into in the ordinary course of business in connection with
a Qualified Securitization Transaction; (2) with which neither Dana nor any
Restricted Subsidiary of Dana (a) provides any credit support or (b) has any
contract, agreement, arrangement or understanding other than on terms that are
fair and reasonable and that are no less favorable to Dana or such Restricted
Subsidiary than could be obtained from an unrelated Person (other than, in the
case of subclauses (a) and (b) of this clause (2), representations, warranties
and covenants (including those relating to servicing) entered into in the
ordinary course of business in connection with a Qualified Securitization
Transaction and intercompany notes relating to the sale of Receivables to such
Securitization Subsidiary); and (3) with which neither Dana nor any Restricted
Subsidiary of Dana has any obligation to maintain or preserve such Subsidiary's
financial condition or to cause such Subsidiary to achieve certain levels of
operating results. Any such designation by the Board of Directors of Dana shall
be evidenced to the Trustee by filing with the Trustee a certified copy of the
resolutions of the Board of Directors of Dana giving effect to such designation.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means, with respect to any security or Indebtedness of a
Person, the date specified therein as the fixed date on which any principal of
such security or Indebtedness is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase thereof at the option of the holder thereof).
"Subsidiary" of any Person means
(1) a corporation a majority of whose Voting Stock is at the time,
directly or indirectly, owned by such Person, by one or more Restricted
Subsidiaries of such Person or by such Person and one or more Restricted
Subsidiaries of such Person or
107
(2) any other Person in which such Person, a Restricted Subsidiary of
such Person or such Person and one or more Restricted Subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, have
at least a majority ownership interest.
"Subsidiary Guarantee" means each Subsidiary Guarantee of the notes issued
pursuant to "-- Certain Covenants -- Limitation on Guarantees by Restricted
Subsidiaries" above.
"Subsidiary Guarantor" means each Restricted Subsidiary of Dana that
becomes a guarantor of the notes pursuant to "-- Certain Covenants -- Limitation
on Guarantees by Restricted Subsidiaries" above.
"Treasury Rate" means, with respect to any redemption date for the dollar
notes,
(1) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication
which is published weekly by the Board of Governors of the Federal Reserve
System and which establishes yields on actively traded United States
Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities," for the maturity corresponding to the
Comparable Treasury Issue (if no maturity is within three months before or
after the maturity date for the dollar notes yields for the two published
maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated or
extrapolated from such yields on a straight line basis, rounding to the
nearest month), or
(2) if such release, or any successor release, is not published during
the week preceding the calculation date or does not contain such yields,
the rate per annum equal to the semi-annual equivalent yield to maturity of
the Comparable Treasury Issue, calculated using a price for the Comparable
Treasury Issue, expressed as a percentage of its principal amount, equal to
the Comparable Treasury Price for such redemption date.
"Unrestricted Subsidiary" means:
(1) each of Dana Credit Corporation, Diamond Financial Holdings, Inc.,
Dana Commercial Credit (UK) Limited, DCC Leasing GmbH and Shannon
Properties GmbH and their respective Subsidiaries until such time as it is
designated a Restricted Subsidiary pursuant to the second succeeding
sentence;
(2) any Subsidiary of Dana that at the time of determination shall be
designated an Unrestricted Subsidiary by the Board of Directors in the
manner provided below; and
(3) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of Dana (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock of, or
holds any Lien on any property of, Dana or any other Restricted Subsidiary of
Dana; provided, that either
(1) the Subsidiary to be so designated has total assets of $1,000 or
less or
(2) if such Subsidiary has assets greater than $1,000, such
designation would be permitted under the covenant described under
"-- Certain Covenants -- Limitation on Restricted Payments" to the extent
then applicable.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, that immediately after giving effect to such
designation (a) if such Unrestricted Subsidiary at such time has Indebtedness,
Dana could incur $1.00 of additional Indebtedness under clause (1) of the
covenant described under "-- Certain Covenants -- Limitation on Incurrence of
Indebtedness and Issuance of Preferred Stock" to the extent then applicable, and
(b) no Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced by Dana to the Trustee by promptly
filing with
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the Trustee a copy of the board resolution giving effect to such designation and
an officers' certificate certifying that such designation complied with the
foregoing provisions.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors or other governing body of such Person.
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BOOK-ENTRY SETTLEMENT AND CLEARANCE
The dollar notes will be represented by one or more global notes in
definitive, fully registered form without interest coupons (collectively, the
dollar global notes) and will be deposited with the Trustee as custodian for The
Depository Trust Company (DTC) and registered in the name of a nominee of DTC.
The euro notes will be represented by one or more global notes in
definitive, fully registered form without interest coupons (collectively, euro
global notes) and will be deposited with a common depositary (the Common
Depositary) for Euroclear Bank S.A./N.V., as operator of the Euroclear system,
or any successor operator of the Euroclear System (Euroclear), and Clearstream
Banking Societe Anonyme (Clearstream), or their nominee, and registered in the
name of a nominee of the Common Depositary.
Except in the limited circumstances described below, owners of beneficial
interests in global notes will not be entitled to receive physical delivery of
certificated notes. Transfers of beneficial interests in the global notes will
be subject to the applicable rules and procedures of DTC, Euroclear and
Clearstream and their respective direct or indirect participants which rules and
procedures may change from time to time.
DEPOSITARY PROCEDURES
The following description of the operations and procedures of DTC,
Euroclear and Clearstream is provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them from time to time. Neither
we nor the initial purchasers take any responsibility for these operations and
procedures and we and they urge investors to contact DTC, Euroclear, Clearstream
or their direct or indirect participants directly to discuss these matters.
Upon the issuance of the dollar global notes, DTC will credit on its
internal system the respective principal amounts of the individual beneficial
interests represented by such global notes to the accounts of persons who have
accounts with DTC. Ownership of beneficial interests in the dollar global notes
will be recorded in denominations of $1,000 and will be limited to DTC's
participants or persons who hold interests through its participants. Ownership
of beneficial interests in the dollar global notes will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of participants (with respect to interest of persons other than participants).
Upon the issuance of the euro global notes, the Common Depositary will
credit, on its internal system, the respective principal amounts to the
beneficial interests represented by such global notes to the accounts of
Euroclear and Clearstream. Euroclear and Clearstream will credit, on their
internal systems, the respective principal amounts of the individual beneficial
interests in such global notes to the accounts of persons who have accounts with
Euroclear or Clearstream. Ownership of beneficial interests in the euro global
notes will be recorded in denominations of E1,000 and will be limited to
participants or persons who hold interests through participants in Euroclear or
Clearstream. Ownership of beneficial interests in euro global notes will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by Euroclear and Clearstream or their nominees (with respect
to interests of participants) and the records of participants (with respect to
interests of persons other than participants).
Investors may hold their interests in the euro global notes through
Euroclear or Clearstream, if they are participants in such systems, or
indirectly through organizations which are participants in such systems.
Investors may also hold interests in the dollar global notes through
organizations other than Clearstream and Euroclear that are participants in the
DTC system. Investors may hold their interests in the dollar global notes
directly through DTC, if they are participants in such system, or indirectly
through organizations (including Euroclear and Clearstream) which are
participants in such system. All interests in a global note may be subject to
the procedures and requirements of DTC and/or Euroclear and Clearstream.
Payments of the principal of and interest on dollar global notes will be
made to DTC or its nominee as the registered owner thereof. Payments of the
principal of and interest on euro global notes will be made to the order of the
Common Depositary or its nominee as the registered owner thereof. Neither Dana,
the Trustee, nor any of their respective agents will have any responsibility or
liability for any aspect of the records relating
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to or payments made on account of beneficial ownership interests in the global
notes or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest in respect of a dollar global note representing any dollar notes
held by it or its nominee, will immediately credit participant's accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such global note for such notes as shown on the records
of DTC or its nominee. We expect that the Common Depositary, in its capacity as
paying agent, upon receipt of any payment or principal or interest in respect of
a euro global note representing any euro notes held by it or its nominee, will
immediately credit the accounts of Euroclear and Clearstream, which in turn will
immediately credit accounts of participants in Euroclear and Clearstream with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such global note for such notes as shown on the records
of Euroclear and Clearstream. We also expect that payments by participants to
owners of beneficial interests in such global note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in "street name." Such payments will be the responsibility of such participants.
Because DTC, Euroclear and Clearstream can only act on behalf of their
respective participants, who in turn act on behalf of indirect participants and
certain banks, the ability of a holder of a beneficial interest in global notes
to pledge such interest to persons or entities that do not participate in the
DTC, Euroclear or Clearstream systems, or otherwise take actions in respect of
such interest, may be limited by the lack of a definitive certificate for such
interest. The laws of some countries and some U.S. states require that certain
persons take physical delivery of securities in certificated form. Consequently,
the ability to transfer beneficial interests in a global note to such persons
may be limited.
DTC, Euroclear and Clearstream have advised us that they will take any
action permitted to be taken by a holder of notes (including the presentation of
notes for exchanges as described below) only at the direction of the
participants to whose accounts interests in the global notes are credited and
only in respect of such portion of the aggregate principal amount of the notes
as to which such participants have given such direction. However, if there is an
event of default under the notes, DTC, Euroclear and Clearstream reserve the
right to exchange the global notes for legended notes in certificated form, and
to distribute such notes to their respective participants.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve system, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participating organizations (participants) and facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entry changes in accounts of its participants, thereby eliminating the need
for physical transfer and delivery of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations. Indirect access to the DTC system
is available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly (indirect participants). Persons who
are not participants may beneficially own securities held by or on behalf of DTC
only through the participants or the indirect participants. The ownership
interest and transfer of ownership interest or each actual purchaser of each
security held by or on behalf of DTC are recorded in the records of the
participants and indirect participants.
Euroclear and Clearstream have advised us as follows: Euroclear and
Clearstream each hold securities for their account holders and facilitate the
clearance and settlement of securities transactions by electronic book-entry
transfer between their respective account holders, thereby eliminating the need
for physical movements of certificates and any risk from lack of simultaneous
transfers of securities.
Euroclear and Clearstream each provide various services including
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Euroclear and Clearstream each
also deal with domestic securities markets in several countries through
established
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depository and custodial relationships. The respective systems of Euroclear and
Clearstream have established an electronic bridge between their two systems
across which their respective account holders may settle trades with each other.
Account holders in both Euroclear and Clearstream are worldwide financial
institutions including underwriters, securities brokers and dealers, trust
companies and clearing corporations. Indirect access of both Euroclear and
Clearstream is available to other institutions that clear through or maintain a
custodial relationship with an account holder of either system.
An account holder's overall contractual relations with either Euroclear or
Clearstream are governed by the respective rules and operating procedures of
Euroclear or Clearstream and any applicable laws. Both Euroclear and Clearstream
act under such rules and operating procedures only on behalf of their respective
account holders, and have no record of or relationship with persons holding
through their respective account holders.
Although DTC, Euroclear and Clearstream currently follow the foregoing
procedures to facilitate transfers of interests in global notes among
participants of DTC, Euroclear and Clearstream, they are under no obligation to
do so, and such procedures may be discontinued or modified at any time. Neither
Dana nor the Trustee will have any responsibility for the performance by DTC,
Euroclear or Clearstream or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
As long as DTC or the Common Depositary, or their respective nominees, are
the registered holder of a global note, DTC or the Common Depositary or such
nominee, as the case may be, will be considered the sole owner and holder of the
notes represented by such global notes for all purposes under the indenture and
the notes. Unless (1) in the case of a dollar global note, DTC notifies us that
it is unwilling or unable to continue as depositary for a global note or ceases
to be a "Clearing Agency" registered under the Exchange Act, (2) in the case of
a euro global note, Euroclear or Clearstream notifies us it is unwilling or
unable to continue as clearing agency, (3) in the case of a euro global note,
the Common Depositary notifies us that it is unwilling or unable to continue as
Common Depositary and a successor Common Depositary is not appointed within 120
days of such notice, (4) in the case of transfers to institutional "accredited
investors" or (5) in the case of any note, an event of default has occurred and
is continuing with respect to such note, owners of beneficial interests in a
global note will not be entitled to have any portions of such global note
registered in their names, will not receive or be entitled to receive physical
delivery of notes in certificated form and will not be considered the owners or
holders of the global note (or any notes represented thereby) under the
indenture or the notes. In addition, no beneficial owner of an interest in a
global note will be able to transfer that interest except in accordance with
DTC's and/or Euroclear's and Clearstream's applicable procedures (in addition to
those under the indenture.
If any of the events set forth in any of clauses (1) through (5) above
shall occur, we will issue certificates for such notes in definitive, fully
registered, non-global form without interest coupons in exchange for the dollar
global note or the euro global note, as the case may be (or the appropriate
portion thereof, in the case of the occurrence of the event set forth in clause
(4)). Certificates for notes delivered in exchange for any global note or
beneficial interests therein will be registered in the names, and issued in any
approved denominations, requested by DTC, Euroclear, Clearstream or the Common
Depositary (in accordance with their customary procedures).
The holder of a non-global note may transfer such note by surrendering it
at the offices or agencies maintained by us for such purpose. Before any note in
non-global form may be transferred to a person who takes delivery in the form of
an interest in any global note, the transferor will be required to provide the
Trustee with a global note certificate. Upon transfer or partial redemption of
any such note, new certificates may be obtained from the Trustee or the Transfer
Agent in Luxembourg.
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Notwithstanding any statement herein, we and the Trustee reserve the right
to impose such transfer, certification, exchange or other requirements, and to
require such restrictive legends on certificates evidencing notes, as either of
us may determine are necessary to ensure compliance with the securities laws of
the United States and the states therein and any other applicable laws or as
DTC, Euroclear or Clearstream may require.
SAME-DAY SETTLEMENT AND PAYMENT
Except for trades involving only Euroclear and Clearstream participants,
interests representing the dollar global notes will trade in DTC's Same-Day Firm
Settlement System, and any permitted secondary market trading activity in such
notes will be required by DTC to be settled in immediately available funds.
Transfers of interests in dollar global notes between participants in DTC will
be effected in accordance with DTC's procedures, and will be settled in same-day
funds. Transfers of interests in euro global notes between participants in
Euroclear and Clearstream will be effected in the ordinary way in accordance
with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
notes described above, cross-market transfers of dollar notes between DTC
participants, on the one hand, and Euroclear or Clearstream participants, on the
other hand, will be effected in DTC in accordance with DTC's rules on behalf of
Euroclear or Clearstream, as the case may be; however, such cross-market
transactions will require delivery of instructions to Euroclear or Clearstream,
as the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Clearstream, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant global note in DTC, and making
or receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Clearstream
participants may not deliver instructions directly to the depositories for
Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a global note from a
participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. Cash received in
Euroclear or Clearstream as a result of sales of interests in a global note by
or through a Euroclear or Clearstream participant to a participant in DTC will
be received with value on the settlement date of DTC but will be available in
the relevant Euroclear or Clearstream cash account only as of the business day
for Euroclear or Clearstream following DTC's settlement date.
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U.S. FEDERAL INCOME TAX CONSIDERATIONS
U.S. TAX CONSIDERATIONS OF THE EXCHANGE OFFER
In the opinion of our counsel, Rosenman & Colin LLP, the exchange of
outstanding notes for exchange notes in the exchange offer will generally not
constitute a taxable event for U.S. Holders. As a result, (1) a U.S. Holder will
generally not recognize taxable gain or loss as a result of exchanging
outstanding notes for exchange notes pursuant to the exchange offer, (2) the
holding period of the exchange notes will generally include the holding period
of the outstanding notes exchanged therefor, and (3) the adjusted tax basis of
the exchange notes will generally be the same as the adjusted tax basis of the
outstanding notes exchanged therefor immediately before such exchange.
For U.S. federal income tax purposes, the exchange of outstanding notes for
exchange notes in the exchange offer will generally not constitute a taxable
event for a Non-U.S. Holder. See "U.S. Federal Income Taxation of Non-U.S.
Holders," below.
NON-U.S. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE APPLICATION OF
THE TREASURY REGULATIONS AND THE PROCEDURES FOR ESTABLISHING AN EXEMPTION FROM
WITHHOLDING TAX.
U.S. TAX CONSIDERATIONS OF THE OWNERSHIP OF NOTES
The following is a general discussion of material United States federal
income tax consequences of the acquisition, ownership and disposition of the
notes. Unless otherwise stated, this discussion is limited to the tax
consequences to those persons who are original beneficial owners of the notes
and who hold such notes as capital assets (Holders, for purposes of this tax
discussion). This discussion does not address specific tax consequences that may
be relevant to particular persons (including, for example, pass-through entities
(e.g., partnerships) or persons who hold the notes through pass-through
entities, individuals who are U.S. expatriates, financial institutions,
broker-dealers, insurance companies, tax-exempt organizations, dealers in
securities or foreign currency, persons that have a functional currency other
than the U.S. dollar and persons in special situations, such as those who hold
notes as part of a straddle, hedge, conversion transaction, or other integrated
investment). This discussion also does not address the tax consequences to
Non-U.S. Holders (as defined below) that are subject to U.S. federal income tax
on a net basis on income realized with respect to a note because such income is
effectively connected with the conduct of a U.S. trade or business. In addition,
this discussion does not address U.S. federal alternative minimum tax
consequences, and does not describe any tax consequences arising under U.S.
federal gift and estate or other federal tax laws or under the tax laws of any
state, local or foreign jurisdiction. This discussion is based upon the Internal
Revenue Code of 1986, as amended (the Code), the Treasury Department regulations
promulgated thereunder, and administrative and judicial interpretations thereof,
all as of the date hereof and all of which are subject to change, possibly on a
retroactive basis.
YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS CONCERNING THE UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES TO YOU OF EXCHANGING THE OUTSTANDING NOTES FOR
EXCHANGE NOTES, AS WELL AS THE APPLICATION OF STATE, LOCAL AND NON-U.S. INCOME
AND OTHER TAX LAWS.
U.S. FEDERAL INCOME TAXATION OF U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a Holder that is: (i) a citizen or individual resident
of the United States (as defined in Section 7701(b) of the Code); (ii) a
corporation (including an entity treated as a corporation for U.S. federal
income tax purposes) created or organized in or under the laws of the United
States or any political subdivision thereof; (iii) an estate, the income of
which is subject to U.S. federal income tax regardless of the source; or (iv) a
trust, if a court within the United States is able to exercise primary
supervision over the trust's administration and one or more U.S. persons have
the authority to control all its substantial decisions, or if the trust was in
existence on August 20, 1996, and has properly elected to continue to be treated
as a U.S. person (each, a U.S. Holder).
A "Non-U.S. Holder" is a Holder that is not a U.S. Holder.
114
Payments of Interest. Interest on a note will generally be includible in
the income of a U.S. Holder as ordinary interest income from domestic sources at
the time accrued or received in accordance with the U.S. Holder's regular method
of accounting for U.S. federal income tax purposes.
In the case of notes denominated in euros, U.S. persons on the cash method
of accounting are required to include in income the U.S. dollar value of the
amount received, based on the spot rate on the date of receipt, regardless of
whether the payment is in fact converted into U.S. dollars. No exchange gain or
loss is recognized with respect to the receipt of such payment. U.S. persons on
the accrual method of accounting may determine the amount of income recognized
with respect to an interest payment in euros in accordance with either of two
methods. Under the first method, the U.S. person will be required to include in
income for each taxable year the U.S. dollar value of the interest that has
accrued during the taxable year, determined by translating the interest at the
average rate of exchange for the period or periods during which the interest
accrued. Under the second method, the U.S. person may elect to translate
interest income at the spot rate on the last day of the accrual period (or last
day of the taxable year in the case of an accrual period that straddles the U.S.
person's taxable year) or on the date the interest payment is received if the
date is within five business days of the end of the accrual period. Upon receipt
of an interest payment on the note (including, upon the sale of a note, the
receipt of proceeds that are attributable to accrued interest previously
included in income), such U.S. person will recognize ordinary income or loss in
an amount equal to the difference between the U.S. dollar value of the payment
of euros (determined by translating the euros received at the "spot rate" for
the euros on the date received) and the U.S. dollar value of the interest income
that the U.S. person has previously included in income with respect to the
payment.
Original Issue Discount. The notes will not be issued with a discount that
is subject to the original issue discount rules of the Code.
Sale, Exchange and Retirement of Notes. A U.S. person's tax basis in a
note will, in general, be the U.S. person's cost (in the case of notes
denominated in euros, the U.S. dollar value of the euros paid for such note
determined at the time of purchase). Upon the sale, taxable exchange, retirement
or other disposition of a note, a U.S. person will recognize gain or loss equal
to the difference between the U.S. dollar value of the amount realized
determined at the time of the sale, exchange, retirement or other disposition
(less any amounts attributable to accrued but unpaid interest not previously
included in such U.S. person's income, which will be taxable as interest income)
and the adjusted tax basis of the note. The gain or loss will generally be
capital gain or loss. However, in the case of notes denominated in euros, the
gain or loss on the sale, exchange, retirement or other disposition of the euro
notes will be ordinary income or loss to the extent attributable to the movement
in exchange rates between the time of purchase and the time of disposition of
the notes. Capital gains of individuals derived in respect of capital assets
held for more than one year are eligible for reduced tax rates. The
deductibility of capital losses is subject to limitations. In the case of a non-
corporate Holder, capital losses are deductible only against capital gains and
$3,000 of ordinary income each year; any unused capital losses may be deducted
in future years. A corporate Holder's capital losses may be offset only against
capital gains; however, any unused capital losses generally may be carried back
three years and forward five years.
Exchange Gain or Loss with Respect to Euros. A U.S. person's tax basis in
euros received as interest on notes denominated in euros, or received on the
sale, exchange, retirement or other disposition of notes denominated in euros
will be the U.S. dollar value of the payment at the spot rate at the time the
U.S. person received the euros. Any gain or loss recognized by a U.S. person on
a sale, exchange, retirement or other disposition of euros will be ordinary
income or loss and will not be treated as interest income or expense, except to
the extent provided for in Treasury Regulations or administrative pronouncements
of the Internal Revenue Service (the IRS).
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U.S. FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
Payments of Interest. Payments of principal and interest on the notes by
us or any of our agents to a Non-U.S. Holder will not be subject to U.S. federal
withholding tax, provided that:
(1) the Non-U.S. Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of our stock
entitled to vote;
(2) the Non-U.S. Holder is not a controlled foreign corporation that
is related to us through stock ownership;
(3) the Non-U.S. Holder is not a bank whose receipt of interest on the
notes is described in Section 881(c)(3)(A) of the Code; and
(4) either (A) the beneficial owner of the notes certifies to us or
our agent on IRS Form W-8BEN (or successor form), under penalties of
perjury, that it is not a "U.S. person" (as defined in the Code) and
provides its name and address and the certificate is renewed periodically
as required by the Treasury Regulations, or (B) the notes are held through
certain foreign intermediaries and the beneficial owner of the notes
satisfies certification requirements of applicable Treasury Regulations.
Special certification rules apply to certain Non-U.S. Holders that are
entities rather than individuals.
If a Non-U.S. Holder cannot satisfy the requirements of the portfolio
interest exemption described above (the Portfolio Interest Exemption), payments
of interest made to such Non-U.S. Holder will be subject to a 30% withholding
tax unless the beneficial owner of the note provides us or our agent, as the
case may be, with a properly executed:
(1) IRS Form W-8BEN (or successor form) claiming an exemption from
withholding or reduced rate of tax under the benefit of an applicable tax
treaty (a Treaty Exemption) or
(2) IRS Form W-8ECI (or successor form) stating that interest paid on
the note is not subject to withholding tax because it is effectively
connected with the conduct of a U.S. trade or business of the beneficial
owner,
each form to be renewed periodically as required by the Treasury Regulations.
If interest on the note is effectively connected with the conduct of a U.S.
trade or business of the beneficial owner, the Non-U.S. Holder, although exempt
from the withholding tax described above, will be subject to United States
federal income tax on such interest on a net income basis in the same manner as
if it were a U.S. Holder. In addition, if such Holder is a foreign corporation,
it may be subject to a branch profits tax equal to 30% (or lower applicable
treaty rate) of its effectively connected earnings and profits for the taxable
year, subject to adjustments. For this purpose, interest on a note will be
included in such foreign corporation's earnings and profit.
Disposition of Notes. Generally, no withholding of United States federal
income tax will be required with respect to any gain realized by a Non-U.S.
Holder upon the sale, exchange or other disposition of a note.
A Non-U.S. Holder will not be subject to U.S. federal income tax on gain
realized on the sale, exchange or other disposition of a note unless (a) the
Non-U.S. Holder is an individual who is present in the United States for a
period or periods aggregating 183 or more days in the taxable year of the
disposition and certain other conditions are met, (b) the Non-U.S. Holder is
subject to tax pursuant to the provisions of U.S. tax law applicable to certain
U.S. expatriates, or (c) such gain is effectively connected with the Non-U.S.
Holder's U.S. trade or business.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the notes are outstanding, we are required
to provide the IRS with certain information, including the beneficial owner's
name, address and taxpayer identification number, the aggregate amount of
interest paid to that beneficial owner during the calendar year and the amount
of tax withheld, if any. This obligation, however, does not apply with respect
to certain payments to U.S. Holders,
116
including corporations and tax-exempt organizations, provided that they
establish entitlement to an exemption.
In the event that a U.S. Holder subject to the reporting requirements
described above fails to supply its correct taxpayer identification number in
the manner required by applicable law or underreports its tax liability, we, our
agents or paying agents or a broker may be required to "backup" withhold on each
payment of interest and principal on the notes. This backup withholding is not
an additional tax and may be credited against the U.S. Holder's U.S. federal
income tax liability, provided that the required information is furnished to the
IRS.
Information reporting and backup withholding will not be required with
respect to payments that we make to a Non-U.S. Holder if the Non-U.S. Holder has
(i) furnished documentation establishing eligibility for the Portfolio Interest
Exemption or a Treaty Exemption (provided that, in the case of a sale of a note
by an individual, Form W-8BEN (or successor form) includes a certification that
the individual has not been, and does not intend to be, present in the United
States for 183 days or more days for the relevant period) or (ii) otherwise
establishes an exemption, provided that neither we nor our agent has actual
knowledge that the holder is a U.S. person or that the conditions of any
exemption are not in fact satisfied. Certain additional rules may apply where
the notes are held through a custodian, nominee, broker, foreign partnership or
foreign intermediary.
In addition, information reporting and backup withholding will not apply to
the proceeds of the sale of a note made within the United States or conducted
through certain United States related financial intermediaries, if the payor
receives the statement described above and does not have actual knowledge that
you are a U.S. person or you otherwise establish an exemption.
NON-U.S. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE APPLICATION OF
THE TREASURY REGULATIONS AND THE PROCEDURES FOR ESTABLISHING AN EXEMPTION FROM
BACKUP WITHHOLDING.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of the exchange notes. This prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of exchange notes received in exchange
for outstanding notes where the outstanding notes were acquired as a result of
market-making activities or other trading activities. We have agreed that, for a
period of 180 days after the date on which the exchange offer is consummated, we
will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own accounts
pursuant to this exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of these methods
of resale, at prevailing market prices at the time of resale, at prices related
to prevailing market prices or at negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer or
the purchasers of any exchange notes. Any broker-dealer that resells exchange
notes that were received by it for its own account pursuant to the exchange
offer and any broker or dealer that participates in a distribution of exchange
notes may be deemed to be an "underwriter" within the meaning of the Securities
Act, and any profit on any resale of exchange notes and any commissions or
compensation received by any persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the date on which the exchange offer is
consummated, we will promptly send additional copies of this prospectus and any
amendments or supplements to this prospectus to any broker-dealer that requests
these documents in the letter of transmittal. We have agreed to indemnify the
holders of outstanding notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters relating to the exchange notes will be passed upon
for us by Rosenman & Colin LLP, New York, New York and Hunton & Williams,
Richmond, Virginia.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Dana and its consolidated
subsidiaries as of December 31, 2000 and 1999, and for each of the three years
in the period ended December 31, 2000, included in this prospectus were audited
by PricewaterhouseCoopers LLP, independent accountants, as set forth in its
report included herein.
GENERAL INFORMATION
(1) The listing of the outstanding notes on the Luxembourg Stock Exchange
became effective on August 23, 2001. Application will also be made to list the
exchange notes on the Luxembourg Stock Exchange. Our certificate of
incorporation and a legal notice relating to the issue of the notes will be
deposited prior to listing with the Chief Registrar of the District Court of
Luxembourg (Greffier en Chef du Tribunal d'Arrondissement de et a Luxembourg)
where copies may be obtained on request. Notice of any optional redemption,
change of control or any change in the rate of interest payable on the notes
will be published in a Luxembourg newspaper of general circulation. The
Luxembourg Stock Exchange will be informed and a notice will be published in a
Luxembourg newspaper in the event of any accrual of additional interest (no
later than the commencement of such accrual). In connection with the exchange
offer, (a) notice will be given to
118
the Luxembourg Stock Exchange and published in a Luxembourg newspaper announcing
the beginning of the registered exchange offer and, following completion of the
exchange offer, the results of such offer, (b) we will appoint Banque Generale
du Luxembourg S.A. as the Luxembourg exchange agent, through which all relevant
documents with respect to the registered exchange offer will be made available,
and (c) Banque Generale du Luxembourg S.A. will be able to perform all agency
functions to be performed by any exchange agent, including providing a letter of
transmittal and other relevant documents to holders, and accepting such
documents on behalf of us. The exchange notes which are dollar notes will be
accepted for clearance through DTC and exchange notes which are euro notes will
be accepted for clearance through Euroclear and Clearstream and notice will be
given to the Luxembourg Stock Exchange and published in a Luxembourg newspaper
announcing the relevant Common Codes and International Securities Identification
Numbers. In addition, copies of this prospectus will be available at the office
of the Luxembourg Paying Agent, without charge.
(2) Throughout the term of the notes, copies of our certificate of
incorporation, the indenture (incorporating forms of the global notes) and the
registration rights agreement may be inspected and our most recent quarterly and
annual financial statements may be obtained free of charge at the office of
Banque Generale de Luxembourg S.A., the paying agent in Luxembourg.
(3) The Indenture has been approved and notes will be issued pursuant to
authority granted by our Board of Directors on July 17, 2001.
(4) Except as disclosed in this prospectus, there has been no material
adverse change in our consolidated financial position since September 30, 2001.
(5) Except as disclosed in this prospectus, we are not involved in, and we
have no knowledge of a threat of, any litigation, administrative proceedings or
arbitration which is or may be material in the context of the issue or exchange
of the notes.
(6) We have taken all reasonable care to ensure that the facts stated in
this prospectus about the notes and us are true and accurate in all material
respects and there are no other material facts which if omitted would make any
statement in this prospectus misleading.
(7) We have prepared this prospectus, are solely responsible for its
contents and accept responsibility for the information disclosed in this
prospectus.
(8) The dollar exchange notes have been accepted for clearance through DTC
with CUSIP, Common Code and International Securities Identification Numbers
(ISIN) as follows: the dollar exchange notes have a CUSIP number of 235811AU0, a
Common Code number of 014196544 and an ISIN of US235811AU05. The euro exchange
notes have been accepted for clearance through Euroclear and Clearstream with
Common Code and ISIN numbers as follows: the euro exchange notes have a Common
Code number of 014188410 and an ISIN of XS0141884105.
119
INDEX TO FINANCIAL STATEMENTS
PAGE
----
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants........................... F-2
Statement of Income for the Years Ended December 31, 1998,
1999 and 2000............................................. F-3
Balance Sheet at December 31, 1999 and 2000................. F-4
Statement of Cash Flows for the Years Ended December 31,
1998, 1999 and 2000....................................... F-5
Statement of Shareholders' Equity for the Years Ended
December 31, 1998, 1999 and 2000.......................... F-6
Notes to Financial Statements............................... F-7
UNAUDITED ADDITIONAL FINANCIAL INFORMATION:
(Dana Corporation with Dana Credit Corporation on the Equity
basis):
Statement of Income for the Years Ended December 31, 1998,
1999 and 2000............................................. F-30
Balance Sheet at December 31, 1999 and 2000................. F-31
Statement of Cash Flows for the Years Ended December 31,
1998, 1999 and 2000....................................... F-32
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Statement of Income for the Three Months and Nine
Months Ended September 30, 2000 and 2001.................. F-33
Condensed Balance Sheet at December 31, 2000 and September
30, 2001.................................................. F-34
Condensed Statement of Cash Flows for the Nine Months Ended
September 30, 2000 and 2001............................... F-35
Notes to Condensed Financial Statements..................... F-36
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
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 F-3 through F-29, present fairly, in all material respects, the
financial position of Dana Corporation and its subsidiaries at December 31, 1999
and 2000, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America. 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
auditing standards generally accepted in the United States of America, 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 our opinion.
PRICEWATERHOUSECOOPERS LLP
Toledo, Ohio
February 2, 2001
F-2
DANA CORPORATION
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1999 2000
---------- ---------- ----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NET SALES................................................... $12,464 $13,159 $12,317
Revenue from lease financing................................ 173 111 143
Other income, net........................................... 202 83 231
------- ------- -------
12,839 13,353 12,691
------- ------- -------
Costs and expenses
Cost of sales............................................. 10,449 10,964 10,599
Selling, general and administrative expenses.............. 1,122 1,192 1,132
Restructuring and integration charges..................... 118 181 173
Merger expenses........................................... 50
Interest expense.......................................... 280 279 323
------- ------- -------
12,019 12,616 12,227
------- ------- -------
Income before income taxes.................................. 820 737 464
Estimated taxes on income................................... 315 251 171
------- ------- -------
Income before minority interest and equity in earnings of
affiliates................................................ 505 486 293
Minority interest........................................... (8) (13) (13)
Equity in earnings of affiliates............................ 37 40 54
------- ------- -------
NET INCOME.................................................. $ 534 $ 513 $ 334
======= ======= =======
NET INCOME PER COMMON SHARE
Basic income per share.................................... $ 3.24 $ 3.10 $ 2.20
Diluted income per share.................................. $ 3.20 $ 3.08 $ 2.18
Cash dividends declared and paid per common share........... $ 1.14 $ 1.24 $ 1.24
Average shares outstanding -- Basic......................... 165 165 152
Average shares outstanding -- Diluted....................... 167 166 153
The accompanying notes are an integral part of the financial statements.
F-3
DANA CORPORATION
BALANCE SHEET
DECEMBER 31,
---------------------
1999 2000
--------- ---------
(IN MILLIONS, EXCEPT
PAR VALUE)
ASSETS
Current assets
Cash and cash equivalents................................... $ 111 $ 179
Accounts receivable
Trade, less allowance for doubtful accounts of $44 -- 1999
and $42 -- 2000........................................ 1,935 1,548
Other..................................................... 411 318
Inventories................................................. 1,784 1,564
Other current assets........................................ 560 714
------- -------
Total current assets................................... 4,801 4,323
Investments and other assets................................ 1,858 2,367
Investment in leases........................................ 1,014 1,037
Property, plant and equipment, net.......................... 3,450 3,509
------- -------
Total assets........................................... $11,123 $11,236
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable, including current portion of long-term
debt...................................................... $ 1,418 $ 1,945
Accounts payable............................................ 1,129 1,015
Accrued payroll and employee benefits....................... 462 398
Other accrued liabilities................................... 755 856
Taxes on income............................................. 124 117
------- -------
Total current liabilities.............................. 3,888 4,331
Deferred employee benefits and other noncurrent
liabilities............................................... 1,398 1,507
Long-term debt.............................................. 2,732 2,649
Minority interest in consolidated subsidiaries.............. 148 121
------- -------
Total liabilities...................................... 8,166 8,608
------- -------
Shareholders' equity
Common stock, $1 par value, shares authorized, 350; shares
issued, 163 -- 1999 and 148 -- 2000.................... 163 148
Additional paid-in capital................................ 520 159
Retained earnings......................................... 2,762 2,909
Accumulated other comprehensive loss...................... (488) (588)
------- -------
Total shareholders' equity............................. 2,957 2,628
------- -------
Total liabilities and shareholders' equity............. $11,123 $11,236
======= =======
The accompanying notes are an integral part of the financial statements.
F-4
DANA CORPORATION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31,
------------------------
1998 1999 2000
------ ------- -----
(IN MILLIONS)
Net cash flows from operating activities.................... $ 795 $ 608 $ 984
------ ------- -----
Cash flows from investing activities:
Purchases of property, plant and equipment................ (661) (807) (662)
Purchases of assets to be leased.......................... (546) (480) (191)
Acquisitions.............................................. (829) (18) (511)
Divestitures.............................................. 1,039 36 571
Changes in investments and other assets................... (96) (155) (183)
Loans made to customers and partnerships.................. (232) (259) (643)
Payments received on leases............................... 265 200 146
Proceeds from sales of certain assets..................... 9 45 41
Proceeds from sales of leased assets...................... 91 135 82
Payments received on loans................................ 228 206 561
Other..................................................... (2) (4) (5)
------ ------- -----
Net cash flows -- investing activities...................... (734) (1,101) (794)
------ ------- -----
Cash flows from financing activities:
Net change in short-term debt............................. 54 (341) 577
Issuance of long-term debt................................ 473 1,396 368
Payments on long-term debt................................ (624) (376) (504)
Dividends paid............................................ (198) (206) (187)
Shares repurchased........................................ (100) (381)
Other..................................................... 41 1 5
------ ------- -----
Net cash flows -- financing activities...................... (254) 374 (122)
------ ------- -----
Net increase (decrease) in cash and cash equivalents........ (193) (119) 68
Cash and cash equivalents -- beginning of year.............. 423 230 111
------ ------- -----
Cash and cash equivalents -- end of year.................... $ 230 $ 111 $ 179
====== ======= =====
Reconciliation of net income to net cash flows from
operating activities
Net income................................................ $ 534 $ 513 $ 334
Depreciation and amortization............................. 488 519 523
Unremitted earnings of affiliates......................... (33) (37) (54)
Deferred income taxes..................................... 64 66 118
Minority interest......................................... 12 6 10
Change in accounts receivable............................. (162) (528) 327
Change in inventories..................................... (72) (183) 128
Change in other operating assets.......................... 17 1 (122)
Change in operating liabilities........................... 13 296 (141)
Additions to lease and loan loss reserves................. 20 8 18
Gains on divestitures..................................... (80) (5) (106)
Other..................................................... (6) (48) (51)
------ ------- -----
Net cash flows from operating activities.................... $ 795 $ 608 $ 984
====== ======= =====
The accompanying notes are an integral part of the financial statements.
F-5
DANA CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY
ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS)
-------------------------------------
NET
ADDITIONAL FOREIGN MINIMUM UNREALIZED
COMMON PAID-IN RETAINED CURRENCY PENSION INVESTMENT SHAREHOLDERS
STOCK CAPITAL EARNINGS TRANSLATION LIABILITY GAIN (LOSS) EQUITY
------ ---------- -------- ----------- --------- ----------- ------------
(IN MILLIONS)
Balance, December 31, 1997...... $164 $ 540 $2,105 $(210) $ (2) $ 7 $2,604
Comprehensive income:
Net income for 1998........... 534
Foreign currency
translation................. (54)
Minimum pension liability..... (9)
Net unrealized investment
gains....................... (4)
Total comprehensive
income.................... 467
Cash dividends declared......... (184) (184)
Cost of shares repurchased...... (14) (14)
Issuance of shares for director
and employee stock plans...... 2 65 67
---- ----- ------ ----- ---- --- ------
Balance, December 31, 1998...... 166 591 2,455 (264) (11) 3 2,940
Comprehensive income:
Net income for 1999........... 513
Foreign currency
translation................. (214)
Minimum pension liability..... (2)
Total comprehensive
income.................... 297
Cash dividends declared......... (206) (206)
Cost of shares repurchased...... (3) (105) (108)
Issuance of shares for director
and employee stock plans...... 34 34
---- ----- ------ ----- ---- --- ------
Balance, December 31, 1999...... 163 520 2,762 (478) (13) 3 2,957
Comprehensive income:
Net income for 2000........... 334
Foreign currency
translation................. (90)
Minimum pension liability..... (10)
Total comprehensive
income.................... 234
Cash dividends declared......... (187) (187)
Cost of shares repurchased...... (15) (366) (381)
Issuance of shares for director
and employee stock plans...... 5 5
---- ----- ------ ----- ---- --- ------
Balance, December 31, 2000...... $148 $ 159 $2,909 $(568) $(23) $ 3 $2,628
==== ===== ====== ===== ==== === ======
The accompanying notes are an integral part of the financial statements.
F-6
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Dana is a global leader in the engineering, manufacturing and distribution
of components and systems for worldwide vehicular and industrial manufacturers
and the related aftermarkets and a leading provider of lease financing services
in selected markets through its wholly-owned subsidiary, Dana Credit Corporation
(DCC).
The preparation of these financial statements requires estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying disclosures. Some of the more significant estimates
include depreciation and amortization of long-lived assets; deferred tax assets
and inventory valuations; sales returns, restructuring, environmental and
warranty accruals; postemployment and postretirement benefits; residual values
of leased assets and allowances for doubtful accounts. Actual results could
differ from those estimates.
The following summary of significant accounting policies should help you
evaluate the financial statements. Certain amounts in 1998 and 1999 have been
reclassified to conform with the 2000 presentation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all significant subsidiaries
in which we have the ability to control operating and financial policies.
Affiliated companies (20% to 50% ownership) are generally recorded in the
statements using the equity method of accounting. Operations of affiliates
accounted for on the equity method of accounting are generally included for
periods ended within one month of our year end. Less than 20%-owned companies
are included in the financial statements at the cost of our investment.
Dividends, royalties and fees from these cost basis affiliates are recorded in
income when received.
FOREIGN CURRENCY TRANSLATION
The financial statements of subsidiaries and equity affiliates outside the
United States (U.S.) located in non-highly inflationary economies are measured
using the currency of the primary economic environment in which they operate as
the functional currency, which for the most part is the local currency.
Transaction gains and losses which result from translating assets and
liabilities of these entities into the functional currency are included in net
earnings. When translating into U.S. dollars, income and expense items are
translated at average monthly rates of exchange and assets and liabilities are
translated at the rates of exchange at the balance sheet date. Translation
adjustments resulting from translating the functional currency into U.S. dollars
are reported as a component of accumulated other comprehensive income in
shareholders' equity. For affiliates operating in highly inflationary economies,
non-monetary assets are translated into U.S. dollars at historical exchange
rates and monetary assets are translated at current exchange rates. Translation
adjustments for these affiliates are included in net earnings.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is generally
determined on the last-in, first-out (LIFO) basis for U.S. inventories and on
the first-in, first-out (FIFO) or average cost basis for non-U.S. inventories.
PRE-PRODUCTION COSTS RELATED TO LONG-TERM SUPPLY ARRANGEMENTS
The cost of tooling that we own that is used to make products sold under
long-term supply arrangements is capitalized as part of property, plant and
equipment and amortized over its useful life. These costs are also capitalized
if our customer owns the tooling and we have a noncancelable right to use the
tooling over the contract period. Costs incurred in connection with the design
and development of tooling that will be billed to
F-7
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
customers upon completion is carried as a component of other accounts
receivable. Design and development costs related to customer products are
deferred if we have an agreement to collect such costs from the customer;
otherwise, they are expensed as incurred.
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 net 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 based
on loss experience and assessment of inherent risk. Adjustments are made to the
allowance for losses to adjust the 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 where equipment repossession has
started 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
on a straight-line basis over the estimated period of expected benefit, ranging
from 10 to 40 years.
LOANS RECEIVABLE
Loans receivable consist primarily of loans to partnerships in which DCC
has an interest and loans secured by equipment and first mortgages on real
property. The loans to partnerships are secured by the partnerships' assets.
Income on all loans is recognized using the interest method. Interest income on
impaired loans is recognized as cash is collected or on a cost recovery basis.
ALLOWANCE FOR LOSSES ON LOANS RECEIVABLE
Provisions for losses on loans receivable are determined on the basis of
loss experience and assessment of inherent risk. Adjustments are made to the
allowance for losses 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.
PROPERTIES AND DEPRECIATION
Property, plant and equipment are valued at historical costs. Depreciation
is recognized over the estimated useful lives using primarily the straight-line
method for financial reporting purposes and accelerated depreciation methods for
federal income tax purposes. Long-lived assets are reviewed for impairment and
where appropriate are adjusted to fair market value.
F-8
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION
Sales are recognized when products are shipped. Accruals for warranty
costs, sales returns and other allowances are provided at the time of shipment
based upon experience. Adjustments are made as new information becomes
available. Shipping and handling fees billed to customers are included in sales
and the costs of shipping and handling are included in cost of sales.
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
balances reflect the impact of temporary differences between the carrying amount
of assets and liabilities and their tax basis. Amounts are stated at enacted tax
rates expected to be in effect when taxes are actually paid or recovered.
Deferred tax assets are reduced, if necessary, by the amount of any tax benefits
not expected to be realized. The "flow-through" method of accounting is used 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.
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 are estimated based on assumptions concerning the amount
and timing of estimated future cash flows and assumed discount rates reflecting
varying degrees of credit risk. Fair values may not represent actual values of
the financial instruments that could be realized as of the balance sheet date or
that will be realized in the future.
DERIVATIVE FINANCIAL INSTRUMENTS
Various types of derivative financial instruments are used primarily to
hedge interest rate and foreign currency effects. Derivatives are not used for
trading or speculative purposes. 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 are primarily used to manage exposure to fluctuations in interest
rates. Differentials to be paid or received on certain interest rate agreements
are accrued and recognized as adjustments to interest expense.
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," was issued in June 1998 and SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Transactions," was issued in June 2000. The Statements require, among other
things, that all derivative instruments be recognized on the balance sheet at
fair value. We will adopt SFAS Nos. 133 and 138 in 2001. Interest rate swap
arrangements are being formally designated as hedges and will be marked to
market through other comprehensive income beginning in 2001. Foreign currency
forwards and other derivatives are not being designated as hedges and will be
marked to market through current earnings. We will evaluate these transactions
from time to time to determine whether they should be designated as hedges. The
adoption of SFAS Nos. 133 and 138 will not have a material effect on the results
of operations.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to existing conditions
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
F-9
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
current laws and regulations, existing technology and the most probable method
of remediation. The costs are not discounted and exclude the effects of
inflation and other societal and economic factors. If 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 defined benefit pension plans are
determined on an actuarial basis. Our policy is to fund these costs as accrued,
including amortization of the initial unrecognized net obligation over 15 years
and obligations arising due to plan amendments over the period benefited,
through deposits with trustees. Benefits are determined based upon employees'
length of service, wages or a combination of length of service and wages.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Annual net postretirement benefits liability and expense under the defined
benefit plans are determined on an actuarial basis. Our policy is to pay these
benefits as they become due. Benefits are determined primarily based upon
employees' length of service and include applicable employee cost sharing.
POSTEMPLOYMENT BENEFITS
Annual net postemployment benefits liability and expense under our 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.
STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, we consider highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
MARKETABLE SECURITIES
The majority of marketable securities satisfy the criteria for cash
equivalents and are classified accordingly. The remainder of our marketable
securities are classified as available for sale. Available-for-sale securities,
which are included in investments and other assets, are carried at fair value
and any unrealized gains or losses, net of income taxes, are reported as a
component of accumulated other comprehensive income or loss in shareholders'
equity.
STOCK-BASED COMPENSATION
Stock-based compensation is accounted for using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. No compensation expense is
recorded for stock options when granted as the option price is set at the market
value of the underlying stock.
NOTE 2 -- PREFERRED SHARE PURCHASE RIGHTS
We have a Preferred Share Purchase Rights Plan which is designed to deter
coercive or unfair takeover tactics. One right has been issued on each share of
our common stock outstanding on and after July 25, 1996. Under certain
circumstances, the holder of each right may purchase 1/1000th of a share of our
Series A Junior Participating Preferred Stock, no par value. The rights have no
voting privileges and will expire on July 15, 2006, unless exercised, redeemed
or exchanged sooner.
F-10
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Generally, the rights cannot be exercised or transferred apart from the
shares to which they are attached. However, if any person or group acquires 15%
or more of our outstanding common stock or commences a tender offer that would
result in the acquirer owning 15% of our outstanding shares, the rights not
owned by the acquirer will become exercisable and, for the exercise price of
$110 per share (unless adjusted), holders of these rights will be able to
purchase Dana common shares at 50% of the market value. If we merge with or sell
50% or more of our assets or earnings power to the acquirer or engage in similar
transactions, the rights not held by the acquirer can also be exercised. In that
event, for the $110 exercise price, the holders will be able to purchase common
shares of the acquiring or surviving company at 50% of market value.
The Board may redeem the rights at a price of $.01 each before anyone
acquires 15% or more of our common shares. After that, and before the acquirer
owns 50% of our outstanding shares, the Board may exchange each right for one
share of our common stock.
NOTE 3 -- PREFERRED SHARES
There are 5,000,000 shares of preferred stock authorized, without par
value, including 1,000,000 shares reserved for issuance under the Rights Plan.
No shares of preferred stock have been issued.
NOTE 4 -- COMMON SHARES
Certain employee and director stock plans provide that employees and
directors may tender stock to satisfy the purchase price of the shares, the
income taxes required to be withheld on the transaction, or both. In connection
with these stock plans, we repurchased 299,082 shares in 1998, 304,927 in 1999,
and 91,074 in 2000.
During 1999, the Board of Directors (Board) authorized the expenditure of
up to $350 to repurchase shares of our common stock and in 2000 it authorized an
additional expenditure of $250 for a total authorization of $600. The
authorizations expired at the end of 2000. The repurchases were accomplished
through open market transactions. In 1999, we repurchased 2,994,400 shares at an
aggregate cost of $100 and in 2000, 15,455,747 shares were repurchased at a cost
of $381.
All shares repurchased were cancelled and became authorized but unissued
shares.
Common stock transactions in the last three years are as follows:
1998 1999 2000
----------- ----------- -----------
Shares outstanding at beginning of year....... 163,810,306 165,690,844 163,151,142
Issued for director and employee stock
plans....................................... 2,179,620 764,535 272,713
Repurchased under stock plans................. (299,082) (309,837) (91,074)
Repurchase program............................ -- (2,994,400) (15,455,747)
----------- ----------- -----------
Shares outstanding at end of year............. 165,690,844 163,151,142 147,877,034
=========== =========== ===========
Average shares outstanding for the year --
basic....................................... 165,057,443 165,322,644 152,038,862
----------- ----------- -----------
Plus: Incremental shares from assumed
conversion of --
Deferred compensation units................. 476,197 461,112 571,029
Deferred restricted stock units............. 27,917 106,044 226,253
Stock options............................... 1,480,967 608,165 95,182
----------- ----------- -----------
Potentially dilutive shares................... 1,985,081 1,175,321 892,464
----------- ----------- -----------
Average shares outstanding for the year --
diluted..................................... 167,042,524 166,497,965 152,931,326
=========== =========== ===========
F-11
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- INVENTORIES
The components of inventory are as follows:
DECEMBER 31,
---------------
1999 2000
------ ------
Raw materials............................................... $ 534 $ 436
Work in process and finished goods.......................... 1,250 1,128
------ ------
$1,784 $1,564
====== ======
Inventories amounting to $1,161 and $1,005 at December 31, 1999 and 2000,
respectively, are valued using the LIFO method. If all inventories were valued
at replacement cost, inventories would be increased by $135 and $119 at December
31, 1999 and 2000, respectively.
NOTE 6 -- SHORT-TERM DEBT
Short-term funds for certain U.S. and non-U.S. operations are obtained from
issuing commercial paper, short-term notes payable to banks and bank overdrafts.
At December 31, 2000, Dana, excluding DCC, had $427 of commercial paper
outstanding, $300 borrowed against committed U.S. bank lines, $40 borrowed
against uncommitted U.S. bank lines, $143 of non-U.S. notes and $96 of notes
payable at its non-U.S. subsidiaries. DCC had $406 of commercial paper issued,
$75 borrowed against uncommitted U.S. bank lines and $39 of notes payable at its
non-U.S. subsidiaries.
Dana, excluding DCC, had committed borrowing lines of $1,665 and
uncommitted borrowing lines of $639 at December 31, 2000. DCC had committed
borrowing lines of $570 and uncommitted borrowing lines of $180 at December 31,
2000. Fees are paid to the banks for providing committed lines, but not for
uncommitted lines. Such fees are not considered material.
Selected details of short-term borrowings are as follows:
WEIGHTED
AVERAGE
INTEREST
AMOUNT RATE
------ --------
Balance at December 31, 1999................................ $ 968 6.0%
Average during 1999......................................... 1,162 5.4
Maximum during 1999 (month end)............................. 1,490 5.6
Balance at December 31, 2000................................ $1,526 7.0%
Average during 2000......................................... 1,614 6.6
Maximum during 2000 (month end)............................. 1,872 6.7
NOTE 7 -- INTEREST RATE AGREEMENTS
We enter into interest rate agreements to manage interest rate risk by
reducing our exposure to the effects of future interest rate movements. Under
interest rate swap agreements, we agree to exchange with third parties, at
specific intervals, the difference between fixed rate and floating rate interest
amounts calculated by reference to an agreed notional amount. At December 31,
2000, DCC was committed to receive interest rates which change periodically in
line with prevailing short-term market rates (the average rate being received at
December 31, 2000 was 7.10%) and to pay an average rate of 7.00% which is fixed
over the period of the
F-12
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
agreements on notional amounts of $125. DCC's notional amounts of interest rate
swaps expire as follows: 2001, $30; 2002, $50 and 2003, $45. Dana, exclusive of
DCC, was not a party to any interest rate swap agreements at December 31, 2000.
NOTE 8 -- LONG-TERM DEBT
DECEMBER 31,
---------------
1999 2000
------ ------
Indebtedness of Dana, excluding consolidated subsidiaries --
Unsecured notes payable, fixed rates --
6.25% notes, due March 1, 2004......................... $ 250 $ 250
6.5% notes, due March 15, 2008......................... 150 150
7.0% notes, due March 15, 2028......................... 200 197
6.5% notes, due March 1, 2009.......................... 350 350
7.0% notes, due March 1, 2029.......................... 400 375
6.32%-7.04%, due 2001 to 2002.......................... 745 470
Various industrial revenue bonds and other................ 4
Indebtedness of DCC -- unsecured notes payable, fixed rates,
4.25%-8.54%, due 2001 to 2007............................. 654 865
Unsecured notes payable, variable rates, 6.31%-7.87%, due
2001 to 2003........................................... 215 220
Nonrecourse notes payable, fixed rates, 6.80%-12.05%, due
2001 to 2010........................................... 154 108
Indebtedness of other consolidated subsidiaries............. 60 83
------ ------
Total long-term debt.............................. 3,182 3,068
Less: Current maturities.................................... 450 419
------ ------
$2,732 $2,649
====== ======
The total maturities of all long-term debt for the five years after 2000
are as follows: 2001, $419; 2002, $477; 2003, $99; 2004, $459 and 2005, $77.
We filed universal shelf registration statements in December 1997 and
December 1998 authorizing us to issue debt or equity securities, or a
combination thereof, in an aggregate amount not to exceed $1,350. In March 1998,
we issued $150 of 6.5% unsecured notes due March 15, 2008 and $200 of 7.0%
unsecured notes due March 15, 2028. In March 1999, we issued $250 of 6.25%
unsecured notes due March 1, 2004, $350 of 6.5% unsecured notes due March 1,
2009 and $400 of 7.0% unsecured notes due March 1, 2029.
During 1999, DCC established a $500 Medium-Term Note Program. Notes under
the program are offered on terms determined at the time of issuance. At December
31, 2000, notes totaling $500 were outstanding under the program. Interest on
the notes is payable on a semi-annual basis. These notes are general, unsecured
obligations of DCC. DCC has agreed that it will not issue any other notes which
are secured or senior to notes issued under the program, except as permitted by
the program.
Interest paid on short-term and long-term debt was $283 in 1998, $285 in
1999 and $314 in 2000.
NOTE 9 -- STOCK OPTION PLANS
The Compensation Committee of the Board grants stock options to selected
Dana employees under the 1997 Stock Option Plan. The option price is equal to
the market price of the stock at the date of grant. One-fourth of the options
granted become exercisable at each of the first four anniversary dates of the
grant; options
F-13
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
generally expire ten years from the date of grant. Stock appreciation rights may
be granted separately or in conjunction with the options.
This is a summary of transactions under the plan in the last three years:
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
---------- --------
Outstanding at December 31, 1997............................ 8,227,608 $30.01
Granted -- 1998........................................... 2,519,524 48.14
Exercised -- 1998......................................... (2,062,466) 25.17
Cancelled -- 1998......................................... (174,009) 35.89
----------
Outstanding at December 31, 1998............................ 8,510,657 $36.43
Granted -- 1999........................................... 2,333,919 45.50
Exercised -- 1999......................................... (569,933) 30.65
Cancelled -- 1999......................................... (193,138) 43.24
----------
Outstanding at December 31, 1999............................ 10,081,505 $38.78
Granted -- 2000........................................... 3,322,750 23.06
Exercised -- 2000......................................... (120,857) 17.93
Cancelled -- 2000......................................... (420,999) 38.08
----------
Outstanding at December 31, 2000............................ 12,862,399 $34.94
==========
The following table summarizes information about stock options under this
plan at December 31, 2000:
OUTSTANDING OPTIONS
------------------------------------- EXERCISABLE OPTIONS
WEIGHTED ---------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OF OPTIONS LIFE IN YEARS PRICE OF OPTIONS PRICE
--------------- ---------- ------------- -------- ---------- --------
$13.18-28.13........................... 4,986,495 7.6 $24.22 1,845,595 $26.20
29.06-38.44........................... 3,288,055 5.4 34.58 3,129,705 34.38
40.08-52.56........................... 4,587,849 8.0 46.85 2,263,161 47.07
---------- ---------
12,862,399 7.2 34.94 7,238,461 36.26
========== =========
At December 31, 2000, there were 1,503,658 shares available for future
grants under this plan.
In accordance with our accounting policy for stock-based compensation, we
have not recognized any expense relating to these stock options. If we had used
the fair value method of accounting, the alternative policy set out in SFAS No.
123, "Accounting for Stock-Based Compensation," the after-tax expense relating
to the stock options would have been $12 in 1998, $11 in 1999 and $14 in 2000.
If we had charged this expense to income, our pro forma net income and earnings
per share would have been as follows:
1998 1999 2000
---- ---- ----
Net Income.................................................. $522 $502 $320
Basic EPS................................................... 3.16 3.03 2.10
Diluted EPS................................................. 3.13 3.01 2.09
F-14
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes model with the following assumptions:
1998 1999 2000
----------- --------- ---------
Risk-free interest rate............................ 4.24-5.52% 5.82% 6.16%
Dividend yield..................................... 2.21-2.87% 2.73% 5.38%
Expected life...................................... 5.4 years 5.4 years 5.4 years
Stock price volatility............................. 30.1-33.7% 38.60% 40.72%
Based on the above assumptions, the weighted average fair value per share
of options granted under the plan was $14.27 in 1998, $15.79 in 1999 and $6.51
in 2000.
Under our Directors' Stock Option Plan, options for 3,000 common shares are
automatically granted to each non-employee director once a year. The option
price is the market value of the stock at the date of grant. The options can be
exercised after one year and expire 10 years from the date of grant.
This is a summary of the stock option activity of the Directors' plan in
the last three years:
NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------
Outstanding at December 31, 1997............................ 99,000 $28.74
Granted -- 1998........................................... 24,000 60.09
Exercised -- 1998......................................... (3,000) 24.25
-------
Outstanding at December 31, 1998............................ 120,000 $35.12
Granted -- 1999........................................... 21,000 50.25
Exercised -- 1999......................................... (3,000) 24.25
-------
Outstanding at December 31, 1999............................ 138,000 $37.66
Granted -- 2000........................................... 21,000 28.78
-------
Outstanding at December 31, 2000............................ 159,000 $36.49
=======
The following table summarizes information about stock options under this
plan at December 31, 2000:
OUTSTANDING OPTIONS
------------------------------------- EXERCISABLE OPTIONS
WEIGHTED ---------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OF OPTIONS LIFE IN YEARS PRICE OF OPTIONS PRICE
--------------- ---------- ------------- -------- ---------- --------
$24.25-32.25..................... 114,000 5.5 $28.98 93,000 $29.03
$50.25-60.09..................... 45,000 7.8 55.50 45,000 55.50
------- -------
159,000 6.0 36.49 138,000 37.66
======= =======
At December 31, 2000, there were 106,000 shares available for future grants
under this plan.
The non-employee directors of Echlin participated in the 1996 Non-Executive
Director Stock Option Plan under which options for 232,325 shares were
authorized for issuance. Options were granted at market value at the date of
grant, were exercisable after one year and expire 10 years from the date of
grant, except in the event of the retirement or death of the director. During
1998, options to purchase 17,654 shares were exercised at $33.49. During 1999,
options to purchase 39,265 shares were exercised at $35.43. No options were
exercised in 2000. At December 31, 2000 there were 38,752 options outstanding
and exercisable at exercise prices ranging from $33.49 to $37.93 per share with
a weighted average exercise price of $34.40. The weighted
F-15
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
average remaining contractual life of these options was 6.2 years. No future
grants are expected under this plan.
NOTE 10 -- EMPLOYEES' STOCK PURCHASE PLAN
The majority of our full-time U.S. and some of our non-U.S. employees are
eligible to participate in our stock purchase plan. Plan participants can
authorize us to withhold up to 15% of their earnings and deposit this amount
with an independent custodian. The custodian uses the funds to purchase our
common stock at current market prices. As record keeper for the plan, we
allocate the purchased shares to the participants' accounts. Shares are
distributed to the participants on request.
We match up to 50% of the participants' contributions over a five-year
period beginning with the year the amounts are withheld. If a participant
withdraws any shares before the end of five years, the amount of our match will
depend on how long the shares were in the account. The custodian purchased
874,272 shares in 1998, 1,177,541 shares in 1999 and 2,212,391 shares in 2000.
The charge to expense for our match was $9 in 1998, $9 in 1999 and $10 in 2000.
NOTE 11 -- ADDITIONAL COMPENSATION PLANS
We have numerous additional compensation plans under which we pay our
employees for increased productivity and improved performance. One such plan is
our Additional Compensation Plan for certain officers and other key employees.
Under this plan, a percentage of the participants' compensation is accrued for
additional compensation if we attain certain profit levels. The Compensation
Committee selects the participants and determines whether to pay the awards
immediately in cash or to defer them for payment later in cash, stock or a
combination of both. Participants may elect to convert deferred awards to units
which are the economic equivalent of shares of Dana common stock. Units are
credited the equivalent of dividends on our common stock and adjusted in value
based on the market value of our common stock. Compensation expense was credited
$3 in 1998, $3 in 1999 and $7 in 2000 in connection with reductions in the value
of deferred units. Awards not converted to units are credited quarterly with
interest earned at a rate tied to the prime rate.
Activity related to the plan for the last three years is as follows:
1998 1999 2000
------ ------ ------
Awarded to participants based on preceding year's
performance.............................................. $ 14 $ 14 $ 15
Dividends and interest credited to participants'
accounts................................................. 1 4 2
Charges to expense......................................... 9 19 (5)
Shares issued to participants.............................. 1,143 3,721 5,240
We also have a Restricted Stock Plan under which the Compensation Committee
grants restricted common shares to certain key employees. The shares are subject
to forfeiture until the restrictions lapse or terminate. Generally, the employee
must remain employed with us for a specified number of years after the date of
grant to receive shares. There were 55,100 shares granted in 1998, 102,500
shares in 1999 and 31,200 shares in 2000. Since 1997, participants have been
able to convert their restricted stock into restricted stock units under certain
conditions. The units are payable in unrestricted stock upon retirement or
termination of employment. There were 200,037 restricted shares converted to
restricted units in 1999 and 32,736 in 2000. Charges to expense for this plan
were $1 in 1998, $2 in 1999 and $2 in 2000. There are 652,268 shares authorized
for future issuance under the plan at December 31, 2000.
F-16
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- PENSION AND OTHER POSTRETIREMENT BENEFITS
We provide defined contribution and defined benefit, qualified and
nonqualified, pension plans for certain employees. We also provide other
postretirement benefits including medical and life insurance for certain
employees upon retirement.
The following tables provide a reconciliation of the changes in the defined
benefit pension plans' and other post retirement plans' benefit obligations and
fair value of assets over the two-year period ended December 31, 2000,
statements of the funded status and schedules of the net amounts recognized in
the balance sheet at December 31, 1999 and 2000:
PENSION BENEFITS OTHER BENEFITS
----------------- -----------------
1999 2000 1999 2000
------- ------- ------- -------
Reconciliation of benefit obligation
Obligation at January 1.............................. $2,382 $2,425 $ 1,083 $ 1,140
Service cost......................................... 78 76 18 16
Interest cost........................................ 153 168 69 79
Employee contributions............................... 4 4 4 4
Plan amendments...................................... 20 6 (28)
Actuarial (gain) loss................................ (41) 28 48 56
Benefit payments..................................... (162) (224) (78) (84)
Settlement, curtailment and terminations............. 15 (12)
Acquisitions and divestitures........................ (5) 11 23
Translation adjustments.............................. (4) (32) 1 (1)
------ ------ ------- -------
Obligation at December 31............................ $2,425 $2,477 $ 1,140 $ 1,198
====== ====== ======= =======
Reconciliation of fair value of plan assets
Fair value at January 1.............................. $2,703 $2,931
Actual return on plan assets......................... 284 49
Acquisitions and divestitures........................ 58 (26)
Employer contributions............................... 36 24
Employee contributions............................... 4 4
Benefit payments..................................... (158) (198)
Settlements.......................................... (1)
Translation adjustments.............................. 4 (31)
------ ------
Fair value at December 31............................ $2,931 $2,752
====== ======
Funded Status
Balance at December 31............................... $ 506 $ 275 $(1,140) $(1,198)
Unrecognized transition obligation................... 1 (1)
Unrecognized prior service cost...................... 82 57 (29) (30)
Unrecognized (gain) loss............................. (581) (351) 254 321
------ ------ ------- -------
Accrued cost........................................... $ 8 $ (20) $ (915) $ (907)
====== ====== ======= =======
F-17
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PENSION BENEFITS OTHER BENEFITS
----------------- -----------------
1999 2000 1999 2000
------- ------- ------- -------
Amounts recognized in the balance sheet consist of:
Prepaid benefit cost................................. $ 129 $ 88
Accrued benefit liability............................ (150) (168) $ (915) $ (907)
Intangible assets.................................... 8 23
Accumulated other comprehensive loss................. 21 37 -- --
------ ------ ------- -------
Net amount recognized................................ $ 8 $ (20) $ (915) $ (907)
====== ====== ======= =======
Benefit obligations of the U.S. non-qualified and certain non-U.S. pension
plans, amounting to $125 at December 31, 2000, and the other postretirement
benefit plans are not funded.
Components of net periodic benefit costs for the last three years are as
follows:
PENSION BENEFITS OTHER BENEFITS
--------------------- ------------------
1998 1999 2000 1998 1999 2000
----- ----- ----- ---- ---- ----
Service cost.................................... $ 71 $ 78 $ 76 $ 18 $ 18 $ 16
Interest cost................................... 153 153 168 70 69 79
Expected return on plan assets.................. (181) (219) (232)
Amortization of transition obligation........... 4 3 3
Amortization of prior service cost.............. 16 23 23 (9) (10) (7)
Recognized net actuarial gain (loss)............ (8) 5 (6) 5 4 10
----- ----- ----- ---- ---- ----
Net periodic benefit cost....................... 55 43 32 84 81 98
Curtailment (gain) loss......................... 4 18 (19) (23)
Settlement gain................................. (3) (3)
Termination expenses............................ 2
----- ----- ----- ---- ---- ----
Net periodic benefit cost after curtailments and
settlements................................... $ 58 $ 43 $ 47 $ 65 $ 81 $ 75
===== ===== ===== ==== ==== ====
The assumptions used in the measurement of pension benefit obligations are
as follows:
U.S. PLANS
------------------------
1998 1999 2000
------ ------ ------
Discount rate............................................... 6.75% 7.25% 7.75%
Expected return on plan assets.............................. 8.75% 9.25% 9.25%
Rate of compensation increase............................... 4.31-5% 4.31-5% 4.31-5%
NON-U.S. PLANS
-------------------------
1998 1999 2000
------ ----- --------
Discount rate.............................................. 5-8% 5.5-7% 5.5-7.75%
Expected return on plan assets............................. 7.25-9% 6.5-9% 6.5-9%
Rate of compensation increase.............................. 3.5-5% 3-5% 2.5-5%
F-18
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The assumptions used in the measurement of other postretirement benefit
obligations are as follows:
1998 1999 2000
----- ---- ----
Discount rate............................................... 6.75% 7.25% 7.75%
Initial weighted health care costs trend rate............... 7.5% 7.2% 6.8%
Ultimate health care costs trend rate....................... 5% 5% 5%
Years to ultimate........................................... 10 9 9
Assumed health care costs trend rates have a significant effect on the
health care plan. A one-percentage-point change in assumed health care costs
trend rates would have the following effects for 2000:
1% POINT 1% POINT
INCREASE DECREASE
-------- --------
Effect on total of service and interest cost components..... $ 7 $ (6)
Effect on postretirement benefit obligations................ 91 (77)
NOTE 13 -- BUSINESS SEGMENTS
Our operations are organized into seven market-focused Strategic Business
Units (SBUs). This structure allows our people in each of these units to focus
their resources to benefit Dana and our global customers. We realigned certain
businesses within our SBU structure in 2000. The most significant change was
shifting our fluid handling products operations from the Engine Systems Group
(ESG) to the Fluid Systems Group (FSG). The segment information was restated to
reflect these changes.
The Automotive Systems Group (ASG) designs, develops and manufactures
"under the vehicle" products for passenger cars and light trucks. Its global,
full-service engineering provides its customers with complete modules and
systems. In the automotive market, the group is a leading manufacturer of axles,
driveshafts, structural components and modules and chassis systems.
The Automotive Aftermarket Group (AAG) provides more than 300,000 different
parts to cover a vast array of aftermarket needs for brake and chassis products,
filtration products and engine systems.
Commercial Vehicle Systems (CVS) serves the global market for class 5
through 8 trucks. Products include heavy axles and brakes, drivetrain
components, power take-offs, trailer products and heavy systems modular
assemblies.
The ESG provides its customers with complete engine systems for their
sealing and power cylinder needs. Its products include gaskets and other sealing
products, piston rings, bearings, liners and camshafts.
The FSG manufactures an extensive line of products focused on the pumping,
routing and thermal management of fluid systems for a wide range of
applications, from passenger cars to heavy trucks and off-highway vehicles.
Products include an extensive line of rubber hose, fluid products and fluid
management systems.
The Off-Highway Systems Group (OHSG) manufactures and markets off-highway
axles, powershift transmissions, transaxles, torque converters and electronic
controls.
Dana Credit Corporation (DCC) provides leasing and financing services to a
broad range of customers in selected markets around the world.
F-19
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Management evaluates the operating segments and regions as if DCC were
accounted for on the equity method of accounting. Information used to evaluate
the SBUs and regions is as follows:
OPERATING NET NET CAPITAL DEPRECIATION/
SALES EBIT PAT PROFIT ASSETS SPEND AMORTIZATION
------- ------ --------- ------ ------ ------- -------------
1998
ASG......................... $ 4,180 $ 504 $ 325 $ 261 $1,810 $221 $132
AAG......................... 2,888 225 138 88 1,822 86 68
CVS......................... 1,746 170 104 72 654 42 37
ESG......................... 978 58 42 29 1,192 65 54
FSG......................... 1,193 124 76 60 774 56 49
OHSG........................ 888 77 47 34 552 45 38
DCC......................... 34 34 122
Other....................... 591 (148) (175) 13 27 37 18
------- ------ ----- ----- ------ ---- ----
Total operations............ 12,464 1,010 591 591 6,953 552 396
Restructuring and
non-recurring items....... (166) (57) (57)
------- ------ ----- ----- ------ ---- ----
Consolidated................ $12,464 $ 844 $ 534 $ 534 $6,953 $552 $396
======= ====== ===== ===== ====== ==== ====
North America............... $ 9,657 $1,036 $ 642 $ 520 $4,825 $339 $258
Europe...................... 1,844 110 66 37 1,392 116 86
South America............... 779 26 27 14 777 61 40
Asia/Pacific................ 184 (6) (5) (12) 138 12 8
DCC......................... 34 34 122
Other....................... (156) (173) (2) (301) 24 4
------- ------ ----- ----- ------ ---- ----
Total operations............ 12,464 1,010 591 591 6,953 552 396
Restructuring and
non-recurring items....... (166) (57) (57)
------- ------ ----- ----- ------ ---- ----
Consolidated................ $12,464 $ 844 $ 534 $ 534 $6,953 $552 $396
======= ====== ===== ===== ====== ==== ====
1999
ASG......................... $ 4,461 $ 538 $ 343 $ 271 $1,761 $190 $142
AAG......................... 3,039 307 188 127 1,998 117 76
CVS......................... 1,904 208 127 91 689 48 34
ESG......................... 1,318 103 69 49 1,136 85 73
FSG......................... 1,238 133 82 63 757 60 50
OHSG........................ 812 56 34 22 546 31 37
DCC......................... 34 34 145
Other....................... 387 (194) (199) 21 208 16 17
------- ------ ----- ----- ------ ---- ----
Total operations............ 13,159 1,151 678 678 7,240 547 429
Restructuring and
non-recurring items....... (229) (165) (165)
------- ------ ----- ----- ------ ---- ----
Consolidated................ $13,159 $ 922 $ 513 $ 513 $7,240 $547 $429
======= ====== ===== ===== ====== ==== ====
F-20
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OPERATING NET NET CAPITAL DEPRECIATION/
SALES EBIT PAT PROFIT ASSETS SPEND AMORTIZATION
------- ------ --------- ------ ------ ------- -------------
North America............... $10,308 $1,235 $ 771 $ 612 $5,222 $379 $283
Europe...................... 2,051 99 57 20 1,267 102 96
South America............... 549 16 13 3 581 48 37
Asia/Pacific................ 251 (1) (10) 143 13 9
DCC......................... 34 34 145
Other....................... (199) (196) 19 (118) 5 4
------- ------ ----- ----- ------ ---- ----
Total operations............ 13,159 1,151 678 678 7,240 547 429
Restructuring and
non-recurring items....... (229) (165) (165)
------- ------ ----- ----- ------ ---- ----
Consolidated................ $13,159 $ 922 $ 513 $ 513 $7,240 $547 $429
======= ====== ===== ===== ====== ==== ====
2000
ASG......................... $ 4,634 $ 423 $ 287 $ 196 $2,097 $180 $149
AAG......................... 2,850 125 77 2 1,940 74 78
CVS......................... 1,598 126 76 41 557 32 42
ESG......................... 1,293 86 63 40 1,082 77 75
FSG......................... 1,163 110 66 45 673 43 48
OHSG........................ 674 49 30 18 438 19 29
DCC......................... 35 35 174
Other....................... 105 (243) (257) 19 9 6
------- ------ ----- ----- ------ ---- ----
Total operations............ 12,317 676 377 377 6,980 434 427
Restructuring and
non-recurring items....... (25) (43) (43)
------- ------ ----- ----- ------ ---- ----
Consolidated................ $12,317 $ 651 $ 334 $ 334 $6,980 $434 $427
======= ====== ===== ===== ====== ==== ====
North America............... $ 9,449 $ 804 $ 525 $ 346 $4,730 $306 $286
Europe...................... 1,947 74 44 4 1,542 78 96
South America............... 563 24 11 451 32 30
Asia/Pacific................ 358 7 5 (8) 169 11 11
DCC......................... 35 35 174
Other....................... (233) (243) (86) 7 4
------- ------ ----- ----- ------ ---- ----
Total operations............ 12,317 676 377 377 6,980 434 427
Restructuring and
non-recurring items....... (25) (43) (43)
------- ------ ----- ----- ------ ---- ----
Consolidated................ $12,317 $ 651 $ 334 $ 334 $6,980 $434 $427
======= ====== ===== ===== ====== ==== ====
With the exception of DCC, operating profit after taxes (PAT) represents
earnings before interest and taxes (EBIT), tax effected at 39% (our estimated
long-term effective rate), plus equity in earnings of affiliates. The Other
category includes discontinued businesses, trailing liabilities for closed
plants, interest expense net of interest income, corporate expenses and
adjustments to reflect the actual effective tax rate. SBU and regional expenses
are included in the respective SBU or region; otherwise they are included in
Other. In arriving at net profit from operating PAT, allocations are based on
sales.
F-21
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Net assets at the SBU and regional level is intended to correlate with
invested capital. It includes accounts receivable, inventories (on a first-in,
first-out basis), net property, plant and equipment, investments in affiliates,
goodwill, trade accounts payable and 2% of annualized sales as an assumption for
cash and prepaid expense.
DCC is evaluated based upon numerous criteria of which net profit and net
assets (equity investment) shown above are the major items.
Restructuring and non-recurring items consist of the restructuring and
integration charges discussed in Note 20, gains on sales of business discussed
in Note 19 and other non-recurring charges.
Sales by region are based on the location of the entity recording the sale.
Sales from the U.S. amounted to $8,784 in 1998, $9,413 in 1999 and $8,552 in
2000. No other country's sales exceeded 10% of total sales. U.S. long-lived
assets were $1,835 in 1999 and $1,865 in 2000. No other country's long-lived
assets exceeded 10% of total long-lived assets.
Net operating assets differ from consolidated assets as follows:
1998 1999 2000
------- ------- -------
Net operating assets.................................... $ 6,953 $ 7,240 $ 6,980
Accounts payable........................................ 996 1,129 1,014
DCC's assets in excess of equity........................ 1,330 1,902 2,279
Non-trade receivables and other current assets.......... 629 655 755
Other long-term assets.................................. 230 197 208
------- ------- -------
Consolidated assets..................................... $10,138 $11,123 $11,236
======= ======= =======
The difference between operating capital spend and depreciation shown above
and purchases of property, plant and equipment and depreciation shown on the
cash flow statement represents the method of measuring DCC for operating
purposes. DCC's capital spend and depreciation are not included above. In
addition, DCC purchases equipment and leases the equipment to the other SBUs.
These operating leases are included in the consolidated statements as purchases
of assets and depreciated over their useful life.
Export sales from the U.S. to customers outside the U.S. amounted to $756
in 1998, $939 in 1999 and $832 in 2000. Total export sales (including sales to
our non-U.S. subsidiaries which are eliminated for financial statement
presentation) were $1,001 in 1998, $1,229 in 1999 and $1,115 in 2000.
Worldwide sales to Ford Motor Company and subsidiaries amounted to $1,911
in 1998, $2,130 in 1999 and $2,396 in 2000, which represented 15%, 16%, and 19%
of our consolidated sales. Sales to DaimlerChrysler AG and subsidiaries were
$1,602 in 1998, $1,777 in 1999 and $1,669 in 2000 representing 13%, 14% and 14%
of our consolidated sales. Sales to Ford were primarily from our ASG and FSG
segments, while sales to DaimlerChrysler were primarily from the ASG and HTG
segments. No other customer accounted for more than 10% of our consolidated
sales.
F-22
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- ESTIMATED INCOME TAXES
Income tax expense (benefit) consists of the following components:
YEAR ENDED
DECEMBER 31,
------------------
1998 1999 2000
---- ---- ----
Current
U.S. federal.............................................. $140 $ 23 $ 22
U.S. state and local...................................... 46 15 18
Non-U.S. ................................................. 74 139 74
---- ---- ----
260 177 114
---- ---- ----
Deferred
U.S. federal.............................................. 43 120 48
Non-U.S. ................................................. 12 (46) 9
---- ---- ----
55 74 57
---- ---- ----
Total expense............................................... $315 $251 $171
==== ==== ====
Deferred tax benefits (liabilities) consist of the following:
DECEMBER 31,
---------------------
1998 1999 2000
----- ----- -----
Postretirement benefits other than pensions................. $ 386 $ 387 $ 328
Postemployment benefits..................................... 38 38 32
Expense accruals............................................ 144 150 210
Inventory reserves.......................................... 28 35 58
Net operating loss and credit carryforwards................. 123 117 151
Valuation allowances........................................ (59) (83) (102)
Other employee benefits..................................... 16 24 23
Other....................................................... 30 63 65
----- ----- -----
Deferred tax benefits....................................... 706 731 765
----- ----- -----
Depreciation -- non-leasing................................. (179) (215) (239)
Leasing activities.......................................... (383) (441) (557)
Pension accruals............................................ (23) (15) (12)
Other....................................................... (11) (17) (17)
----- ----- -----
Deferred tax liabilities.................................... (596) (688) (825)
----- ----- -----
Net deferred tax benefits (liabilities)..................... $ 110 $ 43 $ (60)
===== ===== =====
Worldwide, we have operating loss carryforwards of approximately $366 with
remaining lives ranging from one year to an indefinite period. Valuation
allowances are provided for deferred benefits if the realization of the benefits
is uncertain. To reflect uncertainties related to utilization of specific loss
carryforwards, we increased the valuation allowance by $24 in 1999 and $19 in
2000. Net benefits recognized for loss and tax credit carryforwards generally
relate to the U.S., where we have traditionally been a taxpayer, and Germany and
Brazil, where operating losses may be carried forward indefinitely.
F-23
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Cumulative undistributed earnings of non-U.S. subsidiaries for which U.S.
income taxes, exclusive of foreign tax credits, have not been provided
approximated $935 at December 31, 2000. U.S. income taxes have not been provided
on these undistributed earnings since we intend to permanently reinvest them. If
the total undistributed earnings of non-U.S. subsidiaries had been remitted in
2000, a significant amount of the additional tax provision would have been
offset by foreign tax credits.
We paid income taxes of $228 in 1998, $136 in 1999 and $98 in 2000.
The effective income tax rate differs from the U.S. federal income tax rate
for the following reasons:
YEAR ENDED
DECEMBER 31,
------------------
1998 1999 2000
---- ---- ----
U.S. federal income tax rate................................ 35.0% 35.0% 35.0%
Increases (reductions) resulting from:
State and local income taxes, net of federal income tax
benefit................................................ 3.6 2.1 2.3
Non-U.S. income........................................... (1.1) (0.7) (1.1)
General business tax credits.............................. (0.4) (1.9) (1.7)
Amortization of goodwill.................................. 0.5 0.6 1.2
Miscellaneous items....................................... 0.9 (1.0) 1.1
---- ---- ----
Effective income tax rate................................... 38.5% 34.1% 36.8%
==== ==== ====
NOTE 15 -- COMPOSITION OF CERTAIN BALANCE SHEET AMOUNTS
The following items comprise the net amounts indicated in the respective
balance sheet captions:
DECEMBER 31,
---------------
1999 2000
------ ------
Investments and Other Assets
Goodwill.................................................... $ 997 $ 969
Investments at equity....................................... 429 965
Marketable securities, cost of $45 -- 1999 and
$37 -- 2000............................................... 49 41
Loans receivable............................................ 103 109
Other....................................................... 280 283
------ ------
$1,858 $2,367
====== ======
Property, Plant and Equipment, net
Land and improvements to land............................... $ 159 $ 146
Building and building fixtures.............................. 1,202 1,167
Machinery and equipment..................................... 4,820 4,859
------ ------
6,181 6,172
Less: Accumulated depreciation.............................. 2,731 2,663
------ ------
$3,450 $3,509
====== ======
F-24
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31,
---------------
1999 2000
------ ------
Deferred Employee Benefits and Other Noncurrent Liabilities
Postretirement other than pension........................... $ 839 $ 831
Deferred income tax......................................... 190 310
Pension..................................................... 79 109
Postemployment.............................................. 82 82
Compensation................................................ 68 54
Other noncurrent liabilities................................ 140 121
------ ------
$1,398 $1,507
====== ======
Investment in Leases
Direct financing leases..................................... $ 173 $ 141
Leveraged leases............................................ 816 867
Property on operating leases, net of accumulated
depreciation.............................................. 87 93
Allowance for credit losses................................. (41) (43)
------ ------
1,035 1,058
Less: Current portion....................................... 21 21
------ ------
$1,014 $1,037
====== ======
The components of the net investment in direct financing leases are as
follows:
DECEMBER 31,
-------------
1999 2000
----- -----
Total minimum lease payments................................ $201 $154
Residual values............................................. 43 42
Deferred initial direct costs............................... 2 2
---- ----
246 198
Less: Unearned income....................................... 73 57
---- ----
$173 $141
==== ====
The components of the net investment in leveraged leases are as follows:
DECEMBER 31,
-----------------
1999 2000
------- -------
Rentals receivable.......................................... $ 7,218 $ 7,597
Residual values............................................. 788 874
Nonrecourse debt service.................................... (6,036) (6,409)
Unearned income............................................. (1,143) (1,185)
Deferred investment tax credit.............................. (11) (10)
------- -------
816 867
Less: Deferred taxes arising from leveraged leases.......... 355 423
------- -------
$ 461 $ 444
======= =======
F-25
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Total minimum lease payments receivable on direct financing leases as of
December 31, 2000 are as follows:
Year Ending December 31,
2001...................................................... $ 31
2002...................................................... 25
2003...................................................... 22
2004...................................................... 19
2005...................................................... 14
Later years................................................. 43
----
Total minimum lease payments receivable..................... $154
====
Total minimum lease payments receivable on operating leases as of December
31, 2000 are as follows:
Year Ending December 31,
2001...................................................... $ 24
2002...................................................... 20
2003...................................................... 15
2004...................................................... 11
2005...................................................... 9
Later years................................................. 23
----
Total minimum lease payments receivable..................... $102
====
NOTE 16 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of Dana's financial instruments are as follows:
DECEMBER 31,
---------------------------------------------
1999 2000
--------------------- ---------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
FINANCIAL ASSETS
Cash and cash equivalents................... $ 111 $ 111 $ 179 $ 179
Loans receivable (net)...................... 184 180 219 228
Investment securities....................... 67 67 55 55
FINANCIAL LIABILITIES
Short-term debt............................. 968 968 1,526 1,526
Long-term debt.............................. 3,198 3,101 3,068 2,943
Security deposits -- leases................. 4 3 1
Deferred funding commitments under leveraged
leases................................... 4 3 1 1
UNRECOGNIZED FINANCIAL INSTRUMENTS, NET....... (4) (1)
NOTE 17 -- COMMITMENTS AND CONTINGENCIES
At December 31, 2000, we had purchase commitments for property, plant and
equipment of approximately $166. DCC had commitments to provide the loan and
lease financing in the aggregate amount of $60.
F-26
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Subsequent financing under the DCC commitment is subject to satisfactory
completion of normal conditions precedent to the execution of such lease
financing arrangements.
At December 31, 2000, we had contingent obligations of up to $130 related
to guarantees of third-party loans to equity affiliates. Future minimum rental
commitments under operating leases were $367 at December 31, 2000, with rental
payments during the next five years of: 2001, $67; 2002, $64; 2003, $55; 2004,
$49 and 2005, $41. Net rental expense was $119 in 1998, $117 in 1999 and $103 in
2000.
We are a party 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. We have reviewed the proceedings that are currently pending
including the probable outcomes, reasonably anticipated costs and expenses,
availability and limits of our insurance coverage and our established reserves
for uninsured liabilities. We do not believe that any liabilities that may
result from these proceedings are reasonably likely to have a material effect on
our liquidity, financial condition or results of operations.
NOTE 18 -- ACQUISITIONS
In 1998, we acquired the heavy axle and brake business of Eaton
Corporation; General Automotive Specialty Company, Inc. (GAS); a 98-percent
share of the capital of Nakata S.A. Industria e Comercio (Nakata); full
ownership of SIMESC-Parish, our Brazilian structural components manufacturing
company; the Glacier Vandervell Bearings Group and the AE Clevite North American
non-bearing aftermarket engine hard parts business. GAS manufactures motor
switches and locks. SIMESC-Parish, which has been renamed Dana Parish Produtos
Estruturais, S.A., produces a range of structural products, including full
frames and heavy-truck side rails. Nakata and its subsidiaries are the leading
Brazilian manufacturers of suspension components, such as tie rods and ball
joints. Glacier Vandervell produces and distributes products, primarily engine
bearings, used in passenger car and light-duty vehicle applications for both
original equipment manufacturers and the aftermarket. The AE Clevite business
distributes products such as camshafts, valves and other valvetrain, timing and
cylinder components to the automotive aftermarket.
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. Sales in 1998 were $784 higher than 1997 as a result of
acquisitions and total assets of companies acquired in 1998 amounted to $980.
In July 1998, we completed the merger with Echlin Inc. by exchanging 59.6
million shares of our common stock for all of the common stock of Echlin. Each
share of Echlin was exchanged for .9293 of one share of our common stock. In
addition, the outstanding Echlin stock options were converted at the same
exchange ratio into options to purchase approximately 1.8 million shares of our
common stock.
The merger has been accounted for as a pooling of interests and all prior
period consolidated financial statements have been restated to include the
combined results of operations, financial position and cash flows of Echlin.
In 1999, we acquired Innovative Manufacturing, Inc., a machining operation
that supplies machined castings to our Outdoor Power Equipment Components
Division. We also acquired the remaining interests not previously owned in
Industrias Serva S.A. (30%), Dana Heavy Axle Mexico S.A. de C.V. (9%),
Automotive Motion Technology Limited (49%) and Echlin Charger Mfg. Co. Pty. Ltd.
(8%). These acquisitions have been accounted for as purchases and the results of
operations and earnings previously allocated to minority owners have been
included from the dates of acquisition. The sales and total assets were not
material.
In January 2000, we acquired the cardan-jointed propeller shaft business of
GKN plc. In March, we acquired a majority interest in Tribometal a.s., a
manufacturer of polymer bearings. The automotive axle manufacturing and stamping
operations of Invensys plc were acquired in July. In November, we acquired a
F-27
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
30% interest in GETRAG Cie, a manufacturer of transmissions, transaxles, axles
and other automotive components, and a 49% interest in GETRAG's North American
operations. Except for the interests in GETRAG, which are being accounted for as
equity investments, the acquisitions were accounted for as purchases and the
results of their operations have been included in the consolidated financial
statements from the dates of acquisition. The acquisitions accounted for as
purchases had total assets of $373 at acquisition and recorded sales of $195
since the dates of acquisition.
NOTE 19 -- DIVESTITURES
In February 1998, we completed the sale of our hydraulic brake hose
facilities in Columbia City, IN and Garching, Germany. In April 1998, we sold
our Midland-Grau heavy-duty brake operations. In June 1998, we completed the
sale of our hydraulic cylinder business. In December 1998, DCC completed the
sale of its Technology Leasing Group portfolio resulting in an after-tax gain of
$76. These operations contributed sales of $471 in 1997; through the dates of
divestiture, 1998 sales for these operations totaled $140.
In October 1999, we sold the Coldform operations of our Engine Systems
Group and in November we sold Sierra International Inc. Coldform manufactured
starter components, steering hubs and suspension components and Sierra
manufactured and distributed marine and power equipment engine, drive and hose
products. Annual sales of these operations were approximately $50.
In January 2000, we sold our Gresen Hydraulics businesses, the Truckline
Parts Centres heavy-duty distribution business and certain portions of our
constant velocity (CV) joint businesses. In February, we sold most of the global
Warner Electric businesses and, in March, we sold Commercial Vehicle Cab
Systems. In September 2000, we sold the remaining 35% interest in our Brazilian
CV joint operation. Net gain recorded on these divestitures totaled $106. These
businesses reported sales of $666 in 1999; through the dates of divestiture,
2000 sales for these operations totaled $103.
NOTE 20 -- RESTRUCTURING OF OPERATIONS
In the fourth quarter of 1998, we finalized our synergy plans for
integrating the operations of Echlin into our businesses and recorded
restructuring and integration charges of $138. Of this amount $118 was charged
to restructuring and $20, for writing down inventory, was charged to cost of
sales. The announced restructuring and integration plans included the closing of
eight facilities (seven in the AG and one in the ESG) and a workforce reduction
of approximately 2,450 people.
During 1999, we continued executing the Echlin restructuring plan announced
in 1998, including the closing and downsizing of facilities begun in 1998. We
also incurred integration charges of $51 for relocating assets, training and
relocating employees and other integration activities at the acquired
operations. These costs were charged to expense as incurred.
During the fourth quarter of 1999, we announced plans to downsize and close
additional operations in the U.S., South America and Europe and recorded
restructuring and integration charges totaling $170. The charges included the
costs of exiting businesses, asset impairments and termination benefits. The
announced restructuring and integration plans included closing five facilities,
downsizing three facilities and terminating 1,280 people. The largest component
of these plans was the downsizing of our Reading, PA structures facility. In
total, $229 was charged to income during the year. This amount consisted of $181
charged to restructuring and integration, $57 charged to cost of sales and a $9
gain on the sale of Sierra credited to other income.
During the third quarter of 2000, we announced plans to close our Reading,
PA structures facility and terminate approximately 690 people and recorded
restructuring charges of $53. In the fourth quarter, we approved plans to close
facilities in France, the United Kingdom and Argentina, resulting in $34 of
charges and a workforce reduction of approximately 230 people. We also incurred
integration expenses in 2000 related to consolidating our Engine Controls
warehouse operations and moving operations from closed facilities.
F-28
DANA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following summarizes the restructuring charges and activity recorded in
the last three years:
IMPAIRMENT
--------------------------
EMPLOYEE INVESTMENTS
TERMINATION LONG-LIVED IN OPERATIONS INTEGRATION
BENEFITS ASSETS TO BE SOLD EXIT COSTS EXPENSES TOTAL
----------- ---------- ------------- ---------- ----------- -----
Balance at December 31,
1997....................... $ 88 $ 30 $ 62 $ -- $ -- $ 180
Activity during the year
Charged to expense......... 65 40 13 118
Cash payments.............. (37) (2) (39)
Write-off of assets........ (70) (62) (132)
---- ---- ---- ---- ---- -----
Balance at December 31,
1998....................... 116 -- -- 11 -- 127
Activity during the year
Charged to expense......... 60 59 11 51 181
Cash payments.............. (85) (9) (51) (145)
Write-off of assets........ (59) (59)
---- ---- ---- ---- ---- -----
Balance at December 31,
1999....................... 91 -- -- 13 -- 104
Activity during the year
Charged to expense......... 62 8 27 76 173
Cash payments.............. (60) (20) (76) (156)
Write-off of assets........ (8) (8)
---- ---- ---- ---- ---- -----
Balance at December 31,
2000....................... $ 93 $ -- $ -- $ 20 $ -- $ 113
==== ==== ==== ==== ==== =====
Employee terminations relating to the plans were as follows:
1998 1999 2000
------ ----- -----
Total estimated............................................. 2,450 1,280 1,020
Less terminated:
1999...................................................... (1,123) (595)
2000...................................................... (1,230) (615) (765)
------ ----- -----
Balance at December 31, 2000................................ 97 70 255
====== ===== =====
At December 31, 2000, $113 of restructuring charges remained in accrued
liabilities. This balance was comprised of $93 for the workforce reductions of
approximately 420 employees to be completed in 2001 and $20 for lease
terminations and other exit costs. We estimate that cash expenditures will be
approximately $81 in 2001, $14 in 2002 and $18 thereafter. Our liquidity and
cash flows will not be materially impacted by these actions. It is anticipated
that our operations over the long term will benefit from these realignment
strategies.
NOTE 21 -- NONCASH INVESTING AND FINANCING ACTIVITIES
In leveraged leases, the issuance of nonrecourse debt financing and
subsequent repayments thereof are transacted directly between the lessees and
the lending parties to the transactions. Nonrecourse debt issued to finance
DCC's investment in leveraged leases was $225 in 1998, $878 in 1999 and $403 in
2000; nonrecourse debt obligations repaid were $182 in 1998, $273 in 1999 and
$106 in 2000.
F-29
DANA CORPORATION
(INCLUDING DANA CREDIT CORPORATION ON THE EQUITY BASIS)
ADDITIONAL INFORMATION -- STATEMENT OF INCOME (UNAUDITED)
The additional information on pages F-30 to F-32 shows the statement of
income, balance sheet and cash flows as if DCC were accounted for on the equity
basis. This presentation does not conform with generally accepted accounting
principles.
YEAR ENDED DECEMBER 31,
---------------------------
1998 1999 2000
------- ------- -------
(IN MILLIONS)
NET SALES................................................... $12,464 $13,159 $12,317
Other income................................................ 59 58 190
------- ------- -------
12,523 13,217 12,507
------- ------- -------
Costs and expenses
Cost of sales............................................. 10,485 11,016 10,662
Selling, general and administrative expenses.............. 984 1,074 1,007
Restructuring and integration charges..................... 118 181 173
Merger expenses........................................... 50
Interest expense.......................................... 189 208 218
------- ------- -------
11,826 12,479 12,060
------- ------- -------
Income before income taxes.................................. 697 738 447
Estimated taxes on income................................... 277 273 168
------- ------- -------
Income before minority interest and equity in earnings of
affiliates................................................ 420 465 279
Minority interest in net income of consolidated
subsidiaries.............................................. (8) (13) (13)
Equity in earnings of affiliates............................ 122 61 68
------- ------- -------
NET INCOME.................................................. $ 534 $ 513 $ 334
======= ======= =======
F-30
DANA CORPORATION
(INCLUDING DANA CREDIT CORPORATION ON THE EQUITY BASIS)
ADDITIONAL INFORMATION -- BALANCE SHEET (UNAUDITED)
DECEMBER 31,
---------------
1999 2000
------ ------
(IN MILLIONS)
ASSETS
Current assets
Cash and marketable securities.............................. $ 101 $ 149
Accounts receivable
Trade, less allowance for doubtful accounts of $44 -- 1999
and $42 -- 2000........................................ 1,935 1,505
Other..................................................... 399 318
Inventories................................................. 1,784 1,564
Other current assets........................................ 418 535
------ ------
Total current assets................................... 4,637 4,071
------ ------
Investments and other assets
Investments at equity..................................... 320 636
Goodwill.................................................. 997 969
Other..................................................... 203 212
------ ------
Total investments and other assets..................... 1,520 1,817
------ ------
Deferred income tax benefits................................ 281 209
Property, plant and equipment, net.......................... 3,064 3,069
------ ------
Total assets........................................... $9,502 $9,166
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable............................................... $ 897 $1,307
Accounts payable............................................ 1,128 1,014
Accrued payroll and employee benefits....................... 461 395
Other accrued liabilities................................... 681 809
Taxes on income............................................. 153 165
------ ------
Total current liabilities.............................. 3,320 3,690
Deferred employee benefits and other noncurrent
liabilities............................................... 1,216 1,155
Long-term debt.............................................. 1,862 1,574
Minority interest in consolidated subsidiaries.............. 147 119
Shareholders' equity........................................ 2,957 2,628
------ ------
Total liabilities and shareholders' equity............. $9,502 $9,166
====== ======
F-31
DANA CORPORATION
(INCLUDING DANA CREDIT CORPORATION ON THE EQUITY BASIS)
ADDITIONAL INFORMATION -- STATEMENT OF CASH FLOWS (UNAUDITED)
YEAR ENDED DECEMBER 31,
------------------------
1998 1999 2000
------- ------ -----
(IN MILLIONS)
Net cash flows from operating activities.................... $ 836 $ 464 $ 850
------- ------ -----
Cash flows from investing activities:
Purchases of property, plant and equipment................ (552) (547) (434)
Acquisitions.............................................. (829) (18) (511)
Divestitures.............................................. 218 36 571
Additions to investments and other assets................. (19) (26) 16
Other..................................................... -- 29 (1)
------- ------ -----
Net cash flows -- investing activities...................... (1,182) (526) (359)
------- ------ -----
Cash flows from financing activities:
Net change in short-term debt............................. 225 (555) 424
Issuance of long-term debt................................ 343 1,017 9
Payments on long-term debt................................ (248) (220) (313)
Dividends paid............................................ (198) (206) (187)
Shares repurchased........................................ (100) (381)
Other..................................................... 41 5
------- ------ -----
Net cash flows -- financing activities...................... 163 (64) (443)
------- ------ -----
Net increase (decrease) in cash and cash equivalents........ (183) (126) 48
Cash and cash equivalents -- beginning of year.............. 410 227 101
------- ------ -----
Cash and cash equivalents -- end of year.................... $ 227 $ 101 $ 149
======= ====== =====
Reconciliation of net income to net cash flows from
operating activities:
Net income................................................ $ 534 $ 513 $ 334
Depreciation and amortization............................. 396 429 427
Deferred income taxes..................................... 38 (31) (12)
Minority interest......................................... 13 6 8
Net change in receivables, inventory and payables......... (54) (544) 377
Other assets and accruals................................. (75) 147 (113)
Unremitted earnings of affiliates......................... (5) (45) (68)
Gains on divestitures..................................... (5) (5) (106)
Other..................................................... (6) (6) 3
------- ------ -----
Net cash flows from operating activities.................... $ 836 $ 464 $ 850
======= ====== =====
F-32
DANA CORPORATION
CONDENSED STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
2000 2001 2000 2001
------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Net sales............................................... $2,865 $2,399 $9,629 $7,898
Revenue from lease financing and other income........... 50 98 308 149
------ ------ ------ ------
2,915 2,497 9,937 8,047
------ ------ ------ ------
Costs and expenses
Cost of sales......................................... 2,481 2,149 8,161 7,006
Selling, general and administrative expenses.......... 276 242 847 775
Restructuring and integration charges................. 69 12 103 38
Interest expense...................................... 82 76 238 239
------ ------ ------ ------
2,908 2,479 9,349 8,058
------ ------ ------ ------
Income (loss) before income taxes....................... 7 18 588 (11)
Estimated taxes on income............................... 10 (13) (207) (6)
Minority interest....................................... (4) (1) (12) (6)
Equity in earnings of affiliates........................ 16 9 49 23
------ ------ ------ ------
Net income.............................................. $ 29 $ 13 $ 418 $ *
====== ====== ====== ======
Net income per common share
Basic................................................. $ 0.19 $ 0.08 $ 2.73 $ *
Diluted............................................... $ 0.19 $ 0.08 $ 2.71 $ *
Cash dividends declared and paid per common share....... $ 0.31 $ 0.31 $ 0.93 $ 0.93
Average shares outstanding -- Basic..................... 149 148 153 148
Average shares outstanding -- Diluted................... 150 149 154 149
---------------
* Amount is less than $.5 and per share amounts are less than one-half cent.
The accompanying notes are an integral part of the financial statements.
F-33
DANA CORPORATION
CONDENSED BALANCE SHEET (UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
2000 2001
------------ -------------
(IN MILLIONS)
ASSETS
Current assets
Cash and marketable securities.............................. $ 179 $ 228
Accounts receivable
Trade..................................................... 1,548 1,548
Other..................................................... 318 429
Inventories
Raw materials............................................. 436 419
Work in process and finished goods........................ 1,128 931
Other current assets........................................ 714 526
------- -------
Total current assets................................... 4,323 4,081
------- -------
Property, plant and equipment, net.......................... 3,509 3,411
Investments and other assets................................ 2,367 2,230
Investment in leases........................................ 1,037 1,087
------- -------
Total assets........................................... $11,236 $10,809
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable, including current portion of long-term
debt...................................................... $ 1,945 $ 1,223
Accounts payable............................................ 1,015 1,119
Accrued payroll and employee benefits....................... 398 330
Other accrued liabilities................................... 856 716
Taxes on income............................................. 117 116
------- -------
Total current liabilities.............................. 4,331 3,504
Deferred employee benefits and other noncurrent
liabilities............................................... 1,507 1,595
Long-term debt.............................................. 2,649 3,227
Minority interest in consolidated subsidiaries.............. 121 116
Shareholders' equity........................................ 2,628 2,367
------- -------
Total liabilities and shareholders' equity............. $11,236 $10,809
======= =======
The accompanying notes are an integral part of the financial statements.
F-34
DANA CORPORATION
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
2000 2001
------ ------
(IN MILLIONS)
Net income.................................................. $ 418 $ --
Depreciation and amortization............................... 390 408
Gain on divestitures........................................ (110) (10)
Working capital change...................................... (223) (79)
Other....................................................... (50) 71
----- -----
Net cash flows -- operating activities.................... 425 390
----- -----
Purchases of property, plant and equipment.................. (464) (306)
Purchases of assets to be leased............................ (242) (124)
Payments received on leases................................. 126 28
Net loans to customers...................................... (147) 103
Acquisitions................................................ (279) (21)
Divestitures................................................ 562 232
Other....................................................... 27 127
----- -----
Net cash flows -- investing activities.................... (417) 39
----- -----
Net change in short-term debt............................... 621 (642)
Proceeds from long-term debt................................ 311 796
Payments on long-term debt.................................. (388) (383)
Dividends paid.............................................. (142) (139)
Shares repurchased.......................................... (381)
Other....................................................... 4 (12)
----- -----
Net cash flows -- financing activities.................... 25 (380)
----- -----
Net change in cash and cash equivalents..................... 33 49
Cash and cash equivalents -- beginning of period............ 111 179
----- -----
Cash and cash equivalents -- end of period.................. $ 144 $ 228
===== =====
The accompanying notes are an integral part of the financial statements.
F-35
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(IN MILLIONS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
NOTE 1
In our opinion, all normal recurring adjustments necessary to a fair
presentation of results for the unaudited interim periods have been included.
Where appropriate, we have reclassified certain amounts in 2000 to conform with
the 2001 presentation.
NOTE 2
On January 1, 2001, we adopted Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Transactions." These Statements require, among other things, that all
derivative instruments be recognized on the balance sheet at fair value.
Interest rate swap arrangements have been formally designated as hedges and the
effect of marking these contracts to market has been recorded as unrealized gain
or loss in other comprehensive income as presented in Note 7. Foreign currency
forwards and other derivatives have not been designated as hedges and the effect
of marking these instruments to market has been recognized in the results of
operations. The adoption of SFAS Nos. 133 and 138 has not had a material effect
on our financial position or results of operations.
NOTE 3
In March 2001, we sold Mr. Gasket, Inc., a wholly-owned subsidiary, and
recorded an after-tax loss of $12. In the second quarter of 2001, we divested
three operations and recorded an after-tax loss of $8. The divested operations
included our Marion, Ohio forging facility and the assets of our Dallas, Texas
and Washington, Missouri Fluid Systems Group operations.
NOTE 4
During July 2001, we completed the sale of our Chelsea power take-off
business to Parker Hannifin Corporation. In September 2001, we completed the
sale of our Glacier industrial polymer bearings businesses to Goodrich
Corporation. After-tax gains of $30 were recorded in the third quarter related
to these divestitures.
NOTE 5
In March 2001, we established a $400 accounts receivable securitization
program. Under the program, we either sell or contribute certain of our accounts
receivable to Dana Asset Funding LLC (DAF), a special purpose entity. DAF funds
its accounts receivable purchases in part by pledging a portion of the
receivables as collateral for short-term loans from participating banks. At
September 30, 2001, DAF had borrowed $320 under the program and used the
proceeds to fund the purchase of accounts receivable. We used the sale proceeds
received from DAF to reduce other debt.
We own 100% of the equity interests in DAF. The securitized accounts
receivable are owned in their entirety by DAF and are not available to satisfy
claims of our creditors. However, we are entitled to any dividends paid by DAF
and would be entitled to all proceeds from the liquidation of DAF's assets upon
the termination of the securitization program and the dissolution of DAF. DAF's
receivables are included in our consolidated financial statements solely because
DAF does not meet certain technical accounting requirements for treatment as a
"qualifying special purpose entity" under generally accepted accounting
principles. Accordingly, the sales and contributions of the accounts receivable
are eliminated in consolidation and the loans to DAF are reflected as short-term
borrowings in our consolidated financial statements.
Expenses incurred to establish the program are being amortized over five
years, the contractual life of the program.
F-36
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 6
Following is a reconciliation of average shares for purposes of calculating
basic and diluted net income per share.
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
2000 2001 2000 2001
----- ----- ----- -----
Weighted average common shares outstanding............. 148.9 148.5 153.3 148.2
----- ----- ----- -----
Plus: Incremental shares from assumed conversion of --
Deferred compensation units............................ .8 .9 .8 .8
Stock options.......................................... .1 .1
----- ----- ----- -----
Total potentially dilutive securities.................. .9 .9 .9 .8
----- ----- ----- -----
Adjusted average common shares outstanding............. 149.8 149.4 154.2 149.0
===== ===== ===== =====
NOTE 7
On an annual basis, disclosure of comprehensive income is incorporated into
the Statement of Shareholders' Equity. This statement is not presented on a
quarterly basis. Comprehensive income includes net income and components of
other comprehensive income, such as foreign currency translation adjustments,
unrealized gains or losses on certain marketable securities and derivative
instruments and minimum pension liability adjustments.
Our total comprehensive income (loss) is as follows:
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
2000 2001 2000 2001
----- ----- ----- -----
Net income............................................. $ 29 $13 $ 418 $ --
Other comprehensive income (loss)
Deferred translation gain (loss).................. (70) 25 (130) (121)
Unrealized gain (loss)............................ (1) (2) (2)
---- --- ----- -----
Total comprehensive income (loss)...................... $(42) $36 $ 288 $(123)
==== === ===== =====
The $25 deferred translation gain in the third quarter of 2001 was
primarily due to the strengthening of the euro against the U.S. dollar, as gains
in Australia and Thailand generally offset losses related to further weakening
of Brazilian real. For the first nine months of 2001, weakening of the Brazilian
real accounted for approximately $67 and the euro added another $23 of
translation loss. The $130 deferred translation loss for the nine months of 2000
resulted primarily from an increase in the strength of U.S. dollar relative to
the euro, the British pound and the Canadian dollar, net of the impact of the
strengthening Brazilian real. The $70 deferred translation loss in the third
quarter of 2000 was primarily the result of a decline in the value of the euro
and the British pound, relative to the U.S. dollar.
NOTE 8
We are organized into seven Strategic Business Units (SBUs): Automotive
Systems Group (ASG); Automotive Aftermarket Group (AAG); Commercial Vehicle
Systems (CVS), formerly known as the Heavy Truck Group (HTG); Engine Systems
Group (ESG); Fluid Systems Group (FSG); Off-Highway Systems Group (OHSG) and
Dana Commercial Credit (DCC).
F-37
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
This structure allows our people in each of these areas to focus their
resources to the benefit of Dana and our global customers. Management evaluates
the operating segments and regions as if DCC were accounted for on the equity
method of accounting rather than on the fully consolidated basis used for
external reporting. With the exception of DCC, operating profit after tax (PAT)
represents earnings before interest and taxes (EBIT), tax effected at 39% (our
estimated long-term effective rate), plus equity in earnings of affiliates. The
Other category includes discontinued businesses, trailing liabilities for closed
plants, interest expense net of interest income, corporate expenses and
adjustments to reflect the actual effective tax rate.
Information used to evaluate the SBUs and regions is as follows:
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------
OPERATING
SALES EBIT PAT NET PROFIT
--------------- ----------- ----------- -----------
2000 2001 2000 2001 2000 2001 2000 2001
------ ------ ---- ---- ---- ---- ---- ----
ASG...................................... $1,062 $ 831 $ 81 $ 29 $ 57 $ 25 $ 33 $ 9
AAG...................................... 681 639 27 13 17 8 (1) (6)
CVS...................................... 346 259 27 6 17 3 8 (3)
ESG...................................... 321 273 13 (9) 14 (5) 7 (10)
FSG...................................... 266 237 18 14 11 9 6 4
OHSG..................................... 178 141 11 3 7 2 3 (1)
DCC...................................... 7 5 7 5
Other.................................... 11 19 (57) (34) (69) (55) (2) (6)
------ ------ ---- ---- ---- ---- ---- ----
2,865 2,399 120 22 61 (8) 61 (8)
Restructuring and non-recurring items.... (68) 38 (32) 21 (32) 21
------ ------ ---- ---- ---- ---- ---- ----
Consolidated............................. $2,865 $2,399 $ 52 $ 60 $ 29 $ 13 $ 29 $ 13
====== ====== ==== ==== ==== ==== ==== ====
North America............................ $2,165 $1,787 $155 $ 48 $101 $ 29 $ 54 $ (4)
Europe................................... 441 380 11 6 5 (3) (2)
South America............................ 158 154 10 6 8 4 4 1
Asia/Pacific............................. 101 78 3 2 2 1 (1) (2)
DCC...................................... 7 5 7 5
Other.................................... (59) (34) (63) (52) 0 (6)
------ ------ ---- ---- ---- ---- ---- ----
2,865 2,399 120 22 61 (8) 61 (8)
Restructuring and non-recurring items.... (68) 38 (32) 21 (32) 21
------ ------ ---- ---- ---- ---- ---- ----
Consolidated............................. $2,865 $2,399 $ 52 $ 60 $ 29 $ 13 $ 29 $ 13
====== ====== ==== ==== ==== ==== ==== ====
F-38
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
SALES EBIT OPERATING PAT NET PROFIT
--------------- ------------- ------------- -----------
2000 2001 2000 2001 2000 2001 2000 2001
------ ------ ----- ----- ----- ----- ---- ----
ASG.................................. $3,501 $2,824 $ 356 $ 165 $ 236 $ 115 $168 $ 56
AAG.................................. 2,134 1,950 125 15 76 9 26 (38)
CVS.................................. 1,312 878 131 27 80 16 51 (7)
ESG.................................. 1,070 911 78 12 57 11 37 (7)
FSG.................................. 894 800 89 62 55 37 39 22
OHSG................................. 627 484 52 24 32 14 21 5
DCC.................................. 28 17 28 17
Other................................ 91 51 (174) (146) (189) (200) 5 (29)
------ ------ ----- ----- ----- ----- ---- ----
9,629 7,898 657 159 375 19 375 19
Restructuring and non-recurring
items.............................. 63 (25) 43 (19) 43 (19)
------ ------ ----- ----- ----- ----- ---- ----
Consolidated......................... $9,629 $7,898 $ 720 $ 134 $ 418 $ -- $418 $ --
====== ====== ===== ===== ===== ===== ==== ====
North America........................ $7,435 $5,935 $ 743 $ 253 $ 469 $ 149 $331 $ 29
Europe............................... 1,504 1,308 69 40 41 33 11 4
South America........................ 427 414 20 13 16 (1) 8 (10)
Asia/Pacific......................... 263 241 6 2 4 1 (5) (6)
DCC.................................. 28 17 28 17
Other................................ (181) (149) (183) (180) 2 (15)
------ ------ ----- ----- ----- ----- ---- ----
9,629 7,898 657 159 375 19 375 19
Restructuring and non-recurring
items.............................. 63 (25) 43 (19) 43 (19)
------ ------ ----- ----- ----- ----- ---- ----
Consolidated......................... $9,629 $7,898 $ 720 $ 134 $ 418 $ -- $418 $ --
====== ====== ===== ===== ===== ===== ==== ====
Restructuring and non-recurring items represent after-tax gains and losses on
divestitures and charges related to our restructuring and integration efforts.
Consolidated net operating assets have decreased seven percent since the
beginning of 2001. Due to the combined impact of our working capital
initiatives, the reduction in manufacturing and sales volume and the divestiture
of businesses, net operating assets have decreased 12 percent in AAG, 21 percent
in CVS and 14 percent in ESG since the beginning of the current year.
NOTE 9
During the first nine months of 2001, we announced the closing of
facilities in ASG, AAG and FSG. In connection with these efforts, we accrued an
additional $17 for employee termination benefits, $9 for asset impairments and
$12 for other exit costs. This $38 of restructuring expense had a $25 impact on
net income.
At September 30, 2001, $99 of restructuring charges remained in accrued
liabilities. This balance consisted of $79 related to the termination of
employees, including the announced termination of approximately 730 employees
scheduled for the remainder of 2001, and $20 for lease terminations and other
exit costs. We estimate the related cash expenditures will be approximately $25
in the remainder of 2001, $25 in 2002, $11 in 2003 and $38 thereafter. We do not
believe our liquidity and cash flows will be materially impacted by activities
related to these restructuring plans.
F-39
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 10
The issuance of Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, was approved by the Financial Accounting
Standards Board in June 2001. The new guidance requires, among other things,
that companies discontinue amortizing goodwill and certain other intangibles at
the end of 2001. The covered assets will be reviewed for impairment annually
and, after initial application of this Statement, reductions in the carrying
value will be reflected in the results of operations. Covered assets acquired
after June 2001 will not be subject to amortization. We are currently analyzing
the requirements of this Statement, which is required to be adopted in 2002. We
believe that the initial application of this Statement is likely to result in
the impairment of a portion of our goodwill, but at this time are not able to
quantify the impact on our financial statements.
NOTE 11
On October 17, 2001, we announced our intention to accelerate the
restructuring of our operations and to reduce our workforce by more than 15
percent. More than 30 facilities are being reviewed for possible consolidation
or closure. Plans identifying the specific actions are being developed and will
determine the timing of expense recognition and cash flows. However, we
currently expect to recognize a significant portion of these charges in the
fourth quarter of 2001. We also announced that we will pursue the sale of the
businesses of Dana Commercial Credit (DCC). At September 30, 2001, the
businesses of DCC comprised approximately $1,900 of total assets of Dana.
Although we are unable to estimate the related proceeds, a loss is not expected
to result from the sale of the DCC businesses.
F-40
PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER
Dana Corporation
4500 Dorr Street
Toledo, Ohio 43615
TRUSTEE EXCHANGE AGENT
Citibank, N.A Citibank, N.A., London Branch
111 Wall Street 5 Carmelite Street
14th Floor London EC4Y OPA
New York, New York 10005 England
LEGAL ADVISORS TO THE ISSUER
Rosenman & Colin LLP Hunton & Williams
575 Madison Avenue 200 Park Avenue
New York, New York 10022 New York, New York 10166
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One SeaGate, Suite 1800
Toledo, Ohio 43604
REGISTRAR AND NEW YORK REGISTRAR AND LONDON
PAYING AGENT PAYING AGENT
FOR DOLLAR NOTES FOR EURO NOTES
Citibank, N.A. Citibank, N.A., London Branch
111 Wall Street 5 Carmelite Street
14th Floor London EC4Y OPA
New York, New York 10005 England
LISTING AGENT, LUXEMBOURG PAYING AGENT,
EXCHANGE AGENT AND TRANSFER AGENT
Banque Generale du Luxembourg S.A.
50, Avenue J.F. Kennedy
L-2951 Luxembourg
$575,000,000
E200,000,000
9% NOTES DUE 2011
DANA CORPORATION
[DANA CORPORATION LOGO]
OFFER TO EXCHANGE ALL OUTSTANDING 9% NOTES DUE 2011 FOR 9% NOTES DUE 2011 WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the Virginia Stock Corporation Act, in certain circumstances, Dana is
authorized to indemnify its directors and officers against liabilities
(including reasonable defense expenses) they may incur in proceedings in which
they are named as parties because of their positions as directors and officers
of Dana.
Pursuant to this authorization, the shareholders have adopted the SIXTH
Article of the Company's Restated Articles of Incorporation. This Article
provides that in any proceeding brought by a shareholder in the right of Dana or
on behalf of the shareholders, no director or officer of Dana shall be liable
for monetary damages exceeding $50,000 with respect to any transaction,
occurrence or course of conduct unless such person engaged in willful misconduct
or a knowing violation of criminal law or of any federal or state securities
law. The Article further provides that Dana shall indemnify any director or
officer who is a party to any proceeding (including a proceeding brought by a
shareholder on behalf of Dana or its shareholders) by reason of the fact that he
or she is or was a director or officer of Dana against any liability incurred in
connection with such proceeding, unless he or she engaged in willful misconduct
or a knowing violation of criminal law. In addition, Dana will pay or reimburse
all reasonable expenses (including attorneys' fees) incurred by the director or
officer in connection with such proceeding in advance of the disposition of the
proceeding if certain conditions are met. In general, indemnification will be
made in accordance with Section 13.1-701 of the Virginia Stock Corporation Act.
As authorized in the Restated Articles of Incorporation, the Board of
Directors has adopted a By-Law provision under which Dana will indemnify its
directors and officers in comparable manner against liabilities they may incur
when serving at Dana's request as directors, officers, employees or agents of
other corporations or certain other enterprises.
Dana carries primary and excess "Executive Liability and Indemnification"
insurance covering certain liabilities incurred by the directors and elected and
appointed officers in the performance of their duties. Coverage is either on a
direct basis or through reimbursement of amounts expended by Dana for
indemnification of these individuals. Subject to certain deductibles, the
insurers will pay or reimburse all covered costs incurred up to an annual
aggregate of $100 million. Coverage is excluded for purchases or sales of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
deliberately fraudulent or willful violations of any statute or regulation,
illegal personal gain and certain other acts.
ITEM 21. EXHIBITS
The following exhibits are filed with this Registration Statement or
incorporated by reference herein:
4-A* Purchase Agreement, dated August 1, 2001, between Dana
Corporation and Deutsche Banc Alex. Brown Inc. and J.P.
Morgan Securities, Inc.
4-B* Indenture between Dana, as Issuer, and Citibank, N.A., as
Trustee, dated as of August 8, 2001, relating to $575
million of 9% Notes due August 15, 2011, and E200 million of
9% Notes due August 15, 2011 (incorporated by reference to
Exhibit 4-I to our Form 10-Q for the quarterly period ended
June 30, 2001).
4-B(1)* Form of Rule 144A Dollar Global Notes, Rule 144A Euro Global
Notes, Regulation S Dollar Global Notes and Regulation S
Euro Global Notes (form of initial securities), filed by
reference to Exhibit A to the Indenture filed herewith as
Exhibit 4-A (incorporated by reference to Exhibit 4-I to our
Form 10-Q for the quarterly period ended June 30, 2001).
4-B(2)* Form of Rule 144A Dollar Global Notes, Rule 144A Euro Global
Notes, Regulation S Dollar Global Notes and Regulation S
Euro Global Notes (form of exchange securities), filed by
reference to Exhibit B to the Indenture filed herewith as
Exhibit 4-A (incorporated by reference to Exhibit 4-I to our
Form 10-Q for the quarterly period ended June 30, 2001).
II-1
4-C* Registration Rights Agreement, dated as of August 1, 2001,
among Dana Corporation and Deutsche Banc Alex. Brown Inc.
and J.P. Morgan Securities, Inc.
4-D* Indenture for Senior Securities between Dana, as Issuer, and
Citibank, N.A., as Trustee, dated as of December 15, 1997
(incorporated by reference to Exhibit 4-B of our
Registration Statement No. 333-42239 filed December 15,
1997).
4-E* First Supplemental Indenture related to Senior Securities
between Dana, as Issuer, and Citibank, N.A., as Trustee,
dated as of March 11, 1998 (incorporated by reference to
Exhibit 4-B-1 to our Report on Form 8-K dated March 12,
1998).
4-F* Form of 6.5% Notes due March 15, 2008 and 7% Notes due March
15, 2028 (incorporated by reference to Exhibit 4-C-1 to our
Report on Form 8-K dated March 12, 1998).
4-G* Second Supplemental Indenture related to Senior Securities
between Dana, as Issuer, and Citibank, N.A., as Trustee,
dated as of February 26, 1999 (incorporated by reference to
Exhibit 4-B-1 to our Form 8-K dated March 2, 1999).
4-H* Form of 6.25% Notes due 2004, 6.5% Notes due 2009 and 7%
Notes due 2029 (incorporated by reference to Exhibit 4-C-1
to our Form 8-K dated March 2, 1999).
4-I Issuing and Paying Agent Agreement between Dana Credit
Corporation (DCC), as Issuer, and Bankers Trust Company,
Issuing and Paying Agent, dated as of December 6, 1999, with
respect to DCC's $500 million medium-term notes program.
This exhibit is not filed. We agree to furnish a copy of
this exhibit to the Commission upon request.
4-J Note Agreement dated April 8, 1997, by and between Dana
Credit Corporation and Metropolitan Life Insurance Company
for 7.18% notes due April 8, 2006, in the principal amount
of $37 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-K Note Agreement dated April 8, 1997, by and between Dana
Credit Corporation and Texas Life Insurance Company for
7.18% notes due April 8, 2006, in the principal amount of $3
million. This exhibit is not filed. We agree to furnish a
copy of this exhibit to the Commission upon request.
4-L Note Agreement dated April 8, 1997, by and between Dana
Credit Corporation and Nationwide Life Insurance Company for
6.93% notes due April 8, 2006, in the principal amount of
$35 million. This exhibit is not filed. We agree to furnish
a copy of this exhibit to the Commission upon request.
4-M Note Agreement dated April 8, 1997, by and between Dana
Credit Corporation and The Great-West Life & Annuity
Insurance Company for 7.03% notes due April 8, 2006, in the
aggregate principal amount of $13 million. This exhibit is
not filed. We agree to furnish a copy of this exhibit to the
Commission upon request.
4-N Note Agreement dated April 8, 1997, by and between Dana
Credit Corporation and the Great-West Life Assurance Company
for 7.03% notes due April 8, 2006, in the principal amount
of $7 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-O Note Agreements (three) dated August 28, 1997, by and
between Dana Credit Corporation and Connecticut General Life
Insurance Company for 6.79% notes due August 28, 2004, in
the aggregate principal amount of $16 million. This exhibit
is not filed. We agree to furnish a copy of this exhibit to
the Commission upon request.
4-P Note Agreement dated August 28, 1997, by and between Dana
Credit Corporation and Life Insurance Company of North
America for 6.79% notes due August 28, 2004, in the
principal amount of $4 million. This exhibit is not filed.
We agree to furnish a copy of this exhibit to the Commission
upon request.
4-Q Note Agreement dated August 28, 1997, by and between Dana
Credit Corporation and the Northwestern Mutual Life
Insurance Company for 6.88% notes due August 28, 2006, in
the principal amount of $20 million. This exhibit is not
filed. We agree to furnish a copy of this exhibit to the
Commission upon request.
II-2
4-R Note Agreements (four) dated August 28, 1997, by and between
Dana Credit Corporation and Sun Life Assurance Company of
Canada for 6.88% notes due August 28, 2006, in the aggregate
principal amount of $9 million. This exhibit is not filed.
We agree to furnish a copy of this exhibit to the Commission
upon request.
4-S Note Agreement dated August 28, 1997, by and between Dana
Credit Corporation and Massachusetts Casualty Insurance
Company for 6.88% notes due August 28, 2006, in the
principal amount of $1 million. This exhibit is not filed.
We agree to furnish a copy of this exhibit to the Commission
upon request.
4-T Note Agreements (four) dated December 18, 1998, by and
between Dana Credit Corporation and Sun Life Assurance
Company of Canada for 6.59% notes due December 1, 2007, in
the aggregate principal amount of $12 million. This exhibit
is not filed. We agree to furnish a copy of this exhibit to
the Commission upon request.
4-U Note Agreements (five) dated December 18, 1998, by and
between Dana Credit Corporation and The Lincoln National
Life Insurance Company for 6.59% notes due December 1, 2007,
in the aggregate principal amount of $25 million. This
exhibit is not filed. We agree to furnish a copy of this
exhibit to the Commission upon request.
4-V Note Agreement dated December 18, 1998, by and between Dana
Credit Corporation and The Northwestern Mutual Life
Insurance Company for 6.48% notes due December 1, 2005, in
the principal amount of $15 million. This exhibit is not
filed. We agree to furnish a copy of this exhibit to the
Commission upon request.
4-W Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and Connecticut General Life Insurance
Company for 7.91% notes due August 16, 2006 in the principal
amount of $15 million. This exhibit is not filed. We agree
to furnish a copy of this exhibit to the Commission upon
request.
4-X Note Agreements (two) dated August 16, 1999, by and between
Dana Credit Corporation and The Northwestern Mutual Life
Insurance Company for 7.91% notes due August 16, 2006, in
the aggregate principal amount of $15 million. This exhibit
is not filed. We agree to furnish a copy of this exhibit to
the Commission upon request.
4-Y Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and Allstate Life Insurance Company for
7.58% notes due August 16, 2004, in the principal amount of
$10 million. This exhibit is not filed. We agree to furnish
a copy of this exhibit to the Commission upon request.
4-Z Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and Allstate Insurance Company for 7.58%
notes due August 16, 2004, in the principal amount of $5
million. This exhibit is not filed. We agree to furnish a
copy of this exhibit to the Commission upon request.
4-AA Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and New York Life Insurance and Annuity
Corporation Institutionally Owned Life Insurance Separate
Account for 7.58% notes due August 16, 2004, in the
principal amount of $5 million. This exhibit is not filed.
We agree to furnish a copy of this exhibit to the Commission
upon request.
4-BB Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and New York Life Insurance an Annuity
Corporation for 7.58% notes due August 16, 2004, in the
principal amount of $10 million. This exhibit is not filed.
We agree to furnish a copy of this exhibit to the Commission
upon request.
4-CC Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and Principal Life Insurance Company for
7.58% notes due August 16, 2004, in the principal amount of
$30 million. This exhibit is not filed. We agree to furnish
a copy of this exhibit to the Commission upon request.
4-DD Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and First Trenton Indemnity Company for
7.58% notes due August 16, 2004, in the principal amount of
$2.5 million. This exhibit is not filed. We agree to furnish
a copy of this exhibit to the Commission upon request.
II-3
4-EE Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and Travelers Casualty and Surety Company
for 7.58% notes due August 16, 2004, in the principal amount
of $10 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-FF Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and The Travelers Insurance Company for
7.58% notes due August 16, 2004, in the principal amount of
$2.5 million. This exhibit is not filed. We agree to furnish
a copy of this exhibit to the Commission upon request.
4-GG Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and Allstate Life Insurance Company for
7.42% notes due December 15, 2004, in the principal amount
of $14 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-HH Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and Columbia Universal Life Insurance Co.
for 7.42% notes due December 15, 2004, in the principal
amount of $1 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-II Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and The Northwestern Mutual Life
Insurance Company for 7.42% notes due December 15, 2004, in
the principal amount of $14 million. This exhibit is not
filed. We agree to furnish a copy of this exhibit to the
Commission upon request.
4-JJ Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and The Northwestern Mutual Life
Insurance Company for its Group Annuity Separate Account for
7.42% notes due December 15, 2004, in the principal amount
of $1 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-KK Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and Pacific Life and Annuity Company for
7.42% notes due December 15, 2004, in the principal amount
of $5 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-LL Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and United Life Insurance Company for
7.42% notes due December 15, 2004, in the principal amount
of $3 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-MM Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and Companion Life Insurance Company for
7.42% notes due December 15, 2004, in the principal amount
of $2 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
5 Opinion of Hunton & Williams
8 Opinion of Rosenman & Colin LLP regarding federal income tax
considerations
12* Computation of Ratio of Earnings to Fixed Charges
23-A Consent of PricewaterhouseCoopers LLP
23-B Consent of Hunton & Williams (included in Exhibit 5)
23-C Consent of Rosenman & Colin LLP (included in Exhibit 8)
24* Power of Attorney
25 Form T-1 Statement of Eligibility Under the Trust Indenture
Act of 1939 of Citibank, N.A. to Act as Trustee
99-A* Form of Letter of Transmittal
99-B* Form of Notice of Guaranteed Delivery
99-C* Form of Institutions Letter
99-D* Form of Client Letter
---------------
* Previously filed.
II-4
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer of controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed by the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Toledo, state of Ohio, on
January 16, 2002.
DANA CORPORATION (Registrant)
By: /s/ MICHAEL L. DEBACKER
------------------------------------
Michael L. DeBacker
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Principal Executive Officer:
/s/ *JOSEPH M. MAGLIOCHETTI Chairman of the Board and Chief January 16, 2002
----------------------------------------- Executive Officer
Joseph M. Magliochetti
Principal Financial Officer:
/s/ *ROBERT C. RICHTER Chief Financial Officer January 16, 2002
-----------------------------------------
Robert C. Richter
Principal Accounting Officer:
/s/ *CHARLES W. HINDE Chief Accounting Officer January 16, 2002
-----------------------------------------
Charles W. Hinde
Directors:
/s/ *B.F. BAILAR Director January 16, 2002
-----------------------------------------
B.F. Bailar
/s/ *A.C. BAILLIE Director January 16, 2002
-----------------------------------------
A.C. Baillie
/s/ *E.M. CARPENTER Director January 16, 2002
-----------------------------------------
E.M. Carpenter
/s/ *E. CLARK Director January 16, 2002
-----------------------------------------
E. Clark
/s/ *G.H. HINER Director January 16, 2002
-----------------------------------------
G.H. Hiner
/s/ *M.R. MARKS Director January 16, 2002
-----------------------------------------
M.R. Marks
II-6
SIGNATURE TITLE DATE
--------- ----- ----
/s/ *R.B. PRIORY Director January 16, 2002
-----------------------------------------
R.B. Priory
/s/ *F.M. SENDEROS Director January 16, 2002
-----------------------------------------
F.M. Senderos
---------------
* By M.L. DeBacker, Attorney-in-Fact
II-7
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
4-A* Purchase Agreement, dated August 1, 2001, between Dana
Corporation and Deutsche Banc Alex. Brown Inc. and J.P.
Morgan Securities, Inc.
4-B* Indenture between Dana, as Issuer, and Citibank, N.A., as
Trustee, dated as of August 8, 2001, relating to $575
million of 9% Notes due August 15, 2011, and E200 million of
9% Notes due August 15, 2011 (incorporated by reference to
Exhibit 4-I to our Form 10-Q for the quarterly period ended
June 30, 2001).
4-B(1)* Form of Rule 144A Dollar Global Notes, Rule 144A Euro Global
Notes, Regulation S Dollar Global Notes and Regulation S
Euro Global Notes (form of initial securities), filed by
reference to Exhibit A to the Indenture filed herewith as
Exhibit 4-A (incorporated by reference to Exhibit 4-I to our
Form 10-Q for the quarterly period ended June 30, 2001).
4-B(2)* Form of Rule 144A Dollar Global Notes, Rule 144A Euro Global
Notes, Regulation S Dollar Global Notes and Regulation S
Euro Global Notes (form of exchange securities), filed by
reference to Exhibit B to the Indenture filed herewith as
Exhibit 4-A (incorporated by reference to Exhibit 4-I to our
Form 10-Q for the quarterly period ended June 30, 2001).
4-C* Registration Rights Agreement, dated as of August 1, 2001,
among Dana Corporation and Deutsche Banc Alex. Brown Inc.
and J.P. Morgan Securities, Inc.
4-D* Indenture for Senior Securities between Dana, as Issuer, and
Citibank, N.A., as Trustee, dated as of December 15, 1997
(incorporated by reference to Exhibit 4-B of our
Registration Statement No. 333-42239 filed December 15,
1997).
4-E* First Supplemental Indenture related to Senior Securities
between Dana, as Issuer, and Citibank, N.A., as Trustee,
dated as of March 11, 1998 (incorporated by reference to
Exhibit 4-B-1 to our Report on Form 8-K dated March 12,
1998).
4-F* Form of 6.5% Notes due March 15, 2008 and 7% Notes due March
15, 2028 (incorporated by reference to Exhibit 4-C-1 to our
Report on Form 8-K dated March 12, 1998).
4-G* Second Supplemental Indenture related to Senior Securities
between Dana, as Issuer, and Citibank, N.A., as Trustee,
dated as of February 26, 1999 (incorporated by reference to
Exhibit 4-B-1 to our Form 8-K dated March 2, 1999).
4-H* Form of 6.25% Notes due 2004, 6.5% Notes due 2009 and 7%
Notes due 2029 (incorporated by reference to Exhibit 4-C-1
to our Form 8-K dated March 2, 1999).
4-I Issuing and Paying Agent Agreement between Dana Credit
Corporation (DCC), as Issuer, and Bankers Trust Company,
Issuing and Paying Agent, dated as of December 6, 1999, with
respect to DCC's $500 million medium-term notes program.
This exhibit is not filed. We agree to furnish a copy of
this exhibit to the Commission upon request.
4-J Note Agreement dated April 8, 1997, by and between Dana
Credit Corporation and Metropolitan Life Insurance Company
for 7.18% notes due April 8, 2006, in the principal amount
of $37 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-K Note Agreement dated April 8, 1997, by and between Dana
Credit Corporation and Texas Life Insurance Company for
7.18% notes due April 8, 2006, in the principal amount of $3
million. This exhibit is not filed. We agree to furnish a
copy of this exhibit to the Commission upon request.
EXHIBIT NO. DESCRIPTION
----------- -----------
4-L Note Agreement dated April 8, 1997, by and between Dana
Credit Corporation and Nationwide Life Insurance Company for
6.93% notes due April 8, 2006, in the principal amount of
$35 million. This exhibit is not filed. We agree to furnish
a copy of this exhibit to the Commission upon request.
4-M Note Agreement dated April 8, 1997, by and between Dana
Credit Corporation and The Great-West Life & Annuity
Insurance Company for 7.03% notes due April 8, 2006, in the
aggregate principal amount of $13 million. This exhibit is
not filed. We agree to furnish a copy of this exhibit to the
Commission upon request.
4-N Note Agreement dated April 8, 1997, by and between Dana
Credit Corporation and the Great-West Life Assurance Company
for 7.03% notes due April 8, 2006, in the principal amount
of $7 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-O Note Agreements (three) dated August 28, 1997, by and
between Dana Credit Corporation and Connecticut General Life
Insurance Company for 6.79% notes due August 28, 2004, in
the aggregate principal amount of $16 million. This exhibit
is not filed. We agree to furnish a copy of this exhibit to
the Commission upon request.
4-P Note Agreement dated August 28, 1997, by and between Dana
Credit Corporation and Life Insurance Company of North
America for 6.79% notes due August 28, 2004, in the
principal amount of $4 million. This exhibit is not filed.
We agree to furnish a copy of this exhibit to the Commission
upon request.
4-Q Note Agreement dated August 28, 1997, by and between Dana
Credit Corporation and the Northwestern Mutual Life
Insurance Company for 6.88% notes due August 28, 2006, in
the principal amount of $20 million. This exhibit is not
filed. We agree to furnish a copy of this exhibit to the
Commission upon request.
4-R Note Agreements (four) dated August 28, 1997, by and between
Dana Credit Corporation and Sun Life Assurance Company of
Canada for 6.88% notes due August 28, 2006, in the aggregate
principal amount of $9 million. This exhibit is not filed.
We agree to furnish a copy of this exhibit to the Commission
upon request.
4-S Note Agreement dated August 28, 1997, by and between Dana
Credit Corporation and Massachusetts Casualty Insurance
Company for 6.88% notes due August 28, 2006, in the
principal amount of $1 million. This exhibit is not filed.
We agree to furnish a copy of this exhibit to the Commission
upon request.
4-T Note Agreements (four) dated December 18, 1998, by and
between Dana Credit Corporation and Sun Life Assurance
Company of Canada for 6.59% notes due December 1, 2007, in
the aggregate principal amount of $12 million. This exhibit
is not filed. We agree to furnish a copy of this exhibit to
the Commission upon request.
4-U Note Agreements (five) dated December 18, 1998, by and
between Dana Credit Corporation and The Lincoln National
Life Insurance Company for 6.59% notes due December 1, 2007,
in the aggregate principal amount of $25 million. This
exhibit is not filed. We agree to furnish a copy of this
exhibit to the Commission upon request.
4-V Note Agreement dated December 18, 1998, by and between Dana
Credit Corporation and The Northwestern Mutual Life
Insurance Company for 6.48% notes due December 1, 2005, in
the principal amount of $15 million. This exhibit is not
filed. We agree to furnish a copy of this exhibit to the
Commission upon request.
EXHIBIT NO. DESCRIPTION
----------- -----------
4-W Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and Connecticut General Life Insurance
Company for 7.91% notes due August 16, 2006 in the principal
amount of $15 million. This exhibit is not filed. We agree
to furnish a copy of this exhibit to the Commission upon
request.
4-X Note Agreements (two) dated August 16, 1999, by and between
Dana Credit Corporation and The Northwestern Mutual Life
Insurance Company for 7.91% notes due August 16, 2006, in
the aggregate principal amount of $15 million. This exhibit
is not filed. We agree to furnish a copy of this exhibit to
the Commission upon request.
4-Y Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and Allstate Life Insurance Company for
7.58% notes due August 16, 2004, in the principal amount of
$10 million. This exhibit is not filed. We agree to furnish
a copy of this exhibit to the Commission upon request.
4-Z Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and Allstate Insurance Company for 7.58%
notes due August 16, 2004, in the principal amount of $5
million. This exhibit is not filed. We agree to furnish a
copy of this exhibit to the Commission upon request.
4-AA Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and New York Life Insurance and Annuity
Corporation Institutionally Owned Life Insurance Separate
Account for 7.58% notes due August 16, 2004, in the
principal amount of $5 million. This exhibit is not filed.
We agree to furnish a copy of this exhibit to the Commission
upon request.
4-BB Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and New York Life Insurance an Annuity
Corporation for 7.58% notes due August 16, 2004, in the
principal amount of $10 million. This exhibit is not filed.
We agree to furnish a copy of this exhibit to the Commission
upon request.
4-CC Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and Principal Life Insurance Company for
7.58% notes due August 16, 2004, in the principal amount of
$30 million. This exhibit is not filed. We agree to furnish
a copy of this exhibit to the Commission upon request.
4-DD Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and First Trenton Indemnity Company for
7.58% notes due August 16, 2004, in the principal amount of
$2.5 million. This exhibit is not filed. We agree to furnish
a copy of this exhibit to the Commission upon request.
4-EE Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and Travelers Casualty and Surety Company
for 7.58% notes due August 16, 2004, in the principal amount
of $10 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-FF Note Agreement dated August 16, 1999, by and between Dana
Credit Corporation and The Travelers Insurance Company for
7.58% notes due August 16, 2004, in the principal amount of
$2.5 million. This exhibit is not filed. We agree to furnish
a copy of this exhibit to the Commission upon request.
4-GG Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and Allstate Life Insurance Company for
7.42% notes due December 15, 2004, in the principal amount
of $14 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
EXHIBIT NO. DESCRIPTION
----------- -----------
4-HH Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and Columbia Universal Life Insurance Co.
for 7.42% notes due December 15, 2004, in the principal
amount of $1 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-II Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and The Northwestern Mutual Life
Insurance Company for 7.42% notes due December 15, 2004, in
the principal amount of $14 million. This exhibit is not
filed. We agree to furnish a copy of this exhibit to the
Commission upon request.
4-JJ Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and The Northwestern Mutual Life
Insurance Company for its Group Annuity Separate Account for
7.42% notes due December 15, 2004, in the principal amount
of $1 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-KK Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and Pacific Life and Annuity Company for
7.42% notes due December 15, 2004, in the principal amount
of $5 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-LL Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and United Life Insurance Company for
7.42% notes due December 15, 2004, in the principal amount
of $3 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
4-MM Note Agreement dated December 7, 1999, by and between Dana
Credit Corporation and Companion Life Insurance Company for
7.42% notes due December 15, 2004, in the principal amount
of $2 million. This exhibit is not filed. We agree to
furnish a copy of this exhibit to the Commission upon
request.
5 Opinion of Hunton & Williams
8 Opinion of Rosenman & Colin LLP regarding federal income tax
considerations
12* Computation of Ratio of Earnings to Fixed Charges
23-A Consent of PricewaterhouseCoopers LLP
23-B Consent of Hunton & Williams (included in Exhibit 5)
23-C Consent of Rosenman & Colin LLP (included in Exhibit 8)
24* Power of Attorney
25 Form T-1 Statement of Eligibility Under the Trust Indenture
Act of 1939 of Citibank, N.A. to Act as Trustee
99-A* Form of Letter of Transmittal
99-B* Form of Notice of Guaranteed Delivery
99-C* Form of Institutions Letter
99-D* Form of Client Letter
---------------
* Previously filed.