Donnelly Announces Restatement of Prior Earnings
Donnelly Announces Restatement of Prior Earnings
HOLLAND, Mich., Aug. 20 Donnelly Corporation
announced today that it will be restating its financial statements to reflect
a change in its accounting for its investment in Donnelly Electronics, Inc.
("DEL") and for Donnelly Hohe GmbH & Co. K.G. ("Hohe"). The restatement will
not materially change the company's earnings for its quarter ended June 30,
2001, but will adversely affect prior periods. The accounting change is not
expected to have a material impact on the company's net income or cash flow in
any future period.
Prior to February 28, 2001, the company owned approximately 18% of DEL and
under the accounting method previously used, did not include any of DEL's
losses in the company's financial results. Under the restated financial
statements, the company will include in its net income substantially all of
the losses of DEL, all of which were funded by the company. During its start
up period, DEL incurred substantial research and development costs, much of
which the company expects will be recouped as the products it has developed
are manufactured and sold. On February 28, 2001, the company acquired all of
the remaining stock in DEL and since that date has included all of DEL's
losses in its financial statements.
In 1995, the company acquired a 66-2/3% interest in Hohe and thereafter
had included in its net income 66-2/3% of Hohe's results. The restated
financial statements will include in the company's net income all losses of
Hohe, all of which were funded by the company. Hohe has sustained cumulative
losses after its acquisition by the company through 2000. Hohe was slightly
profitable in the first six months of 2001, but incurred a small loss in the
second quarter.
The company is completing the accounting required to reflect these changes
and estimates that the restatement will reduce previously reported net income
of the company for fiscal 1998, 1999, the six months ended December 31, 1999,
fiscal 2000 and the first quarter of 2001 by approximately $1.4 million, $5.6
million, $2.7 million, $7.3 million and $1.3 million, respectively.
Dwane Baumgardner, chairman and chief executive officer, stated "Although
we are disappointed to be required to restate our financial statements in
order to comply with the technical accounting rules, we are pleased to report
that this accounting change had no material impact on the results of
operations for the quarter ended June 30, 2001, and is not expected to have a
material impact on net income or cash flow moving forward. The company is
excited about its acquisition of DEL and Hohe and about the opportunities
which they bring to the company."
The company's management and audit committee have engaged Arthur Andersen
LLP to advise them in connection with restating its financial statements. The
company's independent auditors, BDO Seidman, LLP, are working to complete the
audit of the company's restated financial statements. When the audit is
completed, the company will amend its Form 10-K for the year ended
December 31, 2000, and its Form 10-Q for the quarter ended March 31, 2001, as
soon as practicable.
Donnelly is a technology-driven, customer-focused automotive supplier that
has been based in Holland, Michigan, since 1905. Through its various product
lines, Donnelly serves every major automotive manufacturer in the world. The
company has more than 6,000 employees in 14 countries worldwide. Donnelly has
been named by the Society of Automotive Engineers as a model company in lean
manufacturing practices. In addition, Donnelly is nationally recognized as a
leader in the application of participative management principles and systems.
More information on Donnelly is available at the company's site on the World
Wide Web, at http://www.donnelly.com .
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Investors are
cautioned that any current expectations of Donnelly, or its management, are
not guarantees of future performance and involve risk and uncertainties.
Actual results may differ materially from those in forward-looking statements
as a result of various factors including, but not limited to (a) general
economic and currency conditions in the markets in which Donnelly operates;
(b) fluctuation in world wide or regional automobile and light truck
production; (c) changes in practices and/or policies of Donnelly's significant
customers; (d) human resource constraints which could impede changes in Europe
and (e) other risks and uncertainties.
The company's financial statements included below reflect the restatement
and supercede the financial statements contained in the company's release of
July 24, 2001.
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Six Months Ended
June 30, July 1, June 30, July 1,
2001 2000 2001 2000
In thousands, (as restated) (as restated)
except share data
Net sales $227,276 $227,492 $447,277 $464,896
Cost of sales 189,646 188,698 376,800 384,822
Gross profit 37,630 38,794 70,477 80,074
Operating expenses:
Selling, general and
administrative 20,110 21,301 41,070 42,182
Research and development 10,535 7,829 19,979 17,591
Total operating expenses 30,645 29,130 61,049 59,773
Operating income 6,985 9,664 9,428 20,301
Non-operating (income)
expenses:
Interest expense 1,683 2,025 3,787 3,808
Other income, net (654) (1,366) (1,019) (1,653)
Non-operating expenses 1,029 659 2,768 2,155
Income before taxes on
income 5,956 9,005 6,660 18,146
Taxes on income 1,101 2,409 916 4,971
Income before minority
interest and equity
earnings 4,855 6,596 5,744 13,175
Minority interest in net
earnings of subsidiaries (131) (63) (117) (136)
Equity in earnings (losses)
of affiliated companies 316 (1,003) (657) (1,942)
Net income $5,040 $5,530 $4,970 $11,097
Per share of common stock:
Basic net income per
share $0.49 $0.54 $0.48 $1.09
Diluted net income per
share $0.48 $0.54 $0.48 $1.09
Cash dividends declared $0.10 $0.10 $0.20 $0.20
Average common shares
outstanding 10,369,569 10,162,983 10,312,735 10,158,266
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2001 2000
In thousands (as restated)
ASSETS
Current assets:
Cash and cash equivalents $3,533 $4,599
Accounts receivable, net 83,954 82,802
Inventories 61,947 55,933
Prepaid expenses and other current assets 29,961 28,990
Total current assets 179,395 172,324
Net property, plant and equipment 213,869 212,134
Other assets 31,195 39,538
Total assets $424,459 $423,996
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $91,747 $89,163
Other current liabilities 45,204 39,727
Current maturities of long-term debt 79 90
Total current liabilities 137,030 128,980
Long-term debt, less current maturities 117,117 132,608
Deferred income taxes and other liabilities 52,039 46,430
Total liabilities 306,186 308,018
Minority interest 2,872 1,353
Shareholders' equity 115,401 114,625
Total liabilities and shareholders'
equity $424,459 $423,996
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