Donnelly Corporation Reports Second Quarter Financial Results
21 January 1998
Donnelly Corporation Reports Second Quarter Financial Results
HOLLAND, Mich., Jan. 21 -- Donnelly Corporation
today reported second quarter financial results for its 1998 fiscal year. Net
income for the period was $5.2 million, which represents the company's
highest-ever second quarter earnings. Included in net earnings for the
quarter is a one-time gain realized on the sale of Donnelly's interest in one
of its non-automotive joint ventures.
Net sales for the second quarter were a record $194.8 million, a 4%
increase over the $188.0 million in sales for the same period last year. The
sales increase came primarily from North America, despite a relatively flat
car build. Most of the increased sales were generated in Donnelly's modular
window and interior lighting and overhead trim product lines.
The company's net earnings for the second quarter of fiscal 1998 were $5.2
million, compared to $3.9 million during the same period last year. This
represents earnings per share of $0.52 during the period, compared with
earnings per share of $0.40 for the second fiscal quarter of last year.
Included in earnings for the second quarter of this year is a one-time,
pretax gain of approximately $4.6 million, or $0.22 per share after tax, from
Donnelly's sale of its 50% interest in Applied Films Corporation of Boulder,
Colorado. Applied Films is primarily a maker of glass for liquid crystal
displays. Donnelly sold its share in Applied Films during an initial public
offering that was completed in November.
On an operating basis, Donnelly's second quarter earnings were negatively
affected by pricing pressures, unfavorable mix and operational issues in the
Company's European operations, and by expenses associated with the continuing
ramp-up of Donnelly's wholly owned subsidiary, Donnelly Optics Corporation.
In Europe, Donnelly continued to experience the severe pricing pressures
being felt throughout the European automotive industry, including increased
competition from Asia on the company's interior prism business. In addition,
the company was adversely affected by unfavorable mix and operational issues
in Germany and Ireland, while operations in France and Spain continued to
perform strongly.
During fiscal 1997, Donnelly announced its plans to improve operating
performance through a restructuring of its European operations. However, the
positive effects expected from the restructuring have not yet been realized
due to a change in top management in Europe late last summer. During the
first quarter of this fiscal year Donnelly recruited Hans Huber, a senior-
level European automotive executive, to serve as chief operating officer for
Europe. Mr. Huber joined Donnelly last fall, and progress on the
restructuring is expected to occur over the remainder of the fiscal year.
"We are very pleased to see continued strong growth in our North American
sales, and to have successfully concluded the Applied Films transaction during
the second quarter," said Dwane Baumgardner, Donnelly chairman and chief
executive officer. "Clearly we are not satisfied with the level of progress
we have achieved in improving our European operations, but Hans Huber, our
European COO, is an exceptionally capable executive and we are confident in
his ability to move our restructuring plans ahead successfully."
An additional second-quarter development pertains to Lear Donnelly
Overhead Systems L.L.C., the 50-50 joint venture formed between Donnelly and
Lear Corporation on November 2, 1997, to design and produce interior
automotive overhead systems. Donnelly's overall sales levels are not impacted
by the joint venture, however, the structuring of Lear Donnelly does result in
slightly lower levels for gross profit, R&D and operating income as a percent
to net sales. Those differences are reflected in the attached financial
statements.
Net sales for the first half of fiscal 1998 were $360 million, compared to
sales of $301.4 million for the same period last year. Net sales for the
period are up 19%, largely due to the consolidation of Donnelly Hohe with
Donnelly Corporation. This consolidation took place during the second quarter
of fiscal 1997 and was not reflected in the first quarter of fiscal 1997.
Without the consolidation, Donnelly's net sales would have increased
moderately compared to the same period last year.
Net earnings for the half were $6.2 million, compared to $5.6 million for
the same period one year ago. This represents earnings per share of $0.62 for
the first half of fiscal 1998, compared to 1997 first-half earnings of $0.57
per share.
Donnelly Corporation is an international automotive supplier dedicated to
serving customers around the globe with industry-leading components and
systems in automotive mirrors, windows and interior lighting and overhead
trim. Through its various product lines, Donnelly is a supplier to every
major automotive manufacturer in the world. The company has been based in
Holland, Michigan since 1905, and today has approximately 5,000 employees
operating in 11 countries worldwide.
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 the Company, 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 the Company operates;
(b) fluctuation in worldwide or regional automobile and light truck
production; (c) changes in practices and/or policies of the Company's
significant customers; (d) human resource constraints which could impede
changes in Europe; and (e) other risks and uncertainties.
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
December 27, December 28, December 27, December 28,
In thousands, 1997 1996 1997 1996
except share data
Net sales $194,800 $188,037 $359,976 $301,437
Cost of sales 161,713 153,266 299,189 243,518
Gross profit 33,087 34,771 60,787 57,919
Operating expenses:
Selling, general and
administrative 17,412 17,723 32,677 28,810
Research and
development 9,297 8,448 18,642 15,567
Operating income 6,378 8,600 9,468 13,542
Non-operating (income) expenses:
Interest expense 2,290 3,034 4,694 4,991
Gain on sale of equity
investment (4,598) -- (4,598) --
Other income, net (511) (2,306) (537) (2,470)
Income before taxes on
income 9,197 7,872 9,909 11,021
Taxes on income 3,733 2,972 3,748 4,143
Income before minority interest and
equity earnings 5,464 4,900 6,161 6,878
Minority interest in net (income)
loss of
subsidiaries (111) (594) 234 (594)
Equity in losses of affiliated
companies (184) (389) (240) (645)
Net income $5,169 $3,917 $6,155 $5,639
Per share of common stock:
Basic net income per
share $0.52 $0.40 $0.62 $0.57
Diluted net income per
share $0.51 $0.39 $0.61 $0.56
Cash dividends
declared $0.10 $0.08 $0.20 $0.16
Average common shares
outstanding 9,940,675 9,822,503 9,916,600 9,809,136
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS
December 27, June 28,
In thousands 1997 1997
ASSETS
Current Assets:
Cash and cash equivalents $5,783 $8,568
Accounts receivable, net 69,647 67,850
Inventories 43,226 42,484
Prepaid expenses and other current assets 32,671 33,738
Total current assets 151,327 152,640
Net property, plant and equipment 165,329 165,124
Other assets 41,934 40,529
Total assets $358,590 $358,293
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $57,950 $76,392
Other current liabilities 44,029 39,154
Current maturities of long-term debt 62 103
Total current liabilities 102,041 115,649
Long-term debt, less current maturities 128,343 122,798
Deferred income taxes and other liabilities 29,872 25,674
Total liabilities 260,256 264,121
Minority interest 726 345
Shareholders' equity 97,608 93,827
Total liabilities and shareholders'
equity $358,590 $358,293
SOURCE Donnelly Corporation