Donnelly Corporation Reports Q1 Financial Results
15 October 1998
Donnelly Corporation Reports First Quarter Financial Results
HOLLAND, Mich., Oct. 15 -- Donnelly Corporation
today reported first quarter financial results for its 1999 fiscal year.
During the period the company experienced a net loss of $2 million, which was
attributable to Donnelly's non-automotive, digital imaging businesses and the
company's European automotive operations.
Net sales for the first quarter were $190 million, a 15% increase over the
$165 million in sales for the same period last year. The company achieved
this very strong 15% sales growth during a quarter in which much of the auto
industry saw sales that remained flat or grew only modestly.
The sales increase was largely due to Donnelly's ongoing favorable product
mix with high dollar content on a number of high-volume vehicle programs in
North America, increased sales of interior lighting and trim products
associated with the company's joint venture, Lear Donnelly Overhead Systems,
increasing sales of electrochromic mirror systems, and continued strong
automotive production in Europe.
The company's net loss for the first quarter of fiscal 1999 was $2
million, or $0.20 per share, compared to earnings of $1 million, or $0.10 per
share for the same period last year.
In Europe, Donnelly continued to experience operational issues at several
of the company's key facilities. In September, Donnelly moved to strengthen
its European management team by sending four of the company's top U.S.
executives on long-term assignments in Europe. However, the new management
has not been in place long enough to have a significant positive effect on
operating performance.
"We now have a strong management team in place to confront the
operational issues we've experienced in Europe and begin to bring those
operations more in line with what we expect," said Dwane Baumgardner, Donnelly
chairman and chief executive officer. "While we have been disappointed with
European performance over the past year, we are confident that the new team
will successfully bring about the changes that are needed because they have
many years of proven experience in Donnelly and our specific markets."
Donnelly has two interests in digital imaging: Donnelly Optics
Corporation, a wholly owned subsidiary, and Vision Group, a publicly traded
company in which Donnelly owns an equity share of about 25 percent. Slower-
than-expected growth in the digital imaging industry has led to significant
losses at both digital imaging companies, and Donnelly is currently evaluating
a full range of options for restructuring those interests to reduce their
impact on net earnings.
"We have committed to redefining the role that digital imaging plays in
our business strategy, and to acting decisively to follow through on that
commitment," Baumgardner said. "We are on track with that process and expect
to make a number of key decisions over the next several weeks. "
Donnelly has also begun carrying out a planned, significant investment in
the company's computer systems. The new systems will replace outdated systems
currently in use to manage data in a number of key areas, improve Donnelly's
customer support capabilities in the future, and reduce operating costs long
term. These investments are expected to continue throughout the fiscal year
and will continue to place pressure on earnings.
Donnelly Corporation is an international automotive supplier dedicated to
serving customers around the globe with industry-leading components and
systems in automotive mirrors, windows, door handles and interior trim and
lighting. 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 more than 5500 employees and
operates in 14 countries worldwide. Donnelly is recognized as a leader in the
application of participative management, and has been named to Fortune
magazine's list of the "100 Best Companies to Work for in America."
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
September 26, September 27,
In thousands, except share data 1998 1997
Net sales $189,603 $165,176
Cost of sales 162,842 137,203
Gross profit 26,761 27,973
Operating expenses:
Selling, general and
administrative 18,588 15,179
Research and development 9,285 9,704
Operating income (loss) (1,112) 3,090
Non-operating (income) expenses:
Interest expense 2,010 2,404
Other income, net (450) (26)
Income (loss) before
taxes on income (2,672) 712
Taxes on income (credit) (1,040) 15
Income (loss) before minority
interest and equity earnings (1,632) 697
Minority interest in net losses
of subsidiaries 233 345
Equity in losses of affiliated
companies (591) (56)
Net income (loss) $(1,990) $ 986
Per share of common stock:
Basic net income per share $ (0.20) $ 0.10
Diluted net income per share $ (0.20) $ 0.10
Cash dividends declared $ 0.10 $ 0.10
Average common shares
outstanding 10,138,634 9,892,525
Certain reclassifications have been made to prior year, previously
released data to conform to the current presentation and had no effect on net
income reported for any period.
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS
September 26, June 27,
In thousands 1998 1998
ASSETS
Current assets:
Cash and cash equivalents $ 4,194 $ 5,628
Accounts receivable, net 98,530 92,972
Inventories 47,182 44,146
Prepaid expenses and other
current assets 26,367 24,031
Total current assets 176,273 166,777
Net property, plant and equipment 177,294 168,905
Other assets 45,150 42,203
Total assets $ 398,717 $ 377,885
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 86,551 $ 77,595
Other current liabilities 35,655 36,662
Current maturities of
long-term debt 113 55
Total current liabilities 122,319 114,312
Long-term debt, less
current maturities 135,694 123,706
Deferred income taxes and
other liabilities 37,740 35,831
Total liabilities 295,753 273,849
Minority interest 803 754
Shareholders' equity 102,161 103,282
Total liabilities and
shareholders' equity $ 398,717 $ 377,885