Donnelly Corporation Reports Record Financial Results for Q4
17 August 1999
Donnelly Corporation Reports Record Financial Results for Fourth Quarter of Fiscal 1999
HOLLAND, Mich., Aug. 17 -- Donnelly Corporation
today reported record sales and earnings for the fourth quarter of fiscal
1999. The company also reported year-end results that recorded its best-ever
six-month period during the third and fourth quarters.
Fourth Quarter Financial Results
Net sales for the fourth quarter of fiscal 1999 were $243 million, which
represented an increase of 15.9 percent over the $210 million in sales for the
fourth quarter of fiscal 1998.
Net earnings for the quarter were $7.3 million, or $0.72 per share, as
compared to $3.5 million or $0.35 per share in fiscal 1998, an increase of 110
percent. However, earnings in each of the comparable periods were impacted by
non-recurring events.
In the fourth quarter of fiscal 1999, Donnelly had a one-time gain of $2.0
million, or $1.3 million at net, which was a cash payment received by Donnelly
upon the formation of Schott Donnelly LLC Smart Glass Solutions.
Without the one-time gain, net earnings for the quarter were $6.0 million,
or $0.59 per share, which is still a record quarter at Donnelly. During the
comparable quarter in fiscal 1998, Donnelly took a $2.3 million charge, net of
taxes, primarily for the write-off of tooling and other assets at the
company's wholly owned affiliate, Donnelly Optics Corporation, due to the
cancellation of a project by a key customer.
"The last six months of fiscal 1999 have provided a tangible demonstration
of our ability to perform as a strong, successful competitor in our markets.
We did what we said we would do, and the results are evident in our
performance," said Dwane Baumgardner, Donnelly chairman and chief executive
officer. "We have established a solid beginning in our drive to improved
profitability, and we can -- and will -- continue to build from here. It is
our intention to keep the entire organization focused on the goal of improved
earnings."
A number of factors contributed to Donnelly's record fourth-quarter
performance. They included:
* Continuing strong sales in North America, led by Donnelly's high levels
of dollar content on popular vehicles such as the Ford Expedition, Chrysler
minivans, Jeep Grand Cherokee and Ford Taurus programs.
* Continuing strong performance from Donnelly operations in France, Spain
and Schleiz, Germany.
* Improved operating performance at Donnelly's Irish manufacturing
facilities.
* A comprehensive global purchasing strategy that has led to reductions in
material costs.
* The ongoing positive effects of cost reduction initiatives launched last
December throughout North American operations.
Annual Financial Results
Led by record performance during the third and fourth quarters, Donnelly
achieved record sales of $905 million during fiscal 1999, an 18.6 percent
increase over sales of $763 million in fiscal 1998. Earnings for the 1999
fiscal year were $10.6 million, or $1.05 per share, compared to $13 million,
or $1.30 per share during fiscal 1998.
Net income in fiscal 1999 included three non-recurring events:
* The sale of Donnelly's interest in VISION Group, plc., which resulted in
a net gain of $3.6 million.
* A charge to net income of $3.5 million for turnaround activities in
several of Donnelly's European operations.
* A net gain of $1.3 million resulting from the formation of a joint
technology venture with Schott Corporation.
Net income in 1998 included two non-recurring events:
* A $2.2 million gain, net of taxes, on the sale of Donnelly's interest in
Applied Films Corporation of Boulder, Colorado.
* A $2.3 million charge, net of taxes, at the company's wholly owned
affiliate, Donnelly Optics Corporation.
During fiscal 1999 Donnelly continued to experience year-over-year
improvements in core automotive operational performance. Particularly strong
were North American automotive operations, which finished the year with record
sales. Also contributing were strong operational performances at Donnelly
facilities in France and Spain and improved performance at Donnelly's
facilities in Ireland.
Donnelly's strong NAAO sales performance during the year extended across
the company's automotive modular window, electrochromic mirror, exterior
hardware and interior lighting and trim product lines.
Net sales also benefited from Donnelly's high dollar content on strong-
selling vehicles such as the Ford Expedition and Chrysler minivans. Year-
over-year, Donnelly's North American automotive sales increased by 23 percent,
compared to overall industry growth of approximately 6 percent.
The company's European operations also experienced moderate year-over-year
improvements, supported by a net sales increase of 12 percent over 1998.
Sales were led by higher volumes in electrochromic mirrors and strong mirror
content on high volume vehicles such as the Volkswagen Passat. During the
third quarter of the fiscal year Donnelly announced a turnaround plan for its
European operations that included elements such as a headcount reduction of
approximately 200 employees, the consolidation of production facilities in
Germany, renegotiation of key labor contracts and accelerated implementation
of the Donnelly Production System.
By year-end the company's European management team made good progress in
implementing the plan, and operating results continued to improve. The
consolidation of manufacturing facilities in Germany began as scheduled and
will be completed before the end of calendar year 1999. Donnelly's Irish
operations made strong improvements in performance during the year, with gains
achieved in both the Naas and Manorhamilton operations.
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 door handles. 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 5,500 employees in 12 countries worldwide. In
addition, Donnelly is nationally recognized as a leader in the application of
participative management principles and systems.
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 Twelve Months Ended
July 3, June 27, July 3, June 27,
In thousands, except share 1999 1998 1999 1998
data
Net sales $243,119 $209,677 $904,969 $763,311
Cost of sales 208,616 173,247 770,653 632,679
Gross profit 34,503 36,430 134,316 130,632
Operating expenses:
Selling, general and
administrative 22,072 20,315 83,217 70,372
Research and development 5,584 8,415 34,221 36,418
Restructuring and other
charges - 3,468 8,777 3,468
Operating income 6,847 4,232 8,101 20,374
Non-operating (income) expenses:
Interest expense 1,474 1,636 7,858 8,347
Gain on sale of equity
investment - - (5,498) (4,598)
Other income, net (3,258) (992) (3,952) (2,554)
Income before taxes on
income 8,631 3,588 9,693 19,179
Taxes on income (credit) 2,468 (103) 1,533 5,053
Income before minority interest
and equity earnings 6,163 3,691 8,160 14,126
Minority interest in net losses
of subsidiaries 1,473 150 3,214 381
Equity in losses of affiliated
companies (325) (360) (782) (1,498)
Net income $7,311 $3,481 $10,592 $13,009
Per share of common stock:
Basic net income per
share $0.72 $0.35 $1.05 $1.30
Diluted net income per
share $0.72 $0.34 $1.04 $1.29
Cash dividends declared $0.10 $0.10 $0.40 $0.40
Average common shares
outstanding 10,105,306 10,047,891 10,090,759 9,961,172
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS
July 3, June 27,
In thousands 1999 1998
ASSETS
Current assets:
Cash and cash equivalents $3,413 $5,628
Accounts receivable, net 73,925 92,972
Inventories 42,722 44,146
Prepaid expenses and other current assets 25,855 24,031
Total current assets 145,915 166,777
Net property, plant and equipment 188,855 168,905
Other assets 60,331 42,203
Total assets $395,101 $377,885
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $97,372 $77,595
Other current liabilities 41,165 30,778
Current maturities of long-term debt 49 55
Total current liabilities 138,586 108,428
Long-term debt, less current maturities 92,166 123,706
Deferred income taxes and other liabilities 54,657 41,715
Total liabilities 285,409 273,849
Minority interest 1,361 754
Shareholders' equity 108,331 103,282
Total liabilities and shareholders' equity $395,101 $377,885
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.