-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, W1WSE28gK35rwgGAN73XV8Jb0u12oggdUvOOJhC9NanL1u01WesJIja6sVUf29vm SovvRgiO1pO0x8BltvxNhA== 0000805583-94-000008.txt : 19940513 0000805583-94-000008.hdr.sgml : 19940513 ACCESSION NUMBER: 0000805583-94-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940402 FILED AS OF DATE: 19940512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DONNELLY CORP CENTRAL INDEX KEY: 0000805583 STANDARD INDUSTRIAL CLASSIFICATION: 3231 IRS NUMBER: 380493110 STATE OF INCORPORATION: MI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09716 FILM NUMBER: 94527417 BUSINESS ADDRESS: STREET 1: 414 E FORTIETH ST CITY: HOLLAND STATE: MI ZIP: 49423 BUSINESS PHONE: 6167867000 MAIL ADDRESS: STREET 1: 424 EAST 40TH STREET CITY: HOLLAND STATE: MI ZIP: 49423 10-Q 1 FORM 10-Q FOR THE PERIOD ENDING APRIL 2, 1994 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended April 2, 1994 Commission File Number 1-9716 DONNELLY CORPORATION (Exact Name of Registrant as Specified in its Charter) Michigan (State or other jurisdiction 38-0493110 of incorporation or organization) (IRS Employer Identification No.) 414 East Fortieth Street Holland, Michigan 49423 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code, (616) 786-7000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / 4,140,160 shares of Class A Common Stock and 3,583,632 shares of Class B Common Stock were outstanding as of May 6, 1994. 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements DONNELLY CORPORATION CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS (in thousands)
April 2 July 3 1994 1993 --------- --------- ASSETS Cash and equivalents.................... $ 600 $ 1,214 Accounts receivable, less allowances of $619 and $562..................... 47,741 39,226 Inventories............................. 18,463 15,049 Prepaid expenses and other current assets 13,248 12,050 -------- -------- Total current assets.................. 80,052 67,539 Property, plant and equipment........... 134,669 113,237 Less accumulated depreciation........... 54,277 47,318 -------- -------- Net property, plant and equipment 80,392 65,919 Other assets............................ 5,826 6,382 -------- -------- Total assets.......................... $166,270 $139,840 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Accounts and notes payable.............. $ 24,049 $ 22,896 Other current liabilities 18,150 10,811 -------- -------- Total current liabilities............. 42,199 33,707 Long-term debt, less current maturities. 47,646 33,688 Deferred income taxes and other liabilities............................ 7,150 6,210 -------- -------- Total liabilities..................... 96,995 73,605 -------- -------- Minority interest....................... 1,333 689 -------- -------- Preferred stock......................... 531 531 Common stock............................ 777 775 Other shareholders' equity.............. 66,634 64,240 -------- -------- Total shareholders' equity............ 67,942 65,546 -------- -------- Total liabilities and shareholders' equity................ $166,270 $139,840 -------- -------- -------- --------
The accompanying notes are an integral part of these statements. 3 DONNELLY CORPORATION CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share data)
Three Months Ended Nine Months Ended April 2 April 3 April 2 April 3 -------------------- -------------------- 1994 1993 1994 1993 -------- -------- -------- -------- Net sales....................... $ 90,897 $ 79,625 $239,222 $218,135 Costs and expenses: Cost of sales................ 71,075 61,630 188,638 169,325 Selling, general and administrative.......... 9,745 9,844 27,640 27,002 Research and development..... 5,675 4,127 15,216 11,667 -------- -------- -------- -------- Operating income................ 4,402 4,024 7,728 10,141 Interest expense............. 960 755 2,553 2,412 Royalty income............... (375) (370) (1,045) (1,129) Other expense................ (163) (88) 109 2 -------- -------- -------- -------- Income before taxes on income... 3,980 3,727 6,111 8,856 Taxes on income.............. 1,233 1,267 1,623 3,035 -------- -------- -------- -------- Income before minority interest and equity earnings.......... 2,747 2,460 4,488 5,821 Minority interest in net income of subsidiary..... (139) (213) (578) (561) Equity in earnings (losses) of affiliated companies.. 71 206 (197) 559 -------- -------- -------- -------- Income before extraordinary gain and cumulative effect of change in accounting principle................ 2,679 2,453 3,713 5,819 Tax benefit from utilization of loss carryforward..... --- 178 --- 447 Cumulative effect of adoption of SFAS 109.............. --- --- 513 --- -------- -------- -------- -------- Net income...................... $ 2,679 $ 2,631 $ 4,226 $ 6,266 -------- -------- -------- -------- -------- -------- -------- -------- Per common share: Income before extraordinary gain and cumulative effect of change in accounting principle................ 0.35 0.32 0.48 0.76 Tax benefit from utilization of loss carryforward..... --- 0.02 --- 0.05 Cumulative effect of adoption of SFAS 109.............. --- --- 0.06 --- Net income................... $ 0.35 $ 0.34 $ 0.54 $ 0.81 -------- -------- -------- -------- -------- -------- -------- -------- Cash dividends declared......... $ 0.08 $ 0.07 $ 0.24 $ 0.21 Average common shares outstanding................ 7,718,623 7,692,852 7,714,563 7,980,879
The accompanying notes are an integral part of these statements. 4 DONNELLY CORPORATION CONDENSED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Nine Months Ended April 2 April 3 -------------------- 1994 1993 -------- -------- OPERATING ACTIVITIES: Net income................................. $ 4,226 $ 6,266 Depreciation and amortization.............. 6,984 6,121 Deferred income taxes...................... (100) (111) Minority interest in net income of subsidiary.............................. 578 561 Equity in (earnings)losses of affiliated companies................................. 148 (614) Extraordinary gain......................... --- (447) Cumulative effect of adoption of SFAS 109.. (513) --- Postretirement Benefits.................... 808 --- Changes in operating assets and liabilities: Accounts receivable...................... (8,515) 440 Inventories.............................. (3,414) (268) Prepaid expenses and other current assets................................ (1,197) (3,166) Accounts payable and other current liabilities........................... 8,992 3,204 Other.................................... (420) 59 -------- -------- NET CASH FROM OPERATING ACTIVITIES....... 7,577 12,045 -------- -------- INVESTING ACTIVITIES: Capital Expenditures....................... (21,594) (9,617) Change in unexpended bond proceeds......... 1,070 (2,839) Other...................................... (36) (600) -------- -------- NET CASH FOR INVESTING ACTIVITIES........ (20,560) (13,056) -------- -------- FINANCING ACTIVITIES: Proceeds from long-term debt............... 17,350 5,000 Repayments on long-term debt............... (3,391) (2,868) Common stock issuance...................... 214 433 Dividends paid............................. (1,804) (2,189) -------- -------- NET CASH FROM FINANCING ACTIVITIES....... 12,369 376 -------- -------- DECREASE IN CASH AND CASH EQUIVALENTS...... (614) (635) CASH, AT BEGINNING OF PERIOD............... 1,214 3,769 -------- -------- CASH, AT END OF PERIOD..................... $ 600 $ 3,134 -------- -------- -------- --------
The accompanying notes are an integral part of these statements. 5 DONNELLY CORPORATION NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) April 2, 1994 NOTE A--BASIS OF PRESENTATION The accompanying unaudited condensed combined consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended April 2, 1994, should not be considered indicative of the results that may be expected for the year ended July 2, 1994. The combined consolidated balance sheet at July 3, 1993, has been taken from the audited financial statements and condensed. The accompanying condensed combined consolidated financial statements and footnotes thereto should be read in conjunction with the Company's annual report on Form 10-K for the year ended July 3, 1993. The Company's fiscal year is the 52 or 53 week period ending the Saturday closest to June 30th. Accordingly, each quarter will end on the Saturday closest to quarter end. Both the quarters ended April 2, 1994 and April 3, 1993 included 13 weeks. The first nine months of 1994 included 39 weeks compared to 40 weeks for the same period last year. NOTE B--INVENTORIES Inventories consist of:
April 2 July 3 (in thousands) 1994 1993 -------- -------- LIFO cost: Finished products and work in process. $ 9,784 $ 7,840 Raw materials......................... 6,629 5,256 -------- -------- 16,413 13,096 -------- -------- FIFO cost: Finished products and work in process. 1,381 1,345 Raw materials......................... 669 608 -------- -------- 2,050 1,953 -------- -------- $ 18,463 $ 15,049 -------- -------- -------- --------
6 NOTE C--INCOME PER SHARE Income per share is computed by dividing net income, adjusted for preferred stock dividends of approximately $10,000 in each respective quarter, by the weighted average number of shares of Donnelly Corporation common stock outstanding, as adjusted for stock splits. NOTE D--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Nine Months Ended April 2 April 3 -------------------- (in thousands) 1994 1993 -------- -------- Cash paid during the period for: Interest................................... $ 2,211 $ 2,147 Income taxes............................... $ 3,145 $ 3,565
7 Item 2. DONNELLY CORPORATION AND SUBSIDIARIES MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 3RD QUARTER REPORT FOR THE THREE AND NINE MONTHS ENDED APRIL 2, 1994 RESULTS OF OPERATIONS The Company's net sales and net income are subject to significant quarterly fluctuations attributable primarily to production schedules of the Company's major automotive customers. These same factors cause quarterly results to fluctuate from year to year, as well as from quarter to quarter. Consolidated net sales in the third quarter of 1994 were $90,897,000, an increase of 14% over the third quarter of 1993. During this period, North American (N.A.) automotive production increased 8%. New complete exterior mirror business for Ford began in the third quarter, more than offsetting the negative sales impact caused by the European recession. Sales increases in Interior Systems, Appliance Products and Information Products also helped the Company's sales increase to outpace N.A. automotive production. Consolidated net sales for the first nine months of 1994 were $239,222,000, an increase of 10% over the same period last year. N.A. automotive production increased 8% in the same period. Gross profit margin for the third quarter of 1994 was 21.8% compared to 22.6% in the third quarter of 1993. The decrease resulted from: the European recession's impact on the Company's Irish subsidiary; start-up costs associated with new complete exterior mirror production including a second shift painting operation; and business units undergoing significant transitions. Margins will continue to be negatively impacted over the next 12-15 months as many business units prepare for new business or complete a transition process. Gross profit for the first nine months of 1994 was 21.2% compared to 22.4% last year. Selling, administrative and general expenses of $9,745,000 or 10.7% of sales in the third quarter decreased from $9,844,000 or 12.4% in the same period last year. Selling, administrative and general expenses increased by $638,000 for the first nine months of 1994 to 11.6%, compared to 12.4% for the same period last year. Patent litigation costs in both the three and nine month periods are significantly lower than last year. Research and development expenses for the third quarter and first nine months of 1994 were 6.2% and 6.4% of sales, respectively. Expenses in both periods were nearly a full percentage point higher than last year. These increases are primarily the result of significant development costs being incurred to support new business for Ford and Mazda complete exterior mirror systems in model years 1995 and beyond, along with the new Chrysler minivan modular window business slated for start-up in late 1995. 8 Interest expense increased $205,000 in the third quarter and $141,000 in the first nine months of 1994. Lower interest rates continued to help offset the higher borrowing levels caused by increased capital spending. Royalty income in the third quarter and first nine months of 1994 were $375,000 and $1,045,000 respectively, virtually flat with the same periods last year. The Company had net income of $2,679,000 in the third quarter, compared to $2,631,000 in the same period last year. Higher sales resulting from the increased N.A. automotive production and new complete exterior mirror business, along with lower selling, general and administration expenses as a percent-of-sales allowed the Company's earnings to remain flat with the same period last year. This performance occurred despite: 1) a deep and prolonged recession in Europe which negatively impacted Donnelly's Irish subsidiary; 2) increased research and development expenditures to support new complete exterior mirror and modular window programs 3) increased competition and a downturn in the demand for coated glass used in liquid crystal displays negatively affecting Donnelly Applied Films performance and 4) postretirement health care cost of $344,000. The Company had earnings in the first nine months of 1994 of $4,226,000 compared to $6,266,000 in the same period last year. LIQUIDITY AND CAPITAL RESOURCES The Company's current ratio was 1.9 at April 2, 1994 and 2.0 at July 3, 1993. Working capital increased $4,021,000 to $37,853,000 to support the higher sales level. Capital expenditures were $21,594,000 in the first nine months of 1994, in support of facility expansions for modular windows, and exterior and interior mirrors. Capital spending is projected to continue at a high level through the remainder of 1994 and throughout 1995 to support construction of new modular window and complete exterior mirror equipment and facilities, redesign of existing manufacturing areas, and construction of new facilities to consolidate operations and replace older facilities. The increased spending will be financed primarily through the Company's $55 million revolving credit agreement, which had borrowings of $13,300,000 against it as of April 2, 1994. The Company also expects to issue an additional $15,000,000 private placement note with an insurance company by the end of the 1994 calendar year. 9 Item 1. Legal Proceedings Certain electrochromic mirror technology of the Company is the subject of patent litigation between the Company and Gentex Corporation ("Gentex"). Following the settlement in May 1993, of two lawsuits previously filed by Gentex, Gentex filed another lawsuit against the Company on June 7, 1993. In this suit, Gentex alleged that the Company's solid polymer film electrochromic mirror infringed one of the Gentex patents involved in the prior litigation and that the Company has violated the injunction entered by the court in the previous litigation. Gentex sought unspecified damages and an injunction against further alleged infringement by the Company. On March 21, 1994, the Company's motion for summary judgement of non- infringement was granted and the lawsuit was dismissed. Gentex has filed an appeal of this ruling, and no decision is expected on this until 1995. The Company's lawsuit against Gentex, filed on July 8, 1993, remains outstanding. In this suit, the Company has alleged that Gentex's lighted electrochromic mirror infringes three of the Company's patents and that all of Gentex's electrochromic mirrors infringe a fourth patent owned by the Company. The Company is seeking unspecified damages and an injunction against further infringement by Gentex. Pretrial discovery is being conducted in this action, and a trial has been scheduled to begin in October 1995. Item 6. Exhibits and Reports on Form 8-K a. Exhibits - none b. The Company did not file any reports on Form 8-K during the three months ended April 2, 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized. DONNELLY CORPORATION Registrant Date: May 6, 1994 /S/ J. Dwane Baumgardner J. Dwane Baumgardner (Chairman, and Chief Executive Officer) Date: May 6, 1994 /S/ James A. Knister James A. Knister (Senior Vice President and Chief Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----