-----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, RdAeyHCREnyVJTtCYvXu54BFrwK1Z5XRylyPgqYOC6cy9hoNyQGuMYMBLvOAERsz rJuuv3BGp79/boswRCWbtA== 0000805583-94-000006.txt : 19940215 0000805583-94-000006.hdr.sgml : 19940215 ACCESSION NUMBER: 0000805583-94-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940101 FILED AS OF DATE: 19940214 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: 34 SEC FILE NUMBER: 001-09716 FILM NUMBER: 94507333 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 ENDED JANUARY 1, 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 January 1, 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 / / 4,134,815 shares of Class A Common Stock and 3,583,632 shares of Class B Common Stock were outstanding as of February 10, 1994. 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements DONNELLY CORPORATION CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS (in thousands)
January 1 July 3 1994 1993 --------- --------- ASSETS Cash and equivalents.................... $ 844 $ 1,214 Accounts receivable, less allowances of $556 and $562..................... 43,511 39,226 Inventories............................. 14,832 15,049 Prepaid expenses and other current assets 11,653 12,050 -------- -------- Total current assets.................. 70,840 67,539 Property, plant and equipment........... 125,609 113,237 Less accumulated depreciation........... 51,690 47,318 -------- -------- Net property, plant and equipment..... 73,919 65,919 Other assets............................ 5,155 6,382 -------- -------- Total assets.......................... $149,914 $139,840 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Accounts and notes payable.............. $ 19,056 $ 22,896 Other current liabilities............... 15,123 10,811 -------- -------- Total current liabilities............. 34,179 33,707 Long-term debt, less current maturities. 42,081 33,688 Deferred income taxes and other liabilities............................ 6,711 6,210 -------- -------- Total liabilities..................... 82,971 73,605 -------- -------- Minority interest....................... 1,194 689 -------- -------- Preferred stock......................... 531 531 Common stock............................ 776 775 Other shareholders' equity.............. 64,442 64,240 -------- -------- Total shareholders' equity............ 65,749 65,546 -------- -------- Total liabilities and shareholders' equity................ $149,914 $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 Six Months Ended January 1 January 2 January 1 January 2 --------------------- --------------------- 1994 1993 1994 1993 --------- --------- --------- --------- Net sales....................... $ 80,070 $ 70,659 $148,325 $138,510 Costs and expenses: Cost of sales................ 63,444 55,098 117,563 107,695 Selling, general and administrative.......... 9,154 8,242 17,895 17,158 Research and development..... 4,978 3,836 9,541 7,540 -------- -------- -------- -------- Operating income................ 2,494 3,483 3,326 6,117 Interest expense............. 828 812 1,593 1,657 Royalty income............... (400) (401) (670) (759) Other expense................ 315 40 272 90 -------- -------- -------- -------- Income before taxes on income... 1,751 3,032 2,131 5,129 Taxes on income.............. 673 1,023 390 1,768 -------- -------- -------- -------- Income before minority interest and equity earnings.......... 1,078 2,009 1,741 3,361 Minority interest in net income of subsidiary..... (247) (158) (439) (348) Equity in earnings (losses) of affiliated companies.. (156) 69 (268) 353 -------- -------- -------- -------- Income before extraordinary gain and cumulative effect of change in accounting principle................ 675 1,920 1,034 3,366 Tax benefit from utilization of loss carryforward..... --- 169 --- 269 Cumulative effect of adoption of SFAS 109.............. --- --- 513 --- -------- -------- -------- -------- Net income...................... $ 675 $ 2,089 $ 1,547 $ 3,635 -------- -------- -------- -------- -------- -------- -------- -------- Per common share: Income before extraordinary gain and cumulative effect of change in accounting principle................ 0.09 0.25 0.14 0.44 Tax benefit from utilization of loss carryforward.... --- 0.02 --- 0.03 Cumulative effect of adoption of SFAS 109.............. --- --- 0.06 --- -------- -------- -------- -------- Net income................... $ 0.09 $ 0.27 $ 0.20 $ 0.47 -------- -------- -------- -------- -------- -------- -------- -------- Cash dividends declared......... $ 0.08 $ 0.07 $ 0.16 $ 0.14 Average common shares outstanding................ 7,714,628 7,679,340 7,712,534 7,675,113
The accompanying notes are an integral part of these statements. 4 DONNELLY CORPORATION CONDENSED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Six Months Ended January 1 January 2 ----------------------- 1994 1993 --------- --------- OPERATING ACTIVITIES: Net income................................. $ 1,547 $ 3,635 Depreciation and amortization.............. 4,390 3,928 Deferred income taxes...................... (100) (189) Minority interest in net income of subsidiary.............................. 439 348 Equity in (earnings)losses of affiliated companies............................... 252 (408) Extraordinary gain......................... --- (269) Cumulative effect of adoption of SFAS 109.. (513) --- Changes in operating assets and liabilities: Accounts receivable................... (4,285) 6,607 Inventories........................... 217 (280) Prepaid expenses and other current assets............................. 398 (1,292) Accounts payable and other current liabilities........................ 973 (4,051) Postretirement benefits................. 532 --- Other................................... 31 172 -------- -------- NET CASH FROM OPERATING ACTIVITIES...... 3,881 8,201 -------- -------- INVESTING ACTIVITIES: Capital Expenditures....................... (12,611) (5,114) Change in unexpended bond proceeds......... 997 (4,281) Other...................................... --- (100) -------- -------- NET CASH FOR INVESTING ACTIVITIES....... (11,614) (9,495) -------- -------- FINANCING ACTIVITIES: Proceeds from long-term debt............... 15,000 5,000 Repayments on long-term debt............... (6,607) (3,546) Common stock issuance...................... 146 243 Dividends paid............................. (1,176) (1,354) -------- -------- NET CASH FROM FINANCING ACTIVITIES...... 7,363 343 -------- -------- DECREASE IN CASH AND EQUIVALENTS CASH...... (370) (951) AND EQUIVALENTS, AT BEGINNING OF PERIOD.... 1,214 3,769 -------- -------- CASH AND EQUIVALENTS, AT END OF PERIOD..... $ 844 $ 2,818 -------- -------- -------- --------
The accompanying notes are an integral part of these statements. 5 DONNELLY CORPORATION NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) January 1, 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 six months ended January 1, 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 January 1, 1994 and January 2, 1993 included 13 weeks. The first half of 1994 included 26 weeks compared to 27 weeks for the same period last year. NOTE B--INVENTORIES Inventories consist of:
January 1 July 3 (in thousands) 1994 1993 --------- --------- LIFO cost: Finished products and work in process. $ 7,489 $ 7,840 Raw materials......................... 5,417 5,256 -------- -------- 12,906 13,096 -------- -------- FIFO cost: Finished products and work in process. 1,250 1,345 Raw materials......................... 676 608 -------- -------- 1,926 1,953 -------- -------- $ 14,832 $ 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
Six Months Ended January 1 January 2 ------------------------- (in thousands) 1994 1993 --------- ---------- Cash paid during the period for: Interest.................................... $ 1,479 $ 1,171 Income taxes................................ $ 2,290 $ 2,815
7 Item 2. DONNELLY'S CORPORATION AND SUBSIDIARIES MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION AND FINANCIAL CONDITION 2ND QUARTER REPORT FOR THE THREE MONTHS ENDED JANUARY 1, 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 quarter to quarter. Consolidated net sales were $80,070,000 in the second quarter of 1994, an increase of 13% over the second quarter last year. North American automotive production increased 9% during this period. Sales increases in modular window systems and complete exterior mirrors, along with the higher North American automotive production, more than offset the effects of a severe recession in the European automotive market. Consolidated net sales for the first half of 1994 were $148,325,000 compared to $138,510,000 for the first half of 1993, an increase of 7%. North American automotive production increased 10% in the same period. Gross profit margin for the second quarter of 1994 was 20.8% compared to 22.0% in the second quarter of 1993. The decrease resulted from lower margins at the Company's Irish subsidiary due to the European recession and start-up costs associated with new and transitioning business units. While margins should improve in the second half of the year, they will be negatively impacted over the next 12-18 months as many business units prepare for new business or complete a transition process. Gross profit margin during the first half of 1994 decreased to 20.7% from 22.2% last year. Selling, administrative and general expenses decreased as a percent-of- sales to 11.4% from 11.7% in the second quarter compared to a year ago. Actual selling, administrative and general expenses increased by $812,000 and $737,000 for the second quarter and first half, respectively. Patent litigation costs continue, however at significantly lower levels than last year. Research and development expenses for the second quarter and first half 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. Interest expense increased $16,000 in the second quarter, but decreased $64,000 in the first half of 1994. Lower interest rates helped offset 8 higher borrowing levels. Interest expense will increase in the second half as capital investments to support future sales and profitability growth continues. Other expenses in the second quarter of 1994 were $315,000 compared to 40,000 a year earlier. The current quarter's expense was primarily due to charges taken at the Company's Irish subsidiary related to the downturn in the European automotive industry. The Company had net income in the second quarter of 1994 of $675,000 compared to $2,089,000 in the same period last year. Earnings decreased due to the following reasons: 1) a deep and prolonged recession in Europe has 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 is negatively affecting Donnelly Applied Films performance and 4) a $350,000 postretirement health care cost. The Company had earnings in the first half of $1,547,000 compared to $3,635,000 in the first half of 1993. Tax benefits associated with adopting SFAS 109 and retroactively reinstated research and development tax credits resulting from the new tax act helped offset some of the negative variances occurring in the period. LIQUIDITY AND CAPITAL RESOURCES The Company's current ratio was 2.1 at January 1, 1994 and July 3, 1993. Working capital increased $2,829,000 to $36,661,000 due to higher accounts receivables at the end of the second quarter. This occurred due to the holiday period at the end of the second quarter. Capital expenditures were $12,611,000 in the first half of 1994, in support of facility expansions for modular window systems, and exterior and interior mirrors. Capital spending is projected to increase in the second half of the year and continue at a high level next year to support expanding and restructuring business requirements. These programs include 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 only had $6.3 million borrowed against it as of January 1, 1994. 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"). Gentex brought two patent lawsuits against the Company alleging that the Company's chemical electrochromic mirrors (as opposed to solid-state, thin- film or polymer film electrochromic mirrors) infringed four Gentex patents. On April 20, 1993, following a jury trial in one of those lawsuits, the court entered judgement in favor of Gentex. The court awarded Gentex damages and enjoined the Company from the manufacture, use or sale of certain chemical electrochromic mirrors. The Company entered into a settlement agreement with Gentex on May 20, 1993. Under this agreement the Company paid a total of $3.6 million in satisfaction of Gentex's claims for damages in both lawsuits. The provisions of the injunction entered by the court were not affected by this settlement agreement. On June 7, 1993, Gentex filed another lawsuit against the Company. In this suit Gentex has alleged that the Company's solid polymer film electrochromic mirror infringes one of the Gentex patents involved in the prior litigation, and that the Company has violated the injunction entered by the court in the litigation. Gentex is seeking unspecified damages and an injunction against further alleged infringement by the Company. The Company has denied that its solid polymer film electrochromic mirror infringes the Gentex patent, and has denied that it violated the court's injunction. Pre-trial discovery is being conducted in the lawsuit and trial has been scheduled to begin on May 16, 1994. On July 8, 1993, the Company filed a lawsuit against Gentex. In this suit the Company has alleged that Gentex's lighted electrochromic mirror infringes three of the Company's patents, and that Gentex's electrochromic mirror infringes a fourth patent owned by the Company. The Company is seeking unspecified damages and an injunction against further infringement by Gentex. Gentex has not yet answered the Company's complaint and no trial date has been set. 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 January 1, 1994. 10 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 /s/ J. Dwane Baumgardner Date: February 10, 1994 --------------------------------------- J. Dwane Baumgardner (Chairman, and Chief Executive Officer) /s/ James A. Knister Date: February 10, 1994 --------------------------------------- James A. Knister (Senior Vice President and Chief Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----