-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SwQ21bkENfeLlblaFyCuIW2dhQ7qnZDNvJXTL6HdF01ECWHfqz8KwsEIaOkD5hxT WXAO4teFwgCL9Zkp/eB6yw== 0000805583-95-000022.txt : 19951120 0000805583-95-000022.hdr.sgml : 19951120 ACCESSION NUMBER: 0000805583-95-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951115 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: DONNELLY CORP CENTRAL INDEX KEY: 0000805583 STANDARD INDUSTRIAL CLASSIFICATION: GLASS PRODUCTS, MADE OF PURCHASED GLASS [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: 95593618 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 SEPTEMBER 30, 1995 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 Commission File Number September 30, 1995 1-9716 DONNELLY CORPORATION (Exact Name of Registrant as Specified in its Charter) MICHIGAN 38-0493110 (State or other jurisdiction (IRS Employer of incorporation or organization) 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 / / 4,215,467 shares of Class A Common Stock and 3,582,198 shares of Class B Common Stock were outstanding as of October 31, 1995. 2 DONNELLY CORPORATION INDEX Page Numbering PART 1. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Combined Consolidated Balance Sheets---September 30, 1995 and July 1, 1995.....3 Condensed Combined Consolidated Statements of Income---Three months ended September 30, 1995 and October 1, 1994...........4 Condensed Combined Consolidated Statements of Cash Flows---Three months ended September 30, 1995 and October 1, 1994...........5 Notes to Condensed Combined Consolidated Financial Statements---September 30, 1995.......6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.....8-9 PART II. OTHER INFORMATION Item 1. Legal Proceedings.................................10 Item 4. Submission of Matters to a Vote of Security Holders...........................................11 Item 6. Exhibits and Reports on Form 8K...................11 Signatures..................................................12 3 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DONNELLY CORPORATION AND SUBSIDIARIES CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, July 1, 1995 1995 --------- -------- ASSETS Cash and cash equivalents $ 5,758 $ 5,224 Accounts receivable, less allowances of $573 and $575 55,095 50,866 Inventories 25,047 22,042 Prepaid expenses and other current assets 27,152 21,674 -------- -------- Total current assets 113,052 99,806 Property, plant, and equipment 152,840 150,578 Less accumulated depreciation 56,711 56,642 -------- -------- Net property, plant, and equipment 96,129 93,936 Investments in and advances to affiliates 37,686 25,246 Other assets 4,539 4,800 -------- -------- Total assets $251,406 $223,788 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Accounts and notes payable $ 42,281 $ 42,676 Other current liabilities 18,250 16,628 -------- -------- Total current liabilities 60,531 59,304 Long-term debt, less current maturities 97,568 66,374 Deferred income taxes and other liabilities 13,136 12,926 -------- -------- Total liabilities 171,235 138,604 -------- -------- Minority interest 61 2,284 Preferred stock 531 531 Common stock 784 780 Other shareholders' equity 78,795 81,589 -------- -------- Total shareholders' equity 80,110 82,900 -------- -------- Total liabilities and shareholders' equity $251,406 $223,788 -------- -------- -------- --------
The accompanying notes are an integral part of these statements. 4 DONNELLY CORPORATION AND SUBSIDIARIES CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share data)
Three Months Ended September 30, October 1, 1995 1994 -------- -------- Net Sales $ 90,523 $ 86,741 Cost and expenses: Cost of Sales 76,838 68,640 Selling, general, and administrative 10,143 11,650 Research and development 5,629 5,640 -------- -------- Operating income (loss) (2,087) 811 Interest expense 1,735 1,150 Royalty income (1,328) (281) Interest income (374) (39) Other income (99) (31) -------- -------- Income (loss) before taxes on income (2,021) 12 Taxes on income (credit) (717) 3 -------- -------- Income (loss) before minority interest and equity earnings (1,304) 9 Minority interest in net (income)loss of subsidiary 123 (187) Equity in earnings (losses) of affiliated companies (608) 93 -------- -------- Net loss $ (1,789) $ (85) -------- -------- -------- -------- Per common share: Net loss $ (0.23) $ (0.01) Cash dividends declared $ 0.10 $ 0.08 Average common shares outstanding 7,773,432 7,730,386
The accompanying notes are an integral part of these statements. 5 DONNELLY CORPORATION AND SUBSIDIARIES CONDENSED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Three Months Ended September 30, October 1, 1995 1994 -------- -------- OPERATING ACTIVITIES: Net loss $ (1,789) $ (85) ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation and amortization 3,683 3,026 Deferred pension and postretirement benefits 479 381 Deferred income taxes 1,233 (892) Minority interest in net income (loss) of subsidiary (123) 187 Equity in (earnings) losses of affiliated companies 1,097 (114) CHANGES IN OPERATING ASSETS AND LIABILITIES: Accounts receivable (4,229) (1,212) Inventories (3,005) (1,184) Prepaid expenses and other current assets (6,754) (2,060) Accounts payable and other current liabilities 1,491 (6,016) Other (337) (236) -------- -------- NET CASH FOR OPERATING ACTIVITIES (8,254) (8,205) -------- -------- INVESTING ACTIVITIES: Capital expenditures (6,064) (7,447) Loan to affiliate (13,680) 0 Purchase of minority interest (2,100) 0 Change in unexpended bond proceeds 174 52 Other --- --- -------- -------- NET CASH FOR INVESTING ACTIVITIES (21,670) (7,395) -------- -------- FINANCING ACTIVITIES: Proceeds from long-term debt 30,930 19,778 Resources provided by minority interest --- 333 Common stock issuance 313 88 Dividends paid (785) (629) -------- -------- NET CASH FROM FINANCING ACTIVITIES 30,458 19,570 -------- -------- INCREASE IN CASH AND CASH EQUIVALENTS 534 3,970 CASH, AT BEGINNING OF PERIOD 5,224 1,374 -------- -------- CASH, AT END OF PERIOD $ 5,758 $ 5,344 -------- -------- -------- --------
The accompanying notes are an integral part of these statements. 6 DONNELLY CORPORATION NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 30, 1995 NOTE A---BASIS OF PRESENTATION The accompanying unaudited condensed combined consolidated financial statements have been prepared in accordance with the instructions to Form 10-A 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 months ended September 30, 1995 should not be considered indicative of the results that may be expected for the year ended June 29, 1996. The combined consolidated balance sheet at July 1, 1995 has been taken from the audited consolidated 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 1, 1995. The Company's fiscal year is the 52 or 53 week period ending the Saturday closest to June 30th. Accordingly, each quarter ends on the Saturday closest to quarter end. Both the quarters ended September 30, 1995 and October 1, 1994 included 13 weeks. NOTE B---INVENTORIES Inventories consist of:
September 30, July 1, (in thousands) 1995 1995 -------- -------- LIFO cost: Finished products and work in process $ 6,822 $ 6,745 Raw materials 10,120 6,622 ------- ------- 16,942 13,365 FIFO costs: Finished products and work in process 3,800 3,397 Raw materials 4,305 5,280 ------- ------- 8,105 8,677 ------- ------- $25,047 $22,042 ------- ------- ------- -------
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. 7 NOTE D---SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Three Months Ended September 30, October 1, (in thousands) 1995 1994 -------- -------- Cash paid during the period for: Interest $ 819 $ 731 Income taxes $ 101 $ 2,500
8 ITEM 2. DONNELLY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 1ST QUARTER REPORT FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 GENERAL 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. RESULTS OF OPERATIONS Consolidated net sales were $90.5 million in the first quarter of 1996, an increase of more than 4% over the first quarter of 1995. The increase was primarily the result of new modular window business at Chrysler and Ford and stronger sales at the Company's Irish subsidiary. The increase in sales was offset by the loss of the Saturn business at D&A Technology, Inc., the Company's joint venture with Asahi Glass Company. This business represented approximately 5% of the Company's combined consolidated net sales in 1995. On September 22, 1995, the Company completed the purchase of Asahi's 40% interest in D&A. The operation has been reduced in size and is being maintained as a division of the Company in Tennessee. Gross profit margin for the first quarter of 1996 was 15.1% compared to 20.9% for the first quarter of 1995. The Company's gross profit margin was negatively affected by the simultaneous start-up of three major new business programs which will ultimately result in over $100 million in new business for the Company annually. Two of the start-up programs are for major new window systems and the third is for a sophisticated new automotive painting process which will be used to produce products for several new customers. The Company expects its gross profit margin as a percent of sales to improve significantly compared to the first quarter as the start-up problems with these programs are resolved. Although global pricing pressures are expected to continue, the Company is focused on reducing costs through improved product design as well as a strong commitment to continuous improvement implementation throughout the Company. Selling, administration and general expenses in the first quarter were at 11.2% of sales, down from 13.4% in the same period last year. These expenses were lower from the previous year due to the restructuring of certain non-automotive business in 1995 and the Company's commitment to leverage these expenses with continued increases in sales. Research and development expenses for the first quarter were $5.6 million, or 6.2 % of sales, compared to 6.5% of sales last year. The Company continues to be committed to develop new and innovative technologies that improve the function, quality and safety of automotive products and support new business for complete exterior mirrors, electrochromic mirror systems, door handles, interior systems and modular windows. 9 Interest expense increased $0.5 million in the first quarter of 1996 to $1.7 million. The increase resulted from higher borrowing levels to support the Company's investment in and advances to Hohe, support higher working capital and capital expenditures for the period. The Company advanced an additional $13.7 million to Hohe in the first quarter. The advanced was financed through the Company's existing borrowing agreements. An increase in interest income was realized by the Company as a result of the interest charged on the advances to Hohe. Royalty income was $1.3 million in the first quarter of 1996 compared to $0.3 million in 1995. The increase primarily resulted from royalty income associated with the appliance business sold to Gemtron Corporation in 1995. The royalties under this agreement are expected to continue through 1996. Equity earnings (losses) of affliated companies was a loss of $0.6 million in the first quarter of 1996 compared to earnings of $0.1 million last year. The loss is primarily due to continued start-up expenses at VLSI Limited and losses at Hohe for the three month period ending August 31, 1995. Hohe's net sales and net income are subject to significant quarterly fluctuations attributable primarily to production schedules of major automotive customers. The Company expects the start-up costs at VLSI Limited to continue through the remainder of the fiscal year. The Company had a net loss of $1.8 million in the first quarter of 1996. This compares to a net loss of $0.1 million in the same period last year. While the Company benefited from stronger sales than a year earlier and improved earnings from the Company's subsidiary in Mexico, the Company's performance was negatively affected by the simultaneous start-up of three major new business programs, described above. LIQUIDITY AND CAPITAL RESOURCES The Company's current ratio was 1.9 and 1.7 at September 30, 1995 and July 1, 1995, respectively. Working capital was $52.5 million at September 30, 1995 compared to $40.5 million at July 1, 1995. This increase included higher customer tooling to be billed to support new programs and increased inventories to support new business programs reaching full production later this year. Capital expenditures for the first quarter of 1996 and 1995 were $6.1 and $7.4 million, respectively. Capital spending will be slightly lower in 1996 due to the completion of the building additions required in the last two years in Langres, France and Newaygo, Michigan to support new business programs; the transfer of the Outside Mirror Glass product line to Mexico and the consolidation of two older interior mirror facilities into a new facility in Holland, Michigan. The Company's $70 million bank revolving credit agreement had borrowings against it of $46.8 million at September 30, 1995. In July of 1995, the Company issued a senior note of $20.0 million with an insurance company. The note has a four to five month delayed takedown with principal payments commencing in fiscal 2001 until maturity in fiscal 2006. The Company expects to increase the borrowing availability under the current revolving line of credit by $20.0 million in the second quarter of fiscal 1996. The Company believes that the borrowing availability under the current revolving line of credit, together with funds generated by operations will meet the Company's current business needs. 10 ITEM 1. LEGAL PROCEEDINGS PATENT LITIGATION. Certain electrochromic mirror technology of the Company has been the subject of patent litigation between the Company and Gentex Corporation ("Gentex"). Following the settlement of prior litigation, 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 judgment of non-infringement was granted and the lawsuit was dismissed. Gentex filed an appeal of this ruling. On November 3, 1995, the Court of Appeals for the Federal Circuit affirmed the summary judgement decision and dismissed Gentex's appeal. 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 mirrors 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 injunction against further infringement by Gentex. A trial has been scheduled to begin in February, 1996. Gentex filed several motions for summary judgment, alleging that the patents in question are invalid or not infringed, and that the Company is not entitled to certain damages. The Court granted Gentex's motion for summary judgment that two of the Company's patents relating to lighted mirrors are invalid. The Court denied Gentex's remaining notions and granted the Company's request to dismiss its claim under the third lighted mirror patent without prejudice. The Company believes that its lighted mirror patents are not invalid and has requested permission to file an immediate appeal on this issue. On October 13, 1994, the Company filed a second lawsuit against Gentex, alleging that Gentex's inside and outside electrochromic mirrors infringe two additional patents owned by the Company which relate to the protection of electrochromic mirrors from ultraviolet radiation. The Company subsequently amended its complaint to allege that Gentex's inside and outside electrochromic mirrors infringe a third patent owned by the Company which also relates to the protection of electrochromic mirrors from ultraviolet radiation. The Company is seeking unspecified damages and an injunction against further infringement by Gentex. The Company has also filed a motion seeking a preliminary injunction against further infringement of two of these patents pending final resolution of the lawsuit. This motion has not yet been decided by the court, and no trial date has been set in the second lawsuit. On June 23, 1995, Gentex filed a lawsuit against the Company seeking a declaration that three patents owned by the Company are invalid and not infringed by Gentex. The Company has responded by denying these allegations, and charging that two of the patents in question are infringed by certain of Gentex's electrochromic mirrors. The Company is seeking unspecified damages and an injunction against further infringement by Gentex. Gentex has filed a motion for summary judgment alleging that two of the Company's patents are invalid; that motion has not yet been decided and no trial date has been set. OTHER LITIGATION. The Company and its subsidiaries are involved in certain other legal actions and claims, including environmental claims, arising in the ordinary course of business. Management believes (based on advice of legal counsel) that such litigation and claims will be resolved without material effect on the Company's financial position or results of operations. 11 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) Donnelly Corporation's 1995 Annual Meeting of Shareholders was held on October 20, 1995. (b) Proxies were distributed pursuant to Regulation 14A under the SecuritiesExchange Act of 1934. There was no opposition to the Board's nominees as listed in the proxy statement and shareholders elected the nominees currently serving in this capacity. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS - 27 FINANCIAL DATA SCHEDULE (b) REPORTS ON FORM 8-K The Registrant filed Form 8-K, dated May 29, 1995, which has subsequently been amended in the period covered by this report, relating to the acquisition of an interest in Hohe GmbH & Co. KG ("Hohe"), a German limited partnership. The filing included an English language summary of an Acquisition Agreement and related documents written in German between the Registrant, Donnelly GmbH, Hohe and other parties related to Hohe, dated May 25, 1995, consolidated financial statements of Hohe as of March 31, 1995 and 1994 (audited) and pro forma financial information of the Registrant. 12 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: November 14, 1995 /s/ J. Dwane Baumgardner ------------------------------ J. Dwane Baumgardner (Chairman, Chief Executive Officer, and President) Date: November 14, 1995 /s/ William R. Jellison ------------------------------ William R. Jellison (Vice President, Corporate Controller, and Treasurer) EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER 30, 1995 DONNELLY CORPORATION FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JUN-29-1996 SEP-30-1995 5,758 0 55,095 573 25,047 113,052 152,840 56,711 251,406 60,531 97,568 784 0 531 78,795 251,406 90,523 90,523 76,838 76,838 0 0 1,735 (2,021) (717) (1,789) 0 0 0 (1,789) (.23) (.23)
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