SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 28, 1996
Donnelly Corporation
(Exact name of Registrant as specified in its charter)
AMENDMENT NO. 1
Michigan I-9716 38-0493110
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) 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
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
1. Consolidated financial statements of Hohe GmbH & Co. KG
("Hohe) as of March 31, 1996 and May 31, 1996 (audited).
(b) Pro Forma Financial Information
1. Pro forma condensed combined consolidated balance sheet for
the Registrant as of June 29, 1996 (unaudited).
2. Pro forma condensed combined consolidated statement of
income for the Registrant for the year ended June 29, 1996
(unaudited).
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 thereunto duly authorized.
Date: November 27, 1996
DONNELLY CORPORATION
(Registrant)
/s/ William R. Jellison
William R. Jellison
Vice President, Corporate
Controller, and
Treasurer
<PAGE>
ITEM 7 a. Financial Statements of Business Acquired
BDO Binder GmbH
Accountant's Report
We have audited the consolidated balance sheets of Hohe GmbH & Co. KG as of
March 31, 1996 and May 31, 1996 and the related consolidated statements of
income and cash flows for the periods then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted
in Germany. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The consolidated financial statements and the cash flow statements have been
prepared using acceptable accounting principles in Germany. Accordingly, the
accompanying financial statements and the cash flow statements are not intended
to present the financial position of Hohe GmbH & Co. KG, the results of its
operations and its cash flows in conformity with generally accepted U.S.
accounting principles.
In our opinion, the financial statements referred to above present fairly, in
all materials respects, the financial position of Hohe GmbH & Co. KG at March
31, 1996 and May 31, 1996, the results of its operations and its cash flows for
the periods then ended, in conformity with accounting principles generally
accepted in Germany and applied on a consistent basis.
Frankfurt am Main, July 12, 1996
BDO Binder GmbH
Wirtschaftsprufungsgesellschaft
/s/ Follner /s/ ppa. Scheld
Wirtschaftsprufer Wirtschaftsprufer
<PAGE>
<TABLE>
<CAPTION>
HOHE GmbH & CO. KG
CONSOLIDATED BALANCE SHEETS
May 31, March 31,
In thousands 1996 1996
<S> <C> <C>
Assets:
Fixed assets
Intangible assets
Franchises, patents, licenses
and other intangible assets ............... 354 346
Goodwill ................................... 38 42
392 388
Tangible assets
Land and buildings ......................... 32,294 33,452
Machinery and equipment .................... 8,160 8,611
Factory, office and other equipment ........ 5,610 5,681
Deposits and construction in progress ...... 2,376 2,312
48,440 50,056
Investments
Loans Receivable ........................... 8,842 9,012
57,674 59,456
Current Assets
Inventories ..................................... 27,749 29,005
Receivables and other assets
Trade receivables .......................... 29,031 33,986
Other assets ............................... 901 1,367
29,932 35,353
Cash ............................................ 4,468 1,078
Deferred tax asset .............................. 0 0
62,149 65,436
Prepaid expenses and deferred charges ................ 588 675
Total Assets ......................................... $120,411 $125,567
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOHE GmbH & CO. KG
CONSOLIDATED BALANCE SHEETS - Cont'd
May 31, March 31,
In thousands 1996 1996
<S> <C> <C>
Partners' Equity and Liabilities:
Deficits due to withdrawals and losses ........... $ (1,592) $ (2,501)
Silent partner's capital contributions ........... 1,313 1,354
Cumulative translation adjustment ................ 168 159
Minority interests ............................... 1,066 936
Accruals
Accruals for pensions ....................... 354 366
Tax accruals ................................ 1,734 2,041
Other accruals .............................. 10,548 8,668
12,636 11,075
Accounts Payable
Amounts owed to banks ....................... 37,701 40,837
Loan from Donnelly Corporation .............. 26,264 27,084
Amounts owed to insurance companies ......... 3,611 3,743
Due from lease-purchase agreements .......... 1,284 1,414
Customer deposits ........................... 5,691 8,632
Trade payables .............................. 20,225 20,948
Liabilities on bills issued and drawn ....... 3,053 2,234
Other liabilities ........................... 8,953 9,618
106,782 114,510
Deferred income ............................. 38 34
Total Equity and Liabilities ................ $ 120,411 $ 125,567
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOHE GmbH & CO. KG
CONSOLIDATED STATEMENTS OF INCOME
Two Months Year
Ended Ended
May 31, March 31,
In thousands 1996 1996
<S> <C> <C>
Sales .............................................. $ 45,822 $ 229,973
Increase/(decrease) in finished goods
and work in process inventories .................. (343) 4,416
Other capitalized costs ............................ 71 953
Other operating income ............................. 717 2,999
46,267 238,341
Cost of materials
Raw materials, supplies and purchased parts ... 24,889 127,932
Purchased services ............................ 698 5,772
25,587 133,704
Gross Profit ....................................... 20,680 104,637
Personnel expenses
Wages and salaries ............................ 10,435 55,368
Employee benefits and pension costs ........... 1,991 10,650
12,426 66,018
Amortization on intangible and depreciation
on tangible fixed assets .......................... 1,184 7,525
Other operating expenses ........................... 3,876 20,324
17,486 93,867
Income from Operations ............................. 3,194 10,770
Other interest and similar income .................. (77) (513)
Interest and similar expense ....................... 1,137 7,042
Payments to silent partners ........................ 16 422
Income before extraordinary items and taxes ........ 2,118 3,819
Net extraordinary items ............................ 994 2,071
Taxes on income .................................... 36 1,035
Other taxes ........................................ 44 145
Net income/(loss) before minority interest ......... 1,044 568
Minority interest in profits of
consolidated subsidiaries ........................ 169 636
Consolidated net income/(loss) ..................... $ 875 $ (68)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOHE GmbH & CO. KG
CONSOLIDATED STATEMENTS OF CASH FLOWS
Two Months Year
Ended Ended
May 31, March 31,
In thousands 1996 1996
<S> <C> <C>
Net income (loss) .................................. $ 875 $ (68)
Depreciation charge ................................ 1,111 7,535
Other non-cash expense items ....................... 50 88
Internal financing ................................. 2,036 7,555
Increase (decrease) in current accruals ............ 1,914 338
Gains on disposal of fixed assets .................. (3) (149)
(Increase) decrease in inventories, trade
receivables and sundry other assets .............. 4,981 (10,776)
Increase(decrease) in trade payables and sundry
other liabilities ................................ (1,960) 9,943
Cash provided by operating activities .............. 6,968 6,911
Proceeds from sales of fixed assets ................ 97 795
Payments for purchases of tangible fixed assets .... (1,166) (10,808)
Cash used for investing activities ................. (1,069) (10,013)
Proceeds from borrowing ............................ -- 49,133
Payments of loans and other borrowing .............. (2,359) (27,384)
Payments to shareholder's (partners) ............... (32) (18,489)
Net cash used in financing activities .............. (2,391) 3,260
Effect of exchange rate changes on cash ............ (118) (71)
Net Increase in cash and cash equivalents .......... 3,390 87
Cash and cash equivalents, beginning of year ....... 1,078 991
Cash and cash equivalents, end of year ............. $ 4,468 $ 1,078
Note: Our audit report on the consolidated financial statements at March 31,
1996 and May 1996, includes the cash flows of the Company. This statement is in
conformity with International Accounting Standards (IAS #7).
</TABLE>
<PAGE>
<PAGE>
Donnelly Hohe GmbH & Co. KG, Collenberg
Consolidated Notes for the Short Fiscal Year April/May 1996
General Disclosures
The entry of Donnelly Holding GmbH as an added Limited Partner of our parent
company necessitated a change in the fiscal years of the major subsidiaries.
Consequently, the fiscal year now extends from June 1 to May 31 of each
subsequent year, and a short fiscal year, running from April 1, 1996 to May 31,
1996 was set up for the group to account for the change.
In its capacity as parent company, Donnelly Hohe GmbH & Co. KG, Collenberg,
prepared consolidated financial statements as of May 31, 1996 and a consolidated
management report pursuant to Section 11 PublG, including all subsidiaries
required to be consolidated.
The consolidated financial statements prepared in accordance with the
requirements of PublG and HGB are in compliance with the statutory presentation
requirements for classification of balance sheets.
Scope of Consolidation
In accordance with the principles of full consolidation, the consolidated
financial statements include the individual financial statements of the parent
company, Donnelly Hohe GmbH & Co. KG, Collenberg, and the eight subsidiaries
listed below:
Registered Share of
Place Capital
Subsidiary of Business in %
Hohe Neunkirchen Verwaltungs GmbH Neunkirchen 100.0
Donnelly Hohe Neunkirchen GmbH & Co. KG Neunkirchen 100.0
Hohe Schleiz Verwaltungs GmbH Schleiz 100.0
Donnelly Hohe Schleiz GmbH & Co. KG Schleiz 100.0
Donnelly Espana S.A. Barcelona/Spain 65.0
Hohe I.C.A. Industria de Componentes
para Automoveis, Lda. Palmela/Portugal 97.2
Factron AG, Vaduz Vaduz, Liechtenstein 100.0
Hohe Anteilstreuhand GmbH Frankfurt 100.0
The company in Portugal, which was formed in 1993, is in the developmental
stage, and the buildings are currently used as storage facilities. The
subsidiary prepared unaudited financial statements as of March 31, 1996, which
are included in the consolidation financial statements of the group.
The inclusion of Factron AG, Vaduz, lessor of the land in Barcelona to Hohe FMB
S.A., in the consolidated report was based on the unaudited interim financial
statements of the facility in Spain as of March 31, 1996, incorporating expenses
allocable to Vaduz.
<PAGE>
The inclusion of Hohe Anteilstreuhand GmbH was also based on unaudited financial
statements as of May 31, 1995. The existence of Hohe Anteilstreuhand GmbH is no
longer necessary since Donnelly Holding was formed.
Consolidation Methods
The assets and liabilities of the subsidiaries included in the consolidated
financial statements are valued and accounted for in accordance with the group's
uniform accounting and valuation guidelines.
For purposes of the consolidated financial statement preparation, the balance
sheets and income statements of the foreign subsidiaries were translated at the
spot rate on the balance sheet date or March 31, 1996, as appropriate.
The intercompany receivables and payables were netted together, but were not
eliminated because they were immaterial in amount.
Intercompany sales and other intercompany income were netted against the
corresponding expenses.
The consolidation was carried out in accordance with the book value method
pursuant to Section-301 Para 1 No. 1 HGB at the time of the initial
consolidation.
As part of the consolidation, hidden reserves, totaling $2.0 million were
released and recorded in the related balance sheet item (land and buildings).
Goodwill from subsidiaries is amortized over four years.
Accounting and Valuation Methods
The start-up and expansion costs of business operations are amortized over an
estimated useful life of 4 years.
The intangible and tangible fixed assets are stated at acquisition or production
cost, net of accumulated amortization and depreciation (straight-line method).
The estimated useful lives of buildings range between 20 and 50 years, and those
of machinery and equipment and other equipment and factory and office equipment
range between 5 and 10 years. Assets purchased in used condition are depreciated
over a useful life of 4 years. Immaterial assets are fully expensed in the
reporting period.
Loans receivable are recorded at the amount of loan proceeds, net of any
payments. Amounts due from insurance companies are stated at the repurchase
values and are included with loans receivable.
The valuation of merchandise inventories is based on average cost.
<PAGE>
The production costs of finished goods and work in process include the cost of
materials and direct labor, as well as a portion of the production overhead and
administrative costs.
Deposits are stated at their nominal amounts.
Receivables and Other Assets are stated at face values. Customer-related default
risks were provided for through individual value adjustments, and the general
credit risk was provided for through an allowance for doubtful accounts.
Long-term, non-interest bearing assets were discounted as required.
The pension accruals were reported at actuarial present values using a discount
rate of 6%.
Other accruals represents amounts set aside for all discernible risks and
uncertain liabilities based on estimates.
Liabilities are reported at the respective amounts payable.
Receivables and payables in foreign currencies are stated at the exchange rates
in effect at the date of transaction. A revaluation at the balance sheet date
was carried out only to the extent current exchange rates would lower than the
carrying value of receivables or increase the carrying value of liabilities. No
currency exchange losses were incurred in the period subsequent to the balance
sheet date.
Disclosures to the Consolidated Balance Sheet
The individual fixed asset positions including the depreciation for the year are
presented in the consolidated schedule of fixed assets (see Page 11).
<PAGE>
<TABLE>
<CAPTION>
Fixed Asset Movement Schedule as of May 31, 1996
Purchase or manufacturing cost Depreciation
April 1, Reclassifi- May 31, April 1, Reclassifi- May 31,
$'s in thousands 1996 Additions Disposals cations 1996 1996 Additions Disposals cations 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Business start-up
and expansion cost 8 0 0 0 8 5 0 0 0 5
Intangible assets
concessions and
licenses .......... 0 0 0 0 0 0 0 0 0 0
Goodwill ............ 1,368 58 0 (19) 1,407 1,016 33 0 0 1,049
Advance payments
on intangible assets 110 0 0 0 110 68 3 0 0 71
1,478 58 0 (19) 1,517 1,084 36 0 0 1,120
Tangible assets
Land and buildings .. 47,604 3 0 0 47,607 14,190 216 0 0 14,406
Plant and machinery . 29,952 223 28 7 30,154 20,748 419 28 0 21,139
Fixtures and fittings 28,268 505 10 19 28,782 22,480 415 17 0 22,878
Payments in advance
and construction
in progress ....... 2,721 173 9 (7) 2,878 409 25 0 0 434
108,545 904 47 19 109,421 57,827 1,075 45 0 58,857
Investments
Other loans ......... 9,012 205 101 0 9,116 0 0 0 0 0
119,043 1,167 148 0 120,062 58,916 1,111 45 0 59,982
</TABLE>
<TABLE>
Fixed Asset Movement Schedule as of May 31, 1996
Exchange Difference Net Book Value
April 1, May 31, March 31, May 31,
$'s in thousands 1996 1996 1996 1996
<S> <C> <C> <C> <C>
Business start-up
and expansion cost ......... (3) (3) 0 0
Intangible assets
concessions and
licenses ................... 0 0 0 0
Goodwill ..................... (6) (4) 346 354
Advance payments
on intangible .............. 0 (1) 42 38
(6) (5) 388 392
Tangible assets
Land and buildings ........... 38 (907) 33,452 32,294
Plant and machinery .......... (593) (855) 8,611 8,160
Fixtures and fittings ........ (107) (294) 5,681 5,610
Payments in advance
and construction
in progress ................ 0 (68) 2,312 2,376
(662) (2,124) 50,056 48,440
Investments .................. 0 (274) 9,012 8,842
Other loans .................. (671) (2,406) 59,456 57,674
</TABLE>
<PAGE>
Loans receivable ($8.8 million) consist of refinancing and lease-related loans
to leasing companies totaling $6.5 million, as well as cash surrender value of
life insurance policies of $1.1 million, required as a result of an external tax
audit, and additional cash surrender value of $1.0 million. The remaining $0.2
million are for receivables from lease purchase agreements in connection with
the Management-Buy-Out (MBO) carried out in 1993/94.
All trade receivables are properly classified as short-term.
The other assets ($0.9 million) consist primarily of VAT prepayments and debit
balances of payables.
The prepaid expenses of $0.6 million consist primarily of discounts totaling
$0.3 million and rental prepayments totaling $0.3 million.
The deficits due to withdrawals and losses totaled $1.6 million as of May 31,
1996.
The contribution from a silent partner of $1.3 million reported as of the
balance sheet date related to Donnelly Hohe Neunkirchen GmbH & Co. KG.
The contribution is contractually available until September 2002. As a result of
the move of mirror production from Neunkirchen to Collenberg the silent
participation, including all outstanding fixed compensation payments, was repaid
in June 1996.
The minority interest of a shareholder from subsidiary ($1.1 million) includes
the capital and reserve shares of other shareholders ($0.9 million) and
allocations of net income from the two month period, April/May 1996, totaling
($0.2 million).
The pension accruals ($0.3 million) are recorded for a pension granted to a
partner in the 1993/94 fiscal year.
The tax accruals of ($1.7 million) include $0.9 million of deferred taxes.
<PAGE>
The other accruals ($10.5 million) included $5.4 million for residual risks and
contingent liabilities (including an accrual, totaling $2.4 million for the
relocation of production from Neunkirchen) and $5.1 million for accrued vacation
and other personnel costs. Additional details are provided in the schedule
below:
<TABLE>
Balance Exchange Balance
$'s 4/1/96 Usage Release Addition Rate 5/31/96
Change
<S> <C> <C> <C> <C> <C> <C>
Pensions ............ $ 367 $ 7 $ 0 $ 5 $ 0 $ 365
Tax Accruals ........ 2,041 52 232 38 (61) 1,734
Personnel Costs
Accrued Vacation 2,179 70 0 1,214 (75) 3,248
Other .......... 1,690 172 129 517 (53) 1,853
Other ............... 4,772 204 76 982 (151) 5,323
Restructuring ....... 27 0 0 99 (1) 125
Total Accruals ...... $11,076 $ 505 $ 437 $ 2,855 $ (341) $12,648
</TABLE>
The liabilities, excluding the loan from Donnelly Corp., have maturities as
follows:
<TABLE>
$'s in Thousands
Up to 1 Year 1 - 5 Over 5
Years Years Total
<S> <C> <C> <C> <C>
Liabilities to Banks .......... $4,246 $31,738 $1,717 $37,701
Liabilities to
Insurance Companies ......... 0.00 0.00 3,611 3,611
Payments Received =
Customer Prepayments ........ 5,691 0.00 0.00 5,691
Trade Payables ................ 20,225 0.00 0.00 20,225
Liabilities on Bills
Issued and Drawn ............ 3,053 0.00 0.00 3,053
Liabilities for Lease
Purchase Agreements ......... 628 656 0.00 1,284
Other Liabilities ............. 8,953 0.00 0.00 8,953
$42,796 $32,394 $5,328 $80,518
</TABLE>
The other liabilities included $2.9 million of tax payables and payables for
employee benefits of $1.8 million.
Loan and leasing commitments are collaterized by land and real estate mortgages
totaling $69.4 million and by machinery and equipment.
The Donnelly Corp. loan for $26.3 million is available long-term.
Donnelly Corp. has provided a letter of subordination for the loan.
Other financial commitments which are not shown on the balance sheet include
leasing commitments and other similar obligations. Residual commitments with a
total face value of $8.7 million were in existence as of the balance sheet date.
<PAGE>
Disclosures to the Consolidated Income Statement
The sales of $45.8 million (Previous Year: $42.3 million) were attributable
mainly to sales of rear view mirrors to domestic and foreign automobile
manufacturers.
The other operating income ($0.7 million) consisted primarily of income from the
release of accruals.
The cost of materials ($25.6 million) includes $24.9 million of raw materials,
supplies and purchased parts and $0.7 million of costs of purchased services.
The personnel expenses include expenses for wages and salaries totaling $10.4
million and employee benefit and pension costs totaling $2.0 million. The total
pension expenses amounted to $5 thousand.
The depreciation expense of $1.2 million consists of straight-line depreciation.
Interest and similar expenses ($1.2 million) result primarily from loans and
overdraft facilities. Of the total expenses reported under this position, $1.0
million are allocable to Donnelly Hohe GmbH & Co. KG.
The payment to the silent partner relates to the contribution of SIKB at
Donnelly Hohe Neunkirchen GmbH & Co. KG.
Consolidated net income for the short fiscal year continued to be affected by
extraordinary expenses in connection with the relocation of production from the
Neunkirchen location to Collenberg.
Other Disclosures
On average, the Hohe Group employed 1,665 employees during the two-month period
covered by the short financial year compared to 1,635 in the previous year.
Included in the total are 1,286 industrial workers (Previous Year 1,271) and 379
salaried employees (Previous Year 364).
<PAGE>
US GAAP Adjustments
Due to the difference in accounting requirements under German standards and US
GAAP virtually all leases classified as operating leases by the Company need to
be reclassified as capital leases for US GAAP. The effect of this adjustment for
leases on the balance sheet is shown in Table 1 below. It is assumed for
purposes of this calculation that the useful lives of the assets over which they
would be depreciated are the same as the lease term. Therefore, leasing charges
are assumed to approximate the depreciation that would have been recognized if
the assets had been capitalized plus the interest element of the financing, with
any differences deemed immaterial. The amount to be capitalized for these leases
was determined by calculating the present value of the future minimum lease
payments using a discount rate of 8% for land and buildings and the implied
interest rate for each machinery and equipment lease.
The above mentioned calculation includes one land lease classified as a capital
lease for US GAAP. An additional adjustment is calculated to add back to
retained earnings the past depreciation. The adjustment is made to the "Deficits
due to Withdrawals and Losses" account. The current period lease interest is
immaterial.
An adjustment to recognize a deferred tax asset has been calculated as a
reconciling item to US GAAP. This asset relates to a loss carry foward. Due to
the improved profitability of the Company, it is expected that the carry forward
will provide a future tax benefit to the Company. The effects of this adjustment
on the balance sheet is shown in Table 1 below. The income statement effect in
the current period is deemed immaterial.
<TABLE>
TABLE I
US GAAP Balance Sheet Adjustments
Adjusted
Balances at Balances at
March 31, Lease Reclassifying March 31,
$'s in thousands 1996 Adjustment Entries 1996
Assets:
<S> <C> <C> <C> <C>
Tangible assets
Land and buildings ........ 32,294 5,210 6,510 44,014
Plant and machinery ....... 8,160 2,600 -- 10,760
Loans Receivable ............... 8,842 0 (6,510) 2,332
Inventories .................... 27,749 0 (9,343) 18,406
Customer tooling to be billed .. 158 0 3,492 3,650
Deferred taxation asset ........ 0 134 0 134
Total assets ................... 120,411 7,944 (5,851) 122,504
Equity and liabilities:
Payments in advance ............ 5,851 0 (5,851) 0
Withdrawals and losses not
covered by capital
contributions ................ (2,170) 476 0 (1,694)
Translation gains
and losses ................... 120 (5) 0 115
Amounts due on finance
leases ....................... 0 7,473 0 7,473
Total equity and
liabilities .................. 120,411 7,944 (5,851) 122,504
</TABLE>
<PAGE>
These financial statements were translated from DM's to dollars by the
Registrant. All balance sheet accounts, except equity accounts, which were
translated assumed historical rates, were translated at the rate in effect at
the applicable balance sheet date. The income statements were translated using
the average exchange rate for the corresponding period. Translation gains and
losses are reported as a separate component of equity.
Collenberg, June 12, 1996
<PAGE>
Donnelly Hohe GmbH & Co. KG, Collenberg
Consolidated Notes for the 1995/96 Fiscal Year
General Disclosures
In its capacity as parent company, Donnelly Hohe GmbH & Co. KG, Collenberg,
prepared consolidated financial statements as of March 31, 1996 and a
consolidated management report pursuant to Section 11 PublG, including all
subsidiaries required to be consolidated.
The consolidated financial statements prepared in accordance with the
requirements of PublG and HGB are in compliance with the statutory presentation
requirements for classification of balance sheets.
Scope of Consolidation
In accordance with the principles of full consolidation, the consolidated
financial statements include the individual financial statements of the parent
company, Donnelly Hohe GmbH & Co. KG, Collenberg, and the eight subsidiaries
listed below:
Registered Share of
Place Capital
Subsidiary of Business in %
Hohe Neunkirchen Verwaltungs GmbH Neunkirchen 100.0
Hohe Neunkirchen GmbH & Co. KG Neunkirchen 100.0
Hohe Schleiz Verwaltungs GmbH Schleiz 100.0
Hohe Schleiz GmbH & Co. KG Schleiz 100.0
Hohe FMB Fabrica Mecanica
Barcelonesa S.A. Barcelona/Spain 65.0
Hohe I.C.A. Industria de Componentes
para Automoveis, Lda. Palmela/Portugal 97.2
Factron AG, Vaduz Vaduz, Liechtenstein 100.0
Hohe Anteilstreuhand GmbH Frankfurt 100.0
The company in Portugal, which was formed in 1993, is in the developmental
stage, and the buildings are currently used as storage facilities. The
subsidiary prepared unaudited financial statements as of March 31, 1996, which
are included in the consolidated financial statements of the group.
Factron AG, Vaduz, who rents the land in Barcelona to Hohe FMB S.A., was also
included in the consolidated financial statements based on unaudited financial
statements.
The inclusion of Hohe Anteilstreuhand GmbH in the consolidated report was also
based on unaudited financial statements as of December 31, 1995. The existence
of Hohe Anteilstreuhand GmbH is no longer necessary since Donnelly Holding was
formed.
<PAGE>
Consolidation Methods
The assets and liabilities of the subsidiaries included in the consolidated
financial statements are valued and accounted for in accordance with the group's
uniform accounting and valuation guidelines.
For purposes of the consolidated financial statement preparation, the balance
sheets and income statements of the foreign subsidiaries were translated at the
spot rate on the balance sheet dates, March 31, 1995 or December 31, 1995, as
appropriate.
The intercompany receivables and payables were netted together, but because they
were immaterial in amount, they were not eliminated.
Intercompany sales and other intercompany income were netted against the
corresponding expenses.
The consolidation was carried out in accordance with the book value method
pursuant to Section 301 Para 1 No. 1 HGB at the time of the initial
consolidation. As part of the consolidation, hidden reserves in the amount of
$2.1 million were released and recorded in the related balance sheet item (land
and buildings). Goodwill from subsidiaries is amortized over four years.
Accounting and Valuation Methods
The start-up and expansion costs of business operations are amortized over an
estimated useful life of 4 years.
The intangible and tangible fixed assets are stated at acquisition or production
cost, net of accumulated amortization and depreciation (straight-line method).
The various depreciation methods used among group companies, (e.g. parent
company: declining balance; Schleiz subsidiary: accelerated depreciation) were
harmonized. The amount of depreciation for the group under the straight line
method was higher than the sum of the depreciation recorded by individual
companies.
The estimated useful lives of buildings range between 20 and 50 years, and those
of machinery and equipment and other equipment and factory and office equipment
range between 5 and 10 years. Assets purchased in used condition are depreciated
over a useful life of 4 years. Immaterial assets are fully expensed in the year
of acquisition.
Loans receivable are recorded at the amount of loan proceeds, net of any
payments. Amounts due from insurance companies are stated at their repurchase
values and are included with loans receivable.
The valuation of merchandise inventories is based on average cost.
The production costs of finished goods and work in process include the cost of
materials and direct labor, as well as a portion of the production overhead and
administrative costs.
<PAGE>
Deposits are stated at their nominal amounts.
Receivables and Other Assets are stated at face values. Customer-related default
risks were provided for through individual value adjustments, and the general
credit risk was provided for through an allowance for doubtful accounts.
Long-term non-interest bearing assets were discounted, as required.
The pension accruals were reported at the actuarial present values using a
discount rate of 6 %.
Other accruals represents amounts set aside for all discernible risks and
uncertain liabilities based on estimates.
Liabilities are reported at the respective amounts payable.
Receivables and payables in foreign currencies are stated at the exchange rates
in effect at the date of transaction. A revaluation at the balance sheet date
was carried out only to the extent current exchange rates would lower the
carrying value of receivables or increase the carrying value of liabilities. No
currency exchange losses were incurred in the period subsequent to the balance
sheet date.
Disclosures to the Consolidated Balance Sheet
The individual fixed asset positions including the depreciation for the year are
presented in the consolidated schedule of fixed assets (see Page 20).
Loans receivable ($9.0 million) consist of refinancing and lease-related loans
to leasing companies totaling $6.6 million, as well as cash surrender value of
life insurance policies of $1.2 million, required as a result of an external tax
audit, and additional cash surrender value of $1.0 million. The remaining $0.2
million are for receivables from lease purchase agreements in connection with
the Management-Buy-Out (MBO) carried out in 1993/94.
All trade receivables are properly classified as short-term.
The other assets ($1.4 million) consist primarily of VAT prepayments.
Other assets include $0.1 million with a remaining term of more than one year.
<PAGE>
<TABLE>
Fixed Asset Movement Schedule as of March 31, 1996
Purchase or manufacturing cost Depreciation
April 1, Reclassifi- March 31, April 1, Reclassifi- March 31,
$'s in thousands 1995 Additions Disposals cations 1996 1995 Additions Disposals cations 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Business start-up
and expansion cost 9 0 0 0 9 4 1 0 0 5
Intangible assets
concessions and
licenses .......... 0 0 0 0 0 0 0 0 0 0
Goodwill ............ 858 135 18 471 1,446 580 167 48 386 1,085
Advance payments
on intangible assets 118 0 0 0 118 54 18 0 0 72
976 135 18 471 1,564 634 185 48 386 1,157
Tangible assets
Land and buildings .. 49,583 638 6 738 50,953 13,725 1,361 18 8 15,076
Plant and machinery . 25,260 6,087 158 679 31,868 19,137 2,713 221 552 22,181
Fixtures and fittings 29,574 2,533 689 (1,157) 30,261 22,614 3,076 698 (935) 24,057
Payments in advance
and construction
in progress ....... 3,236 536 114 (731) 2,927 258 190 0 0 448
107,653 9,794 967 (471) 116,009 55,734 7,340 937 (375) 61,762
Investments
Other loans ......... 9,453 964 769 0 9,648 0 0 0 0 0
118,091 10,893 1,754 0 127,230 56,372 7,526 985 11 62,924
</TABLE>
<TABLE>
Fixed Asset Movement Schedule as of March 31, 1996
Exchange Difference Net Book Value
April 1, March 31, March 31, March 31,
$'s in thousands 1995 1996 1995 1996
<S> <C> <C> <C> <C>
Business start-up
and expansion cost (4) (4) 1 0
Intangible assets
concessions and
licenses .......... 0 0 0 0
Goodwill ............ (6) (15) 272 346
Advance payments
on intangible ..... (1) (4) 63 42
(7) (19) 335 388
Tangible assets
Land and buildings .. 0 (2,425) 35,858 33,452
Plant and machinery . (637) (1,076) 5,486 8,611
Fixtures and fittings (115) (523) 6,845 5,681
Payments in advance
and construction
in progress ....... 0 (167) 2,978 2,312
(752) (4,191) 51,167 50,056
Investments ......... 0 (636) 9,453 9,012
Other loans ......... (763) (4,850) 60,956 59,456
</TABLE>
<PAGE>
Prepaid expenses of $0.7 million consist primarily of discounts totaling $0.4
million and rental prepayments totaling $0.3 million.
The deficits due to withdrawals and losses totaled $2.5 million as of March 31,
1996.
Regarding contributions from silent partners ($16.3 million), shown in the prior
year, the following should be noted:
Contributions from silent partners to the parent company as of March 31, 1995,
in the amount of $14.9 million were repaid during the current year in connection
with the entry of the new limited partner, Donnelly Holding GmbH. Donnelly
Holding GmbH made a contribution of $3.6 million as a limited partner in the
parent company. Donnelly Corporation provided a loan in the amount of $27.1
million.
Donnelly Corporation issued a subordination letter for the loan of $27.1
million.
The remaining $1.4 million related to Hohe Neunkirchen GmbH & Co. KG are
contractually available until September 30, 2002, but repayment in quarterly
installments of $68 thousand is scheduled to begin at December 30, 1997.
However, the relocation of the mirror production from the Neunkirchen location
to Collenberg may necessitate repayment at an earlier date.
The minority interest of a shareholder from subsidiary ($0.9 million) includes
the capital and reserve shares of other shareholders ($0.3 million) and
allocations of net income from 1995/96 totaling $0.6 million.
Pension accruals ($0.4 million) are recorded for a pension granted to a partner
in the 1993/94 fiscal year.
The tax accruals of ($2.0 million) include $0.9 million of deferred taxes.
The other accruals ($8.7 million) include $5.0 million for residual risks and
estimated liabilities and $3.7 million for accrued vacation pay and other
personnel costs. Additional details are provided in the schedule below:
<TABLE>
$'s in Thousands Balance Exchange Balance
4/1/95 Usage Release Addition Rate 3/31/96
Change
<S> <C> <C> <C> <C> <C> <C>
Pensions ............ $ 442 $ 42 $ 36 $ 30 $ (27) $ 367
Tax Accruals ........ 1,930 27 324 599 (137) 2,041
Personnel Costs
Accrued Vacation 3,050 2,951 0 2,259 (179) 2,179
Other .......... 1,816 1,444 193 1,488 (116) 1,551
Other ............... 4,708 2,716 176 3,427 (333) 4,910
Restructuring ....... 1,554 1,073 430 28 (52) 27
Total Accruals ...... $13,500 $ 8,253 $ 1,159 $ 7,831 $ (844) $11,075
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The liabilities, excluding the loan from Donnelly Corp., have maturities as
follows:
$'s in Thousands Up to 1 Year 1 - 5 Over 5 Total
Years Years
<S> <C> <C> <C> <C>
Liabilities to Banks .......... $ 5,167 $ 33,731 $ 1,939 $40,837
Liabilities to
Insurance Companies ......... 0.00 0.00 3,743 3,743
Payments Received =
Customer Prepayments ........ 8,632 0.00 0.00 8,632
Trade Payables ................ 20,948 0.00 0.00 20,948
Liabilities on Bills
Issued and Drawn ............ 2,234 0.00 0.00 2,234
Liabilities for Lease
Purchase Agreements ......... 687 727 0.00 1,414
Other Liabilities ............. 9,618 0.00 0.00 9,618
$47,286 $ 34,458 $ 5,682 $87,426
</TABLE>
The other liabilities include $3.2 million of tax payables and payables for
employee benefits of $1.9 million.
Loans ($40.8 million) and leasing commitments ($9.0 million) are collaterized by
land and real estate mortgages totaling $71.6 million and by machinery and
equipment.
Other financial commitments which are not shown on the balance sheet included
leasing commitments and other similar obligations. Residual commitments with a
total face value of $9.0 million (not discounted) were in existence as of the
balance sheet date.
The contingent liabilities pursuant to Section-251-HGB consist of the following:
$'s in
Thousands
Liabilities from Service Agreements
a) Joint Liability - Leasing- and Lease-Purchase Agreements GOL
- Hohe Schleiz and Hohe Neunkirchen $ 1,591
b) Guarantee Statement-Refund "Silent Partners' Contributions"
Saarbrucken 1,465
c) Comfort Letter for Bance Espirito Santo e Comercial de Lisboa -
Bank Loan Hohe ICA 592
d) Liability under Recourse Agreement - CL Factoring GmbH 337
$ 3,985
<PAGE>
Disclosures to the Consolidated Income Statement
Sales of $230.0 million (Previous Year: $206.9 million) are attributed mainly to
sales of rear view mirrors to domestic and foreign automobile manufacturers,
including $29.8 million allocable to Spanish and Portuguese subsidiaries, net of
consolidation adjustments.
Other operating income ($3.0 million) includes income from the release of
accruals totaling $1.2 million.
The depreciation expense of $7.5 million consists of straight-line depreciation
totaling $7.3 million and a write-down for impairment totaling $190 thousand.
Interest and similar expenses ($7.0 million) result primarily from loans and
overdraft facilities. Of the total expenses reported under this position, $5.8
million are allocable to Donnelly Hohe GmbH & Co. KG.
Payment due to profit sharing agreements with silent partners include payments
due from the current year as well as fixed payments.
Consolidated net income for the year is significantly affected by extraordinary
expenses incurred in connection with the relocation of production from the
Neunkirchen location to Collenberg, totaling $2.1 million and costs of
consulting services totaling $2.0 million.
Other Disclosures
On average, the Hohe group employed 1,635 employees during the year, compared to
1,625* in the previous year. Included in the total are 1,271 industrial workers
(Previous Year 1,266) and 364 salaried employees (Previous Year 359*).
As a result of the entry of Donnelly Holding GmbH as an additional limited
partner, we changed the fiscal years of the major subsidiaries. The new fiscal
year runs from June 1 to May 31. Accordingly, short financial years are required
for the period from April 1, 1996 to May 31, 1996 for the subsidiaries and the
consolidated group.
* The previous year's numbers were adjusted to reflect active employees only.
<PAGE>
US GAAP Adjustments
Due to the difference in accounting requirements under German standards and US
GAAP virtually all leases classified as operating leases by the Company need to
be reclassified as capital leases for US GAAP. The effect of this adjustment for
leases on the balance sheet is shown in Table 1 below. It is assumed for
purposes of this calculation that the useful lives of the assets over which they
would be depreciated are the same as the lease term. Therefore, leasing charges
are assumed to approximate the depreciation that would have been recognized if
the assets had been capitalized plus the interest element of the financing, with
any differences deemed immaterial. The amount to be capitalized for these leases
was determined by calculating the present value of the future minimum lease
payments using a discount rate of 8% for land and buildings and the implied
interest rate for each machinery and equipment lease.
The above mentioned calculation includes one land lease classified as a capital
lease for US GAAP. An additional adjustment is calculated to add back to
retained earnings the past depreciation. The adjustment is made to the "Deficits
due to Withdrawals and Losses" account. The current period lease interest is
immaterial.
An adjustment to recognize a deferred tax asset has been calculated as a
reconciling item to US GAAP. This asset relates to a loss carry foward. Due to
the improved profitability of the Company, it is expected that the carry forward
will provide a future tax benefit to the Company. The effects of this adjustment
on the balance sheet is shown in Table 1 below. The income statement effect in
the current period is deemed immaterial.
<TABLE>
TABLE I Adjusted
US GAAP Balance Sheet Adjustments Balances at Capital Balances at
March 31, Lease Reclassifying March 31,
$'s in thousands 1996 Adjustment Entries 1996
<S> <C> <C> <C> <C>
Assets:
Tangible assets
Land and buildings .......... 33,452 5,573 6,645 45,670
Plant and machinery ......... 8,611 2,871 0 11,482
Loans Receivable ................. 9,012 0 (6,645) 2,367
Inventories ...................... 29,005 0 (9,633) 19,372
Customer tooling to be billed .... 163 0 1,001 1,164
Deferred taxation asset .......... 0 223 0 223
Total assets ..................... 125,567 8,666 (8,632) 125,601
Equity and liabilities:
Payments in advance .............. 8,632 0 (8,632) 0
Withdrawals and losses not
covered by capital contributions (2,501) 563 0 (1,938)
Translation gains and losses ..... 159 (12) 0 147
Amounts due on finance leases .... 0 8,115 -- 8,115
Total equity and liabilities ..... 125,567 8,666 (8,632) 125,601
</TABLE>
<PAGE>
These financial statements were translated from DM's to dollars by the
Registrant. All balance sheet accounts, except equity accounts, which were
translated assumed historical rates, were translated at the rate in effect at
the applicable balance sheet date. The income statements were translated using
the average exchange rate for the corresponding period. Translation gains and
losses are reported as a separate component of equity.
Collenberg, June 12, 1996
<PAGE>
ITEM 7 b. Pro Forma Financial Information
The Company's investment in Donnelly Hohe GmbH & Co. KG ("Hohe") was previously
accounted for using the equity method, with the results of Hohe's operations
included in the Company's combined consolidated financial statements from the
date of acquisition, April 1, 1995. Due to the purchase of an additional 13
percent of the general partner in Hohe, the Company will begin accounting for
the acquisition as a purchase with the result's of Hohe operations included in
the Company's consolidated financial statements as of September 29, 1996 (the
Company) and September 1, 1996 (Hohe).
The following Pro Forma Condensed Combined Consolidated Balance sheet is derived
from the audited balance sheet of the Registrant including the results of Hohe
as if the acquisition occurred on June 30, 1996 (the Company) and June 1, 1996
(Hohe). Also presented are the Pro Forma Condensed Combined Consolidated
Statements of Income for the year ended June 29, 1996, including Hohe results
for the twelve month period ended May 31, 1996, assuming the acquisition
occurred at the beginning of the periods represented. The pro forma information
presented is based on the historical financial statements of the Company and
Hohe for the periods listed. Balance sheet related items are translated for
purposes of these statements at the middle exchange rate at the balance sheet
date and income related items are translated at the average exchange rate for
the period presented.
The pro forma results are not necessarily indicative of the results which would
have actually been attained if the acquisition has been consummated on the date
indicated, or the results that may be expected in the future.
<PAGE>
<TABLE>
<CAPTION>
DONNELLY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET - Unaudited
Donnelly Donnelly
Corporation Hohe
and GmbH &
In thousands June 29, 1996 Subsidiaries Co. KG Adjustments Notes Pro Forma
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..... $ 1,303 $ 4,468 $ -- -- $ 5,771
Accounts receivable, less
allowances of $571
and $1,250 .................. 73,658 29,031 (2,363) -- 100,326
Inventories ................... 24,228 18,406 -- -- 42,634
Customer tooling to be billed . 19,955 3,650 -- -- 23,605
Prepaid expenses and other
current assets .............. 7,551 1,464 -- -- 9,015
Total current assets .......... 126,695 57,019 (2,363) -- 181,351
Property, plant and equipment . 157,161 131,692 -- -- 288,853
Less accumulated depreciation . (57,397) (68,931) -- -- (126,328)
Net property, plant and
equipment ................... 99,764 62,761 -- -- 162,525
Investments and advances
to affiliates ............... 37,932 -- (30,430) 3,4 7,502
Other long-term assets ........ 7,101 2,724 5,273 4 15,098
Total assets .................. $ 271,492 $ 122,504 $ (27,520) -- $ 366,476
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable .............. $ 44,349 $ 24,566 $ (739) 3 $ 68,176
Current maturities of
long-term debt .............. 159 7,496 -- -- 7,655
Other current liabilities ..... 18,705 19,015 (226) 3 37,494
Total current liabilities ..... 63,213 51,077 (965) -- 113,323
Long-term debt, less current
maturities .................. 101,757 68,837 (26,264) 3 144,330
Deferred income taxes and other 17,670 2,611 (1,396) 3 18,884
Total liabilities ............. 182,640 122,525 (28,626) -- 276,539
Minority interest ............. -- 1,066 -- -- 1,066
Shareholders' equity:
Preferred stock ............... 531 -- -- -- 531
Common stock .................. 787 -- -- -- 787
Other shareholders' equity .... 87,534 (1,087) 1,106 -- 87,553
Total shareholders' equity .... 88,852 (1,087) 1,106 4 88,871
Total liabilities and
shareholders' equity ........ $ 271,492 $ 122,504 $ (27,520) -- $ 366,476
The accompanying notes are an integral part of these statements.
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
DONNELLY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Donnelly Donnelly
In thousands Year Ended Corporation Hohe
except per June 29, and GmbH &
share data 1996 Subsidiaries Co. KG Adjustments Notes Pro Forma
<S> <C> <C> <C> <C> <C>
Net sales ................ $ 439,571 $ 225,085 $ (280) 3 $ 664,376
Cost and expenses:
Cost of sales ............ 357,830 191,496 (280) 3 549,046
Selling, general
and administrative ..... 38,123 19,718 -- -- 57,841
Research and
development ............ 27,728 4,507 -- -- 32,235
Restructuring charges .... 2,399 1,309 -- -- 3,708
Operating income .... 13,491 8,055 -- -- 21,546
Non operating expenses
(income):
Interest expense ......... 8,102 7,057 (2,551) 3 12,608
Royalty income ........... (5,239) (35) -- -- (5,274)
Interest income .......... (1,017) (268) 889 1,3 (396)
Other income, net ........ (704) (481) -- -- (1,185)
Income before
taxes on income ... 12,349 1,782 1,662 -- 15,793
Taxes on income .......... 4,191 710 390 1,2 5,291
Income before
minority interest
and equity earnings 8,158 1,072 1,272 -- 10,502
Minority interest in net
income of subsidiaries . 186 (660) (18) 4 (492)
Equity in earnings of
affiliated companies ... 110 -- (1,666) 1 (1,556)
Net income .......... $ 8,454 $ 412 $ (412) -- $ 8,454
Income per share of
common stock: $ 1.08 $ 1.08
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
Notes To Pro Forma Condensed Combined Consolidated Financial Statements
(Noncapitalized Unaudited)
(1) To reverse Hohe equity earnings and consolidating adjustments for fiscal
1996, net of tax
<TABLE>
$'s in thousands Year Ended
June 29,
1996
<S> <C>
Income Statement:
Interest income (1,662)
Taxes on income 582
Equity earnings 1,666
</TABLE>
(2) To record taxes on Hohe
<TABLE>
$'s in thousands Year Ended
June 29,
1996
<S> <C>
Income statement:
Taxes on income (benefit) (288)
</TABLE>
(3) To eliminate intercompany
<TABLE>
$'s in thousands Year Ended
June 29,
1996
<S> <C>
Income statement:
Sales ..................... 280
Cost of sales ............. (280)
Interest income ........... 2,551
Interest expense .......... (2,551)
Balance Sheet:
Accounts receivable ....... (2,363)
Advances to affiliate ..... (26,263)
Accounts payable .......... 739
Other current liabilities . 226
Long-term debt ............ 26,264
Other long-term liabilities 1,397
</TABLE>
(4) To eliminate investment in affiliate and related minority interest.
<TABLE>
$'s in thousands Year Ended
June 29,
1996
<S> <C>
Income Statement:
Minority interest (114)
Balance Sheet:
Investment in affiliate (4,167)
Shareholders' Equity... 5,441
Retained earnings ..... (6,547)
Other long-term assets 5,273
</TABLE>
