SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT TO CURRENT REPORT
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year ended June 29, 1996.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________ to _____________
Commission File Number: 1-9716
DONNELLY CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-0493110
(State of other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
414 East Fortieth Street, Holland, Michigan 49423
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (616) 786-7000
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
Class A Common Stock American Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant was $102,811,298 as of August 30, 1996.
Number of shares outstanding of each of the registrant's classes of common
stock, as of August 30, 1996.
4,261,178 shares of Class A Common Stock par value, $.10 per share
3,575,959 shares of Class B Common Stock par value, $.10 per share
<PAGE>
2
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
General
Donnelly Corporation's (Company) 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. The comparability of the
Company's results on a period to period basis may also be affected by the
Company's implementation of new joint ventures, alliances and acquisitions.
Comparison of 1996 to 1995
The Company's net sales increased 14.7% to $439.6 million in 1996, from
$383.3 million in 1995. Net sales for the Company's operations in North America
increased by approximately 12% despite a 3% decrease in North American car and
light truck production, the loss of Saturn modular window business (which
represented approximately 5% of the Company's net sales in 1995) and price
pressures from the Company's major automotive customers. Price decreases,
however, did not have a material impact on the Company's increase in net sales
for 1996. The increase in net sales remained strong due to higher sales of
modular window systems (particularly for the new Chrysler Caravan/Voyager
minivans), lighting and trim products, complete exterior mirror products and
door handles. Net sales for the Company's European operations increased by
approximately 40% from the previous year due to the introduction of modular
window programs in Langres, France for the Chrysler Caravan/Voyager minivan and
Jeep Cherokee and stronger sales for the Company's electrochromic mirror product
line. The Company's Irish operations experienced significant pricing pressures
during the year from competition in Eastern Europe and Asia slightly offsetting
the higher sales volumes. Consolidated net sales remained relatively strong
throughout the year, but were exceptionally strong during the fourth quarter
with an increase of 24% over the fourth quarter of 1995.
Gross profit margin decreased to 18.6% of net sales in 1996, from 21.5% of
net sales in 1995. The gross profit margins were adversely impacted in the first
half of the year by the start-up of various modular window programs,
particularly for the Chrysler Caravan/Voyager minivan, and the implementation of
a new paint line in the Company's Newaygo facility. North American gross profit
margin performance was also significantly impacted by technical difficulties on
a new business program that resulted in significant additional engineering,
production and other costs that negatively impacted gross margins by $2.2
million. Although this problem was largely due to factors not directly under the
Company's control, the issue was resolved in a timely and cooperative way that
provided an uninterrupted source of supply to the customer. Finally, the
Company's European operations experienced lower gross profit margins in 1996
compared to 1995 due to pricing pressures and operating expenses at the
Company's Irish operations.
Selling, general and administrative expenses were 8.7% of net sales in
1996, down from 11.8% of net sales in 1995. These costs were significantly
reduced primarily as a result of the restructuring plan implemented in 1995 and
continued commitment to achieve higher sales levels without a proportionate
increase in these expenses. In addition, a patent settlement recognized in 1996
resulted in a reduction of these expenses by 1.3% of net sales. See
"Business--Litigation."
Research and development expenses for 1996 were 6.3% of net sales, compared
to 5.9% of net sales in 1995. The increase in research and development costs was
due to the technical difficulties on a new business program and costs for the
design and development of new window, mirror, door handle and interior trim
programs.
A restructuring charge of $2.4 million was recorded in the fourth quarter
of 1996 related to the write-down of certain assets and the closure of the
Company's manufacturing facility in Mt. Pleasant, Tennessee. The decision to
close the Tennessee facility was based on a number of factors that included a
major loss of business during 1995 and the inability to attract significant new
business for the plant. These costs included accruals for severance and related
employee support programs and write-down of certain assets removed from service.
The majority of these liabilities were paid or settled during the first six
months of 1997.
Interest expense increased to $8.1 million in 1996, from $5.0 million in
1995. The increase over 1995 resulted from higher borrowing levels to support
the Company's investment in and advances to Donnelly Hohe, which was then an
equity affiliate of the Company, and to support the Company's capital
expenditures and higher working capital. The Company has advanced $28 million to
Donnelly Hohe under a subordinated loan agreement, $14.3 million in 1995 and
$13.7 million in 1996. Amounts advanced to Donnelly Hohe under the subordinated
loan agreement provide for 10% interest per annum with no principal payments due
until its maturity on April 1, 1998. The advances were financed through the
Company's existing borrowing agreements. The increase in interest income
realized by the Company was a result of the interest charged on the advances to
Donnelly Hohe, which is presented net of amounts eliminated from equity earnings
in accordance with generally accepted accounting principles.
<PAGE>
3
Royalty income was $5.2 million in 1996 compared to $3.8 million in 1995.
This increase resulted from royalty income associated with the sale of the
Appliance Business in 1995. Royalty payments associated with the sale of the
Appliance Business in 1995 concluded in the fourth quarter of 1996.
Equity in earnings of affiliated companies was $0.1 million in 1996
compared to $0.4 million in 1995. Equity earnings from Donnelly Hohe, after the
elimination of intercompany interest, were offset by losses at Applied Films
Corporation ("AFC"), the Company's joint venture in Boulder Colorado, and Vision
Group. The combined impact on net income from the Company's non-automotive joint
ventures was a loss of $1.5 million in 1996, compared to income of $0.1 million
in 1995. AFC's results were adversely affected by a downturn in the market for
coated glass used in the production of liquid crystal displays. The Company is
currently exploring opportunities to exit this business. Vision Group continued
to experience start-up losses during 1996.
The Company reported net income of $8.5 million in 1996 compared to $11.0
million for 1995. Net income in 1996 included $1.1 million of net income
associated with the patent and license settlement and a $1.4 million net loss
for restructuring costs, while 1995 included $2.0 million of net income
associated with the gain on the sale and restructuring of certain non-automotive
businesses. Positively impacting the Company's North American operations were
higher sales volumes, higher royalty income, lower selling, general and
administrative costs as a percentage of net sales and a patent and license
settlement with a competitor. These improvements were offset by higher than
expected start-up costs during the first half of the year, technical
difficulties during the third quarter on a new business program which resulted
in a reduction of net earnings by $1.2 million, higher research and development
costs as a percent of net sales and restructuring charges taken in the fourth
quarter. The Company's European operations experienced lower net income at the
Company's subsidiaries in Ireland in addition to start-up losses at Langres,
France. The Company's net income was also lower in 1996 due to the recognition
of a $1.5 million loss for non-automotive affiliated companies.
Comparison of 1995 to 1994
Donnelly's net sales were $383.3 million in 1995, an increase of 14% over
the $337.3 million of net sales in 1994. The Company's North American net sales
increased by approximately 10% while automotive production increased 5% in 1995
over 1994 production levels. New business in exterior mirrors, door handles,
interior systems and modular systems, along with the strong automotive
production levels, all contributed to the stronger sales level. The Company
continues to experience pricing pressures from its automotive customers. Price
decreases, however, did not have a material impact on the Company's increase in
net sales for 1995. The Company's European net sales were higher due to twelve
months of net sales included in 1995 for Donnelly Vision Systems Europe
("DVSE"), compared to two months in 1994. The Company acquired DVSE in April
1994.
Gross profit margin was 21.5% in 1995 compared to 21.8% in 1994. Continuous
improvement programs being run throughout the Company, along with higher sales
volumes, helped the Company offset price pressures from customers and
significant increases in raw material costs.
Selling, general and administrative expenses were 11.8% of net sales in
1995, an increase from 11.3% of net sales in 1994. The increase was primarily
due to patent litigation costs that were significantly higher in 1995 as the
Company pursued actions to protect its intellectual property.
Research and development expenses were 5.9% of net sales in 1995 compared
to 6.3% of net sales in 1994.
In the second quarter of 1995, the Company implemented a restructuring
plan to focus on its automotive businesses. The restructuring plan included the
sale of the Company's appliance business, the sale of the heavy truck mirror
business and the liquidation of the Company's investment in OSD Envizion, a
joint venture engaged in the manufacture of welding helmet shields. The Company
received total proceeds of $14.2 million associated with the restructuring of
these businesses, which had a combined net book value of $6.5 million. In
addition, restructuring costs of $3.0 million were also recognized consisting of
a severance program and other expenses associated with the plan. The severance
program included twenty-five personnel, primarily middle and senior managers of
the Company. The spending for these costs was essentially completed by the end
of 1995. The restructuring of the non-automotive businesses resulted in a pretax
gain of $4.7 million. These non-automotive businesses represented an
insignificant portion of the Company's operations for each period reported.
The Company also restructured certain automotive operations resulting in a
charge of $2.4 million in the second quarter, primarily for the write-down of
operating assets due to the loss of Saturn's business at D&A Technology, Inc.
("D&A"), the Company's joint venture with Asahi Glass Company. As a result,
minority interest in net income of subsidiaries was $0.4 million in 1995
compared to $0.8 million in 1994. D&A represented 5% and 8%, respectively, of
the Company's net sales and net income in 1995.
<PAGE>
4
Interest expense increased to $5.0 million in 1995, from $3.5 million in
1994, due to higher interest rates and to increased borrowing to support
increased capital spending.
Royalty income was $3.8 million in 1995 compared to $1.4 million in 1994.
The increase resulted primarily from royalty income associated with the sale of
the Appliance Business in 1995. Included in other income was a $0.5 million gain
on the sale of a warehouse facility in the fourth quarter of 1995.
Equity in earnings of affiliated companies increased to $0.4 million in
1995, from a loss of $0.1 million in 1994. Improved earnings at AFC and a slight
profit from Donnelly Hohe for the two month period ending May 31, 1995, more
than offset start-up costs at Vision Group.
The Company had net income of $11.0 million in 1995, compared to $7.3
million in 1994. The increase in net income was the result of a restructuring of
non-automotive businesses, higher sales volumes, lower research and development
costs as a percentage of net sales, higher royalty income and improved equity
earnings in affiliated companies. Results from foreign operations improved
slightly, as improvements in Ireland exceeded start-up losses in Mexico and
France.
ACQUISITIONS AND INVESTMENT IN AFFILIATES
In the fourth quarter of 1996, the Company formed a 50-50 joint venture with
Shanghai Fu Hua Glass Company, Ltd. to produce framed glass products for the
Asian automotive industry. Shanghai Fu Hua Glass Company is itself a joint
venture between Ford Motor Company and Shanghai Yao Hua Glass Works. The joint
venture will have its equipment and processes in place by September 1996 and
will begin manufacturing encapsulated and framed glass products by the end of
1997. Also in the fourth quarter, the Company formed Donnelly Eurotrim Ltd., a
100% owned subsidiary organized under the laws of Ireland, to offer our interior
lighting and overhead trim products for the European market.
During 1996 and 1995, VVL's parent, VISION Group, PLC (VISION), sold common
shares in a private placement and through public offerings reducing the
Company's ownership interest from 40% to 30.4%. The Company's equity in the net
proceeds of these sales is reflected as an increase in additional paid-in
capital in the accompanying financial statements. The aggregate market value of
the Company's investment in VISION, based on the quoted market price for
VISION's common shares, which are listed on the London Stock Exchange, was
approximately $44 million at June 29, 1996. The Company's investment in the net
assets of VISION was $4.0 million at June 29, 1996.
In April 1995, the Company acquired an interest in Hohe GmbH & Co. KG, since
renamed Donnelly Hohe GmbH & Co. KG (Donnelly Hohe), a German limited
partnership with operations in Germany and Spain. Donnelly Hohe, based in
Collenberg, Germany, serves many of the main auto producers in Europe in
exterior automotive mirrors, interior mirrors, door handles, automotive tooling,
and electronic components related to mirror systems.
The Company acquired 48% of the controlling general partnership interest and 66
2/3% of the limited partnership interest for $3.6 million. Additionally, the
Company has advanced $28 million to Donnelly Hohe under a subordinated loan
agreement, $14.3 million in 1995 and $13.7 million in 1996. Amounts advanced to
Donnelly Hohe under the subordinated loan agreement provide for 10% interest per
annum with no principal payments due until its maturity on April 1, 1998. In
connection with the Company's acquisition of the Donnelly Hohe interest,
refinancing and additional loans of approximately $70 million were provided to
Donnelly Hohe by several banks.
The terms of the transaction allow Donnelly to purchase the remaining ownership
interest in Donnelly Hohe through various options ranging from $3 million to $10
million. The remaining owners have an option to require the Company to buy their
interests at any time based upon a formula that results in a price of up to $10
million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current ratio was 2.0 and 1.7 at June 29, 1996 and July 1, 1995,
respectively. Working capital was $63.5 million at June 29, 1996, compared to
$40.5 million at July 1, 1995. This increase included an increase in accounts
receivables to support higher sales and higher customer tooling and increased
inventories to support new business programs reaching full production in the
first quarter of 1997. Accounts receivable were also higher due to the year
ending on June 29 and the timing of customer payments. The Company's accounts
receivable balance as a percent to sales increased from 13.3% at July 1, 1995 to
16.8% at June 29, 1996. The Company's North American customers pay the Company
on pre-established payment dates ranging from the 25th to the 30th of each
month. Therefore, a number of customer payments were not received by the June
29, 1996 balance sheet date, accounting for the increase in accounts receivable
compared to July 1, 1995.
<PAGE>
5
Capital expenditures for 1996 were $20.6 million compared to $29.2 million for
1995 and $35.3 million for 1994. Capital expenditures were lower in 1996 due to
the completion of the building additions required 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 operations into a new facility in Holland, Michigan.
Capital expenditures in 1996 included costs for equipment to support new
business for complete exterior mirrors, door handles and modular window
encapsulation, bonding and hardware programs. The Company does not have any
material commitments for capital expenditures other than those arising out of
the normal course of business, which were approximately $9.0 million at June 29,
1996.
In the second quarter of 1996, the Company amended its revolving credit loan
agreement by increasing the amount to $80 million and extending the maturity
date to November 2002. The revolving credit agreement had borrowings against it
of $35.4 million at June 29, 1996. In November 1995, the Company issued a senior
note of $20.0 million with an insurance company. Principal payments commence in
2001 until maturity in 2006. The Company anticipates completing a $50 million
asset securitization transaction by the end of the first quarter of 1997. This
will be utilized by the Company and Donnelly Hohe to provide additional
financing availability and reduce interest and other costs.
The Company utilizes interest rate swaps and foreign exchange contracts to
manage exposure to fluctuations in interest and foreign currency exchange rates.
The risk of loss to the Company in the event of nonperformance by any party
under these agreements is not material.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The Company
is required to adopt this statement by its fiscal year ending in 1997. The new
statement requires the Company to review long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable through future net cash flows generated by the
assets. The Company does not expect the adoption of this statement to have a
material impact on its financial position or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 allows companies to continue to account for their
stock-based compensation plans in accordance with APB Opinion No. 25, but
encourages the adoption of a new accounting method to record compensation
expense based on the estimated fair value of employee stock-based compensation.
Companies electing not to follow the new fair value based method are required to
provide expanded footnote disclosures, including pro forma net income and
earnings per share, determined as if the company had adopted the new method. The
Statement is required to be adopted by the Company's fiscal year ending in 1997.
Management intends to continue to account for its stock-based compensation plans
in accordance with APB Opinion No. 25 and provide the supplemental disclosures
as required by SFAS No. 123, beginning in 1997.
No other recently issued accounting standards are expected to have a material
impact on the Company.
<PAGE>
6
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Notes to the Combined Consolidated Financial Statements are hereby amended
as follows (the information in Item 8 other than the Notes to the Combined
Consolidated Financial Statements is not altered by this Form 10-K/A):
NOTES TO THE COMBINED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION AND CONSOLIDATION
The combined consolidated financial statements include the accounts of
Donnelly Corporation, Donnelly Export Corporation and all majority owned,
controlled subsidiaries (the Company) after all significant intercompany
balances, transactions and shareholdings have been eliminated. Investments in
20% to 50% owned companies are accounted for using the equity method of
accounting. Investments in affiliates representing less than 20% ownership are
accounted for under the cost method. Cost in excess of net assets of acquired
companies is being amortized on a straight-line basis over a 15 year period.
Voting control of Donnelly Corporation and Donnelly Export Corporation is
vested in the same shareholders and the corporations are under common
management. Because of these relationships, the accounts of the two corporations
are included in the financial statements as if they were a single entity.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
Except for the Company's subsidiary in Mexico, whose functional currency is
the United States dollar, financial statements of international companies are
translated into United States dollar equivalents at exchange rates as follows:
(1) balance sheet accounts at year-end rates; and (2) income statement accounts
at weighted average monthly exchange rates prevailing during the year.
Translation gains and losses are reported as a separate component of
shareholders' equity. For the Company's subsidiary in Mexico, transaction and
translation gains or losses are reflected in net income for all accounts other
than intercompany balances of a long-term investment nature for which the
translation gains or losses are reported as a separate component of
shareholders' equity. Foreign currency transaction gains and losses included in
other income are not material.
REVENUE RECOGNITION
The Company's primary source of revenue is generated from the sale of its
products. The Company recognizes revenue when its products are shipped.
CASH AND CASH EQUIVALENTS
Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
by the last-in, first-out (LIFO) method, except for inventories of the
consolidated subsidiaries which are valued using the first-in, first-out (FIFO)
method.
CUSTOMER TOOLING TO BE BILLED
<PAGE>
7
Customer tooling to be billed represents costs incurred on behalf of the
Company's customers. These costs are recoverable at the time of tool completion
and approval, or are recovered in the program's piece price over the program's
life, not to exceed a period of three years.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided
primarily by the straight-line method. Depreciation is computed over the
estimated useful lives of the assets as follows:
Years
-----
Buildings.................... 10 to 40
Machinery and equipment...... 3 to 12
For tax purposes, useful lives and accelerated methods are used as
permitted by the taxing authorities.
INCOME TAXES
Deferred taxes reflect the tax effects of temporary differences between the
financial statement and tax basis of assets and liabilities, and operating loss
carryforwards. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred income taxes are not
provided on cumulative undistributed earnings of the foreign subsidiaries and
affiliates because they are intended to be permanently reinvested.
INCOME PER SHARE OF COMMON STOCK
Income per share is computed by dividing net income, adjusted for preferred
stock dividends, by the weighted average number of shares of Donnelly
Corporation common stock outstanding, as adjusted for the stock split effective
January 30, 1997 (7,802,846 in 1996, 7,744,042 in 1995 and 7,716,923 in 1994).
The potential dilutive effect from the exercise of stock options is not
material.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates the fair value of all financial instruments where the
carrying value differs from the fair value, primarily long-term fixed rate debt,
interest rate swaps and foreign exchange currency contracts, based upon quoted
amounts or the current rates available for similar financial instruments. The
carrying value of the Company's variable rate debt and all other financial
instruments approximates their fair value.
FISCAL YEAR
The Company's fiscal year is the 52 or 53 week period ending the Saturday
nearest June 30. Fiscal years 1996, 1995 and 1994 ended on June 29, July 1 and
July 2, respectively, each included 52 weeks.
IMPAIRMENT OF ASSETS
In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," was issued. SFAS No. 121 requires long-lived assets, including
the excess of cost over the fair value of assets of businesses acquired, to be
reviewed for impairment losses whenever events or changes in circumstances
indicate the carrying amount may not be recoverable through future net cash
flows generated by the assets. The Company, consistent with existing generally
accepted accounting principles, currently states the majority of its fixed
assets at the
<PAGE>
8
lower of cost or net realizable value. The Company will adopt SFAS No. 121 in
1997 and believes the effect of adoption will not be material.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year data to conform to
the current year presentation and had no effect on net income reported for any
period.
2. NATURE OF OPERATIONS
The Company is an international supplier of high quality automotive parts
and component systems from manufacturing operations in North America and Europe.
The Company supplies automotive customers around the world with rearview mirror
systems, modular window systems and interior lighting and trim systems. The
Company also provides products to several non-automotive markets.
Export revenues are foreign revenues produced by identifiable assets
located in the United States. Foreign revenues are generated by identifiable
assets at the Company's subsidiaries located in Ireland, France and Mexico. A
summary of the Company's operations by geographic area follows:
<TABLE>
Year ended
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Revenues:
United States ............. $ 331,469 $ 317,710 $ 296,226
Foreign ................... 55,998 36,832 18,367
Export:
Americas .................. 49,655 25,016 21,557
Asia ...................... 532 981 310
Europe .................... 1,917 2,786 785
Other ..................... -- 15 17
--------- --------- ---------
$ 439,571 $ 383,340 $ 337,262
--------- --------- ---------
Operating Income (Loss):
United States ............. $ 15,641 $ 19,857 $ 16,397
Foreign ................... (2,150) (2,824) (3,276)
--------- --------- ---------
$ 13,491 $ 17,033 $ 13,121
--------- --------- ---------
Identifiable Assets:
United States ............. $ 226,861 $ 186,743 $ 165,172
Foreign ................... 44,631 37,045 18,629
--------- --------- ---------
$ 271,492 $ 223,788 $ 183,801
--------- --------- ---------
</TABLE>
Sales to major automobile manufacturers as a percent of the Company's net
sales follows:
<TABLE>
Year ended
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Chrysler .......................... 33% 18% 18%
Ford .............................. 22 22 24
Honda ............................. 16 14 12
General Motors .................... 10 17 21
-- -- --
81% 71% 75%
== == ==
</TABLE>
<PAGE>
9
3. INVENTORIES
Inventories consist of:
<TABLE>
1996 1995
(in thousands)
<S> <C> <C>
LIFO cost:
Finished products and work in process ......... $ 6,998 $ 6,743
Raw materials ................................. 6,981 6,622
------- -------
13,979 13,365
------- -------
FIFO cost:
Finished products and work in process ......... 3,202 3,397
Raw materials ................................. 7,047 5,280
------- -------
10,249 8,677
------- -------
$24,228 $22,042
------- -------
</TABLE>
If only the first-in, first-out method of inventory valuation had been
used, inventories would have been $0.4 million and $0.5 million higher than
reported at June 29, 1996 and July 1, 1995, respectively, and would have
approximated replacement cost.
4. INVESTMENTS IN AND ADVANCES TO EQUITY AFFILIATES
The Company's equity affiliates include the following: Donnelly Hohe, a
German limited partnership that produces exterior mirrors, interior mirrors,
door handles, automotive tooling and electronic components related to mirror
systems; Vision Group plc ("Vision Group"), the sole shareholder of VLSI Vision
Limited that produces an advanced video microchip; newly formed Shanghai
Donnelly Fu Hua Window Systems Company Ltd. (Shanghai Donnelly Fu Hua) that will
manufacture encapsulated and framed glass products for the Asian automotive
industry; and Applied Films Corporation, a 50% owned joint venture that
manufactures thin-film glass coatings used in the production of liquid crystal
displays.
In the fourth quarter of 1996, the Company formed Shanghai Donnelly Fu Hua,
a 50-50 joint venture with Shanghai Fu Hua Glass Company, Ltd. Shanghai Fu Hua
Glass Company is itself a joint venture between Ford Motor Company and Shanghai
Yao Hua Glass Works. The joint venture will have its equipment and processes in
place by September 1996, and the venture will begin manufacturing encapsulated
and framed glass products by the end of the year.
During 1996 and 1995, Vision Group sold common shares in a private
placement and through public offerings reducing the Company's ownership interest
from 40% to 30.4%. The Company's equity in the net proceeds of these sales is
reflected as an increase in additional paid-in capital in the accompanying
financial statements. The aggregate market value of the Company's investment in
Vision Group, based on the quoted market price for Vision Group's common shares,
which are listed on the London Stock Exchange, was approximately $44 million at
June 29, 1996. The Company's investment in the net assets of Vision Group was
approximately $4 million at June 29, 1996.
Effective April 1, 1995, the Company acquired an interest in Hohe GmbH &
Co. KG, since renamed Donnelly Hohe GmbH & Co. KG (Donnelly Hohe), a German
limited partnership with operations in Germany and Spain. Donnelly Hohe, based
in Collenberg, Germany, supplies many of the main automakers in Europe.
The Company acquired 48% of the general partnership interest and 662/3% of the
limited partnership interest for $3.6 million. Additionally, the Company has
advanced $28 million to Donnelly Hohe under a subordinated loan agreement, $14.3
million in 1995 and $13.7 million in 1996. Amounts advanced to Donnelly Hohe
under the subordinated loan agreement provide for 10% interest per annum with no
principal payments due until its maturity on April 1, 1998. In connection with
the Company's acquisition of the Donnelly Hohe interest, refinancing and
additional loans of approximately $70 million were provided to Donnelly Hohe by
several banks. The terms of the transaction allow Donnelly to purchase the
remaining ownership interest in Donnelly Hohe through various options ranging
from $3 million to $10 million. The remaining owners have an option to require
the Company to buy their interests at any time based upon a formula which
results in a price range of up to $10 million.
<PAGE>
10
Summarized balance sheet and income statement information for the Company's
non-consolidated affiliates accounted for using the equity method are as
follows. Income statement information includes Donnelly Hohe's twelve months
ended May 31, 1996, and two months ended May 31, 1995. All significant others
presented include twelve months ending in the month of June for each year
presented.
<TABLE>
1996 1995
(in thousands)
<S> <C> <C>
Summarized Balance Sheet Information
Current assets ....................... $ 90,927 $ 80,443
Non-current assets ................... 82,052 80,986
Current liabilities .................. 69,931 57,857
Non-current liabilities .............. 87,905 89,860
Net equity ........................... $ 15,143 $ 13,712
Summarized Income Statement Information
Net sales ............................ $ 250,904 $ 77,756
Costs and expenses ................... 254,403 77,547
Net income (loss) .................... $ (3,500) $ 209
</TABLE>
5. DEBT AND OTHER FINANCING ARRANGEMENTS
Debt consists of:
<TABLE>
1996 1995
(in thousands)
<S> <C> <C>
Borrowings under revolving credit
agreements at 4.15% and 7.50% ................. $ 35,418 $ 15,700
Senior Notes, due 2004, principal
payable in installments beginning
in 1999, interest at 6.67% .................... 15,000 15,000
Senior Notes, due 2005, principal
payable in installments beginning
in 2000, interest at 7.22% .................... 15,000 15,000
Senior Notes, due 2006, principal
payable in installments beginning
in 2001, interest at 6.70% .................... 20,000 --
Industrial revenue bonds:
$9,500 at adjustable rates
(3.80% at June 29, 1996), due in
2008-2010; $5,000 at a fixed rate
of 8.13%, due in 2012 ......................... 14,500 14,500
Other .......................................... 1,998 6,602
Total .......................................... 101,916 66,802
Less current maturities ........................ 159 428
$101,757 $ 66,374
</TABLE>
The Company has an unsecured $80 million Revolving Credit Loan Agreement
which expires November 20, 2002. Interest is at prime unless one of three
alternative elections are made by the Company.
The $9.5 million industrial revenue bonds are secured by letters of credit
which must be renewed annually. All industrial revenue bonds are collateralized
by the purchased land, building and equipment. The senior notes are unsecured.
The various borrowings subject the Company to certain restrictions relating
to, among other things, minimum net worth, payment of dividends and maintenance
of certain financial ratios. At June 29, 1996, the Company was in compliance
with all related covenants. Retained earnings available for dividends at June
29, 1996, are $19.6 million.
Annual principal maturities consist of:
<PAGE>
11
<TABLE>
Year ending Amount
(in thousands)
<S> <C>
1997 ..................................... $ 159
1998 ..................................... 117
1999 ..................................... 3,525
2000 ..................................... 7,000
2001 ..................................... 20,357
2002 and thereafter ...................... 70,758
$101,916
</TABLE>
The Company provides guarantees for $7.3 million in municipal funding for
the construction of a manufacturing facility and up to $5.0 million of Applied
Films Corporation borrowings.
Interest payments of $7.8 million, $5.0 million and $3.7 million were made
in 1996, 1995 and 1994, respectively.
6. FINANCIAL INSTRUMENTS
The Company utilizes interest rate swaps and foreign exchange contracts to
manage exposure to fluctuations in interest and foreign currency exchange rates.
The risk of loss to the Company in the event of nonperformance by any party
under these agreements is not material. At June 29, 1996 and July 1, 1995, the
Company had interest rate swaps with an aggregate notional amount of $60
million, $30 million and $40 million of which were offsetting at June 29, 1996
and July 1, 1995, respectively. These effectively converted $30 million and $20
million of the Company's variable interest rate debt to fixed rates at June 29,
1996 and July 1, 1995, respectively. The Company is currently paying a weighted
average fixed rate of 7.17%, calculated on the notional amounts. These swap
agreements have varied expirations through 2003. The notional amounts of
interest rate swaps do not represent amounts exchanged by the parties, and thus
are not a measure of the exposure to the Company through its use of these
instruments. Net receipts or payments under the agreements are recognized as an
adjustment to interest expense.
The Company's Irish subsidiaries enter into foreign exchange contracts to
hedge against changes in foreign currency exchange rates. The Company had
foreign exchange contracts outstanding of $7.8 million and $13.3 million at June
29, 1996 and July 1, 1995, respectively. The foreign exchange contracts require
the Company to exchange foreign currencies for Irish pounds and generally mature
within 12 months.
In accordance with the requirements of SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments" (see Note 1), the Company has provided the
following fair value estimates for instruments in which the fair value differs
from carrying value at June 29, 1996:
<TABLE>
Carrying Value Fair Value
(in thousands)
<S> <C> <C>
Liabilities
Long-term fixed rate debt ................ $ 55,000 $ 53,630
Derivatives
Interest rate swaps ...................... -- (423)
Foreign exchange contracts ............... -- 274
</TABLE>
7. BENEFIT PLANS
A. Pension Benefits
The Company sponsors defined benefit pension plans covering substantially
all employees. Pension costs for the plans are funded in amounts which equal or
exceed regulatory requirements. Benefits under these plans are based primarily
on years of service and compensation.
Assumptions and net periodic pension cost are as follows:
<PAGE>
12
<TABLE>
Year ended
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Discount rate .............................. 8.00% 8.25% 8.25%
Compensation increase ...................... 5.00% 5.00% 5.00%
Expected return on plan assets ............. 9.50% 9.50% 9.50%
Service cost ............................... $ 3,545 $ 3,544 $ 3,178
Interest cost .............................. 5,060 4,560 3,912
Actual gain on plan assets ................. (8,528) (6,389) (854)
Net amortization and deferral .............. 4,550 2,563 (2,292)
Net periodic pension cost .................. $ 4,627 $ 4,278 $ 3,944
</TABLE>
The funded status of the defined benefit pension plans is summarized below:
<TABLE>
1996 1995
(in thousands)
<S> <C> <C>
Accumulated benefit obligation,
including vested benefits of
$43,101 and $38,997 ................. $(43,945) $(40,328)
Effect of projected compensation
increases ........................... (23,826) (23,462)
Projected benefit obligation
for service rendered to date ........ (67,771) (63,790)
Plan assets at fair value,
primarily corporate equity and
debt securities ..................... 55,784 47,180
Projected benefit obligation
in excess of plan assets ............ (11,987) (16,610)
Unrecognized net transition obligation 408 492
Unrecognized prior service cost ...... 530 120
Unrecognized net loss ................ 1,926 10,165
Net pension liability ................ $ (9,123) $ (5,833)
</TABLE>
B. Postretirement Health Care Benefits
The Company provides certain health care and life insurance benefits for
eligible active and retired employees. The plan contains cost saving features
such as deductibles, coinsurance and a lifetime maximum and is unfunded.
Effective July 4, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." This Statement
requires the accrual, during the employee's years of service, of the expected
cost of providing those benefits to an employee and the employee's beneficiaries
and covered dependents. The net transition obligation represents the difference
between the accrued postretirement benefit costs prior to the adoption of SFAS
No. 106 and the Plan's unfunded accumulated postretirement benefit obligation as
of July 4, 1993. The net transition obligation of $7.9 million at July 4, 1993
is being amortized over 22 years.
The components of the net periodic postretirement benefit cost are as
follows:
<TABLE>
Year ended
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Service cost .......................................... $ 450 $ 402 $ 388
Interest cost ......................................... 830 779 661
Amortization of net transition obligation over 22 years 360 360 360
Unrecognized net loss ................................. 20 13 --
Net periodic postretirement benefit cost .............. $1,660 $1,554 $1,409
</TABLE>
The postretirement health care liability recognized in the balance sheet is
as follows:
<PAGE>
13
<TABLE>
1996 1995
(in thousands)
<S> <C> <C>
Retirees .................................... $ (5,946) $ (5,973)
Fully eligible active participants .......... (66) (14)
Other active participants ................... (5,467) (4,961)
Accumulated postretirement benefit obligation (11,479) (10,948)
Unrecognized transition obligation .......... 6,841 7,201
Unrecognized net loss ....................... 1,486 1,519
Postretirement health care liability ........ $ (3,152) $ (2,228)
======== ========
</TABLE>
The assumed health care inflation rate used in measuring the postretirement
health care liability is 9.0% for 1997, declining uniformly to 6% in 2000 and
remaining level thereafter. The health care cost trend rate has an effect on the
amounts reported. Increasing the assumed health care inflation rate by 1% would
increase the postretirement health care liability by $0.6 million, and the net
periodic postretirement benefit cost for the year by $40,000. The weighted
average discount rate used in determining the accumulated postretirement benefit
obligation was 8.0% and 7.75% in 1996 and 1995, respectively.
8. TAXES ON INCOME
Effective July 4, 1993, the Company adopted SFAS No. 109, "Accounting for Income
Taxes." The cumulative effect of this accounting change of $0.5 million is
reported separately in the 1994 combined consolidated statement of income.
Deferred income taxes under SFAS No. 109 reflect the tax effects of temporary
differences between the amounts of assets and liabilities for financial
reporting purposes and those amounts as measured by income tax laws. The Company
has grouped the noncurrent deferred tax assets with other assets and the net
noncurrent deferred tax liability with certain other liabilities on the balance
sheet. The tax effects of temporary differences which give rise to a significant
portion of deferred tax assets (liabilities) are as follows:
<TABLE>
1996 1995
(in thousands)
<S> <C> <C>
Fixed assets ...................... $(5,581) $(4,237)
Retirement plans .................. 3,106 1,641
Postretirement benefits ........... 1,103 780
Loss carryforwards ................ 2,095 636
Accrued expenses and other ........ (280) (271)
Net deferred tax asset (liability) $ 443 $(1,451)
</TABLE>
Per Balance Sheet:
<TABLE>
1996 1995
(in thousands)
<C> <C>
Current income tax asset .......... $ 1,912 2,197
Noncurrent income tax asset ....... 2,095 --
Noncurrent income tax liability ... (3,564) (3,648)
Net deferred tax asset (liability) $ 443 $(1,451)
</TABLE>
At June 29, 1996, the Company has $2.1 million of net operating loss
carryforwards, the majority of which expire in 2010 or are indefinite.
<PAGE>
14
<TABLE>
Year ended
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Income before taxes on income consists of:
Domestic ........................... $ 15,647 $ 18,692 $ 14,453
Foreign ............................ (3,298) (1,869) (3,445)
$ 12,349 $ 16,823 $ 11,008
Tax expense (benefit) consists of:
Current:
Domestic ...................... $ 6,909 $ 7,920 $ 4,782
Foreign ....................... 8 (17) (16)
6,917 7,903 4,766
Deferred:
Domestic ...................... (2,156) (1,761) (1,101)
Foreign ....................... (570) (347) (331)
(2,726) (2,108) (1,432)
$ 4,191 $ 5,795 $ 3,334
</TABLE>
The difference from the amount that would be computed by applying the
federal statutory income tax rate to income before taxes on income is reconciled
as follows:
<TABLE>
Year ended
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Income taxes at federal statutory rate 35% 35% 34%
Impact of:
Available tax credits ........ -- (2) (11)
Foreign subsidiary earnings .. 5 2 7
DISC earnings ................ (6) (2) (3)
Other ........................ -- 1 3
Effective tax rate ................... 34% 34% 30%
Income taxes paid .................... $ 3,731 $ 10,332 $ 3,149
</TABLE>
9. PREFERRED STOCK AND COMMON STOCK
Each share of 7 1/2% cumulative preferred stock is entitled to one vote for
the election of the members of the Board of Directors not elected by the holders
of Class A Common Stock, and all other matters at all shareholders' meetings
whenever dividend payments are in arrears for four cumulative quarters. No
arrearage existed at June 29, 1996. The preferred stock is redeemable in whole
or in part, if called by the Company, at $10.50 per share. Additionally, there
are 1,000,000 authorized shares of series preferred stock, no par value. At June
29, 1996 and July 1, 1995, no series preferred stock was outstanding.
Each share of Class A Common Stock and Class B Common Stock is entitled to
one vote and ten votes, respectively, at all shareholders' meetings. The holders
of Class A Common Stock are entitled to elect one-quarter of the members of the
Board of Directors. The remaining directors are elected by the holders of Class
B Common Stock and any preferred stock entitled to vote.
10. STOCK PURCHASE AND OPTION PLANS
The Company's Employees' Stock Purchase Plan permits the purchase in an
aggregate amount of up to 437,800 shares of Class A Common Stock. Eligible
employees may purchase stock at market value, or 90% of market value if the
price is $8.00 per share or higher, up to a maximum of $5,000 per employee in
any calendar year. The Company issued 17,460 shares in 1996 and 22,771 shares in
1995 under this plan.
The Company's Stock Option Plans permit the granting of either nonqualified
or incentive stock options to certain key employees and directors to purchase an
aggregate amount of up to 862,500 shares of the Company's Class A Common Stock.
The options, which become exercisable twelve months after date of grant, expire
ten years after date of grant. Although the plan administrator may establish the
nonqualified option price at below market value at date of grant, incentive
stock options may be granted only at prices not less than the market value.
<PAGE>
15
Options have been granted to purchase common stock at prices ranging from
$9.20 to $20.125 per share. Options were exercised during 1995 and 1996 at
prices ranging from $9.20 to $10.60 per share. A summary of option transactions
follows:
<TABLE>
Year ended
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Options outstanding, beginning of year 412 361 283
Options granted ...................... 80 76 79
Options exercised .................... (47) (13) (1)
Options expired ...................... (36) (12) --
Options outstanding, end of year ..... 409 412 361
Exercisable, end of year ............. 337 343 282
</TABLE>
The Company has reserved 364,975 shares for future grants at June 29, 1996
In 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 allows companies to continue to account for their
stock-based compensation plans in accordance with APB Opinion No. 25, but
encourages the adoption of a new accounting method to record compensation
expense based on the estimated fair value of employee stock-based compensation.
Companies electing not to follow the new fair value based method are required to
provide expanded footnote disclosures, including pro forma net income and
earnings per share, determined as if the company had adopted the new method. The
Statement is required to be adopted by the Company's fiscal year ending in 1997.
Management intends to continue to account for its stock-based compensation plans
in accordance with APB Opinion No. 25 and provide the supplemental disclosures
as required by SFAS No. 123, beginning in 1997.
11. COMMITMENTS AND CONTINGENCIES
A. 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 a lawsuit
against the Company on June 7, 1993, alleging that the Company's solid polymer
film electrochromic mirror infringed a patent owned by Gentex. 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 judgment decision and dismissed Gentex's appeal. On December 18, 1995,
the Court of Appeals for the Federal Circuit denied Gentex's request for a
rehearing.
The Company was also a party to three subsequent lawsuits involving 10
patents owned by the Company. In one of these suits, the Court granted Gentex's
motion for summary judgment that two of the Company's patents relating to
lighted mirrors are invalid. The Company believes that its lighted mirror
patents are not invalid and has filed on appeal on this issue. The appeal is
currently pending.
On April 1, 1996, the Company entered into a settlement agreement with
Gentex which resolved all aspects of these three lawsuits except for the pending
appeal referred to above. Under the agreement, Gentex paid the Company $6.0
million in settlement fees and will pay an additional $0.2 million if the
Company prevails in its appeal. In addition, the settlement includes
cross-licensing of certain patents which each party may practice within its own
core technology area, and an agreement that the parties will not pursue
litigation against each other on certain other patents for a period of four
years. This settlement was recognized in selling, general and administrative,
net of related patent litigation costs previously capitalized. Patent litigation
costs included in selling, general and administrative expenses were $3.7
million, $3.1 million and $0.8 million in 1996, 1995, and 1994, respectively.
B. 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, results of operation and liquidity, individually
and in the aggregate.
<PAGE>
16
C. Other
As of June 29, 1996, the Company had capital expenditure purchase
commitments outstanding of approximately $9 million.
12. LEASES
The Company leases various facilities and equipment. Rental expense charged to
operations amounted to approximately $3.8 million for 1996, $2.5 million for
1995 and $2.5 million for 1994. In 1995 the Company entered an agreement for the
sale and leaseback of newly installed modular window production equipment. The
equipment was sold at cost and no gain or loss was recognized on the
transaction. The lease which has six one year renewal terms, an effective 6.9%
fixed interest rate and a 40% balloon for the Company option to purchase after
the full seven year term is classified as an operating lease.
Future minimum lease payments, excluding renewal options, consist of:
<TABLE>
Year ending Amount
(in thousands)
<S> <C>
1997 .............. $3,688
1998 .............. 1,196
1999 .............. 514
2000 .............. 578
2001 .............. 221
2002 and thereafter 485
$6,682
</TABLE>
13. RESTRUCTURING OF OPERATIONS
In the fourth quarter of 1996, the Company recorded a restructuring charge
of $2.4 million related to the write-down of certain assets and the closure of
the Company's manufacturing facility in Mt. Pleasant, Tennessee. The decision to
close the Tennessee facility was based on a number of factors that included a
major loss of business one year ago and the inability to attract significant new
business for the plant. These costs include accruals for severance and related
employee support programs and write-off of certain assets removed from service.
The majority of these liabilities will be paid or settled during the first six
months of 1997.
In the second quarter of 1995, the Company implemented a restructuring
plan to focus on its automotive businesses. The restructuring plan included the
sale of the Company's appliance business, the sale of the heavy truck mirror
business and the liquidation of the Company's investment in OSD Envizion, a
joint venture engaged in the manufacture of welding helmet shields. The Company
received total proceeds of $14.2 million associated with the restructuring of
these businesses, which had a combined net book value of $6.5 million. In
addition, restructuring costs of $3.0 million were also recognized consisting of
a severance program and other expenses associated with the plan. The severance
program included twenty-five personnel, primarily middle and senior managers of
the Company. The spending for these costs was essentially completed by the end
of 1995. The restructuring of the non-automotive businesses resulted in a pretax
gain of $4.7 million. These non-automotive businesses represented an
insignificant portion of the Company's operations for each period reported.
The Company also restructured certain automotive operations in the second
quarter of 1995, resulting in a charge of $2.4 million primarily for the
write-down of operating assets due to the loss of Saturn's business at D&A
Technology, Inc. (D&A), the Company's former joint venture with Asahi Glass
Company. In the first quarter of 1996, the Company dissolved the joint venture
and acquired Asahi's 40% interest in D&A for approximately $2.1 million. D&A
represented 5% and 8%, respectively, of the Company's combined consolidated net
sales and net income in 1995.
In the fourth quarter of 1994, the Company recognized restructuring costs
of $1.2 million to cover a severance program and other expenses associated with
the restructuring of Donnelly Mirrors Limited.
14. QUARTERLY FINANCIAL DATA--UNAUDITED
<PAGE>
17
The Company's common stock is traded on the American Stock Exchange under
the Symbol "DON." Market quotations regarding the range of high and low sales
prices of the Company's common stock were as follows:
<TABLE>
Fiscal 1996 1995
- --------------------------------------------------------------------------------
Quarter High Low High Low
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First $ 16 3/4 $ 14 1/2 $ 17 1/2 $ 15 1/8
Second 15 5/8 13 3/4 17 5/8 13 1/4
Third 14 7/8 13 18 15 1/8
Fourth 16 1/8 13 3/4 17 5/8 14 7/8
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
1996
Net sales ............................... $ 90,523 $106,823 $116,445 $125,780 $439,571
Gross profit ........................... 13,685 20,030 22,153 25,873 81,741
Operating income (loss) ................ (2,087) 3,899 3,920 7,759 13,491
Net Income (loss):
Income (loss) ..................... (1,789) 2,629 2,503 5,111 8,454
Per common share ................... (.23) .34 .32 .65 1.08
Dividends declared per share of common stock .10 .10 .10 .10 .40
1995
Net sales .............................. $ 86,741 $ 98,460 $ 96,708 $101,431 $383,340
Gross profit ........................... 18,101 22,312 21,019 21,136 82,568
Operating income ........................ 811 7,274 4,828 4,120 17,033
Net Income (loss):
Income (loss) ...................... (85) 4,699 3,076 3,319 11,009
Per common share .................. (.01) .61 .40 .42 1.42
Dividends declared per share of common stoc .08 .08 .08 .08 .32
</TABLE>
All per share data has been adjusted for the stock split effective January
30, 1997. The impact of certain transactions on the 1996 and 1995 quarterly
results of operations is discussed in Notes 11 and 13. See Management's
Discussion and Analysis of Results of Operations and Financial Condition for
discussion of the Company's results of operations.
<PAGE>
PART IV.
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(c) EXHIBITS
The response to this portion of Item 14 is submitted as a separate section of
this report.
SIGNATURES
Pursuant to the requirements of Section 13 (d) 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.
DONNELLY CORPORATION
/s/William R. Jellison
Vice President, Corporate
Controller and Treasurer
<PAGE>
Annual Report - Form 10-K
Exhibit Index
3. Articles of Incorporation and Bylaws are incorporated by reference to
Exhibit 3.1 and 3.2 of Registrant's Registration Statement on Form
S-1, as amended, dated March 9, 1988, (Registration No. 33-17167)
("S-1 Registration Statement").
4. A specimen stock certificate of the Class A Common Stock was filed as
part of a Registration Statement on Form S-1 (Registration No.
33-17167) as Exhibit 4.1, and the same is hereby incorporated herein
by reference.
10.1 Amended and Restated First Chicago Revolving Credit Loan Agreement
10.2 Nationwide Life Insurance Company Debt Agreement was filed as part of
Form 10-K for the fiscal year ending July 1, 1995 as Exhibit 10.1 and
is hereby incorporated herein by reference.
10.3 An English language summary of an Acquisition Agreement and related
documents written in German between the Registrant, Donnelly GmbH,
Hohe GmbH & Co. KG ("Hohe") and other related parties, 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 were filed as part of Form 8-K on June 9, 1995, which has
been subsequently amended and are hereby incorporated herein by
reference.
10.4 Nationwide Life Insurance Company Debt Agreement was filed as part of
Form 10-K for the fiscal year ending July 2, 1994 as Exhibit 10.1 and
is hereby incorporated herein by reference.
10.5 The Principal Mutual Debt Agreement was filed as part of Form 10-K for
the fiscal year ending July 3, 1993 as Exhibit 10.2 and is hereby
incorporated herein by reference.
10.6 A Merger Agreement for the Merger of Donnelly Coated Corporation
("DCC") into Applied Coated Corporation, among Registrant, DCC,
Applied Films Lab, Inc. and Cecil Vanalsburg, John Chapin, and Richard
Condon, dated February 24, 1992, was filed as part of a Registration
Statement on Form S-2 (Registration No. 33-47036) and Exhibit 10.7,
and the same is hereby incorporated herein by reference.
10.7 The form of Indemnity Agreement between Registrant and each of its
directors was filed as a part of a Registration Statement on Form S-1
(Registration No. 33-17167) as Exhibit 10.8, and the same is hereby
incorporated herein by reference.
10.8 The Donnelly Corporation Stock Option Plan was filed as part of a
Registration Statement on Form S-1 (Registration No. 33-17167) as
Exhibit 10.9, and the same is hereby incorporated herein by reference.
10.9 The Donnelly Corporation 1987 Employees' Stock Purchase Plan,
including amendments was filed as part of a Registration Statement on
Form S-8 (Registration No. 33-34746) as Exhibit 28.1, and the same is
hereby incorporated herein by reference.
10.10 The Donnelly Corporation Non Employee Director's Stock Option Plan was
filed as part of a Registration Statement on Form S-8 (Registration
No. 33-55499) as Exhibit 99, and the same is hereby incorporated
herein by reference.
22 Schedule of Affiliates.
24 Consent of BDO Seidman, LLP, independent public accountants for
Form-10K for the fiscal year ending June 29, 1996.
24a Consent of BDO Seidman, LLP, independent public accountants for
Form-10K/A for the fiscal year ending June 29, 1996.
27 Financial Data Schedules.
<PAGE>
Exhibit 24a
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference of our reports dated August
2, 1996, relating to the combined consolidated financial statements and schedule
of Donnelly Corporation appearing in the corporation's amended annual report on
Form 10-K for the year ended June 29, 1996, in that corporation's previously
filed Form S-8 Registration Statements for that corporation's 1987 Stock Option
Plan (Registration No. 33-26555), 1987 Employees' Stock Purchase Plan
(Registration No. 33-34746) and Non-Employee Directors' Stock Option Plan
(Registration No. 33-55499).
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
April 14, 1997