SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarter ended December 28, 1996 Commission File Number 1-9716
DONNELLY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Michigan 38-0493110
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
414 East Fortieth Street, Holland, Michigan 49423
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (616) 786-7000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes / X / No / /
5,359,967 shares of Class A Common Stock and 4,468,613 shares of Class B Common
Stock were outstanding as of January 31, 1997.
<PAGE>
DONNELLY CORPORATION
INDEX
Page
PART 1. FINANCIAL INFORMATION Numbering
Item 1. Financial Statements
Condensed Combined Consolidated Balance Sheets -
December 28, 1996 and June 29, 1996 3
Condensed Combined Consolidated Statements of
Income - Three months and six ended December 28,
1996 and December 30, 1995 4
Condensed Combined Consolidated Statements of
Cash Flows - Six months ended December 28, 1996
and December 30, 1995 5
Notes to Condensend Combined Consolidated
Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 9-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
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PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS
December 28, June 29,
In thousands 1996 1996
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents ...................................... $ 10,794 $ 1,303
Accounts receivable, less allowance of $939 and $571 ........... 86,048 73,658
Inventories .................................................... 47,142 24,228
Prepaid expenses and other current assets ...................... 32,608 27,506
Total current assets .......................................... 176,592 126,695
Property, plant and equipment .................................. 295,968 157,161
Less accumulated depreciation .................................. 133,876 57,397
Net property, plant and equipment ............................. 162,092 99,764
Investments in and advances to affiliates ...................... 15,163 37,932
Other assets ................................................... 18,819 7,101
Total assets .................................................. $372,666 $271,492
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts and notes payable ..................................... $ 75,954 $ 44,349
Current maturities on long-term debt ........................... 6,132 159
Other current liabilities ...................................... 35,595 18,705
Total current liabilities ..................................... 117,681 63,213
Long-term debt, less current maturities ........................ 135,045 101,757
Deferred income taxes and other liabilities .................... 23,923 17,670
Total liabilities ............................................. 276,649 182,640
Minority interest .............................................. 426 --
Preferred stock ................................................ 531 531
Common stock ................................................... 790 787
Other shareholders' equity ..................................... 94,270 87,534
Total shareholders' equity .................................... 95,591 88,852
Total liabilities and shareholders' equity .................... $372,666 $271,492
The accompanying notes are an integral part of these statements
</TABLE>
3
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<TABLE>
<CAPTION>
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
December 28, December 30, December 28, December 30,
In thousands except share data 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales ...................................................... $ 188,037 $ 106,823 $ 301,437 $ 197,346
Costs and expenses:
Cost of sales .................................................. 153,266 86,793 243,518 163,631
Selling, general and administrative ............................ 17,723 9,880 28,810 20,023
Research and development ....................................... 8,448 6,251 15,567 11,880
Operating income ............................................... 8,600 3,899 13,542 1,812
Interest expense ............................................... 3,034 2,002 4,991 3,737
Royalty income ................................................. (672) (1,175) (1,081) (2,503)
Interest income ................................................ (342) (230) (414) (604)
Other income, net .............................................. (1,292) (31) (975) (130)
Income before taxes on income .................................. 7,872 3,333 11,021 1,312
Taxes on income ................................................ 2,972 1,147 4,143 430
Income before minority interest
and equity earnings ............................................ 4,900 2,186 6,878 882
Minority interest in net (income)
loss of subsidiaries ........................................... (594) 79 (594) 202
Equity in earnings (losses) of
affiliated companies ........................................... (389) 364 (645) (244)
Net income ..................................................... $ 3,917 $ 2,629 $ 5,639 $ 840
Per share of common stock:
Net income ..................................................... $ 0.40 $ 0.27 $ 0.57 $ 0.08
Cash dividends declared ........................................ $ 0.08 $ 0.08 $ 0.16 $ 0.16
Average common shares outstanding .............................. 9,822,503 9,747,260 9,809,136 9,732,025
The accompanying notes are an integral part of these statements
</TABLE>
4
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<TABLE>
<CAPTION>
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
December 28, December 30,
In thousands 1996 1995
OPERATING ACTIVITIES
<S> <C> <C>
Net income ..................................................................... $ 5,639 $ 5,840
Adjustments to reconcile net income to net cash from (for) operating activities:
Depreciation and amortization .................................................. 9,443 6,534
Gain on sale of property and equipment ......................................... (805) --
Gain on sale of affiliate stock ................................................ (872) --
Deferred pension cost and postretirement benefits .............................. 2,744 968
Deferred income taxes .......................................................... (1,709) 331
Minority interest income (loss) ................................................ 1,201 (202)
Equity in losses of affiliated companies ....................................... 1,032 562
Changes in operating assets and liabilities:
Sale of accounts receivable .................................................... 31,957 --
Accounts receivable ............................................................ (19,887) (8,686)
Inventories .................................................................... (4,440) (2,202)
Prepaid expenses and other current assets ...................................... (1,344) (9,443)
Accounts payable and other current liabilities ................................. 11,538 1,378
Other .......................................................................... (889) (681)
Net cash from (for) operating activities ...................................... 33,608 (10,601)
INVESTING ACTIVITIES
Capital expenditures ........................................................... (11,497) (12,503)
Investments in and advances to equity affiliates ............................... (4,567) (13,683)
Proceeds from sale property and equipment ...................................... 3,132 --
Proceeds from sale of affiliate stock .......................................... 974 --
Purchase of minority interest .................................................. -- (2,100)
Change in unexpended bond proceeds ............................................. 47 292
Cash increase due to consolidation of subsidiary ............................... 9,963 --
Other .......................................................................... (739) --
Net cash for investing activities ............................................. (2,687) (27,994)
FINANCING ACTIVITIES
Proceeds from long-term debt ................................................... -- 37,213
Repayments on long-term debt ................................................... (19,812) --
Common stock issuance .......................................................... 322 411
Dividends paid ................................................................. (1,594) (1,616)
Net cash from (for) financing activities ....................................... (21,084) 36,008
Effect of foreign exchange rate changes on cash ................................ (346) --
Increase (decrease) in cash and cash equivalents ............................... 9,837 (2,587)
Cash and cash equivalents, beginning of period ................................. 1,303 5,224
Cash and cash equivalents, end of period ....................................... $ 10,794 $ 2,637
The accompanying notes are an integral part of these statements
</TABLE>
5
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DONNELLY CORPORATION
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
December 28, 1996
NOTE A---BASIS OF PRESENTATION
The accompanying unaudited condensed combined consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended December 28, 1996,
should not be considered indicative of the results that may be expected for the
year ended June 28, 1997. The combined consolidated balance sheet at June 29,
1996, has been taken from the audited combined consolidated financial statements
and condensed. The accompanying condensed combined consolidated financial
statements and footnotes thereto should be read in conjunction with the
Company's annual report on Form 10-K for the year ended June 29, 1996.
The Company's fiscal year is the 52 or 53 week period ending the Saturday
closest to June 30. Accordingly, each quarter ends on the Saturday closest to
quarter end. Both the quarters ended December 28, 1996, and December 30, 1995,
included 13 weeks.
NOTE B---INVENTORIES
At the beginning of fiscal 1997, the Company changed to the FIFO (first-in,
first-out) method for determining the cost of all inventories. Until fiscal
1997, the Company used the LIFO (last-in, first-out) method for determining
inventory cost, except for the inventories of consolidated subsidiaries which
used the FIFO method. The change in accounting principle was made to provide a
better matching of revenue and expenses. This accounting change is not expected
to be material for the year and was not material to the financial statements for
any previously reported periods. Accordingly, no retroactive restatement of the
prior year's financial statements was made.
<TABLE>
Inventories consist of: December 28, June 29,
(In thousands) 1996 1996
<S> <C> <C>
LIFO cost:
Finished products and work in process $ -- $ 6,745
Raw materials ....................... -- 6,622
------- -------
-- 13,365
------- -------
FIFO costs:
Finished products and work in process 21,428 3,397
Raw materials ....................... 25,714 5,280
------- -------
47,142 8,677
------- -------
$47,142 $22,042
======= =======
</TABLE>
6
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NOTE C---INCOME PER SHARE
Income per share is computed by dividing net income, adjusted for preferred
stock dividends of approximately $10,000 in each respective quarter, by the
weighted average number of shares of Donnelly Corporation common stock
outstanding, as adjusted for stock splits.
On December 6, 1996, the Board of Directors declared a five for four stock split
in the form of a 25 percent stock dividend distributed on January 30, 1997. All
references to weighted average number of shares outstanding and per share
information have been adjusted to reflect the stock split.
NOTE D---SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
Six Months Ended
(In thousands) December 28, December 30,
1996 1995
<S> <C> <C>
Cash paid during the period for:
Interest ....................... $5,424 $1,427
Income taxes ................... $5,175 $ 183
</TABLE>
NOTE E---ACQUISITION AND INVESTMENTS IN AFFILIATES
In October 1996, the Company acquired a controlling interest in Donnelly Hohe
GmbH & Co KG ("Donnelly Hohe"). Accordingly, Donnelly Hohe's financial
statements are consolidated with those of the Company in the second quarter of
1997. The Company consolidates the Donnelly Hohe financial statements from the
one month prior to the Company's period end. For the Company's period ending
December 28, 1996, Donnelly Hohe's financial statements are consolidated using
the three month period ended November 30, 1996.
<TABLE>
Pro-forma impact:
Three Months Ended Six Months Ended
In thousands, except December 28, December 30, December 28 December 30,
share data 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales ................ $188,037 $166,342 $349,899 $305,745
Net Income ............... 3,917 2,629 5,639 840
Per share of common stock:
Income per share $ 0.40 $ 0.27 $ 0.57 $ 0.08
</TABLE>
In the first quarter of 1997, the Company formed Shunde Donnelly Zhen Hua, Ltd.
("Zhen Hua"), a joint venture with Shunde Zhen Hua Automobile Parts Co., Ltd.
The Company acquired a 30% interest in the joint venture which manufactures
exterior mirrors for car makers throughout southern China, including Volkswagen,
Isuzu and Chrysler. The Company also has an option to buy an additional 30% for
a predetermined amount in
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the future. Zhen Hua operates out of three existing buildings in Shunde, China,
which are owned by the joint venture. Certain manufacturing equipment is in
place at the time the joint venture was formed and 200 Shunde Zhen Hua employees
currently are employed at the facilities.
NOTE F--ASSET SECURITIZATION
In November 1996, the Company entered into an agreement to sell, on a revolving
basis, an interest in a defined pool of trade accounts receivable. The maximum
allowable amount of receivables to be sold is $50 million. The amount
outstanding at any measurement date varies based upon the level of eligible
receivables and management's discretion. Under this agreement, $32.0 million
were sold at December 28, 1996. The sale is reflected as a reduction of accounts
receivable in the accompanying Combined Consolidated Balance Sheet and as
operating cash flows in the accompanying Combined Consolidated Statement of Cash
Flows. The proceeds of sales are less than the face amount of accounts
receivable sold by an amount that approximates the purchaser's financing costs
of issuing its own commercial paper backed by these accounts receivable. The
discount fees were $0.2 million during the second quarter ended December 28,
1996, and has been included in selling, general and administrative expense in
the Company's Combined Consolidated Statement of Income. The Company, as agent
for the purchaser, retains collection and administrative responsibilities for
the participating interests of the defined pool.
NOTE G---FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements which involve risks and
uncertainties. When used in this report, the words "believe," "anticipate,"
"think," "intend," "goal" and similar expressions identify forward-looking
statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those anticipated. Readers
are cautioned not be place undue reliance on those forward-looking statements
which speak only as of the date of this report.
8
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ITEM 2.
DONNELLY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
2ND QUARTER REPORT
FOR THE SIX MONTHS ENDED DECEMBER 28, 1996
GENERAL
The Company's net sales and net income are subject to significant quarterly
fluctuations attributable primarily to production schedules of the Company's
major automotive customers. These same factors cause quarterly results to
fluctuate from year to year, as well as from quarter to quarter. 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.
In October 1996, the Company acquired a controlling interest in Donnelly Hohe
GmbH & Co KG ("Donnelly Hohe.") Accordingly, Donnelly Hohe's financial
statements are consolidated with those of the Company in the second quarter of
1997. The Company consolidates the Donnelly Hohe financial statements from the
one month prior to the Company's period end. For the Company's period ending
December 28, 1996, Donnelly Hohe's financial statements are consolidated using
the three month period ended November 30, 1996. At December 28, 1996, Donnelly
Hohe represented approximately 33% of Company's Combined Consolidated total
assets.
RESULTS OF OPERATIONS
Consolidated net sales were $188.0 million in the second quarter of 1997 an
increase of 76% compared to $106.8 million for the same period last year. While
automotive industry production remained stable in both North America and Europe,
net sales for the second quarter increased due to stronger sales for the
Company's products in North America and the consolidation of Donnelly Hohe,
which contributed net sales of $60.5 million for the period. The Company's sales
increased by over 18% without the consolidation of Donnelly Hohe. Net sales were
$301.4 million for the first six months of 1997 compared to $197.3 million for
the same period last year. Consolidated net sales without Donnelly Hohe for the
first six months of fiscal 1997 were $240.9 million, an increase of 22%. The
consolidation of Donnelly Hohe contributed $60.5 million in net sales for the
first half of 1997, all in the second quarter.
Gross profit margin for the second quarter of 1997 was 18.5% compared to 18.8%
for the second quarter of 1996. Second quarter gross profit margin was
positively impacted by higher volumes, improved operational performance in North
America and strong performance in Spain, Mexico and France. The Company's Irish
operations experienced significant losses for the period due to a number of
factors. The most significant ones are price decreases resulting from currency
fluctuations associated with the strong Irish punt and a paint supplier
performance problem. The Irish operations also experienced high development and
new business start-up costs. In addition, the consolidation of Donnelly Hohe
unfavorably impacted gross profit performance for the period. Donnelly Hohe
operations continued to experience start-up difficulties on new business
programs and customer price pressures. The Company is working to restructure
European operations to improve performance to a level
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more in line with overall corporate financial goals. Gross profit margin for
the first six months of fiscal 1997 was 19.2% compared to 17.1% for the same
period last year. The gross profit margin for 1996 was negatively affected by
simultaneous start-up of three major new business programs which have current
annual sales for the Company of over $100 million annually.
Selling, administrative and general expenses increased from $9.9 million in the
second quarter of 1996 to $17.7 million in the same period of 1997 due to the
consolidation of Donnelly Hohe and to support higher sales for this period.
Selling, administrative and general expenses in the second quarter of fiscal
1997 were at 9.4% of sales compared to 9.2% in the second quarter of fiscal
1996. These expenses were 9.6% of sales for the first six months of 1997
compared to 10.1% for the same period last year. Selling, general and
administrative expenses continue to be lower as a percentage of sales from
previous years due to the Company's commitment to leverage these expenses with
continued increases in sales.
Research and development expenses for the second quarter were $8.4 million, or
4.5% of sales, compared to 5.9% of sales last year. These expenses were lower as
a percentage to sales due the consolidation of Donnelly Hohe in the second
quarter of 1997. Research and development expenses, as a percentage to sales,
were at the same level as the previous year for the second quarter without the
consolidation of Donnelly Hohe. The Company continues to be committed to
developing new and innovative technologies that improve function, quality and
safety of automotive products and support new business for complete exterior
mirrors, electrochromic mirror systems, interior systems and modular systems.
Research and development expenses were 5.2% as a percentage of sales in the
first six months of 1997 compared to 6.0% for the same period last year. It is
expected that these expenses will be at 4.5% to 4.8% to sales each period with
the consolidation of Donnelly Hohe.
Interest expense was $3.0 million in the second quarter of 1997 compared to $2.0
million the previous year. The higher interest expense was due to the
consolidation of Donnelly Hohe. Interest expense incurred for the second
quarter, excluding the consolidation of Donnelly Hohe, was at the same level as
the previous year.
Royalty income was $0.7 million in the second quarter of 1997 compared to $1.2
million in 1996 and was $1.1 million and $2.5 million for the six months of 1997
and 1996, respectively. Royalty payments associated with the sale of the
appliance business in 1995 concluded in the fourth quarter of 1996.
Other income was $1.3 million in the second quarter of 1997. The Company sold
2.5% of its holding in Vision Group PLC, resulting in a gain to the Company of
$0.9 million. The Company now owns 25.6% of the common stock in Vision Group
PLC.
Minority interest in net (income) loss of subsidiaries was ($0.6) million in the
second quarter of 1997 due to the consolidation of Donnelly Hohe, compared to
$0.1 million last year. Effective in the second quarter of 1997, the Company
accounts for its investment in Donnelly Hohe under the purchase method of
accounting, thereby requiring the recognition of minority interest in net
(income) loss for 33 1/3% of this subsidiary. Equity losses of affiliated
companies were ($0.4) million in the second quarter of 1997 compared to a gain
of $0.4 million last year. Prior to the second quarter of 1997 the Company
accounted for its investment in Donnelly Hohe under the equity method of
accounting.
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The Company's effective tax rate is 37.8% and 37.6% for the three and six month
periods ending December 28, 1996, respectively. This compares to 34.4% and 32.8%
for the same respective periods last year. The increase in the effective tax
rate is due to higher net operating losses at the Company's subsidiaries in
Ireland. The net operating losses are primarily caused by price decreases
resulting from currency fluctuations associated with the strong Irish punt, a
paint supplier performance problem and high development and new business
start-up costs.
The Company had net income of $3.9 million in the second quarter of 1997
compared to $2.6 million in the same period last year. Earnings increased in
this period primarily due to higher sales volumes and stronger operating
performance in North America in addition to the gain on sale of Vision Group PLC
stock. Net income for the six month period was $5.6 million in 1997 compared to
$0.8 million in 1996. Net income increased for the six month period due to
higher sales volumes, significantly lower start-up costs in North America, lower
selling, general and administrative expenses as a percentage to sales for the
period and the gain in sale of Vision Group PLC. The consolidation of Donnelly
Hohe did not impact the comparability of net income from 1996 to 1997 for either
the second quarter or six month period.
The Company is committed to improving shareholder value through focused
development of core automotive businesses primarily by increasing the Company's
dollar content per vehicle through introduction of new technologies, increasing
volume through penetration into new and emerging markets and improving the
efficiency of current operations and the effectiveness of new product launches.
The Company believes that future results of operations will be influenced by the
Company's introduction of improved program management and lean manufacturing
systems, introduction of new technologies and programs to the Company,
significant global pricing pressures and general economic and industry
conditions. Operating variances, new business start-up costs, continued
development costs and pricing fluctuations from currency movements in foreign
markets are expected to continue placing pressure on the performance of the
Company's European operations into the second half of fiscal 1997. The Company
is working to restructure European operations to improve financial performance
to a level more in line with overall corporate financial goals. In addition
global pricing pressures are continuing to place pressure on the Company's
overall gross profit margin performance as pricing agreements are implemented
throughout the year.
LIQUIDITY AND CAPITAL RESOURCES
In November 1996, the Company entered into an agreement to sell, on a revolving
basis, an interest in a defined pool of trade accounts receivable. The maximum
allowable amount of receivables to be sold is $50 million. The amount
outstanding at any measurement date varies based upon the level of eligible
receivables and management's discretion. Under this agreement, $32.0 million
were sold at December 28, 1996. The sale is reflected as a reduction of accounts
receivable in the accompanying Combined Consolidated Balance Sheet and as
operating cash flows in the accompanying Combined Consolidated Statement of Cash
Flows. The proceeds of sales are less than the face amount of accounts
receivable sold by an amount that approximates the purchaser's financing costs
of issuing its own commercial paper backed by these accounts receivable. The
discount fees were $0.2 million during the second quarter ended December 28,
1996, and has been included in selling, general and administrative expense in
the Company's Combined Consolidated Statement of Income. The Company, as agent
for the purchaser, retains collection and administrative responsibilities for
the participating interests of the defined pool.
11
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The Company's current ratio was 1.5 and 2.0 at December 28, 1996 and June 29,
1996, respectively. Working capital was $58.9 million at December 28, 1996,
compared to $63.5 million at June 29, 1996. The decrease in the current ratio
for the period was due to the sale of $32.0 million of accounts receivable at
December 28, 1996, offset slightly by the addition of Donnelly Hohe's working
capital and the increase in cash. The Company had a cash balance of $10.8
million at December 28, 1996, due to the timing of customer payments and cash
received on the sale of accounts receivable at Donnelly Hohe. The cash balance
was used to reduce bank debt by December 30, 1996.
Capital expenditures for the first six months of 1997 and 1996 were $11.5 and
$12.5 million, respectively. Capital spending in 1997 is expected to be at
approximately the same level as the previous year. Capital expenditures are not
expected to be significantly higher with the consolidation of Donnelly Hohe.
The Company's $80 million bank revolving credit agreement had borrowings against
it of $24.7 million at December 28, 1996, compared to $42.2 million at June 29,
1996. The decrease is primarily due to the sale of $32.0 million of accounts
receivable at December 28, 1996, the proceeds of which were used to reduce
borrowings against the Company's revolving credit agreement. Donnelly Hohe has a
75 million German Mark (approximately $45-$50 million) revolving line of credit
agreement, which had borrowings against it of approximately $28.7 million as of
November 30, 1996.
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.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 21, 1997, Midwest Manufacturing Holdings, L.L.C. filed a lawsuit
against the Company in Cook County Illinois Circuit Court with respect to
terminated discussions regarding the possibility of Midwest's acquisition of the
Company's Information Products business. The litigation has been removed to the
Federal District Court for the Northern District of Illinois. Midwest alleges
that a verbal agreement to purchase the Information Products business had been
reached, and has filed its lawsuit in an attempt to compel the Company to
proceed with the sale. In mid-January, the Company informed Midwest that it did
not believe the transaction could be completed due to a number of different
reasons. The Company believes that it has acted in good faith and in the best
interests of its employees and shareholders. Management believes that the claim
by Midwest is without merit and will be resolved without material effect on the
Company's financial position or results of operations and cash flows.
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 that such litigation and claims will be resolved
without material effect on the Company's financial position or results of
operations and cash flows.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 18 - Preferability Letter for Change in Accounting Method
The preferability letter for change in accounting method was filed as part of
Form 10-Q for the quarter ended September 28, 1996, as Exhibit 18 and is hereby
incorporated herein by reference.
Exhibit 27 - Financial Data Schedule
(b) REPORTS ON FORM 8-K
The Registrant filed a Form 8-K, dated October 28, 1996, relating to the
acquisition of a controlling interest in Donnelly Hohe GmbH & Co. KG ("Donnelly
Hohe.") Therefore, Donnelly Hohe's financial statements are consolidated with
those of the Registrant beginning in the second quarter. The initial filing
included a description of the acquisition and additional options to increase the
Registrant's ownership in the future. The Registrant also filed a Form 8-KA,
dated November 27, 1996, which was an amendment to the above Form 8-K. The
originally filed Form 8-K did not include audited financial statements for Hohe
(the business acquired) or pro forma financial statements which were both filed
under cover of the amended Form 8-KA.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
DONNELLY CORPORATION
Registrant
Date: February 12, 1997 /s/ J. Dwane Baumgardner
------------------------
J. Dwane Baumgardner
(Chairman, Chief Executive
Officer, and President)
Date: February 12, 1997 /s/ William R. Jellison
-----------------------
William R. Jellison
(Vice President, Corporate
Controller, and Treasurer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
December 28, 1996 Donnelly Corporation financial statements and is
qualified in its entirety by reference to such financial statements.
On December 6, 1996, the Board of Directors declared a five for four stock split
in the form of a 25 percent stock dividend distributed on January 30, 1997.
Financial data schedules previously filed by the Registrant have not been
restated for this recapitalization.
</LEGEND>
<CIK> 0000805583
<NAME> DONNELLY CORPORATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Jun-28-1997
<PERIOD-START> Jun-30-1996
<PERIOD-END> Dec-28-1996
<CASH> 10,794
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<RECEIVABLES> 86,048
<ALLOWANCES> 571
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<PP&E> 295,968
<DEPRECIATION> 133,876
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<CURRENT-LIABILITIES> 117,681
<BONDS> 135,045
0
531
<COMMON> 790
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<TOTAL-LIABILITY-AND-EQUITY> 372,666
<SALES> 301,437
<TOTAL-REVENUES> 301,437
<CGS> 243,518
<TOTAL-COSTS> 243,518
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<INCOME-TAX> 4,143
<INCOME-CONTINUING> 6,878
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,639
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.57
</TABLE>
