<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarter ended March 28, 1998 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.)
49 West Third 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 / /
5,689,570 shares of Class A Common Stock and 4,358,505 shares of
Class B Common Stock were outstanding as of April 30, 1998.
<PAGE> 2
DONNELLY CORPORATION
INDEX
Page
Numbering
---------
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Combined Consolidated Balance Sheets
- March 28, 1998 and June 28, 1997 3
Condensed Combined Consolidated Statements of Income
- Three months and nine months ended March 28, 1998
and March 29, 1997 4
Condensed Combined Consolidated Statements of Cash Flows
- Nine months ended March 28, 1998 and
March 29, 1997 5
Notes to Condensed Combined Consolidated Financial
Statements 6-8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 9-15
PART II. OTHER INFORMATION
Item 1. Legal Proceeding 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS
<TABLE>
March 28, June 28,
In thousands 1998 1997
- ------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,679 $ 8,568
Accounts receivable, less allowance of
$881 and $879 75,137 67,850
Inventories 43,384 42,484
Prepaid expenses and other current assets 24,042 33,738
-------- --------
Total current assets 149,242 152,640
Property, plant and equipment 295,409 286,451
Less accumulated depreciation 127,892 121,327
-------- --------
Net property, plant and equipment 167,517 165,124
Investments in and advances to affiliates 18,988 15,487
Other assets 24,051 25,042
-------- --------
Total assets $359,798 $358,293
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts and notes payable $ 68,166 $ 76,392
Other current liabilities 41,952 39,257
-------- --------
Total current liabilities 110,118 115,649
Long-term debt, less current maturities 118,606 122,798
Deferred income taxes and other liabilities 31,323 25,674
-------- --------
Total liabilities 260,047 264,121
-------- --------
Minority interest 732 345
Preferred stock 531 531
Common stock 1,002 991
Other shareholders' equity 97,486 92,305
-------- --------
Total shareholders' equity 99,019 93,827
-------- --------
Total liabilities and
shareholders' equity $359,798 $358,293
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 4
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
Three Months Ended Nine Months Ended
In thousands March 28, March 29, March 28, March 29,
except share data 1998 1997 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 193,658 $ 181,681 $ 553,634 $ 483,118
Cost of sales 161,009 148,360 459,432 391,878
-------- -------- -------- --------
Gross profit 32,649 33,321 94,202 91,240
OPERATING EXPENSES:
Selling, general and
administrative 17,380 18,514 50,057 47,324
Research and development 8,595 9,404 28,003 24,971
-------- -------- -------- --------
Operating income 6,674 5,403 16,142 18,945
NON-OPERATING (INCOME) EXPENSES:
Interest expense 2,017 2,663 6,711 7,654
Royalty income (180) (135) (452) (1,216)
Interest income (204) (135) (481) (549)
Gain on sale of
equity investment --- --- (4,598) ---
Other (income) expense, net (641) (370) (629) (1,345)
-------- -------- -------- --------
Income before taxes
on income 5,682 3,380 15,591 14,401
Taxes on income 1,408 1,226 5,156 5,369
-------- -------- -------- --------
Income before minority
interest and equity
earnings 4,274 2,154 10,435 9,032
Minority interest in net
(income) loss of
subsidiaries (3) 490 231 (104)
Equity in earnings (losses)
of affiliated companies (898) 314 (1,138) (331)
-------- -------- -------- --------
Net income $ 3,373 $ 2,958 $ 9,528 $ 8,597
-------- -------- -------- --------
-------- -------- -------- --------
PER SHARE OF COMMON STOCK:
Basic net income
per share $ 0.34 $ 0.30 $ 0.96 $ 0.87
Diluted net income
per share $ 0.34 $ 0.30 $ 0.95 $ 0.86
Cash dividends
declared $ 0.10 $ 0.10 $ 0.30 $ 0.26
Average common shares
outstanding 9,963,706 9,848,733 9,932,265 9,822,335
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 5
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Nine Months Ended
March 28, March 29,
In thousands 1998 1997
- ------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 9,528 $ 8,597
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH FROM (FOR) OPERATING ACTIVITIES:
Depreciation and amortization 18,013 15,291
Gain on sale of property and equipment (54) (596)
Gain on sale of affiliate stock (4,598) (872)
Deferred pension cost and postretirement
benefits 4,043 3,916
Deferred income taxes 1,248 (1,587)
Minority interest income (loss) (546) 312
Equity in losses of affiliated companies 1,138 786
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Sale (repayment) of accounts receivable (884) 38,777
Accounts receivable (9,093) (12,738)
Inventories (3,943) (4,289)
Prepaid expenses and other current assets 3,827 (2,457)
Accounts payable and other current liabilities (1,441) 9,008
Other (3,773) (2,366)
-------- --------
Net cash from operating activities 13,465 51,782
-------- --------
-------- --------
INVESTING ACTIVITIES
Capital expenditures (33,050) (20,194)
Proceeds from sale of property and equipment 608 3,248
Investments in and advances to equity
affiliates (653) (4,589)
Proceeds from sale of affiliate stock 11,067 974
Change in unexpended bond proceeds --- 142
Cash increase due to consolidation of subsidiary --- 9,963
Other (295) (781)
-------- --------
Net cash for investing activities (22,323) (11,237)
-------- --------
-------- --------
FINANCING ACTIVITIES
Proceeds from long-term debt 9,452 ---
Repayments on long-term debt (429) (33,369)
Common stock issuance 1,110 863
Dividends paid (2,578) (2,592)
Other (218) ---
-------- --------
Net cash from (for) financing activities 7,337 (35,098)
-------- --------
-------- --------
Effect of foreign exchange rate changes on cash (368) (680)
(Decrease) increase in cash and cash
equivalents (1,521) 5,447
Cash and cash equivalents, beginning of period 8,568 1,303
-------- --------
Cash and cash equivalents, end of period $ 6,679 $ 6,070
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
DONNELLY CORPORATION
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
March 28, 1998
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 nine months ended March 28, 1998, should not be
considered indicative of the results that may be expected for the
year ended June 27, 1998. The combined consolidated balance sheet
at June 28, 1997, 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 28, 1997. Certain
reclassifications have been made to current and prior year,
previously released, data to conform to the current presentation
and had no effect on net income reported for any period.
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 the calendar quarter end. Both the quarters
ended March 28, 1998, and March 29, 1997, included 13 weeks.
NOTE B---INVENTORIES
<TABLE>
Inventories consist of:
March 28, June 28,
(In thousands) 1998 1997
- ------------------------------------------------------------------
<S> <C> <C>
FIFO and average cost:
Finished products and work in process $ 17,531 $ 16,675
Raw materials 25,853 25,809
-------- --------
$ 43,384 $ 42,484
-------- --------
-------- --------
</TABLE>
Note C---Earnings Per Share
Effective December 27, 1997, the Company has adopted the provisions
of Statement of Financial Accounting Standards No. 128, Earnings
per Share. Statement No. 128 replaces the previously reported
primary and fully diluted earnings per share with basic and diluted
earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options and
convertible securities. Diluted earnings per share is computed
similarly to fully diluted earnings per share. All earnings per
share amounts for all periods presented have been restated to
conform to the requirements of Statement No. 128.
<PAGE> 7
The following table sets forth the computation of basic and diluted
earnings per share for each period reported:
<TABLE>
Three Months Ended Nine Months Ended
March 28, March 29, March 28, March 29,
1998 1997 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $3,373,000 $2,958,000 $9,528,000 $8,597,000
Less: Preferred stock
dividends (9,959) (9,959) (29,877) (29,877)
--------- --------- --------- ---------
Income available to common
stockholders 3,363,041 2,948,041 9,498,123 8,567,123
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted-average
shares 9,963,706 9,848,733 9,932,265 9,822,335
Plus: Effect of dilutive
stock options 135,196 161,962 143,976 154,263
--------- --------- --------- ---------
Adjusted weighted-average
shares 10,098,902 10,010,695 10,076,241 9,976,598
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
Basic earnings per
share $ 0.34 $ 0.30 $ 0.96 $ 0.87
---------- ---------- --------- ---------
---------- ---------- --------- ---------
Diluted earnings
per share $ 0.33 $ 0.29 $ 0.94 $ 0.86
---------- ---------- --------- ---------
---------- ---------- --------- ---------
</TABLE>
NOTE D---SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
Nine Months Ended
March 28, March 29,
(In thousands) 1998 1997
- -----------------------------------------------------------------
<S> <C> <C>
Cash paid during the period for:
Interest $ 6,269 $ 7,437
Income taxes $ 751 $ 8,575
Non-Cash investing activities:
Transfer of non-cash net assets to
equity-method affiliate (See Note E) $ 7,845 $ ---
</TABLE>
<PAGE> 8
NOTE E---INVESTMENTS IN AND ADVANCES TO AFFILIATES
On November 3, 1997, the Company formed Lear-Donnelly Overhead
Systems, L.L.C. ('Lear-Donnelly'), a 50% owned joint venture with
Lear Corporation ('Lear'), based in Southfield, Michigan, one of
the world's largest independent automotive suppliers. Lear-
Donnelly is engaged in the design, development and production of
overhead systems for the global automotive market, including
complete overhead systems, headliners, consoles and lighting
components, vehicle electrification interfaces, electronic
components, visors and assist handles ('products'). The Company and
Lear each contributed certain technologies, assets and liabilities
for the creation of the joint venture. The Company transferred net
assets of $7.8 million associated with its interior trim and
lighting businesses, including $10 million of debt, to the joint
venture for its 50% interest.
Lear-Donnelly manufactures products for sale to both the Company
and Lear, who are responsible for the customer sales efforts to the
original equipment manufacturers. Because existing and certain
future contracted sales have been retained by the Company, the
existence of the joint venture does not significantly impact the
comparability of net sales or net income of the Company from period
to period. However, due to the supply agreement between Lear-
Donnelly and the parent companies and the related net earnings of
the joint venture being accounted for under the equity method, the
Company's gross profit and operating margins are expected to be
unfavorably impacted.
In the second quarter of 1998, the Company sold its 50% interest in
Applied Films Corporation ('AFC') located in Boulder, Colorado. As
a result of this sale, the Company received $7.9 million in net
proceeds, after taxes and related out of pocket fees, and
recognized a one-time pretax gain of approximately $4.6 million, or
$0.22 per share after tax. AFC is primarily a manufacturer of
thin-film glass coatings and related production equipment used in
the production of liquid crystal displays. The Company sold all
of its shares in AFC during an initial public offering that was
completed in November.
NOTE F---GLOBAL REVOLVER
In September 1997, the Company entered into an unsecured $160
million multi-currency global revolving credit agreement to meet
the financing needs of Donnelly Corporation and its majority owned,
controlled subsidiaries. This multi-currency revolving credit
agreement replaces the Company's previous unsecured $80 million
domestic credit agreement and its 75 million Deutsche Mark
revolving Eurocredit loan agreement. Borrowings under this
agreement bear interest, at the election of the Company, at a
floating rate equal to (i) the Federal Funds Funding rate plus
.385% to .875% or (ii) the Eurodollar rate plus .185% to .675%
based on specific financial ratios of the Company. The Company's
initial borrowings under the agreement bear interest at a floating
rate of approximately 3.5-4.0% per annum when borrowed in Deutsche
Marks and 5.7-6.0% per annum when borrowed in U.S. Dollars. This
new revolving credit agreement terminates in September 2004, with
an opportunity for the Company to extend for one year periods with
the consent of all the revolver banks.
<PAGE> 9
Item 2.
DONNELLY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THIRD QUARTER REPORT
FOR THE NINE MONTHS ENDED MARCH 28, 1998
On November 3, 1997, the Company formed Lear-Donnelly Overhead
Systems, L.L.C. ('Lear-Donnelly'), a 50% owned joint venture with
Lear Corporation ('Lear'), based in Southfield, Michigan, one of
the world's largest independent automotive suppliers. Lear-
Donnelly is engaged in the design, development and production of
overhead systems for the global automotive market, including
complete overhead systems, headliners, consoles and lighting
components, vehicle electrification interfaces, electronic
components, visors and assist handles ('products'). The Company
and Lear each contributed certain technologies, assets and
liabilities for the creation of the joint venture. The Company
transferred net assets of $7.8 million associated with its interior
trim and lighting businesses, including $10 million of debt, to the
joint venture for its 50% interest.
Lear-Donnelly manufactures products for sale to both the Company
and Lear, who are responsible for the customer sales efforts to the
original equipment manufacturers. Because existing and certain
future contracted sales have been retained by the Company, the
existence of the joint venture does not significantly impact the
comparability of net sales or net income of the Company from period
to period. However, due to the supply agreement between Lear-
Donnelly and the parent companies and the related net earnings of
the joint venture being accounted for under the equity method, the
Company's gross profit and operating margins are unfavorably
impacted.
On February 3, 1998, the Company reached a final settlement with
Happich Fahrzeug-Innausstaltung GmbH ('Happich') regarding
Happich's withdrawal from Donnelly Happich Technology, Inc.
('DHT'), a joint venture for the production of interior trim
components, see Part II, Item 1 for a more detailed discussion. As
a result of the settlement, the Company now owns 100% of DHT
(rather than 60%), resulting in increased charges against earnings
from start-up costs of DHT. However, the Company also received
payments from Happich for past and future damages and for costs
incurred as a result of Happich's withdrawal from DHT which offset
the additional start-up costs, resulting in a positive impact on
net income in the first and second quarters. The settlement had no
impact on the Company's net income in the third quarter.
In the second quarter of 1997, the Company acquired a controlling
interest in the general partner of Donnelly Hohe, and therefore,
began consolidating the financial statements of Donnelly Hohe with
those of the Company. Prior to acquiring control of the general
partner, the Company's investment in Donnelly Hohe was accounted
for using the equity method. Because the Company's limited
partnership interest has remained unchanged, the impact on net
income has remained unchanged for each period reported.
The Company's fiscal year ends on the Saturday nearest June 30, and
its fiscal quarters end on the Saturdays nearest September 30,
December 31, March 31 and June 30. Donnelly Hohe's fiscal year ends
on May 31, and its fiscal quarters end on August 31, November 30,
February 28 and May 31. Accordingly, the Company's Combined
Consolidated Financial Statements as of or for a period ended on a
particular date include Donnelly Hohe's financial statements as of
or for a period ended approximately
<PAGE> 10
one month before that date. Accordingly, the Company's financial
statements for the period ended March 28, 1998, consolidate
Donnelly Hohe's financial statements for the period ended
February 28, 1998.
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. The
comparability of the Company's results on a period to period basis
may also be affected by the Company's formation of new joint
ventures, alliances, acquisitions, and substantial investment in
new product lines.
RESULTS OF OPERATIONS
Net sales were $193.7 million in the third quarter of 1998 compared
to $181.7 million for the third quarter of 1997. For the nine
month period, net sales were $553.6 million and $483.1 million for
1998 and 1997, respectively, an increase of 14.6% which is
primarily attributed to the consolidation of Donnelly Hohe.
Excluding the consolidation of Donnelly Hohe, consolidated net
sales for the first nine months of 1998 increased by approximately
5% compared to 1997.
Net sales for the Company's North American operations increased by
approximately 10.8% and 9.9% in the third quarter and for the first
nine months of 1998 compared to 1997, respectively. The increase
was primarily due to programs launched in 1997 running at full
production volumes and new product introductions in the modular
window, door handle and interior trim product lines. North
American car and light truck build was flat in the third quarter
and increased only moderately for the nine-month period. Net sales
for the Company's European operations, as reported in the local
currencies for these operations were slightly higher in the third
quarter of 1998 compared to 1997 and increased moderately in the
first nine months of 1998, compared to the same period in 1997,
excluding the impact of the consolidation of Donnelly Hohe.
However, due to the increased strength of the dollar to the Deutsch
Mark, Irish Punt and French Franc for the third quarter and first
nine months of 1998 as compared to the third quarter and first nine
months of 1997, the reported consolidated net sales in dollars for
the Company's European operations were flat quarter to quarter and
down slightly compared to the first nine months of 1997, excluding
the impact of the consolidation of Donnelly Hohe.
Gross profit margin for the third quarter of 1998 was 16.9%
compared to 18.3% for the third quarter of 1997 and 17.0% and 18.9%
for the nine month periods of 1998 and 1997, respectively. The
Company's North American gross profit margins for the three and
nine month periods were lower compared to the same periods in 1997
primarily due to the formation of the Lear-Donnelly joint venture
and relatively greater revenue growth of products with lower profit
margins. The Company's North American operations have experienced
a more rapid rate of revenue growth in modular window net sales,
relative to the net sales growth of other products, such as
mirrors, that have higher profit margins. The Company may
experience a change in gross profit margin from period to period
based on the sales growth or change in mix of higher or lower
margin products. The favorable arbitration award associated with
DHT offset excess costs on the visor program in the first and
second quarters and improved margins slightly for the first nine
month of 1998. Some of the excess costs are expected to continue
in the future. The Company's European gross profit margin in the
third quarter was stronger than 1997 due to higher volumes at the
Company's German operations, strong performance in Spain and France
and operational improvements in Ireland. For the nine month
period, the Company's European gross profit margin, as a percent to
sales, was down slightly.
<PAGE> 11
Selling, general and administrative expenses decreased to 9.0% of
net sales in the third quarter of 1998 from 10.2% of net sales in
the third quarter of 1997, primarily due to the formation of the
Lear-Donnelly joint venture. These costs are lower as a percent to
sales due to certain general and administrative expenses to support
the interior trim and lighting business transferring to the joint
venture, which is accounted for under the equity method. Selling,
general, and administrative expenses were 9.0% of net sales for the
first nine months of 1998 compared to 9.8% for the same period last
year. Discount fees of $1.7 million associated with asset
securitization entered into in November 1996 are also included in
selling, general and administrative expenses for the first nine
months of 1998, compared to $1.0 million of discount fees for the
first nine months of 1997.
Research and development expenses for the third quarter of 1998
were 4.4% of net sales compared to 5.2% of net sales for the third
quarter of 1997 and were 5.1% and 5.2% of net sales for the first
nine months of 1998 and 1997, respectively. The Company expects
future research and development expenses to be lower than in the
past, primarily due to the transfer of direct expenses to support
the interior trim and lighting business to the Lear-Donnelly joint
venture, which is being accounted for under the equity method and
due to the consolidation of Donnelly Hohe.
The Company's operating income was $6.7 million in the third
quarter of 1998, up from $5.4 million in the third quarter of 1997
and for the nine month period was $16.1 million, down from $18.9
million in 1997. The Company's North American operating income was
lower as a percent to sales for the three and nine months periods
primarily due to losses associated with the start-up of Donnelly
Optics and an unfavorable product mix. A favorable arbitration
award associated with DHT offset excess costs on the visor program
in the first and second quarters and improved margins for the nine
month period slightly. Some of the excess costs are expected to
continue in the future. The formation of the Lear-Donnelly joint
venture did not have a significant impact on the Company's North
American operating income. The Company's European operating income
was favorably impacted for the quarter due to higher volumes at the
Company's German operations, strong performance in Spain and France
and operational improvements in Ireland. Operating Income for the
Company's European operations, as a percent to sales, was flat for
the nine month period compared to 1997. In Germany, plans for
restructuring the operations have been delayed due to the change in
management at Donnelly Hohe. A modified restructuring plan is in
the process of being implemented in the fourth quarter of 1998.
Interest expense was $2.0 and $6.7 million in the third quarter and
first nine months of 1998, respectively, compared to $2.7 and $7.7
million for the third quarter and first nine months of 1997,
respectively. Interest expense was lower primarily due to lower
average debt during the quarter compared to the same period last
year and favorable interest rates. In the second quarter of 1997,
the Company entered into an agreement to sell an interest in a
defined pool of trade accounts receivable. As of the Company's
Consolidated Balance Sheet, dated March 28, 1998, a $41.5 million
interest in accounts receivable was sold under this agreement, with
proceeds used to reduce revolving lines of credit. The discount
expense associated with this transaction is included in selling,
general and administrative expenses.
Royalty income was $0.2 million and $0.1 million for the third
quarter of 1998 and 1997, respectively, and $0.5 million and $1.2
million for the nine month periods, respectively. Royalty income
is lower due to the completion of various licensing agreements with
companies in Asia. Other income was $0.6 million and $0.4 million
for the third quarter of 1998 and 1997, respectively, and $0.6
million and $1.3 million for the nine month periods, respectively.
Other income is slightly higher in the third quarter of 1998,
compared to the previous year, due to the sale of certain operating
assets, as well as a favorable
<PAGE> 12
gain on foreign currency transactions. In the second quarter of
1997, the Company sold 2.5% of its holding in Vision Group plc
('Vision Group'), resulting in a $0.9 million gain.
In the second quarter of 1998, the Company recognized a one-time
pretax gain of approximately $4.6 million, or $0.22 per share after
tax, from the sale of its 50% interest in Applied Films Corporation
('AFC') located in Boulder, Colorado. The Company sold all of its
shares in AFC during an initial public offering that was completed
in November 1997. As a result of this sale, the Company received
$7.9 million in net proceeds, after taxes and related fees.
The Company's effective tax rate was 24.8% and 33.1% for the three
and nine month periods ended March 28, 1998, respectively. This
compares to 36.3% and 37.2% for the respective comparable periods
for 1997. The lower effective tax rate for the quarter is due to a
tax benefit recognized on trade income taxes in the period at the
Company's German operations.
Minority interest in net (income) loss of subsidiaries was $0.0
million in the third quarter of 1998 compared to $0.5 million in
the third quarter of 1997 and $0.2 million and ($0.1) million in
the first nine months of 1998 and 1997, respectively. Equity in
earnings (losses) of affiliated companies was ($0.9) million in the
third quarter of 1998 compared to $0.3 million for the same period
in 1997 and ($1.1) million and ($0.3) million in the first nine
months of 1998 and 1997, respectively. Equity earnings were also
lower in the third quarter and nine month periods due to losses
incurred at Vision Group. The losses were incurred due to slower
than anticipated consumer acceptance for Vision Group's integrated
camera microchip products. In the first quarter of 1997, the
Company accounted for its investment in Donnelly Hohe under the
equity method of accounting. The formation of the Lear-Donnelly
joint venture did not have a significant impact on the Company's
equity earnings for the three or nine month periods.
Net income was $3.4 million in the third quarter of 1998, compared
to $3.0 million for the third quarter of 1997 and $9.5 million and
$8.6 million for the first nine months of 1998 and 1997,
respectively. Net income for the nine month periods included a
$2.2 million net gain after taxes associated with the sale of AFC.
The Company recognized a net gain of approximately $0.7 million in
the second quarter of 1998, and $1.2 million in the first half of
1998, associated with the cash settlement following a favorable
interim DHT arbitration award granted to the Company on July 31,
1997. This expected cash settlement was based upon recovery of
past and future losses and the recovery of litigation costs. The
consolidation of Donnelly Hohe did not impact the comparability of
net income from 1997 to 1998 for the third quarter or the nine
month periods.
The Company continues to focus on implementing plans during 1998 to
improve financial performance. However, the delays in implementing
improvements Europe and the investments required for Donnelly
Optics are making it difficult to improve the financial performance
of the Company. Donnelly Optics continues to experience major
losses due to slower-than-expected consumer acceptance of digital
imaging products. The Company is currently evaluating options for
responding to the market conditions.
LIQUIDITY AND CAPITAL RESOURCES
In September 1997, the Company entered into a new unsecured $160
million multi-currency global revolving credit agreement to meet
the financing needs of Donnelly Corporation and its majority owned,
controlled subsidiaries. This multi-currency revolving credit
agreement replaces the Company's previous unsecured $80 million
domestic credit agreement and its 75 million Deutsche Mark
revolving
<PAGE> 13
Eurocredit loan agreement. Borrowings under this agreement bear
interest, at the election of the Company, at a floating rate equal
to (i) the Federal Funds Funding rate plus .385% to .875% or (ii)
the Eurodollar rate plus .185% to .675% based on specific financial
ratios of the Company. The Company's initial borrowings under the
agreement bear interest at a floating rate of approximately 3.5-
4.0% per annum when borrowed in Deutsche Marks and 5.7-6.0% per
annum when borrowed in U.S. Dollars. This new revolving credit
agreement terminates in September 2004, with an opportunity for the
Company to extend for one year periods with the consent of all the
revolver banks.
The Company's $160 million multi-currency global revolving credit
agreement had borrowings against it of $41.1 million in the
Company's Combined Consolidated Balance Sheet dated March 28, 1998,
compared to no borrowings against the Company's $80 million bank
revolving credit agreement and borrowings of $33.4 million against
the Company's 75 million Deutsche Mark (approximately $41 to $44
million) credit agreement in the Company's Combined Consolidated
Balance Sheet dated June 28, 1997. These credit agreements were
replaced by the $160 million revolver in September 1997. The
Company's long-term borrowing decreased by $4.2 million from June
28, 1997, to March 28, 1998, primarily due to lower working capital
requirements for the period, proceeds associated with the sale of
the Company's investment in AFC and the transfer of debt to the
Lear-Donnelly joint venture, offset by borrowing to support capital
expenditures.
The Company's current ratio was 1.4 and 1.3 at March 28, 1998 and
June 28, 1997, respectively. Working capital was $39.1 million at
March 28, 1998, compared to $37.0 million at June 28, 1997. The
increase in working capital at March 28, 1998, was primarily due to
a decrease in accounts payable combined with an increase in
accounts receivable, compared to June 28, 1997, offset by a
decrease in prepaid tooling for the same period. Accounts payable
at June 28, 1997, was higher than normal due to timing of payments
on account at this date.
Capital expenditures for the first nine months of 1998 and 1997
were $33.1 and $20.2 million, respectively. Capital spending in
1998 is expected to be higher compared to the previous year due to
the consolidation of Donnelly Hohe for the entire twelve month
period, business in diffractive optics and electrochromic mirrors
and implementation of new manufacturing, distribution and
administrative systems in North America and Europe. 1998 capital
spending includes expenditures on assets for the interior lighting
and trim business through November 3, 1997.
The Company believes that its long term liquidity and capital
resource needs will continue to be provided principally by funds
from operating activities, supplemented by borrowings under the
Company's existing credit facilities. The Company also considers
equity offerings to properly manage the Company's total
capitalization position. The Company considers, from time to time,
new joint ventures, alliances and acquisitions, the implementation
of which could impact the liquidity and capital resource
requirements of the Company.
Except for Mexico, the value of the Company's consolidated assets
and liabilities located outside the United States and income and
expenses reported by the Company's foreign operations may be
affected by translation values of various functional currencies.
Translation gains and loss adjustments are reported as a separate
component of shareholders' equity. For the Company's subsidiary in
Mexico, whose functional currency is the United States Dollar,
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.
<PAGE> 14
The Company utilizes interest rate swaps and foreign exchange
contracts, from time to time, 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.
'Safe Harbor' Provisions
This report contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that any forward-looking statements, including
statements regarding the intent, belief, or current expectations of
the Company or its management, are not guarantees of future
performance and involve risks and uncertainties. Actual results
may differ materially from those in forward-looking statements as a
result of various factors including, but not limited to (i) general
economic conditions in the markets in which the Company operates,
(ii) fluctuation in worldwide or regional automobile and light
truck production, (iii) changes in practices and/or policies of the
Company's significant customers and (iv) other risks and
uncertainties. The Company does not intend to update these
forward-looking statements.
Recently Issued Accounting Standards
SFAS No. 130, 'Reporting Comprehensive Income,' establishes
standards for reporting and display of comprehensive income, its
components and accumulated balances in a financial statement that
is displayed with the same prominence as other financial
statements. Comprehensive income is defined to include all changes
in equity except those resulting from investments by owners and
distributions to owners.
SFAS No. 131, 'Disclosures about Segments of an Enterprise and
Related Information,' which supersedes SFAS No. 14, 'Financial
Reporting for Segments of a Business Enterprise,' establishes
standards for the way that public enterprises report information
about operating segments in annual financial statements and
requires reporting of selected information about operating segments
in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and
services, geographic areas and major customers.
SFAS Nos. 130 and 131 are effective for financial statements for
fiscal years beginning after December 15, 1997, and require
comparative information for earlier years to be restated.
Management has not yet fully evaluated the impact, if any, they may
have on future financial statement disclosures. However, results
of operations and financial position will be unaffected by
implementation of these new standards.
SFAS No. 132, 'Employer's Disclosures about Pensions and Other
Postretirement Benefits,' an amendment of FASB Statements No. 87,
88, and 106, revises the standards for employers' disclosures about
pension and other postretirement benefit plans. It does not change
the measurement or the recognition of those plans. This Statement
is effective for fiscal years beginning after December 15, 1997,
and requires comparative information for earlier periods to be
restated. Results of operations and financial position of the
Company will be unaffected by implementation of this new standard.
SOP 98-1, 'Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use,' provides guidance on accounting for
the costs of computer software developed or obtained for internal
use and requires certain costs incurred to be expensed or
capitalized depending on the stage of its development and nature.
This Statement of Position is effective for fiscal years beginning
after December 15, 1998. The Company's current accounting policy
complies with this Statement. Results of operations and financial
position of the Company will be unaffected by this new standard.
<PAGE> 15
SOP 98-5, 'Reporting on Costs of Start-Up Activities,' requires
costs of start-up activities and organization costs to be expensed
as incurred. This Statement of Position is effective for fiscal
years beginning after December 15, 1998. Management has not fully
evaluated the impact of this standard on results of operations and
financial position of the Company.
No other recently issued accounting standards are expected to have
a material impact on the Company.
Year 2000 Date Conversion
The Company has established an ongoing process to identify and
resolve the business issues associated with the Year 2000. The
Year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the applicable year.
Any of the Company's programs, and programs at the Company's
customers or suppliers, that have time-sensitive software may
recognize a date using '00' as the year 1900 rather than the year
2000, which could result in miscalculations or system failures. A
global team of professionals has been assigned responsibility for
addressing the business issues and monitoring progress toward their
resolution. In addition, executive management regularly monitors
the status of the Company's Year 2000 remediation plans.
Based on preliminary information, costs of addressing the Year 2000
issues are not currently expected to have a materially adverse
impact on the Company's financial position, results of operations
or cash flows in future periods. However, if the Company, its
customers or vendors are unable to complete critical Year 2000
compliance efforts in a timely manner, it could result in a
material financial risk. Management believes it is devoting the
necessary resources to resolve all known significant Year 2000
issues in a timely manner. The Company will expense any
maintenance or modification costs incurred to resolve this issue
while the costs of new software will be capitalized and amortized
over the software's useful life.
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 21, 1997, Midwest Manufacturing Holdings, L.L.C.
('Midwest') 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 or to pay
Midwest damages. On August 28, 1997, the court granted the
Company's motion to dismiss one of three counts and on February 5,
1998, the court granted the Company's motion for summary judgment
on the remaining two counts. Midwest has appealed the court's
decision to the U.S. Seventh Circuit Court of Appeals. Management
believes that the claim by Midwest will be resolved without a
material effect on the Company's financial condition or results of
operations and liquidity.
In June 1994, the Company entered into a joint venture with Happich
Fahrzeug-InnausstaHung GmbH of Germany ('Happich') to manufacture
and sell sun visors, grab handles and other interior parts in North
America. In 1995, when the joint venture was at an early stage of
its development, Happich expressed its desire to terminate the
joint venture. The parties had been engaged in arbitration over
the terms of the joint venture termination since July 29, 1996.
On July 31, 1997, the Company was granted an interim arbitration
award favorable to the Company. On February 3, 1998, the Company
reached a final settlement with Happich on all outstanding issues.
As a result of the settlement, the Company owns 100% of the former
joint venture, received payment for damages and costs incurred and
entered into other agreements with respect to certain technology
and the supply of parts.
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, results of operations and
liquidity, individually and in the aggregate.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 10.1 An English language translation of an Amendment
dated March 23, 1998, amending the Acquisition
Agreement between the Registrant, Donnelly Holding
GmbH, Donnelly Hohe GmbH & Co. KG and the other
parties thereto, dated May 25, 1995.
Exhibit 27 Financial Data Schedules
<PAGE> 17
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: May 7, 1998 /s/ J. Dwane Baumgardner
J. Dwane Baumgardner
(Chairman, Chief Executive
Officer, and President)
Date: May 7, 1998 /s/ Ronald L. Winowiecki
Ronald L. Winowiecki
(Chief Accounting Officer)
<PAGE> 1
EXHIBIT 10.1
[TRANSLATION]
AGREEMENT
between
Donnelly Holding GmbH
seated in Collenberg,
registered in the Commercial Register
of the local court Aschaffenburg
under No. HRB 6031,
represented by the Managing Director
Dr. Dwane Baumgardner,
who has sole power of representation
(Hereinafter referred to as 'Donnelly')
and
Mr. Paul Hohe,
Mrs. Elisabeth Hohe,
Mr. Peter Hohe,
Dr. Maria Hohe-Schramm,
Mrs. Margarete Meyer
(Hereinafter jointly referred to as the 'Hohe Family'
and individually referred to as
'Member of the Hohe Family' or 'Family Member')
<PAGE> 2
Preamble
The parties to this Agreement are parties to the Acquisition
Agreement made and entered into (with the participation of
further persons) on 25th May 1995 (hereinafter referred to as the
'Acquisition Agreement') in relation to Donnelly Hohe GmbH & Co.
KG seated in Collenberg and registered in the Commercial Register
at the local court of Aschaffenburg under number HRA 1546
(hereinafter referred to as the 'Company').
Donnelly set forth warranty claims against the Hohe Family under
the Acquisition Agreement. The parties disagree on whether and
up to which amount such claims are justified. In view of a
settlement of the differences in opinion the parties hereto agree
to make the following modifications and add the following
supplemental provisions to the Acquisition Agreement,
particularly in regard to the mutually granted call options and
put options. The remaining provisions of the Acquisition
Agreement remain unchanged unless modified in the following.
(1) In derogation of the call option granted to Donnelly in
Section 1.5 lit. B) subsection (2) and the terms agreed in
this section for a purchase, the parties hereto hereby agree
as follows:
The date of March 31st, 1998 is (due to the change of the
fiscal year) replaced by May 31, 1998 which is the date on
which the exercise of a call option under Section 1.5 lit. B)
subsection 2 can become effective for the first time. The
minimum price of DM 1.5 million fixed in Section 1.5 lit. B)
subsection (2) payable to each Member of the Hohe Family as
consideration for the entire limited partnership interest
held by the Members including al shareholders' accounts and
all earlier payments to the individual Member of the Hohe
Family is replaced by a minimum price of DM 1 million payable
to each member of the Hohe Family, which makes the price
total DM 5 million.
(2) As to the put options granted to the Members of the Hohe
Family in Section 1.5 lit. A) (Put-Option) the parties hereto
agree as follows:
The minimum price of DM 500,000 fixed in Section 1.5 lit. A)
as price payable to each Member of the Hohe Family is
replaced by a minimum price of DM 600,000 if the put option
is exercised to take effect on a date later than May 31,
1999.
(3) In derogation of Section 1.5 lit. D) sentence 1 of the
Acquisition Agreement the transfer of the individual limited
partner interest becomes effective upon the exercise of the
option and the registration of the change in the limited
partnership in the Commercial Register.
(4) In view of a possible increase of taxes (income tax and
church tax) payable by the
<PAGE> 3
Hohe Family on account of the cause that the Members of the
Hohe Family's are limited partners of the company, the
parties hereto agree as follows:
(a) If the following extraordinary depreciations and
reserves for galvonics in the annual financial statement
of March 31, 1995
- depreciation DM 1,400,000 for galvonics
(Cf. Audit report explanatory narrative Tz 7).
- threatening losses for galvonic orders DM 130,000
(Cf. Audit report explanatory narrative Tz 48).
- reorganization costs for galvonics DM 300,000
(Cf. Audit report explanatory narrative Tz 48 -
part of the amount of DM 2,143,000)
should qualify as inappropriate and therefore, be
reversed and lead to an increase of taxes payable by the
Hohe Family, the Members of the Hohe Family are entitled
to draw Company funds for this increase without any
effect on the purchase price upon the exercise of the
put options or call options; this provision also applies
in case an eventual reverse is effected for fiscal years
other than 1994/95. If a Member of the Hohe Family is
no longer shareholder at the point of time when the tax
increase accrues and falls due, the option price is
subsequently increased by the required amount; the
increase of the option price falls due as son as the
accrual and maturity of the tax increase is proven to
Donnelly. Article 13 (2) lit. A) of the Partnership
Agreement applies mutatis mutandis to the computation
and evidence of such tax increases. The amounts in
question are limited to a total of DM 500,000 and to DM
100,000 for each Member of the Hohe Family.
(b) The foregoing paragraph a) applies mutatis mutandis to
possible tax increases payable by the Members of the
Hohe Family in consequence of the tax audits for the
years 1988/89 to 1991/92 provided that only 50% of such
tax increases are taken into account and on condition
that it is proven to Donnelly that the losses carried
forward for tax purposes for each Member of the Hohe
Family as per 31st March 1995 come to at least DM
500,000.
(c) The parties hereto agree that it follows from the
foregoing reference to 13 (2) a) of the Partnership
Agreement that tax increases under this paragraph 4 can
only be taken into account as far as increases in
profits cannot be compensated by losses carried forward
resulting from interest held in the Company.
(5) The Hohe Family assures to have paid in the DM 500,000
liability amount for each
<PAGE> 4
Member of the Hohe Family (except for the amount paid by Paul
Hohe) and that no repayments have been or will made before
the registration of Donnelly in the commercial Register upon
the exercise of the options. Furthermore, the Hohe Family
guarantees that no property takeover liability pursuant to
419 BGB will be triggered off for the Members of the Hohe
Family by the sale effected by the exercise of the options.
(6) The Members of the Hohe Family signed the Powers of Attorney
attested by a public notary and attached as Annex 1 to this
agreement. The Powers of Attorney authorize Donnelly Hohe
Verwaltungs-GmbH seated in Collenberg and registered in the
Commercial Register of the local court of Aschaffenburg under
No. HRB 4438, to apply for registration of the change in the
limited partnership in the Commercial Register.
(7) The Hohe Family is released from any and all warranty
liabilities under the Acquisition Agreement.
(8) The non-competition clause 4.2 of the Acquisition Agreement
is relaxed as follows for the period following the withdrawal
from the Company. Peter Hohe and Dr. Maria Hohe-Schramm
shall be entitled to become active in business areas of the
Company other than the manufacture of car mirrors in the
event that they do now longer hold an interest in the Company
and that their employment with the Company is terminated by
the Company and has effectively ended.
(9) All other provisions of the Acquisition Agreement remain
unchanged and in full force and effect unless already
implemented.
Collenberg, (Date) March 20, 1998
/s/Dwane Baumgardner
Donnelly Holding GmbH /s/Paul Hohe
/s/Elisabeth Hohe /s/Dr. Maria Hohe-Schramm
/s/Peter Hohe /s/Margarete Meyer
<PAGE> 5
Read and approved:
Collenberg March 23, 1998 /s/Dwane Baumgardner
Place/Date Donnelly Corporation, Michigan
/s/Hans Huber
Collenberg March 23, 1998 /s/Peter Turzer
Place/Date Donnelly Hohe GmbH & Co. KG
/s/Hans Huber
Collengerg March 23, 1998 /s/Peter Turzer
Place/Date Donnelly Hohe Verwaltungs-GmbH
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
March 28, 1998 Donnelly Corporation financial statements and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
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0
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<TABLE> <S> <C>
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<LEGEND>
This schedule contains summary financial information extracted from the
March 29, 1997 Donnelly Corporation financial statements and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
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0
531
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<NET-INCOME> 8597
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</TABLE>
<TABLE> <S> <C>
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<LEGEND>
This schedule contains summary financial information extracted from the
December 27, 1997 Donnelly Corporation financial statements and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
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<PERIOD-TYPE> 6-MOS
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<PERIOD-END> DEC-27-1997
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0
531
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 28, 1996 Donnelly Corporation financial statements and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
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0
531
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<NET-INCOME> 5639
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 27, 1997 Donnelly Corporation financial statements and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
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<TOTAL-ASSETS> 360243
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0
531
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<CHANGES> 0
<NET-INCOME> 986
<EPS-PRIMARY> 0.10
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 28, 1996 Donnelly Corporation financial statements and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-END> SEP-28-1996
<CASH> 5652
<SECURITIES> 0
<RECEIVABLES> 80426
<ALLOWANCES> 571
<INVENTORY> 27040
<CURRENT-ASSETS> 139966
<PP&E> 160865
<DEPRECIATION> 60902
<TOTAL-ASSETS> 288870
<CURRENT-LIABILITIES> 67313
<BONDS> 113366
0
531
<COMMON> 789
<OTHER-SE> 87744
<TOTAL-LIABILITY-AND-EQUITY> 288870
<SALES> 113400
<TOTAL-REVENUES> 113400
<CGS> 90252
<TOTAL-COSTS> 90252
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1957
<INCOME-PRETAX> 3149
<INCOME-TAX> 1171
<INCOME-CONTINUING> 1978
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<CHANGES> 0
<NET-INCOME> 1722
<EPS-PRIMARY> 0.18
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the June 28,
1997 Donnelly Corporation financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> JUN-28-1997
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<INVENTORY> 42484
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<DEPRECIATION> 121327
<TOTAL-ASSETS> 358293
<CURRENT-LIABILITIES> 115649
<BONDS> 122798
0
531
<COMMON> 991
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<TOTAL-LIABILITY-AND-EQUITY> 358293
<SALES> 671297
<TOTAL-REVENUES> 671297
<CGS> 544629
<TOTAL-COSTS> 544629
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9530
<INCOME-PRETAX> 12005
<INCOME-TAX> 2786
<INCOME-CONTINUING> 9219
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10020
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the June 29,
1996 Donnelly Corporation financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> JUN-29-1996
<CASH> 1303
<SECURITIES> 0
<RECEIVABLES> 73123
<ALLOWANCES> 571
<INVENTORY> 24228
<CURRENT-ASSETS> 126695
<PP&E> 157161
<DEPRECIATION> 57397
<TOTAL-ASSETS> 271492
<CURRENT-LIABILITIES> 63213
<BONDS> 101757
0
531
<COMMON> 787
<OTHER-SE> 87534
<TOTAL-LIABILITY-AND-EQUITY> 271492
<SALES> 439571
<TOTAL-REVENUES> 439571
<CGS> 357830
<TOTAL-COSTS> 357830
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8102
<INCOME-PRETAX> 12349
<INCOME-TAX> 4191
<INCOME-CONTINUING> 8158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8454
<EPS-PRIMARY> 0.86
<EPS-DILUTED> 0.85
</TABLE>
