Donnelly Brings Financial Performance Statistics Public

March 26, 2002
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HOLLAND — After promising for years to improve profitability, Donnelly Corp. for the first time is publicly offering specifics on the near-term financial performance it expects to achieve.

Executives told brokerage analysts recently that their goal is to increase revenues by 4 percent in 2002 — even with a projected decline in North American automotive production — and more than double earnings over 2001.

The guidance is based on Donnelly’s conservative 2002 automotive production estimate of 15 million units in North America. Many industry forecasts generally foresee a 15.5 million-unit production level for the year.

Donnelly has pushed for years to cut expenses and boost profitability in an increasingly competitive industry, trimming $12 million alone in 2001 from its cost structure. The new guidance, offered in a conference call with brokerage analysts to discuss the corporation’s fourth quarter and 2001 results, represents the first time Donnelly has offered specific performance targets to Wall Street analysts.

Offering specific targets publicly stems from an internal desire to better communicate the company’s goals to investors during a difficult economic period, as well as respond to increasing demands of analysts for detailed guidance going forward, said Charlie Pear, Donnelly’s vice president and corporate controller.

“With everything going on in the general environment, we felt it would be beneficial (to offer specifics on) what we’re trying to do and trying to attain,” Pear said. “We thought a little clarity would help.”

Donnelly expects net income to fare far better in 2002, even with a predicted slide in auto production. The Holland-based automotive supplier is forecasting annual per-share earnings $1 to $1.25 for this year on projected revenues of $888 million.

The first quarter will turn out as the softest of the year, with earnings improving each quarter throughout the year.

“We are certainly not where we would like to be. We are getting back on track to where we want to be,” Chief Financial Officer Kevin Brown said during the Feb. 21 conference call.

For the fourth quarter of 2001, Donnelly posted earnings of $3.9 million, or 38 cents per share, a 134 percent increase over the $1.7 million, or 17 cents per share, recorded during the same period a year earlier. Quarterly net income includes a one-time charge of $1.3 million to cover restructuring costs.

Net income for the year fell significantly, from $11.2 million, or $1.09 per share, to $2.5 million, or 25 cents per share, for 2001. The 2002 earnings included $4.1 million in restructuring charges and are indicative in part of lower margins resulting from reduced automotive production.

As it expects financial performance to improve in 2002, Donnelly is no longer counting on any revenues from a major product program that it has touted for several months. General Motors has cancelled a contract for Donnelly’s SmartRelease system, which automatically opens a vehicle’s trunk when someone is trapped inside.

A federal regulation requires automakers to install a manual trunk escape system on new cars beginning this year. SmartRelease, as an electronic device, does not preclude an automaker from having to install a manual release as well.

That led GM to cancel the contract because of cost concerns, said Donnelly executives, who still hope to modify the SmartRelease system to add a manual function and address GM’s concerns.

“We’re still very optimistic and hopeful because we think this is a great product,” Chairman and CEO Dwane Baumgardner said. 

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