Donnelly Blows Away Wall Streets Estimates

May 7, 2002
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Donnelly Corp.

Revenue
1Q 2002: $210.6 million
1Q 2001: $220.0 million

Net income
1Q 2002: $3.39 million,
32 cents EPS
1Q 2001: -$1 million, 1 cent EPS

HOLLAND — Donnelly Corp.’s first quarter financial performance provides “tangible evidence” that the company is committed to improving profitability and valuation, Chairman and CEO Dwane Baumgardner says.

Donnelly’s net income for the quarter exceeded both internal and external expectations, even as revenues slid, and set a strong foundation to meet, and possibly exceed, earnings targets for all of 2002.

“We are cautiously optimistic about the outlook for the remainder of the year,” Baumgardner told brokerage analysts in an April 25 conference call. “I am confident that we will be able to continue to report improvement as the year unfolds.”

For the first quarter, the Holland-based Donnelly earned $3.39 million, or 32 cents per share. That compares with a net loss of $70,000 for the same period a year earlier and far exceeds Wall Street’s 14 cents per-share estimate.

Revenues totaled $210.6 million, down 4.2 percent from the first quarter of 2001. The company blamed the lower revenues on a 13 percent decline in automotive production in Europe, which accounts for one-third of Donnelly’s overall sales, and the slow launch of several products programs for North American customers.

The strong earnings showing in the first quarter comes as welcome news for Donnelly, which has struggled with profitability in recent years.

The company undertook two restructurings in 2001 that are now showing up on the bottom line, Chief Financial Officer Kevin Brown said. The first quarter represented the second consecutive quarter that Donnelly has improved its gross margin, Brown said.

While Donnelly did not offer analysts new guidance for the rest of the year, a revised outlook may come following the second quarter if the earnings trend continues, the North American auto market remains strong and conditions in Europe improve, he said.

For now, the first quarter results are “a large step in the right direction” toward meeting earnings goals for 2002, Brown said.

“We should be at least on track as we look forward to the rest of the year,” he said.

Donnelly executives in February forecast annual per-share earnings of $1 to $1.25 for this year on projected revenues of $888 million. The guidance is based on Donnelly’s conservative 2002 automotive production estimate of 15 million units in North America. Through the first quarter, the auto industry’s North American production rate was running at 15.8 million units.

Wall Street analysts polled by Thompson/First Call expect the company to earn $1.30 per share for 2002, twice what the company earned in 2001.

Most promising for Donnelly during the first quarter was a strong 23 percent increase in revenues for its electronics business group that consists of interior electro-chromic mirrors, electronic features for mirrors such as a temperature gauge and compass, telematics mirrors for vehicles’ communications systems such as GM’s OnStar, and camera systems. The division accounted for $200 million of Donnelly’s $650 million revenues in 2001.

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