Denison International Meets Q1 2002 Earnings Expectations Before Benefit From Accounting Change; Q1 2002 EPS lower than Q1 2001
MARYSVILLE, Ohio--April 17, 2002--Denison International plc today reported results for its first quarter ended March 31, 2002.Special Note:
Effective January 1, 2002 Denison International (the "Company") adopted Financial Accounting Standards No. 142. The provision of the Standard requires that, upon adoption, the Company write off the balance of its negative goodwill, established when the company was formed in 1993, and cease the periodic amortization of goodwill. The effect of the amortization of goodwill in 2001 was not significant. For comparative purposes, the table below summarizes the impact of the accounting change related to the negative goodwill, on 2002 and 2001 results:
$000 Q1 2002 Q1 2001
------- -------
Diluted EPS before Negative
Goodwill Amortization $0.28 $0.35
Normal Negative Goodwill
Amortization $ -0- $0.03
2002 Cumulative Effect of
Negative Goodwill Write-off $0.18 $ -0-
------- -------
Reported Diluted EPS $0.46 $0.38
Quarterly Results
For the current quarter ended March 31, 2002, the Company's net sales were $38.2 million, 10.6% lower than record net sales recorded in the first quarter of 2001 of $42.7 million.
Net income before the impact of the negative goodwill write-off was $3.0 million, or $0.7 million lower than net income of $3.7 million (before the amortization of negative goodwill) recorded for the comparable quarter a year ago. Diluted earnings per share prior to the impact of the negative goodwill write off for the current first quarter of $0.28 were $0.07 per share lower than first quarter 2001 results.
Net income as reported was $4.8 million for the quarter ended March 31, 2002, $0.8 million favorable to the same quarter of 2001. As reported, earnings per diluted share were $0.46, or $0.08 per share higher than the first quarter of 2001.
Commenting on first quarter results, President and CEO David Weir said, "Results for the quarter were in line with our expectations, reflecting declining worldwide economic conditions. We realized that we would not be able to match the results of the same period of last year, a quarter in which the Company recorded both record sales and first quarter earnings. Our results reflect the weak overall economic conditions worldwide, and in particular the state of the North American economy and hydraulics markets."
Gross margin as a percent of sales of 35.6% in the current first quarter was in line with the gross margin of 35.8% recorded for the same quarter of 2001. Despite lower sales volume, efficiencies and cost reductions in the Company's manufacturing facilities were the primary reasons for the stable margin performance. Also impacting costs were the higher acquisition costs of US manufactured products for the Company's European and Asia-Pacific operations as the dollar continued to strengthen during the beginning of 2002. SG&A, as a percent of sales, was 24.5% for the first quarter of 2002 versus 22.2% for the first quarter of 2001. The actual level of SG&A spending decreased in the quarter by $161K, however, the lower volume recorded in the current quarter resulted in a higher SG&A as a percentage of net sales versus 2001.
Order receipts were down in the first quarter, declining 14.2% from a year ago to $38.0 million. However, first quarter 2002 average monthly order receipts were up 21.2% versus the monthly average order intake for the fourth quarter of 2001. North American order receipts were down 22.9% versus the first quarter of 2001, while European orders decreased 10.3% and Asia-Pacific orders decreased 10%. On a volume basis, excluding the impact of currency fluctuations, European orders decreased by 5.8%, and the decrease in order receipts for the Asia-Pacific region narrowed to 4.5%. Order backlog at March 31, 2002 was $24.6 million compared to $24.2 million at December 31, 2001.
Segment Results
Sales in North America declined 18.1% to $11.6 million for the current quarter. Sales in Europe declined by 10.7% to $21.4 million in the current quarter versus 2001; however, volume adjusted (to 2001 currency exchange rates) sales of $22.4 million declined 6.2% from the first quarter of 2001. Sales in the Asia-Pacific region increased 12.8% to $5.2 million, and were favorable by 20.3% on a volume adjusted basis. The increase in volume for the Company's Asia-Pacific region reflects increased penetration by the Company in the Asian marketplace, particularly in China where the Company recorded an 87% increase in sales for the first quarter versus the same period in 2001.
North America reported operating income of $0.5 million for the current quarter, compared to operating income of $1.2 million for the first quarter of 2001, reflecting lower production as a result of less worldwide demand for the Company's US manufactured products. Operating income in the Asia-Pacific region was $0.3 million for the first quarter of 2002, $0.1 million higher than the results recorded for the same period of 2001. European operating income decreased 36.3%, or $1.8 million, to $3.2 million for the current quarter from $5.0 million recorded a year ago, resulting from lower volume and lower production at the Company's manufacturing facilities, partially offset by cost reductions.
CEO Comments and Outlook
Weir continued, "We knew, after analyzing our year end 2001 order trends, our markets and the worldwide economies that we would get off to a slow start in 2002, and that the trend would continue into our second quarter. We also have seen greater than expected de-stocking by our customers and distributors in the beginning of 2002, with inventories currently at very low levels. However, with current indications that worldwide economic conditions are improving we still believe that our original 2002 projection to equal our 2001 earnings per share performance, is attainable. We are well positioned, with over $31 million in free cash and our manufacturing facilities ready to accept additional demand, to benefit from any upturn in business levels."
Denison International plc , with US executive offices in Marysville, Ohio is an industrial manufacturer and servicer of highly engineered hydraulic fluid power systems and components. The Company, which employs more than 1,000 associates at its manufacturing and sales operations in 16 countries, services a broad array of original equipment manufacturers, hydraulic distributors and end-users. Denison products are used in a multitude of end use applications from mobile equipment used in the construction, demolition, agricultural, mining and utility industries to machinery used in industrial manufacturing processes and marine equipment used in both commercial and military sea vessels. For more information about our products and services, please visit us at www.denisonhydraulics.com
NOTICE: Denison will hold a conference call on Thursday, April 18, 2002 at 1:30 p.m. to discuss its first quarter 2002 results. Denison President and CEO, David L. Weir and Bruce A. Smith, Denison Chief Financial Officer, will host the call. The call will be broadcast live over the Internet and can be accessed at http://www.denisonhydraulics.com. If you are unable to participate during the live webcast, the call will be archived and available at the same address. The Company will also continue to offer its traditional conference call telephonic replay from approximately 4:30 p.m. April 18, 2002 through 4:30 p.m. Eastern Standard Time on April 25, 2002. The phone number for the replay is (888) 203-1112 (International investors dial: (719) 457-0820). Enter confirmation number 651352 to access the replay.
Certain matters discussed in this press release are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Act of 1995. Such forward-looking statements, including statements in the CEO Comments paragraph regarding future prospects and performance, are subject to certain risks and uncertainties, which could cause actual results to differ materially from those currently anticipated. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements made herein are only made as of the date of this press release and the company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
USD-(000's)
(unaudited)
Three Months Ended March 31,
-----------------------------
2002 2001
------------ ------------
Net Sales $ 38,186 $ 42,717
Cost of Sales 24,590 27,429
------------ ------------
Gross Profit 13,596 15,288
% 35.6% 35.8%
S,G&A 9,338 9,499
------------ ------------
Operating Income 4,258 5,789
% 11.2% 13.6%
Other Income /(expense) (169) (27)
Net Interest Income 207 137
------------ ------------
Income Before Taxes 4,296 5,899
Tax Provision 1,329 1,884
------------ ------------
Net Income, Before Cumulative
Effect of a Change in
Accounting Principal $ 2,967 $ 4,015
Cumulative Effect of a Change
in Accounting Principal, Net
of Taxes 1,858 --
------------ ------------
Net Income, Before Cumulative
Effect of a Change in
Accounting Principal $ 4,825 $ 4,015
------------ ------------
------------ ------------
Basic & Diluted Earnings Per
Share, Before Cumulative
Effect of a Change in
Accounting Principal $ 0.28 $ 0.38
Cumulative Effect of a Change
in Accounting Principal $ 0.18 $ --
------------ ------------
Basic & Diluted Earnings Per
Share $ 0.46 $ 0.38
------------ ------------
------------ ------------
Denison International plc
Segment Information
($000) Three Months Ended March 31
----------------------------
2002 2001
------------ ------------
Net Sales
---------
Europe 21,374 23,922
North America 11,622 14,193
Asia-Pacific 5,190 4,602
Corporate -- --
============ ============
Consolidated 38,186 42,717
Gross Earnings
--------------
Europe 8,255 10,383
North America 3,329 3,994
Asia-Pacific 1,633 1,517
Corporate 379 (606)
============ ============
Consolidated 13,596 15,288
Operating Income
----------------
Europe 3,199 5,017
North America 455 1,240
Asia-Pacific 296 233
Corporate 308 (701)
============ ============
Consolidated 4,258 5,789
DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED BALANCE SHEETS
USD-(000's)
March 31, December 31,
2002 2001
----------- ------------
Current assets:
Cash & cash equivalents $ 42,567 $ 43,245
Accounts receivable, net 30,441 27,715
Inventories 39,332 39,257
Other current assets 3,619 4,680
----------- ------------
Total current assets 115,959 114,897
Property, plant & equipment, net 27,481 27,912
Other assets 13,681 14,006
----------- ------------
Total assets $ 157,121 $ 156,815
----------- ------------
----------- ------------
Current liabilities:
Notes payable to bank $ 11,106 $ 10,545
Accounts payable and other
accrued liabilities 30,203 31,729
----------- ------------
Total current liabilities 41,309 42,274
Noncurrent liabilities 16,060 18,316
Shareholders equity:
Retained earnings 107,932 103,107
Other shareholders equity (8,180) (6,882)
----------- ------------
Total shareholders equity 99,752 96,225
Total liabilities and
shareholders equity $ 157,121 $ 156,815
----------- ------------
----------- ------------