Denison International Meets Q3 2002 Earnings Expectations
MARYSVILLE, Ohio--Oct. 23, 2002--Denison International plc today reported results for its third quarter and nine months ended September 30, 2002.For the current quarter ended September 30, 2002, the Company's net sales increased 6% to $38.9 million from third quarter 2001 net sales of $36.6 million. Net income for the current quarter was $3.2 million, equal to net income recorded for the comparable quarter a year ago. Reported diluted earnings per share for the current third quarter of $0.31 were $0.01 per share higher than third quarter 2001 results.
Gross margin as a percent of sales of 36.5% in the current third quarter was favorable to the 35.2% gross margin recorded for the same quarter of 2001. Higher sales volume, and its impact on manufacturing efficiencies due to higher production levels, combined with cost controls implemented, are the primary reasons for the higher margins recorded. SG&A, as a percent of sales, was 25.0% for the second quarter of 2002 versus 22.8% for the second quarter of 2001, resulting primarily from the absence in 2002 of amortization of negative goodwill of $300K and one time costs at several of the Company's subsidiaries.
For the nine months ended September 30, 2002, net sales decreased 3.0% to $116.7 million versus net sales of $120.4 million for the comparable period of 2001. Year to date net income of $11.5 million was equal to net income for the same period of 2001. Net Income per diluted share as reported was $1.08, versus net income per diluted share of $1.09 for the nine months ended September 30, 2001.
Gross margin, as a percent of sales, increased to 35.8% for the nine months ended September 30, 2002, from 35.3% a year ago. Lower manufacturing costs, combined with the lower acquisition costs of the Company's US manufactured products for its subsidiaries in Europe and Asia, helped to improve margins versus 2001. SG&A, as a percent of sales, increased to 25.0% from 22.4% recorded for 2001, resulting primarily from the absence of $900K of negative amortization of goodwill in the 2002 results.
Net working capital at the end of September 2002 was $82.7 million, compared to $82.8 million at June 30, 2002 and $72.6 million at December 31, 2001. The Company's balance sheet remains strong, with the increase in working capital from year-end 2001 resulting from the weakening dollar during most of 2002.
Net cash at September 30, 2002 was $37.7 million compared to $34.5 million at June 30, 2002, and $32.7 million at December 31, 2001. In the quarter ended September 30, 2002 the Company repurchased 250,000 of its shares under the shareholder approved share repurchase program at an average price of $15.00 per share.
CEO Comments and Outlook
Commenting on quarterly performance, President and CEO David Weir said, "Results for the quarter were in line with our expectations, and, based on our current order backlog and general business trends, we expect the results for full year 2002 to be similar to those achieved in 2001. However, we remain concerned about the overall state of both the US and worldwide economies, along with the continued weakness in the US hydraulics markets. As a result we will be closely analyzing our order receipts in the fourth quarter to gain some additional insights as to our projections for 2003."
Weir continued, "The weakening of the US dollar has benefited the Company year to date not only in the currency translation of our European results, but also by reducing the acquisition costs of our US manufactured products in Europe. While business in the Asia-Pacific region has slowed from the rapid growth experienced earlier in the year, our strong presence in Asia Pacific, and the addition of our manufacturing facility in Shanghai, China, positions us for continued growth in the region."
"Notwithstanding the share repurchase, our cash, net of borrowings, increased by $3.2 million during the quarter and now stands at almost $3.58 per share."
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.
For comparative purposes, the table below summarizes the impact of the accounting change related to goodwill, on the Company's 2002 and 2001 results:
$000 Q3 2002 Q3 2001 YTD 2002 YTD 2001
------- ------- -------- --------
Diluted EPS before effect of
Goodwill Amortization $0.31 $0.27 $0.90 $1.00
Net Goodwill Amortization $0.00 $0.03 $0.00 $0.09
Negative Goodwill Write-off $0.00 $0.00 $0.18 $0.00
----- ----- ----- -----
Reported Diluted EPS $0.31 $0.30 $1.08 $1.09
Third quarter diluted earnings per share, before the impact of amortization of goodwill in 2001, was $0.31 for the current quarter versus $0.27 per share for the same quarter of 2001.
Net income per diluted share for the nine months ended September 30, 2002, before the impact of amortization of goodwill in 2001, was $0.90 per share compared to $1.00 per share for the same period in 2001.
Order Activity
Order receipts for the current quarter increased 5% from a year ago to $37.6 million on an actual basis, and were 1% unfavorable to third quarter 2001 on a currency adjusted volume basis. North American order receipts were favorable by 2.5% versus the third quarter of 2001, while European orders increased by 19.0% (7.7% on a currency adjusted volume basis) and Asia-Pacific orders declined by 29%. Order backlog at September 30, 2002 was $28.2 million compared to $28.6 million at September 30, 2001.
Order receipts for the nine months ended September 30, 2002 were down 1.6% to $115.9 million, versus 2001. On a currency adjusted volume basis, 2002 order receipts were 2.9% unfavorable to the same period in 2001. Year to date 2002 North American order receipts were down 5.7% versus the same period of 2001, while European orders increased 2.8% and Asia-Pacific orders were unfavorable to the same period of 2001 by 9.0%. On a volume basis, excluding the impact of the currency fluctuations between the dollar and Euro and Asian currencies, Asia-Pacific orders were unfavorable by 6.7% versus 2001 and European orders were unfavorable to the nine months ended September 30, 2001 by 0.5%.
Segment Results
Sales in North America increased 9.4% to $11.6 million for the current quarter. Sales in the Asia-Pacific region were up 9.3% to $5.9 million (or up 6.9% on a currency adjusted basis to $5.7 million), reflecting increased penetration in the Asian marketplace. Sales in Europe increased by 4% in the current quarter versus 2001 to $21.5 million; however were unfavorable to third quarter 2001 by 5.7% after adjusting for the change in currency rates.
North America reported operating income of $0.9 million for the current quarter, compared to operating income of $0.4 million for the third quarter of 2001, resulting from increased sales volume and cost controls. Operating income in the Asia-Pacific region was $0.4 million compared to operating income of $0.5 million for the 2001 third quarter. European operating income decreased 7%, or $0.2 million, to $3.1 million for the current quarter from a year ago as lower demand and associated production inefficiencies for the Company's products manufactured in Europe negatively impacted total manufacturing costs.
Year to date North American sales declined by 8.7% to $35.1 million, while Asia-Pacific sales rose 6.8% to $16.9 million from 2001 (or up 8.2% to $17.1 million on a currency adjusted basis). Year to date European net sales were $64.8 million, a 2.1% decrease over the same period of 2001 (or down 5% to $62.9 million on a currency adjusted basis).
North America reported operating income of $2.1 million for the first nine months of 2002 versus $2.3 million for the same period in 2001, reflecting lower sales volume. Year to date operating income for the Company's European operations declined 23.2%, or $2.8 million, to $9.3 million, from the same period in 2001, reflecting lower revenues and production. The Company's Asia-Pacific operations recorded operating income of $1.1 million, down 21.6% from the operating income reported for the same period in 2001.
Denison International plc , is an industrial manufacturer and servicer of highly engineered hydraulic fluid power systems and components. For more information about our products and services, please visit us at www.denisonhydraulics.com.
Notice of Conference call: Denison's conference call will be held on Thursday, October 24, 2002 at 2:00 p.m. ET to discuss the Company's third quarter 2002 results and will be available to all interested parties via live audio webcast or through archive on the company's website.
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) (unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- -----------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net Sales 38,925 36,612 116,731 120,400
Cost of Sales 24,728 23,739 74,936 77,934
----------- ----------- ----------- -----------
Gross Profit 14,197 12,873 41,795 42,466
% 36.5% 35.2% 35.8% 35.3%
S,G&A 10,007 8,653 29,235 26,916
----------- ----------- ----------- -----------
Operating Income 4,190 4,220 12,560 15,550
% 10.8% 11.5% 10.8% 12.9%
Other (expense) (110) 207 (332) 171
Net Interest Income 270 233 713 707
----------- ----------- ----------- -----------
Income Before Taxes 4,350 4,660 12,941 16,428
Tax Provision 1,130 1,441 3,348 4,885
----------- ----------- ----------- -----------
Net Income, Before
Cumulative Effect of a
Change in Accounting
Principal 3,220 3,219 9,593 11,543
Cumulative Effect of a
Change in Accounting
Principal, Net
of Taxes -- -- 1,858 --
----------- ----------- ----------- -----------
Net Income, Before
Cumulative Effect
of a Change in
Accounting Principal 3,220 3,219 11,451 11,543
=========== =========== =========== ===========
Basic Earnings Per
Share, Before
Cumulative Effect of
a Change in Accounting
Principal $0.31 $0.31 $0.91 $1.09
Cumulative Effect of a
Change in Accounting
Principal $-- $-- $0.18 $--
----------- ----------- ----------- -----------
Basic Earnings Per
Share $0.31 $0.30 $1.09 $1.09
=========== =========== =========== ===========
Diluted Earnings Per
Share $0.31 $0.30 $1.08 $1.09
=========== =========== =========== ===========
Basic Shares for
Period 10,510,635 10,563,950 10,548,469 10,563,950
=========== =========== =========== ===========
Diluted Shares for
Period 10,525,982 10,587,412 10,589,733 10,582,132
=========== =========== =========== ===========
DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED BALANCE SHEETS
USD-(000's) (Unaudited)
September December
30 31,
2002 2001
----------- ---------
Current assets:
Cash & cash equivalents $38,670 $43,245
Accounts receivable, net 33,228 27,715
Inventories 42,404 39,257
Other current assets 4,705 4,680
----------- ---------
Total current assets 119,007 114,897
Property, plant & equipment, net 29,374 27,912
Other assets 17,479 14,006
----------- ---------
Total assets $165,860 $156,815
=========== =========
Current liabilities:
Notes payable to bank $945 $10,545
Accounts payable and other
accrued liabilities 35,341 31,729
----------- ---------
Total current liabilities 36,286 42,274
Noncurrent liabilities 18,531 18,316
Shareholders equity:
Retained earnings 111,561 103,107
Other shareholders equity (518) (6,882)
----------- ---------
Total shareholders equity 111,043 96,225
Total liabilities and
shareholders equity $165,860 $156,815
=========== =========
Denison International plc
Segment Information
Three Months Nine Months
Ended Ended
($000) September 30 September 30
--------------- -----------------
2002 2001 2002 2001
------- ------- -------- --------
Net Sales
---------
Europe 21,488 20,668 64,810 66,223
North America 11,568 10,574 35,064 38,395
Asia-Pacific 5,869 5,370 16,857 15,782
Corporate -- -- -- --
------- ------- -------- --------
Consolidated 38,925 36,612 116,731 120,400
Gross Earnings
--------------
Europe 8,581 8,113 25,170 27,247
North America 3,675 3,080 10,742 10,432
Asia-Pacific 1,946 1,877 5,477 5,324
Corporate (5) (197) 406 (537)
------- ------- -------- --------
Consolidated 14,197 12,873 41,795 42,466
Operating Income
----------------
Europe 3,094 3,328 9,265 12,076
North America 928 410 2,070 2,280
Asia-Pacific 359 520 1,072 1,368
Corporate (191) (38) 153 (174)
------- ------- -------- --------
Consolidated 4,190 4,220 12,560 15,550