Denison Continues Positive Earnings Momentum for its Q3 2000
25 October 2000
Denison International Continues Positive Earnings Momentum for its Third Quarter 2000
MARYSVILLE, Ohio--Oct. 24, 2000--Denison International plc today reported results for its third quarter and nine months ended September 30, 2000.The Company reports results both pre and post the Riva Calzoni Oleodinamica S.p.A. ("Calzoni") acquisition, which was completed in April 2000.
Quarterly Results
For the current quarter ended September 30, 2000, the Company's net sales increased 22% to $36.7 million, or 13% on a pre-acquisition basis, from $30.2 million recorded in the third quarter of 1999. Restated to mitigate the impact of foreign currency exchange rates, net pre-acquisition sales were up 21% to $36.5 million and up 29.9% on a post-acquisition basis.
Gross margin as a percent of sales, increased to 33.5% in the current third quarter, from 30.4% a year ago in the third quarter, as a result of leveraging fixed expenses against higher volume, combined with operating efficiencies instituted at the Company's manufacturing facilities. SG&A, as a percent of sales, declined to 21.9% from 24.7% recorded in the year earlier third quarter, principally resulting from higher volume and cost reductions implemented in 1999 and throughout this year.
Net income more than tripled from a year ago for the current quarter to $3.3 million, or $0.30 per diluted share, compared to net income of $0.9 million and diluted earnings per share of $0.08 for the comparable quarter a year ago. Net income, restated at 1999 exchange rates, increased 309% to $3.6 million, or $0.33 per diluted share. Pre-acquisition net income, restated at 1999 exchange rates, increased 284% to $3.4 million, or $0.31 per diluted share.
The company generated strong free cash flow from operations of $4.6 million after adjusting for currency translations for its third quarter and $10.8 million on a year to date basis. In addition, the Company repurchased 75,000 of its shares in the quarter at a cost of $1.0 million.
Order receipts continued to build in the quarter, advancing 24% from a year ago to $39.4 million, with particular strength in order receipts from the Company's U.S. operations, which grew by 46% in the third quarter. Order backlog at quarter end was also strong at $35.3 million, a 41% increase from a year ago.
The company also noted that its effective tax rate dropped from 42.1% to 28.8% in the current quarter, as a result of increased profitability in certain regions where the company was able to offset income with previously unrecognized net operating loss carryforwards.
Commenting on the results, President and CEO David Weir said, "Sales revenues at $36.7 million were a record for a third quarter and would have been higher by an additional 7%, or $2.5 million, at last year's currency exchange rates. In local operating currencies, 15 out of 16 subsidiaries reported growth in sales revenues and all production plants worked overtime during the summer vacation period to keep up with buoyant demand. Incoming orders during the quarter remained firm with the backlog increasing to a record $35.3 million. Net income, which increased in the quarter by $2.4 million from last year, increased in all three of the Company's geographic segments. In addition, we generated strong free cash flow in the quarter of $4.6 million and kept our gross inventory stocks at constant levels versus December 1999, both after adjusting for currency rates to 1999 levels."
Nine Month Results
For the nine months ended September 30, 2000, net sales increased $12.5 million, or 12% to $113.7 million (6% on a pre-acquisition basis), versus sales of $101.3 million for the comparable period of 1999. Restated at 1999 exchange rates, pre-acquisition sales were up 12% for the nine months ended September 30, 2000, and 18.7% on a post-acquisition basis.
Gross margin as a percent of sales, increased to 34.9% for the nine months ended September 30th from 33.7% a year ago, also as a result of production and cost efficiencies. SG&A, as a percent of sales, declined to 22.6% from 24.0% recorded in the year earlier third quarter, principally resulting from higher volume and cost reductions previously noted.
Net income for the first nine months of 2000 was $10.3 million, or $0.93 per diluted share, compared with $6.6 million, or $0.60 per diluted share for the comparable 1999 period. Net income per diluted share for the nine months of 2000, restated at 1999 exchange rates, increased to $1.01. For the nine months ended September 30, 2000 same location order receipts were $124.0 million, a 20% increase over 1999.
Segment Results
Sales in North America rose more than 52% or by $4.2 million, to $12.3 million for the current quarter. Sales in the Asia-Pacific region increased nearly 10%, or by $0.45 million to $5.1 million, reflecting improving economic conditions in the region and increased penetration in the Asian marketplace. Post-acquisition sales in Europe increased by 11% in the current quarter versus 1999, but were down by nearly 5% on a pre-acquisition basis as a result of the weakening Euro. After adjusting for the change in currency rates, pre-acquisition sales were, in fact, up nearly 10%.
North America reported operating income for the current quarter of $0.5 million, compared to a net loss of $0.9 million for the third quarter of 1999. Operating income in the Asia-Pacific region was $0.2 million compared to breakeven operating results recorded in the third quarter 1999. European operating income increased 79%, or $1.5 million, to $3.4 million for the current quarter from $1.9 million recorded a year ago. On a currency adjusted, pre-acquisition basis, European operating income for the third quarter was up 84%, or $1.5 million, versus 1999.
Year to sales in North America rose by 24% or by $7.3 million, to $37.9 million versus 1999. Sales in the Asia-Pacific region increased 13%, or by $1.7 million to $14.6 million. Post-acquisition sales in Europe increased by 6% year to date 2000 versus 1999, but were down by 5% on a pre-acquisition basis as a result of the weakening Euro. After adjusting for the change in currency rates, pre-acquisition sales increased by 7%.
North America reported operating income of $2.9 million for the nine months ended September 30, 2000, compared to an operating loss of $0.2 million for 1999. Operating income in the Asia-Pacific region was $0.5 million compared to an operating loss of $0.2 million recorded in 1999. European operating income of $9.9 million increased 6.5%, or $0.6 million from $9.3 million recorded a year ago. On a currency adjusted, pre-acquisition basis, European operating income for the nine months ended September 30, 2000, was $10.3 million, an 11% increase over 1999.
CEO Comments and Outlook
Weir concluded, "The results for the third quarter continue this year's strong performance in sales revenue, profit growth and cash generation. The Company seems positioned for continued growth, albeit tempered by the strength of the US dollar against foreign currencies, especially the Euro. Denison Calzoni has already exceeded our first year's expectations. At the end of the third quarter both the order book and the balance sheet look strong. Cash net of borrowings stands at $27.0 million, or $2.43 per share, enabling the Company to continue to pursue further acquisitions and to invest in the internal development of new products, both of which should lead to further growth and increased shareholder value."
DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Nine Months
Ended September 30th: Ended September 30th:
--------------------- ---------------------
USD-(000's) 2000 1999 2000 1999
---- ---- ---- ----
Net Sales $ 36,744 $ 30,192 $113,736 $101,254
Cost of Sales 24,430 21,021 74,049 67,111
-------- -------- -------- --------
Gross Profit 12,314 9,171 39,687 34,143
% 33.5% 30.4% 34.9% 33.7%
S,G&A 8,058 7,446 25,753 24,292
-------- -------- -------- --------
Operating Income 4,256 1,725 13,934 9,851
% 11.6% 5.7% 12.3% 9.7%
Other Income/
(expense) 27 (261) 170 (442)
Net Interest Income 342 64 475 199
-------- -------- -------- --------
Income Before
Taxes 4,625 1,528 14,579 9,608
Tax Provision 1,334 643 4,269 2,964
-------- -------- -------- --------
Net Income $ 3,291 $ 885 $ 10,310 $ 6,644
-------- -------- -------- --------
-------- -------- -------- --------
Basic Earnings
per Share $ 0.30 $ 0.08 $ 0.93 $ 0.60
Diluted Earnings
per Share $ 0.30 $ 0.08 $ 0.93 $ 0.60
DENISON INTERNATIONAL plc
SUPPLEMENTAL SEGMENT INFORMATION
USD-(000's) Three Months Nine Months
Ended September 30th: Ended September 30th:
--------------------- ---------------------
2000 1999 2000 1999
---- ---- ---- ----
Net Sales
---------
Europe 19,344 17,433 61,218 57,767
North America 12,342 8,085 37,882 30,569
Asia-Pacific 5,130 4,674 14,636 12,918
Corporate (72) - - -
-------- -------- -------- --------
Consolidated 36,744 30,192 113,736 101,254
Gross Earnings
--------------
Europe 7,937 6,330 24,370 23,785
North America 2,694 1,266 10,323 6,222
Asia-Pacific 1,683 1,278 4,874 3,841
Corporate - 297 120 295
-------- -------- -------- --------
Consolidated 12,314 9,171 39,687 34,143
Operating Income
----------------
Europe 3,375 1,853 9,943 9,302
North America 494 (914) 2,894 (205)
Asia-Pacific 224 7 532 (175)
Corporate 163 779 565 929
-------- -------- -------- --------
Consolidated 4,256 1,725 13,934 9,851
DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
USD-(000's) 2000 1999
---- ----
Current assets:
Cash & cash equivalents $ 32,947 $ 31,174
Accounts receivable, net 31,222 28,267
Inventories 33,620 31,453
Other current assets 5,581 3,566
-------- --------
Total current assets 103,370 94,460
Property, plant & equipment, net 23,772 24,519
Other assets 10,016 9,841
-------- --------
Total assets $137,158 $128,820
-------- --------
-------- --------
Current liabilities:
Notes payable to bank $ 5,938 $ 5,586
Accounts payable and other
accrued liabilities 27,318 22,341
-------- --------
Total current liabilities 33,256 27,927
Noncurrent liabilities 19,014 19,833
Shareholders' equity:
Retained earnings 93,001 82,691
Other shareholders' equity (8,113) (1,631)
-------- --------
Total shareholders' equity 84,888 81,060
Total liabilities and
shareholders' equity $137,158 $128,820
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