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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of August 1998
DENISON INTERNATIONAL plc
(Translation of registrant's name into English)
Masters House
107 Hammersmith Road
London W14 0QH
England
(Address of principal executive offices)
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DENISON INTERNATIONAL plc
TABLE OF CONTENTS
Part I. Financial Information Page
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations
for the three and six months 5
ended June 30, 1998 and 1997
Condensed Consolidated Statements of Cash Flows
for the six months 6
ended June 30, 1998 and 1997
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition And Results of Operations 9
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DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except per share data)
June 30, December 31,
1998 1997
---- ----
(Unaudited) (Note)
Current assets:
Cash and cash equivalents $ 30,857 $ 30,337
Accounts receivable, less allowances of 30,189 29,212
$2,383 and $3,087 at June 30, 1998
and December 31, 1997 respectively
Inventories 33,838 28,182
Other current assets 3,212 3,327
----------- -----------
Total current assets 98,096 91,058
Property, plant and equipment, net 16,742 14,948
Other assets 1,841 1,487
----------- -----------
Total assets $ 116,679 $ 107,493
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ 1,042 $ 1,472
Accounts payable 9,578 9,413
Other accrued liabilities 17,809 15,677
Current portion of capital lease 505 662
obligations
----------- -----------
Total current liabilities 28,934 27,224
Noncurrent liabilities:
Capital lease obligations,
less current portion 169 344
Pension accrual 10,166 9,482
Other noncurrent liabilities 6,013 6,733
Negative goodwill, net of accumulated
amortization of $3,785 and $3,406
at June 30, 1998 and December 31, 1997
respectively 3,846 4,158
----------- -----------
Total Noncurrent Liabilities 20,194 20,717
Shareholders' equity:
'A' ordinary shares (pound)
8.00 par value; 7,125
shares authorized, and 7,015
issued and outstanding at
June 30, 1998 and December 31, 1997 86 86
Ordinary shares $0.01 par value;
15,000,000 shares authorized;
11,091,450 and 11,057,700 issued
and outstanding at June 30, 1998
and December 31, 1997 111 111
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Additional paid-in capital 5,441 5,411
Capital redemption reserve 1,090 1,090
Retained earnings 66,822 58,115
Accumulated other comprehensive income (5,999) (5,261)
Total shareholders' equity 67,551 59,552
----------- -----------
Total liabilities and shareholders'
equity $ 116,679 $ 107,493
=========== ===========
Note: The Balance Sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by general accounting principles for complete financial
statements.
The accompanying notes are an integral part of these statements.
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DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(U.S. dollars in thousands, except share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------- ------------------
1998 1997 1998 1997
-------------------- ------------------
<S> <C> <C> <C> <C>
Net sales $ 35,343 $ 38,169 $ 72,714 $ 75,081
Cost of sales 21,263 23,923 44,772 47,942
---------- ---------- ---------- ----------
Gross profit 14,080 14,246 27,942 27,139
Selling, general and 7,788 8,154 16,328 16,374
administrative expenses ---------- ---------- ---------- ----------
Operating income 6,292 6,092 11,614 10,765
Other income -- -- -- 24
Interest (expense) income, net 334 49 492 50
---------- ---------- ---------- ----------
Income before taxes 6,626 6,141 12,106 10,839
Provision for income taxes 1,796 1,293 3,399 2,435
---------- ---------- ---------- ----------
Net income $ 4,830 $ 4,848 $ 8,707 $ 8,404
========== ========== ========== ==========
Basic earnings per share $.44 $.46 $.79 $.80
==== ==== ---- ----
Diluted earnings per share $.43 $.45 $.78 $.79
==== ---- ---- ----
</TABLE>
The accompanying notes are an integral part of these statements.
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DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars in thousands)
Six months ended
June 30,
1998 1997
---------------------------------
Net cash provided by operating activities $ 5,032 $ 5,783
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (3,463) (1,652)
Proceeds from disposal of property,
plant and equipment -- 24
------------ ------------
Net cash used in investing activities (3,463) (1,628)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment on lines of credit (390) (634)
Redemption of preferred stock -- (1,090)
Repayment of capital lease obligations (328) (568)
Proceeds from exercise of stock options 30 --
------------ ------------
Net cash used in financing activities (688) (2,292)
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (361) (1,753)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 520 110
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 30,337 19,144
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 30,857 $ 19,254
============ ============
The accompanying notes are an integral part of these statements.
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DENISON INTERNATIONAL plc
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Financial Statements
Interim Financial Information
The financial information at June 30, 1998 and for the periods ended
June 30, 1998 and June 30, 1997 is unaudited but includes all adjustments which
Denison International plc (the "Company") considers necessary for a fair
presentation of financial position at such date and the operating results and
cash flows for those periods. Results for the interim period are not necessarily
indicative of results that may be expected for the entire year. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with United States generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
promulgated by the Securities and Exchange Commission. These condensed
consolidated financial statements should be read in conjunction with the
Company's audited financial statements for the year ended December 31, 1997
included in the Company's Annual Report on Form 20-F.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly-owned. Significant
intercompany accounts and transactions have been eliminated on consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity
with United States generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from these estimates.
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2. Inventories
Inventories consisted of the following:
(U.S. dollars in thousands)
June 30, December 31,
1998 1997
(Unaudited)
------------- -------------
Finished goods $ 20,529 $ 16,365
Work-in-progress 3,529 2,861
Raw materials and supplies 9,780 8,956
---------- ----------
$ 33,838 $ 28,182
========== ==========
3. Earnings per Share
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Unaudited
(U.S. dollars in thousands Three months ended June 30, Six months ended June 30,
- -------------------------- --------------------------- -------------------------
except share and per share data) 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Numerator:
Net income $ 4,830 $ 4,848 $ 8,707 $ 8,404
--------------- --------------- --------------- ---------------
Denominator:
Denominator for basic earnings per
share - weighted-average shares 11,085,896 10,535,965 11,075,364 10,535,964
Effect of dilutive stock options 67,223 141,319 64,571 141,319
--------------- --------------- --------------- ---------------
Denominator for diluted earnings per
share - adjusted weighted-average
shares 11,153,119 10,677,284 11,139,935 10,677,283
--------------- --------------- --------------- ---------------
Basic earnings per share $.44 $.46 $.79 $.80
==== ==== ---- ----
Diluted earnings per share $.43 $.45 $.78 $.79
==== ===== ---- ----
</TABLE>
4. Comprehensive Income
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"). The Company adopted this statement as of the beginning of 1998. SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components; however the adoption of SFAS 130 had no impact on the Company's
net income or shareholders equity. SFAS 130 requires foreign currency
translation
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adjustments and minimum pension liability adjustments, which prior to adoption
were reported separately in shareholders equity, to be included in other
comprehensive income. SFAS 130 also requires that all items recognized under
accounting standards as components of comprehensive earnings be reported in an
annual financial statement that is displayed with the same prominence as other
annual financial statements. The Company's annual financial statements for prior
periods will be reclassified, as required.
Total comprehensive income was as follows:
Unaudited
(U.S. dollars in thousands)
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
Net income $ 4,830 $ 4,848 $ 8,707 $ 8,404
Foreign currency translation
adjustment, net of tax benefit (40) (2,170) (738) (3,787)
Comprehensive net income $ 4,790 $ 2,678 $ 7,969 $ 4,617
The components of accumulated other comprehensive income, net of related tax, at
December 31, 1997 and June 30, 1998 are as follows:
Pension Foreign Accumulated
Liability Other Currency Comprehensive
Adjustment Translation Income
Balance at December 31, 1997 $(43) $(5,218) $(5,261)
Current period other
comprehensive income -- (738) (738)
Balance at June 30, 1998 $(43) $(5,956) $(5,999)
==== ======= =======
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Although the Company reports its financial results in U.S. dollars,
approximately 65% of the Company's revenues and expenses are incurred in foreign
currencies. The fluctuation of the functional currencies earned by the Company
against the U.S. dollar has had the effect of increasing or decreasing (as
applicable) U.S. dollar reported net sales, cost of goods sold, gross profit,
and selling, general and administrative expenses denominated in such foreign
currencies when translated into U.S. dollars as compared to prior periods.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1998 compared with Three Months ended June 30, 1997.
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The Company's net sales decreased 7.4% to $35.3 million in the three
month period ended June 30, 1998 from $38.2 million in the comparable period in
1997. During the same period, net sales in North America decreased 8.4% to $13.3
million from $14.5 million, net sales in Europe increased 0.5% to $18.3 million
from $18.2 million, and net sales in the Asia-Pacific region decreased 30.8% to
$3.7 million from $5.4 million. The decrease in net sales is attributable to the
current economic conditions in the Asian market, and, in turn, slower sales to
North American customers who have substantial exports into the Asian markets.
Partially offsetting these conditions were continued strengthening conditions in
the European market.
Restated (at average exchange rates for the three month period ended
June 30, 1997), net sales for the three month period ended June 30, 1998, were
$36.6 million, a 4.2% decrease over the comparable 1997 period. The increased
sales revenue for the period attributable to the exchange rate differences was
$1.3 million. Restated (at average exchange rates for the three month period
ended June 30, 1997), net sales for the three month period ended June 30, 1998
for the Company's European operations increased 3.8% to $18.9 million from $18.2
million in the comparable period in 1997, and net sales for the Asia-Pacific
decreased 20.3% to $4.3 million from $5.4 million in the comparable period in
1997.
The Company's gross profit decreased 0.8% to $14.1 million in the
three month period ended June 30, 1998 from $14.2 million in the comparable 1997
period. Gross profit as a percentage of net sales increased to 39.8% in the
three months ended June 30, 1998 from 37.3% in the comparable period in 1997.
Despite the lower revenues realized, gross profits were strong in the three
month period ending June 30, 1998 resulting from the effects of a continued
favorable product mix shift towards the Company's higher margin vane pump
product line, compared to the same period in 1997. Margins were further enhanced
by the effects of manufacturing and operational cost efficiencies implemented by
the Company. Also favorably impacting gross profits for the three months ended
June 30, 1998 were adjustments made to certain reserves and accruals, reflecting
current business conditions. These adjustments had no impact on the results for
the six months ended June 30, 1998.
Gross profit in Europe increased by 22.6% to $8.8 million in the three
months ended June 30, 1998 from $7.2 million in the comparable period in 1997,
while gross profit in North America decreased by 21.1% to $4.1 million in the
three months ended June 30, 1998 from $5.2 million in the comparable 1997
period, and gross profit in the Asia-Pacific region decreased 35.9% to $1.2
million in the three months ended June 30, 1998 from $1.8 million in the
comparable period in 1997. Slightly higher volume levels in Europe, combined
with the strength of the Company's vane pump product line and the benefits of
implemented manufacturing cost improvements, accounted for the improvement in
gross profits. The overall depressed economic conditions in the Asia-Pacific
region, combined with the strengthening U.S. dollar relative to the functional
currencies in Australia, Japan and Singapore, reduced sales volume to that
region, and subsequently reduced gross profits. The impact of the overall
Asia-Pacific economy also impacted volume in the North American markets by
reducing exports to customers in the Asia-Pacific region, and reduced gross
profits.
Restated (at average exchange rates for the three month period ended
June 30, 1997), gross profit in Europe was $9.2 million, a 26.7% increase over
the comparable 1997 period, and gross profit in the Asia-Pacific region was $1.3
million, a 27.0% decrease versus the comparable 1997 period. On a consolidated
basis, restated (at average exchange rates for the three month period ended
June 30, 1997), gross profit increased by 2.8%, or $0.4 million, to $14.6
million from $14.2 million in the same period in 1997. Restated (at average
exchange rates for the three month period ended June 30, 1997), gross profit as
a percentage of net sales increased to 39.9% for the three months ended June 30,
1998 compared to 37.3% for the same period in 1997.
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Selling, general and administrative ("SG&A") expenses decreased 4.9%
to $7.8 million in the three month period ended June 30, 1998 from $8.2 million
in the comparable period in 1997. SG&A expenses as a percentage of net sales
increased to 22.0% in the three months ended June 30, 1998 compared to 21.4% for
the same period in 1997. Cost reductions and operating efficiencies accounted
for the overall reduction in SG&A spending for the three months ended June 30,
1998 versus the comparable period in 1997, while the lower revenues recorded is
the primary reason for the increase in these expenses as a percentage of net
sales.
Operating income increased 3.3% to $6.3 million in the three months
ended June 30, 1998 from $6.1 million for the comparable 1997 period. Operating
income as a percentage of net sales increased to 17.8% from 16.0% for the
comparable period 1997. Restated (at average exchange rates for the three month
period ended June 30, 1997), operating income for the three month period ended
June 30, 1998 increased 5.9% to $6.5 million from $6.1 million in the same
period in 1997. The increase in operating income for the three month period
ended June 30, 1998 attributable to the exchange rate was $0.2 million.
Net interest income was $0.3 million in the three month period ended
June 30, 1998 compared to $0.05 million of interest income in the comparable
1997 period. Increased profitability, combined with unused portions of the net
proceeds of the Company's initial public offering held in August 1997 and lower
investing and financing activities increased interest bearing cash balances for
the period, and, subsequently, net interest income.
The effective tax rate for the three month period ended June 30, 1998
was 27.1% compared to 21.1% for the comparable 1997 period. The provision for
taxes increased 38.9% to $1.8 million for the three month period ended June 30,
1998 compared to $1.3 million for the same 1997 period. This provision as a
percentage of net sales increased to 5.1% for the three month period ended June
30, 1998 from 3.4% in the same 1997 period. Full utilization of net operating
loss carryforwards in 1997 for North American operations, unavailable for use in
1998, was the primary reason for the increase in the tax rate.
Six Months Ended June 30, 1998 compared with Six Months Ended June 30, 1997.
Net sales decreased 3.2% to $72.7 million in the six months ended June
30, 1998 from $75.1 million in the comparable period in 1997. For the six months
ended June 30, 1998 versus the same period in 1997, net sales in Europe
increased 3.7% to $36.8 million from $35.5 million, while net sales in North
America decreased 5.1% to $27.7 million from $29.2 million, and net sales in the
Asia-Pacific region decreased 21.0% to $8.2 million from $10.4 million. A weak
Asian economy, combined with a strengthening U.S. dollar against most of the
functional currencies used by the Company, were the primary reasons for the
decline in sales revenue during the six months ended June 30, 1998 versus the
same period in 1997.
Restated (at average exchange rates for the six month period ended
June 30, 1997), net sales for the six months ended June 30, 1997, were $75.9
million, a 1% increase over the comparable 1997 period. The increased revenue
for the period attributable to the exchange rate difference was $3.2 million.
Restated (at average exchange rates for the six month period ended June 30,
1997), net sales for the Company's European operations increased 9.6% to $38.9
million for the six months ended June 30, 1998 from $35.5 million in the
comparable 1997 period, while net sales for the Asia-Pacific operations
decreased 12.5% to $9.1 million for the six months ended June 30, 1998 from
$10.4 million in the comparable 1997 period.
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Gross profit increased by 3.0% to $27.9 million in the six months
ended June 30, 1998, from $27.1 million in the comparable 1997 period. Gross
profit as a percentage of net sales increased to 38.4% for the six months ended
June 30, 1998 versus 36.1% in the same period for 1997. Despite the lower
revenues recorded for the period, gross profits and margins were strong
reflecting the continued shift towards the Company's higher profit margin vane
pump product line, combined with the favorable effects of previously implemented
manufacturing cost improvement programs.
Gross profit for the Company's North American operations was $8.8
million for the six months ended June 30, 1998, a 5.4% decrease from the $9.3
million recorded in the comparable period in 1997, and gross profit in the
Asia-Pacific region decreased 30.6% to $2.5 million for the six months ended
June 30, 1998 from $3.6 million for the six months ended June 30, 1997. Gross
profit for the Company's European operations was $16.7 million for the six
months ended June 30, 1998, a 17.6% increase from the $14.2 million gross profit
recorded in the six months ended June 30, 1997. The decrease in Asia-Pacific and
North American gross profit can be directly related to the reduction in net
sales, partially offset by cost and operating efficiencies in the North American
manufacturing facilities, while the increased gross profit in the Company's
European operations is the result of higher sales volume, cost and operating
efficiencies and the strong market for the Company's higher profit vane pump
product line.
Restated (at average exchange rates for the six month period ended
June 30, 1997), gross profits were $29.3 million for the six months ended June
30, 1998, a 8.1% increase over the same period in 1997. Gross profit increased
by $1.4 million due to the effects of the exchange rate differences. Restated
(at average exchange rates for the six month period ended June 30, 1998), gross
profit for the Company's European operations was $17.7 million for the six
months ended June 30, 1998, a 24.7% increase over the comparable 1997 period,
and gross profit in the Asia-Pacific region was $2.7 million for the six months
ended June 30, 1998, a 25% decrease over the comparable 1997 period. Restated
(at average exchange rates for the six month period ended June 30, 1997), gross
profit as a percentage of net sales increased to 38.6% for the six months ended
June 30, 1998 versus 36.1% for the same period in 1997.
SG&A expenses for the six months ended June 30, 1998 decreased by $0.1
million to $16.3 million for the six months ended June 30, 1998 versus $16.4
million for the comparable 1997 period. These expenses as a percentage of net
sales were 22.5% for the six month period ended June 30, 1998 compared to 21.8%
for the comparable period in 1997. Despite the lower revenues recorded, SG&A
expenses were reduced due to cost reductions focused primarily in the Company's
Asia-Pacific region operations.
Operating income for the six months ended June 30, 1998 increased by
7.4% to $11.6 million from $10.8 million for the comparable period in 1997.
Operating income as a percentage of net sales increased to 16.0% for the six
months ended June 30, 1998 from 14.3% in the comparable 1997 period. Restated
(at average exchange rates for the six month period ended June 30, 1997),
operating income increased by 12% to $12.1 million (15.9% of net sales) for the
six months ended June 30, 1998 from $10.8 million (14.3% of net sales) in the
same period in 1997. The increased operating income for the period attributable
to the exchange rate differences was $0.5 million.
Higher profitability, combined with the unused portion of the proceeds
from the Company's initial public offering in August 1997, resulted in higher
interest bearing cash balances for the six months ended June 30, 1998 compared
to the same period in 1997. With higher interest bearing cash balances
available, interest income rose 400% to $0.5 million for the six months ended
June 30, 1998 from $0.1 million in the comparable period of 1997.
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The effective tax rate for the six month period ending June 30, 1998
was 28.1% (i.e., $3.4 million) versus a tax rate for the same period in 1997 of
22.5% (i.e., $2.4 million). This provision as a percentage of net sales rose to
4.7% in 1998 from 3.2% in the comparable period for 1997. Full utilization of
net operating loss carryforwards in 1997 for North American operations,
unavailable for use in 1998, was the primary reason for the increase in the tax
rate.
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Liquidity and Capital Resources
Six Months Ended and At June 30,
--------------------------------
1998 1997
------------- -------------
(U.S. dollars in thousands)
Cash and cash equivalents 30,857 19,254
Net cash provided by operating activities 5,032 5,783
Net cash used in investing activities (3,463) (1,628)
Net cash used in financing activities (688) (2,292)
Effect of exchange rate changes on cash (361) (1,753)
Net cash provided by operating activities for the six months ended
June 30, 1998 decreased to $5.0 million from $5.8 million as compared to the
same 1997 period. The decrease in the Company's cash generated from operating
activities primarily resulted from additional working capital requirements. The
$0.8 million decrease in net cash provided by operating activities for the six
month period ended June 30, 1998 as compared to the same period in 1997 was
primarily attributable to a $3.1 million net increase in cash utilized for
inventories, a $0.6 million increase in cash utilized for accounts receivables,
partially offset by a $3.1 million decrease in cash utilized for accrued and
other liabilities. The Company anticipates that operating activities and capital
expenditure requirements will continue to be funded utilizing cash flow from
operations, cash on hand, and, if necessary, bank borrowings.
Net cash utilized in investing activities increased to $3.5 million
for the six month period ended June 30, 1998 from $1.6 million in the comparable
1997 period. Investing activities consisted primarily of investment in machinery
and equipment for the Company's three production facilities. Purchases of
machinery and equipment were $3.5 million for the six months ended June 30, 1998
as compared to $1.7 million for the comparable period in 1997. The Company
anticipates that it will incur approximately $8.5 million in capital
expenditures for fiscal year 1998.
Net cash utilized in financing activities decreased to $0.7 million in
the six months ended June 30, 1998 from $2.3 million in the comparable 1997
period. The decrease of $1.6 million in net cash utilized by financing
activities was primarily attributable to a reduction of $1.1 million in the six
month period ended June 30, 1998 compared to the same period in 1997 for
nonrecurring costs associated with the redemption of preferred stock and a
decrease in net repayments of lines of credit and capital lease obligations of
$0.5 million.
The effects of exchange rate fluctuations on cash and cash equivalents
were $0.4 million and $1.8 million for the six months ended June 30, 1998 and
June 30, 1997, respectively. Since approximately two-thirds of the Company's
business is transacted in currencies other than the U.S. dollar, foreign
currency fluctuations had a significant impact on U.S. dollar reported balances
for the six month period ended June 30, 1998 compared to the same period in
1997. The $1.4 million decline in the exchange rate fluctuations on cash and
cash equivalents was attributable to a strengthening U.S. dollar against most of
the functional currencies earned by the Company in its European operations and
Asia-Pacific operations. The average dollar-weighted foreign currency decline
for the six month period ended June 30, 1998 for the Company's European and
Asia-Pacific operations was 5.7% and 11.0%, respectively.
In September 1995, the Company's U.S. subsidiary entered into a loan
agreement with a bank that provides for a revolving line of credit of up to $3.0
million. The loan agreement was renewed in September 1997. Borrowings under the
loan agreement are secured by substantially all of the U.S. subsidiary's assets.
Interest on
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the revolving line of credit, which is at the prime rate (8.5% at June 30, 1998)
minus 0.5%, is payable monthly. The loan agreement contains various restrictions
and financial maintenance requirements, including the requirement to maintain a
compensating balance of $100,000. At June 30, 1998, the Company's U.S.
subsidiary had $3.0 million of unused credit available under this facility.
Short-term borrowings outside the United States under available
informal credit facilities are typically a result of overdrafts. At June 30,
1998, the Company had $1.0 million of foreign debt outstanding. The Company also
has an additional $2.2 million of unused foreign credit facilities. The banks
may withdraw these facilities at any time.
Use of proceeds
The Company has not used the net proceeds of the initial public
offering held in August 1997. The net proceeds totaling approximately $4.8
million are currently being held in cash and short-term investments.
Year 2000 (Millennium) Issues
Currently, many computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with such "Year 2000"
requirements. The Company and third parties with which the Company does business
rely on numerous computer programs in their day to day operations. The Company
is evaluating the Year 2000 issue, and as it relates to the Company's internal
computer systems and third party computer systems with which the Company
interacts. The Company is being advised by a majority of its vendors and
suppliers that certain of their products are Year 2000 compliant, or can be
upgraded, or will not be affected by the Year 2000 problem.
The Company expects to incur consulting and other expenses related to these
issues, and such costs will be expensed as incurred. In addition, the
appropriate course of action may include a replacement of, or an upgrade to
certain systems or equipment. There can be no assurance that the Year 2000
issues will be resolved in 1998 or 1999. The Company may incur significant costs
in resolving its Year 2000 issues, however, the Company believes this issue will
not have a significant adverse impact on the Company's operations.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DENISON INTERNATIONAL plc
By: /s/ Bruce A. Smith
-------------------
Bruce A. Smith
Chief Financial Officer
Date: August 14, 1998
