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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 October 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 REPORTS RESULTS FOR
THIRD QUARTER AND NINE MONTHS
---------------------------------------------
MARYSVILLE, Ohio, October 28 - Denison International plc (NASDAQ: DENHY)
announced today its financial results for the third quarter and nine months
ended September 30, 1998.
For the current three months ended September 30, 1998, the Company's net sales
decreased 5.9% to $34.0 million, from $36.2 million in the third quarter of
1997. Restated, net sales (at 1997 third quarter exchange rates) for the current
third quarter were $34.5 million, a 4.7% decrease over the comparable 1997
period. The decrease in net sales is attributed to the impact of the current
economic conditions in the Asian market, and, in turn, slower sales to North
American customers who have substantial exports to the Asian markets, combined
with the effects of military sales achieved in 1997, nonrecurring in 1998. The
lower sales in the Asian and North American markets were partially offset by
strong sales in the European markets.
Net income was $4.2 million, or $.38 per diluted share, for the third quarter of
1998, compared to net income of $5.6 million and diluted earnings per share of
$.51 for the comparable period in 1997. The third quarter of 1997 included a
gain from the sale of property in Germany of $2.1 million, and, after adjusting
third quarter 1997 results for this non-recurring item, third quarter 1998 net
income of $4.2 million represents a $0.8 million or 22.2% increase over 1997.
Third quarter 1998 profits from continuing operations were strong, despite the
lower revenues realized, resulting from the effects of continued manufacturing
and operating cost efficiencies consistent with the company's overall business
strategy, combined with a continued favorable product mix of the company's
higher margin hydraulic vane pump product line. In addition, the company
recorded adjustments to certain reserves and accruals in the third quarter of
1998, reflecting normal changing business conditions. These adjustments had
little impact on year-to-date 1998 results. Also favorably impacting net income
in the third quarter 1998 versus 1997 was interest income. Net income was also
impacted by a higher effective tax rate for the third quarter 1998 of 26.0%
versus 23.5% for third quarter 1997, as a result of the full utilization of net
operating losses in the Company's U.S. subsidiary in 1997, unavailable for 1998.
Operating income in the third quarter 1998 increased by 3.9% versus 1997
reflecting cost controls in operating expenses. Operating margin of 15.5% for
the third quarter 1998 was favorable to the same period 1997 margin of 14.1%.
For the quarter ended September 30, 1998, gross profit decreased by 4.7% to
$12.9 million, from $13.6 million in the same period 1997. Gross margin for the
third quarter 1998 of 38.0% was favorable to the gross margin of 37.5% for the
same period 1997, reflecting implemented cost improvements in the Company's
manufacturing facilities.
Year-to-date 1998 net sales of $106.7 million declined by $4.5 million or 4.1%
versus the same period 1997. Restated, net sales (at year-to-date 1997 exchange
rates) for the first nine months of 1998 were $110.4 million, $0.8 million or 1%
lower than in 1997.
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Year-to-date 1998 net income decreased by $1.1 million, or 7.7% to $12.9
million, or $1.16 per diluted share, versus 1997 net income of $14.0 million, or
$1.30 per diluted share. After adjusting 1997 results for the non-recurring gain
on sale of property of $2.1 million, year-to-date 1998 net income of $12.9
million was $1.0 million or 8.4% favorable to 1997. Strength in the company's
higher margin hydraulic vane pump product line, combined with continuing
manufacturing and operational cost improvements, were the primary reasons for
the strong profits realized. The increase in net income was impacted by a higher
effective tax rate for 1998 of 27.4% versus 22.9% for 1997.
Operating earnings year-to-date 1998 were $16.9 million representing a $ 1.0
million or 6.6% increase versus the first nine months of 1997. Operating margin
of 15.8% for year-to-date 1998 was 1.5 points higher than the comparable period
last year. Despite the lower sales revenues realized, gross profit in the
current year to date period rose by $0.2 million to $40.9 million. Year-to-date
1998 gross margin of 38.3% was 1.7 points higher than 1997's gross margin of
36.6%.
Commenting on the results, David Weir, President and CEO, stated, "Our efforts
to reduce costs and improve operating efficiencies resulted in strong profits
and margins for the third quarter and year-to-date 1998, despite the adverse
affect on net sales from the current economic conditions in Asia, the
strengthening U.S. dollar and, in turn, soft sales in the North American market.
While I am concerned about our ability to increase sales in the 4th quarter
versus 1997, given the adverse impacts on volume, all Denison International
employees, including myself, will continue to seek out and implement new ways to
reduce costs and improve operating efficiencies to achieve our current year and
long term profit and growth goals."
Denison International plc designs, manufactures, distributes and services highly
engineered fluid power systems and components. Denison distributes its products
and services globally to a diverse group of original equipment manufacturers and
end users in a broad array of industrial applications, including machine tools
and material handling equipment, mobile construction, agricultural and utility
equipment, and marine applications, including military equipment.
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 are
subject to certain risks and uncertainties which could cause actual results to
differ materially from those currently anticipated. Shareholder, 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.
(Tables Follows)
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DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
--------- --------- ---------- ----------
USD-(000's)
Net Sales $ 34,016 $ 36,163 $ 106,730 $ 111,244
Cost of Sales 21,096 22,601 65,868 70,543
--------- --------- ---------- ----------
Gross Profit 12,920 13,562 40,862 40,701
SG&A 7,633 8,472 23,961 24,846
--------- --------- ---------- ----------
Operating Income 5,287 5,090 16,901 15,855
Other Income - 2,151 - 2,175
Net Interest Income 408 80 900 130
--------- --------- ---------- ----------
Income Before Taxes 5,695 7,321 17,801 18,160
Tax Provision 1,483 1,724 4,882 4,159
--------- --------- ---------- ----------
Net Income $ 4,212 $ 5,597 $ 12,919 $ 14,001
========= ========= ========== ==========
Basic Earnings
per Share $ 0.38 $ 0.52 $ 1.17 $ 1.32
Diluted Earnings $ 0.38 $ 0.51 $ 1.16 $ 1.30
per Share
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DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1998 1997
------------- ------------
Current Assets:
Cash & cash equivalents $ 34,557 $ 30,337
Accounts receivable, net 28,921 29,212
Inventories 36,729 28,182
Other current assets 3,577 3,327
------------ ------------
Total current assets 103,784 91,058
Property, plant and equipment, net 19,998 14,948
Other assets 1,822 1,487
------------ ------------
Total assets $ 125,604 $ 107,493
============ ============
Current Liabilities:
Notes payable to bank $ 411 $ 1,472
Accounts payable and
other current liabilities 29,909 25,752
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Total current liabilities 30,320 27,224
Noncurrent liabilities 21,060 20,717
Shareholders equity:
Retained earnings 71,034 58,115
Other shareholders equity 3,190 1,437
------------- ------------
Total shareholders equity 74,224 59,552
Total liabilities and
shareholders equity $ 125,604 $ 107,493
============== ============
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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
Dated: October 29, 1998
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