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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM_________TO ___________
Commission file number 000-29358
DENISON INTERNATIONAL plc
-------------------------
(Exact name of registrant as specified in its charter)
England and Wales Not Applicable
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14249 Industrial Parkway
Marysville, Ohio 43040
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(937) 644-4437
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Ordinary Shares, $0.01 Par Value, 9,945,366 shares as of November 14, 2003
"A" Ordinary Shares, (pound)8.00 par value, 7,015 shares as of November 14, 2003
TABLE OF CONTENTS
FORM 10-Q
PART I - FINANCIAL INFORMATION
PAGE
----
Item 1 Financial Statements 2
Condensed Consolidated Balance Sheets (Unaudited) 2
Condensed Consolidated Statements of Operations
(Unaudited) 3
Condensed Consolidated Statements of Cash Flows
(Unaudited) 4
Notes to Condensed Consolidated Financial Statements
(Unaudited) 5
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Critical Accounting Policies and Estimates 10
Impact of Recently Adopted Accounting Pronouncements 11
Results of Operations 12
Liquidity and Capital Resources 13
Contractual Obligations 14
Impact of Inflation 14
Exposure to Currency Fluctuations 14
Market Risk 15
Order Receipts and Backlog 15
Access to Information 15
Forward-looking Information 15
Item 3 Quantitative and Qualitative Disclosures About Market Risk 15
Item 4 Controls and Procedures 16
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 16
Item 2 Changes in Securities and Use of Proceeds 16
Item 3 Defaults upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
Exhibit Index 17
Signatures 18
Exhibits 19
Part I. Financial Information
Item 1. Financial Statements
DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(U.S. dollars in thousands)
September 30, 2003 December 31, 2002
------------------ -----------------
Current assets:
Cash and cash equivalents $ 56,203 $ 39,752
Accounts receivable, less allowances of $2,438 and $2,242 at
September 30, 2003 and December 31, 2002 respectively 36,870 32,554
Inventories 46,816 45,324
Other current assets 4,489 5,590
--------- ---------
Total current assets 144,378 123,220
Property, plant and equipment, net 32,457 31,132
Other assets 2,332 2,263
Goodwill 14,368 12,924
--------- ---------
Total assets $ 193,535 $ 169,539
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ 793 $ 898
Accounts payable 13,347 14,553
Other accrued liabilities 25,091 19,372
--------- ---------
Total current liabilities 39,231 34,823
Noncurrent liabilities:
Pension accrual 14,883 13,201
Other noncurrent liabilities 4,774 5,159
--------- ---------
19,657 18,360
Shareholders' equity:
'A' ordinary shares (pound)8.00 par value; 7,125 shares authorized, and 7,015
issued and outstanding at September 30, 2003 and
December 31, 2002 86 86
Ordinary shares $0.01 par value; 15,000,000 shares authorized, and
9,937,651 and 10,017,700 issued and outstanding at
September 30, 2003 and December 31, 2002 respectively 101 102
Additional paid-in capital 5,202 5,202
Capital redemption reserve 1,090 1,090
Retained earnings 119,555 109,900
Accumulated other comprehensive (loss) 8,613 (24)
--------- ---------
Total shareholders' equity 134,647 116,356
--------- ---------
Total liabilities and shareholders' equity $ 193,535 $ 169,539
========= =========
The accompanying notes are an integral part of these statements.
1
DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(U.S. dollars in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---- ---- ---- ----
Net Sales $ 43,365 $ 38,925 $ 134,165 $ 116,731
Cost of sales 27,851 24,728 86,037 74,936
--------- --------- --------- ---------
Gross profit 15,514 14,197 48,128 41,795
Selling, general and administrative expenses 10,753 10,007 33,225 29,235
--------- --------- --------- ---------
Operating income 4,761 4,190 14,903 12,560
Other income/(expense) (241) (110) (333) (332)
Interest income, net 265 270 640 713
--------- --------- --------- ---------
Income before taxes 4,785 4,350 15,210 12,941
Provision for income taxes 1,293 1,130 4,222 3,348
--------- --------- --------- ---------
Net income, before cumulative effect of a
change in accounting principle 3,492 3,220 10,988 9,593
Cumulative effect of a change in accounting
principle -- -- -- 1,858
--------- --------- --------- ---------
Net income $ 3,492 $ 3,220 $ 10,988 $ 11,451
========= ========= ========= =========
Basic earnings per share, before cumulative
Effect of a change in accounting principle $ .35 $ .31 $ 1.10 $ .91
Cumulative effect of a change in
accounting principle -- -- -- .18
--------- --------- --------- ---------
Basic earnings per share $ .35 $ .31 $ 1.10 $ 1.09
========= ========= ========= =========
Diluted earnings per share $ .35 $ .31 $ 1.10 $ 1.08
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
2
DENISON INTERNATIONAL plc
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars in thousands)
Nine months ended September 30,
2003 2002
---- ----
Net cash provided by operating activities $ 16,132 $ 13,002
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (3,918) (4,339)
Proceeds from disposal of property, plant
and equipment (165) (150)
Purchase of subsidiary, net of cash acquired -- (2,749)
-------- --------
Net cash used in investing activities (4,083) (7,238)
-------- --------
Cash flows from financing activities:
Net borrowings on lines of credit (164) (9,669)
Buyback of stock (1,334) (3,010)
Exercise of stock options -- 34
-------- --------
Net cash used in financing activities (1,498) (12,645)
-------- --------
Effect of exchange rate changes on cash 5,900 2,306
-------- --------
Net increase (decrease) in cash and cash equivalents 16,451 (4,575)
Cash and cash equivalents at beginning of period 39,752 43,245
-------- --------
Cash and cash equivalents at end of period $ 56,203 $ 38,670
======== ========
The accompanying notes are an integral part of these statements.
3
DENISON INTERNATIONAL plc
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1) Basis of Financial Statements
Interim Financial Information
The financial information at September 30, 2003 and for the three and nine
month periods ended September 30, 2003 and September 30, 2002 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. All adjustments made
were of a normal, recurring nature. 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 Securities
and Exchange Commission Rules and Regulations. These condensed consolidated
financial statements should be read in conjunction with the Company's audited
financial statements and the notes thereto for the year ended December 31, 2002
included in the Company's Annual Report on Form 10-K.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly owned. The intercompany accounts
and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States 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.
2) Recent Accounting Developments
In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No.
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 and prohibits the use of the
pooling-of-interests method. SFAS No. 142 changes the accounting for goodwill
from an amortization method to an impairment-only approach. The amortization of
goodwill from past business combinations ceased upon adoption of this Statement
on January 1, 2002. Goodwill and intangible assets acquired in business
combinations completed after June 30, 2001 must comply with the provisions of
this Statement. Also under this Statement, companies were required to perform a
transitional impairment test of goodwill by evaluating all existing goodwill for
impairment within six months of adoption by comparing the fair value of each
reporting unit to its carrying value at the date of adoption. During 2002, the
Company performed both the transitional impairment test in June of 2002 and the
annual impairment test in the fourth quarter of 2002. Both of these tests
determined that no impairment existed.
Additionally, SFAS No. 141 requires that in a business combination in
which the fair value of the net assets acquired exceeds cost, any residual
negative goodwill is recognized as an extraordinary gain in the period in which
the business combination is initially recognized. The transition provisions of
SFAS No. 141 require that upon adoption of SFAS No. 142, any existing negative
goodwill be adjusted as a cumulative effect of a change in accounting principle
in the statement of operations. In the first quarter of 2002, the Company
recorded a cumulative effect of a change in accounting principle for its
remaining unamortized negative goodwill of $1.9 million.
A reconciliation of previously reported net income before cumulative
effect of a change in accounting principle and related per share amounts to the
amounts adjusted for the exclusion of goodwill and negative goodwill
amortization net of the related income tax effect follows:
Three months ended Nine months ended
September 30, September 30,
(U.S. dollars in thousands, except per share data) 2003 2002 2003 2002
---- ---- ---- ----
Net income, before cumulative effect of a change in
accounting principle as reported $ 3,492 $ 3,220 $ 10,988 $ 9,593
Less: Negative goodwill amortization -- -- -- 1,858
---------- ---------- ---------- ----------
Adjusted net income, after cumulative effect of a
change in accounting principle as adjusted $ 3,492 $ 3,220 $ 10,988 $ 11,451
Basic earnings per share:
Net income, before cumulative effect of a change
in accounting principle as reported $ .35 $ .31 $ 1.10 $ .91
Less: Negative goodwill amortization -- -- -- .18
---------- ---------- ---------- ----------
Adjusted net income, after cumulative effect of a
change in accounting principle as adjusted $ .35 $ .31 $ 1.10 $ 1.09
Diluted earnings per share:
Net income, before cumulative effect of a change in
accounting principle as reported $ .35 $ .31 $ 1.10 $ .90
Less: Negative goodwill amortization -- -- -- .18
---------- ---------- ---------- ----------
Adjusted net income, after cumulative effect of a
change in accounting principle as adjusted $ .35 $ .31 $ 1.10 $ 1.08
Goodwill balance of $14,368 and $12,924 at September 30, 2003 and December
31, 2002, respectively, relates to the Company's operations in its European
segment. The increase in goodwill from December 31, 2002 is the result of
foreign currency translation adjustments.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No. 146 replaces EITF Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." Among other things, SFAS No. 146 requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred instead of at the date of an entity's commitment to an
exit plan, as under EITF Issue No. 94-3. SFAS No. 146 is effective for exit or
disposal activities that are initiated after December 31, 2002, with early
application encouraged. The Company does not expect the adoption of this
statement to have a significant effect on the Company's results of operations,
financial position, or cash flows.
In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation - Transition and Disclosures", which amends FASB SFAS No. 123,
"Accounting for Stock-Based Compensation". SFAS No. 148 provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. Statement No. 148 amends the
disclosure requirements of SFAS No. 123 to require more prominent and more
frequent disclosure in the financial statements about the effects of stock-based
compensation. SFAS No. 148 is effective for fiscal years ended after December
15, 2002. Accordingly, the Company adopted the annual disclosure provisions of
SFAS No. 148 in its financial statements for the year ended December 31, 2002.
The Company has implemented SFAS No. 148 effective January 1, 2003 regarding
disclosure requirements for condensed financial statements for interim periods.
As provided by SFAS No. 123 and 148, the Company has chosen to continue use of
the accounting method under Accounting Principles Board Opinion No. 25 and the
related interpretations to account for the Company's stock compensation plans.
As adoption of Statement No. 148 only involves disclosures by the Company, the
Company does not expect any impact on its results of operations, financial
position, or liquidity.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No.
5, 57, and 107 and Rescission of FASB Interpretation No. 34" (FIN No. 45). The
interpretation requires that upon issuance of a guarantee, the entity must
recognize a liability for the fair value of the obligation it assumes under that
obligation. This interpretation is intended to improve the comparability of
financial reporting by requiring identical accounting for guarantees issued with
separately identified consideration and guarantees issued without separately
identified consideration. The disclosure provisions of FIN No. 45 were effective
for the Company as of December 31, 2002. The Company currently has no
significant guarantees and claims arising during the course of its business
operations. As applicable the Company would accrue for losses under such
arrangements when they become probable and estimable. The initial recognition
and measurement provisions of FIN No. 45 are applicable to guarantees
issued or modified after December 31, 2002. The adoption of FIN No. 45 has not
had an impact on the company's consolidated results of operations, financial
position, or cash flows.
Effective July 1, 2003 the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) no. 149 "Amendment of Statement 133 on
Derivative Instruments and Hedging Activity" and SFAS No. 150 "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity". The implementation of these accounting pronouncements did not have an
impact of the Company's results of operations, financial position or cash flow.
3) Acquisitions
On May 31, 2002 the Company completed its acquisition of 100% of the
outstanding shares of Rander & Company Hydraulick-Systeme und Anlagenbau GmbH
("Rander"), effective as of June 1, 2002. The Rander acquisition improved the
Company's strategic presence in the German hydraulics market, one of the largest
hydraulics markets in Europe. The cash purchase price was $3,300,000 ($2,749,000
net of cash acquired and debt assumed). Rander designs, manufactures and
distributes hydraulic systems for industrial and mobile hydraulics applications,
and is located in Bremen, Germany. The acquisition has been accounted for
utilizing the purchase method of accounting, and the operating results of Rander
have been included in the operating results of the Company from June 1, 2002.
The purchase price resulted in $2.2 million of goodwill. The Company preformed
an evaluation of the operations of Rander, in accordance with the provisions of
SFAS 141 / 142, and has determined that there were no identifiable intangible
assets.
The following unaudited pro forma summary presents the Company's combined
September 2003 and 2002 results as if the Rander acquisition had occurred at
January 1, 2002, after giving effect to certain adjustments. These pro forma
results are not necessarily indicative of those that would have occurred had the
acquisition occurred at January 1, 2002:
(U.S. dollars in thousands) Nine months ended
-----------------
September 30, 2003 September 30, 2002
------------------ ------------------
Revenue $134,165 $119,526
Net Income $ 10,988 $ 11,646
Basic Earnings per share $ 1.10 $ 1.10
Diluted Earnings per share $ 1.10 $ 1.10
4) Inventory
Inventories consisted of the following:
(U.S. dollars in thousands) September 30, 2003 December 31, 2002
------------------ -----------------
Finished goods $26,258 $27,551
Work-in-progress 4,454 3,675
Raw materials and supplies 16,104 14,098
------- -------
$46,816 $45,324
======= =======
5) Property, Plant and Equipment
Property, plant and equipment, net, consisted of the following:
(U.S. dollars in thousands) September 30, 2003 December 31, 2002
------------------ -----------------
Cost:
Land and buildings $ 7,567 $ 6,954
Machinery and equipment 59,542 53,939
Motor vehicles 1,079 978
-------- -------
$ 68,188 $61,871
Less: accumulated depreciation (35,731) (30,739)
-------- -------
Property, plant and equipment, net $ 32,457 $31,132
======== =======
6) Financial and Derivative Instruments
The Company's worldwide manufacturing facilities sell products to the
Company's sales and marketing subsidiaries under various currencies. In
addition, certain of the Company's subsidiaries record billings of export sales
in the customer's functional currency. Accordingly, the U.S. dollar-equivalent
cash flows may vary due to changes in
related foreign currency exchange rates. To reduce that risk, from time to time,
the Company enters into foreign currency forward contracts with a maximum
hedging period of 12 months. The Company has no other freestanding or embedded
derivative instruments.
Under the cash flow hedging model, gains and losses on the foreign
currency forward contracts are recorded in other comprehensive income (equity)
to the extent that the hedges are effective until the underlying sale or
purchase transactions are recognized in earnings. Gains and losses on sale and
purchase transactions are classified as sales or cost of sales, respectively.
No amounts were reclassified to earnings during the three and nine months
ended September 30, 2003 in connection with forecasted transactions that were no
longer considered probable of occurring.
7) Stock Options
Effective January 1, 2003, the Company adopted SFAS No. 148 "Accounting
for Stock-Based Compensation--Transition and Disclosure", which allowed the
Company to continue following the guidance of Accounting Principles Board (APB)
Opinion No. 25 "Accounting for Stock Issued to Employees", for measurement and
recognition of stock-based transactions with employees. Accordingly, no
compensation cost has been recognized for the Company's stock option plan in the
Consolidated Statements of Operations, as all options granted under the plan had
an exercise price equal to the market value of the Company's stock on the date
of grant. Had the determination of the compensation cost for the plan been based
on the fair value at the grant dates for awards under the plan, the Company's
net income would have decreased to the pro forma amounts indicated below:
(U.S. dollars in thousands, except per share data)
Three months ended Nine months ended
September 30, 2003 September 30, 2003
2003 2002 2003 2002
---- ---- ---- ----
Net Income
As reported: $ 3,492 $ 3,220 $ 10,988 $ 11,451
Deduct: Total stock-based employee
compensation expense determined utilizing the
Black-Scholes option pricing model for all
awards, net of tax (10) 15 (53) 42
---------- ---------- ---------- ----------
Pro-Forma Net Income $ 3,482 $ 3,235 $ 10,935 $ 11,493
========== ========== ========== ==========
Earnings per Share
Basic - as reported $ .35 $ .31 $ 1.10 $ 1.09
- pro forma $ .35 $ .31 $ 1.10 $ 1.09
Diluted - as reported $ .35 $ .31 $ 1.10 $ 1.08
- pro forma $ .35 $ .31 $ 1.09 $ 1.09
8) Earnings per Share
The following table sets forth the computation of basic and diluted earnings per
share:
(U.S. dollars and shares in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---- ---- ---- ----
Numerator:
Net income $ 3,492 $ 3,220 $10,988 $11,451
======= ======= ======= =======
Denominator:
Denominator for basic earnings per share
weighted-average shares 9,938 10,511 9,961 10,548
Effect of dilutive stock options 120 15 61 42
------- ------- ------- -------
Denominator for diluted earnings per
share - adjusted weighted-average shares 10,058 10,526 10,022 10,590
======= ======= ======= =======
Basic earnings per share $ .35 $ .31 $ 1.10 $ 1.09
======= ======= ======= =======
Diluted earnings per share $ .35 $ .31 $ 1.10 $ 1.08
======= ======= ======= =======
9) Shareholders Equity
At the Company's 2003 Annual General Meeting of Shareholders held on May
22, 2003, shareholders unanimously approved a plan under which the Company may
purchase up to 993,410 of its ordinary shares under certain terms and
conditions. The approval will expire on November 7, 2004. As of September 30,
2003, the Company had remaining authorization for future purchases under the
plan of 993,410 shares or approximately $20.9 million at market price as of
September 30, 2003.
10) Comprehensive Income
The Company's total comprehensive income (loss) was as follows:
Three months ended Nine months ended
September 30, September 30,
(U.S. dollars in thousands) 2003 2002 2003 2002
---- ---- ---- ----
Net income $ 3,492 $ 3,220 $ 10,988 $ 11,451
Foreign currency translation adjustment 2,142 (822) 8,832 6,830
Derivative instruments, net of tax 0 (268) (195) 333
-------- -------- -------- --------
Comprehensive income $ 5,634 $ 2,130 $ 19,625 $ 18,614
======== ======== ======== ========
The components of accumulated other comprehensive income (loss), net of related
tax, at December 31, 2002 and September 30, 2003 is as follows:
Accumulated
Foreign Currency Derivative Other Comprehensive
Translation Instruments Income (Loss)
----------- ----------- -------------
Balance at December 31, 2002 $ (219) $ 195 $ (24)
Current period other
comprehensive income 8,832 (195) 8,637
------- ------- -------
Balance at September 30, 2003 $ 8,613 $ 0 $ 8,613
======= ======= =======
11) Segment Information
A summary of the Company's operations by geographic area follows:
Three months ended Nine months ended
(U.S. dollars in thousands) September 30, September 30,
2003 2002 2003 2002
---- ---- ---- ----
Sales to unaffiliated companies:
Europe $ 25,949 $ 21,488 $ 81,168 $ 64,810
North America 10,577 11,568 34,459 35,064
Asia-Pacific 6,839 5,869 18,538 16,857
--------- --------- --------- ---------
Total consolidated $ 43,365 $ 38,925 $ 134,165 $ 116,731
========= ========= ========= =========
Transfers between geographic areas:
Europe $ 11,740 $ 10,376 $ 36,162 $ 29,619
North America 3,030 3,308 9,523 9,757
Asia-Pacific 68 51 223 190
--------- --------- --------- ---------
Total transfers 14,838 13,735 45,908 39,566
Eliminations (14,838) (13,735) (45,908) (39,566)
--------- --------- --------- ---------
Total consolidated $ 0 $ 0 $ 0 $ 0
========= ========= ========= =========
Operating income (loss):
Europe $ 3,619 $ 3,094 $ 11,197 $ 9,265
North America 296 928 2,041 2,070
Asia-Pacific 636 359 1,338 1,072
Corporate 210 (191) 327 153
--------- --------- --------- ---------
Total consolidated $ 4,761 $ 4,190 $ 14,903 $ 12,560
========= ========= ========= =========
Identifiable assets: September 30, 2003 December 31, 2002
------------------ -----------------
Europe $138,248 $119,065
North America 34,511 31,694
Asia-Pacific 20,776 18,780
-------- --------
Total consolidated $193,535 $169,539
======== ========
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following should be read in conjunction with the Company's Condensed
Consolidated Financial Statements and the Notes related thereto appearing in
Item 1. Financial Statements.
Although the Company reports its financial results in U.S. dollars,
approximately 81% 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, as well as the 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. The table below summarizes the results of operations for the three and
nine months ended September 30, 2003 at the actual currency rates utilized for
the period and as adjusted utilizing the currency rates in effect for the
comparable period of 2002.
Three months ended September 30, 2003 Nine months ended September 30, 2003
------------------------------------- ------------------------------------
(U.S. dollars
in thousands) Adjusted Utilizing Adjusted Utilizing
As Reported 2002 Currency Rates As Reported 2002 Currency Rates
----------- ------------------- ----------- -------------------
Net Sales $ 43,365 $ 39,736 $134,165 $119,456
Gross Profit 15,514 14,143 48,128 42,519
SG&A Expenses 10,753 9,878 33,225 29,630
Operating Income 4,761 4,265 14,903 12,889
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's Discussion and Analysis of Financial Condition and Results of
Operations discuss the Company's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an on-going basis, management evaluates its
estimates and judgments, including those related to revenue recognition,
allowance for doubtful accounts, inventories, warranty obligations and deferred
tax assets. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
Management believes the following critical accounting policies, among
others, affect its more significant judgments and estimates used in the
preparation of its consolidated financial statements.
Revenue Recognition
The Company recognizes revenue in accordance with SEC Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), as
amended by SAB 101A and 101B. SAB 101 requires that four basic criteria must be
met before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and
determinable; and (4) collectibility is reasonably assured. Determination of
criteria (3) and (4) are based on management's judgments regarding the fixed
nature of the fee charged for services rendered and products delivered and the
collectibility of those fees. Should changes in conditions cause management to
determine these criteria are not met for certain future transactions, revenue
recognized for any reporting period could be adversely affected.
Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
If the financial condition of the Company's customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.
Inventory
The Company establishes reserves against its inventory for estimated
obsolescence or unmarketable inventory based upon the difference between the
cost of inventory and the estimated market value based upon assumptions about
future demand and market conditions. If actual future demand or market
conditions are less favorable than those projected by management, additional
inventory reserves may be required.
Goodwill
Effective January 1, 2002 the Company adopted SFAS 141, "Business
Combinations". SFAS 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001 and prohibits the
use of the pooling-of-interests method. Additionally, SFAS 141 requires that in
a business combination in which the fair value of the net assets acquired
exceeds cost, any residual negative goodwill is recognized as an extraordinary
gain in the period in which the business combination is initially recognized.
The transition provisions of SFAS 141 require that upon adoption of the new
standard, any existing negative goodwill be adjusted as a cumulative effect of a
change in accounting principle in the statement of operations. In the first
quarter of 2002, the Company recorded a cumulative effect of a change in
accounting principle for its remaining unamortized negative goodwill of $1.9
million.
Effective January 1, 2002 the Company adopted SFAS 142, "Goodwill and
other Intangible Assets". Goodwill and intangible assets with indefinite lives
are not amortized; rather, they are tested for impairment at minimum on an
annual basis. Pursuant to SFAS 142, the Company was required to complete a
transitional impairment test of goodwill in the initial year of adopting the
standard, with any impairment charges recorded as a cumulative effect of a
change in accounting principal. Additionally, the Company completed its annual
impairment test in the fourth quarter of 2002. Both tests determined that no
impairment existed.
Warranties
Products sold are generally covered by a warranty for a period of one
year. The Company accrues a warranty reserve for estimated costs to provide
warranty services. The Company's estimate of costs to service its warranty
obligations is based on historical experience and expectation of future
conditions. To the extent the Company experiences increased warranty claim
activity or increased costs associated with servicing those claims, its warranty
accrual will increase resulting in decreased profits.
Deferred Tax Assets
Carrying value of the Company's net deferred tax assets assumes that the
Company will be able to generate sufficient future taxable income in certain tax
jurisdictions, based on estimates and assumptions. If these estimates and
related assumptions change in the future, the Company may be required to record
additional valuation allowances against its deferred tax assets resulting in
additional income tax expense in the Company's consolidated statement of
operations. Likewise, should the Company determine that it would be able to
realize its deferred tax assets in the future in excess of its net recorded
amount, an adjustment to the deferred tax asset would result in a decrease in
the Company's income tax expense in the Company's consolidated statement of
operations. Management evaluates the extent to which it will realize the future
benefits of the deferred tax assets annually and assesses the need for
adjustments in its valuation allowances.
IMPACT OF RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 142 in the first quarter of 2002. Its adoption had a twofold impact on the
Company's results for the three months ended March 31, 2002. SFAS 142 provisions
pertaining to the immediate elimination of negative goodwill resulted in a
cumulative effect of a change in accounting principle and had a one time after
tax benefit to earnings in the first quarter of 2002 of $1.9 million, or $0.18
per diluted share. In addition, SFAS 142 provisions pertaining to the systematic
elimination of amortization of goodwill (approximately $75,000 per quarter) has
a recurring benefit of less than $0.01 per diluted share per quarter.
RESULTS OF OPERATIONS
Third quarter ended September 30, 2003 compared with third quarter ended
September 30, 2002
The Company's net sales increased 11.6% to $43.4 million in the three
months ended September 30, 2003 from $38.9 million for the same period in 2002.
During the same period, net sales in Europe increased 20.5% to $25.9 million
from $21.5 million; net sales in North America decreased 8.6% to $10.6 million
from $11.6 million; and net sales in Asia-Pacific region increased 15.3% to $6.8
million from $5.9 million. The increased sales in the third quarter of 2003
compared with the third quarter of 2002 resulted from stronger demand for the
Company's products, particularly from its European segment, combined with the
impact of a strong Euro throughout the quarter and the resulting impact on the
translation of the Company's European operations.
The Company's gross profit increased to $15.5 million for the quarter
ended September 30, 2003 from $14.2 million in the same period of 2002. Gross
profit as a percentage of net sales of 35.7% in the quarter ended September 30,
2003 was unfavorable to the gross profit as a percentage of net sales of 36.5%
recorded for the quarter ended September 30, 2002. The decreased percentage of
gross profit can be attributed to the impact of lower production activity at the
Company's manufacturing facilities partially offset by cost controls
implemented.
Gross profit in Europe increased 15.1% to $9.9 million for the three
months ended September 30, 2003 from $8.6 million in the same period of 2002.
Gross profit in North America of $3.3 million decreased 10.8% or $0.4 million
versus gross profit recorded in the comparable period of 2002. Asia-Pacific
gross profit of $2.0 million increased 5.3% or $0.1 million gross profit
recorded in the same period of 2002.
Selling, general and administrative ("SG&A") expenses increased by 8.0% to
$10.8 million for the quarter ended September 30, 2003 versus SG&A expenses of
$10.0 million for the quarter ended September 30, 2002. These expenses as a
percentage of net sales were 24.9% for 2003 as compared to 25.7% for 2002. The
decrease in SG&A expenses as a percent of net sales for the three months ended
September 30, 2003 as compared to the three months ended September 30, 2002 can
be attributed to cost controls implemented at the Company's worldwide locations.
Operating income increased 14.3% to $4.8 million for the quarter ended
September 30, 2003 from $4.2 million in the same period of 2002. Operating
income as a percentage of net sales increased to 11.1% in the quarter ended
September 30, 2003 from 10.8% in the quarter ended September 30, 2002. The
changes in exchange rates had the effect of increasing operating income for the
period by $0.5 million. The increase in operating income as a percentage of net
sales resulted from the variances noted in gross profit and SG&A expenses.
Other expense was recorded in the quarter ended September 30, 2003 of
$241,000 (0.6% of net sales) versus other expense of $110,000 (0.3% of net
sales) for the comparable period of 2002. The other expense recorded for the
third quarter of 2003 was the result of the recognition of non-cash currency
losses on inter-company loans. The change in non-cash currency losses for 2003
versus 2002 can be attributed to the weakening dollar and its impact on
translation.
Net interest income was $265,000 for the quarter ended September 30, 2003,
as compared to net interest income of $270,000 for the comparable period in
2002. The decrease reflects short term interest rates available worldwide,
partially offset by the Company's higher cash balances.
The effective tax rate for the three months ended September 30, 2003 was
27.0% compared with 26.0% for the three months ended September 30, 2002. The
increased effective tax rate reflects a mix difference in profits generated from
the Company's worldwide operations, which have varying tax rates.
Net income for the three months ended September 30, 2003, was $3.5
million, or $0.35 per diluted share, compared to $3.2 million, or $0.31 per
diluted share for the comparable period in 2002.
Nine months ended September 30, 2003 compared with nine months ended September
30, 2002
The Company's net sales increased 15.0% to $134.2 million in the nine
months ended September 30, 2003 from $116.7 million for the same period in 2002.
During the same period, net sales in North America decreased 1.7% to $34.5
million from $35.1 million; net sales in Europe increased 25.3% to $81.2 million
from $64.8 million; and net sales in the Asia-Pacific region increased 9.5% to
$18.5 million from $16.9 million. The increased sales for the nine months ended
September 30, 2003 as compared to the similar period of 2002 reflects stronger
demand for the Company's products on a worldwide basis, combined with the impact
of a strong Euro throughout the first nine months of 2003 and the resulting
impact on the translation of the Company's European operations.
The Company's gross profit increased 15.1% to $48.1 million for the nine
months ended September 30, 2003 from $41.8 million in the same period of 2002.
Gross profit as a percentage of net sales increased to 35.8% for year to date
2003 from 35.8% in the comparable period of 2002. The increased gross profit was
primarily attributable to the higher sales volumes recorded, while the favorable
showing of gross profits as a percentage of net sales was the result of the
impacts of higher production levels throughout 2003 at the Company's
manufacturing facilities to support the higher demand from customers.
Gross profit in North America increased 0.9% to $10.8 million for the nine
months ended September 30, 2003 from $10.7 million in the same period of 2002.
Gross profit in Europe of $31.0 million increased 23.0% or $5.8 million versus
gross profit recorded in the comparable period of 2002. Asia-Pacific gross
profit increased 3.6% to $5.7 million from $5.5 million.
Selling, general and administrative ("SG&A") expenses increased 13.7% to
$33.2 million for the nine months ended September 30, 2003 from $29.2 million
for the nine months ended September 30, 2002. SG&A expenses as a percentage of
net sales were 24.7% for 2003 as compared to 25.0% for 2002.
Operating income increased 18.3% to $14.9 million in the nine month period
ended September 30, 2003 from $12.6 million in the comparable period of 2002.
Operating income as a percentage of net sales increased to 11.1% in the nine
months ended September 30, 2003 from 10.8% in the nine months ended September
30, 2002.
Other expense was recorded in the nine months ended September 30, 2003 of
$333,000 as compared to other expense of $332,000 for the comparable period of
2002. The increase in other expense was the result of recognition of non-cash
currency losses on inter-company loans for the nine months ended September 30,
2003 and reflects the strengthening Euro.
Net interest income was $640,000 for the nine months ended September 30,
2003, as compared to net interest income of $713,000 for the comparable period
in 2002 due to lower worldwide short term interest rates, partially offset by
higher investable cash balances.
The effective tax rate for the nine months ended September 30, 2003, on
income before taxes and the cumulative of a change in accounting principal, was
27.8% compared with 25.9% for the nine months ended September 30, 2002. The
lower effective tax rates for the nine months ended September 30, 2002 reflects
the additional one time recognition of deferred tax assets for the Company's
German operations of $450,000.
Net income, before cumulative effect of the change in accounting
principle, for the nine months ended September 30, 2003, as detailed above, was
$11.0 million, or $1.10 per diluted share, compared to $9.6 million, or $0.91
per diluted share for the comparable period in 2002.
The cumulative effect of a change in accounting principle, net of taxes,
resulted in a benefit of $1.9 million, or $0.18 per diluted share for the six
months ended June 30, 2002. There were no such effects in the nine months ended
September 30, 2003.
Net income, after the effects of the change in accounting principle, was
$11.0 million, or $1.10 per diluted share for the nine months ended September
30, 2003 versus net income of $11.5 million, or $1.08 per diluted share for the
comparable period of 2002.
LIQUIDITY AND CAPITAL RESOURCES
(U.S. dollars in thousands) Nine months ended September 30,
2003 2002
---- ----
Cash and cash equivalents $ 56,203 $ 38,670
Net cash provided by operating activities 16,132 13,002
Net cash used in investing activities (4,083) (7,238)
Net cash used in financing activities (1,498) (12,645)
Effect of exchange rate changes on cash 5,900 2,306
Historically the Company has funded its cash requirements through cash
flow from operations, although short-term fluctuations in working capital
requirements for some of the Company's subsidiaries have been met through
borrowings under revolving lines of credit obtained locally. The Company's
primary uses of cash have been to fund capital expenditures, acquisitions and to
re-purchase shares of the Company.
Net cash provided by operating activities for the nine months ended
September 30, 2003 increased to $16.1 million from $13.0 million for the same
period in 2002. The $3.1 million increase in net cash provided by operating
activities for the nine months ended September 30, 2003 compared to the
comparable period in 2002 was attributable to a $1.4 million increase in net
income, before the cumulative effect in change in accounting principle, lower
utilization of cash for accounts receivable and inventories partially offset by
a higher utilization of cash for Accounts payable and accrued expenses. The
Company anticipates that operating cash and capital expenditure requirements
will continue to be funded by cash flow from operations, cash on hand and bank
borrowings.
Net cash used in investing activities was $4.1 million for the nine months
ended September 30, 2003, compared to $7.2 million for the same period in 2002.
The decrease in cash used for investing activities in the nine month period
ended September 30, 2003 consisted of lower capital expenditures to invest in
manufacturing equipment for the Company's six production facilities of $3.9
million for the nine months ended September 30, 2003 versus $4.3 for the similar
period in 2002, combined with cash utilized in 2002 for the acquisition of
Rander & Co. of $2.7 million.
Net cash used in financing activities was $1.5 million for the nine months
ended September 30, 2003 as compared to cash used of $12.6 million for the same
period in 2002. The decrease of $11.1 million in cash used in financing
activities for the nine months ended September 30, 2003 as compared to the same
period in 2002 was attributable to funds utilized in 2002 to repay lines of
credit totaling $9.7 million, partially offset by $1.3 million in funds utilized
in 2003 to repurchase 86,300 shares of the Company's common stock.
The effect of exchange rate changes on cash and cash equivalents was $5.9
million and $2.3 million, respectively, of cash provided for 2003 and 2002. As
approximately 81% of the Company's business is transacted in currencies other
than the U.S. dollar, foreign currency fluctuations potentially can have a
significant impact on dollar reported balances for the Company.
CONTRACTUAL OBLIGATIONS
As of September 30, 2003, the Company had the following contractual
obligations:
Payments Due By Period
----------------------
Less After
(U.S. dollars in thousands) Total Than 1 Year 1-3 Years 4-5 Years 5 Years
----- ----------- --------- --------- -------
Notes payable to bank $ 693 $ 693 -- -- --
Short-term borrowings 100 100 -- -- --
Purchase commitments 1,600 1,600 -- -- --
Non-cancelable operating leases 4,100 2,074 1,805 221 --
------ ------ ------ ------ ----
Total contractual cash obligations $6,493 $4,467 $1,805 $ 221 $ --
====== ====== ====== ====== ====
IMPACT OF INFLATION
The impact of inflation on the operating results of the Company has been
moderate in recent years reflecting generally lower rates of inflation in the
economy and relative stability in the Company's cost structure. Although
inflation has not had, and the Company does not expect that it will have, a
material impact on operating results, there is no assurance that the Company's
business will not be affected by inflation in the future.
EXPOSURE TO CURRENCY FLUCTUATIONS
A significant portion of the Company's business is conducted in currencies
other than the dollar, including pounds sterling, euros and Japanese yen. The
Company's financial statements are prepared in dollars, and therefore
fluctuations in exchange rates in the pound sterling and other currencies in
which the Company does business relative to the dollar may cause fluctuations in
reported financial information, which are not necessarily related to the
Company's operations. For the nine months ended September 30, 2003 as compared
to the nine months ended September 30, 2002, for example, the Company
experienced a 1.0% increase in net sales in its European segment (denominated in
local currencies); however, the dollar-translated net sales figures showed a net
increase of 25.2% due to the fluctuation of the dollar against the local
currencies. The impact of currency fluctuations can also been seen in the
Company's balance sheet, as exampled by the movement in the Company's pension
accrual. The balance, as shown on the enclosed Condensed Consolidated Balance
Sheets, indicates an increase in the accrual since December 31, 2003 of $1.7
million; however the increase due to the fluctuation of the dollar against the
local currencies is $1.1 million, with $0.6 million representing the increase
required to match accrued benefit obligations. Due to the volatility of currency
exchange rates, the Company cannot predict the effect of exchange rate
fluctuations upon future operating results. From time to time, the Company
engages in transactions to hedge a portion of the risks associated with
fluctuations in currency exchange rates. There can be no assurance that the
Company's business, financial condition and results of operations will not be
materially adversely affected by exchange rate fluctuations or that any hedging
techniques implemented by the Company will be effective.
MARKET RISK
Market risks relating to the Company's operations result primarily from
changes in exchange rates or interest rates or weak economic conditions in the
markets in which the Company sells its products. The Company does not use
financial instruments for trading purposes and is not a party to any leveraged
derivatives.
Foreign Currency Risk
The Company enters into foreign exchange contracts to hedge some of its
foreign currency exposure. The Company uses such contracts to hedge exposure to
foreign currency exchange rates associated with anticipated costs to be incurred
in a foreign currency. The Company seeks to minimize the risk that the expenses
incurred by a subsidiary in a currency other than its functional currency will
be affected by changes in the exchange rates. The Company believes that the
possible financial statement impact of its foreign currency forward contracts is
immaterial. A significant portion of the Company's business is conducted in
currencies other than the US dollar. See "Exposure to Currency Fluctuations"
above.
Interest Rate Risk
The Company's interest bearing liabilities are most sensitive to changes
in the London InterBank Offered Rate (LIBOR) and substantially all of its short
term investments bear minimal interest rate risk.
As of September 30, 2003, the Company had approximately $0.8 million
outstanding on its revolving line of credit and short term credit agreements.
The potential loss to the Company over one year that would result from a
hypothetical, instantaneous, and unfavorable change of 100 basis points in the
interest rates of all applicable assets and liabilities would be approximately
be $0.1 million.
ORDER RECEIPTS AND BACKLOG
Worldwide customer order receipts were $136.1 million for the nine months
ended September 30, 2003, a 17.2% increase over the same period in 2002. On a
volume basis, utilizing constant currency exchange rates, order receipts for the
nine months ended September 30, 2003 were $121.2 million and represent a 4.4%
increase over the nine months ended September 30, 2002.
The worldwide backlog of unshipped orders at September 30, 2003 totaled
$30.8 million, a $2.6 million or 9.2% increase versus the backlog at September
30, 2002, and represents a 17.1% increase versus the order backlog at December
31, 2002.
ACCESS TO INFORMATION
The Company makes available, free of charge, its annual reports on Form
10-K, its quarterly reports on Form 10-Q, current reports on Form 8-K and all
other filings with the Securities and Exchange Commission ("SEC"), as
applicable, through its internet website. Such SEC filings are made available as
soon as reasonably practicable after they have been electronically filed with or
furnished to the SEC. To access these reports, interested parties should log on
to the Company's website at www.denisonhydraulics.com, and then click on the
Investor Relations tab.
FORWARD-LOOKING INFORMATION
This Form 10-Q includes and incorporates forward-looking statements within
the meaning of section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amednded (the "Exchange
Act"). All statements, other than statements of historical facts, included or
incorporated in this Form 10-Q regarding the Company's strategy, future
operations, financial position, future revenues, projected costs, prospects,
plans and objectives of management are forward-looking statements. The words
"anticipates," "believes," "estimates," "expects," "intends," "may," "suggests,"
"plans," "projects," "will," "would," and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements
contain these identifying words. The Company cannot guarantee that it will
actually achieve the plans, intentions or expectations disclosed in its
forward-looking statements and undue reliance should not be placed on the
Company's forward-looking statements. Actual results or events could differ
materially from the plans, intentions and expectations disclosed in the
forward-looking statements. The Company has included important factors in the
cautionary statements included or incorporated in this Form 10-Q that the
Company believes could cause actual results or events to differ materially from
the forward-looking statements
made. These important factors include, but are not limited to, demand for the
Company's products, competition by rival developers of hydraulic components and
systems, changes in technology, customer preferences, growth in the hydraulics
industries, fluctuations in the functional currencies of the Company and general
economic and business conditions. In addition the Company's forward-looking
statements do not reflect the potential impact of any future acquisitions,
mergers, dispositions, joint ventures or investments the Company may make. These
important factors and other factors, which could affect the Company's results,
are detailed in the Company's filings with the Securities and Exchange
Commission and are included herein by reference. The Company assumes no
obligation to update the information in this filing.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information regarding market risk of the registrant is presented under the
caption "Market Risk" which is included in Item 2 of this report and is
incorporated herein by reference.
Item 4. Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, the Company's management,
including the chief executive officer and chief financial officer, conducted an
evaluation as of the end of the period covered by this report, of the
effectiveness of the company's disclosure controls and procedures as defined in
Exchange Act Rule 13a-15(e). Based on that evaluation, the chief executive
officer and chief financial officer have concluded that, as of the end of the
period covered by this report, the Company's disclosure controls and procedures
were effective to ensure that information required to be disclosed in the
Company's periodic reports filed under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified by the Securities and
Exchange Commission's rules and regulations. As required by Rule 13a-15(d), the
Company's management, including the chief executive officer and chief financial
officer, also conducted an evaluation of the Company's internal control over
financial reporting to determine whether any changes occurred during the quarter
covered by this report that have materially affected, or are reasonably likely
to materially affect, the Company's internal control over financial reporting.
Based on that evaluation, the chief executive officer and chief financial
officer have concluded that there has been no such change during the quarter
covered by this report.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in certain legal proceedings incidental to the
normal conduct to its business. The Company does not believe that any
liabilities relating to any of the legal proceedings to which it is a party are
likely to be, individually or in the aggregate, material to its consolidated
financial position or results of operations.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Employment Agreement, dated as of July 16, 2003 by and between
Bruce A. Smith and Denison International plc.
31.1 Certification of Principal Executive Officer, David L. Weir,
pursuant to Rule 13a-14(a) under the Securities Exchange Act
of 1934, as amended.
31.2 Certification of Principal Financial Officer, Bruce A. Smith,
pursuant Rule 13a-14(a) under the Securities Exchange Act of
1934, as amended.
32.1 Certification by Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(b) Reports on Form 8-K:
Form 8-K filed on October 21, 2003 relating to the Company's press
release reporting financial results for the three months ended
September 30, 2003.
Index to Exhibits
Exhibit No. Description
- ----------- -----------
10.1 Employment Agreement, dated as of July 16, 2003 by and between
Bruce A. Smith and Denison International plc.
31.1 Certification of Principal Executive Officer, David L. Weir,
pursuant to Rule 13a-14(a) under the Securities Exchange Act
of 1934, as amended.
31.2 Certification of Principal Financial Officer, Bruce A. Smith,
pursuant Rule 13a-14(a) under the Securities Exchange Act of
1934, as amended.
32.1 Certification by Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
SIGNATURE
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
Date November 14, 2003 by /s/ Bruce A. Smith
--------------------------------------
Bruce A. Smith
Director and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)