* Company Posts Record Quarterly Revenues
* Income from Operations up 54%
* Income before Discontinued Operations up 400%
CLEVELAND, May 3 /PRNewswire-FirstCall/ -- Hawk Corporation (Amex: HWK)
announced today that net sales from continuing operations for the first
quarter of 2004 increased by 10.2% to $60.3 million from $54.7 million in the
comparable prior year period. The Company also announced income before
discontinued operations of $.20 per diluted share in the first quarter of 2004
compared to $.04 per diluted share in the comparable prior year period.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001129/HWKLOGO )
The Company reported that net income, including the results of its
discontinued operations, was $1.8 million, or $.20 per diluted share, in the
first quarter of 2004 compared to net income of $0.1 million, or $.01 per
diluted share in the comparable prior year period.
The Company's $60.3 million net sales from continuing operations were the
highest in the Company's history. Increases were posted in all of the
Company's business segments. The effect of foreign currency exchange rates
accounted for 7.4% of the net sales increase. The Company's net sales from
continuing operations benefited from improved economic conditions and new
business awards during the quarter in a number of the Company's end markets,
including construction, agriculture, heavy truck, specialty friction and fluid
power. This increase was partially offset by sales declines to the aerospace
and lawn and garden markets and the previously announced June 2003 sale of an
automotive product line which reported sales of $1.5 million in the first
quarter of 2003.
Income from operations in the first quarter of 2004 increased 54.1%, to
$5.7 million compared to $3.7 million in the prior year period. As a
percentage of net sales, the Company's operating margin improved to 9.5% in
the first quarter of 2004 from 6.8% in the comparable quarter of 2003. The
favorable operating leverage was the result of higher absorption of fixed
manufacturing costs, product mix and continued implementation of lean
manufacturing and cost-out programs throughout the organization.
Ronald E. Weinberg, Hawk's Chairman and CEO, said, "We are pleased with
the first quarter results and our corporate decision to concentrate on our
friction products and precision components businesses. While we haven't yet
divested our motor business, our ability to refocus management talent and
financial resources is clearly paying off in our core businesses." Mr.
Weinberg continued, "We continue to benefit from the strength of the markets
we serve and remain optimistic that this positive sales trend will continue."
Business Segment Results
In the friction segment, first quarter net sales increased $4.2 million or
13.4%, to $35.5 million from $31.3 million in the year-ago period. The effect
of foreign currency exchange rates caused the friction segment's net sales in
the first quarter of 2004 to increase by 8.2%. Primary drivers of the sales
increase were new product introductions resulting in market share gains
primarily in the construction market, improved conditions in the Company's
construction, agriculture and truck markets, increased sales to the
aftermarket and the fleet market, and increased sales from the Company's
Italian and Chinese facilities. These increases were partially offset by
sales declines in the aerospace market and from the Company's sale of its
automotive stamping product line which reported sales of $1.5 million in the
first quarter of 2003.
The Company's global business programs continue to benefit from improved
economic conditions, as well as new product introductions. Net sales at the
Company's Italian facility, on a local currency basis, increased 17.5% in the
first quarter of 2004 compared to the same period in 2003 as a result of
economic improvement and new product introductions in the period. Net sales
at the Company's Chinese facility increased 486% during the same period.
Income from operations in the friction segment during the first quarter of
2004 increased 50.0%, to $3.9 million compared to $2.6 million in the prior
year period. The increase was the result of improved sales volumes which
provided a higher absorption of fixed manufacturing costs, product mix,
especially due to the increased sales in the construction and heavy truck
markets, and continued implementation of cost-out programs throughout the
segment.
In the Company's precision components segment, net sales increased 6.2% to
$20.6 million in the first quarter of 2004 from $19.4 million in the
comparable prior year period. The increase during the quarter was driven by
the continued improvements in the industrial markets served by this segment.
The segment experienced increases in its fluid power, appliance, truck and
power tool markets, partially offset by declines in the lawn and garden and
automotive markets during the quarter.
Income from operations in the precision components segment in the first
quarter of 2004 was $1.2 million compared to $0.7 million during the
comparable quarter of 2003, an increase of $0.5 million or 71.4%. The
increase was primarily due to the increased sales volumes as well as product
mix. Although the segment continues to support the start-up of its new
facility in China, these costs were significantly lower during the first
quarter of 2004 compared to the 2003 prior year period.
Net sales in the Company's performance racing segment increased 5.0%, to
$4.2 million in the first quarter of 2004 compared to $4.0 million in the
prior year period. The increase in net sales was primarily caused by the
introduction of new products during the quarter.
Income from operations in the performance racing segment in the first
quarter of 2004 increased by 50.0% to $0.6 million compared to $0.4 million in
the comparable prior year period.
Working Capital and Liquidity
As of March 31, 2004 working capital, exclusive of the Company's senior
credit facility increased by $9.5 million from December 31, 2003 levels. The
increase was largely the result of higher sales and expanded inventory levels
to support the Company's seasonal selling programs and recent new product
award requirements. Principal amounts outstanding under the Company's senior
credit facility increased by $7.5 million, to $31.6 million, compared to
$24.1 million at December 31, 2003. The increase was primarily to support the
growth of the Company's working capital assets.
Business Outlook
"We are encouraged by the sales momentum that began in the latter half of
2003. It appears that we are in the early stages of a broad recovery, and we
expect continued growth and increased profitability from this sales momentum.
Additionally, we have been awarded a number of new product programs that we
believe will lead to continued sales growth during the balance of this year.
Sales from our foreign operations should remain robust. We expect that as a
result of this sales momentum, our revenues will increase in the second
quarter of 2004 by approximately 10% to 13% compared to the second quarter of
2003," stated Mr. Weinberg. "We believe that we are solidly positioned to
achieve our previously stated net sales and income from operations growth
objectives of 6% and 10%, respectively, for the full year 2004. Nevertheless,
since we are only one quarter into the year, at this time we are not changing
our revenue or income from operations guidance for 2004."
The Company
Hawk Corporation is a leading worldwide supplier of highly engineered
products. Its friction products group is a leading supplier of friction
materials for brakes, clutches and transmissions used in airplanes, trucks,
construction equipment, farm equipment and recreational vehicles. Through its
precision components group, the Company is a leading supplier of powder metal
and metal injected molded components used in industrial, consumer and other
applications, such as pumps, motors and transmissions, lawn and garden
equipment, appliances, small hand tools, trucks and telecommunications
equipment. The Company's performance racing group manufactures clutches and
gearboxes for motorsport applications and performance automotive markets.
Headquartered in Cleveland, Ohio, Hawk has approximately 1,600 employees at 17
manufacturing, research, sales and administrative sites in five countries.
Forward-Looking Statements
This press release includes forward-looking statements concerning sales,
market share, foreign operations, working capital and other statements that
involve risks and uncertainties. These forward-looking statements are based
upon management's expectations and beliefs concerning future events. Forward-
looking statements are necessarily subject to risks, uncertainties and other
factors, many of which are outside the control of the Company and which could
cause actual results to differ materially from such statements. These risks
and uncertainties include, but are not limited to: the ability of the Company
to meet the existing and amended terms of its credit facilities, including the
numerous financial covenants and other restrictions; the effect of our debt
service requirements on funds available for operations and future business
opportunities and our vulnerability to adverse general economic and industry
conditions and competition; our ability to effectively utilize all of our
manufacturing capacity as the industrial and commercial end-markets we serve
gradually improve or if improvement is not achieved as we anticipate; the
timely completion of the construction of the new facility in our friction
products segment; the ability to hire and train qualified people at the new
facility; the ability to transfer production to the new facility and commence
production at the new facility without causing customer delays or
dissatisfaction; the ability to achieve the projected cost savings at the new
facility, including whether the cost savings can be achieved in a timely
manner; whether or not Hawk's motor segment will be sold and if sold whether
the sale can take place in the time or at the price projected by Hawk; whether
or not the motor segment will be able to improve its operating performance
during the selling process; higher than anticipated costs related to the sale
of Hawk's motor segment; the impact of the reduction in air travel on our
aerospace business; the impact on our gross profit margins as a result of
changes in our product mix; the Company's ability to effectively utilize all
of its manufacturing capacity as the industrial and commercial end-markets we
serve improve or if improvement is not achieved as we anticipate; the effect
of general economic and industry conditions and competition; the ability of
the Company to begin generating profits from its facilities in China and to
turn a profit at our start-up metal injection molding operation; the effect of
the transfer of manufacturing to China and other lower wage locations by other
manufacturers who compete with us; the effect of changes in international laws
and regulations and currency exchange rates; the effect of competition by
manufacturers using new or different technologies; the ability of the Company
to successfully negotiate new agreements with its unions as they come due; the
effect of any interruption in the Company's supply of raw materials or a
substantial increase in the price of raw materials; the continuity of business
relationships with major customers; and the ability of the Company's aircraft
component products to meet stringent Federal Aviation Administration criteria
and testing requirements.
Actual results and events may differ significantly from those projected in
the forward-looking statements. Reference is made to Hawk's filings with the
Securities and Exchange Commission, including its annual report on Form 10-K
for the year ended December 31, 2003, its quarterly reports on Form 10-Q, and
other periodic filings, for a description of the foregoing and other factors
that could cause actual results to differ materially from those in the
forward-looking statements. Any forward-looking statement speaks only as of
the date on which such statement is made, and the Company undertakes no
obligation to update any forward-looking statement, whether as a result of new
information, future events or otherwise.
Investor Conference Call
A live Internet broadcast of the Company's conference call discussing
quarterly and year to date results can be accessed via the investor relations
page on Hawk Corporation's web site ( http://www.hawkcorp.com ) on Tuesday, May 4,
2004 at 10:00 a.m. Eastern time. An archive of the call will be available
shortly after the end of the conference call on the investor relations page of
the Company's web site.
Hawk Corporation is online at: http://www.hawkcorp.com/
HAWK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
Three Months Ended
March 31,
2004 2003
Net sales $60,295 $54,661
Cost of sales 44,571 41,675
Gross profit 15,724 12,986
Selling, technical and administrative expenses 9,828 9,068
Amortization of intangibles 184 197
Total expenses 10,012 9,265
Income from continuing operations 5,712 3,721
Interest expense (2,528) (2,745)
Interest income 13 12
Other expense, net 322 265
Income from continuing operations before
income taxes 2,875 723
Income tax provision 1,120 328
Income before discontinued operations 1,755 395
Income (loss) from discontinued operations,
net of tax 5 (276)
Net income $1,760 $119
Basic and diluted earnings per share:
Earnings before discontinued operations $0.20 $0.04
Discontinued operations, net of tax 0.00 (0.03)
Net earnings per basic and diluted share $0.20 $0.01
Other data:
Depreciation and amortization
Continuing operations $2,816 $2,706
Discontinued operations $- $200
HAWK CORPORATION
CONSOLIDATED BALANCE SHEET (Unaudited)
(in thousands)
March 31, December 31,
2004 2003
ASSETS
Current assets
Cash and cash equivalents $3,912 $3,365
Accounts receivable 38,865 32,272
Inventories 38,237 35,424
Taxes receivable 521 521
Deferred tax asset 3,540 3,551
Other current assets 4,474 4,032
Assets of discontinued operations 4,830 4,302
Total current assets 94,379 83,467
Property, plant and equipment, net 63,460 63,136
Goodwill 32,495 32,495
Other intangible assets 9,720 9,904
Other assets 4,016 4,547
Total assets $204,070 $193,549
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $23,498 $21,569
Other accrued expenses 17,474 18,185
Short-term debt 980 1,326
Bank facility 31,576 24,059
Current portion of long-term debt 1,113 1,148
Liabilities of discontinued operations 4,223 3,652
Total current liabilities 78,864 69,939
Long-term debt 68,403 68,443
Deferred income taxes 4,349 4,360
Other 9,094 9,102
Shareholders' equity 43,360 41,705
Total liabilities and shareholders' equity $204,070 $193,549
SOURCE Hawk Corporation
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CONTACT:
Ronald E. Weinberg, Chairman, CEO and
President, +1-216-861-3553, or Thomas A. Gilbride, Vice President
- Finance, +1-216-861-3553, both of Hawk Corporation; or Investor
Relations, John Baldissera of BPC Financial Marketing,
+1-800-368-1217
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