- Net sales from continuing operations increase by 10.2% to record $58.2
million
- Precision components segment sold for $94.2 million
- Net income from continuing operations reaches a record $.21 per diluted
share
CLEVELAND, May 14 /PRNewswire-FirstCall/ -- Hawk Corporation (AMEX:
HWK) announced today that net sales for the first quarter ended March 31,
2007 increased by 10.2% to $58.2 million from $52.8 million in the
comparable prior year period. The Company's net sales benefited during the
quarter from the impact of pricing actions, strong economic conditions in
most of the Company's end markets, including the construction and mining,
aerospace, agriculture and performance brake markets. An exception to
strength in the Company's end markets was the softness in the heavy truck
market caused by reduced truck builds in the first quarter of 2007 as a
result of pre-buying in 2006 in advance of new vehicle emission control
standards.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001129/HWKLOGO )
Income from operations for the first quarter of 2007 was $5.4 million,
an increase of $5.3 million, from $0.1 million in the prior year period.
The increase in income from operations resulted from the Company's pricing
actions, sales unit volume increases and continued operating improvements
at the Company's Tulsa facility. This improvement was partially offset by
$0.5 million of legal costs during the three month period ended March 31,
2007, related to our voluntary compliance with the previously announced
Securities and Exchange Commission and Department of Justice
investigations.
Ronald E. Weinberg, Hawk's Chairman and CEO, said, "I am pleased with
the first quarter results, and particularly with the progress which has
been made in our Tulsa facility. We continue to improve throughput in all
of our facilities and have been able to substantially reduce extraneous
costs related to the new facility. Of course, there continues to be the
opportunity and need for continuous improvement ahead of us." Mr. Weinberg
continued, "With the sale of the precision components segment completed and
improvements at our Tulsa facility gaining traction, our focus will now
include targeted sales growth and possible acquisitions related to our
friction products business."
For the first quarter ended March 31, 2007, the Company reported net
income from continuing operations of $2.0 million, or $.21 per diluted
share, an improvement of $3.5 million, compared to a net loss from
continuing operations of $1.5 million, or a loss of $.16 per diluted share,
in the comparable prior year period. The Company reported interest income
of $0.7 million for the three month period ended March 31, 2007 which was
generated from the investment of the cash proceeds from the sale of the
precision components segment on February 2, 2007.
The Company reported net income of $12.8 million, or $1.36 per diluted
share for the three months ended March 31, 2007, which included an
after-tax gain of $11.8 million on the sale of the precision components
segment, compared to net income of $0.4 million, or $.04 per diluted share
for the three month period ended March 31, 2006.
Business Segment Results
Net sales in the friction products segment for the three months ended
March 31, 2007 increased $5.1 million, or 10.4%, to a record $54.2 million
from $49.1 million in the comparable prior year period. Primary drivers of
the sales increase included pricing actions, strong worldwide demand in the
construction and mining, aerospace, agriculture and performance automotive
markets, and increased sales as a result of new business awards. As
expected, sales to the heavy truck market declined as a result of the
implementation of the new vehicle emission control standards during the
first quarter of 2007. Net sales from the segment's foreign facilities
represented 38.2% of the segment's total net sales for the three month
period ended March 31, 2007 compared to 31.6% in the comparable prior year
period. The effect of foreign currency exchange rates accounted for 3.2% of
the segment's 10.4% net sales increase during the quarter.
For the quarter ended March 31, 2007, income from operations in the
friction products segment increased to $5.4 million from $0.3 million,
compared to the three months ended March 31, 2006. The increase in income
from operations was driven by pricing actions, sales unit volume increases,
and increased production and manufacturing efficiencies from the Company's
Tulsa plant.
In the Company's performance racing segment, net sales for the three
months ended March 31, 2007 were $4.0 million, an increase of $0.3 million
or 8.1%, from $3.7 million in the comparable prior year period. Over the
course of the last two years, the Company has sought to upgrade the
engineering and technological expertise of this segment to reflect similar
changes taking place in the motorsports market. The sales increase
represented the initial effects of the upgrade initiative and new business
awards resulting from the newly introduced NASCAR "Car of Tomorrow" which
was introduced on a limited schedule for the 2007 race season.
For the three months ended March 31, 2007, the performance racing
segment reported breakeven results from operations compared to a loss from
operations of $0.2 million for the comparable prior year period. The
improvement was a result of the increased sales unit volumes partially
offset by the effect of product mix.
The Company's discontinued operations, which consisted of the precision
components segment for the period ended March 31, 2007 and the precision
components and motor segments for the period ended March 31, 2006, reported
income after taxes of $10.7 million for the three months ended March 31,
2007, an increase of $8.8 million, compared to $1.9 million in the
comparable prior year period. As previously reported, the Company's
precision components segment was sold on February 2, 2007 for $94.2
million. The Company reported a $15.0 million gain on the sale of the
segment ($11.8 million after tax).
Working Capital and Liquidity
At March 31, 2007, working capital increased by $17.2 million from
December 31, 2006. This increase was largely the result of cash proceeds
from the gain on the sale of the precision components segment, increased
sales volumes in the friction products segment during the first quarter of
2007 compared to December 31, 2006, which led to higher accounts receivable
levels in addition to a reduction in accrued expenses during the period. As
previously announced, the Company initiated its $4.0 million common stock
repurchase plan on March 5, 2007. Through March 31, 2007, the Company
repurchased 11,965 shares of common stock and spent $0.1 million in
connection with its repurchase of such stock.
Total debt outstanding, including current portion, decreased $0.1
million, to $111.1 million at March 31, 2007, compared to $111.2 million at
December 31, 2006. Cash and marketable securities increased to $90.2
million as of March 31, 2007 from $6.2 million as of December 31, 2006
primarily as a result of the net proceeds received from the sale of the
precision components segment partially offset by the growth in the
Company's receivables during the first quarter of 2007. As of March 31,
2007 and December 31, 2006, the Company had no borrowings under its
revolving credit facility. At March 31, 2007, the Company had $20.7 million
available for additional borrowings under the facility.
Business Outlook
The Company previously announced guidance, expecting full year 2007 net
revenues to be between $217.0 million and $222.0 million, and income from
operations for the same period to be between $11.0 million and $14.0
million. Despite the strength of the first quarter actual results, we
remain cautious and leave standing our previously issued guidance for the
full year 2007.
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 and mining equipment, farm equipment, recreational and
performance automotive vehicles. The Company's performance racing group
manufactures clutches and gearboxes for motorsport applications and
performance automotive markets. Headquartered in Cleveland, Ohio, Hawk has
approximately 1,100 employees at 11 manufacturing, research, sales and
administrative sites in 5 countries.
Forward-Looking Statements
This press release includes forward-looking statements concerning sales
and operating earnings. 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
Company's ability to execute its business plan to meet its forecasted
results from continuing operations; the Company's vulnerability to adverse
general economic and industry conditions and competition; the Company's
dependence on a limited number of customers for a significant portion of
its total revenues; the impact on the Company's gross profit margins as a
result of changes in product mix; the effect of the transfer of
manufacturing to China and other lower wage locations by other
manufacturers who compete with the Company; decisions by the Company
regarding the use of proceeds from the sale of its precision components
segment, including the Company's ability to identify suitable acquisition
candidates and complete such acquisition; the satisfaction of limitations
on the use of proceeds contained in the Company's financing arrangements;
the effect on the Company's international operations of unexpected changes
in legal and regulatory requirements, export restrictions, currency
controls, tariffs and other trade barriers, difficulties in staffing and
managing foreign operations, political and economic instability, difficulty
in accounts receivable collection and potentially adverse tax consequences;
the effect of foreign currency exchange rates as the Company's non-U.S.
sales continue to increase; the effect of any interruption in the Company's
supply of raw materials or a substantial increase in the price of raw
materials; and, the continuity of business relationships with major
customers.
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, 2006, 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 15, 2007 at 11:00 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 INCOME
(In thousands, except per share data)
Three Months ended March 31
2007 2006
Net sales $58,167 $52,817
Cost of sales 43,196 43,765
Gross profit 14,971 9,052
Selling, technical and administrative
expenses 9,441 8,788
Amortization of intangibles 181 124
Total expenses 9,622 8,912
Income from operations 5,349 140
Interest expense (2,560) (2,807)
Interest income 741 9
Other income (expense), net 110 95
Income (loss) from continuing
operations before income taxes 3,640 (2,563)
Income tax provision (benefit) 1,592 (1,067)
Income (loss) from continuing
operations, after income taxes 2,048 (1,496)
Income from discontinued operations,
net of tax 10,738 1,900
Net income $12,786 $404
Diluted earnings (loss) per share:
Income (loss) from continuing
operations $0.21 $(0.16)
Discontinued operations, net of tax 1.15 0.20
Net earnings per diluted share $1.36 $0.04
Diluted weighted average shares
outstanding 9,386 9,513
Three Months Ended
March 31
Segment data: 2007 2006
Net sales:
Friction products $54,175 $49,087
Performance racing 3,992 3,730
Total $58,167 $52,817
Gross profit:
Friction products $14,235 $8,259
Performance racing 736 793
Total $14,971 $9,052
Depreciation and amortization:
Friction products $1,885 $1,719
Performance racing 64 58
Total $1,949 $1,777
Income (loss) from operations:
Friction products $5,375 $344
Performance racing (26) (204)
Total $5,349 $140
Capital expenditures:
Friction products $2,489 $2,538
Performance racing 74 102
Total $2,563 $2,640
HAWK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31 December 31
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $45,012 $6,177
Marketable securities - held to
maturity 45,193 -
Accounts receivable, net 40,218 34,502
Inventories 38,182 38,890
Deferred tax asset 2,380 2,472
Other current assets 4,271 4,607
Current assets of discontinued
operations - 87,313
Total current assets 175,256 173,961
Property, plant and equipment, net 39,205 39,409
Finite-lived intangible assets 7,703 7,884
Other assets 5,044 8,000
Total assets $227,208 $229,254
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $22,802 $23,023
Other accrued expenses 17,377 20,269
Short-term debt 980 980
Current portion of long-term debt 121 127
Current liabilities of discontinued
operations - 12,795
Total current liabilities 41,280 57,194
Long-term debt 110,028 110,053
Deferred income taxes 1,040 1,025
Other 14,871 14,253
Shareholders' equity 59,989 46,729
Total liabilities and shareholders'
equity $227,208 $229,254
SOURCE Hawk Corporation
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Related links:
http://www.hawkcorp.com
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CONTACT:
media, Joseph J. Levanduski, Vice President,
CFO, +1-216-861-3553, or Thomas A. Gilbride, Vice President,
Finance, +1-216-861-3553, both of Hawk Corporation, or investors,
John Baldissera of BPC Financial Marketing, 1-800-368-1217, for
Hawk Corporation
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