- Net sales increase by 29.8% to record $71.8 million
- Income from continuing operations, after taxes increases 226.3% to $6.2
million
- Driving 2008 second quarter diluted EPS to $0.66 from $0.20 in prior year
period
- Net income increases 138.1% to $5.0 million
- Company raises 2008 earnings guidance
CLEVELAND, Aug. 7 /PRNewswire-FirstCall/ -- Hawk Corporation (Amex:
HWK) announced today that net sales from continuing operations for the
second quarter ended June 30, 2008 increased by 29.8% to a record $71.8
million from $55.3 million in the comparable prior year period. The
Company's second quarter 2008 net sales benefited from strong economic
conditions in all of its end markets, pricing actions to partially offset
cost increases, favorable foreign currency exchange rates and new product
introductions. The effect of foreign currency exchange rates accounted for
7.8% of the total net sales increase of 29.8% during the second quarter of
2008. The Company experienced strong sales growth from all of its
facilities in the second quarter of 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001129/HWKLOGO )
Net sales for the six months ended June 30, 2008 were $137.6 million,
an increase of 25.7%, from $109.5 million in the comparable prior year
period. The effect of foreign currency exchange rates accounted for 7.2% of
the consolidated net sales increase of 25.7% during the six months ended
June 30, 2008.
Income from continuing operations for the second quarter ended June 30,
2008 was $10.6 million, an increase of $5.3 million, or 100.0%, from $5.3
million in the prior year period. Income from continuing operations
benefited from the impact of sales volume increases, a continued
implementation of the Company's lean manufacturing process improvement
initiatives and foreign currency exchange rates. This increase during the
second quarter of 2008 compared to 2007 was partially offset by increases
in wages, employee benefits and variable incentive compensation expense and
increases in raw material costs during the quarter.
For the six month period ended June 30, 2008, the Company reported
income from continuing operations of $18.1 million, an increase of $7.6
million, or 72.4%, from $10.5 million in the comparable prior year period.
Ronald E. Weinberg, Hawk's Chairman and CEO, said, "We are extremely
pleased with our second quarter 2008 results as we achieved record sales,
earnings from continuing operations and net income during the quarter. We
achieved gains in our Hawk Performance(R) automotive aftermarket, our
industrial aftermarkets served by our Velvetouch(R) brand as well as
continued strong global industrial markets and the dedicated efforts of our
worldwide employees." Mr. Weinberg continued, "The results that we have
achieved in the second quarter, as well as for the year to date, give us
confidence about our growth potential for the balance of the year. The
technical solutions we provide to our customers combined with the diversity
of markets served has provided us continued growth in spite of a slowdown
in the general North American marketplace."
For the quarter ended June 30, 2008, the Company reported income from
continuing operations, after income taxes, of $6.2 million, or $0.66 per
diluted share, an improvement of $4.3 million or 226.3%, compared to $1.9
million, or $0.20 per diluted share, in the comparable prior year period.
For the six months ended June 30, 2008, the Company reported net income
from continuing operations, after income taxes of $10.0 million, or $1.06
per diluted share, an improvement of $6.2 million, or 163.2%, compared to
net income from continuing operations, after income taxes of $3.8 million,
or $0.40 per diluted share, in the comparable prior year period.
For the second quarter 2008, the Company reported net income of $5.0
million, or $0.53 per diluted share, an increase of $2.9 million, or
138.1%, compared to net income of $2.1 million, or $0.22 per diluted share,
in the second quarter of 2007. For the six months ended June 30, 2008, the
Company reported net income of $8.2 million, or $0.86 per diluted share
compared to $14.9 million or $1.58 per diluted share during the comparable
prior year period. The June 30, 2007 results included a gain (net of tax)
on the sale of our precision components segment of $11.8 million.
During the second quarter of 2008, the Company completed the sale of
its performance racing transmission business that was accounted for as a
component of its discontinued operations. The Company expects to complete
the sale of its remaining performance racing business prior to the end of
2008.
Working Capital and Liquidity
-----------------------------
At June 30, 2008, working capital increased by $8.7 million to $121.9
million from $113.2 million at December 31, 2007. The increase in working
capital was largely the result of increased accounts receivable and
inventory levels at June 30, 2008, as a result of 2008 sales increases
during the period.
As of June 30, 2008, the Company had no borrowings under its revolving
credit facility and $22.6 million was available for additional borrowings
under that facility based on its eligible collateral.
The Company has $77.3 million in cash and marketable securities as of
June 30, 2008, largely derived from the net proceeds from the sale of its
precision components segment in February 2007. The Company's total debt of
$87.1 million is attributable to senior notes that mature in November 2014.
During the six months ended June 30, 2008, the Company spent $6.0
million on capital expenditures compared to $4.3 million during the
comparable period of 2007.
Business Outlook
----------------
Based on first half results and expectations that the markets served by
the Company will remain robust for the balance of the year, the Company is
increasing its net sales guidance for the full year 2008 to between $255.0
million and $260.0 million from its previous guidance range of between
$245.0 million and $250.0 million. This revised range represents an
increase of between 18.1% and 20.4% compared to full year 2007 net sales of
$215.9 million.
A portion of this net sales increase relates to current expectations
regarding the Company's ability to pass through raw material price
increases to its customer base. Additionally, the Company expects that
shipments to the aircraft market will soften in the fourth quarter, as a
result of announced cutbacks from many of the major airlines.
Driven by the improved net sales outlook, the Company is also
increasing its full year 2008 outlook for operating income to a revised
range of between $28.0 million and $30.0 million from its previous guidance
range of between $21.0 million and $23.0 million. This revised range
represents an increase of between 43.6% and 53.8% compared to 2007 income
from operations of $19.5 million.
To address additional capacity required to facilitate the expected
revenue growth, the Company is increasing its capital expenditure
expectation to $20.0 million, an increase of $5.0 million over its previous
guidance. Depreciation and amortization expense is expected to remain at
approximately $8.0 million for the 2008 year.
As both domestic and international operating earnings have improved,
the Company's effective tax rate continues to decline as a result. The
Company is now expecting its annual effective tax rate for 2008 to be
38.5%, which is 2.5% lower than its previous guidance of 41.0%.
The Company
-----------
Hawk Corporation 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. Headquartered in Cleveland, Ohio, Hawk has
approximately 1,180 employees at 13 manufacturing, research, sales and
international rep offices and administrative sites in 8 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 sell its remaining performance racing segment company
on a timely basis or at terms favorable to the Company; the Company's
ability to execute its business plan to meet its forecasted results from
continuing operations; the costs and outcome of the ongoing SEC and DOJ
investigations; decisions by the Company regarding the use of proceeds from
the sale of its precision components segment, including acquisition and
organic growth opportunities; the impact on the Company's gross profit
margins as a result of changes in product mix; the Company's vulnerability
to adverse general economic and industry conditions and competition; the
effect of any interruption in the Company's supply of raw materials or a
substantial increase in the price of raw materials; work stoppages by union
employees; ongoing capital expenditures and investment in research and
development; compliance with government regulations; compliance with
environmental and health and safety laws and regulations; 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; reliance for a significant portion of the Company's total
revenues on a limited number of large organizations and the continuity of
business relationships with major customers; the loss of key personnel; and
control by existing preferred stockholders.
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, 2007, 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
Thursday, August 7, 2008 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
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Three Months Six Months
Ended Ended
June 30 June 30
2008 2007 2008 2007
------------------------------------
Net sales $71,801 $55,342 $137,580 $109,517
Cost of sales 50,702 41,869 99,070 82,047
------------------------------------
Gross profit 21,099 13,473 38,510 27,470
Operating expenses:
Selling, technical and
administrative expenses 10,403 8,009 20,094 16,629
Amortization of finite-lived
intangible assets 138 182 312 363
------------------------------------
Total operating expenses 10,541 8,191 20,406 16,992
------------------------------------
Income from operations 10,558 5,282 18,104 10,478
Interest expense (2,013) (2,551) (4,028) (5,111)
Interest income 525 1,100 1,191 1,841
Other income (expense), net 63 (44) 354 66
------------------------------------
Income from continuing operations,
before income taxes 9,133 3,787 15,621 7,274
Income tax provision 2,953 1,889 5,616 3,431
------------------------------------
Income from continuing operations,
after income taxes 6,180 1,898 10,005 3,843
(Loss) income from discontinued
operations, after income taxes (1,168) 219 (1,842) 11,060
------------------------------------
Net income $5,012 $2,117 $8,163 $14,903
====================================
Diluted earnings per share:
Income from continuing operations,
after income taxes $0.66 $0.20 $1.06 $0.40
Discontinued operations, after
income taxes (0.13) 0.02 (0.20) 1.18
------------------------------------
Net earnings per diluted share $0.53 $0.22 $0.86 $1.58
====================================
Average shares and equivalents
outstanding - diluted 9,345 9,374 9,352 9,374
====================================
HAWK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands)
June 30 December 31
2008 2007
---------------------------
ASSETS
Current assets:
Cash and cash equivalents $76,342 $79,972
Marketable securities 990 1,019
Accounts receivable, net 55,008 37,486
Inventories 38,672 36,719
Deferred income taxes 1,000 1,355
Other current assets 3,941 4,766
Current assets of discontinued
operations 2,886 5,509
---------------------------
Total current assets 178,839 166,826
Property, plant and equipment, net 43,655 39,575
Other intangible assets 6,845 7,157
Other assets 5,243 5,176
Long-term assets of discontinued operations - 1,170
---------------------------
Total assets $234,582 $219,904
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $32,702 $30,325
Other accrued expenses 23,489 21,434
Current portion of long-term debt 15 59
Current liabilities of discontinued
operations 647 1,740
===========================
Total current liabilities 56,853 53,558
Long-term debt 87,090 87,090
Deferred income taxes 473 922
Other 12,065 11,010
Shareholders' equity 78,101 67,324
---------------------------
Total liabilities and shareholders'
equity $234,582 $219,904
===========================
SOURCE Hawk Corporation
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Related links:
http://www.hawkcorp.com
Photo Notes:
NewsCom: http://www.newscom.com/cgi-bin/prnh/20001129/HWKLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
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 Investor Relations:
John Baldissera, BPC Financial Marketing, +1-800-368-1217
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