- Net sales between $298 million and $300 million -- an increase
of 11.6% - 12.4%
- Income from operations to increase 55.8% - 62.3% compared to
2005 adjusted income from operations
- Net earnings to be $.80 - $.90 per diluted share
CLEVELAND, Dec. 19 /PRNewswire-FirstCall/ -- Hawk Corporation
(Amex: HWK) announced today its guidance for 2006. Net sales for the full
year 2006 are expected to be between $298.0 million to $300.0 million, an
increase of 11.6% to 12.4% over net sales of $267.0 million expected to be
reported for the full year 2005. Hawk expects a majority of its markets to
perform better than 2005 year levels, particularly construction and mining
equipment, heavy-duty truck and fluid power. Additionally, we expect that new
business awards in our three business segments, increased sales to the
friction products aftermarket, as well as the continued growth of our
international operations will positively impact our revenues.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001129/HWKLOGO)
As a result of the anticipated increase in net sales in 2006, Hawk expects
its income from operations to increase to a range of $24.0 million to $25.0
million in 2006, or 55.8% to 62.3%, from adjusted income from operations of
approximately $15.4 million expected for the full year 2005. Adjusted income
from operations in 2005 excludes plant restructuring charges of $5.3 million
related to the move of a friction products facility to Tulsa, Oklahoma and
employee severance costs and other net costs of $0.7 million relating to a
pension curtailment and loan forgiveness costs (see Table 1). We are not
forecasting plant restructuring charges, relating to the relocation of the
Tulsa facility and employee severance expense, or other non-recurring costs to
impact our 2006 income from operations. Our 2006 forecast also gives effect
to diminishing levels of start-up costs in the first and second quarter of
2006. We expect our consolidated depreciation and amortization expense for
2006 to be approximately $13.0 million.
Hawk's effective tax rate is expected to be approximately 42.0% for the
full year 2006. The expected improvement in our effective tax rate for 2006
compared to 2005 will result primarily from our anticipated ability to
generate domestic pre-tax earnings. The pre-tax earnings of the Company's
international operations are expected to remain strong in 2006.
As a result of the above factors, Hawk expects earnings per share for 2006
to be in a range of $0.80 to $0.90 cents per diluted share on approximately
9.4 million fully diluted shares.
Ronald E. Weinberg, Hawk's Chairman and CEO, stated, "With strong demand
continuing from our core customer base, new product introductions during the
year and the continuing integration of our new Tulsa facility, we look forward
to 2006 being an excellent year. We have made significant progress with the
integration of our new Tulsa friction products facility in 2005 and expect it
be a positive contributor to our earnings growth in 2006. As a realistic
assessment of the operating improvement curve of our new Tulsa facility we
have forecasted the continued effect of start-up costs in our operating
results for the first quarter of 2006, and to a much lesser extent in the
second quarter of 2006." Mr. Weinberg continued, "We continue to experience
marketing and operating momentum throughout the Company enabling us to take
advantage of our world class position and drive significant improvement in our
operating results in 2006. In order to maintain our technological advantage
and support our expected sales growth in the marketplace, we expect our
capital expenditures in 2006 will be approximately $15.0 million. Through our
2006 guidance, we are affirming our commitment to new product introduction for
both our original equipment and aftermarket friction product customers and our
world class manufacturing and technology development in our friction products,
powder metal and performance racing businesses."
2005 fourth quarter results
We expect our net sales for the fourth quarter of 2005 to be approximately
$61.2 million. Adjusted loss from operations in the fourth quarter of 2005 is
expected to be approximately $2.0 million. The adjusted loss from operations
excludes restructuring charges of approximately $1.1 million incurred during
the quarter relating to the move of a friction products facility to Tulsa (see
Table 2). The move of the facility was completed during the fourth quarter of
2005.
This fourth quarter expectation revises our current full year 2005 revenue
guidance to $267.0 million from the previous guidance of $270.0 million to
$273.0 million. Our full year 2005 adjusted income from operations will be
approximately $15.4 million, a reduction from our previous guidance of $21.5
million to $21.8 million. Both guidance targets were negatively impacted
primarily by the start-up costs experienced by our new Tulsa facility.
Mr. Weinberg stated, "We incurred a greater degree of start-up costs in
Tulsa than anticipated, but I am pleased with the degree of focus our
operating team is bringing to bear on the issues. We believe we have made a
realistic assessment of our expectations for the full year 2005. We believe
we are on track to deliver a world-class friction products manufacturing
facility in 2006 which will provide our customers with more efficient
production capabilities and lower manufacturing costs."
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 for industrial, consumer and medical
applications, including pump, motor and transmission elements, lawn and garden
and telecommunication 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 1,800 employees and 17 manufacturing, research, sales and
administrative sites in 6 countries.
Table 1
Adjusted income from operations -- projected
(in millions)
Year ended December 31,
Income from Adjusted income
operations (GAAP) Restructuring Other from operations
costs costs, net(1)
2006 2005 2006 2005 2006 2005 2006 2005
Adjusted
income
from $24.0-25.0 $9.4 $ $5.3 $ $0.7 $24.0-25.0 $15.4
operations
Table 2
Adjusted loss from operations -- projected
(in millions)
Fourth quarter ended December 31, 2005
(Loss) from
operations Restructuring Other costs, Adjusted (loss)
(GAAP) costs net(1) from operations
Adjusted loss
from operations $(3.1) $1.1 $ $(2.0)
1. Other costs, net include loan forgiveness costs and employee benefit
curtailment costs.
We have presented this non-GAAP financial measure because we believe that
meaningful analysis of our financial performance is enhanced by an
understanding of isolated factors underlying that performance. In addition,
our chief operating decision makers use this measure in monitoring and
evaluating both our overall performance and the ongoing performance of each of
our business segments. This non-GAAP financial measure should not be
considered an alternative to measures required by GAAP.
Forward-Looking Statements
This press release includes forward-looking statements concerning sales,
market share, foreign operations, operating income, adjusted operating income
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: continuing impact of operational inefficiencies in Tulsa;
higher than anticipated costs related to the relocation of the friction
products segment facility; the ability to achieve the projected cost savings
at the new facility, including whether the cost savings can be achieved in a
timely manner; the ability of the Company to reduce its effective tax rate;
the impact on the Company's gross profit margins as a result of changes in
product mix; the ability of the Company to begin generating profits from its
powder metal facility in China; the effect of the transfer of manufacturing to
China and other lower wage locations by other manufacturers who compete with
the Company; 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; the
effect of foreign currency exchange rates as the Company's non-U.S. sales
continue to increase; the ability of the Company to meet the terms of its
credit facilities, including the numerous financial covenants and other
restrictions; the Company's vulnerability to adverse general economic and
industry conditions and competition; the ability of the Company to utilize tax
loss carryforwards in future periods; 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, 2004, 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.
Conference Call
Hawk Corporation (Amex: HWK) will hold a conference call tomorrow,
December 20, 2005, with financial analysts and investors at 10:30 a.m. Eastern
time to discuss its financial guidance for 2006. To participate, callers
should dial (800) 268-8047. Participants should ask for the "Hawk Corporation
Conference Call." A simultaneous webcast will also be available through a
link on the Investor Relations page of the Company's website via
http://www.hawkcorp.com. In addition, a replay of the conference call will be
archived and available online through the Investor Relations page of
http://www.hawkcorp.com for 90 days following this earnings conference call.
Hawk Corporation is online at: http://www.hawkcorp.com/
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,
or Thomas A. Gilbride, Vice President - Finance, both of Hawk
Corporation, +1-216-861-3553; or Investors, John Baldissera of
BPC Financial Marketing, +1-800-368-1217
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