Attached files
| file | filename |
|---|---|
| 8-K - 8-K - PARK OHIO HOLDINGS CORP | d392616d8k.htm |
EXHIBIT 99.1
| FOR IMMEDIATE RELEASE | CONTACT: | EDWARD F. CRAWFORD PARK-OHIO HOLDINGS CORP. (440) 947-2000 |
ParkOhio Announces Increased Revenues and Earnings in the Second Quarter
CLEVELAND, OHIO, August 7, 2012 — Park-Ohio Holdings Corp. (NASDAQ:PKOH) today announced results for its second quarter and six-months ended June 30, 2012.
SECOND QUARTER RESULTS
Net sales were $308.8 million for the second quarter of 2012, an increase of $62.0 million or 25% from net sales of $246.8 million for the second quarter of 2011. ParkOhio reported income before income taxes of $6.8 million for the second quarter 2012, an increase of 224% compared to income before income taxes of $2.1 million for the second quarter 2011. ParkOhio recorded income tax expense of $2.3 million for the second quarter of 2012, an effective income tax rate of 34.5%. ParkOhio reported net income of $4.4 million, or $.37 per diluted share, for the second quarter of 2012, which included the impact of a $13.0 million pre-tax litigation settlement charge, or $.69 per diluted share. This compared to a net loss of $1.1 million, or ($.10) per diluted share, for the second quarter of 2011, which included debt extinguishment costs of $7.3 million resulting from the refinancing of the Company’s senior subordinated notes and the amendment of its revolving credit facility and income taxes of $2.1 million resulting from the retirement of $26.2 million of its senior subordinated notes that were held by a foreign affiliate. The combined effect of the debt extinguishment costs and the tax impact of the retirement of the senior notes was $.81 per diluted share in the second quarter of 2011.
YEAR-TO-DATE RESULTS
Net sales were $571.9 million for the first six months of 2012, an increase of $83.4 million or 17% from net sales of $488.4 million in the first six months of 2011. ParkOhio reported income before income taxes of $20.2 million for the first six months of 2012, an increase of 62% compared to income before income taxes of $12.5 million for the first six months of 2011. ParkOhio recorded income tax expense of $6.8 million for the first six months of 2012, an effective income tax rate of 33.6%. ParkOhio reported net income of $13.4 million, or $1.11 per diluted share, for the first six months of 2012, which included the impact of a $13.0 million pre-tax litigation settlement charge, or $.69 per diluted share. This compared to net income of $7.6 million, or $.64 per diluted share, for the first six months of 2011 which included debt extinguishment costs and income taxes on the retirement of the senior subordinated notes as described above. The combined effect of the debt extinguishment costs and the tax impact of the retirement of the senior subordinated notes was $.78 per diluted share for the six-month period ended June 30, 2011.
-more-
1
2012 REVENUE AND EARNINGS GUIDANCE UPDATE
We currently forecast our consolidated 2012 revenues to be in the range of $1.165 billion to $1.175 billion. We are also updating our earnings per diluted share forecast to be in the range of $2.60 to $2.70 per diluted share, which includes $.69 per diluted share for the unusual $13.0 million pre-tax litigation settlement charge in the second quarter of 2012. In addition, we are forecasting EBITDA, as defined, to be approximately $96.0 million for the year ended December 31, 2012, which also includes the settlement charge as an expense in deriving EBITDA, as defined. EBITDA, as defined, reflects earnings before interest expense, income taxes, and excludes depreciation, amortization, certain non-cash charges and corporate-level expenses as defined in the Company’s revolving credit agreement.
Edward F. Crawford, Chairman and Chief Executive Officer, stated, “The operating performance of ParkOhio continues to be stable with strong performance in most businesses and end markets. This performance coupled with the continued successful integration of FRS and the developing progress in Aluminum Products has us cautiously optimistic regarding the second half of 2012.”
A conference call reviewing ParkOhio’s second quarter results will be broadcast live over the Internet on Wednesday, August 8, commencing at 10:00 am Eastern Time. Simply log on to http://www.pkoh.com.
ParkOhio is a leading provider of supply management services and a manufacturer of highly-engineered products. Headquartered in Cleveland, Ohio, the Company operates 36 manufacturing sites and 45 supply chain logistics facilities.
This news release contains forward-looking statements, including statements regarding future performance of the Company that are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected.
Among the key factors that could cause actual results to differ materially from expectations are: the cyclical nature of the vehicle industry; timing of cost reductions; labor availability and stability; changes in economic and industry conditions; adverse impacts to the Company, its suppliers and customers from acts of terrorism or hostilities; the financial condition of the Company’s customers and suppliers, including the impact of any bankruptcies; the Company’s ability to successfully integrate the operations of acquired companies; the uncertainties of environmental, litigation or corporate contingencies; and changes in regulatory requirements. These and other risks and assumptions are described in the Company’s reports that are available from the United States Securities and Exchange Commission. The Company assumes no obligation to update the information in this release.
2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
(In Thousands, Except per Share Data)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net sales |
$ | 308,817 | $ | 246,808 | $ | 571,873 | $ | 488,436 | ||||||||
| Cost of products sold |
252,867 | 201,628 | 467,044 | 401,321 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Gross profit |
55,950 | 45,180 | 104,829 | 87,115 | ||||||||||||
| Selling, general and administrative expenses |
29,623 | 28,846 | 58,368 | 54,511 | ||||||||||||
| Litigation settlement |
13,000 | — | 13,000 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income |
13,327 | 16,334 | 33,461 | 32,604 | ||||||||||||
| Interest expense |
6,540 | 6,894 | 12,970 | 12,757 | ||||||||||||
| Debt extinguishment costs |
— | 7,335 | 305 | 7,335 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income before income taxes |
6,787 | 2,105 | 20,186 | 12,512 | ||||||||||||
| Income taxes |
2,344 | 3,212 | 6,787 | 4,890 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
$ | 4,443 | $ | (1,107 | ) | $ | 13,399 | $ | 7,622 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Amounts per common share: |
||||||||||||||||
| Basic |
$ | 0.37 | $ | (0.10 | ) | $ | 1.13 | $ | 0.66 | |||||||
| Diluted |
$ | 0.37 | $ | (0.10 | ) | $ | 1.11 | $ | 0.64 | |||||||
| Common shares used in the computation |
||||||||||||||||
| Basic |
11,929 | 11,545 | 11,858 | 11,503 | ||||||||||||
| Diluted |
12,112 | 11,545 | 12,077 | 12,000 | ||||||||||||
| Other financial data: |
||||||||||||||||
| EBITDA, as defined |
$ | 18,395 | $ | 21,303 | $ | 41,992 | $ | 41,971 | ||||||||
Note A—As we disclosed in previous periodic filings, one of our subsidiaries, Ajax Tocco Magnethermic ("ATM"), was a party to a binding arbitration proceeding pending in South Africa with a customer. The arbitration involved a dispute over the design and installation of a melting furnace. The customer sought binding arbitration in September 2011 for breach of contract and sought compensatory damages in the amount of $37.0 million, as well as fees and expenses related to the arbitration. ATM counterclaimed in the arbitration, alleging breach of contract for non-payment of $2.7 million as well as fees and expenses related to the arbitration.
In June 2012, we entered into a settlement agreement with the customer pursuant to which we agreed to settle all claims subject to the arbitration proceeding by paying the customer $13.0 million in cash, which payment was made in June 2012.
Note B—EBITDA, as defined, reflects earnings before interest expense, income taxes, and excludes depreciation, amortization, certain non-cash charges and corporate-level expenses as defined in the Company's Revolving Credit Agreement. EBITDA is not a measure of performance under generally accepted accounting principles ("GAAP") and should not be considered in isolation or as a substitute for net income, cash flows from operating, investing and financing activities and other income or cash flow statement data prepared in accordance with GAAP or as a measure of profitability or liquidity. The Company presents EBITDA because management believes that EBITDA is useful to investors as an indication of the Company's satisfaction of its Debt Service Ratio covenant in its Revolving Credit Agreement and because EBITDA is a measure used under the Company's revolving credit facility to determine whether the Company may incur additional debt under such facility. EBITDA as defined herein may not be comparable to other similarly titled measures of other companies. The following table reconciles net income to EBITDA, as defined:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net income (loss) |
$ | 4,443 | $ | (1,107 | ) | $ | 13,399 | $ | 7,622 | |||||||
| Add back: |
||||||||||||||||
| Income taxes |
2,344 | 3,212 | 6,787 | 4,890 | ||||||||||||
| Interest expense |
6,540 | 6,894 | 12,970 | 12,757 | ||||||||||||
| Debt extinguishment costs |
— | 7,335 | 305 | 7,335 | ||||||||||||
| Depreciation and amortization |
4,790 | 4,274 | 8,286 | 8,229 | ||||||||||||
| Miscellaneous |
278 | 695 | 245 | 1,138 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| EBITDA, as defined |
$ | 18,395 | $ | 21,303 | $ | 41,992 | $ | 41,971 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
| (Unaudited) June 30, 2012 |
December 31, 2011 |
|||||||
| (in Thousands) | ||||||||
| ASSETS |
||||||||
| Current Assets |
||||||||
| Cash and cash equivalents |
$ | 43,440 | $ | 78,001 | ||||
| Accounts receivable, net |
183,473 | 139,941 | ||||||
| Inventories |
226,241 | 202,039 | ||||||
| Deferred tax assets |
23,036 | 20,561 | ||||||
| Unbilled contract revenue |
12,441 | 18,778 | ||||||
| Other current assets |
14,840 | 8,790 | ||||||
|
|
|
|
|
|||||
| Total Current Assets |
503,471 | 468,110 | ||||||
| Property Plant and Equipment |
92,032 | 61,810 | ||||||
| Goodwill and other intangible assets |
98,205 | 20,187 | ||||||
| Other assets |
65,372 | 63,833 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 759,080 | $ | 613,940 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current Liabilities |
||||||||
| Trade accounts payable |
$ | 134,312 | $ | 99,588 | ||||
| Accrued expenses |
92,407 | 73,651 | ||||||
| Current portion of long-term debt |
4,480 | 1,415 | ||||||
| Current portion of other postretirement benefits |
2,002 | 2,002 | ||||||
|
|
|
|
|
|||||
| Total Current Liabilities |
233,201 | 176,656 | ||||||
| Long-Term Liabilities, less current portion |
||||||||
| Senior Notes |
250,000 | 250,000 | ||||||
| Revolving credit |
140,829 | 93,000 | ||||||
| Other long-term debt |
2,937 | 3,165 | ||||||
| Deferred tax liability |
28,355 | 1,392 | ||||||
| Other postretirement benefits and other long-term liabilities |
24,456 | 24,285 | ||||||
|
|
|
|
|
|||||
| Total Long-Term Liabilities |
446,577 | 371,842 | ||||||
| Shareholders’ Equity |
79,302 | 65,442 | ||||||
|
|
|
|
|
|||||
| Total Liabilities and Shareholders’ Equity |
$ | 759,080 | $ | 613,940 | ||||
|
|
|
|
|
|||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
| Six Months Ended June 30, | ||||||||
| 2012 | 2011 | |||||||
| (in Thousands) | ||||||||
| OPERATING ACTIVITIES |
||||||||
| Net income |
$ | 13,399 | $ | 7,622 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
8,295 | 8,277 | ||||||
| Share-based compensation expense |
1,238 | 920 | ||||||
| Debt extinguishment costs |
305 | 7,335 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(12,612 | ) | (20,896 | ) | ||||
| Inventories and other current assets |
(10,037 | ) | (17,370 | ) | ||||
| Accounts payable and accrued expenses |
20,810 | 26,518 | ||||||
| Other |
(2,278 | ) | (831 | ) | ||||
|
|
|
|
|
|||||
| Net Cash Provided by Operating Activities |
19,120 | 11,575 | ||||||
| INVESTING ACTIVITIES |
||||||||
| Purchases of property, plant and equipment, net |
(6,851 | ) | (5,258 | ) | ||||
| Acquisitions, net of cash acquired |
(96,707 | ) | — | |||||
|
|
|
|
|
|||||
| Net Cash Used by Investing Activities |
(103,558 | ) | (5,258 | ) | ||||
| FINANCING ACTIVITIES |
||||||||
| Proceeds from (payments on) term loans and other debt |
23,373 | (35,939 | ) | |||||
| Proceeds from revolving credit facility |
27,293 | 300 | ||||||
| Issuance of 8.125% senior notes, net of deferred financing costs |
— | 244,970 | ||||||
| Redemption of 8.375% senior subordinated notes due 2014 |
— | (189,555 | ) | |||||
| Bank debt issue costs |
(875 | ) | (1,080 | ) | ||||
| Exercise of stock options |
1,081 | 8 | ||||||
| Purchase of treasury stock |
(995 | ) | (238 | ) | ||||
|
|
|
|
|
|||||
| Net Cash Provided by Financing Activities |
49,877 | 18,466 | ||||||
|
|
|
|
|
|||||
| (Decrease) Increase in Cash and Cash Equivalents |
(34,561 | ) | 24,783 | |||||
| Cash and Cash Equivalents at Beginning of Period |
78,001 | 35,311 | ||||||
|
|
|
|
|
|||||
| Cash and Cash Equivalents at End of Period |
$ | 43,440 | $ | 60,094 | ||||
|
|
|
|
|
|||||
| Taxes paid |
$ | 3,598 | $ | 1,769 | ||||
| Interest paid (includes $5,720 of senior subordinated debt redemption costs in 2011) |
11,709 | 15,389 | ||||||
BUSINESS SEGMENT INFORMATION (UNAUDITED)
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
(Dollars in Thousands)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| NET SALES |
||||||||||||||||
| Supply Technologies |
$ | 131,495 | $ | 123,770 | $ | 264,157 | $ | 245,323 | ||||||||
| Assembly Components |
91,425 | 40,699 | 136,048 | 88,011 | ||||||||||||
| Engineered Products |
85,897 | 82,339 | 171,668 | 155,102 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 308,817 | $ | 246,808 | $ | 571,873 | $ | 488,436 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCOME BEFORE INCOME TAXES |
||||||||||||||||
| Supply Technologies |
$ | 9,659 | $ | 8,119 | $ | 19,572 | $ | 16,597 | ||||||||
| Assembly Components |
7,249 | 934 | 8,380 | 4,056 | ||||||||||||
| Engineered Products |
14,299 | 12,003 | 28,480 | 20,896 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Segment Operating Income |
31,207 | 21,056 | 56,432 | 41,549 | ||||||||||||
| Corporate and other costs |
(4,880 | ) | (4,722 | ) | (9,971 | ) | (8,945 | ) | ||||||||
| Settlement of litigation |
(13,000 | ) | — | (13,000 | ) | — | ||||||||||
| Interest expense |
(6,540 | ) | (6,894 | ) | (12,970 | ) | (12,757 | ) | ||||||||
| Debt extinguishment costs |
— | (7,335 | ) | (305 | ) | (7,335 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 6,787 | $ | 2,105 | $ | 20,186 | $ | 12,512 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Note A—On March 23, 2012, the Company completed the acquisition of Fluid Routing Solutions Holding Corp. (“FRS”), a leading manufacturer of automotive and industrial rubber and thermoplastic hose products and fuel filler and hydraulic fluid assemblies for the automotive and industrial industries. FRS will expand the Company’s sales of assembled components.
During the second quarter, as a result of the FRS acquisition, the Company realigned its segments in order to better align its business with the underlying markets and customers that the Company serves. In so doing, we combined Aluminum Products, Rubber Products (previously included in the former Manufactured Products segment), and Delo Screw Products (previously included in the Supply Technologies segment) along with FRS to form the Assembly Components segment. The former Manufactured Products segment will now be referred to as Engineered Products. The results of operations of FRS from the date of the acquisition through June 30, 2012 are included in the Assembly Components segment. The business segment results for the prior year have been reclassified to reflect these changes.