ParkOhio Announces Increased Revenues and Earnings in the Second Quarter
CLEVELAND, Aug. 7, 2012 /PRNewswire/ — 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.
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.
CONDENSED CONSOLIDATEDSTATEMENTS 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
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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
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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.
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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:
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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
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CONDENSED CONSOLIDATED BALANCE SHEETS
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
(Unaudited)
June 30, December 31,
2012 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
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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
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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
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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
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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.
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SOURCE Park-Ohio Holdings Corp.
