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ParkOhio Announces Increased Revenues and Earnings in the Second Quarter

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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 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,


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











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.


 

SOURCE Park-Ohio Holdings Corp.



RELATED LINKS
http://www.pkoh.com

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