2014

ParkOhio Announces Increased Revenues and Earnings in the Third Quarter

CLEVELAND, Oct. 31, 2012 /PRNewswire/ -- Park-Ohio Holdings Corp. (NASDAQ: PKOH) today announced results for its third quarter and nine-months ended September 30, 2012. 

THIRD QUARTER RESULTS

Net sales were $286.5 million for the third quarter of 2012, an increase of $43.0 million, or 18%, from net sales of $243.5 million for the third quarter of 2011.  ParkOhio reported net income of $10.7 million, or $.88 per diluted share, for the third quarter of 2012.  This compared to a net income of $2.9 million, or $.24 per diluted share, for the third quarter of 2011, which included a restructuring and asset impairment charge of $5.4 million relating to the assets of a unit of the Assembly Components segment. The effect of the restructuring and asset impairment charge was $.45 per diluted share in the third quarter of 2011.

YEAR-TO-DATE RESULTS

Net sales were $858.3 million for the first nine months of 2012, an increase of $126.3 million, or 17%, from net sales of $732.0 million for the first nine months of 2011.  ParkOhio reported net income of $24.1 million, or $1.99 per diluted share, for the first nine 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 $10.5 million, or $.87 per diluted share, for the first nine months 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.  Also, during the third quarter of 2011, the Company recorded a restructuring and asset impairment charge of $5.4 million relating to the assets of a unit of the Assembly Components segment. The combined effect of the debt extinguishment costs, tax impact of the retirement of the senior subordinated notes and the restructuring and asset impairment charge was $1.23 per diluted share for the nine-month period ended September 30, 2011.

2012 REVENUE AND EARNINGS GUIDANCE UPDATE

We currently forecast our consolidated 2012 revenues to be approximately 18% greater than 2011 revenues.  We are also updating our earnings per diluted share forecast to be in the range of $2.45 to $2.55 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 $94 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, "We are very proud of our performance during the third quarter of 2012 as we reported strong quarterly sales and record quarterly operating income.  While the global economic environment has created uncertainty regarding the fourth quarter, we are well-positioned to manage through adversity and to capitalize on market cycle volatility."

A conference call reviewing ParkOhio's third quarter results will be broadcast live over the Internet on Thursday, November 1, 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


Nine Months Ended






September 30,


September 30,






2012


2011


2012


2011














Net sales




$   286,462


$   243,544


$   858,335


$  731,980


Cost of products sold



232,532


201,700


699,576


603,021


   Gross profit




53,930


41,844


158,759


128,959


Selling, general and administrative expenses

31,233


26,222


89,601


80,733


Settlement of litigation



-


-


13,000


-


Restructuring and asset impairment charges

-


5,359


-


5,359


   Operating income



22,697


10,263


56,158


42,867


Interest expense



6,520


6,215


19,490


18,972


Debt extinguishment costs


-


-


305


7,335


   Income before income taxes 


16,177


4,048


36,363


16,560


Income taxes 




5,449


1,178


12,236


6,068


   Net income




$     10,728


$       2,870


$     24,127


$    10,492














Amounts per common share:










   Basic




$          0.89


$         0.25


$         2.03


$         0.91


   Diluted




$          0.88


$         0.24


$         1.99


$         0.87














Common shares used in the computation









   Basic




12,003


11,600


11,907


11,536


   Diluted




12,175


12,012


12,109


12,004














Other financial data:











   EBITDA, as defined



$     27,823


$     20,440


$     72,404


$    63,331













Note A - Our subsidiary, 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 uses EBITDA to measure performance and 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


Nine Months Ended





September 30,


September 30,





2012


2011


2012


2011

Net income




$     10,728


$       2,870


$     24,127


$    10,492

Add back:











   Income taxes 



5,449


1,178


12,236


6,068

   Interest expense



6,520


6,215


19,490


18,972

   Debt extinguishment costs


-


-


305


7,335

   Restructuring and asset impairment charge

-


5,359


-


5,359

   Depreciation and amortization


4,872


3,645


13,167


11,922

   Share-based compensation


807


605


2,045


1,525

   Miscellaneous



(553)


568


1,034


1,658

EBITDA, as defined



$     27,823


$     20,440


$     72,404


$    63,331

 

 






CONDENSED CONSOLIDATED BALANCE SHEETS

PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES








(Unaudited)





September 30,


December 31,



2012


2011



(in Thousands)

ASSETS









Current Assets




   Cash and cash equivalents

$      41,309


$      78,001

   Accounts receivable, net

173,030


139,941

   Inventories

223,922


202,039

   Deferred tax assets

22,244


20,561

   Unbilled contract revenue

9,541


18,778

   Other current assets

19,914


8,790


Total Current Assets

489,960


468,110






Property Plant and Equipment

99,898


61,810






Goodwill and other intangible assets

97,550


20,187

Other assets

64,134


63,833


Total Assets

$    751,542


$    613,940











LIABILITIES AND SHAREHOLDERS' EQUITY









Current Liabilities




   Trade accounts payable

$    120,386


$      99,588

   Accrued expenses

95,118


73,651

   Current portion of long-term debt

4,230


1,415

   Current portion of other postretirement benefits

2,002


2,002


Total Current Liabilities

221,736


176,656






Long-Term Liabilities, less current portion




   Senior Notes 

250,000


250,000

   Credit facility

125,929


93,000

   Other long-term debt

2,821


3,165

   Deferred tax liability

29,728


1,392

   Other postretirement benefits and other long-term liabilities

26,774


24,285


Total Long-Term Liabilities

435,252


371,842






Shareholders' Equity

94,554


65,442


Total Liabilities and Shareholders' Equity

$    751,542


$    613,940






 

 









CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES






















Nine Months Ended September 30,






2012


2011






(in Thousands)









OPERATING ACTIVITIES














Net Income




$    24,127


$    10,492

Adjustments to reconcile net income to net cash provided by operating activities:




   Depreciation and amortization 



13,167


11,922

   Restructuring and asset impairment charges


-


5,359

   Share-based compensation expense 


2,045


1,525

   Gain on sale of property 



(250)


-

   Debt extinguishment costs 



305


7,335

Changes in operating assets and liabilities:





   Accounts receivable 



(2,169)


(18,478)

   Inventories and other current assets 



(9,099)


(22,890)

   Accounts payable and accrued expenses 


8,852


37,854

   Other 





5,523


(7,048)

      Net Cash Provided by Operating Activities 


42,501


26,071









INVESTING ACTIVITIES














Purchases of property, plant and equipment


(19,083)


(9,544)

Proceeds from sale of property



400


-

Acquisition, net of cash acquired 



(95,963)


-

      Net Cash Used by Investing Activities 


(114,646)


(9,544)









FINANCING ACTIVITIES














Proceeds from (payments on) term loans and other debt 

22,116


(36,052)

Proceeds from revolving credit facility, net


13,286


1,000

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)


(1,079)

Exercise of stock options 



1,081


42

Income tax effect of share-based compensation exercise and vesting

1,031


-

Purchase of treasury stock 



(1,186)


(592)

      Net Cash Provided by Financing Activities 


35,453


18,734

(Decrease) Increase in Cash and Cash Equivalents 


(36,692)


35,261

Cash and Cash Equivalents at Beginning of Period 


78,001


35,311

Cash and Cash Equivalents at End of Period 


$    41,309


$    70,572









Taxes paid 




$      4,834


$      2,466

Interest paid (includes $5,720 of senior subordinated debt redemption costs in 2011) 

12,694


10,449









 

 

BUSINESS SEGMENT INFORMATION (UNAUDITED)

PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES

(Dollars in Thousands)














Three Months Ended

September 30,


Nine Months Ended

September 30,




2012


2011


2012


2011

NET SALES



















Supply Technologies

$   117,384


$     123,186


$      381,541


$     368,509


Assembly Components

84,426


38,131


220,474


126,142


Engineered Products

84,652


82,227


256,320


237,329




$   286,462


$     243,544


$      858,335


$     731,980











INCOME BEFORE INCOME TAXES



















Supply Technologies

$       7,632


$         7,896


$        27,204


$       24,493


Assembly Components

6,013


(1,039)


14,393


3,017


Engineered Products

14,187


13,584


42,667


34,480



Total Segment Operating Income

27,832


20,441


84,264


61,990


Corporate and other costs

(5,135)


(4,819)


(15,106)


(13,764)


Settlement of litigation

-


-


(13,000)


-


Restructuring and asset impairment charge

-


(5,359)


-


(5,359)


Interest expense

(6,520)


(6,215)


(19,490)


(18,972)


Debt extinguishment costs

-


-


(305)


(7,335)




$     16,177


$         4,048


$        36,363


$       16,560











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. The results of operations of FRS from the date of the acquisition through September 30, 2012 are included in the Assembly Components segment.

 

 

SUPPLEMENTAL FINANCIAL INFORMATION

BUSINESS SEGMENT INFORMATION RECLASSIFIED (UNAUDITED)

PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES

(Dollars in Thousands)


































Three Months 


Three Months 


Three Months 


Nine Months 









Ended


Ended


Ended


Ended









March 31,


June 30,


September 30,


September 30,









2012


2012


2012


2012






NET SALES





























Supply Technologies

$         132,662


$         131,495


$         117,384


$         381,541







Assembly Components

44,623


91,425


84,426


220,474







Engineered Products

85,771


85,897


84,652


256,320









$         263,056


$         308,817


$         286,462


$         858,335





















INCOME BEFORE INCOME TAXES





























Supply Technologies

$             9,913


$             9,659


$             7,632


$           27,204







Assembly Components

1,131


7,249


6,013


14,393







Engineered Products

14,181


14,299


14,187


42,667








Total Segment operating income

25,225


31,207


27,832


84,264







Corporate and other costs

(5,091)


(4,880)


(5,135)


(15,106)







Settlement of litigation

-


(13,000)


-


(13,000)







Gain on acquisition of business

-


-


-


-







Asset impairment charge

-


-


-


-







Interest expense

(6,430)


(6,540)


(6,520)


(19,490)







Debt extinguishment costs

(305)


-


-


(305)









$           13,399


$             6,787


$           16,177


$           36,363







































Three Months 


Three Months 


Three Months 


Three Months 









Ended


Ended


Ended


Ended









March 31,


June 30,


September 30,


December 31,


Year Ended



Year Ended




2011


2011


2011


2011


2011



2010

NET SALES





























Supply Technologies

$         121,553


$         123,770


$         123,186


$         118,062


$       486,571



$      397,038


Assembly Components

47,312


40,699


38,131


31,622


157,764



173,555


Engineered Products

72,763


82,339


82,227


84,909


322,238



242,929




$         241,628


$         246,808


$         243,544


$         234,593


$       966,573



$      813,522
















INCOME BEFORE INCOME TAXES





























Supply Technologies

$             8,478


$             8,119


$             7,896


$             6,810


$         31,303



$        21,738


Assembly Components

3,122


934


(1,039)


(1,592)


1,425



6,972


Engineered Products

8,893


12,003


13,584


10,809


45,289



28,827



Total Segment operating income

20,493


21,056


20,441


16,027


78,017



57,537


Corporate and other costs

(4,223)


(4,722)


(4,819)


(2,510)


(16,274)



(15,195)


Settlement of litigation

-


-


-


-


-



-


Gain on acquisition of business

-


-


-


-


-



2,210


Asset impairment charge

-


-


(5,359)


-


(5,359)



(3,539)


Interest expense

(5,863)


(6,894)


(6,215)


(5,845)


(24,817)



(23,792)


Debt extinguishment costs

-


(7,335)


-


-


(7,335)



-




$           10,407


$             2,105


$             4,048


$             7,672


$         24,232



$        17,221
















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.



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