ParkOhio Announces Increased Revenues and Earnings in the Third Quarter

News provided by

Park-Ohio Holdings Corp.

Oct 31, 2012, 05:00 ET

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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