- Net sales increase by 44.1% over prior year period to record
$74.2 million CLEVELAND, Nov. 6 /PRNewswire-FirstCall/ -- Hawk
Corporation (NYSE Alternext US: HWK) announced today that net sales
from continuing operations for the third quarter ended September
30, 2008, increased by 44.1% to a record $74.2 million from $51.5
million in the comparable prior year period. The Company's third
quarter 2008 net sales benefited from strong customer demand in all
of its end markets, new product introductions and pricing actions
pursuant to the terms of long-term agreements as well as, to offset
raw material cost increases, and favorable foreign currency
exchange rates. The Company experienced strong sales growth from
all of its facilities in the third quarter of 2008. Net sales for
the nine months ended September 30, 2008, were $211.8 million, an
increase of 31.6%, from $161.0 million in the comparable prior year
period. (Logo: http://www.newscom.com/cgi-bin/prnh/20001129/HWKLOGO
) Income from operations for the third quarter ended September 30,
2008, was $15.6 million, an increase of $11.0 million, or 239.1%,
from $4.6 million in the prior year period. Income from operations
benefited from the impact of sales volume increases, a FIFO
inventory pricing benefit arising from the sale of our first in,
lower priced inventory, pricing actions, continued implementation
of the Company's lean manufacturing process improvement
initiatives, product mix and foreign currency exchange rates. The
increase during the third quarter of 2008 compared to the same
period of 2007 was partially offset by increases in raw material
costs and increases in employee compensation and variable incentive
compensation expenses during the quarter. For the nine month period
ended September 30, 2008, the Company reported income from
operations of $33.7 million, an increase of $18.7 million, or
124.7%, from $15.0 million in the comparable prior year period.
Ronald E. Weinberg, Hawk's Chairman and CEO, said, "We are pleased
with our third quarter 2008 results as we were able to achieve
record sales, income from operations and net income. However,
because of the disruptions in the financial and commodity markets,
we find conditions in most of our global markets to remain
difficult to predict for the remainder of the year and into 2009."
Mr. Weinberg continued, "Relative to the economy as a whole, Hawk
benefited from a number of factors in achieving our third quarter
and year to date results. We serve a variety of markets on a global
basis, many of which have been strong this year. Additionally, we
continue implementation of lean manufacturing and localization of
our supply chain and production processes. We are currently
monitoring the uncertainty in the financial and commodity markets
and its potential effect on Hawk and our customers, but we remain
dedicated to managing our business for the long-term and utilizing
our strong cash position to our benefit. As of September 30, 2008,
our cash and investment portfolio totaled $87.1 million." For the
quarter ended September 30, 2008, the Company reported income from
continuing operations, after income taxes, of $10.3 million, or
$1.09 per diluted share, an improvement of $8.4 million or 442.1%,
compared to $1.9 million, or $0.20 per diluted share, for the
quarter ended September 30, 2007. For the nine months ended
September 30, 2008, the Company reported net income from continuing
operations, after income taxes of $20.3 million, or $2.15 per
diluted share, an improvement of $14.5 million, or 250.0%, compared
to net income from continuing operations, after income taxes of
$5.8 million, or $0.61 per diluted share, in the comparable prior
year period. For the third quarter of 2008, the Company reported
net income of $10.3 million, or $1.09 per diluted share, an
increase of $8.6 million, or 505.9%, compared to net income of $1.7
million, or $0.18 per diluted share, in the third quarter of 2007.
For the nine months ended September 30, 2008, the Company reported
net income of $18.4 million, or $1.95 per diluted share, an
increase of 10.8%, compared to $16.6 million or $1.76 per diluted
share during the comparable prior year period. The nine month
period ended September 30, 2007, included a gain (net of tax) on
the sale of our precision components segment of $11.8 million.
Working Capital and Liquidity ------------------------------ At
September 30, 2008, working capital increased by $15.3 million to
$128.5 million from $113.2 million at December 31, 2007. The
increase in working capital was largely the result of increased
accounts receivable and inventory levels at September 30, 2008,
resulting from sales increases during the period. Cash and
short-term investments were up $6.0 million to $87.1 million as of
September 30, 2008, compared to December 31, 2007. As of September
30, 2008, the Company had no borrowings under its revolving credit
facility and $21.9 million was available for additional borrowings
under that facility based on its eligible collateral. The Company's
total debt of $87.1 million is comprised of senior notes that
mature in November 2014. During the nine months ended September 30,
2008, the Company spent $9.2 million on capital expenditures
compared to $5.8 million during the comparable period of 2007.
Depreciation and amortization was $5.8 million during the nine
month period ended September 30, 2008, compared to $5.9 million in
the comparable period of 2007. Business Outlook -----------------
Based on the record revenues reported in the first nine-months of
2008, and our current expectation for the fourth quarter, the
Company is increasing its net sales guidance for the full year 2008
to approximately $270.0 million from its previous guidance range of
between $250.0 million and $260.0 million. This revised guidance
represents an increase of approximately 25.1% compared to full year
2007 net sales of $215.9 million. This revised guidance anticipates
2008 fourth quarter net sales of approximately between $58.0
million to $58.5 million, an increase of approximately between 5.6%
to 6.6% compared to net sales for the fourth quarter of 2007 of
$54.9 million. Historically the Company's fourth quarter revenues
are impacted by the reduced number of working days surrounding the
holiday season, and a holdback on the receipt of shipments by our
customers as they affect working capital levels at year end. The
Company anticipates that the impact of the working capital
fluctuations may be more significant than in past years given the
current economic climate. Driven by the record net sales provided
by our current net sales expectations, the Company is also
increasing its full year 2008 income from operations guidance to a
revised estimate of between $38.0 million and $39.0 million from
its previous guidance range of between $28.0 million and $30.0
million. This revised range represents an increase of between 94.9%
and 100.0% compared to 2007 income from operations of $19.5
million. The revised full year guidance reflects the Company's
expectation for fourth quarter income from operations of between
$4.3 million and $5.3 million, which includes the effect of higher
cost inventory on the Company's operating results. Given the
uncertainty in today's economic climate the Company is assessing
its current capital expenditure plans. Although we anticipate
maintaining progress on our key initiatives with respect to
increased capacity and lean manufacturing, we will be carefully
scrutinizing expenditures and their timing. Consequently, we have
lowered our expectation for full year capital spending to be
approximately between $16.0 million and $18.0 million from our
previous guidance of $20.0 million. Based on our updated financial
guidance that affects the relative profitability between our
domestic and international operations, the Company's effective tax
rate continues to decline. The Company is now expecting its fourth
quarter 2008 effective tax rate to be 36.7% resulting in a full
year effective tax rate of 34.7%. The Company ------------ Hawk
Corporation is a leading supplier of friction materials for brakes,
clutches and transmissions used in airplanes, trucks, construction
and mining equipment, farm equipment, recreational and performance
automotive vehicles. Headquartered in Cleveland, Ohio, Hawk has
approximately 1,200 employees at 14 manufacturing, research, sales
and international rep offices and administrative sites in 8
countries. Forward-Looking Statements ---------------------------
This press release includes forward-looking statements concerning
sales and operating earnings. These forward-looking statements are
based upon management's expectations and beliefs concerning future
events. Forward- looking statements are necessarily subject to
risks, uncertainties and other factors, many of which are outside
the control of the Company and which could cause actual results to
differ materially from such statements. These risks and
uncertainties include, but are not limited to: the Company's
ability to sell its remaining performance racing segment company on
a timely basis or at terms favorable to the Company; the Company's
ability to execute its business plan to meet its sales, operating
income and capital expenditure guidance; the costs and outcome; the
costs and outcome of the ongoing SEC and DOJ investigations;
decisions by the Company regarding the use of proceeds from the
sale of its precision components segment, including acquisition and
organic growth opportunities; the impact on the Company's gross
profit margins as a result of changes in product mix; the Company's
vulnerability to adverse general economic and industry conditions
and competition; the effect of any interruption in the Company's
supply of raw materials or a substantial increase in the price of
raw materials; work stoppages by union employees; ongoing capital
expenditures and investment in research and development; compliance
with government regulations; compliance with environmental and
health and safety laws and regulations; the effect on the Company's
international operations of unexpected changes in legal and
regulatory requirements, export restrictions, currency controls,
tariffs and other trade barriers, difficulties in staffing and
managing foreign operations, political and economic instability,
difficulty in accounts receivable collection and potentially
adverse tax consequences; the effect of foreign currency exchange
rates as the Company's non-U.S. sales continue to increase;
reliance for a significant portion of the Company's total revenues
on a limited number of large organizations and the continuity of
business relationships with major customers; the loss of key
personnel; and control by existing preferred stockholders. Actual
results and events may differ significantly from those projected in
the forward-looking statements. Reference is made to Hawk's filings
with the Securities and Exchange Commission, including its annual
report on Form 10-K for the year ended December 31, 2007, its
quarterly reports on Form 10-Q, and other periodic filings, for a
description of the foregoing and other factors that could cause
actual results to differ materially from those in the
forward-looking statements. Any forward-looking statement speaks
only as of the date on which such statement is made, and the
Company undertakes no obligation to update any forward-looking
statement, whether as a result of new information, future events or
otherwise. Investor Conference Call ------------------------- A
live Internet broadcast of the Company's conference call discussing
quarterly and year to date results can be accessed via the investor
relations page on Hawk Corporation's web site
(http://www.hawkcorp.com/) on Thursday, November 6, 2008 at 11:00
a.m. Eastern time. An archive of the call will be available shortly
after the end of the conference call on the investor relations page
of the Company's web site. HAWK CORPORATION CONSOLIDATED STATEMENTS
OF INCOME (Unaudited) (In thousands, except per share data Three
Months Ended Nine Months Ended September 30 September 30 2008 2007
2008 2007 ----- ----- ----- ----- Net sales $74,181 $51,490
$211,761 $161,007 Cost of sales 49,070 39,775 148,140 121,822
------- ------ ------- ------- Gross profit 25,111 11,715 63,621
39,185 Operating expenses: Selling, technical and administrative
expenses 9,332 6,983 29,426 23,612 Amortization of finite-lived
intangible assets 139 182 451 545 ------- ------ ------- -------
Total operating expenses 9,471 7,165 29,877 24,157 ------- ------
------- ------- Income from operations 15,640 4,550 33,744 15,028
Interest expense (2,013) (2,265) (6,041) (7,376) Interest income
488 1,053 1,679 2,894 Other income (expense), net 1,198 (501) 1,552
(435) ------- ------ ------- ------- Income from continuing
operations, before income taxes 15,313 2,837 30,934 10,111 Income
tax provision 5,016 910 10,632 4,341 ------- ------ ------- -------
Income from continuing operations, after income taxes 10,297 1,927
20,302 5,770 (Loss) income from discontinued operations, after
income taxes (41) (266) (1,883) 10,794 ------- ------ -------
------- Net income $10,256 $1,661 $18,419 $16,564 ======= ======
======= ======= Diluted earnings per share: Income from continuing
operations, after income taxes $1.09 $0.20 $2.15 $0.61 Discontinued
operations, after income taxes - (0.02) (0.20) 1.15 ------- ------
------- ------- Net earnings per diluted share $1.09 $0.18 $1.95
$1.76 ======= ====== ======= ======= Average shares and equivalents
outstanding - diluted 9,403 9,356 9,375 9,368 ======= ======
======= ======= HAWK CORPORATION CONDENSED CONSOLIDATED BALANCE
SHEET (Unaudited) (In thousands) September 30 December 31 2008 2007
ASSETS Current assets: Cash and cash equivalents $42,258 $21,992
Marketable securities 44,848 58,999 Accounts receivable, net 50,392
37,486 Inventories 42,229 36,719 Deferred income taxes 1,000 1,355
Other current assets 4,753 4,766 Current assets of discontinued
operations 2,793 5,509 ------- ------- Total current assets 188,273
166,826 Property, plant and equipment, net 44,239 39,575 Other
intangible assets 6,706 7,157 Other assets 5,001 5,176 Long-term
assets of discontinued operations - 1,170 ------- ------- Total
assets $244,219 $219,904 ======= ======= LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $32,644
$30,325 Other accrued expenses 26,625 21,434 Current portion of
long-term debt - 59 Current liabilities of discontinued operations
457 1,740 ------- ------- Total current liabilities 59,726 53,558
Long-term debt 87,090 87,090 Deferred income taxes 701 922 Other
liabilities 11,545 11,010 Shareholders' equity 85,157 67,324
------- ------- Total liabilities and shareholders' equity $244,219
$219,904 ======= =======
http://www.newscom.com/cgi-bin/prnh/20001129/HWKLOGO
http://photoarchive.ap.org/ DATASOURCE: Hawk Corporation CONTACT:
Joseph J. Levanduski, Vice President - CFO, +1-216-861-3553, Thomas
A. Gilbride, Vice President - Finance, +1-216-861-3553, both of
Hawk Corporation; or Investor Relations, John Baldissera, BPC
Financial Marketing, +1-800-368-1217 Web site:
http://www.hawkcorp.com/
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