Hawk Corporation (NYSE Amex: HWK) announced today that net sales
for the three months ended December 31, 2009, were $45.6 million
compared to $57.9 million in the comparable prior year period, a
decline of 21.2%. The decrease in sales during the fourth quarter
of 2009 compared to the fourth quarter of 2008 was primarily the
result of volume decreases, which had remained strong during the
fourth quarter of 2008. However, starting in the second half of
2009, the Company saw improvements in a number of its markets,
particularly in its construction and mining and truck markets.
Total sales were up 4.8% in the fourth quarter of 2009 when
compared to the third quarter of 2009. Net sales for the full year
ended December 31, 2009 were $172.4 million, a decrease of 36.1%,
from $269.6 million in 2008.
Income from operations during the fourth quarter 2009 was $4.9
million, a decrease of $0.5 million, or 9.3%, from $5.4 million in
the comparable prior year period. The decrease in income from
operations was primarily impacted by the volume declines and sales
product mix during the quarter, largely offset by the impact of
cost reductions initiated by the Company earlier in the year,
including manufacturing cost controls, headcount reductions,
elimination of certain employee benefits and a reduction of
incentive compensation expense. For the year ended December 31,
2009, the Company reported income from operations of $16.7 million,
a decrease of $22.5 million, or 57.4%, from $39.2 million in the
comparable prior year period.
Ronald E. Weinberg, Hawk's Chairman and CEO, said, "As with
virtually all segments of the economy, we were affected by adverse
business conditions. However, our results were cushioned by our
proactive cost cutting, and the benefit of recession-resistant
aftermarket sales of our 'wear-part' friction materials. As a
result, we were able to generate cash from operations of $19.2
million and continued to fund important long-term initiatives of
the Company."
During the fourth quarter of 2009, the Company reported net
income of $1.6 million, or $0.18 per diluted share compared to $2.4
million, or $0.26 per diluted share, in the comparable period of
2008, a decline of $0.8 million or 33.3%. For the year ended
December 31, 2009, the Company reported net income of $6.4 million,
or $0.73 per diluted share, a decrease of $14.4 million, or 69.2%,
compared to net income of $20.8 million, or $2.21 per diluted share
in 2008.
Working Capital and Liquidity
Cash and short-term investments decreased $10.2 million to $83.1
million as of December 31, 2009, compared to $93.3 million as of
December 31, 2008. During 2009, the Company used its cash generated
from operations to repurchase $12.6 million of its common stock and
$10.0 million to repurchase a portion of its outstanding senior
notes. In addition, the Company made a $3.9 million supplemental
contribution to its defined benefit pension plans.
The Company's total debt of $77.1 million is comprised of senior
notes that mature in November 2014. At December 31, 2009, the
Company's cash and short-term investments exceeded total debt by
$6.0 million.
During 2009, the Company spent $7.5 million on capital
expenditures compared to $15.2 million in 2008. Depreciation and
amortization was $8.1 million in 2009 compared to $7.8 million in
2008.
Business Outlook
Mr. Weinberg said, "Coming off a challenging year in 2009 which
produced significantly lower revenues than 2008 record levels, we
expect 2010 to reflect a recovery in the general economy and the
markets we serve. As a result, we expect our revenues to be within
a range of $190.0 million and $200.0 million, which represents an
increase of between 10.2% and 16.0% from 2009 revenues of $172.4
million."
Mr. Weinberg continued, "In 2009, we instituted several cost
reduction initiatives in response to the decline in volumes. To
remain competitive with our work force, we expect to reinstate some
of the benefits and employee expenses that were frozen or
eliminated in 2009. Although we are already beginning to experience
a sales rebound in the early months of 2010, we are maintaining a
degree of caution with respect to the effect cost increases and
product mix will have on our operating margins. Based on these
factors, we are forecasting 2010 income from operations to be
between $18.0 million and $19.0 million, which represents an
increase of 7.8% to 13.8% over 2009 operating income of $16.7
million."
Mr. Weinberg continued, "Among the growth initiatives we are
pursuing during 2010 is the enhancement of our presence in China
via the acquisition of a small supplier and the expansion of our
R&D, sales and engineering efforts in that country. Further, we
have taken the first steps toward our establishment of a
manufacturing presence in India."
The Company expects to invest between $8.0 million and $10.0
million throughout 2010 in capital projects aligned with its
long-term strategic plan. Depreciation and amortization is expected
to be approximately $8.5 million. Its 2010 world-wide effective tax
rate will be approximately 40%.
Stock Repurchase Program
On November 24, 2008, the Company's Board of Directors approved
a stock repurchase program pursuant to which the Company was
authorized to purchase up to $15.0 million of its outstanding
shares of common stock as allowed under its senior note indenture
and credit facility. From the program's inception in November 2008
through January 11, 2010, the Company purchased 1,090,271 shares of
its common stock at an average price of $13.74 per share. On
January 11, 2010, the $15.0 million repurchase limit was met and
the program was completed.
On February 19, 2010, the Company's Board of Directors approved
a new stock repurchase program pursuant to which the Company is
authorized to purchase up to an additional $25.0 million of its
outstanding shares of common stock as allowed under its current
senior note indenture and credit facility. Under the program, stock
can be purchased from time to time in the open market, through
privately negotiated transactions, through a trading plan
satisfying the safe harbor provisions of Rule 10b5-1 and Rule
10b-18 under the Securities Exchange Act of 1934, as amended, or
otherwise in accordance with securities laws and regulations. The
timing and amount of any repurchases will be determined by the
Company's management, based on its evaluation of market conditions,
share price and other factors. The Company has no obligation to
repurchase shares under the repurchase program and the timing,
actual number of shares to be purchased and the purchase prices to
be paid by the Company will depend in part on market conditions.
Under its domestic bank facility, the Company can repurchase the
full $25.0 million of its common stock. Under the covenant formula
applicable to stock repurchases in the indenture, including the
recent amendment to the indenture which allowed for a repurchase of
up to $20.0 million of stock, the Company can repurchase as of
today, $20.9 million of its common stock. To date, no shares have
been purchased under this 2010 program.
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 950 employees at 11 manufacturing, research,
sales and international rep offices and administrative sites in 7
countries.
Forward-Looking Statements
This press release includes forward-looking statements
concerning sales, operating earnings and effective tax rates. 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 effect of regional and global economic and
industrial market conditions, including our expectations concerning
their impact on the markets the Company serves; the effect of
conditions in the financial and credit markets and their impact on
the Company and our customers and suppliers; the impact of the
Company's cost reduction initiatives; the Company's ability to
execute its business plan to meet its sales, operating income, cash
flow and capital expenditure guidance; the costs and outcome of the
ongoing SEC and DOJ investigations; the Company's ability to
utilize its cash and short-term investments; the impact on the
Company's gross profit margins as a result of changes in product
mix; the Company's vulnerability to industry conditions and
competition; the effect of any interruption in the Company's supply
of raw materials, including steel, 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 on the Company's non-U.S. sales; 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; control by existing preferred stockholders and
significant changes in discount rates and actual investment return
on the Company's pension assets.
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, 2009, 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
(www.hawkcorp.com) on Wednesday, March 10, 2010 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 is online at: http://www.hawkcorp.com/
HAWK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31 December 31
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Net sales $ 45,588 $ 57,887 $ 172,402 $ 269,648
Cost of sales 32,071 44,412 124,927 192,552
--------- --------- --------- ---------
Gross profit 13,517 13,475 47,475 77,096
Operating expenses:
Selling, technical and
administrative expenses 8,474 7,899 30,238 37,325
Amortization of finite-lived
intangible assets 138 138 553 589
--------- --------- --------- ---------
Total operating expenses 8,612 8,037 30,791 37,914
--------- --------- --------- ---------
Income from operations 4,905 5,438 16,684 39,182
Interest expense (1,958) (2,014) (8,036) (8,055)
Interest income 97 410 491 2,089
Other income, net 173 (49) 1,879 1,503
--------- --------- --------- ---------
Income from continuing
operations, before income taxes 3,217 3,785 11,018 34,719
Income tax provision 1,699 1,508 4,505 12,139
--------- --------- --------- ---------
Income from continuing
operations, after income taxes 1,518 2,277 6,513 22,580
Income (loss) from discontinued
operations, after income taxes 51 146 (136) (1,738)
--------- --------- --------- ---------
Net income $ 1,569 $ 2,423 $ 6,377 $ 20,842
========= ========= ========= =========
Earnings per share:
Diluted earnings per share:
Income from continuing
operations, after income
taxes $ 0.18 $ 0.24 $ 0.75 $ 2.40
Discontinued operations,
after income taxes - 0.02 (0.02) (0.19)
--------- --------- --------- ---------
Net earnings per diluted
share $ 0.18 $ 0.26 $ 0.73 $ 2.21
========= ========= ========= =========
Average shares and equivalents
outstanding - diluted 8,316 9,298 8,507 9,356
========= ========= ========= =========
HAWK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
December 31 December 31
2009 2008
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 47,206 $ 62,520
Short-term investments 35,930 30,774
Accounts receivable, net 27,578 38,569
Inventories 27,495 41,377
Deferred income taxes 1,305 414
Other current assets 5,686 5,521
------------ ------------
Total current assets 145,200 179,175
Property, plant and equipment, net 47,096 47,498
Other intangible assets 6,015 6,568
Other assets 6,181 6,751
------------ ------------
Total assets $ 204,492 $ 239,992
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,861 $ 30,207
Other accrued expenses 15,033 23,010
------------ ------------
Total current liabilities 31,894 53,217
Long-term debt 77,090 87,090
Deferred income taxes 2,873 338
Other liabilities 15,165 21,956
Shareholders' equity 77,470 77,391
------------ ------------
Total liabilities and shareholders' equity $ 204,492 $ 239,992
============ ============
Contact Information Thomas A. Gilbride Vice President - Finance
(216) 861-3553 Investor Relations Contact Information John
Baldissera BPC Financial Marketing (800) 368-1217
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