UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010
Commission File No. 001-13797
HAWK CORPORATION
(Exact name of Registrant as specified in its charter)
|
|
|
Delaware
|
|
34-1608156
|
(State of incorporation)
|
|
(I.R.S. Employer Identification No.)
|
200 Public Square, Suite 1500, Cleveland, Ohio 44114
(Address of principal executive offices) (Zip Code)
(216) 861-3553
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such report(s)), and (2) has been
subject to such filing requirements for the past 90 days. YES
þ
NO
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). YES
o
NO
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer and smaller reporting company in rule 12b-2 of the Exchange Act.
(Check one):
|
|
|
|
|
|
|
Large Accelerated Filer
o
|
|
Accelerated Filer
þ
|
|
Non-accelerated Filer
o
|
|
Smaller Reporting Company
o
|
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the
Act: YES
o
NO
þ
As of October 31, 2010, the registrant had the following number of shares of common stock
outstanding:
|
|
|
|
|
Class A Common Stock, $0.01 par value:
|
|
7,759,063
|
Class B Common Stock, $0.01 par value:
|
|
None (0)
|
As used in this Form 10-Q, the terms Company, Hawk, Registrant, we, us and our mean
Hawk Corporation and its consolidated subsidiaries, taken as a whole, unless the context indicates
otherwise. Except as otherwise stated, the information contained in this Form 10-Q is as of
September 30, 2010.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HAWK CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
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|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
(Note A)
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
47,845
|
|
|
$
|
47,206
|
|
Short-term investments
|
|
|
25,440
|
|
|
|
35,930
|
|
Accounts receivable, less allowance of $626 in 2010 and $985 in 2009
|
|
|
42,535
|
|
|
|
27,578
|
|
Inventories:
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
7,945
|
|
|
|
5,503
|
|
Work-in-process
|
|
|
17,290
|
|
|
|
10,886
|
|
Finished products
|
|
|
12,829
|
|
|
|
11,106
|
|
|
|
|
|
|
|
|
Total inventories
|
|
|
38,065
|
|
|
|
27,495
|
|
Deferred income taxes
|
|
|
1,694
|
|
|
|
1,305
|
|
Other current assets
|
|
|
3,316
|
|
|
|
5,686
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
158,895
|
|
|
|
145,200
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
|
|
Land and improvements
|
|
|
1,159
|
|
|
|
1,166
|
|
Buildings and improvements
|
|
|
19,089
|
|
|
|
19,264
|
|
Machinery and equipment
|
|
|
104,493
|
|
|
|
102,365
|
|
Furniture and fixtures
|
|
|
8,517
|
|
|
|
8,327
|
|
Construction in progress
|
|
|
2,599
|
|
|
|
2,186
|
|
|
|
|
|
|
|
|
|
|
|
135,857
|
|
|
|
133,308
|
|
Less accumulated depreciation
|
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|
90,573
|
|
|
|
86,212
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
45,284
|
|
|
|
47,096
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Finite-lived intangible assets
|
|
|
5,600
|
|
|
|
6,015
|
|
Deferred income taxes
|
|
|
59
|
|
|
|
289
|
|
Other
|
|
|
6,499
|
|
|
|
5,892
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
12,158
|
|
|
|
12,196
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
216,337
|
|
|
$
|
204,492
|
|
|
|
|
|
|
|
|
Note A: The consolidated balance sheet at December 31, 2009, has been derived from the audited
financial statements at that date, but does not include all of the information and footnotes
required by U.S. generally accepted accounting principles for complete financial statements. See
notes to consolidated financial statements (unaudited)
.
3
HAWK CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
(Note A)
|
|
Liabilities and shareholders equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
33,514
|
|
|
$
|
16,861
|
|
Accrued compensation
|
|
|
12,089
|
|
|
|
7,324
|
|
Accrued interest
|
|
|
1,261
|
|
|
|
3,385
|
|
Accrued taxes
|
|
|
4,003
|
|
|
|
345
|
|
Other accrued expenses
|
|
|
4,301
|
|
|
|
3,979
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
55,168
|
|
|
|
31,894
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
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Long-term debt, net of unamortized consent payment of $980 in 2010
|
|
|
56,110
|
|
|
|
77,090
|
|
Deferred income taxes
|
|
|
2,948
|
|
|
|
2,873
|
|
Pension liabilities
|
|
|
1,090
|
|
|
|
2,509
|
|
Other accrued expenses
|
|
|
12,590
|
|
|
|
12,656
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
72,738
|
|
|
|
95,128
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
Series D preferred stock,
$.01 par value; an aggregate liquidation value
of $1,530, plus any unpaid dividends with 9.8% cumulative dividend
(1,530 shares authorized, issued and outstanding)
|
|
|
1
|
|
|
|
1
|
|
Series E preferred stock, $.01 par value;
100,000 shares authorized;
none issued or outstanding
|
|
|
|
|
|
|
|
|
Class A common stock, $.01 par value; 75,000,000 shares authorized;
9,187,750 issued; 7,756,763 and 7,979,740 outstanding in 2010 and
2009, respectively
|
|
|
92
|
|
|
|
92
|
|
Class B common stock, $.01 par value; 10,000,000 shares authorized;
none issued or outstanding
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
55,058
|
|
|
|
55,323
|
|
Retained earnings
|
|
|
59,597
|
|
|
|
42,011
|
|
Accumulated other comprehensive loss
|
|
|
(4,285
|
)
|
|
|
(3,281
|
)
|
Treasury stock, at cost, 1,430,987 and 1,208,010 shares in 2010 and
2009, respectively
|
|
|
(22,032
|
)
|
|
|
(16,676
|
)
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
88,431
|
|
|
|
77,470
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
216,337
|
|
|
$
|
204,492
|
|
|
|
|
|
|
|
|
Note A: The consolidated balance sheet at December 31, 2009 has been derived from the audited
financial statements at that date, but does not include all of the information and footnotes
required by U.S. generally accepted accounting principles for complete financial statements. See
notes to consolidated financial statements (unaudited)
.
4
HAWK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30
|
|
|
Nine Months Ended
September 30
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net sales
|
|
$
|
70,145
|
|
|
$
|
43,452
|
|
|
$
|
185,233
|
|
|
$
|
126,814
|
|
Cost of sales
|
|
|
48,843
|
|
|
|
29,883
|
|
|
|
126,336
|
|
|
|
92,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
21,302
|
|
|
|
13,569
|
|
|
|
58,897
|
|
|
|
33,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, technical and administrative expenses
|
|
|
8,706
|
|
|
|
7,305
|
|
|
|
26,568
|
|
|
|
21,764
|
|
Amortization of finite-lived intangible assets
|
|
|
138
|
|
|
|
138
|
|
|
|
415
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
8,844
|
|
|
|
7,443
|
|
|
|
26,983
|
|
|
|
22,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
12,458
|
|
|
|
6,126
|
|
|
|
31,914
|
|
|
|
11,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,426
|
)
|
|
|
(2,048
|
)
|
|
|
(4,945
|
)
|
|
|
(6,078
|
)
|
Interest income
|
|
|
133
|
|
|
|
125
|
|
|
|
278
|
|
|
|
394
|
|
Other income (expense), net
|
|
|
1,922
|
|
|
|
1,583
|
|
|
|
389
|
|
|
|
1,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, before income taxes
|
|
|
13,087
|
|
|
|
5,786
|
|
|
|
27,636
|
|
|
|
7,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
4,655
|
|
|
|
2,003
|
|
|
|
9,917
|
|
|
|
2,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, after income taxes
|
|
|
8,432
|
|
|
|
3,783
|
|
|
|
17,719
|
|
|
|
4,995
|
|
Loss from discontinued operations, after income tax
benefit of $6 and $12 for the three and nine months
ended September 30, 2010 and $7 and $100 for the three and
nine months ended September 30, 2009
|
|
|
(10
|
)
|
|
|
(13
|
)
|
|
|
(21
|
)
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
8,422
|
|
|
$
|
3,770
|
|
|
$
|
17,698
|
|
|
$
|
4,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, after income taxes
|
|
$
|
1.08
|
|
|
$
|
0.46
|
|
|
$
|
2.25
|
|
|
$
|
0.59
|
|
Discontinued operations, after income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per basic share
(1)
|
|
$
|
1.08
|
|
|
$
|
0.46
|
|
|
$
|
2.24
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, after income taxes
|
|
$
|
1.03
|
|
|
$
|
0.45
|
|
|
$
|
2.16
|
|
|
$
|
0.57
|
|
Discontinued operations, after income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per diluted share
|
|
$
|
1.03
|
|
|
$
|
0.45
|
|
|
$
|
2.16
|
|
|
$
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding basic
|
|
|
7,757
|
|
|
|
8,059
|
|
|
|
7,840
|
|
|
|
8,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares and equivalents outstanding diluted
|
|
|
8,118
|
|
|
|
8,315
|
|
|
|
8,144
|
|
|
|
8,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common shareholders
|
|
$
|
8,385
|
|
|
$
|
3,733
|
|
|
$
|
17,586
|
|
|
$
|
4,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The summation to net earnings per diluted share does not mathematically
calculate due to rounding.
|
5
HAWK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30
|
|
|
|
2010
|
|
|
2009
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
17,698
|
|
|
$
|
4,808
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
|
21
|
|
|
|
187
|
|
Depreciation and amortization
|
|
|
6,363
|
|
|
|
5,988
|
|
Deferred income taxes
|
|
|
(430
|
)
|
|
|
(337
|
)
|
Amortization of discount on investments
|
|
|
(43
|
)
|
|
|
(105
|
)
|
(Gain) loss on sale or disposal of fixed assets
|
|
|
(28
|
)
|
|
|
58
|
|
Write-off of deferred financing fees and consent payment
|
|
|
694
|
|
|
|
|
|
Share based compensation
|
|
|
530
|
|
|
|
756
|
|
Changes in operating assets and liabilites:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(15,433
|
)
|
|
|
10,680
|
|
Inventories
|
|
|
(10,919
|
)
|
|
|
13,010
|
|
Other assets
|
|
|
1,230
|
|
|
|
(780
|
)
|
Accounts payable
|
|
|
16,760
|
|
|
|
(14,798
|
)
|
Accrued expenses
|
|
|
6,692
|
|
|
|
(7,536
|
)
|
Pension accounts, net
|
|
|
(448
|
)
|
|
|
(3,213
|
)
|
Other
|
|
|
273
|
|
|
|
1,447
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities of continuing operations
|
|
|
22,960
|
|
|
|
10,165
|
|
Net cash used in operating activities of discontinued operations
|
|
|
(21
|
)
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchases of available for sale securities
|
|
|
(108,736
|
)
|
|
|
(108,880
|
)
|
Proceeds from available for sale securities
|
|
|
119,452
|
|
|
|
106,000
|
|
Purchases of property, plant and equipment
|
|
|
(3,821
|
)
|
|
|
(6,948
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
1
|
|
|
|
|
|
Acquisition of business
|
|
|
(447
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities of continuing operations
|
|
|
6,449
|
|
|
|
(9,828
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Payments on long-term debt
|
|
|
(20,000
|
)
|
|
|
|
|
Proceeds from stock options
|
|
|
432
|
|
|
|
429
|
|
Payment of consent fee for senior notes indenture modification
|
|
|
(1,512
|
)
|
|
|
|
|
Stock repurchase
|
|
|
(7,247
|
)
|
|
|
(11,245
|
)
|
Tax benefit from exercise of incentive stock options
|
|
|
664
|
|
|
|
|
|
Receipts from government grants
|
|
|
|
|
|
|
225
|
|
Payments of deferred financing fees
|
|
|
|
|
|
|
(340
|
)
|
Payments of preferred stock dividends
|
|
|
(112
|
)
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
Net cash used in financing activities of continuing operations
|
|
|
(27,775
|
)
|
|
|
(11,043
|
)
|
Effect of exchange rate changes on cash
|
|
|
(974
|
)
|
|
|
723
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operations
|
|
|
660
|
|
|
|
(9,983
|
)
|
Net cash used in discontinued operations
|
|
|
(21
|
)
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
639
|
|
|
|
(10,170
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
47,206
|
|
|
|
62,520
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
47,845
|
|
|
$
|
52,350
|
|
|
|
|
|
|
|
|
6
HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2010
(In Thousands, except share data)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in conformity
with U.S. generally accepted accounting principles (GAAP) for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the nine month period
ended September 30, 2010 are not necessarily indicative of the results that may be expected for the
full year ending December 31, 2010. For further information, refer to the consolidated financial
statements and footnotes thereto in the Form 10-K for Hawk Corporation (the Company or Hawk) for
the year ended December 31, 2009.
Hawk Corporation, through the businesses that comprise its friction products segment, designs,
engineers, manufactures and markets specialized components used in a variety of off-highway,
on-highway, industrial, aircraft, agricultural and performance applications. Friction products are
the replacement components used in brakes, clutches and transmissions to absorb vehicular energy
and dissipate it through heat and normal mechanical wear. The Companys revenue is generated
primarily in the U.S. and Italy. The Companys largest customer, Caterpillar Inc., represented
approximately 25.8% and 15.8% of consolidated net sales in the nine month periods ended September
30, 2010 and September 30, 2009, respectively.
The consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been eliminated in the
accompanying financial statements.
2. Subsequent Event
On October 14, 2010, the Company entered into an Agreement and Plan of Merger (Merger
Agreement) with Carlisle Companies Incorporated (Carlisle), a publicly traded Delaware corporation
and HC Corporation, a Delaware corporation and wholly-owned subsidiary of Carlisle (the Purchaser).
Under the terms of the Merger Agreement, Carlisle has commenced a tender offer to purchase all of
the outstanding shares of the Companys Class A common stock at a price of $50.00 per share, net
to the seller in cash, without interest, less any applicable
withholding taxes, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated November 1, 2010 (the Offer to Purchase) and in the related Letter of
Transmittal (as amended or supplemented from time to time, the Letter of Transmittal, which
together with the Offer to Purchase constitute the Offer), each of which was filed with the
Securities and Exchange Commission (SEC) on November 1, 2010. The Merger Agreement provides, among
other things, that following the consummation of the Offer and subject to the satisfaction and
waiver of the conditions set forth in the Merger Agreement and in accordance with the relevant
provisions the Delaware General Corporate Law and other applicable law, the Purchaser will merge
with and into the Company, with the Company being the surviving corporation (the Merger and
together with the Offer and the other transactions contemplated by the Merger Agreement, the
Transaction).
The Company expects the Offer and the Merger to be completed during the fourth calendar
quarter of 2010. The consummation of the Offer and Merger are subject to various closing
conditions, including the tender of a majority of the shares of the Companys Class A common stock,
the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and other customary conditions. The Offer is not subject to a financing
condition.
3. Recent Accounting Developments
There were no new significant accounting updates or guidance that became effective for the
Company commencing with its third quarter of 2010. The Companys management does not believe that
any recently issued, but not yet effective, accounting standards, if currently adopted, would have
a material effect on the accompanying financial statements.
7
4. Discontinued Operations
There are no remaining assets or liabilities classified as discontinued operations recorded in
the Consolidated Balance Sheets at September 30, 2010 or December 31, 2009. Through September 30,
2010, the Company continues to make adjustments to amounts previously reported as discontinued
operations and incur legal and professional expenses associated with the finalization of legal
matters and closure of its legal presence in Mexico. This residual activity is included in the
following summary of the Companys results of discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30
|
|
|
September 30
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, before income taxes
|
|
$
|
(16
|
)
|
|
$
|
(20
|
)
|
|
$
|
(33
|
)
|
|
$
|
(287
|
)
|
Income tax benefit
|
|
|
(6
|
)
|
|
|
(7
|
)
|
|
|
(12
|
)
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, after income taxes
|
|
$
|
(10
|
)
|
|
$
|
(13
|
)
|
|
$
|
(21
|
)
|
|
$
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Fair Value Measurements
The Company follows the accounting guidance for fair value measurements and disclosures for
all financial assets and liabilities that are recognized or disclosed at fair value on a recurring
basis or on a non-recurring basis during the reporting period. The fair value is an exit price,
representing the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants based upon the best use of the asset or
liability at the measurement date.
The Companys financial instruments include cash and cash equivalents, short and long-term
investments, short-term trade receivables, short-term notes receivable, accounts payable and debt
instruments. For short-term instruments, other than those required to be reported at fair value on
a recurring basis and for which additional disclosures are included below, management concluded the
historical carrying value is a reasonable estimate of fair value because of the short period of
time between the origination of such instruments and their expected realization.
The accounting guidance establishes a three-tier hierarchy, which prioritizes the inputs in
measuring fair value. The Companys financial instruments are classified in their entirety based
on the lowest level of input that is significant to the fair value measurement. The three levels
that may be used to measure fair value are as follows:
Level 1
Quoted prices in active markets for identical assets or liabilities.
Level 2
Inputs other than Level 1 that are either directly or indirectly observable, such
as quoted prices for similar assets or liabilities; quoted prices that are not active; or other
inputs that are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
Level 3
Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
There have been no changes in the methodologies used at September 30, 2010 and December 31,
2009. Following is a description of the valuation methodologies used for assets measured
at fair value as of September 30, 2010 and December 31, 2009:
Money market funds
: Valued at the net asset value (NAV) of shares based on the closing
quoted price reported on the active market on which the individual securities are traded.
Commercial paper
: Corporate debt securities rated at least A1 by Standard & Poors and P1
by Moodys rating services having maturities not exceeding 90 days. The fair values of obligations
issued by U.S. corporations held by the Company were determined by obtaining quoted prices from
nationally recognized securities broker-dealers.
Mutual funds
: Valued at the NAV of shares based on the closing quoted price reported on the
active market on which the individual securities are traded.
8
Guaranteed income fund:
Valued at contract value which approximates fair value based on the
nature of the fund. This fund is a stable value fund designed to provide safety of principal,
liquidity and a competitive rate of return (see Guaranteed Income Fund below for further
information related to the valuation of this investment).
The following tables set forth the Companys financial assets and liabilities that were
recorded at fair value on a recurring basis as of September 30, 2010 and December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
4,976
|
|
|
|
4,976
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
19,996
|
|
|
|
|
|
|
|
19,996
|
|
|
|
|
|
Other trading
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed income fund
|
|
|
1,012
|
|
|
|
|
|
|
|
|
|
|
|
1,012
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth funds
(2)
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
Value funds
(3)
|
|
|
697
|
|
|
|
697
|
|
|
|
|
|
|
|
|
|
Index fund
(4)
|
|
|
140
|
|
|
|
140
|
|
|
|
|
|
|
|
|
|
International fund
(5)
|
|
|
516
|
|
|
|
516
|
|
|
|
|
|
|
|
|
|
Fixed income fund
(6)
|
|
|
119
|
|
|
|
119
|
|
|
|
|
|
|
|
|
|
Specialty fund real estate
(7)
|
|
|
112
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
29,068
|
|
|
$
|
8,060
|
|
|
$
|
19,996
|
|
|
$
|
1,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan liability
(1)
|
|
$
|
4,096
|
|
|
$
|
3,084
|
|
|
$
|
|
|
|
$
|
1,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value
|
|
$
|
4,096
|
|
|
$
|
3,084
|
|
|
$
|
|
|
|
$
|
1,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
11,172
|
|
|
$
|
11,172
|
|
|
$
|
|
|
|
$
|
|
|
Commercial paper
|
|
|
34,977
|
|
|
|
|
|
|
|
34,977
|
|
|
|
|
|
Other trading
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed income fund
|
|
|
480
|
|
|
|
|
|
|
|
|
|
|
|
480
|
|
Mutual funds
|
|
|
2,538
|
|
|
|
2,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
49,167
|
|
|
$
|
13,710
|
|
|
$
|
34,977
|
|
|
$
|
480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan liability
(1)
|
|
$
|
3,018
|
|
|
$
|
2,538
|
|
|
$
|
|
|
|
$
|
480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value
|
|
$
|
3,018
|
|
|
$
|
2,538
|
|
|
$
|
|
|
|
$
|
480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Other trading assets represent mutual fund assets held in a rabbi trust to fund
deferred compensation plan liabilities and are included as a component of Other long-term
assets in the Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009.
The deferred compensation plan liability is the Companys liability under its deferred
compensation plan and is included in Other long-term accrued expenses in the Consolidated
Balance Sheets as of September 30, 2010 and December 31, 2009.
|
|
(2)
|
|
Growth funds seek long-term growth of capital. The funds will normally invest at least
80% of its assets in common stocks of large, mid-cap or small-cap companies based on the
defined focus of the fund.
|
|
(3)
|
|
Value funds seek high current income in addition to long-term capital appreciation.
These accounts primarily invest in dividend-paying common and preferred stocks which are
expected to provide current income and consistent, stable returns.
|
9
|
|
|
(4)
|
|
The index fund seeks to mirror the returns of the S&P 500 Index. The fund normally
invests at least 80% of its assets in securities included in the S&P 500 according to each
securitys weighting in the index.
|
|
(5)
|
|
The international fund seeks long-term capital appreciation and some current income by
investing worldwide with normally at least 50% of its assets invested outside the U.S. The
fund may invest in debt securities of any maturity or quality and illiquid securities.
International investing presents certain unique risks not associated with domestic
investments, including currency fluctuation and political and economic changes, which may
result in greater share price volatility.
|
|
(6)
|
|
The fixed income fund seeks current income consistent with preservation of capital. It
normally invests at least 80% of assets in bonds of which at least 60% of assets in bonds
and debt securities rated A or better at the time of investment.
|
|
(7)
|
|
The specialty real estate fund seeks long-term capital appreciation with current
income as a secondary objective. The fund invests mainly in securities issued by real
estate investment trusts and at least 80% of assets in equities issued by companies in the
real estate industry.
|
At September 30, 2010, the fair values of the Companys money market funds and the majority of
certain other trading assets are determined based on quoted prices in active markets and have been
classified as Level 1. The other trading securities are maintained for the future payments under
the Companys deferred compensation plan, which is structured as a rabbi trust. The investments
are all managed by a third party and, with the exception of the guaranteed income fund whose
valuation is discussed further below, valued based on the underlying fair value of each mutual fund
held by the trust, for which there are active quoted markets. The related deferred compensation
liabilities are valued based on the underlying investment selections held in each participants
shadow account. Investment funds held by the rabbi trust, for which there is an active quoted
market, mirror the investment options selected by participants in the deferred compensation plan.
The majority of the Companys deferred compensation liability is comprised of mutual funds and is
classified as Level 1. The total net realized and unrealized gains totaled $358 and $177 for the
three months ended September 30, 2010 and 2009, respectively and $196 and $474 for the nine months
ended September 30, 2010 and 2009, respectively, and are included in Other income (expense), net in
the Companys Consolidated Statements of Operations. Offsetting entries to the deferred
compensation liability and compensation expense within Selling, technical and administrative
expenses, for the same amounts were also recorded during the nine months ended September 30, 2010,
and 2009, respectively. The fair value of a guaranteed income fund maintained in the rabbi trust
and reported in Other trading assets in the table above, and the related deferred compensation
liability have been classified as Level 3.
At September 30, 2010 and December 31, 2009, certain of the Companys financial assets were
classified as Level 2. Those assets were initially valued at the transaction price and
subsequently valued typically utilizing third party pricing services. The pricing services use
many inputs to determine value, including reportable trades, broker/dealer quotes, bids, offers,
and other industry and economic events. The Company validates the prices provided by its third
party pricing services by reviewing their pricing methods and matrices, obtaining market values
from other pricing sources, and analyzing pricing data in certain instances. Considerable judgment
is required in interpreting market data to develop estimates of fair value. Accordingly, the fair
value estimates provided herein were not necessarily indicative of the amount that the Company or
its debt holders could realize in a current market exchange. The use of different assumptions
and/or estimation methodologies may have a material effect on the estimated fair value. After
completing its validation procedures, the Company did not adjust or override any fair value
measurements provided by its pricing services at either September 30, 2010 or December 31, 2009.
During the period ended September 30, 2010, there were no transfers of financial assets
between Level 1 and Level 2.
10
Level 3 Gains and Losses
The table below sets forth a summary of changes in the fair value of the deferred compensation
plans Level 3 assets for the nine months ended September 30, 2010:
|
|
|
|
|
|
|
Guaranteed
|
|
|
|
Income Fund
|
|
Balance January 1, 2010
|
|
$
|
480
|
|
Realized gains
|
|
|
|
|
Unrealized gains / (losses) relating to instruments still
held at reporting date
|
|
|
|
|
Purchases, sales, issuances and settlements (net)
|
|
|
532
|
|
|
|
|
|
Balance September 30, 2010
|
|
$
|
1,012
|
|
|
|
|
|
Guaranteed Income Fund
The deferred compensation plan has entered into an investment contract, the Guaranteed Income
Fund (fund), with Prudential Retirement Services, Inc. (Prudential). Prudential maintains the
contributions to this fund in a general account, which is credited with earnings on the underlying
investments and charged for participant withdrawals and administrative expenses.
The Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009 presents the
fund at contract value, which approximates fair value. Contract value is the amount deferred
compensation plan participants would receive if they were to initiate permitted transactions under
the terms of the plan. Contract value represents contributions made under the contract, plus
earnings and transfers in, less participant withdrawals, administrative expenses and transfers out.
Prudential is contractually obligated to repay the principal and a specified interest rate that is
guaranteed to the plan. Participants may ordinarily direct the withdrawal or transfer of all or a
portion of their investment at contract value. However, Prudential has the right to defer certain
disbursements (excluding retirement, termination, and death or disability disbursements) or
transfers from the fund when total amounts disbursed from the pool in a given calendar year exceed
10% of the total assets in that pool on January 1 of that year. The Company does not believe that
any events that would limit the deferred compensation plans ability to transact at contract value
with participants are probable of occurring.
There are no reserves against contract value for credit risk of the contract issuer or
otherwise. The average annual yield and crediting interest rate of the fund was approximately
2.60% for the trailing twelve months ended September 30, 2010. The crediting interest rate is
based on a formula agreed upon with Prudential, based on the yields of the underlying investments
and considering factors such as projected investment earnings, the current interest environment,
investment expenses, and a profit and risk component. The rate may never be less than 1.50% nor
may it be reduced by more than 2.10% during any calendar year. Interest rates are declared in
advance and guaranteed for six month periods.
11
Long-Term Financial Instruments
The carrying value and the fair value as determined by a third-party pricing service of
non-current financial liabilities that qualify as financial instruments are reported in the table
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
Long-term financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
(1)
|
|
$
|
57,090
|
|
|
$
|
57,090
|
|
|
$
|
77,090
|
|
|
$
|
76,994
|
|
|
|
|
(1)
|
|
Long-term debt of $56,110 as reported on the Consolidated Balance Sheet as of
September 30, 2010 includes $980 of unamortized consent payments, which is accounted for
as a debt valuation account.
|
6. Investments
The Company determines the appropriate classification of its investments at the time of
purchase and reevaluates such designation as of each balance sheet date. At both September 30,
2010 and December 31, 2009, the Company accounted for all of its short-term investments as
available-for-sale. Available-for-sale securities are reported at fair value with unrealized
holding gains and losses, net of tax, included in Accumulated other comprehensive loss in the
Consolidated Balance Sheets. The amortized cost of debt securities in this category is adjusted
for the amortization of any discount or premium to maturity computed under the effective interest
method. Dividend and interest income, including the amortization of any discount or premium, as
well as realized gains or losses, are included in Interest income in the Consolidated Statements of
Operations. Both the cost of any security sold and the amount reclassified out of Accumulated
other comprehensive (loss) income into earnings is based on the specific identification method.
The following is a summary of the Companys available-for-sale securities as of September 30,
2010 and December 31, 2009, by contractual maturity dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale Securities
|
|
|
|
|
|
|
|
Gross Unrealized
|
|
|
Gross Unrealized
|
|
|
Estimated Fair Value
|
|
September 30, 2010
|
|
Amortized Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
(Net Carrying Amount)
|
|
Other debt securities due in
one year or less
|
|
$
|
25,442
|
|
|
$
|
|
|
|
$
|
(2
|
)
|
|
$
|
25,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt securities due in
one year or less
|
|
$
|
35,941
|
|
|
$
|
|
|
|
$
|
(11
|
)
|
|
$
|
35,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010, there is an unrealized loss on available-for-sale securities of $2
($1 net of tax) compared to unrealized losses on available-for-sale securities of $11 ($7 net of
tax) at December 31, 2009, which were included in Accumulated other comprehensive loss in the
accompanying Consolidated Balance Sheet. Unrealized gains of $10 ($6 net of tax) and unrealized
losses of $106 ($68 net of tax) were reclassified out of Accumulated other comprehensive (loss)
income and into earnings during the nine months ended September 30, 2010 and 2009, respectively.
At September 30, 2010, the Company had one investment with an amortized cost totaling $19,998
that was in an unrealized loss position totaling $2 and the Company determined that the gross
unrealized loss on this investment is temporary in nature. The gross unrealized loss on this
investment was due to changes in interest rates and, at September 30, 2010, the Company had both
the intent and ability to hold this investment through its maturity date in the fourth quarter of
2010, at which time it expects to receive the full maturity value of $20,000.
12
7. Financing Arrangements
On February 8, 2010, the Company announced that it was soliciting consents from holders of
$75,740 of its senior notes to effect an amendment, allowing the Company to repurchase up to
$20,000 of its outstanding common stock, to the indenture governing the senior notes. On February
23, 2010, $75,585 of the senior notes consented and a fee of $1,512 was paid to the consenting
senior note holders and the Company entered into a supplemental indenture to allow for the stock
repurchase. The consent fee is accounted for as a debt valuation account and is being amortized
over the remaining life of the outstanding senior notes as interest expense.
In May 2010, the Company purchased $20,000 of its outstanding senior notes in the open market.
These notes have not been formally retired by the Company, but have been treated as an
extinguishment of debt for accounting purposes, as the Company has been released from being the
primary obligor under the liability. The Company reported a loss on extinguishment of debt of
$694 comprised of a pro-rata portion of unamortized debt issuance costs and unamortized consent
fees which was included in Other income (expense), net in the Consolidated Statements of Operations
for the nine months ended September 30, 2010, and a commission expense of $50, which is included in
Selling, technical and administrative expense in the Consolidated Statements of Operations for the
nine months ended September 30, 2010. As of September 30, 2010, $980 of the consent fee remains to
be amortized. After taking into account the above transactions, the remaining principal balance of
senior notes outstanding as of September 30, 2010 is $57,090.
8. Transfers of Financial Assets Accounts Receivable Factoring Programs
The Company accounts for its trade accounts receivable factoring programs as required under
ASC 860,
Transfers and Servicing
and, effective January 1, 2010, the Company prospectively adopted
the guidance under ASU No. 2009-16,
Accounting for Transfers of Financial Assets
.
As part of its working capital management, the Company sells certain domestic and Italian
trade accounts receivable at its discretion to unrelated third-party financial institutions without
recourse. Under the terms of the factoring agreements, the Company retains no rights or interest,
has no obligations with respect to the sold receivables, and does not service the receivables after
the sale. As such, the factoring of trade accounts receivable under these agreements is accounted
for as a sale. The amount sold varies each month based on the amount of underlying receivables,
the cash flow needs of the Company and limitations imposed under the terms of the Companys credit
and factoring facilities. Specifically, under the terms of Companys domestic bank facility, the
maximum amount of U.S. outstanding advances at any one time is $10,000. Under the terms of the
Italian factoring agreement, the maximum available amount of the Italian-based outstanding advances
is $5,601 (4,115 Euro) and $6,931 (4,750 Euro) at September 30, 2010 and 2009, respectively, which
limitation is subject to change based on the level of eligible receivables and at the discretion of
the third-party financial institution. The Company is not obligated to draw cash immediately upon
the factoring of accounts receivable under the terms of its Italian factoring agreement, and pays
an administrative fee each month over the term of the agreement based on the dollar value of
receivables sold. Fees related to the Italian factoring agreement for the three and nine months
ended September 30, 2010 and 2009 were $10, $34, $9 and $31, respectively, and are included in
Selling, technical and administrative expenses in the Consolidated Statements of Operations.
During the nine months ended September 30, 2010 and 2009, the Company sold $28,842 and $5,499,
respectively of trade accounts receivable under its factoring agreements. The sale of these
receivables accelerated the collection of the Companys cash and reduced credit exposure. The
receivables sold pursuant to these factoring agreements have been recorded as a reduction of trade
accounts receivable and as cash provided by operating activities in the Consolidated Statements of
Cash Flows. At September 30, 2010 and December 31, 2009, the Company had $3,034 and $3,278,
respectively of receivables outstanding under receivable factoring agreements, net of advances
received, which are included in Accounts receivable in the Consolidated Balance Sheets. For
transactions in which cash is drawn immediately, proceeds on the sale reflect the face value of the
receivable less a discount. This discount is recorded as a loss in the Consolidated Statements of
Operations in the period of the sale. The Company reported a loss on the sale of receivables for
the three and nine months ended September 30, 2010 and 2009 of $39, $55, $0 and $0, respectively;
this amount is recorded in Other income (expense), net in the Consolidated Statements of
Operations.
13
9. Comprehensive Income
Comprehensive income is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30
|
|
|
September 30
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net income
|
|
$
|
8,422
|
|
|
$
|
3,770
|
|
|
$
|
17,698
|
|
|
$
|
4,808
|
|
Amortization of prior service cost and net loss, net of tax
|
|
|
336
|
|
|
|
231
|
|
|
|
644
|
|
|
|
718
|
|
Unrealized (loss) gain on available for sale securities, net of tax
|
|
|
(1
|
)
|
|
|
8
|
|
|
|
6
|
|
|
|
(16
|
)
|
Foreign currency translation gain (loss)
|
|
|
4,262
|
|
|
|
1,688
|
|
|
|
(1,654
|
)
|
|
|
1,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
13,019
|
|
|
$
|
5,697
|
|
|
$
|
16,694
|
|
|
$
|
7,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. Stock Compensation Plan
The Companys Amended and Restated 2000 Long Term Incentive Plan (Plan), provides for the
granting of up to 1,315,000 shares of common stock of the Company in the form of stock options,
restricted stock awards, stock appreciation rights (SARs) and performance-based awards. The Plan
had 499,483 shares available for grants as of September 30, 2010. Options generally vest over a
five year period after the grant date and expire no more than ten years after the grant date.
Stock Options
The Company recognized $120 and $205 of compensation expense for the three month periods ended
September 30, 2010 and 2009, respectively and $431 and $756 for the nine month periods ended
September 30, 2010 and September 30, 2009, respectively. Net cash proceeds from the exercise of
stock options were $432 and $429 for the nine month periods ended September 30, 2010 and 2009,
respectively, and the intrinsic value of stock options exercised was $1,897 and $329 for the nine
months ended September 30, 2010 and 2009, respectively. As of September 30, 2010, there was $599
of total unrecognized compensation cost related to the non-vested share-based compensation
arrangements under the Companys stock compensation plans. The remaining cost is expected to be
recognized over the next 1.9 years. The Company classifies its stock option expense principally in
Selling, technical and administrative expenses in its Consolidated Statements of Operations.
Stock-based option activity during the nine months ended September 30, 2010, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Remaining Contract
|
|
|
Intrinsic Value
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Term
|
|
|
(in thousands)
|
|
Options outstanding at
January 1, 2010
|
|
|
729,179
|
|
|
$
|
8.72
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(115,959
|
)
|
|
|
3.74
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at
September 30, 2010
|
|
|
613,220
|
|
|
$
|
9.66
|
|
|
4.6 yrs.
|
|
$
|
20,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2010
|
|
|
452,219
|
|
|
$
|
7.53
|
|
|
3.5 yrs.
|
|
$
|
16,164
|
|
There were no options granted during the nine months ended September 30, 2010.
The aggregate intrinsic value in the table above represents the total pre-tax difference
between the $43.27 closing price of shares of common stock of the Company on September 30, 2010,
over the exercise price of the stock option, multiplied by the number of options outstanding and
exercisable. The aggregate intrinsic value is not recorded for financial accounting purposes and
the value changes based on the daily changes in the fair market value of the Companys shares of
common stock.
14
Restricted Stock
On February 18, 2010, under the Plan, 10,000 shares of service-vested restricted common stock
awards were issued to certain employees of the Company. These restricted stock awards vest in
equal one-fifth installments on February 18, 2010, 2011, 2012, 2013, and 2014. Additionally, the
Company paid the taxes due on the taxable portion of the total award on behalf
of the employees. Compensation expense on these awards is being recognized from the date of
grant through the end of the vesting period on a straight-line basis. The fair value of this
restricted stock award was measured using the closing price of the Companys common stock at the
date of grant of $18.71 per share. The Company recorded $9 and $59 of compensation expense for the
restricted stock awards for the three and nine months ended September 30, 2010, respectively, and
$0 and $135 for the income tax gross-up paid on behalf of the participants for the three and nine
months ended September 30, 2010, respectively, within Selling, technical, and administrative
expense in its Consolidated Statement of Operations. As of September 30, 2010, there were 8,000
shares of restricted stock outstanding and unvested. As of September 30, 2010, the remaining
unrecognized compensation cost related to the unvested restricted stock awards was $128, which is
expected to be recognized over the remaining vesting period of 3.4 years.
The following table summarizes restricted stock activity for the nine months ended September
30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
Unvested balance as of January 1, 2010
|
|
|
|
|
|
|
|
|
Granted
|
|
|
10,000
|
|
|
$
|
187
|
|
Vested
|
|
|
(2,000
|
)
|
|
$
|
(37
|
)
|
|
|
|
|
|
|
|
Unvested balance as of September 30, 2010
|
|
|
8,000
|
|
|
$
|
150
|
|
|
|
|
|
|
|
|
The intrinsic value of the unvested restricted shares as of September 30, 2010 was $346.
11. Shareholders Equity
On November 24, 2008, the Company announced a plan, approved by the Board of Directors, to
repurchase up to $15,000 of its Class A common stock in the open market, through privately
negotiated transactions or otherwise in accordance with securities laws and regulations. In the
first quarter of 2010, the Company purchased $317 of its common stock under the plan. As of
January 11, 2010, all $15,000 had been spent by the Company to repurchase 1,090,271 shares of its
Class A common stock at market prices and the plan expired.
On February 19, 2010, the Companys Board of Directors approved a plan (the new plan) to
repurchase up to $25,000 of its shares of Class A common stock 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 (the Exchange
Act), or otherwise in accordance with securities laws and regulations. At September 30, 2010, the
provisions of the Companys credit facility, indenture and supplemental indenture allowed the
Company to purchase up to the board-approved plan amount of $25,000 of its common stock. The
Company made no purchases of its common stock during the three months ended September 30, 2010.
From February 19, 2010 through June 30, 2010, the Company purchased $6,930 of its common stock
under the new plan.
15
12. Employee Benefits
A summary of the components of net periodic benefit cost of the Companys defined benefit
pension plans for the periods presented in the Consolidated Statements of Operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30
|
|
|
September 30
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of net periodic pension cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
101
|
|
|
$
|
106
|
|
|
$
|
312
|
|
|
$
|
253
|
|
Interest cost
|
|
|
455
|
|
|
|
457
|
|
|
|
1,378
|
|
|
|
1,363
|
|
Expected return on plan assets
|
|
|
(594
|
)
|
|
|
(440
|
)
|
|
|
(1,786
|
)
|
|
|
(1,319
|
)
|
Amortization of prior service cost
|
|
|
60
|
|
|
|
60
|
|
|
|
180
|
|
|
|
180
|
|
Recognized net actuarial loss
|
|
|
174
|
|
|
|
284
|
|
|
|
534
|
|
|
|
924
|
|
Settlement expense
|
|
|
189
|
|
|
|
|
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost of defined benefit plans
|
|
$
|
385
|
|
|
$
|
467
|
|
|
$
|
807
|
|
|
$
|
1,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the third quarter of 2010, the Companys Canadian pension plan incurred a partial
settlement of its projected benefit obligation resulting from a significant lump sum death benefit
distribution. The settlement expense of $189 has been recorded as a component of Cost of sales in
the 2010 Consolidated Statement of Operations.
The Company contributed $1,267 of cash in the first nine months of 2010 to fund its defined
benefit pension plans for the 2009 and 2010 plan years based on revised funding requirements
provided by its third party actuaries, and anticipates contributing an additional $49 in cash
during the remainder of 2010 for the 2010 plan year, for total cash contributions of $1,314.
13. Income Taxes
The effective income tax rate from continuing operations for the nine months ended September
30, 2010, was 35.9%, compared to 36.0% for the nine months ended September 30, 2009. The Companys
effective rate differs from the U.S. statutory rate of 35.0% primarily as a result of the impact of
non-deductible expenses on the Companys worldwide taxes.
The total amount of unrecognized tax benefits as of September 30, 2010, was $692 (including
$138 of accrued interest and penalties) the recognition of which would have had an effect of $644
on the continuing operations effective tax rate. The change in the unrecognized tax benefits from
December 31, 2009 was due primarily to the Companys settlement of its Italian tax audit, which
reduced the unrecognized tax benefits by $438 (including $93 of accrued interest and penalties).
The Company believes it is reasonably possible that the unrecognized tax benefit may be reduced by
$259 in the next twelve months primarily for issues that lapse due to statutes.
The Company recorded an adjustment to deferred taxes for a foreign subsidiary which increased
the tax provision $193 for the nine months ended September 30, 2010. The Company does not
anticipate any further adjustments related to this matter.
The Company files income tax returns in the U.S. federal jurisdiction and various state and
foreign jurisdictions. The Company is currently not under examination for income taxes in the
jurisdictions in which it files. The years 2003 2009 are open years available for examination
by various state, local and foreign tax authorities.
16
14. Earnings Per Share
Basic and diluted earnings per share are computed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30
|
|
|
Nine Months Ended
September 30
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Income from continuing operations, after
income taxes
|
|
$
|
8,432
|
|
|
$
|
3,783
|
|
|
$
|
17,719
|
|
|
$
|
4,995
|
|
Less: Preferred stock dividends
|
|
|
37
|
|
|
|
37
|
|
|
|
112
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, after
income taxes available to common shareholders
|
|
$
|
8,395
|
|
|
$
|
3,746
|
|
|
$
|
17,607
|
|
|
$
|
4,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
8,422
|
|
|
$
|
3,770
|
|
|
$
|
17,698
|
|
|
$
|
4,808
|
|
Less: Preferred stock dividends
|
|
|
37
|
|
|
|
37
|
|
|
|
112
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
8,385
|
|
|
$
|
3,733
|
|
|
$
|
17,586
|
|
|
$
|
4,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
(in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
7,757
|
|
|
|
8,059
|
|
|
|
7,840
|
|
|
|
8,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
7,757
|
|
|
|
8,059
|
|
|
|
7,840
|
|
|
|
8,304
|
|
Dilutive effect of stock options
|
|
|
361
|
|
|
|
256
|
|
|
|
304
|
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
8,118
|
|
|
|
8,315
|
|
|
|
8,144
|
|
|
|
8,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings from continuing operations,
after income taxes
|
|
$
|
1.08
|
|
|
$
|
0.46
|
|
|
$
|
2.25
|
|
|
$
|
0.59
|
|
Discontinued operations, after income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per basic share
(1)
|
|
$
|
1.08
|
|
|
$
|
0.46
|
|
|
$
|
2.24
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings from continuing operations,
after income taxes
|
|
$
|
1.03
|
|
|
$
|
0.45
|
|
|
$
|
2.16
|
|
|
$
|
0.57
|
|
Discontinued operations, after income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per diluted share
|
|
$
|
1.03
|
|
|
$
|
0.45
|
|
|
$
|
2.16
|
|
|
$
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The summation to net earnings per diluted share does not mathematically
calculate due to rounding.
|
A weighted average of 0 and 7,112 options were not included in the calculation of diluted
weighted shares outstanding because they were anti-dilutive for the three and nine months ended
September 30, 2010, respectively. A weighted average of 228,044 and 251,044 options were not
included in the calculation of diluted weighted shares outstanding because they were anti-dilutive
for the three and nine months ended September 30, 2009, respectively.
On February 18, 2010, the Company issued 10,000 shares of common stock from treasury to
certain employees as a restricted stock award under the Companys Amended and Restated 2000 Long
Term Incentive Plan. These awarded shares are included in the basic and diluted weighted average
shares outstanding from the period of time outstanding. 20% of these awarded shares vested
immediately and the remaining shares vest ratably over the next four years from the grant date. No
forfeitures are anticipated over the vesting period. All restricted shares include the right to
vote and the right to receive cash and stock dividends.
17
15. Supplemental Guarantor Information
Each of the Guarantor Subsidiaries has fully and unconditionally guaranteed, on a joint and
several basis, to pay principal, premium, and interest with respect to the Companys senior notes.
The Guarantor Subsidiaries are direct or indirect wholly-owned subsidiaries of the Company.
The following supplemental consolidating condensed financial statements present:
|
|
|
Consolidating condensed Balance Sheets as of September 30, 2010 and December 31, 2009,
consolidating condensed Statements of Operations for the three and nine months ended
September 30, 2010 and 2009 and consolidating condensed Statements of Cash Flows for the
nine months ended September 30, 2010 and 2009.
|
|
|
|
Hawk Corporation (Parent) combined Guarantor Subsidiaries and combined Non-Guarantor
Subsidiaries consisting of the Companys subsidiaries in Italy, Canada and China with their
investments in subsidiaries accounted for using the equity method.
|
|
|
|
Elimination entries necessary to consolidate the financial statements of the Parent and
all of its subsidiaries.
|
The Company does not believe that separate financial statements of the Guarantor Subsidiaries
provide material additional information to investors. Therefore, separate financial statements and
other disclosures concerning the Guarantor Subsidiaries are not presented. The Companys bank
facility contains covenants with respect to the Company and its subsidiaries that,
among other things, would prohibit the payment of dividends to the Company by the subsidiaries
(including Guarantor Subsidiaries) in the event of a default under the terms of the bank facility.
The indenture governing the senior notes permits the payment of dividends to the Company by the
subsidiaries (including Guarantor Subsidiaries) provided that no event of default has occurred
under the terms of the indenture of the senior notes.
18
Supplemental Consolidating Condensed
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(dollars in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
24,816
|
|
|
$
|
2
|
|
|
$
|
23,027
|
|
|
$
|
|
|
|
$
|
47,845
|
|
Short-term investments
|
|
|
19,995
|
|
|
|
|
|
|
|
5,445
|
|
|
|
|
|
|
|
25,440
|
|
Accounts receivable, net
|
|
|
|
|
|
|
20,162
|
|
|
|
22,373
|
|
|
|
|
|
|
|
42,535
|
|
Inventories, net
|
|
|
|
|
|
|
25,126
|
|
|
|
13,242
|
|
|
|
(303
|
)
|
|
|
38,065
|
|
Deferred income taxes
|
|
|
932
|
|
|
|
|
|
|
|
762
|
|
|
|
|
|
|
|
1,694
|
|
Other current assets
|
|
|
554
|
|
|
|
542
|
|
|
|
2,220
|
|
|
|
|
|
|
|
3,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
46,297
|
|
|
|
45,832
|
|
|
|
67,069
|
|
|
|
(303
|
)
|
|
|
158,895
|
|
Investment in subsidiaries
|
|
|
75,800
|
|
|
|
|
|
|
|
|
|
|
|
(75,800
|
)
|
|
|
|
|
Inter-company advances, net
|
|
|
|
|
|
|
2,763
|
|
|
|
(2,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
33,107
|
|
|
|
12,177
|
|
|
|
|
|
|
|
45,284
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finite-lived intangible assets
|
|
|
|
|
|
|
5,600
|
|
|
|
|
|
|
|
|
|
|
|
5,600
|
|
Other
|
|
|
6,499
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
6,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
6,499
|
|
|
|
5,600
|
|
|
|
59
|
|
|
|
|
|
|
|
12,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
128,596
|
|
|
$
|
87,302
|
|
|
$
|
76,542
|
|
|
$
|
(76,103
|
)
|
|
$
|
216,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
120
|
|
|
$
|
19,086
|
|
|
$
|
14,308
|
|
|
$
|
|
|
|
$
|
33,514
|
|
Accrued compensation
|
|
|
4,275
|
|
|
|
4,552
|
|
|
|
3,262
|
|
|
|
|
|
|
|
12,089
|
|
Accrued interest
|
|
|
1,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,261
|
|
Accrued taxes
|
|
|
1,770
|
|
|
|
|
|
|
|
2,231
|
|
|
|
2
|
|
|
|
4,003
|
|
Other accrued expenses
|
|
|
1,855
|
|
|
|
2,095
|
|
|
|
339
|
|
|
|
12
|
|
|
|
4,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
9,281
|
|
|
|
25,733
|
|
|
|
20,140
|
|
|
|
14
|
|
|
|
55,168
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net
|
|
|
56,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,110
|
|
Deferred income taxes
|
|
|
2,601
|
|
|
|
|
|
|
|
347
|
|
|
|
|
|
|
|
2,948
|
|
Other
|
|
|
4,428
|
|
|
|
5,542
|
|
|
|
3,710
|
|
|
|
|
|
|
|
13,680
|
|
Inter-company advances, net
|
|
|
(32,255
|
)
|
|
|
23,812
|
|
|
|
8,760
|
|
|
|
(317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
30,884
|
|
|
|
29,354
|
|
|
|
12,817
|
|
|
|
(317
|
)
|
|
|
72,738
|
|
Shareholders equity
|
|
|
88,431
|
|
|
|
32,215
|
|
|
|
43,585
|
|
|
|
(75,800
|
)
|
|
|
88,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders
equity
|
|
$
|
128,596
|
|
|
$
|
87,302
|
|
|
$
|
76,542
|
|
|
$
|
(76,103
|
)
|
|
$
|
216,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
Supplemental Consolidating Condensed
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(dollars in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
24,182
|
|
|
$
|
11
|
|
|
$
|
23,013
|
|
|
$
|
|
|
|
$
|
47,206
|
|
Short-term investments
|
|
|
34,977
|
|
|
|
|
|
|
|
953
|
|
|
|
|
|
|
|
35,930
|
|
Accounts receivable, net
|
|
|
|
|
|
|
12,520
|
|
|
|
15,058
|
|
|
|
|
|
|
|
27,578
|
|
Inventories, net
|
|
|
|
|
|
|
16,714
|
|
|
|
11,025
|
|
|
|
(244
|
)
|
|
|
27,495
|
|
Deferred income taxes
|
|
|
511
|
|
|
|
|
|
|
|
794
|
|
|
|
|
|
|
|
1,305
|
|
Other current assets
|
|
|
3,704
|
|
|
|
723
|
|
|
|
1,259
|
|
|
|
|
|
|
|
5,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
63,374
|
|
|
|
29,968
|
|
|
|
52,102
|
|
|
|
(244
|
)
|
|
|
145,200
|
|
Investment in subsidiaries
|
|
|
49,927
|
|
|
|
|
|
|
|
|
|
|
|
(49,927
|
)
|
|
|
|
|
Inter-company advances, net
|
|
|
|
|
|
|
2,738
|
|
|
|
(2,738
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
34,728
|
|
|
|
12,368
|
|
|
|
|
|
|
|
47,096
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finite-lived intangible assets
|
|
|
|
|
|
|
6,015
|
|
|
|
|
|
|
|
|
|
|
|
6,015
|
|
Other
|
|
|
5,892
|
|
|
|
|
|
|
|
289
|
|
|
|
|
|
|
|
6,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
5,892
|
|
|
|
6,015
|
|
|
|
289
|
|
|
|
|
|
|
|
12,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
119,193
|
|
|
$
|
73,449
|
|
|
$
|
62,021
|
|
|
$
|
(50,171
|
)
|
|
$
|
204,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
46
|
|
|
$
|
9,696
|
|
|
$
|
7,119
|
|
|
$
|
|
|
|
$
|
16,861
|
|
Accrued compensation
|
|
|
2,455
|
|
|
|
2,599
|
|
|
|
2,270
|
|
|
|
|
|
|
|
7,324
|
|
Accrued interest
|
|
|
3,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,385
|
|
Accrued taxes
|
|
|
|
|
|
|
56
|
|
|
|
345
|
|
|
|
(56
|
)
|
|
|
345
|
|
Other accrued expenses
|
|
|
1,804
|
|
|
|
1,870
|
|
|
|
292
|
|
|
|
13
|
|
|
|
3,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
7,690
|
|
|
|
14,221
|
|
|
|
10,026
|
|
|
|
(43
|
)
|
|
|
31,894
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
77,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,090
|
|
Deferred income taxes
|
|
|
2,508
|
|
|
|
|
|
|
|
365
|
|
|
|
|
|
|
|
2,873
|
|
Other
|
|
|
4,499
|
|
|
|
6,534
|
|
|
|
4,132
|
|
|
|
|
|
|
|
15,165
|
|
Inter-company advances, net
|
|
|
(50,064
|
)
|
|
|
42,346
|
|
|
|
7,919
|
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
34,033
|
|
|
|
48,880
|
|
|
|
12,416
|
|
|
|
(201
|
)
|
|
|
95,128
|
|
Shareholders equity
|
|
|
77,470
|
|
|
|
10,348
|
|
|
|
39,579
|
|
|
|
(49,927
|
)
|
|
|
77,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders
equity
|
|
$
|
119,193
|
|
|
$
|
73,449
|
|
|
$
|
62,021
|
|
|
$
|
(50,171
|
)
|
|
$
|
204,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
Supplemental Consolidating Condensed
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2010
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(dollars in thousands)
|
|
Net sales
|
|
$
|
|
|
|
$
|
49,183
|
|
|
$
|
22,951
|
|
|
$
|
(1,989
|
)
|
|
$
|
70,145
|
|
Cost of sales
|
|
|
|
|
|
|
32,283
|
|
|
|
18,549
|
|
|
|
(1,989
|
)
|
|
|
48,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
16,900
|
|
|
|
4,402
|
|
|
|
|
|
|
|
21,302
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, technical and administrative
expenses
|
|
|
|
|
|
|
7,043
|
|
|
|
1,663
|
|
|
|
|
|
|
|
8,706
|
|
Amortization of intangibles
|
|
|
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
|
|
|
7,181
|
|
|
|
1,663
|
|
|
|
|
|
|
|
8,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
|
|
9,719
|
|
|
|
2,739
|
|
|
|
|
|
|
|
12,458
|
|
Interest (expense) income, net
|
|
|
|
|
|
|
(1,395
|
)
|
|
|
102
|
|
|
|
|
|
|
|
(1,293
|
)
|
Income from equity investee
|
|
|
8,422
|
|
|
|
2,117
|
|
|
|
|
|
|
|
(10,539
|
)
|
|
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
1,820
|
|
|
|
102
|
|
|
|
|
|
|
|
1,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations,
before income taxes
|
|
|
8,422
|
|
|
|
12,261
|
|
|
|
2,943
|
|
|
|
(10,539
|
)
|
|
|
13,087
|
|
Income tax provision
|
|
|
|
|
|
|
3,829
|
|
|
|
826
|
|
|
|
|
|
|
|
4,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations,
after income taxes
|
|
|
8,422
|
|
|
|
8,432
|
|
|
|
2,117
|
|
|
|
(10,539
|
)
|
|
|
8,432
|
|
Income from discontinued operations,
after income taxes
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
8,422
|
|
|
$
|
8,422
|
|
|
$
|
2,117
|
|
|
$
|
(10,539
|
)
|
|
$
|
8,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Supplemental Consolidating Condensed
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2009
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(dollars in thousands)
|
|
Net sales
|
|
$
|
|
|
|
$
|
31,399
|
|
|
$
|
12,894
|
|
|
$
|
(841
|
)
|
|
$
|
43,452
|
|
Cost of sales
|
|
|
|
|
|
|
19,806
|
|
|
|
10,918
|
|
|
|
(841
|
)
|
|
|
29,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
11,593
|
|
|
|
1,976
|
|
|
|
|
|
|
|
13,569
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, technical and administrative
expenses
|
|
|
|
|
|
|
6,132
|
|
|
|
1,173
|
|
|
|
|
|
|
|
7,305
|
|
Amortization of intangibles
|
|
|
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
|
|
|
6,270
|
|
|
|
1,173
|
|
|
|
|
|
|
|
7,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
|
|
5,323
|
|
|
|
803
|
|
|
|
|
|
|
|
6,126
|
|
Interest (expense) income, net
|
|
|
|
|
|
|
(1,969
|
)
|
|
|
46
|
|
|
|
|
|
|
|
(1,923
|
)
|
Income from equity investee
|
|
|
3,770
|
|
|
|
491
|
|
|
|
|
|
|
|
(4,261
|
)
|
|
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
1,701
|
|
|
|
(118
|
)
|
|
|
|
|
|
|
1,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations,
before income taxes
|
|
|
3,770
|
|
|
|
5,546
|
|
|
|
731
|
|
|
|
(4,261
|
)
|
|
|
5,786
|
|
Income tax provision
|
|
|
|
|
|
|
1,763
|
|
|
|
240
|
|
|
|
|
|
|
|
2,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations, after income taxes
|
|
|
3,770
|
|
|
|
3,783
|
|
|
|
491
|
|
|
|
(4,261
|
)
|
|
|
3,783
|
|
Loss from discontinued operations,
after income tax benefit
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,770
|
|
|
$
|
3,770
|
|
|
$
|
491
|
|
|
$
|
(4,261
|
)
|
|
$
|
3,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
Supplemental Consolidating Condensed
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2010
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(dollars in thousands)
|
|
Net sales
|
|
$
|
|
|
|
$
|
127,272
|
|
|
$
|
62,706
|
|
|
$
|
(4,745
|
)
|
|
$
|
185,233
|
|
Cost of sales
|
|
|
|
|
|
|
81,545
|
|
|
|
49,536
|
|
|
|
(4,745
|
)
|
|
|
126,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
45,727
|
|
|
|
13,170
|
|
|
|
|
|
|
|
58,897
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, technical and
administrative
expenses
|
|
|
|
|
|
|
21,699
|
|
|
|
4,869
|
|
|
|
|
|
|
|
26,568
|
|
Amortization of intangibles
|
|
|
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
|
|
|
22,114
|
|
|
|
4,869
|
|
|
|
|
|
|
|
26,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
|
|
23,613
|
|
|
|
8,301
|
|
|
|
|
|
|
|
31,914
|
|
Interest (expense) income, net
|
|
|
|
|
|
|
(4,874
|
)
|
|
|
207
|
|
|
|
|
|
|
|
(4,667
|
)
|
Income from equity investee
|
|
|
17,698
|
|
|
|
5,483
|
|
|
|
|
|
|
|
(23,181
|
)
|
|
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
388
|
|
|
|
1
|
|
|
|
|
|
|
|
389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations,
before income taxes
|
|
|
17,698
|
|
|
|
24,610
|
|
|
|
8,509
|
|
|
|
(23,181
|
)
|
|
|
27,636
|
|
Income tax provision
|
|
|
|
|
|
|
6,891
|
|
|
|
3,026
|
|
|
|
|
|
|
|
9,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations,
after income taxes
|
|
|
17,698
|
|
|
|
17,719
|
|
|
|
5,483
|
|
|
|
(23,181
|
)
|
|
|
17,719
|
|
Loss from discontinued operations,
after income tax benefit
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
17,698
|
|
|
$
|
17,698
|
|
|
$
|
5,483
|
|
|
$
|
(23,181
|
)
|
|
$
|
17,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Supplemental Consolidating Condensed
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2009
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(dollars in thousands)
|
|
Net sales
|
|
$
|
|
|
|
$
|
92,558
|
|
|
$
|
36,423
|
|
|
$
|
(2,167
|
)
|
|
$
|
126,814
|
|
Cost of sales
|
|
|
|
|
|
|
60,998
|
|
|
|
34,025
|
|
|
|
(2,167
|
)
|
|
|
92,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
31,560
|
|
|
|
2,398
|
|
|
|
|
|
|
|
33,958
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, technical and
administrative
expenses
|
|
|
|
|
|
|
18,258
|
|
|
|
3,506
|
|
|
|
|
|
|
|
21,764
|
|
Amortization of intangibles
|
|
|
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
|
|
|
18,673
|
|
|
|
3,506
|
|
|
|
|
|
|
|
22,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
|
|
|
|
12,887
|
|
|
|
(1,108
|
)
|
|
|
|
|
|
|
11,779
|
|
Interest (expense) income, net
|
|
|
|
|
|
|
(5,884
|
)
|
|
|
200
|
|
|
|
|
|
|
|
(5,684
|
)
|
Income (loss) from equity investee
|
|
|
4,808
|
|
|
|
(1,389
|
)
|
|
|
|
|
|
|
(3,419
|
)
|
|
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
2,039
|
|
|
|
(333
|
)
|
|
|
|
|
|
|
1,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations,
before income taxes
|
|
|
4,808
|
|
|
|
7,653
|
|
|
|
(1,241
|
)
|
|
|
(3,419
|
)
|
|
|
7,801
|
|
Income tax provision (benefit)
|
|
|
|
|
|
|
2,658
|
|
|
|
148
|
|
|
|
|
|
|
|
2,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations, after income taxes
|
|
|
4,808
|
|
|
|
4,995
|
|
|
|
(1,389
|
)
|
|
|
(3,419
|
)
|
|
|
4,995
|
|
Loss from discontinued operations, after
income tax benefit
|
|
|
|
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,808
|
|
|
$
|
4,808
|
|
|
$
|
(1,389
|
)
|
|
$
|
(3,419
|
)
|
|
$
|
4,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Supplemental Consolidating Condensed
Cash Flows Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(dollars in thousands)
|
|
Net cash provided by operating
activities of continuing operations
|
|
$
|
13,376
|
|
|
$
|
1,941
|
|
|
$
|
7,643
|
|
|
$
|
|
|
|
$
|
22,960
|
|
Net cash used in operating
activities of discontinued operations
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of available for sale securities
|
|
|
(103,466
|
)
|
|
|
|
|
|
|
(5,270
|
)
|
|
|
|
|
|
|
(108,736
|
)
|
Proceeds from available for sale
securities
|
|
|
118,499
|
|
|
|
|
|
|
|
953
|
|
|
|
|
|
|
|
119,452
|
|
Purchases of property, plant and
equipment
|
|
|
|
|
|
|
(1,929
|
)
|
|
|
(1,892
|
)
|
|
|
|
|
|
|
(3,821
|
)
|
Proceeds from sales of property, plant
and equipment
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Acquisition of business
|
|
|
|
|
|
|
|
|
|
|
(447
|
)
|
|
|
|
|
|
|
(447
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing
activities of continuing operations
|
|
|
15,033
|
|
|
|
(1,929
|
)
|
|
|
(6,655
|
)
|
|
|
|
|
|
|
6,449
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on long-term debt
|
|
|
(20,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,000
|
)
|
Proceeds from stock options
|
|
|
432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
432
|
|
Stock repurchase
|
|
|
(7,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,247
|
)
|
Payment of consent fee for senior
notes indenture modification
|
|
|
(1,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,512
|
)
|
Tax benefit from exercise of incentive
stock options
|
|
|
664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
664
|
|
Payments of preferred stock dividend
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing
activities of continuing operations
|
|
|
(27,775
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,775
|
)
|
Effect of exchange rate changes on cash
|
|
|
|
|
|
|
|
|
|
|
(974
|
)
|
|
|
|
|
|
|
(974
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing
operations
|
|
|
634
|
|
|
|
12
|
|
|
|
14
|
|
|
|
|
|
|
|
660
|
|
Net cash used by discontinued
operations
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
|
634
|
|
|
|
(9
|
)
|
|
|
14
|
|
|
|
|
|
|
|
639
|
|
Cash and cash equivalents at beginning of
period
|
|
|
24,182
|
|
|
|
11
|
|
|
|
23,013
|
|
|
|
|
|
|
|
47,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
24,816
|
|
|
$
|
2
|
|
|
$
|
23,027
|
|
|
$
|
|
|
|
$
|
47,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Supplemental Consolidating Condensed
Cash Flows Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net cash (used in) provided by operating
activities of continuing operations
|
|
$
|
159
|
|
|
$
|
6,093
|
|
|
$
|
3,913
|
|
|
$
|
|
|
|
$
|
10,165
|
|
Net cash used in operating
activities of discontinued operations
|
|
|
|
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
(187
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of available for sale securities
|
|
|
(108,880
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(108,880
|
)
|
Proceeds from available for sale
securities
|
|
|
106,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,000
|
|
Purchases of property, plant and
equipment
|
|
|
|
|
|
|
(6,152
|
)
|
|
|
(796
|
)
|
|
|
|
|
|
|
(6,948
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities of continuing operations
|
|
|
(2,880
|
)
|
|
|
(6,152
|
)
|
|
|
(796
|
)
|
|
|
|
|
|
|
(9,828
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from stock options
|
|
|
429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
429
|
|
Stock repurchase
|
|
|
(11,245
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,245
|
)
|
Receipts from government grants
|
|
|
|
|
|
|
225
|
|
|
|
|
|
|
|
|
|
|
|
225
|
|
Payments of deferred financing fees
|
|
|
(340
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(340
|
)
|
Payments of preferred stock dividend
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing
activities of continuing operations
|
|
|
(11,268
|
)
|
|
|
225
|
|
|
|
|
|
|
|
|
|
|
|
(11,043
|
)
|
Effect of exchange rate changes on cash
|
|
|
|
|
|
|
|
|
|
|
723
|
|
|
|
|
|
|
|
723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by continuing
operations
|
|
|
(13,989
|
)
|
|
|
166
|
|
|
|
3,840
|
|
|
|
|
|
|
|
(9,983
|
)
|
Net cash used in discontinued
operations
|
|
|
|
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash
equivalents
|
|
|
(13,989
|
)
|
|
|
(21
|
)
|
|
|
3,840
|
|
|
|
|
|
|
|
(10,170
|
)
|
Cash and cash equivalents at beginning of
period
|
|
|
45,241
|
|
|
|
32
|
|
|
|
17,247
|
|
|
|
|
|
|
|
62,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
31,252
|
|
|
$
|
11
|
|
|
$
|
21,087
|
|
|
$
|
|
|
|
$
|
52,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
ITEM 2.
|
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS
|
You should read this discussion in conjunction with the consolidated financial statements,
notes and tables included in Part I, Item 1 of this Form 10-Q. Statements that are not historical
facts, including statements about our confidence in our prospects and strategies and our
expectations about growth of existing markets and our ability to expand into new markets, to
identify and acquire complementary businesses and to attract new sources of financing, are
forward-looking statements that involve risks and uncertainties. In addition to statements that
are forward-looking by reason of context, the words believe, expect, anticipate, intend,
designed, goal, objective, optimistic, will and other similar expressions identify
forward-looking statements. In light of the risks and uncertainties inherent in all future
projections, the inclusion of the forward-looking statements should not be regarded as a guarantee
of performance. Although we believe that our plans, objectives, intentions and expenditures
reflected in our forward-looking statements are reasonable, we can give no assurance that our
plans, objectives, intentions and expectations will be achieved. Our forward-looking statements
are made based on expectations and beliefs concerning future events affecting us and are subject to
uncertainties, risks and factors relating to our operations and business environments, all of which
are difficult to predict and many of which are beyond our control, that could cause our actual
results to differ materially from those matters expressed or implied by our forward-looking
statements.
When considering these risk factors, you should keep in mind the cautionary statements
elsewhere in this report and the documents incorporated by reference. New risks and uncertainties
arise from time to time, and we cannot predict those events or how they may affect us. We assume
no obligation to update any forward-looking statements or risk factor after the date of this report
as a result of new information, future events or developments, except as required by the federal
securities law.
Unless otherwise stated, all forward-looking information contained in this Managements
Discussion and Analysis of Financial Position and Results of Operations does not take into account
or give any effect to the impact of our potential merger with Carlisle.
Recent Event
|
|
|
On October 14, 2010, we entered into the Merger Agreement with Carlisle and the
Purchaser. Under the terms of the Merger Agreement, Carlisle commenced a tender offer to
purchase all of the outstanding shares of our Class A common stock at a price of $50.00 per
share, net to the seller in cash, without interest, less any
applicable withholding taxes upon the terms and subject to the
conditions set forth in the Offer to Purchase dated November 1, 2010, and in the related
Letter of Transmittal, each of which was filed with the SEC on November 1, 2010. The Merger
Agreement provides, among other things, that following the consummation of the Offer and
subject to the satisfaction and waiver of the conditions set forth in the Merger Agreement
and in accordance with the relevant provisions of the Delaware General Corporate Law and
other applicable law, the Purchaser will merge with and into Hawk, with Hawk being the
surviving corporation.
|
|
|
|
We expect the Offer and the Merger to be completed during the fourth calendar quarter of
2010. The consummation of the Offer and Merger are subject to various closing conditions,
including the tender of a majority of the shares of our Class A common stock, the expiration
of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and other customary conditions. The Offer is not subject to a financing
condition.
|
Friction Products Information
Through our various subsidiaries, we operate in one reportable segment: friction products. Our
results of operations are affected by a variety of factors, including but not limited to, global
economic conditions, manufacturing efficiency, customer demand for our products, competition, raw
material pricing and availability, our ability to pass increases in raw material prices through to
our customers, labor relations with our employees and political conditions in the countries in
which we operate. We sell a wide range of products that have a correspondingly wide range of gross
margins. Our consolidated gross margin is affected by product mix, selling prices, material and
labor costs, as well as our ability to absorb overhead costs resulting from fluctuations in demand
for our products.
27
We believe that, based on net sales, we are one of the top worldwide manufacturers of friction
products used in off-highway, on-highway, industrial, agricultural, performance and aircraft
applications. Our friction products business manufactures parts and components made from
proprietary formulations of composite materials, primarily consisting of metal powders and
synthetic and natural fibers. Friction products are used in brakes, clutches and transmissions to
absorb vehicular energy and dissipate it through heat and normal mechanical wear. Our friction
products include parts for brakes, clutches and transmissions used in construction and mining
vehicles, agricultural vehicles, military vehicles, trucks, motorcycles and race cars, and brake
parts for landing systems used in commercial and general aviation. We believe we are:
|
|
|
a leading domestic and international supplier of brake and clutch friction materials
for construction and mining equipment, agricultural equipment and trucks,
|
|
|
|
the leading North American independent supplier of metallic friction materials for
braking systems for new and existing series of many commercial and military aircraft
models, including Boeing, EADS, Lockheed and United Technologies, as well as the Canadair
regional jet series,
|
|
|
|
the largest supplier of metallic friction materials for the general aviation market,
including numerous new and existing series of Cessna, Hawker, Lear and Pilatus aircrafts,
and
|
|
|
|
a leading domestic supplier of friction materials into performance, defense and
specialty markets such as military vehicles, motorcycles, race cars, performance
automobiles, and ATVs.
|
In our fuel cell component business we believe we are:
|
|
|
a leading supplier of critical stack components used in the manufacture of phosphoric
acid fuel cells. The fuel cells which use our stack components have a major presence in
the on-site stationary fuel cell market.
|
Critical Accounting Policies
The following discussion of our financial position and results of operations is based on the
consolidated financial statements included in this Form 10-Q, which have been prepared in
accordance with U.S. generally accepted accounting principles. Some of our accounting policies
require the application of significant judgment by us in the preparation of our consolidated
financial statements. In applying these policies, we use our best judgment to determine the
underlying assumptions that are used in calculating the estimates that affect the reported values
on our financial statements. On an ongoing basis, we evaluate our estimates and judgments based on
historical experience and various other factors that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under different assumptions or
conditions.
We review our financial reporting and disclosure practices and accounting policies quarterly
to ensure that they provide accurate and transparent information relative to the current economic
and business environment. We base our estimates and assumptions on historical experience and other
factors that we consider relevant. If these estimates differ materially from actual results, the
impact on our consolidated financial statements may be material. However, historically our
estimates have not been materially different from actual results. During the third quarter of
2010, there have been no significant changes to the critical accounting policies that we disclosed
in Managements Discussion and Analysis of Financial Position and Results of Operations on our 2009
Form 10-K filed with the Securities and Exchange Commission (SEC) on March 10, 2010.
Recent Accounting Pronouncements
There were no new significant accounting updates or guidance that became effective for us
commencing with our third quarter of 2010. We do not believe that any recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material effect on the
accompanying financial statements.
However, during the third quarter of 2010, the Financial Accounting Standards Board (FASB)
issued certain proposed Accounting Standards Updates (ASU) that we anticipate will have an impact
on our future financial position, results of operations, cash flows and disclosures, the most
significant of which is the FASBs August 17, 2010 exposure draft on lease accounting. For
operating lessees like us, the proposal effectively eliminates off-balance sheet accounting for all
leases. The exposure draft eliminates the concepts of capital and operating leases in current
standards and would require all leased assets and lease obligations to be recognized in financial
statements. Expense recognition will be accelerated because straight-line rent expense will be
replaced by amortization and interest expense. Comments on the proposed standard are due by
December 15, 2010, and there is currently no specified effective date for the proposal. We are
currently in the process of identifying the anticipated impact of this proposed ASU on our future
financial position, results of operations, cash flows and disclosures.
28
The FASB also issued a revised exposure draft on loss contingency disclosures with a focus on
providing financial statement users with factual information about loss contingencies. The
proposal would (1) expand the scope of loss contingencies subject to disclosure to include certain
remote contingencies; (2) increase the quantitative and qualitative disclosures entities must
provide to enable users to assess the nature, potential magnitude and potential timing (if known)
of loss contingencies; and (3) for public entities, require a tabular reconciliation for changes in
amounts recognized for loss contingencies. Comments on the proposed ASU were due by September 20,
2010, and there is currently no specified effective date for the proposal. We are currently in the
process of determining the anticipated impact of this proposed standard on our future disclosures.
Third Quarter of 2010 Compared to the Third Quarter of 2009
The following tables show our net sales by principal market and geographic location for the
three months ended September 30, 2010 and 2009:
Sales by Principal Markets
Three Months Ended September 30
|
|
|
|
|
|
|
|
|
|
|
% of Sales
|
|
Market
|
|
2010
|
|
|
2009
|
|
Construction and Mining
|
|
|
50.4
|
%
|
|
|
34.1
|
%
|
Aircraft and Defense
|
|
|
16.6
|
%
|
|
|
28.5
|
%
|
Agriculture
|
|
|
11.1
|
%
|
|
|
14.5
|
%
|
Truck
|
|
|
8.4
|
%
|
|
|
9.7
|
%
|
Performance Friction
|
|
|
5.1
|
%
|
|
|
7.6
|
%
|
Specialty Friction
|
|
|
4.5
|
%
|
|
|
3.4
|
%
|
Alternative Energy
|
|
|
3.9
|
%
|
|
|
2.2
|
%
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
Sales by Geographic Location of our Manufacturing Facilities
Three Months Ended September 30
|
|
|
|
|
|
|
|
|
|
|
% of Sales
|
|
Location
|
|
2010
|
|
|
2009
|
|
United States
|
|
|
71.8
|
%
|
|
|
73.3
|
%
|
Italy
|
|
|
22.5
|
%
|
|
|
22.4
|
%
|
Other foreign
|
|
|
5.7
|
%
|
|
|
4.3
|
%
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
29
The following table summarizes our results of operations for the three months ended September
30, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
2010
|
|
|
Sales
|
|
|
2009
|
|
|
Sales
|
|
|
|
(dollars in millions)
|
|
Net sales
|
|
$
|
70.1
|
|
|
|
100.0
|
%
|
|
$
|
43.5
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
$
|
48.8
|
|
|
|
69.6
|
%
|
|
$
|
29.9
|
|
|
|
68.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
21.3
|
|
|
|
30.4
|
%
|
|
$
|
13.6
|
|
|
|
31.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, technical and administrative expenses
|
|
$
|
8.7
|
|
|
|
12.4
|
%
|
|
$
|
7.3
|
|
|
|
16.8
|
%
|
Income from operations
|
|
$
|
12.5
|
|
|
|
17.8
|
%
|
|
$
|
6.1
|
|
|
|
14.0
|
%
|
Interest expense
|
|
$
|
(1.4
|
)
|
|
|
-2.0
|
%
|
|
$
|
(2.0
|
)
|
|
|
-4.6
|
%
|
Interest income
|
|
$
|
0.1
|
|
|
|
0.1
|
%
|
|
$
|
0.1
|
|
|
|
0.2
|
%
|
Other income (expense), net
|
|
$
|
1.9
|
|
|
|
2.7
|
%
|
|
$
|
1.6
|
|
|
|
3.7
|
%
|
Income tax provision
|
|
$
|
4.7
|
|
|
|
6.7
|
%
|
|
$
|
2.0
|
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, after income taxes
|
|
$
|
8.4
|
|
|
|
12.0
|
%
|
|
$
|
3.8
|
|
|
|
8.7
|
%
|
Discontinued operations, net of tax
|
|
$
|
|
|
|
|
0.0
|
%
|
|
$
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
8.4
|
|
|
|
12.0
|
%
|
|
$
|
3.8
|
|
|
|
8.7
|
%
|
Net Sales.
Our net sales for the third quarter of 2010 were $70.1 million, an increase of
$26.6 million, or 61.1%, from the same period in 2009. Sales increases during the period resulted
primarily from volume increases to customers in our construction and mining and truck end-markets
and new product introductions. Of our total sales increase of 61.1% in the third quarter of 2010,
volume represented approximately 65.7 of the total percentage point increase. Offsetting the
favorable impact of volume, foreign exchange and pricing negatively impacted the total sales
increase by approximately 3.1 and 1.5 percentage points, respectively.
Our sales to the construction and mining market, our largest, were up 138.9% in the third
quarter of 2010 compared to the third quarter of 2009, as a result of increased activity primarily
in the mining market as customers experienced business expansion. Sales to our agriculture market
were up 22.9% in the third quarter of 2010 compared to the third quarter of 2009, primarily as a
result of improved market conditions, especially in Europe. Sales to our truck market increased
39.7% in the third quarter of 2010 compared to the third quarter of 2009, due to increased freight
volumes being shipped with existing vehicles and the impact of new truck builds. Sales in our
friction direct aftermarket that we service through our VelveTouch
®
and Hawk
Performance
®
brand names increased 16.9% in the third quarter of 2010 compared to the
third quarter of 2009. Although a small percentage of our total net sales, sales to the
alternative energy market were up 187.3% in the third quarter of 2010 compared to the third quarter
of 2009 as shipments of units in this product line continued to increase. Our aircraft and defense
markets were down 5.9% in the third quarter of 2010 compared to the third quarter of 2009, as one
of our primary defense customers realigned its inventory purchase levels with its current stock
position, partially offset by an increase in our aircraft market.
Net sales from our foreign facilities represented 28.2% of our total net sales in the third
quarter of 2010 compared to 26.7% for the comparable period of 2009. The increase in our foreign
facility revenues as a percent of total revenues was due primarily to the improvements in the end
markets that we serve in Europe and Asia. Sales at our Italian operation, on a local currency
basis, were up 80.3% in the third quarter of 2010 compared to the third quarter of 2009, and sales
at our Chinese operation, on a local currency basis, were up 139.2% in the third quarter of 2010,
primarily due to improvements in the construction and agriculture markets served by those
facilities.
Cost of Sales.
Cost of sales was $48.8 million in the third quarter of 2010, an increase of
$18.9 million, or 63.2%, compared to cost of sales of $29.9 million in the third quarter of 2009.
As a percent of sales, our cost of sales represented 69.6% of our net sales in the third quarter of
2010 compared to 68.7% of net sales in the third quarter of 2009. The increase in our cost of
sales percentage was driven primarily by a less favorable product mix and increased labor costs
compared to the third quarter of 2009. Of our total cost of sales increase of 63.2% in 2010, the
impact of our increased sales volumes represented 60.3 percentage points and the unfavorable shift
in product mix represented 16.3 percentage points. Offsetting these increases, our higher
absorption of manufacturing overhead and overall cost improvements and the effect of foreign
exchange favorably impacted the total cost of sales increase by 9.8 and 3.6 percentage points,
respectively.
30
Selling, Technical and Administrative Expenses.
Selling, technical and administrative (ST&A)
expenses increased $1.4 million, or 19.2%, to $8.7 million in the third quarter of 2010 from $7.3
million during the third quarter of 2009. As a percentage of net sales, ST&A was 12.4% in the
third quarter of 2010 compared to 16.8% in the third quarter of 2009 as we continued our successful
efforts to control discretionary spending, which has not increased at a rate proportional to our
rapid sales volume increase. During the third quarter of 2010, we incurred $0.7 million of costs
related to our pursuit of strategic alternatives, including our proposed merger transaction, with
no comparable costs in 2009, representing 10.1 percentage points of the total increase. Wages and
benefits have increased approximately $0.4 million, or 5.3 percentage points, resulting primarily
from the impact of 2010 salary increases and the reinstitution of our defined contribution plan
company match (which had been suspended from the third quarter of 2009 through the first quarter of
2010) and accruals for our anticipated 2010 profit sharing contribution into our defined
contribution plan ($0 in 2009). Incentive compensation expense was $1.0 million in the third
quarter of 2010 compared to $0.7 million in the third quarter of 2009, an increase of $0.3 million
representing 4.3 percentage points of the total increase.
We spent $1.3 million, or 1.9% of our net sales, on product research and development in the
third quarter of 2010, compared to $1.2 million or 2.8%, of our net sales for the third quarter of
2009.
Interest Expense.
Interest expense decreased to $1.4 million in the third quarter of 2010
from $2.0 million in the third quarter of 2009 due to our aggregate purchases of $30.0 million of
our senior notes on the open market between November 2009 and May 2010, which reduced our fixed
interest expenses for 2010 as compared to 2009. These repurchased notes are being held by us in
treasury. We did not have any borrowings under our variable rate domestic or Italian bank
facilities in the third quarters of 2010 or 2009. Included as a component of Interest expense in
our Consolidated Statements of Operations is the amortization of deferred financing costs for both
2010 and 2009 and the amortization of a consent payment related to our senior notes amendment in
February 2010 for the three months ended September 30, 2010.
Interest Income
. We invested our excess cash in various short-term interest bearing
investments. Interest income was $0.1 million in the third quarter of both 2010 and 2009.
Other Income (Expense), Net
. We reported other income of $1.9 million in the third quarter of
2010 compared to $1.6 million of income in the third quarter of 2009. The components of Other
income (expense), net for the three months ended September 30, 2010 and 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(dollars in millions)
|
|
Components of Other income (expense), net
|
|
|
|
|
|
|
|
|
Net realized and unrealized trading gains
|
|
$
|
0.4
|
|
|
$
|
0.2
|
|
Foreign currency transaction gains
(losses)
|
|
|
0.1
|
|
|
|
(0.1
|
)
|
Joint project cancellation payment
|
|
|
1.5
|
|
|
|
1.5
|
|
Other
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Other income (expense), net
|
|
$
|
1.9
|
|
|
$
|
1.6
|
|
|
|
|
|
|
|
|
Income Taxes.
We recorded a tax provision from our continuing operations of $4.7 million for
the quarter ended September 30, 2010, compared to a tax provision of $2.0 million in the third
quarter of 2009. Our effective rate of 35.6% in the third quarter of 2010 differs from the current
U.S. statutory rate of 35.0% primarily as a result of the impact of non-deductible expenses on our
worldwide taxes.
31
First Nine Months of 2010 Compared to the First Nine Months of 2009
The following tables show our net sales by market segment and geographic location for the nine
months ended September 30, 2010 and 2009:
Sales by Principal Market
Nine Months Ended September 30
|
|
|
|
|
|
|
|
|
|
|
% of Sales
|
|
Market
|
|
2010
|
|
|
2009
|
|
Construction and Mining
|
|
|
48.3
|
%
|
|
|
34.5
|
%
|
Aircraft and Defense
|
|
|
16.6
|
%
|
|
|
28.5
|
%
|
Agriculture
|
|
|
12.9
|
%
|
|
|
14.6
|
%
|
Truck
|
|
|
9.0
|
%
|
|
|
9.5
|
%
|
Performance Friction
|
|
|
5.7
|
%
|
|
|
7.4
|
%
|
Specialty Friction
|
|
|
4.0
|
%
|
|
|
4.0
|
%
|
Alternative Energy
|
|
|
3.5
|
%
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
Sales by Geographic Location of our Manufacturing Facilities
Nine Months Ended September 30
|
|
|
|
|
|
|
|
|
|
|
% of Sales
|
|
Location
|
|
2010
|
|
|
2009
|
|
United States
|
|
|
70.1
|
%
|
|
|
73.5
|
%
|
Italy
|
|
|
24.5
|
%
|
|
|
22.3
|
%
|
Other foreign
|
|
|
5.4
|
%
|
|
|
4.2
|
%
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
The following table summarizes our results of operations for the nine months ended September
30, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
2010
|
|
|
Sales
|
|
|
2009
|
|
|
Sales
|
|
|
|
(dollars in millions)
|
|
Net sales
|
|
$
|
185.2
|
|
|
|
100.0
|
%
|
|
$
|
126.8
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
$
|
126.3
|
|
|
|
68.2
|
%
|
|
$
|
92.9
|
|
|
|
73.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
58.9
|
|
|
|
31.8
|
%
|
|
$
|
34.0
|
|
|
|
26.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, technical and administrative expenses
|
|
$
|
26.6
|
|
|
|
14.4
|
%
|
|
$
|
21.8
|
|
|
|
17.2
|
%
|
Income from operations
|
|
$
|
31.9
|
|
|
|
17.2
|
%
|
|
$
|
11.8
|
|
|
|
9.3
|
%
|
Interest expense
|
|
$
|
(4.9
|
)
|
|
|
-2.6
|
%
|
|
$
|
(6.1
|
)
|
|
|
-4.8
|
%
|
Interest income
|
|
$
|
0.3
|
|
|
|
0.2
|
%
|
|
$
|
0.4
|
|
|
|
0.3
|
%
|
Other income (expense), net
|
|
$
|
0.4
|
|
|
|
0.2
|
%
|
|
$
|
1.7
|
|
|
|
1.3
|
%
|
Income tax provision
|
|
$
|
9.9
|
|
|
|
5.3
|
%
|
|
$
|
2.8
|
|
|
|
2.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, after
income taxes
|
|
$
|
17.7
|
|
|
|
9.6
|
%
|
|
$
|
5.0
|
|
|
|
3.9
|
%
|
Discontinued operations, net of tax
|
|
$
|
|
|
|
|
0.0
|
%
|
|
$
|
(0.2
|
)
|
|
|
-0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
17.7
|
|
|
|
9.6
|
%
|
|
$
|
4.8
|
|
|
|
3.8
|
%
|
32
Net Sales.
Our net sales for the first nine months of 2010 were $185.2 million, an increase
of $58.4 million or 46.1% from the same period in 2009. Sales increases during the period resulted
primarily from the overall economic improvement in most of our end-markets as customers started the
reordering process and shipments increased in response to increasing orders and production. Of our
total sales increase of 46.1% in the first nine months of 2010, volume represented approximately
50.7 of the total percentage point increase, and pricing decreases and the impact of foreign
exchange accounted for a reduction of approximately 2.4 and 2.2 to the total percentage point
change, respectively.
Our sales to the construction and mining market, our largest, were up 104.2% in the first nine
months of 2010 compared to 2009, primarily as a result of inventory replenishment through the first
six months of 2010, and new product introductions and an expansion of business activity throughout
the entire nine month period. Sales to our agriculture market were up 29.3% in the first nine
months of 2010 compared to 2009, primarily as a result of improved market conditions, especially in
Europe. Sales to our heavy truck market increased 37.6% during the first nine months of 2010
compared to the first nine months of 2009, due to increased freight volumes being shipped with
existing vehicles and new truck builds. Sales in our friction direct aftermarket that we service
through our VelveTouch
®
and Hawk Performance
®
brand names increased 13.8% in the first nine months
of 2010 compared to the first nine months of 2009. Although a small percentage of our total net
sales, sales to the alternative energy market were up 264.5% in the first nine months of 2010
compared to the first nine months of 2009 as shipments of units in this product line continued to
increase. Our aggregate aircraft and defense markets were down 14.9% in the first nine months of
2010 compared to the first nine months of 2009 as one of our primary defense customers realigned
its inventory purchase levels with its current stock position, partially offset by an increase in
aircraft demand.
Net sales from our foreign facilities represented 29.9% of our total net sales in the first
nine months of 2010 compared to 26.5% for the comparable period of 2009. The increase in our
foreign facility revenues as a percent of total revenue was due primarily to improvements in the
end markets that we serve in Europe and Asia. Sales at our Italian operation, on a local currency
basis, were up 67.1% in the first nine months of 2010, compared to the first nine months of 2009,
and sales at our Chinese operation, on a local currency basis, were up 132.9% during the same
period, primarily due to improvements in the construction and agriculture markets served by those
facilities.
Cost of Sales.
Cost of sales was $126.3 million during the first nine months of 2010, an
increase of $33.4 million, or 36.0%, compared to cost of sales of $92.9 million in the first nine
months of 2009. As a percent of sales, our cost of sales represented 68.2% of our net sales in the
first nine months of 2010 compared to 73.3% of net sales in the comparable period of 2009. The
improvement in our cost of sales percentage was driven by primarily by the positive impact that
higher production volumes had on our absorption of manufacturing costs, and by overall cost
improvements, offset somewhat by a less favorable product mix than in 2009 and increased labor
costs. Of our total cost of sales increase of 36.0% in 2010, increased sales and production
volumes represented 43.2 percentage points and an unfavorable shift in product mix represented 13.7
percentage points. Offsetting these components, our higher absorption of manufacturing overhead
and overall cost improvements and the effect of foreign exchange favorably impacted the total cost
of sales increase by 18.8 and 2.1 percentage points, respectively.
Selling, Technical and Administrative Expenses.
ST&A expenses increased $4.8 million, or
22.0%, to $26.6 million in 2010 from $21.8 million during 2009. As a percentage of net sales, ST&A
was 14.4% in 2010 compared to 17.2% in 2009 as we continued our successful efforts to control
discretionary spending, which has not increased at a rate proportional to our rapid sales volume
increase. During the first nine months of 2010, we incurred $0.9 million of costs related to our
pursuit of strategic alternatives, including our proposed merger transaction, with no comparable
costs in 2009. In addition, incentive compensation expense was $5.0 million in 2010 compared to
$1.3 million in 2009, an increase of $3.7 million representing 17.3 percentage points of the total
increase.
We spent $3.7 million and $3.6 million on product research and development in the first nine
months of 2010 and 2009, or 2.0% and 2.8% of our net sales, respectively.
Interest Expense.
Interest expense decreased to $4.9 million in the first nine months of 2010
compared to $6.1 million in the first nine months of 2009 due to our purchase of an aggregate of
$30.0 million of our senior notes in the open market between November 2009 and May 2010, which
reduced our fixed interest expense for 2010 as compared to 2009. These notes are being held by us
in treasury. We did not have any borrowings under our variable rate domestic or Italian bank
facilities in the first nine months of 2010 or 2009. Included as a component of Interest expense
in our Consolidated Statements of Operations is the amortization of deferred financing fees for
both 2010 and 2009 and the amortization of a consent payment related to our senior notes amendment
in February 2010 for the nine month period ended September 30, 2010.
33
Interest Income.
We invested our excess cash in various short-term interest bearing
investments. Interest income was $0.3 million in the first nine months of 2010 compared to $0.4
million during the first nine months of 2009. The decrease was the result of lower invested cash
balances during the period ended September 30, 2010 compared to the nine months ended September 30,
2009. Effective interest rates remain at historically low levels in all periods presented.
Other Income (Expense), Net
. We reported other income of $0.4 million in the first nine
months of 2010 compared to $1.7 million of income in the first nine months of 2009. The components
of Other income (expense), net for the nine months ended September 30, 2010 and 2009 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(dollars in millions)
|
|
Components of Other income (expense), net
|
|
|
|
|
|
|
|
|
Net realized and unrealized trading gains
|
|
$
|
0.2
|
|
|
$
|
0.5
|
|
Foreign currency transaction losses
|
|
|
|
|
|
|
(0.3
|
)
|
Senior notes consent solicitation third-party expenses
|
|
|
(0.6
|
)
|
|
|
|
|
Write off of deferred financing fees and consent
payment
|
|
|
(0.7
|
)
|
|
|
|
|
Joint project cancellation payment
|
|
|
1.5
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
Total Other income (expense), net
|
|
$
|
0.4
|
|
|
$
|
1.7
|
|
|
|
|
|
|
|
|
Income Taxes.
We recorded a tax provision from our continuing operations of $9.9 million for
the nine months ended September 30, 2010, compared to a tax provision of $2.8 million in the
comparable period of 2009. Our effective rate of 36.2% in the nine months ended September 30, 2010
differs from the current U.S. statutory rate of 35.0% primarily as a result of the impact of
non-deductible expenses on our worldwide taxes. Our worldwide provision for income taxes is based
on annual tax rates for the year applied to all sources of income.
Discontinued Operations.
The loss from discontinued operations, after income taxes of $0.2
million for the nine months ended September 30, 2009 consists primarily of adjustments to amounts
previously reported in discontinued operations and related legal and professional expenses.
Liquidity, Capital Resources and Cash Flows
Our primary liquidity requirements are for capital expenditures, for funding our day-to-day
working capital requirements and to pay interest on our indebtedness. Our access to capital
resources that provide liquidity has not been affected by the recent volatility in the global
credit markets. We are not aware of any material trend, event or capital commitment which would
potentially adversely affect our liquidity. To date, we have not been materially adversely
affected by customer, supplier or subcontractor credit problems or bankruptcies. We continue to
monitor and take measures to limit our credit exposure. Based on current business operations and
economic conditions, we believe that our net cash and short-term investment position, coupled with
our availability under our bank facilities and factoring programs, will continue to be sufficient
to support our operations and internal growth needs, to pay interest on our indebtedness and to
fund anticipated capital expenditures in the near-term.
34
The following selected measures of liquidity, capital resources and cash flows outline various
metrics that are reviewed by our management and are provided to our shareholders to enhance the
understanding of our business:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
|
|
(dollars in millions)
|
|
LIQUIDITY
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
47.8
|
|
|
$
|
47.2
|
|
Short-term investments
|
|
$
|
25.4
|
|
|
$
|
35.9
|
|
Working capital
(1)
|
|
$
|
103.7
|
|
|
$
|
113.3
|
|
Current ratio
(2)
|
|
2.9 to 1.0
|
|
|
|
4.6 to 1.0
|
|
Net debt as a % of capitalization
(3) (4)
|
|
|
N/A
|
|
|
|
N/A
|
|
Average number of days sales in accounts receivable
|
|
67 days
|
|
|
58 days
|
|
Average number of days sales in inventory
|
|
88 days
|
|
|
80 days
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(dollars in millions)
|
|
CASH FLOWS
|
|
|
|
|
|
|
|
|
Cash provided by operating activities of continuing operations
|
|
$
|
23.0
|
|
|
$
|
10.1
|
|
Cash provided by (used in) investing activities of continuing
operations
|
|
|
6.4
|
|
|
|
(9.8
|
)
|
Cash used in financing activities of continuing operations
|
|
|
(27.8
|
)
|
|
|
(11.0
|
)
|
Effect of exchange rates on cash
|
|
|
(1.0
|
)
|
|
|
0.7
|
|
Cash (used in) provided by discontinued operations
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
0.6
|
|
|
$
|
(10.2
|
)
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Working capital is defined as total current assets minus total current
liabilities.
|
|
(2)
|
|
Current ratio is defined as total current assets divided by total current
liabilities.
|
|
(3)
|
|
Net debt is defined as gross long-term debt, including current portion, and
short-term borrowings, less cash and short-term investments. Capitalization is defined
as net debt plus shareholders equity.
|
|
(4)
|
|
We have zero net debt at September 30, 2010 and December 31, 2009 because our
cash, cash equivalents and short-term investments were $16.2 million and $6.0 million
greater than gross total debt, respectively.
|
Cash and cash equivalents increased $0.6 million to $47.8 million as of September 30, 2010,
from $47.2 million at December 31, 2009. Short-term investments decreased $10.5 million at
September 30, 2010 from the December 31, 2009 balance. The primary drivers of the combined
decrease in aggregate cash and equivalents and short-term investments in 2010 was our purchase of
$20.0 million of our senior notes in open market transactions in May of 2010 and our repurchase of
$7.2 million of our common stock in the nine month period ended September 30, 2010, which decreases
were offset in part by our positive cash generated by our operating activities.
In assessing liquidity, we review certain working capital measurements. At September 30,
2010, our working capital was $103.7 million, a decrease of $9.6 million from December 31, 2009.
The decrease in working capital in 2010 was primarily due to a decrease in our overall cash and
equivalents and short-term investments position experienced during the period for the reasons noted
in the prior paragraph. Our accounts receivable and inventory levels are evaluated through the
computation of days sales outstanding and inventory turnover. Days sales in accounts receivable
was 67 days at September 30, 2010, compared to 58 days at December 31, 2009, primarily due to our
overall increase in sales volumes in 2010 compared to the fourth quarter of 2009, including
increases at our Italian facility, which extends longer credit terms to its customers, which is
customary in the European market. We have not experienced any significant change in accounts
receivable collectability, and continue to monitor the financial condition of our major customers.
As part of our working capital management in an effort to accelerate our cash flows and reduce our
credit exposure to certain customers, we sell certain trade accounts receivable to third party
financial institutions on a non-recourse basis pursuant to factoring agreements. The amount sold
varies each month based on the amount of underlying receivables and the cash flow needs of the
Company.
Days sales in inventory was 88 days at September 30, 2010, compared to 80 days at December 31,
2009, primarily resulting from increased inventory levels to support our higher customer demand and
sales volumes. We continue to focus on optimizing overall inventory at levels sufficient to meet
current customer demands.
35
At September 30, 2010, our current ratio was 2.9, a decrease from the current ratio of 4.6 at
December 31, 2009. The reduction in the current ratio in 2010 was due primarily to the overall
reduction of our combined cash and investment balances due primarily to the purchase of our senior
notes and common stock as noted above, and the increase in accounts payable resulting from
increased spending levels for inventory and expense items to levels commensurate with our increased
current business demands.
Operating Activities
Our ability to generate cash from internal operations may be affected by general economic,
financial, competitive, legislative and regulatory factors beyond our control. Generally, our cash
flow from operations fluctuates due to various factors, including customer order patterns,
fluctuations in working capital requirements, the amounts of payments of incentive compensation and
profit sharing, changes in customer and supplier credit policies, and changes in customer payment
patterns.
Cash provided by our operating activities from continuing operations in 2010 was $23.0
million, compared to cash provided by operating activities of $10.1 million in 2009. The increase
was primarily due to $12.9 million higher net income in the first nine months of 2010 compared to
the corresponding period in 2009. In addition, we experienced higher levels of sales in 2010
compared to the same period in 2009 due to the impact of the economic recovery, which necessitated
increased purchases of inventories and service supplies, resulting in higher accounts payable at
September 30, 2010, generating positive cash flows of $16.8 million in the period. Offsetting this
source of operating cash flows were increased levels of accounts receivable and inventory, which
used operating cash during the period.
Investing Activities
Our investing activities from continuing operations provided $6.4 million in the nine months
ended September 30, 2010 compared to using $9.8 million in the nine months ended September 30,
2009. Net short-term investment purchases and sales through the third quarter of 2010 provided
cash of $10.7 million compared to using cash of $2.9 million in the 2009 period.
During the first quarter of 2010, our Chinese facility utilized cash of $0.5 million to
acquire a former key supplier.
We used $3.8 million and $6.9 million for the purchase of property, plant and equipment in the
nine months ended September 30, 2010 and 2009, respectively. The principal sources of financing
for these capital expenditures were existing cash and internally generated funds. We anticipate
capital expenditures in 2010 in the range of $6.0 million to $8.0 million. Our management
critically evaluates all proposed capital expenditures and requires that each project maximizes
shareholders value, and in doing so supports our business needs and long-term strategic plans.
Financing Activities
Cash used in financing activities was $27.8 million and $11.0 million in 2010 and 2009,
respectively.
During the first quarter of 2010, we solicited consents from holders of our non-affiliated
senior notes to amend the indenture governing our senior notes to permit an extension of our stock
repurchase program. In connection with this consent solicitation, we paid a $1.5 million fee to
consenting senior note holders, which is being amortized to interest expense over the remaining
life of our senior notes. We used $7.2 million and $11.2 million to repurchase shares of our
common stock pursuant to our stock repurchase programs in the nine month periods ended September
30, 2010 and 2009, respectively. At September 30, 2010, the approximate dollar value of shares
that may be purchased under our stock repurchase program was $18.1 million.
During the second quarter of 2010, we purchased $20.0 million of senior notes in open market
transactions.
We received cash proceeds from the exercise of stock options of $0.4 million in both 2010 and
2009, respectively. Also during 2010, we recognized a tax benefit from the exercise of incentive
stock options of $0.7 million.
36
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements other than operating leases for certain of
our facilities and certain equipment and letters of credit.
Contractual Obligations and Other Commercial Commitments
In May 2010, the Company purchased $20.0 million of its senior notes in open market purchases.
The remaining principal balance outstanding is $57.1 million as of September 30, 2010. Annual
interest accrues at 8
3
/
4
% per annum, or $5.0 million per year, which is paid semi-annually on January
1 and July 1.
We had no outstanding borrowings under our domestic or Italian bank facilities at September
30, 2010 or December 31, 2009.
At September 30, 2010, we had issued stand-by letters of credit totaling $0.5 million under
our letter of credit sub-facility. This compares to $0.9 million of issued stand-by letters of
credit at December 31, 2009.
Our liability for deferred compensation plan distributions has increased to $4.1 million at
September 30, 2010 compared to $3.0 million at December 31, 2009, primarily resulting from 2010
discretionary Company contributions, employee deferrals and favorable market performance by the
investment selections held in each participants shadow account.
There have been no other material changes to the Contractual Obligations and Other Commercial
Commitments table presented in our Annual Report on Form 10-K for the year ended December 31, 2009.
The table excludes our liability for unrecognized tax benefits, which totaled $0.7 million at
September 30, 2010 and $1.2 million at December 31, 2009, since we cannot predict with reasonable
reliability the timing of cash settlements with the respective taxing authorities.
Debt
The following table summarizes the components of our indebtedness:
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(dollars in millions)
|
|
Senior notes
|
|
$
|
57.1
|
|
|
$
|
77.1
|
|
Unamortized consent payment
|
|
|
(1.0
|
)
|
|
|
|
|
Bank facilities (domestic and foreign)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
56.1
|
|
|
$
|
77.1
|
|
|
|
|
|
|
|
|
In May 2010, we purchased $20.0 million of our outstanding senior notes in the open market.
These notes have not been formally retired by the Company, but have been treated as an
extinguishment of debt for accounting purposes. The remaining principal balance of senior notes
outstanding as of September 30, 2010 is $57.1 million.
At September 30, 2010, we had no borrowings under our credit facilities. A total of $23.3
million was available for borrowing under our domestic revolving credit facility based on eligible
collateral. Additionally, we had $3.1 million (2.3 million Euro) available to borrow under our
foreign short-term line of credit.
As of September 30, 2010 and December 31, 2009, we were in compliance with the provisions of
all of our debt instruments. Completion of the Merger with Carlisle would constitute a Change in
Control under the terms of our domestic credit facility, and we would be required to obtain the
consent of KeyBank National Association to maintain this facility subsequent to the merger. We are
not aware of any other business or economic trends affecting our business that would cause us to
become non-compliant with the provisions of our debt instruments during the next twelve months.
37
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk since December 31, 2009.
See Item 7A in our Form 10-K for the year ended December 31, 2009, filed with the SEC on March 10,
2010.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
. As of September 30, 2010, we evaluated the
effectiveness of the design and operation of our disclosure controls and procedures as such term is
defined in Rule 13a-15(e) of the Exchange Act. The evaluation was carried out under the supervision
of and with the participation of our management, including our principal executive officer and
principal financial and accounting officer. Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer each concluded that as of the end of the period covered by this report,
our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
. There have been no changes in our
internal control over financial reporting during the quarter ended September 30, 2010 that have
materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
PART II
ITEM 1. LEGAL PROCEEDINGS
We are involved in lawsuits that have arisen in the ordinary course of our business. We are
contesting each of these lawsuits vigorously and believe we have defenses to the allegations that
have been asserted. In our opinion, the outcome of these lawsuits will not have a material adverse
effect on our financial position, results of operations or cash flows. We are not aware of any
material legal proceedings instituted against us during the third quarter of 2010 other than as
described below:.
Since October 25, 2010, two putative stockholder class action complaints challenging the
Transaction contemplated by the Merger Agreement were filed in the Court of Chancery in the State
of Delaware against Hawk, the individual members of our board of directors, Carlisle and the
Purchaser. The complaints generally allege, among other things, that members of our board of
directors breached their fiduciary duties owed to the public stockholders of Hawk by entering into
the Merger Agreement, approving the Offer and the proposed Merger and failing to take steps to
maximize the value of Hawk to our public stockholders, that
Mr. Weinberg, Mr. Harbert and Mr. Krantz, the holders of our Series D preferred
stock, breached their fiduciary duties of loyalty and entire fairness, and that Carlisle aided and
abetted such breaches of fiduciary duties. In addition, the complaints allege that the Merger
Agreement unduly restricts our ability to negotiate with rival bidders, and that our stockholders
have been deprived of the ability to make an informed decision as to whether to tender their
shares. The complaints generally seek, among other things, declaratory and injunctive relief
concerning the alleged fiduciary breaches, injunctive relief prohibiting the defendants from
consummating the Merger and other forms of equitable relief. While
these lawsuits are at a preliminary stage, we believe that the claims are without merit and we
intend to vigorously defend them.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider
the risk factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for
the year ended December 31, 2009 filed with the SEC on March 10, 2010. Except as set forth below,
we are currently unaware of any material changes to the risk factors previously disclosed in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2009; however, additional risks
and uncertainties not presently known to us or that we currently deem immaterial also may impair
our business operations and financial condition.
38
Risks Related to the Transaction with Carlisle:
If the Transaction with Carlisle is not completed or is delayed, our share price, business and
results of operations may
be adversely affected.
It is possible the Transaction with Carlisle might not be completed or could be delayed for a
number of reasons. If the Transaction is not consummated within the contemplated time period or
completed at all, we could suffer a number of consequences that may materially adversely affect our
business, results of operations and share price, including:
|
|
|
a loss of revenue and market position that we may not be able to regain if the
Transaction is not consummated,
|
|
|
|
damage to our relationships with our customers, suppliers and other business partners,
|
|
|
|
a potential obligation to pay a $14.5 million termination fee depending on the reasons
for terminating the Transaction,
|
|
|
|
significant costs related to the Transaction, including substantial legal, accounting
and investment banking expenses,
|
|
|
|
key employees may be lost during the pendency of the Transaction and our relationships
with employees may be damaged, and
|
|
|
|
business and organizational opportunities may be lost due to covenants in the Merger
Agreement that restrict certain actions by us prior to the completion of the Transaction.
|
Other Risk Factors:
The recently enacted federal healthcare legislation could impact the healthcare benefits required
to be provided by us and cause our compensation and administrative costs to increase, potentially
reducing our net income and adversely affecting our cash flows.
The recently enacted federal healthcare legislation contains provisions that could materially
impact our future healthcare and administrative costs. Although we cannot yet determine the
legislations ultimate impact on us, the new law could increase our compensation and administrative
compliance costs which would reduce our net income and adversely impact our cash flows.
Any currently proposed or to-be-proposed U.S. or foreign legislation concerning climate change or a
publicly perceived risk associated with climate change could potentially negatively impact our
financial position, results of operations or cash flows.
Changing environmental and energy laws and regulations, including those relating to climate
change and greenhouse gas emissions, new interpretations of existing laws and regulations,
increased governmental enforcement or other developments in the United States and foreign countries
where we operate could result in increased operating and capital expenditure costs for us. To the
extent these new laws or regulations cause changes in the supply, demand or available sources of
energy that we need to operate our facilities or affect the availability or costs of raw materials
we use in our operations, our financial position, results of operations or cash flows could be
negatively impacted.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Hawk did not repurchase any of its equity securities registered under the Securities Exchange
Act of 1934 during the three months ended September 30, 2010.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
39
ITEM 4.
Removed and Reserved
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
(a) Exhibits
|
|
|
|
|
|
31.1*
|
|
|
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
31.2*
|
|
|
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
32.1*
|
|
|
Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
32.2*
|
|
|
Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
*
|
|
Filed or Furnished herewith
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
HAWK CORPORATION
|
|
Date: November 9, 2010
|
By:
|
/s/ RONALD E. WEINBERG
|
|
|
|
Ronald E. Weinberg
|
|
|
|
Chairman of the Board and Chief Executive Officer
(principal executive officer)
|
|
|
|
|
|
Date: November 9, 2010
|
By:
|
/s/ JOSEPH J. LEVANDUSKI
|
|
|
|
Joseph J. Levanduski
|
|
|
|
Chief Financial Officer
(principal financial and accounting officer)
|
|
40
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