HAWK CORPORATION

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A+YTyigWq5N8BZELh1xcBioU1ZROcdjphemKb7FzxNeXyIuvVWgc96LLEL3wX2Yb U+mbjtn3qnqxSaYkzthSoA== 0000950152-04-005816.txt : 20040803 0000950152-04-005816.hdr.sgml : 20040803 20040803144311 ACCESSION NUMBER: 0000950152-04-005816 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040803 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040803 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAWK CORP CENTRAL INDEX KEY: 0000849240 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728] IRS NUMBER: 341608156 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13797 FILM NUMBER: 04947982 BUSINESS ADDRESS: STREET 1: 200 PUBLIC SQ. STREET 2: STE 1500 CITY: CLEVELAND STATE: OH ZIP: 44114 BUSINESS PHONE: 2168613553 MAIL ADDRESS: STREET 1: 200 PUBLIC SQUARE STREET 2: STE 1500 CITY: CLEVELAND STATE: OH ZIP: 44114-2301 FORMER COMPANY: FORMER CONFORMED NAME: HAWK GROUP OF COMPANIES INC DATE OF NAME CHANGE: 19950417 8-K 1 l08488ae8vk.htm HAWK CORPORATION HAWK CORPORATION

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Act of 1934

Date of Report: August 3, 2004
(Date of earliest event reported)

Hawk Corporation

(Exact name of registrant as specified in its charter)


Delaware		001-13797		34-1608156
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification Number)

200 Public Square, Suite 1500, Cleveland, Ohio 44114
(Address of principal executive offices including zip code)

(216) 861-3553
(Registrant’s telephone number, including area code)

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	Item 7. Financial Statements and Exhibits.
	Item 12. Results of Operations and Financial Condition.
SIGNATURES
EXHIBIT INDEX
EXHIBIT 99.1 PRESS RELEASE

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Item 7. Financial Statements and Exhibits.


(c)	Exhibits:
	99.1	Hawk Corporation Press Release dated August 3, 2004

Item 12. Results of Operations and Financial Condition.

On August 3, 2004, Hawk Corporation issued a press release containing Hawk’s financial results for the second fourth quarter of 2004 and the six months ended June 30, 2004. The press release was posted to Hawk’s website <www.hawkcorp.com> and a copy is also set forth in Exhibit 99.1.

Pursuant to General Instruction B, subsection 6, of Form 8-K, this exhibit is not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, but is instead furnished as required by that section.

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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 hereunto duly authorized.

Date: August 3, 2004 HAWK CORPORATION

By: /s/ Thomas A. Gilbride
Thomas A. Gilbride
Vice President — Finance and Treasurer

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EXHIBIT INDEX


Exhibit Number		Description
99.1		Hawk Corporation Press Release dated August 3, 2004

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EX-99.1 2 l08488aexv99w1.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 [HAWK CORPORATION LOGO] HAWK ANNOUNCES SECOND QUARTER 2004 NET INCOME OF $.16 PER SHARE - COMPANY POSTS RECORD QUARTERLY REVENUES OF $63.4 MILLION - INCOME FROM OPERATIONS UP 36% - INCOME FROM CONTINUING OPERATIONS UP 25% - NET INCOME UP 200% CLEVELAND, Ohio - August 3, 2004 - Hawk Corporation (AMEX: HWK) announced today that net sales from continuing operations for the second quarter of 2004 increased by 21.5% to $63.4 million from $52.2 million in the comparable prior year period. Increases were posted in each of the Company's business segments. Income from continuing operations was $1.5 million or $.16 per diluted share in the second quarter of 2004 compared to $1.2 million or $.14 per diluted share in the comparable prior year period, an increase of 25.0%. The Company's worldwide effective tax rate was 55.8% in the second quarter of 2004. This second quarter effective tax rate incorporates the Company's most recent full year earnings expectations in order to achieve a full year effective tax rate of approximately 48.0%. The Company's net sales of $63.4 million from continuing operations were the highest in its history surpassing the previous high set during the first quarter of 2004. The Company's net sales from continuing operations benefited from improved economic conditions and new business awards during the quarter in a number of the Company's end markets, including construction, agriculture, heavy truck, specialty friction and fluid power. In addition, during the second quarter, the Company shipped an initial stocking order of its Hawk Performance(R) brand brake pads to Pep Boys automotive retail outlets for the national rollout of its performance brake components. The effect of foreign currency exchange rates accounted for 1.4% of the net sales increase during the quarter. The net sales increase was partially offset by sales declines resulting from the previously announced June 2003 sale of an automotive product line, which reported sales of $1.0 million in the second quarter of 2003. Income from operations in the second quarter of 2004 increased 35.6% to $6.1 million compared to $4.5 million in the prior year period. As a percentage of net sales, the Company's operating margin improved to 9.6% in the second quarter of 2004 from 8.6% in the comparable quarter of 2003. The favorable operating leverage was the result of increased sales volumes, higher absorption of fixed manufacturing costs and continued implementation of lean manufacturing and cost-out programs throughout the organization. The gains were dampened by surcharges on a number of our raw materials, production inefficiencies and freight expediting costs resulting from availability issues on steel shipments, product mix, and to a lesser extent, restructuring costs relating to the Company's new facility in Oklahoma. Ronald E. Weinberg, Hawk's Chairman and CEO, said, "We are pleased with the second quarter results particularly because our sales growth and income from operations during the period surpassed the high end of our most recently issued guidance. We anticipate continued strength in our end markets for the balance of 2004." Mr. Weinberg continued, "We have noted that based on our increased sales in the quarter, there has been less than the expected pull-through of profit margin to our operating results. Management is working proactively to pass on the surcharges we have encountered and to respond to the production disruptions caused by material shortages in the face of increased market demand." For the six month period ended June 30, 2004, net sales from continuing operations were $123.7 million, an increase of $16.8 million or 15.7%, from $106.9 million in the comparable prior year period. Income from operations for the same six month period increased $3.6 million, or 43.9%, to $11.8 million from $8.2 million in the comparable prior period. As a percent of net sales, income from operations increased to 9.5% for the first six months of 2004 compared to 7.7% in the comparable period of 2003. The Company reported net income of $1.5 million, or $.16 per diluted share, in the second quarter of 2004 compared to net income of $0.5 million, or $.05 per diluted share in the comparable prior year period, an increase of 200.0%. This improvement in net income was the result of the Company's increased earnings from continuing operations and the elimination of net losses from the Company's discontinued motor segment through better operating performance. This improvement was partially offset by the higher worldwide effective tax rate for the period. BUSINESS SEGMENT RESULTS In the friction segment, second quarter net sales increased $7.6 million or 23.8%, to $39.5 million from $31.9 million in the year-ago period. Primary drivers of the sales increase were new sales from the initial stocking order to Pep Boys automotive retail outlets, market share gains primarily in the construction market, improved conditions in the Company's construction, agriculture, truck and aerospace markets, increased sales to the aftermarket and the fleet market, increased sales from the Company's Italian facility, and to a lesser extent, favorable foreign currency exchange rates. The effect of foreign currency exchange rates accounted for 2.3% of the net sales increase during the quarter. These increases were partially offset by sales declines from the Company's sale of its automotive stamping product line which reported sales of $1.0 million in the second quarter of 2003. Net sales in the friction segment for the six months ended June 30, 2004 increased 18.7% to $75.0 million from $63.2 million in the comparable prior year period. Net sales at the Company's Italian facility, on a local currency basis, increased 24.4% in the second quarter of 2004 compared to the same period in 2003 as a result of market share gains, economic improvement and new product introductions in the period. Income from operations in the friction segment during the second quarter of 2004 increased 21.1%, to $4.6 million compared to $3.8 million in the prior year period. The increase was the result of improved sales volumes in all of the markets served by the Company which provided a higher absorption of fixed manufacturing costs and the continued implementation of cost-out programs throughout the segment. The gains were partially offset by higher material costs due to raw material surcharges, increased operating costs to support the higher sales activity and limited availability of product during the period, increased labor and incentive compensation costs, restructuring costs associated with the Company's new manufacturing facility in Oklahoma and product mix. For the six months ended June 30, 2004, income from operations increased $2.1 million, or 32.8%, to $8.5 million from $6.4 million in the comparable prior year period. As a percentage of net sales, the segment's operating margin improved to 11.3% during the first six months of 2004 from 10.1% in the comparable period of 2003. In the Company's precision components segment, net sales increased 17.1% to $19.9 million in the second quarter of 2004 from $17.0 million in the comparable prior year period. The increase during the quarter was driven by the continued improvements in the industrial markets served by this segment. The segment experienced increases in its fluid power, appliance, truck and power tool markets, partially offset by a slight decline in the lawn and garden market during the quarter. Net sales for the six months ended June 30, 2004, were up $4.1 million, or 11.3%, to $40.5 million from $36.4 million in the prior year. Income from operations in the precision components segment in the second quarter of 2004 was $1.2 million compared to $0.6 million during the comparable quarter of 2003, an increase of 100.0%. The increase was primarily due to the increased sales volumes as well as product mix. The segment continues to support the start-up of its new facility in China. During the second quarter of 2004, operating costs increased when compared to the 2003 prior year period as the Company incurred increased personnel costs to support the production levels at this new facility. As a percentage of net sales, the segment's operating margin improved to 6.0% in the second quarter of 2004 from 2.9% in the comparable quarter of 2003. For the six months ended June 30, 2004, income from operations increased 84.6% to $2.4 million from $1.3 million in the prior year. As a percentage of net sales, the segment's operating margin improved to 5.9% for the six month period ended June 30, 2004 from 3.6% in the comparable prior year period. Net sales in the Company's performance racing segment increased 21.2%, to $4.0 million in the second quarter of 2004 compared to $3.3 million in the prior year period. The increase in net sales was primarily caused by the introduction of new products during the quarter. Net sales for the six months ended June 30, 2004 increased 12.3% to $8.2 million from $7.3 million in the prior year. Income from operations in the performance racing segment in the second quarter of 2004 increased by 200.0% to $0.3 million compared to $0.1 million in the comparable prior year period. For the six month period ended June 30, 2004, income from operations was $0.9 million compared to $0.5 million in the prior year, an increase of 80.0%. As a percentage of net sales, the segment's operating margin improved to 11.0% for the six month period ended June 30, 2004 from 6.8% in the comparable prior year period. WORKING CAPITAL AND LIQUIDITY As of June 30, 2004 working capital, exclusive of the Company's senior credit facility increased by $6.0 million from December 31, 2003 levels. The increase was largely the result of growth in the Company's receivable levels as a result of the higher sales volumes and expanded inventory levels to support the increased production volumes. Principal amounts outstanding under the Company's senior credit facility increased by $5.0 million, to $29.1 million, compared to $24.1 million at December 31, 2003. The increase was primarily to support the growth of the Company's working capital assets. The principal amounts outstanding under the Company's senior credit facility as of June 30, 2004 decreased by $2.5 million or 7.9% from the amount outstanding as of March 31, 2004. Borrowing availability under the Company's senior credit facility continued to increase during the period. BUSINESS OUTLOOK "Our year to date results have benefited from the continuing economic improvements and the sales demand increases to our customers as well as the continued implementation of our technology initiatives. We have been awarded a number of new product programs that we believe will lead to continued sales growth during the balance of this year. Additionally, sales from our Italian operation should remain robust for the balance of 2004. As a result of this sales momentum, we believe our revenues will increase in the third quarter of 2004 by approximately 8% to 10% compared to the third quarter of 2003," stated Mr. Weinberg. "We believe that we are positioned to achieve our previously stated revised net sales growth objectives of 10% to 13% and operating income from continuing operations of 55% to 60%, respectively, for the full year 2004. We will continue to pursue our growth initiatives which we believe will provide future sales opportunities for all of our businesses." THE COMPANY Hawk Corporation is a leading worldwide supplier of highly engineered products. Its friction products group is a leading supplier of friction materials for brakes, clutches and transmissions used in airplanes, trucks, construction equipment, farm equipment, recreational and performance automotive vehicles. Through its precision components group, the Company is a leading supplier of powder metal and metal injected molded components used in industrial, consumer and other applications, such as pumps, motors and transmissions, lawn and garden equipment, appliances, small hand tools, trucks and telecommunications equipment. The Company's performance racing group manufactures clutches and gearboxes for motorsport applications and performance automotive markets. Headquartered in Cleveland, Ohio, Hawk has approximately 1,600 employees at 16 manufacturing, research, sales and administrative sites in 5 countries. FORWARD-LOOKING STATEMENTS This press release includes forward-looking statements concerning sales, market share, foreign operations, working capital and other statements that involve risks and uncertainties. These forward-looking statements are based upon management's expectations and beliefs concerning future events. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company and which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to: the ability of the Company to meet the terms of its credit facilities, including the numerous financial covenants and other restrictions; the effect of our debt service requirements on funds available for operations and future business opportunities and our vulnerability to adverse general economic and industry conditions and competition; our ability to effectively utilize all of our manufacturing capacity as the industrial and commercial end-markets we serve improve; the timely completion of the construction of the new facility in our friction products segment; the ability to hire and train qualified people at the new facility; the ability to transfer production to the new facility and commence production at the new facility without causing customer delays or dissatisfaction; the ability to achieve the projected cost savings at the new facility, including whether the cost savings can be achieved in a timely manner; whether or not Hawk's motor segment will be sold and if sold whether the sale can take place in the time or at the price projected by Hawk; whether or not the motor segment will be able to improve its operating performance during the selling process; higher than anticipated costs related to the sale of Hawk's motor segment; the impact on our gross profit margins as a result of changes in our product mix; the effect of general economic and industry conditions and competition; the ability of the Company to begin generating profits from its facilities in China and to turn a profit at our start-up metal injection molding operation; the effect of the transfer of manufacturing to China and other lower wage locations by other manufacturers who compete with us; the effect of changes in international laws and regulations and currency exchange rates; the effect of competition by manufacturers using new or different technologies; the ability of the Company to successfully negotiate new agreements with its unions as they come due; the effect of any interruption in the Company's supply of raw materials or a substantial increase in the price of raw materials; the continuity of business relationships with major customers; and the ability of the Company's aircraft component products to meet stringent Federal Aviation Administration criteria and testing requirements. Actual results and events may differ significantly from those projected in the forward-looking statements. Reference is made to Hawk's filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2003, its quarterly reports on Form 10-Q, and other periodic filings, for a description of the foregoing and other factors that could cause actual results to differ materially from those in the forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. INVESTOR CONFERENCE CALL A live Internet broadcast of the Company's conference call discussing quarterly and year to date results can be accessed via the investor relations page on Hawk Corporation's web site (www.hawkcorp.com) on Tuesday, August 3, 2004 at 1:00 p.m. Eastern time. An archive of the call will be available shortly after the end of the conference call on the investor relations page of the Company's web site. CONTACT INFORMATION Ronald E. Weinberg, Chairman, CEO and President (216) 861-3553 Thomas A. Gilbride, Vice President - Finance (216) 861-3553 INVESTOR RELATIONS CONTACT INFORMATION John Baldissera, BPC Financial Marketing (800) 368-1217 Hawk Corporation is online at: http://www.hawkcorp.com/ HAWK CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)

HAWK CORPORATION CONSOLIDATED BALANCE SHEET (UNAUDITED) (IN THOUSANDS)

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