Hawk Announces 2010 Third Quarter Results
Sales Increase 61.1% to $70.1 Million in the Third Quarter; Income From Operations Increases 104.9% to $12.5 Million; Company Reports Third Quarter Net Income of $8.4 Million
CLEVELAND, OH -- (Marketwire - November 09, 2010) - Hawk Corporation (NYSE Amex: HWK) announced
today that sales for the third quarter ended September 30, 2010 were $70.1
million, an increase of $26.6 million, or 61.1%, from $43.5 million in the
comparable prior year quarter. Net sales for the nine months ended
September 30, 2010 were $185.2 million, an increase of 46.1%, from $126.8
million in the comparable prior year period. The economic recovery, market
share gains and new product introductions have been the principal drivers
of the revenue increases. Sales in all of the Company's end markets, with
the exception of defense, showed growth during the quarter. Sales to the
defense market were down during the third quarter of 2010 compared to 2009,
as the Company's largest defense customer continued to realign its
inventory levels during the period.
Income from operations for the third quarter ended September 30, 2010 was
$12.5 million, an increase of $6.4 million, or 104.9%, from $6.1 million in
the prior year period. Income from operations was favorably impacted by
the sales volume increase and the absorption of manufacturing costs as a
result of higher production volumes in all of Hawk's manufacturing
facilities. This increase was partially offset by the effect of foreign
currency exchange rates and product mix during the quarter. For the nine
month period ended September 30, 2010, the Company reported income from
operations of $31.9 million, an increase of $20.1 million, or 170.3%, from
$11.8 million in the comparable prior year period.
For the third quarter 2010, the Company reported net income of $8.4
million, or $1.03 per diluted share, an increase of $4.6 million compared
to $3.8 million, or $0.45 per diluted share, in the third quarter of 2009.
For the nine months ended September 30, 2010, the Company reported net
income of $17.7 million, or $2.16 per diluted share, an increase of $12.9
million, or 268.8%, compared to $4.8 million, or $0.55 per diluted share,
during the comparable prior year period.
Working Capital and Liquidity
Cash and short-term investments decreased $9.8 million to $73.3 million as
of September 30, 2010, compared to $83.1 million as of December 31, 2009.
The decrease in cash and short-term investments was due primarily to the
repurchase of $20.0 million of the Company's senior notes and $7.2 million
of the Company's common stock during the nine months ended September 30,
2010. There were no repurchases of senior notes or of the Company's common
stock during the three months ended September 30, 2010. As a result of the
significant sales and production volume increases during the period, the
Company experienced an increase in its accounts receivable, accounts
payable and inventory levels at September 30, 2010. The Company believes
that the quality of its accounts receivable and inventory remains strong.
During the nine months ended September 30, 2010, the Company spent $3.8
million on capital expenditures compared to $6.9 million during the
comparable period of 2009. Depreciation was $5.5 million for the nine
months ended September 30, 2010 compared to $5.3 million for the nine
months ended September 30, 2009.
Business Outlook
The Company continues to experience strength in demand coming from the
majority of its end markets, especially construction and mining, and as a
result is now expecting its 2010 full year net sales to be $251.3 million,
representing an approximately 45.6% increase over 2009 net sales of $172.4
million. Previous guidance provided by the Company called for net sales to
be in a range of between $241.0 million and $246.0 million.
Based on this increased net sales expectation, the Company is also
increasing its guidance for 2010 full year operating income to $40.4
million, representing an approximately 139.5% increase over 2009 operating
income of $16.7 million. Previous guidance for operating income provided
by the Company was a range of between $36.0 million and $39.0 million.
Merger Announcement
On October 15, 2010, the Company announced the signing of a definitive
merger agreement whereby Carlisle Companies Incorporated (Carlisle) has
agreed to acquire Hawk for $50.00 per share in an all-cash transaction. The
transaction has been unanimously approved by the Boards of Directors of
both companies. At $50.00 per share, the transaction represents an equity
value of approximately $413 million. At the closing of the transaction,
Hawk will become part of Carlisle Industrial Brake & Friction, a leading
global provider of high performance off-highway braking solutions in the
mining, construction, agricultural, wind energy, military and industrial
markets. On November 1, 2010 Carlisle commenced a tender offer for the
purchase of all outstanding shares of Hawk Corporation common stock.
The Company
Hawk Corporation is a leading supplier of friction materials for brakes,
clutches and transmissions used in airplanes, trucks, construction and
mining equipment, farm equipment, recreational and performance automotive
vehicles. The Company also manufactures fuel cell components.
Headquartered in Cleveland, Ohio, Hawk has approximately 1,450 employees at
12 manufacturing, research, sales and international rep offices and
administrative sites in 7 countries.
Forward-Looking Statements
This press release includes forward-looking statements concerning sales,
operating earnings and effective tax rates. These forward-looking
statements are based upon management's expectations and beliefs concerning
future events. Forward-looking statements are necessarily subject to risks,
uncertainties and other factors, many of which are outside the control of
the Company and which could cause actual results to differ materially from
such statements. These risks and uncertainties include, but are not limited
to: the risk that the merger with Carlisle Companies Incorporated may not
be consummated and the risk that regulatory approval that may be required
for the transaction or is obtained subject to conditions that are not
anticipated; the effect of regional and global economic and industrial
market conditions, including the Company's expectations concerning the
impact on the markets it serves; the effect of conditions in the financial
and credit markets and their impact on the Company and its customers and
suppliers; the Company's ability to execute its business plan to meet its
sales, operating income, cash flow and capital expenditure guidance; the
Company's ability to utilize its cash and short-term investments; the
impact on the Company's gross profit margins as a result of changes in
product mix; the Company's vulnerability to industry conditions and
competition; the effect of any interruption in the Company's supply of raw
materials, including steel, or a substantial increase in the price of raw
materials; work stoppages by union employees; ongoing capital expenditures
and investment in research and development; compliance with government
regulations; compliance with environmental and health and safety laws and
regulations; the effect on the Company's international operations of
unexpected changes in legal and regulatory requirements, export
restrictions, currency controls, tariffs and other trade barriers,
difficulties in staffing and managing foreign operations, political and
economic instability, difficulty in accounts receivable collection and
potentially adverse tax consequences; the effect of foreign currency
exchange rates on the Company's non-U.S. sales; reliance for a significant
portion of the Company's total revenues on a limited number of large
organizations and the continuity of business relationships with major
customers; the loss of key personnel; significant changes in discount rates
and actual investment return on the Company's pension assets and control by
existing preferred stockholders.
Actual results and events may differ significantly from those projected in
the forward-looking statements. Reference is made to Hawk's filings with
the Securities and Exchange Commission, including its annual report on Form
10-K for the year ended December 31, 2009, its quarterly reports on Form
10-Q, and other periodic filings, for a description of the foregoing and
other factors that could cause actual results to differ materially from
those in the forward-looking statements. Any forward-looking statement
speaks only as of the date on which such statement is made, and the Company
undertakes no obligation to update any forward-looking statement, whether
as a result of new information, future events or otherwise.
Investor Conference Call
The Company expects that the transaction with Carlisle will be completed
during the fourth quarter of 2010. As a result, the Company will not hold
a conference call to discuss its quarterly and year to date results.
HAWK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30 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 taxes (10) (13) (21) (187)
--------- --------- --------- ---------
Net income $ 8,422 $ 3,770 $ 17,698 $ 4,808
========= ========= ========= =========
Earnings per share:
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 and equivalents
outstanding - diluted 8,118 8,315 8,144 8,566
========= ========= ========= =========
HAWK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands)
September 30 December 31
2010 2009
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 47,845 $ 47,206
Short-term investments 25,440 35,930
Accounts receivable, net 42,535 27,578
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, net 45,284 47,096
Other intangible assets 5,600 6,015
Other assets 6,558 6,181
------------- -------------
Total assets $ 216,337 $ 204,492
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,514 $ 16,861
Other accrued expenses 21,654 15,033
------------- -------------
Total current liabilities 55,168 31,894
Long-term debt, net 56,110 77,090
Deferred income taxes 2,948 2,873
Other liabilities 13,680 15,165
Shareholders' equity 88,431 77,470
------------- -------------
Total liabilities and shareholders' equity $ 216,337 $ 204,492
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