Net sales increase 11.3% in third quarter compared to second
quarter 2009 Company reports third quarter net income of $3.8
million or $0.45 per diluted share CLEVELAND, Nov. 9
/PRNewswire-FirstCall/ -- Hawk Corporation (NYSE Amex: HWK)
announced today that sales for the third quarter ended September
30, 2009 were $43.5 million, a decrease of $30.7 million or 41.4%,
from $74.2 million in the comparable prior year quarter. Net sales
for the nine months ended September 30, 2009 were $126.8 million, a
decrease of 40.1%, from $211.8 million in the comparable prior year
period. The economic downturn was the principal driver of the
revenue decline. Despite this downturn, the Company has continued
to receive new business awards from new and existing customers,
which the Company expects will result in future sales gains as the
economy recovers. Total sales were up 11.3% in the third quarter of
2009 when compared to the second quarter of 2009, as a result of
sales increases at all of its global facilities. (Logo:
http://www.newscom.com/cgi-bin/prnh/20001129/HWKLOGO) Income from
operations for the third quarter ended September 30, 2009 was $6.1
million, a decrease of $9.5 million, or 60.9%, from $15.6 million
in the prior year period. The decrease in income from operations
during the quarter was impacted primarily by the sales volume
decrease and to a lesser extent, foreign currency exchange rates.
This decline was partially offset by reductions in incentive
compensation expense, stringent cost controls during the quarter
and product mix. For the nine month period ended September 30,
2009, the Company reported income from operations of $11.8 million,
a decrease of $21.9 million, or 65.0%, from $33.7 million in the
comparable prior year period primarily caused by sales volumes
declines and to a lesser extent, foreign currency exchange rates.
This decline was partially offset by reductions in incentive
compensation expense, stringent cost controls, pricing actions and
product mix. During the nine months ended September 30, 2009, the
Company reduced its global labor force by approximately 16% in
addition to lesser reduction taken in the last quarter of 2008. For
the third quarter 2009, the Company reported net income of $3.8
million, or $0.45 per diluted share, a decrease of $6.5 million
compared to net income of $10.3 million, or $1.09 per diluted
share, in the third quarter of 2008. During the third quarter of
2009, the Company reported other income of $1.5 million ($0.9
million after tax), or $0.12 per diluted share related to its
decision to accept cash from its partner in lieu of its obligation
to develop a potential new product for the Company. The Company
decided that the funds could earn a higher return deployed on other
projects. During the third quarter of 2008, the Company reported
other income of $1.3 million ($0.9 million after tax), or $0.09 per
diluted share, as a result of a similar decision. For the nine
months ended September 30, 2009, the Company reported net income of
$4.8 million, or $0.55 per diluted share, compared to $18.4
million, or $1.95 per diluted share, during the comparable prior
year period. Ronald E. Weinberg, Hawk's Chairman and CEO, said,
"Despite the softness caused by the economic recession, I am
pleased with our performance. We have been awarded a steady stream
of additional new business during the period and have been
successful in controlling costs without diminishing the competitive
momentum of our business. During the third quarter, we began to see
the very early stages of a recovery in a number of our end-markets.
Our sales in the third quarter were up 11.3% compared to the second
quarter of 2009. We reacted quickly to the downturn and enacted
cost reductions beginning in the fourth quarter of 2008, and expect
that a number of these reductions will provide a benefit to our
earnings power as the economy continues to improve." Mr. Weinberg
continued, "Our balance sheet remains strong with approximately $86
million in cash and short-term investment as of September 30, 2009.
This amount of cash demonstrates a level of financial stability to
our customers, suppliers and lenders and allows us to be more
proactive in gaining market share and actively reviewing our
options for potential acquisitions." Working Capital and Liquidity
Cash and short-term investments increased $7.6 million to $86.3
million as of September 30, 2009, compared to $78.7 million as of
June 30, 2009. At September 30, 2009, working capital decreased by
$8.1 million to $117.9 million from $126.0 million at December 31,
2008. The decrease in working capital was largely the result of
decreased accounts receivable and inventory levels partially offset
by reductions in accounts payable at September 30, 2009. As a
result of the emphasis on working capital reductions and in spite
of the economic downturn, cash flow from operations remained
positive at $10.2 million for the nine months ended September 30,
2009, compared to $13.8 million for the period ended September 30,
2008. Mr. Weinberg continued, "We were pleased to have been able to
increase our cash balances by $7.6 million from June 30, 2009 and
to further reduce inventory levels by an additional $1.7 million
during the same period. Our receivables continue to be of excellent
quality." At September 30, 2009, the Company had no borrowings
under its global bank facilities, and $18.8 million was available
for borrowings under these facilities. During the nine months ended
September 30, 2009, the Company spent $6.9 million on capital
expenditures, compared to $9.2 million during the comparable period
of 2008. Depreciation was $5.3 million for the nine months ended
September 30, 2009 compared to $5.0 million for the nine months
ended September 30, 2008. Business Outlook The Company remains
vigilant in controlling its operating expenses in response to
economic conditions while at the same time investing globally in
its technology and sales efforts. A slight improvement in demand is
being experienced, and a portion of the direct workforce has been
recalled. Management believes the earnings benefit of this in the
fourth quarter will be tempered by expected product mix changes and
the possibility that customers will push shipments into the first
quarter of 2010 in order to control their own inventory levels. As
a result of this combination of factors, the Company is refining
its range for operating income for the year to between $15.0
million and $17.0 million from its previously issued range of $14.0
million and $18.0 million. The Company's previously provided
capital spending guidance for 2009 remains unchanged at a range of
between $8.0 and $10.0 million. Given the actual results through
September 30, 2009 and the Company's forecasted mix of domestic and
foreign earnings in the remainder of 2009, the Company is revising
its effective tax rate to 36.0% from its previous guidance of
39.9%. 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 930 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 effect of regional and global economic and
industrial market conditions including our expectations concerning
their impact on the markets we serve; the effect of conditions in
the financial and credit markets and their impact on the Company
and our customers and suppliers; the impact of the Company's cost
reduction initiatives; the Company's ability to execute its
business plan to meet its sales, operating income, cash flow and
capital expenditure guidance; the costs and outcome of the ongoing
SEC and DOJ investigations; the 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 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; 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, 2008, its
quarterly reports on Form 10-Q, and other periodic filings, for a
description of the foregoing and other factors that could cause
actual results to differ materially from those in the
forward-looking statements. Any forward-looking statement speaks
only as of the date on which such statement is made, and the
Company undertakes no obligation to update any forward-looking
statement, whether as a result of new information, future events or
otherwise. Investor Conference Call A live Internet broadcast of
the Company's conference call discussing quarterly and year to date
results can be accessed via the investor relations page on Hawk
Corporation's web site (http://www.hawkcorp.com/) on Monday,
November 9, 2009 at 11:00 a.m. Eastern time. An archive of the call
will be available shortly after the end of the conference call on
the investor relations page of the Company's web site. Hawk
Corporation is online at: http://www.hawkcorp.com/ HAWK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands,
except per share data) Three Months Ended Nine Months Ended
September 30 September 30 ---------------- ----------------- 2009
2008 2009 2008 ---- ---- ---- ---- Net sales $43,452 $74,181
$126,814 $211,761 Cost of sales 29,883 49,070 92,856 148,140 ------
------ ------ ------- Gross profit 13,569 25,111 33,958 63,621
Operating expenses: Selling, technical and administrative expenses
7,305 9,332 21,764 29,426 Amortization of finite- lived intangible
assets 138 139 415 451 --- --- --- --- Total operating expenses
7,443 9,471 22,179 29,877 ----- ----- ------ ------ Income from
operations 6,126 15,640 11,779 33,744 Interest expense (2,048)
(2,013) (6,078) (6,041) Interest income 125 488 394 1,679 Other
income, net 1,583 1,198 1,706 1,552 ----- ----- ----- ----- Income
from continuing operations, before income taxes 5,786 15,313 7,801
30,934 Income tax provision 2,003 5,016 2,806 10,632 ----- -----
----- ------ Income from continuing operations, after income taxes
3,783 10,297 4,995 20,302 Loss from discontinued operations, after
income taxes (13) (41) (187) (1,883) --- --- ---- ------ Net income
$3,770 $10,256 $4,808 $18,419 ====== ======= ====== ======= Diluted
earnings per share: Income from continuing operations, after income
taxes $0.45 $1.09 $0.57 $2.15 Discontinued operations, after income
taxes - - (0.02) (0.20) --- --- ----- ----- Net earnings per
diluted share $0.45 $1.09 $0.55 $1.95 ===== ===== ===== =====
Average shares and equivalents outstanding - diluted 8,315 9,403
8,566 9,375 ===== ===== ===== ===== HAWK CORPORATION CONDENSED
CONSOLIDATED BALANCE SHEET (Unaudited) (In thousands) September 30
December 31 2009 2008 ---- ---- ASSETS Current assets: Cash and
cash equivalents $52,350 $62,520 Short-term investments 33,911
30,774 Accounts receivable, net 28,022 38,569 Inventories 28,558
41,377 Deferred income taxes 382 414 Other current assets 4,956
5,521 ----- ----- Total current assets 148,179 179,175 Property,
plant and equipment, net 48,667 47,498 Other intangible assets
6,153 6,568 Other assets 8,126 6,751 ----- ----- Total assets
$211,125 $239,992 ======== ======== LIABILITIES AND SHAREHOLDERS'
EQUITY Current liabilities: Accounts payable $14,763 $30,207 Other
accrued expenses 15,489 23,010 ------ ------ Total current
liabilities 30,252 53,217 Long-term debt 87,090 87,090 Deferred
income taxes 350 338 Other liabilities 18,901 21,956 Shareholders'
equity 74,532 77,391 ------ ------ Total liabilities and
shareholders' equity $211,125 $239,992 ======== ========
http://www.newscom.com/cgi-bin/prnh/20001129/HWKLOGODATASOURCE:
Hawk Corporation CONTACT: Thomas A. Gilbride, Vice President -
Finance, +1-216-861-3553; Investor Relations: John Baldissera, BPC
Financial Marketing, 1-800-368-1217 Web Site:
http://www.hawkcorp.com/
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