MRO Magazine

ParkOhio Announces Results for the Second Quarter of 2015


August 7, 2015
By Business Wire News

CLEVELAND, OHIO

Park-Ohio Holdings Corp. (NASDAQ: PKOH) today announced its results for the second quarter of 2015.

SECOND QUARTER RESULTS

Net sales were a quarterly record $377.3 million for the second quarter of 2015, an increase of $34.0 million, or 9.9%, from net sales of $343.3 million for the second quarter of 2014.

ParkOhio reported net income attributable to ParkOhio common shareholders of $12.4 million, or $1.00 per diluted share, for the second quarter of 2015. This compared to net income attributable to ParkOhio common shareholders of $12.4 million, or $1.00 per diluted share, for the second quarter of 2014. As adjusted earnings were $1.04 per diluted share in the second quarter of 2015 compared to $1.02 per diluted share in the second quarter of 2014. Please refer to the table that follows for a reconciliation of net income to as adjusted earnings.

In addition, EBITDA, as defined was $34.1 million during the second quarter of 2015 compared to EBITDA, as defined of $32.7 million during the second quarter of 2014.

YEAR-TO-DATE RESULTS

Net sales were $752.0 million for the first six months of 2015, an increase of $90.9 million, or 13.7%, from net sales of $661.1 million in the first six months of 2014. ParkOhio reported net income attributable to ParkOhio common shareholders of $23.2 million, or $1.87 per diluted share, for the first six months of 2015. This compares to net income attributable to ParkOhio common shareholders of $22.5 million, or $1.81 per diluted share, for the first six months of 2014. As adjusted earnings were $1.93 per diluted share in the first six months of 2015 compared to $1.86 per diluted share in the first six months of 2014. Please refer to the table that follows for a reconciliation of net income to as adjusted earnings. In addition, EBITDA, as defined was a record $67.0 million during the first six months of 2015 and compares to EBITDA, as defined of $61.9 million during the first six months of 2014.

Edward F. Crawford, Chairman and Chief Executive Officer stated, “The year-to-date results demonstrate the potential of ParkOhio as a diversified, international manufacturing and supply chain management company.”

A conference call reviewing ParkOhio’s second quarter results will be broadcast live over the Internet on Monday, August 10, commencing at 10:00 am Eastern Time. Simply log on to http://www.pkoh.com.

ParkOhio is a leading provider of supply management services and a manufacturer of highly-engineered products. Headquartered in Cleveland, Ohio, the Company operates 45 manufacturing sites and 55 supply chain logistics facilities.

This news release contains forward-looking statements, including statements regarding future performance of the Company that are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors that could cause actual results to differ materially from expectations include, but are not limited to the following: our ability to successfully integrate acquired companies and achieve the expected results of such acquisitions; our substantial indebtedness; the uncertainty of the global economic environment; general business conditions and competitive factors, including pricing pressures and product innovation; demand for our products and services; raw material availability and pricing; fluctuations in energy costs; component part availability and pricing; changes in our relationships with customers and suppliers; the financial condition of our customers, including the impact of any bankruptcies; our ability to successfully integrate other recent and future acquisitions into existing operations; the amounts and timing, if any, of purchases of our common stock; changes in general domestic economic conditions such as inflation rates, interest rates, tax rates, unemployment rates, higher labor and healthcare costs, recessions and changing government policies, laws and regulations, including the uncertainties related to any global financial crises; adverse impacts to us, our suppliers and customers from acts of terrorism or hostilities; our ability to meet various covenants, including financial covenants, contained in the agreements governing our indebtedness; disruptions, uncertainties or volatility in the credit markets that may limit our access to capital; potential disruption due to a partial or complete reconfiguration of the European Union; increasingly stringent domestic and foreign governmental regulations, including those affecting the environment; inherent uncertainties involved in assessing our potential liability for environmental remediation-related activities; the outcome of pending and future litigation and other claims and disputes with customers; the outcome of the review being conducted by the special committee of our Board of Directors; our dependence on the automotive and heavy-duty truck industries, which are highly cyclical; the dependence of the automotive industry on consumer spending, which could be lower due to the effects of the recent financial crises; our ability to negotiate contracts with labor unions; our dependence on key management; our dependence on information systems; our ability to continue to pay cash dividends; and the other factors we describe under the “Item 1A. Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. In light of these and other uncertainties, the inclusion of a forward-looking statement herein should not be regarded as a representation by us that our plans and objectives will be achieved. The Company assumes no obligation to update the information in this release.

   
Park-Ohio Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
 

Three Months Ended June 30,

Six Months Ended June 30,

2015  20142015  2014
(In millions, except earnings per share data)
Net sales $ 377.3 $ 343.3 $ 752.0 $ 661.1
Cost of sales 316.9   282.3   633.2   544.1  
Gross profit 60.4 61.0 118.8 117.0
Selling, general and administrative expenses 34.8   34.9   68.9   68.7  
Operating income 25.6 26.1 49.9 48.3
Interest expense 6.9   6.6   13.7   12.9  
Income before income taxes 18.7 19.5 36.2 35.4
Income tax expense 6.1   6.6   12.5   12.2  
Net income 12.6 12.9 23.7 23.2
Net income attributable to noncontrolling interest (0.2 ) (0.5 ) (0.5 ) (0.7 )
Net income attributable to ParkOhio common shareholders $ 12.4   $ 12.4   $ 23.2   $ 22.5  
 
Earnings per common share attributable to ParkOhio common shareholders:
Basic $ 1.02   $ 1.02   $ 1.90   $ 1.86  
Diluted $ 1.00   $ 1.00   $ 1.87   $ 1.81  
Weighted-average shares used to compute earnings per share:
Basic 12.2   12.1   12.2   12.1  
Diluted 12.4   12.4   12.4   12.4  
 
Dividend per common share $ 0.125   $ 0.125   $ 0.250   $ 0.125  
 
Other financial data:
EBITDA, as defined $ 34.1   $ 32.7   $ 67.0   $ 61.9  
 

Park-Ohio Holdings Corp. and Subsidiaries
Supplemental Non-GAAP Financial Measures (Unaudited)

As adjusted earnings are a measure of earnings that excludes significant non-cash credits and charges; and significant and infrequent contingency expenses. As adjusted earnings reflect net income after: the exclusion of net income attributable to noncontrolling interest and before the inclusion of acquisition-related costs in cost of sales and in selling, general and administrative (“SG&A”) expenses, and executive severance. The acquisition-related costs in cost of sales relate to the fair value measurements to inventory acquired from the acquisitions that were expensed during the periods presented. Acquisition-related costs in SG&A expenses relate to adjustments to fair-value of contingent consideration related to certain acquisitions. As adjusted earnings are not a measure of performance under generally accepted accounting principles (“GAAP”) and should not be considered in isolation or as a substitute for net income, cash flows from operating, investing and financing activities and other income or cash flow statement data prepared in accordance with GAAP or as a measure of profitability or liquidity. The Company presents as adjusted earnings because management uses as adjusted earnings to measure performance. As adjusted earnings herein may not be comparable to other similarly titled measures of other companies. The following table reconciles net income to as adjusted earnings:

   
Three Months Ended June 30,  

Six Months Ended June 30,

2015  2014  2015  2014
 Diluted  Diluted  Diluted  Diluted
EarningsEPSEarningsEPS  EarningsEPSEarningsEPS
(In millions, except for earnings per share (EPS))
Net income $ 12.6 $ 1.02 $ 12.9 $ 1.04 $ 23.7 $ 1.91 $ 23.2 $ 1.87
Net income attributable to noncontrolling interest (0.2 ) (0.02 ) (0.5 ) (0.04 )   (0.5 )   (0.04 )   (0.7 )   (0.06 )
Net income attributable to ParkOhio common shareholders 12.4 1.00 12.4 1.00 23.2 1.87 22.5 1.81
Add back:
Acquisition-related costs in cost of sales 0.1 0.01 0.2 0.02 0.1 0.01
Acquisition-related costs in SG&A expenses, net of tax benefit 0.2 0.02 0.1 0.01 0.3 0.02 0.5 0.04
Executive severance, net of tax benefit 0.3   0.02         0.3     0.02          
As adjusted earnings $ 12.9   $ 1.04   $ 12.6   $ 1.02     $ 24.0     $ 1.93     $ 23.1     $ 1.86  
 

Park-Ohio Holdings Corp. and Subsidiaries
Supplemental Non-GAAP Financial Measures (Unaudited)

EBITDA, as defined reflects net income attributable to ParkOhio common shareholders before interest expense and income taxes, and excludes depreciation, amortization, certain non-cash charges and corporate-level expenses as defined in the Company’s revolving credit agreement. The acquisition-related costs in cost of sales relate to the fair value measurements to inventory acquired from the acquisitions that were expensed during the periods presented. Acquisition-related costs in SG&A expenses relate to adjustments to fair-value of contingent consideration related to certain acquisitions. EBITDA, as defined is not a measure of performance under GAAP and should not be considered in isolation or as a substitute for net income, cash flows from operating, investing and financing activities and other income or cash flow statement data prepared in accordance with GAAP or as a measure of profitability or liquidity. The Company presents EBITDA, as defined because management uses EBITDA, as defined to assess the Company’s performance and believes that EBITDA, as defined is useful to investors as an indication of the Company’s satisfaction of its debt service ratio covenant in its revolving credit agreement. Additionally, EBITDA, as defined is a measure used under the Company’s revolving credit facility to determine whether the Company may incur additional debt under such facility. EBITDA, as defined herein may not be comparable to other similarly titled measures of other companies. The following table reconciles net income attributable to ParkOhio common shareholders to EBITDA, as defined:

   

Three Months Ended June 30,

Six Months Ended June 30,

2015  20142015  2014
(In millions)
Net income attributable to ParkOhio common shareholders $ 12.4 $ 12.4 $ 23.2 $ 22.5
Add back:
Interest expense 6.9 6.6 13.7 12.9
Income tax expense 6.1 6.6 12.5 12.2
Depreciation and amortization 7.0 5.3 14.0 10.6
Share-based compensation 1.3 1.2 2.9 2.5
Acquisition related costs in cost of sales 0.1 0.2 0.1
Acquisition-related costs in SG&A expenses 0.2 0.2 0.3 0.7
Miscellaneous 0.2   0.3   0.2   0.4
EBITDA, as defined $ 34.1   $ 32.7   $ 67.0   $ 61.9
 

     
Park-Ohio Holdings Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
 
(Unaudited)
June 30, 2015December 31, 2014
(In millions)
ASSETS
Current assets:
Cash and cash equivalents $ 50.9 $ 58.0
Accounts receivable, net 216.8 208.0
Inventories, net 252.5 238.4
Deferred tax assets 28.9 28.9
Unbilled contract revenue 31.3 26.8
Other current assets 20.0   22.1
Total current assets 600.4 582.2
Property, plant and equipment, net 148.6 141.1
Goodwill 74.7 89.5
Intangible assets, net 96.9 88.1
Other long-term assets 78.0   73.3
Total assets $ 998.6   $ 974.2
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable $ 147.5 $ 160.3
Accrued expenses and other 98.1   103.6
Total current liabilities 245.6 263.9
Long-term liabilities:
Debt, less current portion 457.2 434.4
Deferred tax liabilities 45.4 43.9
Other postretirement benefits and other long-term liabilities 40.9   40.1
Total long-term liabilities 543.5 518.4
Park-Ohio Holdings Corp. and Subsidiaries shareholders’ equity 202.7 185.6
Noncontrolling interest 6.8   6.3
Total equity 209.5   191.9
Total liabilities and shareholders’ equity $ 998.6   $ 974.2
 

   
Park-Ohio Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Six Months Ended June 30,
2015    2014
(In millions)
OPERATING ACTIVITIES
Net income $   23.7 $   23.2
Adjustments to reconcile net income to net cash (used) provided by operating activities:
Depreciation and amortization 14.0 10.6
Share-based compensation 2.9 2.5
Gain on sale of assets (0.5 )
Other 0.7
Changes in operating assets and liabilities, excluding business acquisitions:
Accounts receivable (10.6 ) (26.4 )
Inventories and other current assets (18.4 ) (7.4 )
Accounts payable and accrued expenses (17.7 ) 12.2
Other 1.1   0.6  
Net cash (used) provided by operating activities (5.0 ) 15.5
INVESTING ACTIVITIES
Purchases of property, plant and equipment (19.9 ) (12.3 )
Proceeds from sale of assets 0.5
Business acquisitions, net of cash acquired   (5.9 )
Net cash used by investing activities (19.9 ) (17.7 )
FINANCING ACTIVITIES
Proceeds from term loans and other debt 3.4
Payments on term loans and other debt (1.5 ) (4.4 )
Proceeds from revolving credit facility, net 24.9 15.8
Dividends (3.1 ) (1.6 )
Purchase of treasury stock (4.4 ) (3.3 )
Other   (1.3 )
Net cash provided by financing activities 19.3 5.2
Effect of exchange rate changes on cash (1.5 ) (0.8 )
(Decrease) increase in cash and cash equivalents (7.1 ) 2.2
Cash and cash equivalents at beginning of period 58.0   55.2  
Cash and cash equivalents at end of period $   50.9   $   57.4  
Income taxes paid $ 7.6 $ 13.2
Interest paid $ 12.7 $ 12.4
 
   
Park-Ohio Holdings Corp. and Subsidiaries
Business Segment Information (Unaudited)
 

Three Months Ended June 30,

Six Months Ended June 30,
2015  20142015  2014
(In millions)
Net sales:
Supply Technologies $ 150.2 $ 142.4 $ 301.6 $ 276.8
Assembly Components 139.8 122.0 280.3 230.1
Engineered Products 87.3   78.9   170.1   154.2  
$ 377.3   $ 343.3   $ 752.0   $ 661.1  
 
Income before income taxes:
Supply Technologies $ 13.0 $ 10.4 $ 27.2 $ 20.5
Assembly Components 13.6 12.2 24.2 20.3
Engineered Products 5.2   10.7   11.4   21.3  
Total segment operating income 31.8 33.3 62.8 62.1
Corporate costs (6.2 ) (7.2 ) (12.9 ) (13.8 )
Interest expense (6.9 ) (6.6 ) (13.7 ) (12.9 )
Income before income taxes $ 18.7   $ 19.5   $ 36.2   $ 35.4  
 

Park-Ohio Holdings Corp.
Edward F. Crawford , 440-947-2000