- Company reports net income of $1.6 million despite global
economic downturn CLEVELAND, May 6 /PRNewswire-FirstCall/ -- Hawk
Corporation (NYSE Amex: HWK) announced today that net sales for the
first quarter ended March 31, 2009 were $44.3 million, a decrease
of $21.5 million or 32.7%, from $65.8 million in the comparable
prior year period. The Company's first quarter 2009 net sales were
negatively impacted by the severe downturn in most of the
industrial markets served by the Company and by the effect of
unfavorable foreign currency exchange rates during the period. All
of the Company's operating facilities were impacted by the market
downturn. (Logo:
http://www.newscom.com/cgi-bin/prnh/20001129/HWKLOGO ) Income from
operations for the first quarter ended March 31, 2009 was $4.4
million, a decrease of $3.1 million, or 41.3%, from $7.5 million in
the prior year. Income from operations was negatively impacted by
reduced sales and production volumes which were partially offset by
a positive impact from reduced incentive compensation, marketing
and legal expenses, and personnel reductions during the period.
During the quarter ended March 31, 2009, the Company did not incur
any legal fees related to the ongoing investigation by the SEC
compared to $0.3 million during the prior year period. The effect
of foreign currency exchange rates accounted for 5.3 percentage
points of the 41.3% decline in operating income. During the first
quarter of 2009, the Company reduced its total global workforce by
approximately 17.0% in response to the slowdown in production.
Ronald E. Weinberg, Hawk's Chairman and CEO, said, "We are pleased
to report a profitable quarter in spite of this being an extremely
challenging period for the global markets we serve. We have taken
actions to address our fundamental cost structure and continue to
focus on managing our fixed and variable spending and our cash
position. We view this period as an opportunity to expand our
global market presence utilizing our world-class technical
capabilities and strong financial position. We believe that we have
the opportunity and the wherewithal during this downturn to drive
long-term value for our shareholders." For the quarter ended March
31, 2009, the Company reported net income of $1.6 million, or $0.17
per diluted share, a decrease of $1.6 million or 50.0%, compared to
$3.2 million, or $0.33 per diluted share, in the comparable prior
year period. Working Capital and Liquidity Cash and short-term
investments were reduced $15.6 million to $77.7 million as of March
31, 2009, compared to $93.3 million as of December 31, 2008. During
the quarter, the Company spent $4.6 million to repurchase stock
under its buy-back program and paid semi-annual accrued interest of
$3.8 million on its senior notes. During the first quarter of 2009,
the Company also used cash for its annual incentive compensation,
profit sharing and deferred compensation awards, all of which were
obligations arising from the Company's record 2008 performance.
Additionally, the Company made supplemental payments into its
domestic defined benefit pension plans totaling $3.9 million during
the first quarter of 2009. As of March 31, 2009, the Company had no
borrowings under its credit facilities $15.5 million was available
for borrowing under the Company's domestic revolving credit
facility based on eligible collateral. Additionally, as of March
31, 2009, the Company had $3.0 million available to borrow under
its foreign short-term line of credit. During the first quarter
ended March 31, 2009, the Company spent $2.9 million on capital
expenditures compared to $3.4 million during the comparable period
of 2008. Depreciation and amortization was $1.9 million in both the
first quarter of 2009 and 2008. Business Outlook Forecasting 2009
is increasingly difficult given the uncertainty in the global
economic climate, the timing and impact on our customers of
worldwide stimulus measures, and the effects that inventory
reduction in our market channels will have on sales volumes.
Accordingly, the Company is providing a revised revenue range for
2009 of between $160.0 million and $180.0 million from its previous
range of between $180.0 million and $200.0 million. Income from
operations will be impacted by the effect of this reduced volume
expectation, partially offset by the various cost reduction
measures that were initiated in the first quarter of 2009. Based on
the revised revenue range, the Company is estimating that Income
from operations will be between $14.0 million and $18.0 million, a
reduction from the Company's previously issued guidance range of
between $16.0 million and $20.0 million. "While we have taken
prudent measures to control costs and remain offensive-minded in
the marketplace, the deterioration of demand is unprecedented." Mr.
Weinberg continued, "While we initially thought the first quarter
of 2009 would be the weakest in terms of demand, it now looks more
likely that the second quarter will be even more challenging. We
anticipate that the second half of 2009 will bring stronger demand
than the first half of 2009, but not to levels originally
anticipated in our earlier guidance. We continue to remain focused
on responding to current demand declines while supporting our
long-term strategic initiatives." The Company's effective tax rate
is also being revised to 38.4% for the 2009 year from its previous
guidance of between 43.0% and 45.0%. The Company's previously
provided capital spending guidance for 2009 remains unchanged in a
range of between $8.0 million and $10.0 million. Stock Repurchase
Program On November 24, 2008, the Company's Board of Directors
approved a stock repurchase program pursuant to which the Company
is authorized to repurchase up to $15.0 million of its outstanding
shares of common stock as permitted under its current senior note
indenture and credit facility. Such repurchases may occur from time
to time in the open market, in negotiated transactions, under a
trading plan satisfying the safe harbor provisions of Rule 10b5-1
and Rule 10b-18 under the Securities and Exchange Act of 1934, or
otherwise in accordance with securities laws and regulations. The
timing and amount of any repurchases is determined by the Company's
management, based on its evaluation of market conditions, share
price and other factors. Since the inception of this program in
2008 and through April 30, 2009, the Company has purchased 842,219
shares of its common shares at an average price of $13.16 per
share. Currently, under the covenant formula applicable to stock
repurchases in the senior note indenture, the Company can
repurchase an additional $2.1 million of its common stock under the
program. 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 operates a fuel cell components business and intends
to continue developing this alternative energy product line.
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 and operating earnings.
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 Wednesday, May
6, 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 March 31
--------------------------- 2009 2008 ---- ---- Net sales $44,285
$65,779 Cost of sales 32,287 48,368 ------ ------ Gross profit
11,998 17,411 Operating expenses: Selling, technical and
administrative expenses 7,452 9,691 Amortization of finite-lived
intangible assets 138 174 --- --- Total operating expenses 7,590
9,865 ----- ----- Income from operations 4,408 7,546 Interest
expense (2,013) (2,015) Interest income 163 666 Other income
(expense), net (44) 291 --- --- Income from continuing operations,
before income taxes 2,514 6,488 Income tax provision 930 2,662 ---
----- Income from continuing operations, after income taxes 1,584
3,826 Loss from discontinued operations, after income tax benefit
(10) (675) --- ---- Net income $1,574 $3,151 ====== ====== Diluted
earnings per share: Income from continuing operations, after income
taxes $0.17 $0.40 Discontinued operations, after income taxes -
(0.07) ----- ----- Net earnings per diluted share $0.17 $0.33 =====
===== Average shares and equivalents outstanding - diluted 8,996
9,366 ===== ===== HAWK CORPORATION CONDENSED CONSOLIDATED BALANCE
SHEET (Unaudited) (In thousands) March 31 December 31 2009 2008
------------------------ ASSETS Current assets: Cash and cash
equivalents $46,933 $62,520 Short-term investments 30,785 30,774
Accounts receivable, net 28,217 38,569 Inventories 35,741 41,377
Deferred income taxes 401 414 Other current assets 3,502 5,521
----- ----- Total current assets 145,579 179,175 Property, plant
and equipment, net 47,876 47,498 Other intangible assets 6,430
6,568 Other assets 7,690 6,751 ----- ----- Total assets $207,575
$239,992 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Accounts payable $14,422 $30,207 Other accrued
expenses 14,698 23,010 ------ ------ Total current liabilities
29,120 53,217 Long-term debt 87,090 87,090 Deferred income taxes
317 338 Other liabilities 18,219 21,956 Shareholders' equity 72,829
77,391 ------ ------ Total liabilities and shareholders' equity
$207,575 $239,992 ======== ========
http://www.newscom.com/cgi-bin/prnh/20001129/HWKLOGODATASOURCE:
Hawk Corporation CONTACT: Joseph J. Levanduski, Vice President -
CFO, +1-216-861-3553, or 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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