- Full year net sales increased by 24.9% over prior year period to
record $269.6 million; fourth quarter net sales increased by 5.5%
to $57.9 million CLEVELAND, March 10 /PRNewswire-FirstCall/ -- Hawk
Corporation (NYSE Alternext US: HWK) announced today that net sales
from continuing operations for the three months ended December 31,
2008, increased by 5.5% or $3.0 million, to $57.9 million from
$54.9 million in the comparable prior year period. Although net
sales were up in the quarter over quarter period, the Company began
to feel the effects of the economic slowdown during the fourth
quarter of 2008. The Company had anticipated a slowdown and had
previously incorporated its impact into its fourth quarter net
sales guidance. Most of the Company's end-markets continued to show
increases during the fourth quarter of 2008 compared to the prior
year. However, the rate of increase during the fourth quarter
slowed considerably from the growth rates achieved during the prior
three quarters of 2008. Additionally, as a result of the
strengthening of the U.S. dollar against other currencies during
the fourth quarter of 2008, the Company's reported net sales
increase of 5.5% would have been 8.3% when compared to the fourth
quarter of 2007. Net sales for the full year ended December 31,
2008 increased by 24.9% to a record $269.6 million from $215.9
million in 2007. (Logo:
http://www.newscom.com/cgi-bin/prnh/20001129/HWKLOGO ) Income from
operations for the three months ended December 31, 2008 was $5.4
million, an increase of $1.0 million, or 22.7%, from $4.4 million
in the prior year period. Income from operations benefited from
sales volume increases, pricing actions which took place in 2008,
continued implementation of lean manufacturing initiatives and
product mix. The increase during 2008 compared to the same period
of 2007 was partially offset by increases in raw material component
costs, employee compensation and variable incentive compensation
expenses during the quarter. For the year ended December 31, 2008,
the Company reported record income from operations of $39.2
million, an increase of $19.7 million, or 101.0%, from $19.5
million in the comparable prior year period. Ronald E. Weinberg,
Hawk's Chairman and CEO, said, "We are pleased to report record
sales and net income for the full year 2008. We serve a variety of
markets on a global basis, most of which had shown strong year over
year growth through the first nine months of 2008. We began to
experience the effect of the economic downturn in the fourth
quarter of 2008 and remain dedicated to managing our business
prudently during this challenging time. Toward that end, we sold
the last of our non-core businesses in December 2008, continued the
implementation of lean manufacturing and the localization of our
supply chain and production processes and adjusted our staffing
levels in line with the change in production demands. We expect to
utilize our strong cash position to benefit our customers and
achieve our long-term strategic goals. As of December 31, 2008, our
cash and investments totaled $93.3 million. Our strong balance
sheet allows us to be opportunistic in pursuing growth initiatives
that include new customer relationships, internal projects and
potential acquisitions." For the three months ended December 31,
2008, the Company reported income from continuing operations, after
income taxes, of $2.3 million, or $0.24 per diluted share, an
improvement of $0.3 million or 15.0%, compared to $2.0 million, or
$0.21 per diluted share, for the three months ended December 31,
2007. For the year ended December 31, 2008, the Company reported
record income from continuing operations, after taxes, of $22.6
million, or $2.40 per diluted share, an increase of $14.8 million,
or 189.7%, compared to income from continuing operations, after
taxes of $7.8 million, or $0.82 per diluted share. The Company
reported net income for the three months ended December 31, 2008 of
$2.4 million, or $0.26 per diluted share, an increase of $1.7
million, or 242.9%, compared to $0.7 million, or $0.07 per diluted
share for the comparable three month period in 2007. For the full
year 2008, the Company reported record net income of $20.8 million,
or $2.21 per diluted share, an increase of $3.5 million, or 20.2%,
compared to net income of $17.3 million, or $1.83 per diluted
share, in 2007. The period ended December 31, 2007, included a
gain, net of tax, on the sale of the Company's precision components
segment of $11.8 million, or $1.26 per dilutee share. Working
Capital and Liquidity Cash and short-term investments increased
$12.3 million to $93.3 million as of December 31, 2008, compared to
$81.0 million as of December 31, 2007. Operating cash flows from
continuing operations achieved a record $23.6 million in 2008. As
of December 31, 2008, the Company had no borrowings under its
revolving credit facility and $18.3 million was available for
additional borrowings under the facility based on eligible
collateral. The Company's total debt of $87.1 million is comprised
of senior notes that mature in November 2014. At December 31, 2008,
the Company's cash and short-term investments exceeded total debt
by $6.2 million. During the year ended December 31, 2008, the
Company spent $15.2 million on capital expenditures compared to
$7.6 million during the comparable period of 2007. Depreciation and
amortization was $7.8 million in 2008 compared to $7.7 million in
2007. Business Outlook Mr. Weinberg continued, "We have taken many
actions in light of the economic downturn that began impacting us
in the last two months of 2008, including controlling our
discretionary spending, implementing headcount reductions and
freezing the pay levels of our global salaried workforce. These
actions did not have a material impact on our 2008 financial
results but are anticipated to provide a more significant benefit
in 2009. Because of the continued disruptions in the financial and
industrial manufacturing markets, we believe business conditions in
most of our global markets will remain difficult to predict for
2009. However, we currently anticipate some moderation of the
current economic turmoil during the latter half of 2009. Since we
are a wear-part supplier, our products still must go through
replacement cycles. More importantly, during the last few years we
have continued to add market share which is expected to contribute
to our sales as we go through this uncertain period." The 2009 year
will be challenging for the Company as it adjusts its production
levels to correspond to lower demand in its end-markets.
Forecasting is difficult as the economic outlook is unclear given
the dramatic declines in demand experienced in the fourth quarter
of 2008, and which have continued into the first quarter of 2009
and the uncertainty surrounding the impact of the stimulative
spending programs being initiated by numerous industrialized
countries. In virtually every market that the Company serves, it
expects declining volumes compared to extremely strong volumes it
experienced in 2008. The Company is forecasting revenues in 2009 to
be in the range of $180.0 million to $200.0 million, which
represents a reduction of between 25.8% to 33.2% from the all-time
record revenues posted in 2008 of $269.6 million. The Company has
aggressively pursued cost reduction initiatives in response to
volume reductions that began in the fourth quarter of 2008,
including salary, hourly and temporary workforce reductions
representing approximately 19% of its global workforce from
employment levels as of the end of the third quarter of 2008. The
Company has also decreased discretionary spending, reduced employee
benefit programs, and frozen salary pay rates of its global
workforce. The Company's variable incentive compensation program
will also contribute to an expense reduction as it is designed to
fluctuate responsively to the overall profitability of the
organization. The Company took these actions proactively to better
match operational resources with its current outlook of demand.
However, the Company cannot predict whether these actions will be
sufficient should volumes continue to decline. If demand returns,
the Company expects that it can move quickly to increase production
levels to meet increased demand requirements. Including the
anticipated cost savings from the Company's initiatives, the
Company expects its income from operations in 2009 to be between
$16.0 and $20.0 million. This represents a decrease of between
49.0% to 59.2% from income from operations of $39.2 million
reported in 2008. The Company continues to focus on its previously
stated goals of utilizing its significant cash position to
aggressively pursue strategic acquisition opportunities, execute on
share and bond repurchase opportunities and make investment in
long-term research and development projects. However, the Company
cannot predict timing of the implementation of any these projects
or the impact that any of these projects may have on its earnings.
The Company expects its capital spending in 2009 to be between $8.0
and $10.0 million compared to $15.2 million spent during 2008. Its
effective tax rate is expected to be between 43.0% and 45.0% for
the year ending December 31, 2009 compared to 35.0% in 2008. The
expected increase in the effective tax rate in 2009 is primarily
the result of anticipated lower foreign taxable earnings and the
impact these reduced earnings will have on the Company's
consolidated effective tax rate. 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 purchase up to $15.0 million of its outstanding
shares of common stock as allowed under its current senior note
indenture and credit facility. Such repurchases may occur from time
to time in the open market, in negotiated transactions, 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. From the program's inception in November
2008 through February 28, 2009, the Company has purchased 301,373
shares of its common stock at an average price of $15.24 per share.
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. Headquartered in
Cleveland, Ohio, Hawk has approximately 950 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 as the Company's non-U.S. sales continue to
increase; 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 Tuesday, March 10, 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 INCOME (In thousands, except per share data) Three Months Twelve
Months Ended Ended December 31 December 31 -------------
-------------- 2008 2007 2008 2007 ---- ---- ---- ---- Net sales
$57,887 $54,872 $269,648 $215,879 Cost of sales 44,412 42,687
192,552 164,509 ------ ------ ------- ------- Gross profit 13,475
12,185 77,096 51,370 Operating expenses: Selling, technical and
administrative expenses 7,899 7,560 37,325 31,172 Amortization of
finite-lived intangible assets 138 182 589 727 --- --- --- ---
Total operating expenses 8,037 7,742 37,914 31,899 ----- -----
------ ------ Income from operations 5,438 4,443 39,182 19,471
Interest expense (2,014) (2,018) (8,055) (9,394) Interest income
410 941 2,089 3,835 Other (expense) income, net (49) 138 1,503
(297) --- --- ----- ---- Income from continuing operations, before
income taxes 3,785 3,504 34,719 13,615 Income tax provision 1,507
1,488 12,139 5,829 ----- ----- ------ ----- Income from continuing
operations, after income taxes 2,278 2,016 22,580 7,786 Income
(loss) from discontinued operations, after income taxes 145 (1,312)
(1,738) 9,482 --- ------ ------ ----- Net income $2,423 $704
$20,842 $17,268 ====== ==== ======= ======= Diluted earnings per
share: Income from continuing operations, after income taxes $0.24
$0.21 $2.40 $0.82 Discontinued operations, after income taxes 0.02
(0.14) (0.19) 1.01 ---- ----- ----- ---- Net earnings per diluted
share $0.26 $0.07 $2.21 $1.83 ===== ===== ===== ===== Average
shares and equivalents outstanding - diluted 9,298 9,360 9,356
9,360 ===== ===== ===== ===== HAWK CORPORATION CONDENSED
CONSOLIDATED BALANCE SHEET (In thousands) December 31 2008 2007
---- ---- ASSETS Current assets: Cash and cash equivalents $62,520
$21,992 Short-term investments 30,774 58,999 Accounts receivable,
net 38,569 37,306 Inventories 41,377 36,719 Deferred income taxes
414 1,355 Other current assets 5,521 4,946 Current assets of
discontinued operations - 5,509 ----- ----- Total current assets
179,175 166,826 Property, plant and equipment, net 47,498 39,575
Other intangible assets 6,568 7,157 Other assets 6,751 5,176
Long-term assets of discontinued operations - 1,170 ----- -----
Total assets $239,992 $219,904 ======== ======== LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $30,207
$30,325 Other accrued expenses 23,010 21,434 Current portion of
long-term debt - 59 Current liabilities of discontinued operations
- 1,740 ----- ----- Total current liabilities 53,217 53,558
Long-term debt 87,090 87,090 Deferred income taxes 338 922 Other
liabilities 21,956 11,010 Shareholders' equity 77,391 67,324 ------
------ Total liabilities and shareholders' equity $239,992 $219,904
======== ========
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, both of Hawk Corporation; or Investor
Relations, John Baldissera, BPC Financial Marketing, 800-368-1217
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