Hawk Reports Earnings for Fourth Quarter and
Full Year 2000
CLEVELAND, Feb. 13 Hawk Corporation today
reported diluted earnings per share for the fourth quarter ended December 31,
2000 declined to $0.02 per share, compared with $0.07 per diluted share in the
fourth quarter last year. Net sales were $45.5 million in the fourth quarter
of 2000, a 2.4 percent decrease from $46.6 million in the prior year quarter.
The Company noted that its sales, excluding the results of its recent
acquisitions, declined by 5.4 percent during the 2000 fourth quarter compared
to the same period of 1999.
For the full year of 2000, diluted earnings per share were $0.66, compared
with $0.71 during the comparable 1999 period. Net sales for the full year of
2000 were $202.3 million, an increase of 7.8 percent from $187.6 million in
the prior year's comparable period. Excluding the impact of its recent
acquisitions, sales for the full year ended December 31, 2000 increased
2.8 percent compared to the prior year period.
Income from operations decreased $0.7 million, or 20.0 percent, to
$2.8 million in the fourth quarter of 2000, compared with $3.5 million in the
year-ago period. The decrease in operating profit was driven by the sales
decline in certain markets served by the Company during the quarter, increased
technical and administrative personnel spending to support the Company's
growth initiatives, a 15.4 percent increase in depreciation expense in the
quarter as a result of capital expenditures to support its growth objectives
and continuing start-up expenditures at the Company's facilities in Mexico and
China. The Company expects these facilities to begin production in the early
part of 2001. For the 2000 full year period, income from operations was
$19.5 million, an increase of $0.9 million, or 4.8 percent, compared with
$18.6 million in the prior year period.
The Company's effective tax rate for the fourth quarter of 2000 was
59.1 percent compared to 18.7 percent in the comparable quarter of 1999. The
increase in the effective tax rate was the result of higher tax rates at the
Company's foreign operations. In addition, the Company benefited from various
state tax credits in the fourth quarter of 1999 resulting in the lower 1999
rate. For the year ended December 31, 2000, the Company's effective tax rate
was 43.0 percent compared to 36.7 percent in the year ago period.
Segment Results
In the Friction segment, fourth-quarter sales decreased 0.6 percent to
$24.5 million from $26.2 million a year ago. While the Company experienced
strong volume increases during the quarter in the specialty friction markets,
primarily driven by increased demand in the motorcycle and bicycle markets and
the aerospace market, these increases were offset by softness in the truck,
agriculture and automotive (non performance) markets during the quarter.
Sales into the Company's truck markets were down 38.3 percent in the fourth
quarter of 2000 when compared to the fourth quarter of 1999. Income from
operations during the fourth quarter of 2000 was $2.7 million, an increase of
$1.1 million, or 68.8 percent, from $1.6 million in the comparable period.
Sales for the year ended December 31, 2000 decreased 0.9 percent to
$106.3 million from $107.3 million in the comparable period. Income from
operations for the year ended December 31, 2000 was $10.6 million, an increase
of $2.8 million, or 35.9 percent, from $7.8 million in the comparable period.
In the Powder Metal segment, fourth quarter sales decreased 2.3 percent to
$17.0 million, from $17.4 million in the year-ago quarter. The segment's
sales decline was due to softness in the heavy truck and power tool markets
and the continued reduction of sales to the office equipment market as a
result of the move to offshore production by a customer. Additionally, sales
to the lawn and garden market were flat during the fourth quarter of 2000 when
compared to the 1999 period. Income from operations during the fourth quarter
of 2000 was $1.3 million, a decrease of $1.0 million, or 43.5 percent, from
$2.3 million in the comparable period. Sales for the year ended December 31,
2000 increased 14.5 percent to $78.2 million from $68.3 million in the
comparable 1999 period. In addition to the factors noted above, sales for the
year ended December 31, 2000 benefited fully from the March 1999 acquisition
of Allegheny Powdered Metallurgy, Inc., which is only partially reflected in
the results of the 1999 period. Income from operations for the year ended
December 31, 2000 was $9.8 million, a decrease of $1.2 million, or
10.9 percent, from $11.0 million in the comparable period.
Sales in the Company's Performance Automotive segment, which consist of
high performance brakes, racing clutches and drive train components, increased
109.1 percent to $2.3 million in the fourth quarter of 2000, from $1.1 million
in the year-ago quarter. This increase was primarily the result of the
acquisitions of Tex Racing in November 2000 and Quarter Master in November
1999. Losses from operations during the fourth quarter of 2000 were
$0.5 million compared to break-even results for the comparable period of 1999.
Sales for the year ended December 31, 2000 increased 184.8 percent to
$9.4 million from $3.3 million in the comparable period. Income from
operations for the year ended December 31, 2000 was $0.4 million, an increase
of $0.2 million, or 100.0 percent, from $0.2 million in the comparable period.
In the Company's Motor segment, fourth quarter sales decreased
$0.3 million, or 15.0 percent, to $1.7 million from $2.0 million a year ago.
The decline was a result of inventory adjustments by two of the Company's
customers and softening economic conditions in markets served by the motor
segment during the quarter. Losses from operations during the fourth quarter
were $0.7 million, an increase of $0.3 million, or 75.0 percent, from a loss
of $0.4 million in the comparable quarter of 1999. Sales for the year ended
December 31, 2000 decreased $0.2 million, or 2.3 percent, to $8.4 million from
$8.6 million in the comparable period. Losses from operations for the year
ended December 31, 2000 were $1.3 million, an increase of $0.9 million, or
225.0 percent, from $0.4 million in the comparable period. The start up costs
in Mexico represented the majority of the losses incurred in this segment for
the period.
Business Outlook
During 2001, the Company expects to see continuing softness in a number of
its markets for the first half of the year with more favorable market
conditions developing during the second half. Sales in the Company's Friction
segment are expected to remain flat in 2001. During the first quarter of
2001, we expect that friction segment sales to the heavy truck, agricultural
and automotive markets will continue to experience softness due to the reduced
production schedules of our customers. In addition, the Company believes that
heavy truck and agricultural markets will remain soft through mid-year. Based
on current economic forecasts, we expect friction sales to the aircraft market
to modestly increase in 2001, as air travel demand remains strong. Sales into
markets served by the Company's Powder Metal segment are expected to grow
between 5.0 and 8.0 percent, as the Company benefits from the continued
introduction of new products to its customers. Sales in the Company's Motor
segment are expected to increase between 30.0 to 40.0 percent in 2001. The
increase in this segment in 2001 is primarily the result of sales to new
customers out of its Mexican facility. We expect sales from this facility to
ramp up to full production by the fourth quarter of 2001. Sales in the
Company's Performance segment are estimated to grow between 100.0 to
120.0 percent as a result of the acquisition of Tex Racing in November 2000,
new customer activity and expansion of the Company's existing product lines.
As a result of the factors noted above and expected margin improvement
from product mix and continued operating efficiencies, the Company expects its
first quarter earnings to be in the range of $0.10 to $0.14 per diluted share.
Hawk Corporation is a leading worldwide supplier of highly engineered
products. Its Friction Products Group, is a leading supplier of friction
materials for brakes, clutches and transmissions used in airplanes, trucks,
construction equipment, farm equipment and recreational vehicles. Through its
Powder Metal Group, the Company is a leading supplier of powder metal
components for industrial applications, including pump, motor and transmission
elements, gears, pistons and anti-lock sensor rings. The Company's
Performance Group manufactures brakes, clutches and gearboxes for motorsport
applications and performance automotive markets. The Company's Motor Group
designs and manufactures die-cast aluminum rotors for small electric motors
used in appliances, business equipment and exhaust fans. Headquartered in
Cleveland, Ohio, Hawk has 1,600 employees and 15 manufacturing sites in
five countries.
This press release includes forward-looking statements that involve risks
and uncertainties. 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 that could
cause actual results to differ materially from such statements. These risks
and uncertainties include, but are not limited to: changes in market
conditions served by the Company; the effect of any future acquisitions by the
Company; the effect of competition by manufacturers using new or different
technologies; the ability of the Company to successfully integrate its
international expansion to Mexico and China; the ability of the Company to
successfully negotiate new agreements with its unions as they come due; the
continuity of business relationships with major customers; the effect of
product mix on margins; and the ability of the Company's aircraft component
products to meet stringent Federal Aviation Administration criteria and
testing requirements. 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, 1999, its quarterly
report on Form 10-Q for the quarter ended September 30, 2000, 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.
A live Internet broadcast of the Company's conference call discussing
quarterly results can be accessed via the investor relations page on Hawk
Corporation's web site (http://www.hawkcorp.com) at 10:30 a.m. Eastern Time on
Tuesday, February 13, 2001. A replay of the call will be available shortly
after the end of the conference call through May 15, 2001.
Hawk Corporation is online at: http://www.hawkcorp.com/
HAWK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
Year Ended Three Months Ended
December 31, December 31,
2000 1999 2000 1999
Net sales $ 202,329 $ 187,638 $ 45,461 $ 46,645
Cost of sales 147,387 138,879 33,779 34,752
Gross profit 54,942 48,759 11,682 11,893
Selling, technical and
administrative expenses 31,318 26,366 7,810 7,420
Amortization of intangibles 4,161 3,829 1,086 1,013
Total expenses 35,479 30,195 8,896 8,433
Income from operations 19,463 18,564 2,786 3,460
Interest expense (9,016) (9,409) (2,241) (2,314)
Interest income 218 431 47 32
Other income (expense), net (535) 405 (94) (375)
Income before income taxes 10,130 9,991 498 803
Income taxes 4,360 3,662 295 150
Net income $ 5,770 $ 6,329 $ 203 $ 653
Earnings per share:
Basic earnings
per share $ .66 $ .71 $ .02 $ .07
Diluted earnings
per share $ .66 $ .71 $ .02 $ .07
Note: In the fourth quarter of 2000, the Company changed its accounting
policy to reflect in its consolidated statement of income all shipping and
handling costs as costs of sales and related shipping revenue in net
sales. All prior periods have been changed to conform to current year
presentation.
HAWK CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
December 31, December 31,
2000 1999
ASSETS
Current assets
Cash and cash equivalents $ 4,010 $ 3,993
Accounts receivable 29,602 29,745
Inventories 31,864 27,119
Deferred income taxes and
other current assets 4,089 5,346
Total current assets 69,565 66,203
Property, plant and equipment, net 70,401 70,185
Intangible assets 70,713 69,177
Other assets 4,706 4,055
Total assets $ 215,385 $ 209,620
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 11,579 $ 11,414
Short-term borrowings -- 872
Other accrued expenses 14,237 13,215
Current portion of long-term debt 7,273 7,160
Total current liabilities 33,089 32,661
Long-term debt 96,661 98,244
Deferred income taxes 11,554 10,559
Other 2,092 1,667
Minority interest 300 --
Shareholders' equity 71,689 66,489
Total liabilities and
shareholders' equity $ 215,385 $ 209,620
