Hawk Reports Earnings for Fourth Quarter and Full Year 1999
15 February 2000
Hawk Reports Earnings for Fourth Quarter and Full Year 1999
CLEVELAND, Feb. 15 -- Hawk Corporation today
reported an 11 percent increase in fourth quarter sales to $46.6 million, and
net income of $0.7 million or $0.07 per diluted share. This compares with
sales of $42.0 million and net income of $2.8 million, or
$0.30 per diluted share, in the fourth quarter of 1998. The increase in sales
in the fourth quarter of 1999 was primarily due to the acquisitions of
Allegheny Powder Metallurgy in March 1999 and Quarter Master Industries in
November 1999.
Fourth quarter operating earnings were negatively affected by continuing
sales weakness in the agricultural and construction markets served by the
Company's friction and powder metal divisions. This market softness
contributed to reduced sales of higher-margin friction and powder metal
products and under-utilization of manufacturing capacity, primarily in the
friction segment, which resulted in lower operating margins. In addition, the
Company incurred start-up expenditures in the fourth quarter of 1999, for its
expansion into Mexico and China.
Fourth quarter earnings were positively affected by a reduction in the
Company's effective tax rate due to various state investment and job creation
tax credits. In the fourth quarter of 1999, the Company's effective tax rate
was 18.7 percent compared with 49.4 percent in the previous year.
For the full year 1999, the Company achieved record sales of
$187.4 million, an increase of 3 percent over sales of $182.1 million during
1998. Net income for the full year 1999 was $6.3 million, or $0.71 per
diluted share, down 31 percent from $9.1 million, or $1.12 per diluted share,
in the comparable prior year period.
"Like many industrial manufacturing companies, we faced lower market
demand for our products during the year, and we were not satisfied with our
financial results," said Jeffrey H. Berlin, president and chief operating
officer. "We are especially disappointed with the results coming out of our
Wellman Friction businesses, where we made modest improvements in processes
and costs and plan to do more. As previously announced, we recently hired
Steven Campbell as president of Wellman Friction and made other significant
changes in the top management of that subsidiary."
"We further took advantage of our leadership position in the industrial
powder metal industry with the acquisition of Allegheny in 1999. We are
encouraged by the continuing demand for powder metal components in most of the
markets served by our facilities. During 1999, we undertook an expansion of
our Pennsylvania facilities to meet the requirements of our expanding customer
base. The long-term outlook for the powder metal industry continues to be
positive," continued Berlin.
Sales of friction product components were $24.5 million in the fourth
quarter of 1999, compared with $24.1 million in the fourth quarter of 1998, an
increase of 2 percent. For the full year 1999, sales of friction product
components were $100.3 million, a 9 percent decline from sales of
$109.6 million in the comparable period of 1998. The decline in this segment
was impacted primarily by the worldwide downturn in agriculture markets and in
the mining and forestry segments of the construction markets. In addition,
shipments in the aerospace friction market for the full year of 1999 were
approximately 6 percent below record levels achieved during 1998.
Sales of powder metal components were $17.5 million in the fourth quarter
of 1999, a 28 percent increase from sales of $13.7 million in the comparable
quarter of 1998. For the full year 1999, sales of powder metal components
grew 27 percent to $68.3 million from sales of $53.8 million in the same
period last year. The acquisitions of Allegheny and Clearfield Powdered
Metals were the primary drivers behind the sales increase. This growth
occurred despite the 28 percent reduction in powder metal sales from the
Company's Sinterloy facility in 1999 and softness in the agriculture and
construction markets served by other facilities in the powder metal segment.
"We continued to execute our long-term strategy for growth via
acquisitions, new customers and product applications and international
marketing efforts in 1999. We are beginning to ship product from our newly
opened Mexican rotor facility and initial market acceptance from the electric
motor industry has been extremely positive. We also are beginning
construction of a friction facility in China to serve both our current
aftermarket customers, as well as to pursue new domestic Chinese customers,"
according to Berlin.
Hawk Corporation is a leading worldwide supplier of friction products for
brakes, clutches and transmissions used in airplanes, trucks, construction
equipment, farm equipment and recreational vehicles. Hawk also is a leading
supplier of powder metal components for industrial applications, including
pump, motor and transmission elements; gears; pistons; and anti-lock brake
sensor rings. The Company designs and manufactures die-cast aluminum rotors
for small electric motors used in appliances, business equipment and exhaust
fans; and clutch assemblies for the high performance racing markets.
Headquartered in Cleveland, Ohio, the Company has 1,500 employees and
12 manufacturing sites in 4 countries.
This press release includes forward-looking statements that involve risks
and uncertainties. These risks and uncertainties include, but are not limited
to: changes in end markets served by the Company, including the duration and
extent of the existing weakness in the Company's agricultural and construction
markets; the effect of any future acquisitions by the Company; the effect of
competition by manufacturers using new or different technologies; the
continuity of business relationships with major customers; the effect of
product mix on margins; and the ability of the Company's 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, 1998 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.
Hawk Corporation financial results and news releases are available on-line
at: http://www.hawkcorp.com.
HAWK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Data)
Year Ended Three Months Ended
December 31, December 31,
1999 1998 1999 1998
Net sales $187,356 $182,131 $46,575 $42,011
Cost of sales 137,737 123,761 34,473 28,776
Gross profit 49,619 58,370 12,102 13,235
Selling, technical
and administrative
expenses 27,226 22,020 7,629 4,807
Amortization of
intangibles 3,829 3,532 1,013 884
Total expenses 31,055 25,552 8,642 5,691
Income from
operations 18,564 32,818 3,460 7,544
Interest expense (9,409) (11,883) (2,314) (2,352)
Interest income 431 999 32 258
Other income
(expense), net 405 (31) (375) (12)
Income before income
taxes and
extraordinary items 9,991 21,903 803 5,438
Income taxes 3,662 9,690 150 2,687
Income before
extraordinary items 6,329 12,213 653 2,751
Extraordinary
charges, net of
income taxes -- 3,079 -- --
Net income $6,329 $9,134 $653 $2,751
Earnings per share:
Basic:
Earnings before
extraordinary
charges .71 1.59 .07 .30
Extraordinary
charges -- (.41) -- --
Basic earnings
per share $.71 $1.18 $.07 $.30
Diluted:
Earnings before
extraordinary
charges .71 1.51 .07 .30
Extraordinary
charges -- (.39) -- --
Diluted earnings
per share $.71 $1.12 $.07 $.30
HAWK CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
December 31, December 31,
1999 1998
ASSETS
Current assets
Cash and cash equivalents $3,993 $14,317
Accounts receivable 29,745 25,056
Inventories 27,119 25,139
Deferred income taxes and
other current assets 5,346 6,840
Total current assets 66,203 71,352
Property, plant and equipment, 70,185 64,319
net
Intangible assets 69,177 60,604
Other assets 4,055 7,171
Total assets $ 209,620 $ 203,446
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Accounts payable $11,414 $10,590
Short-term borrowings 872 1,019
Other accrued expenses 13,215 13,710
Current portion of 7,160 6,181
long-term debt
Total current liabilities 32,661 31,500
Long-term debt 98,244 96,366
Deferred income taxes 10,559 9,251
Other 1,667 1,914
Shareholders' equity 66,489 64,415
Total liabilities and
shareholders' equity $ 209,620 $ 203,446