Hawk Corporation (NYSE Amex: HWK) announced today that sales for
the third quarter ended September 30, 2010 were $70.1 million, an
increase of $26.6 million, or 61.1%, from $43.5 million in the
comparable prior year quarter. Net sales for the nine months ended
September 30, 2010 were $185.2 million, an increase of 46.1%, from
$126.8 million in the comparable prior year period. The economic
recovery, market share gains and new product introductions have
been the principal drivers of the revenue increases. Sales in all
of the Company's end markets, with the exception of defense, showed
growth during the quarter. Sales to the defense market were down
during the third quarter of 2010 compared to 2009, as the Company's
largest defense customer continued to realign its inventory levels
during the period.
Income from operations for the third quarter ended September 30,
2010 was $12.5 million, an increase of $6.4 million, or 104.9%,
from $6.1 million in the prior year period. Income from operations
was favorably impacted by the sales volume increase and the
absorption of manufacturing costs as a result of higher production
volumes in all of Hawk's manufacturing facilities. This increase
was partially offset by the effect of foreign currency exchange
rates and product mix during the quarter. For the nine month period
ended September 30, 2010, the Company reported income from
operations of $31.9 million, an increase of $20.1 million, or
170.3%, from $11.8 million in the comparable prior year period.
For the third quarter 2010, the Company reported net income of
$8.4 million, or $1.03 per diluted share, an increase of $4.6
million compared to $3.8 million, or $0.45 per diluted share, in
the third quarter of 2009. For the nine months ended September 30,
2010, the Company reported net income of $17.7 million, or $2.16
per diluted share, an increase of $12.9 million, or 268.8%,
compared to $4.8 million, or $0.55 per diluted share, during the
comparable prior year period.
Working Capital and
Liquidity
Cash and short-term investments decreased $9.8 million to $73.3
million as of September 30, 2010, compared to $83.1 million as of
December 31, 2009. The decrease in cash and short-term investments
was due primarily to the repurchase of $20.0 million of the
Company's senior notes and $7.2 million of the Company's common
stock during the nine months ended September 30, 2010. There were
no repurchases of senior notes or of the Company's common stock
during the three months ended September 30, 2010. As a result of
the significant sales and production volume increases during the
period, the Company experienced an increase in its accounts
receivable, accounts payable and inventory levels at September 30,
2010. The Company believes that the quality of its accounts
receivable and inventory remains strong. During the nine months
ended September 30, 2010, the Company spent $3.8 million on capital
expenditures compared to $6.9 million during the comparable period
of 2009. Depreciation was $5.5 million for the nine months ended
September 30, 2010 compared to $5.3 million for the nine months
ended September 30, 2009.
Business
Outlook
The Company continues to experience strength in demand coming
from the majority of its end markets, especially construction and
mining, and as a result is now expecting its 2010 full year net
sales to be $251.3 million, representing an approximately 45.6%
increase over 2009 net sales of $172.4 million. Previous guidance
provided by the Company called for net sales to be in a range of
between $241.0 million and $246.0 million.
Based on this increased net sales expectation, the Company is
also increasing its guidance for 2010 full year operating income to
$40.4 million, representing an approximately 139.5% increase over
2009 operating income of $16.7 million. Previous guidance for
operating income provided by the Company was a range of between
$36.0 million and $39.0 million.
Merger
Announcement
On October 15, 2010, the Company announced the signing of a
definitive merger agreement whereby Carlisle Companies Incorporated
(Carlisle) has agreed to acquire Hawk for $50.00 per share in an
all-cash transaction. The transaction has been unanimously approved
by the Boards of Directors of both companies. At $50.00 per share,
the transaction represents an equity value of approximately $413
million. At the closing of the transaction, Hawk will become part
of Carlisle Industrial Brake & Friction, a leading global
provider of high performance off-highway braking solutions in the
mining, construction, agricultural, wind energy, military and
industrial markets. On November 1, 2010 Carlisle commenced a tender
offer for the purchase of all outstanding shares of Hawk
Corporation common stock.
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 manufactures fuel
cell components. Headquartered in Cleveland, Ohio, Hawk has
approximately 1,450 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, operating earnings and effective tax rates. 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 risk that the merger with Carlisle Companies
Incorporated may not be consummated and the risk that regulatory
approval that may be required for the transaction or is obtained
subject to conditions that are not anticipated; the effect of
regional and global economic and industrial market conditions,
including the Company's expectations concerning the impact on the
markets it serves; the effect of conditions in the financial and
credit markets and their impact on the Company and its customers
and suppliers; the Company's ability to execute its business plan
to meet its sales, operating income, cash flow and capital
expenditure guidance; the Company's ability to utilize its cash and
short-term investments; 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,
including steel, 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; significant
changes in discount rates and actual investment return on the
Company's pension assets 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, 2009, 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
The Company expects that the transaction with Carlisle will be
completed during the fourth quarter of 2010. As a result, the
Company will not hold a conference call to discuss its quarterly
and year to date results.
HAWK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Net sales $ 70,145 $ 43,452 $ 185,233 $ 126,814
Cost of sales 48,843 29,883 126,336 92,856
--------- --------- --------- ---------
Gross profit 21,302 13,569 58,897 33,958
Operating expenses:
Selling, technical and
administrative expenses 8,706 7,305 26,568 21,764
Amortization of finite-lived
intangible assets 138 138 415 415
--------- --------- --------- ---------
Total operating expenses 8,844 7,443 26,983 22,179
--------- --------- --------- ---------
Income from operations 12,458 6,126 31,914 11,779
Interest expense (1,426) (2,048) (4,945) (6,078)
Interest income 133 125 278 394
Other income (expense), net 1,922 1,583 389 1,706
--------- --------- --------- ---------
Income from continuing
operations, before income
taxes 13,087 5,786 27,636 7,801
Income tax provision 4,655 2,003 9,917 2,806
--------- --------- --------- ---------
Income from continuing
operations, after income taxes 8,432 3,783 17,719 4,995
Loss from discontinued
operations, after income taxes (10) (13) (21) (187)
--------- --------- --------- ---------
Net income $ 8,422 $ 3,770 $ 17,698 $ 4,808
========= ========= ========= =========
Earnings per share:
Diluted earnings per share:
Income from continuing
operations, after income
taxes $ 1.03 $ 0.45 $ 2.16 $ 0.57
Discontinued operations,
after income taxes - - - (0.02)
--------- --------- --------- ---------
Net earnings per diluted
share $ 1.03 $ 0.45 $ 2.16 $ 0.55
========= ========= ========= =========
Average shares and equivalents
outstanding - diluted 8,118 8,315 8,144 8,566
========= ========= ========= =========
HAWK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands)
September 30 December 31
2010 2009
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 47,845 $ 47,206
Short-term investments 25,440 35,930
Accounts receivable, net 42,535 27,578
Inventories 38,065 27,495
Deferred income taxes 1,694 1,305
Other current assets 3,316 5,686
------------- -------------
Total current assets 158,895 145,200
Property, plant and equipment, net 45,284 47,096
Other intangible assets 5,600 6,015
Other assets 6,558 6,181
------------- -------------
Total assets $ 216,337 $ 204,492
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,514 $ 16,861
Other accrued expenses 21,654 15,033
------------- -------------
Total current liabilities 55,168 31,894
Long-term debt, net 56,110 77,090
Deferred income taxes 2,948 2,873
Other liabilities 13,680 15,165
Shareholders' equity 88,431 77,470
------------- -------------
Total liabilities and shareholders' equity $ 216,337 $ 204,492
============= =============
Contact Information Joseph J. Levanduski Senior Vice President -
Chief Financial Officer (216) 861-3553 Thomas A. Gilbride Vice
President - Finance (216) 861-3553 Hawk Corporation is online at:
www.hawkcorp.com
Hawk (AMEX:HWK)
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