Park-Ohio Holdings Corp. (NASDAQ: PKOH) today announced its results for
the third quarter of 2018.
THIRD QUARTER RESULTS
Net sales were $414.3 million in the third quarter of 2018, an increase
of 18% from net sales of $352.2 million in the third quarter of 2017,
driven by organic growth of 7% and acquisition-related growth of 11%.
The Company reported net income attributable to ParkOhio common
shareholders of $14.2 million, or $1.14 per diluted share, in the third
quarter of 2018, compared to $10.0 million, or $0.80 per diluted share,
in the third quarter of 2017. On an adjusted basis, net income
attributable to ParkOhio common shareholders was $1.07 per diluted share
in the third quarter of 2018 compared to $0.82 per diluted share in the
2017 period, an increase of 30%. The adjustments in the 2018 period
included $0.07 per share of income tax benefits related to U.S. Tax
Reform. Please refer to the table that follows for a reconciliation of
net income to adjusted earnings.
Matthew V. Crawford, Chairman and Chief Executive Officer, stated, "Our
strong year continued with record third quarter revenues and earnings.
We continue to invest vigorously in our businesses and are currently
launching our third new manufacturing facility in the last twelve months
to serve our global customers. The acquisition of Hydrapower, our third
of the year, provides a strategic opportunity to grow in new market
segments for Assembly Components and Supply Technologies."
In the third quarter of 2018, operating cash flows were $23.1 million,
and the Company ended September 2018 with $62.9 million of cash on-hand,
after repatriating $24.4 million from a foreign subsidiary to pay down
long-term debt. EBITDA, as defined was $37.8 million in the 2018 period,
an increase of 22% from $31.0 million in the corresponding period of
2017. Please refer to the table that follows for a reconciliation of net
income to EBITDA, as defined.
ACQUISITION
In October 2018, the Company acquired Hydrapower Dynamics Limited
("Hydrapower") for $8.0 million in cash. Headquartered in Birmingham,
England, Hydrapower is a manufacturer of fluid handling systems
incorporating hoses, manipulated tubes and fabricated assemblies for the
bus and truck, automotive, agricultural and construction end markets.
Hydrapower will be included in our Assembly Components segment from the
date of acquisition.
YEAR-TO-DATE RESULTS
Net sales were a record $1,252.2 million in the first nine months of
2018, an increase of 20% from net sales of $1,046.9 million in the first
nine months of 2017, driven by organic growth of 10% and
acquisition-related growth of 10%. The Company reported net income
attributable to ParkOhio common shareholders of $38.8 million, or $3.09
per diluted share, in the first nine months of 2018, compared to $22.8
million, or $1.83 per diluted share, in the 2017 period. On an adjusted
basis, net income attributable to ParkOhio common shareholders was $3.08
per diluted share in the first nine months of 2018 compared to $2.37 per
diluted share in the 2017 period, an increase of 30%. EBITDA, as defined
was $114.3 million in the first nine months of 2018, an increase of 18%
from $96.9 million in the first nine months of 2017. Please refer to the
tables that follow for reconciliations of net income to adjusted
earnings and net income to EBITDA, as defined.
GUIDANCE
"We are re-affirming our full year 2018 Adjusted EPS guidance of $3.80 -
$4.00 and are cautiously optimistic to be at the high end of this
range," stated Mr. Crawford.
CONFERENCE CALL
A conference call reviewing ParkOhio's third quarter 2018 results will
be broadcast live over the Internet on Tuesday, November 6, commencing
at 10:00 am Eastern Time. Simply log on to http://www.pkoh.com.
ParkOhio is a diversified international company providing world-class
customers with a supply chain management outsourcing service, capital
equipment used on their production lines, and manufactured components
used to assemble their products. Headquartered in Cleveland, Ohio,
ParkOhio operates more than 125 manufacturing sites and supply chain
logistics facilities worldwide, through three reportable segments:
Supply Technologies, Assembly Components and Engineered Products.
This news release contains forward-looking statements, including
statements regarding future performance of the Company, that are subject
to known and unknown risks, uncertainties and other factors that may
cause our actual results, performance and achievements, or industry
results, to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements.
These factors that could cause actual results to differ materially from
expectations include, but are not limited to, the following: our
substantial indebtedness; the uncertainty of the global economic
environment; general business conditions and competitive factors,
including pricing pressures and product innovation; demand for our
products and services; raw material availability and pricing;
fluctuations in energy costs; component part availability and pricing;
changes in our relationships with customers and suppliers; the financial
condition of our customers, including the impact of any bankruptcies;
our ability to successfully integrate recent and future acquisitions
into existing operations; the amounts and timing, if any, of purchases
of our common stock; changes in general economic conditions such as
inflation rates, interest rates, tax rates, unemployment rates, higher
labor and healthcare costs, recessions and changing government policies,
laws and regulations, including those related to the current global
uncertainties and crises, such as tariffs and surcharges; adverse
impacts to us, our suppliers and customers from acts of terrorism or
hostilities; our ability to meet various covenants, including financial
covenants, contained in the agreements governing our indebtedness;
disruptions, uncertainties or volatility in the credit markets that may
limit our access to capital; potential disruption due to a partial or
complete reconfiguration of the European Union; increasingly stringent
domestic and foreign governmental regulations, including those affecting
the environment or import and export controls and other trade barriers;
inherent uncertainties involved in assessing our potential liability for
environmental remediation-related activities; the outcome of pending and
future litigation and other claims and disputes with customers; the
outcome of the review conducted by the special committee of our board of
directors; our dependence on the automotive and heavy-duty truck
industries, which are highly cyclical; the dependence of the automotive
industry on consumer spending; our ability to negotiate contracts with
labor unions; our dependence on key management; our dependence on
information systems; our ability to continue to pay cash dividends, and
the other factors we describe under "Item 1A. Risk Factors" included in
the Company's Annual Report on Form 10-K for the year ended December 31,
2017. Any forward-looking statement speaks only as of the date on which
such statement is made, and we undertake no obligation to update any
forward-looking statement, whether as a result of new information,
future events or otherwise, except as required by law. In light of these
and other uncertainties, the inclusion of a forward-looking statement
herein should not be regarded as a representation by us that our plans
and objectives will be achieved. The Company assumes no obligation to
update the information in this release.
|
| |
| |
Park-Ohio Holdings Corp. and Subsidiaries |
Condensed Consolidated Statements of Income (Unaudited) |
| | | |
|
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2018 |
| 2017 (2) | | 2018 |
| 2017 (2) |
| | (In millions, except per share data) |
Net sales
| |
$
|
414.3
| | |
$
|
352.2
| | |
$
|
1,252.2
| | |
$
|
1,046.9
| |
Cost of sales (1) | |
348.4
|
| |
295.5
|
| |
1,048.1
|
| |
875.4
|
|
Gross profit
| |
65.9
| | |
56.7
| | |
204.1
| | |
171.5
| |
Selling, general and administrative expenses (1) | |
41.1
| | |
37.7
| | |
131.9
| | |
112.5
| |
Gain on sale of assets
| |
-
| | |
-
| | |
(1.9
|
)
| |
-
| |
Litigation settlement gain
| |
-
|
| |
-
|
| |
-
|
| |
(3.3
|
)
|
Operating income
| |
24.8
| | |
19.0
| | |
74.1
| | |
62.3
| |
Other components of pension income and other postretirement benefits
expense, net (1) | |
2.0
| | |
1.7
| | |
6.4
| | |
4.7
| |
Interest expense, net
| |
(8.9
|
)
| |
(7.8
|
)
| |
(26.1
|
)
| |
(23.1
|
)
|
Loss on extinguishment of debt
| |
-
|
| |
-
|
| |
-
|
| |
(11.0
|
)
|
Income before income taxes
| |
17.9
| | |
12.9
| | |
54.4
| | |
32.9
| |
Income tax expense
| |
(3.2
|
)
| |
(2.7
|
)
| |
(14.5
|
)
| |
(9.4
|
)
|
Net income
| |
14.7
| | |
10.2
| | |
39.9
| | |
23.5
| |
Net income attributable to noncontrolling interests
| |
(0.5
|
)
| |
(0.2
|
)
| |
(1.1
|
)
| |
(0.7
|
)
|
Net income attributable to Park-Ohio Holdings Corp. common
shareholders
| |
$
|
14.2
|
| |
$
|
10.0
|
| |
$
|
38.8
|
| |
$
|
22.8
|
|
| | | | | | | |
|
Earnings per common share attributable to Park-Ohio Holdings Corp.
common shareholders:
| | | | | | | | |
Basic
| |
$
|
1.15
|
| |
$
|
0.82
|
| |
$
|
3.15
|
| |
$
|
1.87
|
|
Diluted
| |
$
|
1.14
|
| |
$
|
0.80
|
| |
$
|
3.09
|
| |
$
|
1.83
|
|
Weighted-average shares used to compute earnings per share:
| | | | | | | | |
Basic
| |
12.3
|
| |
12.2
|
| |
12.3
|
| |
12.2
|
|
Diluted
| |
12.5
|
| |
12.4
|
| |
12.5
|
| |
12.4
|
|
| | | | | | | |
|
Dividends per common share
| |
$
|
0.125
|
| |
$
|
0.125
|
| |
$
|
0.375
|
| |
$
|
0.375
|
|
| | | | | | | |
|
Other financial data:
| | | | | | | | |
EBITDA, as defined
| |
$
|
37.8
|
| |
$
|
31.0
|
| |
$
|
114.3
|
| |
$
|
96.9
|
|
|
|
| |
| |
(1) - The Company adopted ASU 2017-07 in the first quarter of
2018, resulting in a change to the presentation of components of
pension income and other postretirement benefits expense,
net. The following amounts are reflected in the condensed
consolidated statements of income:
|
| | | |
|
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2018 |
| 2017 | | 2018 |
| 2017 |
Amounts recorded in Cost of sales
| |
$
|
(0.7
|
)
| |
$
|
(0.5
|
)
| |
$
|
(2.2
|
)
| |
$
|
(1.5
|
)
|
Amounts recorded in SG&A expenses
| |
(0.2
|
)
| |
(0.2
|
)
| |
(0.7
|
)
| |
(0.4
|
)
|
Amounts recorded in Other components of pension income and other
postretirement benefits expense, net
| |
2.0
|
| |
1.7
|
| |
6.4
|
| |
4.7
|
|
Total pension income and other postretirement benefit expense, net
| |
$
|
1.1
|
| |
$
|
1.0
|
| |
$
|
3.5
|
| |
$
|
2.8
|
|
| | | | | | | | | | | | | | | |
|
|
(2) - 2017 pension and other postretirement amounts have been
reclassified to conform to the 2018 presentation.
|
|
Park-Ohio Holdings Corp. and Subsidiaries
Supplemental
Non-GAAP Financial Measures (Unaudited)
Adjusted earnings is a non-GAAP financial measure that the Company is
providing in this press release. Adjusted earnings is net income
calculated in accordance with generally accepted accounting principles
("GAAP"), adjusted for special items. The Company presents this non-GAAP
financial measure because management uses adjusted earnings to compare
its operating performance on a consistent basis over multiple periods
because they remove the impact of certain significant non-cash credits
or charges and certain infrequent items impacting net income. Adjusted
earnings is not a measure of performance under GAAP and should not be
considered in isolation from, or as a substitute for, net income
calculated in accordance with GAAP. Adjusted earnings herein may not be
comparable to similarly titled measures of other companies. The
following table reconciles net income to adjusted earnings:
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| | 2018 |
| 2017 | | 2018 |
| 2017 |
| | |
| Diluted | | |
| Diluted | | |
| Diluted | | |
| Diluted |
| | Earnings | | EPS | | Earnings | | EPS | | Earnings | | EPS | | Earnings | | EPS |
| | (In millions, except for earnings per share (EPS)) |
Net income
| |
$
|
14.7
| | |
$
|
1.18
| | |
$
|
10.2
| | |
$
|
0.82
| | |
$
|
39.9
| | |
$
|
3.18
| | |
$
|
23.5
| | |
$
|
1.89
| |
Net income attributable to noncontrolling interests
| |
(0.5
|
)
| |
(0.04
|
)
| |
(0.2
|
)
| |
(0.02
|
)
| |
(1.1
|
)
| |
(0.09
|
)
| |
(0.7
|
)
| |
(0.06
|
)
|
Net income attributable to Park-Ohio Holdings Corp. common
shareholders
| |
14.2
| | |
1.14
| | |
10.0
| | |
0.80
| | |
38.8
| | |
3.09
| | |
22.8
| | |
1.83
| |
Adjustments:
| | | | | | | | | | | | | | | | |
Acquisition-related expenses
| |
-
| | |
-
| | |
0.3
| | |
0.03
| | |
1.0
| | |
0.09
| | |
0.7
| | |
0.05
| |
Gain on sale of assets
| |
-
| | |
-
| | |
-
| | |
-
| | |
(1.9
|
)
|
|
(0.15
|
)
| |
-
| | |
-
| |
Loss on extinguishment of debt
| |
-
| | |
-
| | |
-
| | |
-
| | |
-
| | |
-
| | |
11.0
| | |
0.89
| |
Litigation settlement gain
| |
-
| | |
-
| | |
-
| | |
-
| | |
-
| | |
-
| | |
(3.3
|
)
| |
(0.27
|
)
|
Plant relocation and related costs
| |
-
| | |
-
| | |
-
| | |
-
| | |
-
| | |
-
| | |
0.7
| | |
0.05
| |
Tax effect of above adjustments
| |
-
| | |
-
| | |
(0.1
|
)
| |
(0.01
|
)
| |
0.2
| | |
0.02
| | |
(2.4
|
)
| |
(0.18
|
)
|
U.S. Tax Act adjustments
| |
(0.9
|
)
| |
(0.07
|
)
| |
-
|
| |
-
|
| |
0.3
|
| |
0.03
|
| |
-
|
| |
-
|
|
Adjusted earnings
| |
$
|
13.3
|
| |
$
|
1.07
|
| |
$
|
10.2
|
| |
$
|
0.82
|
| |
$
|
38.4
|
| |
$
|
3.08
|
| |
$
|
29.5
|
| |
$
|
2.37
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Park-Ohio Holdings Corp. and Subsidiaries
Supplemental
Non-GAAP Financial Measures (Unaudited)
EBITDA, as defined is a non-GAAP financial measure that the Company is
providing in this press release. EBITDA, as defined reflects net income
attributable to Park-Ohio Holdings Corp. common shareholders before
interest expense, income taxes, depreciation and amortization, and also
excludes certain non-cash charges and corporate-level expenses as
defined in the Company's current revolving credit facility. The Company
presents this non-GAAP financial measure because management uses EBITDA,
as defined to assess the Company's performance and believes that EBITDA
is useful to investors as an indication of the Company's satisfaction of
its Debt Service Ratio covenant in its current revolving credit
facility. Additionally, EBITDA, as defined is a measure used under the
Company's current revolving credit facility to determine whether the
Company may incur additional debt under such facility. EBITDA, as
defined is not a measure of performance under GAAP and should not be
considered in isolation from, or as a substitute for, net income or cash
flow information calculated in accordance with GAAP. EBITDA, as defined
herein may not be comparable to similarly titled measures of other
companies. The following table reconciles net income to EBITDA, as
defined:
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| 2018 |
| 2017 | | 2018 |
| 2017 |
| (In millions) |
Net income attributable to Park-Ohio Holdings Corp. common
shareholders
|
$
|
14.2
| |
$
|
10.0
| |
$
|
38.8
| |
$
|
22.8
|
Add back:
| | | | | | | |
Interest expense, net
|
8.9
| |
7.8
| |
26.1
| |
23.1
|
Loss on extinguishment of debt
|
-
| |
-
| |
-
| |
11.0
|
Income tax expense
|
3.2
| |
2.7
| |
14.5
| |
9.4
|
Depreciation and amortization
|
9.2
| |
7.7
| |
27.3
| |
23.6
|
Stock-based compensation expense
|
1.9
| |
2.3
| |
6.5
| |
6.3
|
Acquisition-related expenses and other
|
0.4
| |
0.5
| |
1.1
| |
0.7
|
EBITDA, as defined
|
$
|
37.8
| |
$
|
31.0
| |
$
|
114.3
| |
$
|
96.9
|
| | | | | | | | | | |
|
|
| |
| |
Park-Ohio Holdings Corp. and Subsidiaries |
Condensed Consolidated Balance Sheets |
| | | |
|
| | (Unaudited) | | |
| | September 30, 2018 | | December 31, 2017 |
| | (In millions) |
ASSETS |
Current assets:
| | | | |
Cash and cash equivalents
| |
$
|
62.9
| |
$
|
82.8
|
Accounts receivable, net
| |
287.8
| |
242.6
|
Inventories, net
| |
309.4
| |
282.8
|
Other current assets
| |
83.3
| |
61.4
|
Total current assets
| |
743.4
| |
669.6
|
Property, plant and equipment, net
| |
205.6
| |
177.0
|
Goodwill
| |
103.6
| |
100.2
|
Intangible assets, net
| |
101.4
| |
99.5
|
Other long-term assets
| |
88.4
| |
86.2
|
Total assets
| |
$
|
1,242.4
| |
$
|
1,132.5
|
| | | |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
Current liabilities:
| | | | |
Trade accounts payable
| |
$
|
181.7
| |
$
|
173.7
|
Current portion of long-term debt and short-term debt
| |
16.4
| |
17.7
|
Accrued expenses and other
| |
107.5
| |
84.7
|
Total current liabilities
| |
305.6
| |
276.1
|
Long-term liabilities, less current portion:
| | | | |
Debt
| |
563.1
| |
515.5
|
Other long-term liabilities
| |
57.9
| |
52.9
|
Total long-term liabilities
| |
621.0
| |
568.4
|
Park-Ohio Holdings Corp. and Subsidiaries shareholders' equity
| |
302.7
| |
276.0
|
Noncontrolling interests
| |
13.1
| |
12.0
|
Total equity
| |
315.8
| |
288.0
|
Total liabilities and shareholders' equity
| |
$
|
1,242.4
| |
$
|
1,132.5
|
| | | | | |
|
|
| |
Park-Ohio Holdings Corp. and Subsidiaries |
Condensed Consolidated Statements of Cash Flows (Unaudited) |
| |
|
| | Nine Months Ended September 30, |
| | 2018 |
| 2017 |
| | (In millions) |
OPERATING ACTIVITIES | | | | |
Net income
| |
$
|
39.9
| | |
$
|
23.5
| |
Adjustments to reconcile net income to net cash provided by
operating activities:
| | | | |
Depreciation and amortization
| |
27.3
| | |
23.6
| |
Stock-based compensation expense
| |
6.5
| | |
6.3
| |
Net impact of U.S. Tax Act
| |
0.3
| | |
-
| |
Gain on sale of assets
| |
(1.9
|
)
| |
-
| |
Loss on extinguishment of debt
| |
-
| | |
11.0
| |
Litigation settlement gain
| |
-
| | |
(3.3
|
)
|
Changes in operating assets and liabilities:
| | | | |
Accounts receivable
| |
(37.2
|
)
| |
(29.9
|
)
|
Inventories
| |
(23.2
|
)
| |
(15.7
|
)
|
Other current assets
| |
(9.8
|
)
| |
(14.9
|
)
|
Accounts payable and accrued expenses
| |
26.0
| | |
34.4
| |
Litigation settlement payment
| |
-
| | |
(4.0
|
)
|
Other
| |
(6.1
|
)
| |
(3.8
|
)
|
Net cash provided by operating activities
| |
21.8
| | |
27.2
| |
INVESTING ACTIVITIES | | | | |
Purchases of property, plant and equipment
| |
(35.9
|
)
| |
(18.9
|
)
|
Proceeds from sale of assets
| |
2.8
| | |
-
| |
Business acquisitions, net of cash acquired
| |
(36.8
|
)
| |
(10.5
|
)
|
Net cash used by investing activities
| |
(69.9
|
)
| |
(29.4
|
)
|
FINANCING ACTIVITIES | | | | |
Proceeds from (payments on) revolving credit facility, net
| |
48.3
| | |
(32.5
|
)
|
Payments on term loans and other debt
| |
(2.8
|
)
| |
(27.7
|
)
|
Proceeds from term loans and other debt
| |
2.2
| | |
-
| |
(Payments on) proceeds from capital lease facilities, net
| |
(3.5
|
)
| |
0.1
| |
Issuance of 6.625% Senior Notes due 2027
| |
-
| | |
350.0
| |
Debt financing costs
| |
-
| | |
(7.5
|
)
|
Repurchase of 8.125% Senior Notes due 2021
| |
-
| | |
(250.0
|
)
|
Premium on early extinguishment of debt
| |
-
| | |
(8.0
|
)
|
Dividends
| |
(4.8
|
)
| |
(5.0
|
)
|
Purchase of treasury shares
| |
(6.1
|
)
| |
(3.6
|
)
|
Payments of withholding taxes on share awards
| |
(3.1
|
)
| |
(2.3
|
)
|
Net cash provided by financing activities
| |
30.2
| | |
13.5
| |
Effect of exchange rate changes on cash
| |
(2.0
|
)
| |
5.1
|
|
(Decrease) increase in cash and cash equivalents
| |
(19.9
|
)
| |
16.4
| |
Cash and cash equivalents at beginning of period
| |
82.8
|
| |
64.3
|
|
Cash and cash equivalents at end of period
| |
$
|
62.9
|
| |
$
|
80.7
|
|
Income taxes paid
| |
$
|
14.8
| | |
$
|
8.6
| |
Interest paid
| |
$
|
19.0
| | |
$
|
16.5
| |
| | | | | | | |
|
|
| |
| |
Park-Ohio Holdings Corp. and Subsidiaries |
Business Segment Information (Unaudited) |
| | | |
|
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2018 |
| 2017 | | 2018 |
| 2017 |
| | (In millions) |
Net sales: | | | | | | | | |
Supply Technologies
| |
$
|
155.1
| | |
$
|
140.2
| | |
$
|
482.2
| | |
$
|
415.8
| |
Assembly Components
| |
146.1
| | |
127.9
| | |
444.7
| | |
393.2
| |
Engineered Products
| |
113.1
|
| |
84.1
|
| |
325.3
|
| |
237.9
|
|
| |
$
|
414.3
|
| |
$
|
352.2
|
| |
$
|
1,252.2
|
| |
$
|
1,046.9
|
|
| | | | | | | |
|
Segment operating income: | | | | | | | | |
Supply Technologies
| |
$
|
11.3
| | |
$
|
10.2
| | |
$
|
37.3
| | |
$
|
32.8
| |
Assembly Components
| |
9.3
| | |
10.7
| | |
33.6
| | |
35.2
| |
Engineered Products
| |
12.2
|
| |
5.6
|
| |
27.4
|
| |
12.4
|
|
Total segment operating income
| |
32.8
| | |
26.5
| | |
98.3
| | |
80.4
| |
Corporate costs
| |
(8.0
|
)
| |
(7.5
|
)
| |
(26.1
|
)
| |
(21.4
|
)
|
Gain on sale of assets
| |
-
| | |
-
| | |
1.9
| | |
-
| |
Litigation settlement gain
| |
-
|
| |
-
|
| |
-
|
| |
3.3
|
|
Operating income
| |
24.8
| | |
19.0
| | |
74.1
| | |
62.3
| |
Other components of net pension income and other postretirement
benefits expense, net
| |
2.0
| | |
1.7
| | |
6.4
| | |
4.7
| |
Interest expense, net
| |
(8.9
|
)
| |
(7.8
|
)
| |
(26.1
|
)
| |
(23.1
|
)
|
Loss on extinguishment of debt
| |
-
|
| |
-
|
| |
-
|
|
|
(11.0
|
)
|
Income before income taxes
| |
$
|
17.9
|
| |
$
|
12.9
|
| |
$
|
54.4
|
| |
$
|
32.9
|
|
| | | | | | | | | | | | | | | |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20181105005990/en/
Matthew V. Crawford
Park-Ohio Holdings Corp.
440-947-2000