May 8, 2017   SOURCE: BusinessWire

ParkOhio Announces Significantly Higher First Quarter Results

Park-Ohio Holdings Corp. (NASDAQ: PKOH) today announced its results for the first quarter of 2017.

FIRST QUARTER RESULTS

Net sales were $343.8 million in the first quarter of 2017, an increase of 5% from net sales of $328.0 million in the first quarter of 2016. The Company reported net income attributable to ParkOhio common shareholders of $9.8 million, or $0.79 per diluted share, in the first quarter of 2017, compared to $2.7 million, or $0.22 per diluted share, in the first quarter of 2016. On an adjusted basis, net income attributable to ParkOhio common shareholders was $0.68 per diluted share in the first quarter of 2017, compared to $0.46 per diluted share in the 2016 period. Please refer to the table that follows for a reconciliation of net income to adjusted earnings.

Operating results in the 2017 first quarter were significantly higher than the same period a year ago due primarily to higher sales levels and an increase in gross margin, as a percentage of net sales, of 150 basis points. EBITDA, as defined was $31.9 million in the first quarter of 2017 compared to $25.6 million in the first quarter of 2016. Please refer to the table that follows for a reconciliation of net income to EBITDA, as defined.

Edward F. Crawford, Chairman and Chief Executive Officer, stated, “We are pleased with the start of 2017. Additionally, the $700 million refinancing of our senior notes and bank agreement positions ParkOhio for substantial growth over the next 3-5 years. Our 2017 EPS guidance remains at $3.15 to $3.35 per diluted share.”

SUBSEQUENT EVENTS - DEBT REFINANCING

On April 17, 2017, the Company completed the issuance, in a private placement, of $350 million aggregate principal amount of 6.625% Senior Notes due 2027. The proceeds from the issuance were used to repay in full the Company’s previously-outstanding 8.125% Senior Notes due 2021 in the aggregate principal amount of $250 million, the Company’s term loan in the aggregate principal amount of $21 million, and a portion of the borrowings outstanding under the Company’s revolving credit facility.

Also on April 17, 2017, the Company amended its existing credit agreement to, among other things, provide an increased revolving credit facility of up to $350 million and extend the maturity date of the facility to April 17, 2022.

CONFERENCE CALL

A conference call reviewing ParkOhio’s first quarter 2017 results will be broadcast live over the Internet on Tuesday, May 9, 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 63 manufacturing sites and 65 supply chain logistics facilities, 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 domestic 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; 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, 2016. 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 March 31,
2017   2016
(In millions, except per share data)
Net sales $ 343.8 $ 328.0
Cost of sales 288.3   280.2
Gross profit 55.5 47.8
Selling, general and administrative expenses 36.6 32.5
Litigation settlement gain (3.3 ) —
Asset impairment charge —   4.0
Operating income 22.2 11.3
Interest expense 7.4   7.1
Income before income taxes 14.8 4.2
Income tax expense 4.7   1.5
Net income 10.1 2.7
Net income attributable to noncontrolling interests (0.3 ) —
Net income attributable to ParkOhio common shareholders $ 9.8   $ 2.7
 
Earnings per common share attributable to ParkOhio common shareholders:
Basic $ 0.80   $ 0.22
Diluted $ 0.79   $ 0.22
Weighted-average shares used to compute earnings per share:
Basic 12.2   12.1
Diluted 12.5   12.2
 
Dividends per common share $ 0.125   $ 0.125
 
Other financial data:
EBITDA, as defined $ 31.9   $ 25.6
 

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 March 31,
2017   2016
Earnings   Diluted EPS Earnings   Diluted EPS
(In millions, except for earnings per share (EPS))
Net income $ 10.1 $ 0.81 $ 2.7 $ 0.22
Net income attributable to noncontrolling interests (0.3 ) (0.02 ) —   —  
Net income attributable to ParkOhio common shareholders 9.8 0.79 2.7 0.22
Adjustments:
Litigation settlement gain (3.3 ) (0.26 ) — —
Asset impairment charge — — 4.0 0.33
Plant relocation and related costs 0.7 0.05 — —
Acquisition-related costs 0.3 0.02 0.2 0.02
Severance — — 0.4 0.04
Tax effect of adjustments 1.0   0.08   (1.6 ) (0.15 )
Adjusted earnings $ 8.5   $ 0.68   $ 5.7   $ 0.46  
 

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 ParkOhio 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 March 31,
2017   2016
(In millions)
Net income attributable to ParkOhio common shareholders $ 9.8 $ 2.7
Add back:
Interest expense 7.4 7.1
Income tax expense 4.7 1.5
Depreciation and amortization 7.8 7.4
Share-based compensation expense 2.2 2.5
Asset impairment charge — 4.0
Acquisition-related costs — 0.2
Miscellaneous —   0.2
EBITDA, as defined $ 31.9   $ 25.6
   
Park-Ohio Holdings Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
 
(Unaudited)
March 31, 2017 December 31, 2016
(In millions)
ASSETS
Current assets:
Cash and cash equivalents $ 67.5 $ 64.3
Accounts receivable, net 225.9 194.4
Inventories, net 248.6 240.6
Other current assets 56.1   53.4
Total current assets 598.1 552.7
Property, plant and equipment, net 168.8 167.1
Goodwill 87.1 86.6
Intangible assets, net 95.1 96.6
Other long-term assets 73.6   71.3
Total assets $ 1,022.7   $ 974.3
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 154.5 $ 133.6
Current portion of long-term debt and short-term debt 29.7 30.8
Accrued expenses and other 86.0   77.5
Total current liabilities 270.2 241.9
Long-term liabilities, less current portion:
Debt 452.0 439.0
Deferred income taxes 28.0 27.7
Other long-term liabilities 22.3   29.7
Total long-term liabilities 502.3 496.4
Park-Ohio Holdings Corp. and Subsidiaries shareholders' equity 239.9 226.0
Noncontrolling interests 10.3   10.0
Total equity 250.2   236.0
Total liabilities and shareholders' equity $ 1,022.7   $ 974.3
 
 
Park-Ohio Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Three Months Ended March 31,
2017   2016
(In millions)
OPERATING ACTIVITIES
Net income $ 10.1 $ 2.7
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization 7.8 7.4
Litigation settlement gain (3.3 ) —
Asset impairment charge — 4.0
Share-based compensation expense 2.2 2.5
Changes in operating assets and liabilities:
Accounts receivable (30.0 ) (11.6 )
Inventories (6.5 ) (3.5 )
Other current assets (2.3 ) (2.6 )
Accounts payable and accrued expenses 27.1 16.9
Litigation settlement payment (4.0 ) —
Other (1.3 ) (5.7 )
Net cash provided by operating activities (0.2 ) 10.1
INVESTING ACTIVITIES
Purchases of property, plant and equipment (6.1 ) (8.9 )
Net cash used by investing activities (6.1 ) (8.9 )
FINANCING ACTIVITIES
Proceeds from (payments on) revolving credit facility, net 13.0 (4.5 )
Payments on term loans and other debt (3.0 ) (1.1 )
Proceeds from term loans and other debt — 4.7
Proceeds from (payments on) capital lease facilities, net 1.1 (0.7 )
Dividends (1.6 ) (1.5 )
Payments of withholding taxes on share awards (0.7 ) (0.4 )
Other —   (0.1 )
Net cash provided (used) by financing activities 8.8 (3.6 )
Effect of exchange rate changes on cash 0.7   0.8  
Increase (decrease) in cash and cash equivalents 3.2 (1.6 )
Cash and cash equivalents at beginning of period 64.3   62.0  
Cash and cash equivalents at end of period $ 67.5   $ 60.4  
Income taxes paid $ 1.9 $ 0.8
Interest paid $ 1.9 $ 1.5
 
 
Park-Ohio Holdings Corp. and Subsidiaries
Business Segment Information (Unaudited)
 
Three Months Ended March 31,
2017   2016
(In millions)
Net sales:
Supply Technologies $ 133.2 $ 129.9
Assembly Components 139.3 131.7
Engineered Products 71.3   66.4  
$ 343.8   $ 328.0  
 
Segment operating income:
Supply Technologies $ 11.3 $ 10.2
Assembly Components 12.5 10.2
Engineered Products 1.7   1.4  
Total segment operating income 25.5 21.8
Corporate costs (6.6 ) (6.5 )
Litigation settlement gain 3.3 —
Asset impairment charge —   (4.0 )
Operating income 22.2 11.3
Interest expense (7.4 )   (7.1 )
Income before income taxes $ 14.8   $ 4.2