NINE MONTHS RESULTS
Park-Ohio reported net sales of $785.8 million for the first nine months of 2006, a 14% increase on sales of $691.9 million for the same period of 2005. Park-Ohio reported net income of $13.4 million, or $1.17 per share dilutive, for the first nine months of 2006, which included the impact of federal income tax expense. This compared to $18.9 million, or $1.66 per share dilutive, in the same period of 2005, which benefited from the absence of federal income tax expense. Had federal income taxes been recorded in the first nine months of 2005, Park-Ohio would have reported net income fully taxed(A) of $13.3 million, or $1.17 per share dilutive.
THIRD QUARTER RESULTS
Park-Ohio reported net sales of $257.2 million for third quarter 2006, a 10% increase on sales of $234.2 million for third quarter 2005. Park-Ohio reported net income of $3.7 million, or $.33 per share dilutive, for third quarter 2006, which included the impact of federal income tax expense. This compared to net income of $5.2 million, or $.45 per share dilutive, for third quarter 2005, which benefited from the absence of federal income tax expense. Had federal income taxes been recorded in third quarter 2005, Park-Ohio would have reported net income fully taxed(A) of $3.7 million, or $.33 per share dilutive.
Recent History of Earnings per Share Nine months ended Quarter ended
Sept. 30, Sept. 30,
2006 2005 2006 2005
Dilutive EPS, GAAP, as reported $1.17 $1.66 $0.33 $0.45
Dilutive EPS, as adjusted
with 37% income tax $1.17 $0.33
Edward F. Crawford, Chairman and Chief Executive Officer, stated, "We continue to be buoyed by strong performance in most of our businesses and end markets. This success is being offset by a challenging automotive environment which impact principally our aluminum and rubber businesses. We expect significant improvements in both businesses, beginning in very late 2006 and 2007. The NABS acquisition will provide little improvement to our 2006 earnings while we integrate their operations into ILS and prepare for a very exciting 2007. We are hopeful that as a result of expected strong fourth quarter performance across many businesses and the recent operational improvements at our rubber business, we will achieve the lower end of our previously announced earnings guidance of $1.65 to $1.75 dilutive EPS."
A conference call reviewing Park-Ohio's third quarter results will be broadcast live over the Internet on Tuesday, October 31, commencing at 10:00 am Eastern Time. Simply log on to http://www.pkoh.com.
Park-Ohio is a leading provider of supply chain logistics services and a manufacturer of highly engineered products. Headquartered in Cleveland, Ohio, the Company operates 24 manufacturing sites and 55 supply chain logistics facilities.
In fourth quarter 2005, the Company reversed $7.3 million of its domestic deferred tax asset valuation allowance, increasing net income. In 2006, the Company began recording a quarterly provision for federal income taxes, which resulted in a total effective income tax rate of approximately 37%. Park- Ohio's significant net operating loss carry-forward should preclude the payment of cash federal income taxes in 2006 and substantially reduce cash payments in 2007. In fourth quarter 2006, if a portion or all of its remaining deferred tax asset will more likely than not be realized, the Company will reverse into income the appropriate portion of its remaining tax valuation allowance of approximately $5.0 million.
(Note A) Reconciliation to GAAP: Nine months ended Quarter ended
(In millions, except EPS) September 30, September 30,
2006 2005 2006 2005
Income before income taxes, GAAP,
as reported $21.3 $21.1 $5.7 $5.9
2006 income taxes (7.9) (2.0)
2005 Adjusted income taxes at 2006
year-to-date rate (37%) (7.8) (2.2)
Net income fully taxed (2006 GAAP,
2005 adjusted) $13.4 $13.3 $3.7 $3.7
Number of dilutive shares 11.4 11.4 11.4 11.4
Dilutive EPS (GAAP for 2006,
Adjusted for 2005) $1.17 $1.17 $0.33 $0.33
The Company presents fully-taxed net income and EPS to facilitate comparison between periods because the Company began recording a quarterly provision for federal income taxes in 2006.
This news release contains forward-looking statements, including statements regarding future performance of the Company, that are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected.
Among the key factors that could cause actual results to differ materially from expectations are: the cyclical nature of the vehicular industry; timing of cost reductions; labor availability and stability; changes in economic and industry conditions; adverse impacts to the Company, its suppliers and customers from acts of terrorism or hostilities; the financial condition of the Company's customers and suppliers, including the impact of any bankruptcies; the Company's ability to successfully integrate the operations of acquired companies; the uncertainties of environmental, litigation or corporate contingencies; and changes in regulatory requirements. These and other risks and assumptions are described in the Company's reports that are available from the United States Securities and Exchange Commission. The Company assumes no obligation to update the information in this release.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
(In Thousands, Except per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Net sales $257,167 $234,247 $785,841 $691,925
Cost of products sold 220,967 198,327 675,039 585,543
Gross profit 36,200 35,920 110,802 106,382
Selling, general and
administrative expenses 22,444 22,817 66,372 64,897
Operating income 13,756 13,103 44,430 41,485
Interest expense 8,065 7,200 23,170 20,374
Income before income taxes 5,691 5,903 21,260 21,111
Income taxes 1,955 751 7,866 2,260
Net income $3,736 $5,152 $13,394 $18,851
Amounts per common share:
Basic $0.34 $0.47 $1.22 $1.73
Diluted $0.33 $0.45 $1.17 $1.66
Common shares used in the computation:
Basic 11,007 10,928 10,987 10,896
Diluted 11,451 11,414 11,448 11,385
Other financial data:
EBITDA, as defined $18,332 $17,434 $59,356 $54,949
Note A -- In 2006, the Company began recording a quarterly provision for
federal income taxes, resulting in a total effective income tax rate of
approximately 37 percent. The Company's significant net operating loss
carryforwards should preclude the cash payment of federal income taxes in
2006. In the fourth quarter of 2006, if a portion or all of its remaining
deferred tax asset will more likely than not be realized, the Company
will reverse into income the appropriate portion of its remaining tax
valuation allowance of approximately $5.0 million.
Note B -- EBITDA, as defined, reflects earnings before interest, income
taxes, and excludes depreciation, amortization, certain non-cash charges
and corporate-level expenses as defined in the Company's Revolving Credit
Agreement. EBITDA is not a measure of performance under generally
accepted accounting principles ("GAAP") and should not be considered in
isolation or as a substitute for net income, cash flows from operating,
investing and financing activities and other income or cash flow
statement data prepared in accordance with GAAP or as a measure of
profitability or liquidity. The Company presents EBITDA because
management believes that EBITDA is useful to investors as an indication
of the Company's satisfaction of its Debt Service Ratio covenant in its
revolving credit agreement and because EBITDA is a measure used under the
Company's revolving credit facility to determine whether the Company may
incur additional debt under such facility. EBITDA as defined herein may
not be comparable to other similarly titled measures of other companies.
The following table reconciles net income to EBITDA, as defined:
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Net income $3,736 $5,152 $13,394 $18,851
Add back:
Income taxes 1,955 751 7,866 2,260
Interest expense 8,065 7,200 23,170 20,374
Depreciation and amortization 4,270 3,967 14,097 12,843
Miscellaneous 306 364 829 621
EBITDA, as defined $18,332 $17,434 $59,356 $54,949
Note C -- On October 18, 2006, the Company acquired 100 percent of the
outstanding stock of NABS for $21.0 million in cash. NABS is an
international supply chain manager of production components providing
services to high technology companies in the computer, electronics and
consumer products industries. The acquisition was funded with borrowings
under the Company's revolving credit facility.
CONSOLIDATED CONDENSED BALANCE SHEETS
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
September 30, December 31,
2006 2005
(Unaudited) (Audited)
(In Thousands)
ASSETS
Current Assets
Cash and cash equivalents $17,114 $18,696
Accounts receivable, net 184,359 153,502
Inventories 219,926 190,553
Deferred tax assets 8,627 8,627
Other current assets 31,505 21,651
Total Current Assets 461,531 393,029
Property, Plant and Equipment 254,416 244,367
Less accumulated depreciation 143,473 130,557
Total Property Plant and
Equipment 110,943 113,810
Other Assets
Goodwill 85,389 82,703
Net assets held for sale 7,010 1,992
Other 68,072 71,320
Total Other Assets 160,471 156,015
Total Assets $732,945 $662,854
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $136,655 $115,401
Accrued expenses 75,565 65,416
Current portion of long-term liabilities 4,520 4,161
Total Current Liabilities 216,740 184,978
Long-Term Liabilities, less current portion
8.375% Senior Subordinated Notes due 2014 210,000 210,000
Revolving credit maturing on
December 31, 2010 152,700 128,300
Other long-term debt 5,439 6,705
Deferred tax liability 3,176 3,176
Other postretirement benefits and
other long-term liabilities 24,598 26,174
Total Long-Term Liabilities 395,913 374,355
Shareholders' Equity 120,292 103,521
Total Liabilities and
Shareholders' Equity $732,945 $662,854
BUSINESS SEGMENT INFORMATION (UNAUDITED)
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
(In Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
NET SALES
ILS $149,133 $137,810 $449,630 $394,212
Aluminum Products 33,274 36,816 120,889 122,800
Manufactured
Products 74,760 59,621 215,322 174,913
$257,167 $234,247 $785,841 $691,925
INCOME BEFORE INCOME TAXES
ILS $8,796 $8,200 $29,449 $24,675
Aluminum Products (118) 1,515 4,318 7,419
Manufactured
Products 8,148 5,995 19,942 17,757
16,826 15,710 53,709 49,851
Corporate and
Other Costs (3,070) (2,607) (9,279) (8,366)
Interest Expense (8,065) (7,200) (23,170) (20,374)
$5,691 $5,903 $21,260 $21,111
