CLEVELAND, July 31 /PRNewswire-FirstCall/ -- Park-Ohio Holdings Corp. today announced results for its second quarter ended June 30, 2006.
SIX MONTHS RESULTS
Park-Ohio reported net sales of $528.7 million for the first six months of 2006, a 16% increase on sales of $457.7 million for the same period of 2005.
Park-Ohio reported income before income taxes of $15.6 million for the first six months of 2006, a 3% increase on income before income taxes of $15.2 million in the same period of 2005. Park-Ohio recorded income tax expense of $5.9 million in the first six months of 2006, resulting in an effective income tax rate of 38%, compared to $1.5 million in the same period of 2005, or an effective income tax rate of 10%. No federal income taxes were expensed in the first six months of 2005 due to the Company's tax valuation allowance, which was reversed at the end of 2005. Park-Ohio reported net income of $9.7 million, or $.84 per share dilutive, for the first six months of 2006, which included the impact of federal income tax expense. This compared to $13.7 million, or $1.21 per share dilutive, in the same period of 2005, which benefited from the absence of federal income tax expense. If federal income taxes had been recorded in the first six months of 2005, Park-Ohio would have reported net income fully taxed(A) of $9.4 million, or $.83 per share dilutive.
SECOND QUARTER RESULTS
Park-Ohio reported net sales of $268.5 million for second quarter 2006, a 17% increase on sales of $228.8 million for second quarter 2005.
Park-Ohio reported income before income taxes of $7.8 million for second quarter 2006, a 5% decrease on income before income taxes of $8.2 million for second quarter 2005. Park-Ohio recorded income tax expense of $2.9 million in second quarter 2006, resulting in an effective income tax rate of 37%, compared to $.7 million in second quarter 2005, or an effective income tax rate of 9%. No federal income taxes were expensed in second quarter 2005 due to the Company's tax valuation allowance, which was reversed at the end of 2005. Park-Ohio reported net income of $4.9 million, or $.43 per share dilutive, for second quarter 2006, which included the impact of federal income tax expense. This compared to net income of $7.5 million, or $.66 per share dilutive, for second quarter 2005, which benefited from the absence of federal income tax expense. If federal income taxes had been recorded in second quarter 2005, Park-Ohio would have reported net income fully taxed(A) of $5.1 million, or $.45 per share dilutive.
Six months ended Quarter ended
Recent History of Earnings per Share June 30, June 30,
2006 2005 2006 2005
Dilutive EPS, GAAP, as reported $0.84 $1.21 $0.43 $0.66
Dilutive EPS, as adjusted with
38% income tax $0.84 $0.83 $0.43 $0.45
Edward F. Crawford, Chairman and Chief Executive Officer, stated, "Business conditions continue to be favorable for our Company. Our performance was led by another record quarter in revenue and earnings for ILS. We are addressing disappointing operational and earnings issues at one of the smaller units in our manufactured products segment. We remain confident in the strength of our businesses in the remainder of 2006 and beyond, and reaffirm our guidance of dilutive EPS of $1.65 to $1.75 for 2006."
A conference call reviewing Park-Ohio's second quarter results will be broadcast live over the Internet on Tuesday, August 1, 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 39 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 38%. 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: Six months ended Quarter ended
(In millions, except EPS) June 30, June 30,
2006 2005 2006 2005
Income before income taxes, GAAP,
as reported $15.6 $15.2 $7.8 $8.2
Income taxes at 38% (GAAP for 2006,
Adjusted for 2005) (5.9) (5.8) (2.9) (3.1)
Net income (GAAP for 2006,
Adjusted for 2005) $9.7 $9.4 $4.9 $5.1
Number of dilutive shares 11.4 11.3 11.4 11.3
Dilutive EPS (GAAP for 2006,
Adjusted for 2005) $0.84 $0.83 $0.43 $0.45
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 Six Months
Ended Ended
June 30, June 30,
2006 2005 2006 2005
Net sales $268,453 $228,795 $528,674 $457,678
Cost of products sold 230,738 193,429 454,072 387,216
Gross profit 37,715 35,366 74,602 70,462
Selling, general and
administrative expenses 22,209 20,428 43,928 42,079
Operating income 15,506 14,938 30,674 28,383
Interest expense 7,735 6,715 15,105 13,174
Income before income taxes 7,771 8,223 15,569 15,209
Income taxes 2,870 710 5,911 1,509
Net income $4,901 $7,513 $9,658 $13,700
Amounts per common share:
Basic $0.45 $0.69 $0.88 $1.26
Diluted $0.43 $0.66 $0.84 $1.21
Common shares used in the
computation
Basic 10,983 10,886 10,976 10,880
Diluted 11,446 11,348 11,440 11,363
Other financial data:
EBITDA, as defined $20,810 $19,531 $41,024 $37,515
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 38 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 Six Months
Ended Ended
June 30, June 30,
2006 2005 2006 2005
Net income $4,901 $7,513 $9,658 $13,700
Add back:
Income taxes 2,870 710 5,911 1,509
Interest expense 7,735 6,715 15,105 13,174
Depreciation and amortization 5,047 4,429 9,827 8,876
Miscellaneous 257 164 523 256
EBITDA, as defined $20,810 $19,531 $41,024 $37,515
CONSOLIDATED CONDENSED BALANCE SHEETS
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
June 30, December 31,
2006 2005
(Unaudited) (Audited)
(In Thousands)
ASSETS
Current Assets
Cash and cash equivalents $17,106 $18,696
Accounts receivable, net 187,869 153,502
Inventories 227,536 190,553
Deferred tax assets 8,627 8,627
Other current assets 11,450 21,651
Total Current Assets 452,588 393,029
Property, Plant and Equipment 250,025 244,367
Less accumulated depreciation 140,327 130,557
Total Property Plant and Equipment 109,698 113,810
Other Assets
Goodwill 85,418 82,703
Net assets held for sale 7,178 1,992
Other 71,042 71,320
Total Other Assets 163,638 156,015
Total Assets $725,924 $662,854
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $135,166 $115,401
Accrued expenses 67,334 65,416
Current portion of long-term
liabilities 5,557 4,161
Total Current Liabilities 208,057 184,978
Long-Term Liabilities, less current
portion
8.375% Senior Subordinated Notes due
2014 210,000 210,000
Revolving credit maturing on
December 31, 2010 157,400 128,300
Other long-term debt 6,116 6,705
Deferred tax liability 3,176 3,176
Other postretirement benefits and
other long-term liabilities 24,967 26,174
Total Long-Term Liabilities 401,659 374,355
Shareholders' Equity 116,208 103,521
Total Liabilities and
Shareholders' Equity $725,924 $662,854
BUSINESS SEGMENT INFORMATION (UNAUDITED)
PARK-OHIO HOLDINGS CORP. AND SUBSIDIARIES
(In Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
NET SALES
ILS $150,338 $129,515 $300,497 $256,402
Aluminum Products 44,913 43,094 87,615 85,984
Manufactured Products 73,202 56,186 140,562 115,292
$268,453 $228,795 $528,674 $457,678
INCOME BEFORE INCOME TAXES
ILS $10,231 $8,271 $20,653 $16,475
Aluminum Products 2,396 3,481 4,436 5,904
Manufactured Products 6,132 5,949 11,794 11,762
18,759 17,701 36,883 34,141
Corporate and Other Costs (3,253) (2,763) (6,209) (5,758)
Interest Expense (7,735) (6,715) (15,105) (13,174)
$7,771 $8,223 $15,569 $15,209
