Park-Ohio Holdings Corp. (PKOH)

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Park-Ohio Holdings Corp. (PKOH)

Q1 2013 Earnings Call

May 2, 2013 10:30 am ET


Edward F. Crawford – Chairman and Chief Executive Officer

W. Scott Emerick – Vice President and Chief Financial Officer

Matthew V. Crawford – President and Chief Operating Officer


Ajay Kejriwal – FBR Capital Markets & Co.

Steve Barger – Keybanc Capital Markets

Jay R. Harris – Goldsmith & Harris Incorporated



Good morning, and welcome to the Park-Ohio’s First Quarter 2013 Results Conference Call. At this time all participants are in a listen-only mode. After the presentation the Company will conduct a question-and-answer session. Today’s conference is being recorded. If you have any objections you may disconnect at this time.

Up now I’d like to turn the conference over to Mr. Edward Crawford, Chairman and CEO. Please proceed.

Edward F. Crawford

Good morning ladies and gentlemen, welcome to the first quarter conference call for Park-Ohio 2013. I’d like to turn over the microphone to Scott Emerick, our Chief Financial Officer who cover the necessary comments related to projections and reasons and so forth and so on.

W. Scott Emerick

Thank you, Ed. Good morning everyone and thank you for joining us today. You’ve now received a copy of our earnings press release you can find it on Investor Relation section of our corporate website at I want to remind everybody that certain statements we make on today’s call both during opening remarks and during the question-and-session maybe forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. A list of relevant risks and uncertainties maybe found in the earnings press release as well as in the Company’s 2012 10-K filed with the SEC on March 15, 2013. The Company undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Additionally, the Company may discuss EBITDA. EBITDA is not a measure of performance under Generally Accepted Accounting Principles. For reconciliation of net income to EBITDA please refer to the Company’s recent earnings release.

This time I’ll turn the call back over to Ed.

Edward F. Crawford

Yes, I’d like to introduce Matt Crawford, President and COO of the Company, for his comments on the first quarter results.

Matthew V. Crawford

Thank you, and good morning, we appreciate you joining us today. Overall our results came in about as we were expecting for the first quarter. Our March forecast recognized a lack of any significant catalyst in our current economic environment and as a result we need to restart a little more slowly in the first quarter and as I’ll discuss later to pick up steam during the rest of the year.

Highlights of the first quarter financial performance included an 8% increase over the prior year and with revenues of $285 million and earnings of $0.85 per diluted share, which was an increase of 15% over 2012. EBITDA defined total $28.6 million which was an 18% increase over EBITDA in the first quarter of 2012. On a sequential basis comparing to our fourth quarter of 2012, first quarter revenues increased 3% and our earnings per diluted share increased 35%. 8% increase in net sales to $285 million is primarily attributable to the inclusion of a full quarter of FRS results in 2013. For the prior year results include only about a week of FRS performance.

In addition the impact of our new program ramp ups in our Aluminum business within the Assembly Components segment also contributed to the increase in net sales. These increases were partially offset by decreases in net sales in the Supply Technologies segment and the Engineered Products segment which we were anticipated in the current environment. The gross profit margin was 18.2% in the first quarter which is comparable to 18.6% gross profit margin in the first quarter of last year, this change is largely due to volatility in the segment sales mix between the two periods.

SG&A expenses as a percentage of net sales up 10.3% in 2013, compares favorably to 10.9% during 2012. We continue to watch our spending very carefully before making investments to support our growth plan particularly in the aluminum casting business and Supply Technologies international expansion.

Looking at taxes; our effective tax rate for the first quarter of 2013 was 35.8%. As a reminder we fully utilized our U.S. NOL during 2012. Consequently our cash taxes were $4.7 million in the first quarter.

Now looking at the segments, first we’ll review the Supply Technologies segment performance. Supply Technologies segment revenues which represent about 40% of the consolidated revenues of the first quarter of 2013, revenues decreased 14% to $114 million compared to the first quarter of 2012. While we do continue to see revenue growth in a minority of end-markets, we saw most of our other markets experienced demand softness, related to a weaker economic environment. Notably we saw the Class A truck market demand declined 32% compared to the prior year quarter. In addition, as we communicated in our last call, we selectively exited two customer accounts during 2012, which do not meet our return on invested capital expectations.

On a positive note, volumes in the New Year have strengthened and on the sequential basis with the fourth quarter of 2012 revenues increased 5% even though the truck market demand is down a 11% sequentially we benefited in the lawn and garden, HVAC, industrial and semiconductor markets. We continue to focus on our international growth initiatives, diversifying expand our customer base and add growth resources to our sales and marketing team. With those goals in mind our backlog of quoting activity is still in excess of $100 million of annual business. We’re happy to report that we’ve just won approximately $6 million of new annualized business that should commence realization in the fourth quarter of 2013.

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