PKOH - Earnings call transcript Q3 2018 | Park-Ohio Holdings Corp.

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Operator

Good morning and welcome to the Park-Ohio Third Quarter 2018 Results Conference Call. [Operator Instructions] Today's conference is also being recorded.

If you have any objections you may disconnect at this time.

Before we get started, I want to remind everyone that certain statements made on today's call may be 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. on risks release, may the as XX-K, was relevant the found company's of with which press XXXX earnings well filed list and be uncertainties in XXXX the A SEC. X, March as in

earnings may defined. adjusted EBITDA as Additionally, the as and company discuss

As adjusted are as EBITDA not under performance of earnings Accounting Accepted and Generally Principles. defined measures

to Park-Ohio over For Mr. the turn defined, of net reconciliation and for a reconciliation a release. as earnings of recent the Please Matthew EBITDA net attributable company's income Chairman common to I to please like proceed, to and CEO. refer as to adjusted earnings now Crawford, shareholders income Crawford. would Mr. conference

Matthew Crawford

welcome Thank quarter our third you, morning call. Kevin. and to Good

Corporate Joining President. Crawford, me this are Fogarty, morning of and Development; our Pat our Director Ed and CFO

our pleased continue assets and I about am in performance third to our which We underpin report the invest XXXX. a significant will to $X are particularly we has with people to excellent revenue but investments These margin aggressively in profitability. included hard period headwind XX% discuss both billion EBITDA and current Pat a are which and by performance quarter to will where revenue during value as I this to performance future. record our objective in be

strategy growth creation and has value three Our for pillars.

created see being like some First, acquisition new value products and more of UK, services; and pillar. third our recent cases we in second acquisition. In than international strategic expansion Hydrapower one the in

very during These grown Forge our I Drop to successfully. acquired Canton out casting performance, our almost of the demand managing leverage in across operating the months want Forge aggressively all third highlight last XX and point quarter businesses Year-over-year February. businesses. aluminum last we Looking increased are also I and improvements which the to business want Group at the have the our saw specifically in

first albeit to from slightly continue the year. growth double-digit see to the more half Technologies Turning of Supply moderate strong segments the themselves.

have been sales continued the to the and third us of during XX% has quarter in the during accelerate aerospace and to quarter. business New increase third great interest defense

you couple an area service last has of of of the focus most new and years. us for recall, during As product been this

continue from zero to Components emission and to transition the Assembly benefit orders vehicles.

quarter of During relating initiatives, important new rubber our the light OE most also and benefited platforms. milestones qualification and in but globally we product from weighting products met launches to extrusion were our

expect development XXXX success We of international a our to late the big product in new beyond. expansion part and be and

add growth growth strong we to XXXX the million Specifically, mechanical press from aerospace our half included and but and booked. of Engineered this Relating by took patch. for in quarter agriculture, demand which also a value continues only which to of strong most oil not expect creation strategy, XXXX. Perhaps from to plan than at X,XXX see early exciting our new these $XXX we in pound forging commissioned to Arkansas we frame delivery rail and a segment revenue our investments segment, more this expect is Component already our

developments, exciting continue across board. signs the to of we are these battle While inflation

to we but pricing be these are on both doing also external focused expected are is reducing the supply internal We and what strategy. and chain, costs increasingly managing including

continue will and have increases We to price when appropriate. implement

early much, very year highly spill though into opportunities. these XXXX. acquisition you Thank to over and strategic it will Lastly several likely At point our Pat remains Fogarty. now turn I'll this and includes robust pipeline the

Pat Fogarty

Thanks Matt.

year. in year-over-year which contributed of resulted quarter the in our our each quarter, strong the many continuing third of quarter was the on exceeded fronts. that sales in market on profitability. strength to growth number mentioned and and a the expectations experienced saw continued Matt of the outstanding the We a momentum growth As Each end in business segment both segments first sales half businesses

notably sales billion, year million solid an compared and businesses. basis increased to X% in XX% flow Of the of growth acquisitions XXXX. increase forging a percentage a was operating XXXX the through $XXX due above aluminum $X.X and a income was and September third to was industrial remaining year-over-year. leverage in and On completed quarter of the We approximately revenues in as of margin casting, businesses, Our quarter ago. of and many in through up realized XXth, sales were XX% year-to-date our Gross XXXX a third due XX% the our equipment in most our XX% record XXXX. net to organic were

and to in will margins However, comments. I segment continued assembly plant component impacted quarter compared higher a discuss costs new operational start-up my which in year our later ago costs were by third

X.X% in year April impact was the Third higher sales the SG&A slightly from the income the quarter, $XX.X a which Operating third offset to third X.X% Canton impact income in year. under primarily dollar $X.X acquisitions. to of ago due an year due of our totaled the of higher borrowings were average expense by to the in borrowings the The quarter quarter from primarily to decreased volumes X.X% The operating positive last of during strong million to year borrowing expenses partially ago. increase by margins to refinancing rate the quarter SG&A interest driven sales resulting the Forge average million third the expense in lower the in compared expenses to quarter. increased quarter. third of $XX Drop the compared the in a sales of increase debt was and to of quarter XX.X% sales $XX year of from volumes impact XX% acquisition. in compared the of third Interest quarter SG&A due was million million last favorable Segment increased higher last

in the was compared third XX% quarter Our quarter XX% income tax year. effective last the to of third in

benefit The of Tax adjustment this reduce tax an per quarter $X.XX is our third tax was our from EPS of excluded income a transition share adjusted from US resulting $X.XX. included liability to Our impact provision Reform. and quarter tax the the in

have quarter certain our effective England. tax which XXXX in third the item, due Excluding to been recognition is and benefits Italy rate would in this our of businesses full XX%

For rate income XX% year to be we of full effective the our XX%. tax approximately expect XXXX, to now

Our in GAAP quarter performance third million last Operating quarter, $X.XX quarter to per from earnings was used quarter. the our revolving third US from an share in Also foreign were by to the during cash an capital third XX%. of subsidiary $X.XX cash quarter portion and year, credit flows prior funds and On our third working down the improved a for a a XX% EPS $XX year. repatriated compared up $X.XX during the $X.XX increase $XX the adjusted basis pay the million driven in profitability of facility. was we

since our As continued to $XX XX% gross million reduced was approximately debt XXth, quarter hand of quarter. a and strong cash under result, unused last compared and availability on of liquidity, $XXX reduced was arrangements. banking leverage by We various our million global June by with including $XX total debt nearly borrowing the ended million

million approximately to long-term million $XX to CapEx we million. full million of the operating in $XX in and down to XXXX, to the of to further $XX million million spend to $XX For continue flows, generate to pay quarter expect $XX by debt $XX cash approximately year fourth

our and were comment by $XX accounted X% Technologies on made will Now year-over-year. Organic or million during up and defense came results. XX% for aerospace our in higher segment In growth from sales up year-over-year. end XXXX. The of many which driven and and industrial related Supply X% truck sales growth heavy-duty acquisitions I was XX% year-over-year; including XX% equipment key customer year-over-year which which up markets agricultural up XX% demand was was was

quarter sales sales $XX.X of perform sales and and reflecting XX% price up year-over-year year-over-year. and as at higher to a benefit ago, from to demand a in were offset year the in million business quarter increase prior the XX% continues Our manufacturing year a Operating for the with flow-through year-to-date segment, strong X.X% strong this lesser in well a this an results strategic percentage XX% continued segment the sales impact increases. in comparable sales commodity to driven were with degree Operating average mix million quarter. customer line product increased margins $XX.X unfavorable income our fastener increase Also their by investment of as by of initiatives in the was volumes. from daily

quarter, compact the The revenues slightly rates. will our improved aluminum to volumes crossover higher use transmissions including sales we an on Now segment, business. primarily rubber XFX-XX our year-over-year to XX-speed were in and primarily expected strength driven XXXX, in In demand up XX% turn the the related in Cherokee. sales quarter in global due Assembly due third in of products high-volume the aluminum increase which our and launched were increasing the sales including to were build Jeep business automotive for SUVs volumes Components truck by platforms continued fuel up year-over-year product and the the

for new the As fuel we product. both production China auto shipping replants global to and systems products fuel are calls, are facilities well. the produce we filler and three which market discussed production plants have extruded have Mexico. in and of on invest in rubber continued and previous molded These Two in progressing various rails,

is year. third located operational will plant by be end the in of which The China production the

in mix to production of in production operational employees costs revenue beginning which Our levels. are in new evidence rate run a should fourth XXXX. million increase costs, training operating are and sales current in $XXX launch from up was decrease projections We income of continue steady facilities, costs. excess so we to year-over-year approximate $X.X and our and progress these of eliminating show operating the in costs result our to new efforts we higher costs X.X% million a and quarter. controlling $XX.X startup ramp due quarter as in third from excess XXXX and quarter were primarily the X.X year XXXX. of The of in sales to this impact production and million operational the to far of due the These decreases making hiring last unfavorable believe incremental % year declined third margins seeing and Segment

We in continued acquisition of customers combination supply Product beginning a Engineered segment, Hydrapower. provides our growth there we will facilities, October, launch in sales provide future in eliminated. acquired segment truck, margins included ago, of up fuel, Components be and are XX% which synergies the up once improvement driven rail in by In operating In this in The fourth Hydrapower was business pipe year Forge. its end demand our significant chain in rubber excess Limited assemblies a end threading products and the compared new the for driven ramp segment and levels for induction and tubing which fasteners businesses prior primarily expect Assembly over and hose, in into that costs XX% quarter. will located the The extruded Dynamics and and England. startup our were up organic agriculture with organic from fluid global to growth Canton We production and believe of incorporate Birmingham, product is our rubber bus are equipment XX% markets. XX% Hydrapower serves the growth hardening year-to-date our increased Drop year. and by

backlogs forging to equipment businesses strong. Our our in capital and be continue

income identified synergies Operating when to we The of from well, third and is Canton Canton been other significantly well perform this benefit quarter in year we segment in businesses to acquired our ago was progressing with gas a are strong. seeing continues has of Drop we end and to compared and the markets $XX.X acquisition Canton. the million oil as Our $X.X the Forge forging million. up demand the aerospace integration in of

margin higher and XX.X% levels in points third Canton Our was resulting income is of the in from this absorption, profitability basis significant The to of due plant increase the an impact operating year-over-year. in acquisition. quarter XXX increase segment an increase sales

Finally, XXXX. I comment on of to like the would remainder

in adjusted seeing Although, the guidance are fourth the customer automotive we optimistic in quarter. higher soften we the to range, we at end platforms demand begin that end year EPS are our slightly certain will of mid to

continue we increases. of manage In price to the addition, commodity impact

expect there slight with increases, fully such our customer we recover a to on base. their Although, lag recovery is

guidance EPS As result, $X.XX adjusted per share. $X.XX we our XXXX to a are maintaining year full of

I'll call Now the Matt. over turn to back

Matthew Crawford

your Great, thank report. for Pat, much, very you detailed

for open now questions. the floor will We

Operator

& first Sidoti [Operator coming Edward today Company. question Instructions] from Our is Marshall from

line Your now live. is

Edward Marshall

How gentlemen. Good are you? morning. Hi,

few language I'd the So of the I kind remarks. vigorously investing if a in a about know in focus that's mentioned to know and ask you they highlighted can wanted your get near-term, that coming mean your sense prepared press your headwinds the and the Thanks. I the segments? impact on in quite is like on quantify how to the you maybe you individual during the I of the is where from much I release, horizon. are

Matthew Crawford

Pat maybe the financial you new scale me me answer, some of what's Let of detailed in would terms to talk of let facilities. in have going but the more on

currently right it's money For if example, profitable XXXX. the now headcount employees. Mexican all in That's I several keep its of losing facility, our business, at been for it's profitable marginally hundred most is New

So the launch you been even. as expect are would has

launched, of effective delayed taken cases business Other launches OE qualifications the been have in in structure than Some our been years. have other in we which has we've around thought. months moving longer some plant not

and roles. different that same any the are know time terms happening that which sense you very To have a terms of period and of at people your the of than qualifying extents, very, China. launch but for the the in launching direct in new of in I typical supervisory labor you management facility the in more both facility a So asset. gives of be scale, this in we amount this don't to that clear of roles important there's is is a

You ready essentially that able be the validate you're need to are to ready. production to OE --you

So with comes doesn't yet is order. that all pre-production that and come,

is that argue with you there, would wouldn't other the that anything specificity. clearly number to dollars, any Pat want to the millions I want of than So I is that add - in but comment

Pat Fogarty

No.

cost being up, in that the is front the in people and it's and as begin costs of in incurred would add first but the plants new the I facility you'll amount of think XXXX. ramped incurring, is expect not I only up setting that quarter that on thing get only the also absorption production to we significant levels we're

Edward Marshall

and-- it Got

Matthew Crawford

in but other as easiest parts because a is talking going a a of spent opportunities we mentioned it's lot about think Ed, wonderful put periods X,XXX time I invest. launches are at to profits down forging got those lot of are well investment we've our scale of to we're fact drag forging, significant this putting press mechanical Arkansas. as I technologies of those but prior money, three in MRO. talked a on, also really our Those not we mentioned in relative the that I the pound the about I've in comments, right the my in point. new finger producing bit supplies in That of of places none the business. our on as are

Edward Marshall

been to familiarity kind both investment long Is with this You've biggest the your have guys has that I curious business? your ever business through the for of Park am tenure, time. opinion. period in gone your a the around get

Matthew Crawford

is answer The yes. unquestionably

think goals of think focused We've aggressively. we've We've or about the my the pillars strategic spoke in our I always, I meeting think billion that talked and the includes which pillars more what always we And excellent investment been financial the comments for at. success I about acquisition. I XX%. pillar that of business, this and $X on

I and us product seeing the investment is think you're on the on expansion accelerate new our development. where international

but --would or is is have I between million think our years ago. only you Xx that We to $XX focusing one it million. at That Xx products. a competitive are in think opportunities and that ways considerable business, current our ways own lot us CapEx be look spend and spending $XX businesses our or and teams that four our on is sum there's --that up and have to for advantages resources would forecast the own found three of growth is there And our own of found I

that opportunities is zap clear the see space. the I have just mean expected all weighting now the this we be hose and forging light in we've and to but grown we or the in size. the zero vehicle but business, that aluminum at I in think, So so business twice extruded tremendous rubber of today business emission considerably also notably in some business most not opportunities the particularly

Edward Marshall

you in kind facilities or Mexico to and linked that legacy softness I'm in in Are related China? the fourth referred the quarter they And business auto the orders. to it. of curious they Got the to

Pat Fogarty

no. in at function really and year. year it's China. things current indication heading we're there inventory Yes, and really Mexico with. being of it's are to in on kind And a the the an but rest don't XXXX of think of the I levels what fourth where unrelated playing platforms where Really are out through of things changed certain is schedules facilities seeing the some quarter work we that into

Matthew Crawford

I add to And would Pat's comments.

are of that for the OE themselves something's the reposition to SUV modifying holiday fourth just related significant key being to platforms. relative some lines. or the think made right tough moment at and decisions And to truck they're to quarter. the those platforms I and if they're There shutdown current it's now how discrete going are level production if stories platforms a typical know at

agree This So discrete story. be with the quarter Pat. fourth I This some about not December. may a is just and most story XXXX notably

Edward Marshall

Got it's bolt-on typically pretty the --was technologies are curious serve? the on that AC that other assuming business? integrate small they I but quick to it or --is markets customers it, deal it or Hydrapower. will into and be or And a I'm existing there I'm -is know what

Pat Fogarty

it's and a Yes more than bolt-on. would say just I

synergies sales technologies. provides key we supply into with and Europe end from a in have Although there our fittings components the today and specific various markets, in within synergies of tremendous hose with assembly which are group. assembly standpoint us don't a that it location currently hose our and business extruded comes marketing And with

support throughout in companies not three Europe. the also but last over years throughout customer really only UK to you demand As England many the we've know, acquired

Operator

is next Barger Our question from from KeyBanc Capital today coming Markets. Steve

Your is line now live.

Ryan Mills

the you Mills morning, should sectors? growth And the tech, organic comps rates was organic growth going is running to of Yes seeing came for forward. on This we with guys. digit these single past some in quarter. Steve. supply on are Are on or the just digits starting Good taking over X%; signs tougher it double Ryan in Congrats about slowing year. low be mid

Matthew Crawford

with You that start want to Pat?

Pat Fogarty

I'll Sure. that you, Ryan. answer for

to of and was The markets began third as up. ramp truck other strong year last quarter end quarter a heavy-duty

in see notably We year-over-year in continue strength to and quarter, defense. the aerospace most comps

at the than XX%. other markets growing were Some less of

don't I to was such in future high difficult quarter. a strong to of it's but think still the single because year So last which believe business, indicative in digits, growth organic were we this somewhat mid quarter-over-quarter comps the be the

Matthew Crawford

Matt. this is We,

We continue for the growth to year. our year. and plan sales progress this see the made sales robust new about pleased new for just we've estimate on we're We're

as So to we're comps be excited suggested. about you that, the it clear are getting difficult is more but

Ryan Mills

and more And with new luck seeing you at from running are processes? having prospecting tech tighter. supply looking product existing lines any customers inquiries customers to labor Or higher customers? you for in outsourcing more levels Are getting take

Matthew Crawford

relative out delicate running. customers a they've Whether trying at or they're it's of has lot think situation disruption plants there. been I current for customers. their many this keep a parts. prospective been securing year just customers There of to to us Most

some to at spike has - express that freight happy to been had things were that times. have keep extraordinary fortunately our we mouth it do some not hand we did absorb for a some in --to us issue, that to and but demand. have So with customers had And has

And happy a difficult more OE environment really in sell a value opportunity trying relationship an transition sometimes parts. It's be while you, are agree a consider where happening. tremendous to tech. just time there to it's an proposition getting they're I to conversations of in So scale to supply with our also

Ryan Mills

and switch the they still and I'm China components, assembly points. of look plants be Okay the couple it's impact from Mexico. new year basis then hundred assuming into down in might margins for like the a And

and So I business stabilize you everything is how you online? does margins can guess talk the my come where progressing see this question as about

Matthew Crawford

a numbers, the is about think comment I but Pat XXXX very the interesting to be let year. I'll going

amount margins I range. be question in reason We that the we business online have about. will kinds of make XXXX in how that need volumes in XX% businesses get XX% absorption can any quickly to the seen the back come that with to get margins sustained talking to there. the don't of anywhere The see we're can't why And appropriate these we near we

than next I a about that for of this So the way. about I the business don't, We manage we make investments haul. lot confidence have first more end long But XXXX XXXX, I of year. half don't do

Ryan Mills

last an and my but for then tracking cash how I just has basis you guys investment question, years, the thinking and going more or do about flow Okay forward? fourth free it's you on free for know XXXX for you been flow prior cash conversions a year quarter are below what expect normalized

Pat Fogarty

Ryan. Well,

was to As management we spent a This not in you million year $XX capital, look the flow de-leverage But be give I EBITDA further historically. than our back probably mentioned, continue million through we cash and over expect where us That very the if quarter also only the the we've quarter CapEx. be fourth will see year that's the flow XX% we strong to strong to been of $XX company. history due profitability. conversion and unusual to to cash but that of will continue opportunity and strong an to working higher our

Operator

from Our is Company. & Gabelli coming question Paige Matthew from next

live. line Your is now

Matthew Paige

to up up Good global targets? end production there your facility ramping ramp you ramp production morning. And up that market does the slowdown to are in the how that In levels key your impact watch production? relation you Chinese especially, to automotive ability you're potential any as

Matthew Crawford

very Chinese on market It the the of seen of the we're some Matthew. - question, we've side. demand is space disruption mindful Great in

for, plants the plants launched the importance you what of launching in use singular, products I'll we the use that and into We've next year. is-- concern positioning we mentioned, in plural. two over are have some But China do China. two market about have that our is absolutely and you So the going concern

is not just One many the of hybrid around XX to JVs the years once combustion in injection sort which important a OEs XX to look engines and be to them as domestic the again XX create is but this direct also technology through is or and control our of electrification. fast up extremely they to transition better or as space combined running. we cases get plank with will internal it performing the as That foreign can

that We part of That the overall trying environment regardless have they're regulatory customers what demand. there. for conversion to is extremely to important the through do

initial car Our this in as facility expansion we're can for can getting multiple again, both qualification historically second extrusion the transition. particularly These of be approvals be and really more hydraulic OEs. are They facets zero battery used rubber. extruded foreign the which broadly that and the and national hose. fused at can well Once for the for --is be typically some and vital These strong controlled just stages on our car. for side products the hose spot, launching particularly our emissions into as from Chinese has fuel and been our electric but full product

is or demand new cars. on that despite some throughout I nineteen And Chinese in volatility transition. focused this much that early on again So very for maybe once XXXX think XXXX the

transition. that from benefit to continue will we think I

Matthew Paige

your are you to some Great, of need add lines you that's new there any really products leads to guess end and product OEM question the that color of, portfolio think I right those markets into you that second your customers? have, or needs coming of that helpful now hit to on my really

Matthew Crawford

rubber --I continue exciting will for investment. the extrusion think we XXXX think be I and story this will

cool technology our air-conditioning ability into and stuff for of pretty is be our us. hose This adapt some could exciting otherwise. that generally think to I batteries to extrusion hose going for and

provide that lot particularly we to expertise development are area, in China. in space that So and in believe money us tremendous and that in our opportunities is history spending market of a going

don't Some fully in appreciate. places we probably even

Operator

session. floor management further turn comments. of I the question-and-answer any the We Thank back to you. our to reach over like or end for closing

Matthew Crawford

everyone. Great. and Thank you for much today time interest very your your

pleased are the in do the well perform quarter. think third will performance We quarter. we in We with the fourth

As we to optimistic. clear, But doing. are because we very be Pat about are reinvestment how feel cautiously word we use I the to on the focused mentioned, continue that's what future. we are

our I'll are XXXX our investments for that, And and focused wish and us what beyond. day. to team making you With good We meet keeps excited. that's Bye-bye. goal strategic

Operator

conclude teleconference. Thank does you. today's That

You may disconnect line thank And your for at time. wonderful day. your today. this a participation you have We

Park-Ohio (PKOH) 6 Nov 182018 Q3 Earnings call transcript