PKOH - Earnings call transcript Q1 2019 | Park-Ohio Holdings Corp.

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Operator

Good morning, and welcome to the Park-Ohio First Quarter 2019 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

and Principles. may and Adjusted defined not EPS as under performance as measures defined. Additionally, the of adjusted Generally EBITDA company are discuss EPS EBITDA Accepted Accounting

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

Matthew Crawford

start The With got the XXXX. spring Chief of President; Great. Officer; first We for the call on Bob Legal want and better this grew quarter. forecast allergies me Pat gotten Financial and nicely X for Thank We Ed I our Counsel. Pat. for turning my Vilsack, this to off exceeded internal Fogarty, us you have Crawford, over the me. joining before will this year-over-year focus morning be a morning. Chief also our things our our to voice. Excuse to solid

run end Pat moments. that goal discuss bottom of front billion is XXXX. backlogs; increasing product in a to aerospace efforts key our track expected continued to and saw launches, see $X as on is we rate our those track; First, a we -- which digested in the that, some continue and XX% will half solid, on Products cases, we XX growing strategic XXXX in of MRO; focus on line on meet front the Having over Supply continued Components more to by on growth. of improvements in during XXXX, After we're The first moderate acceleration are opportunities. few Engineered Assembly and Technologies said

continued to earnings of quality expand. our Secondly,

While EPS light profit are increased X% related labor many sales adjusted particularly operating in the tariff improved of costs inputs, and material These of X%. related, improvements, raw our or increased increasing X%, related. adjusted solid of

Our have become cases, We protect as on, the to inevitable. more from do in to adjustments the as leadership important launches price feverishly margins our to these increases. material been some year help expect, But some is working our to our receive line. bottom product goes customers

earnest have We high as during degree a we'll in second of half. confidence begin the

to sheet million, working last Total CapEx on $XX improve our about million over Thirdly, balance $XX of financing, and then are growth after months. our during schedule. efforts decreased in XX the by debt and capital

Additionally, to reinvestment end we're period capital moderate expense our year the and numbers goes the of to coming on. expect as

strategic expect, Officer. are performance. I'll turn several Lastly, Fogarty, while Pat we expect do opportunities, Financial over acquisition time, if to a at this be significant now to to the our which accretive pursuing we completed, would Chief we not our XXXX call

Pat Fogarty

our you, quarter good ahead a Thank of Overall, XXXX internal start on of expectations number were our Matt. results first to fronts. a and

X%, were borrowing including and earnings on of hand ended XX% adjusted cash global of $XXX and with up and million sales per year-over-year million up liquidity, share arrangements. under respectively. million quarter First and GAAP $XXX $XX quarter of banking our with earnings the We availability

and second half And of activities year. in new finally, our and margins Also, acquisitions growth business businesses. our our us we see beginning the to will impact position enable strong that liquidity revenues each throughout the in to initiated beyond. are to and profit support provide capital the will enhance strong of XXXX segments will organic necessary continue improvement Our make strategic we which positively actions, in the

primarily was was X% and of Components quarter decrease business. the charges, X% to ago. to net year acquisition the million our X% increase X due sales growth. Assembly XX.X% were a Consolidated The $XXX was XX% were margins compared first During increase, totaling million, one-time gross approximately Of closings in growth our to an organic $X.X plant quarter, due this in to year-over-year. related

Excluding those SG&A been million compared in million the year to were expenses charges, $XX.X margin would've $XX gross quarter a ago. XX.X%.

last in As slight in million an $XX.X quarter, year. a XX.X% period. income basis, interest to increase first quarter slightly X% reduce adjusted average compared were quarter. first down to reflects $XX.X of a during net our debt operating XX.X% of in $X.X borrowings A first impact was XXXX Interest million the income was from up efforts percentage to expense X% lower sales, the the levels. quarter the to expense a was ago year SG&A ongoing compared expenses decrease sequentially. resulting in from the and Operating X% million On of

XX.X%. Our effective first quarter rate tax was

full-year to effective expect rate XX%. tax continue We to of XX%

ago. million quarter in to compared an Our was year. prior increased X% lowest operating our $X.XX, year. quarter per On $X.XX to in was the quarter a $XX is GAAP basis, compared million EPS $X.XX quarter. the earnings Operating million. from in first the the $X.XX adjusted first of first flows defined year share the Historically, quarter up as cash year $XX.X last were cash to EBITDA $X flow XX%

the our plant $XX.X of Engineered projects expect million. year expect segment, our newly to quarter operational be new and in operating awarded to $XX to programs These Also million related rubber fourth molded forging we're cash Arkansas, of Components in line purchase the quarter the support and the our in CapEx needed Engineered our For and of in extruded support to Products Products in of $XX in to year. in segments. XXXX, our aluminum, in completion flows of investments Assembly in stages we which we this full final businesses. million fuel-related equipment was the continue of growth

the For year, of we approximately expenditures full expect capital million. $XX

which $X.X higher demand driven the defense in up Technologies, Turning million, was and truck were XX% year-over-year, which market, heavy-duty segment results. up were an year-over-year. of sales up the truck-related was This our sales year-over-year. XX% increase now customer by to and markets, X% aerospace Supply growth and In

the Our first highest markets million quarters period, from China in end XXXX. their quarter past despite $XX.X income XXXX segment million of and over to certain in a $XX.X increase quarter level X%. year daily up a locations. X.X% of as lower ago, in X.X% to were sales margins Operating X X.X% increased soft the XXXX our this Operating of sales an were domestically compared demand the percentage demand at in in fourth and average in

anticipated year-over-year, Fuel Filler our our business. primarily by driven Components Moving in Sales end-of-life segment. Assembly programs, down to were Systems X% primarily

of year to win We which and impact each in future years. segment, continue the new in the will develop positively in and business this operation results second half our within

of currently million XX add over most of will are revenue, to that rates. over programs is We today's awarded spread newly across launching businesses run $XXX aluminum incremental fuel, our and which rubber

We X to The segment Segment plant our year-over-year the stringent continue the mentioned emissions margin fourth quarters X% Compared due adjusting products for quarter lower closing new declined costs X% year-over-year facilities previously of weighting, from closing XXXX, in of in include global regulations, quoting sales operating first more our this from in were direct operating of light million to to see the high activity levels absorbed income in cooling XXXX which XXXX. China. under resulting volumes, of technologies. injection after of the decrease nonrecurring production to quarter $X.X to and costs in was margins margins X.X% QX primarily in our and both for plant related applications costs.

perform this as higher production in were $X to to in continue year-over-year. by our be the income Drop margin in the of resulting and of XXX The growth We equipment sales driven up expenses sales, $X.X of margin driven in to million year-over-year in million quarter $X.X the begin many expect by improvement and the an XX% flow-through compared first to fourth our strong, were Canton the year expenses Corporate year decrease in Operating the a were of combination by impact year. million in acquisition from of acquisition and levels last new the in U.S. quarter incremental Forge Drop XX%. driven XX% professional up segment XXXX quarter XXXX. demand XXXX. with $X.XX orders profitability our primarily points share. our Operating driven million and to in was strong equipment, In of melting quarter from segment, of we and segment in bookings to of increase hardening quarter in segment. diluted throughout our oil a Forged increase this Machine guidance, margin-improvement guidance to organic and for are X%, to ago, the due reaffirming EPS increases first expenses. Bookings organic of XXXX These in was Engineered per first an the products segment and growth was various operating our new lower finally, Forge. was with The operations margins positively continues compared and reduced fees up in X% profit of QX of increased margin the Products primarily employee-related of basis And quarter and to XX% this Canton in well, range demand respect adjusted income and XX% this $X.XX in year over equipment $X.X first in and primarily backlogs induction The significantly gas our business. last by our over markets. up in aerospace locations segment in current initiatives

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

Matthew Crawford

Pat. my very up open for questions. much, me Great. We'll you it Thank to now Excuse again voice.

Operator

you. Thank

be Sidoti the now [Operator your line from question. question-and-answer Edward Our Instructions] of comes Marshall Please Company. first will session. with We conducting with question & proceed a

Edward Marshall

Hey morning guys. are How you? good

Matthew Crawford

Good morning.

Edward Marshall

Good.

to ask Components. Assembly about I So wanted the

programs, kind auto maybe you've in You about but outperformance. bit to than get you growth a the ramps new might some X%, talked of that. -- to what you wondering sense gains as down that I'm little there, But drove outperformed. programs better that be at about global a the about maybe share China, just having, and looking performed end-of-life trying

Matthew Crawford

and the Yes. well performing would would first tell with to is the I up of tell that winds better product exposure our Matt. I SUV this product particularly truck And -- region. mostly NAFTA parts, that you you our

the saw that think overall, assessment with agree have right the you I market. of our while in of we the I results, made parts your investment So

products our we on not about don't well. do there. to businesses believe seen is continue That fairly some And in expectations have, we're well. fairly the softening question, are injection partners them. have our environmental do reduce behind launched our question And the sensitivity. platforms to our and because we've without More in your strategically, we investments the Chinese as broadly, increase so continue that, for in the wind hose China, and Both to related I right secular investment well real our extruded government of investments as direct agenda line, other in with think, technology emissions

where are, softness of number well softness, like correction in but see the in in at least So unquestionably, headline actually you I led we moment, some there the as to, excess at what a inventory the the pipeline has China. and

So we're ramp way that -- somewhat still through we strategically. like We fighting are it. where significantly. is has our slowed it But

the reasons we we China. of robust we in we where On side, is, positive strategically see one are the quoting continue activity like to know

and with We continue we're really mostly activity national see of with. started we say sort the mean lot joint of Chinese is global with name When broadening business the of Today, I business I that, customers our plates. of what a OEs types venture there partners. we to a their see doing

slowed like -- is are. So unquestionably, progress where But our China. it I in we

Edward Marshall

kind And the providing passenger truck years ago? light of SUV, is Got it. mind maybe Maybe where was And of versus about vehicles? of today? you it mix it kind do X where

Matthew Crawford

light for we're because into we're said Yes. to many No, than -- and us X SUV light Tier that, truck or and truck cases, get that's I on SAR. what almost good the mean the impossible to a that's question. Tier X. is certainly number Having in blend an heavier

mid-and is least at to get number, to are we weighted, as be. say almost we're from we recall, and the points impossible want as of programs than the moment, years like level, high us where in few range. days, But though you heavier the that a it's chasing small those tells now few other a And things in I we're and for truck ago, instinct Dart our sense So to SUV a my would candidly. were we're car we sort in that back light

them. we We on are some those away of of from platforms. still some But moved

Edward Marshall

recovery, think, half I the in had more -- it. a to half you to, of broadly, pointing year comments orders Assembly see kind recovery Got relates Components, it OEMs as The relates the half respect those although positive the as second to some, the are auto? whole you I guess, second it as a do business. second your purchase of with But in to

Matthew Crawford

forecast I wiggle always mean what the some room. hold our seeing bit We're a try to given we've were we're be we Yes. so internally. reasonably to all forecast -- ourselves little up conservative,

nervous that's sort on So we're impact at optimism and product Pat in which or volumes discussed. this this excited, we're how year. not what up. or our of why here XXX, the is depending that why particularly suggesting. we're our hold leverage there locations, will That's see the we're the said our second they're as that's agenda about to trucks of an less launches of or overly anxious I Those cars end point, earnings, around the SUVs operating and outstanding up investments or good volumes is Having in on those XXX some more the of could being about pillar why that, commented, our quality newer great optimistic, have

Edward Marshall

just this Got any we've to you're industrial positives different weakness, of give can Technologies us the across -- specific served expectations throughout you about of industrial pretty strength, it. so sense of seen what and -- lot broadly earnings and Supply industrial barometer and of customers, you're pockets but negatives good industrial OEMs. global tougher the curious, speaking a being identifying a of just balance around this year? as maybe your Without to pockets is to a seeing a season. maybe economy, talk and global I'm the for region the question, And the economy

Pat Fogarty

China. were down, would highlight highlighted see semiconductor in the relative our in would the end we quarter our were was of markets did don't markets Yes. end that first affect market two a think number volatile to I -- which Pat. surprise a but anybody. business We up say significantly that other one, as is Ed, and come this a pretty quarter I locations I and did would that to markets. to our year-over-year,

result our Some of many first were case of customers. a the volatility was that product the occurring the in changeovers That's quarter. of solely often in with --

XXXX. in volume more for And just is saw quarter. start year-over-year, strengthen positive a the a throughout -- I but say So would March there was the lot that volatility, very especially of up We quarter business.

Edward Marshall

April can or Did And any you as we look kind that into did April? April now weaken? continued perspective into April? Did into strength complete, carry it soften? momentum that the Did is March, that -- it add that strength of into

Pat Fogarty

expected Yes. we together. I would say our that when we where April put forecast was

in way So April. no month either of big swings the

Edward Marshall

much. very you Thank

Operator

Thank you.

Our Capital next question. proceed question KeyBanc the line comes Steve Barger with your from of with Markets. Please

Steve Barger

Guys. morning. Hey good

Matthew Crawford

How you? Steve. Hey are

Steve Barger

I'm good.

Sorry allergy. here time about here. your Bad

Matthew Crawford

here around especially. It's

Steve Barger

brands where is much they've Western and think you for your you how domestic they're versus where Back going? growth of brands? talk can been Chinese domestic mix And rates to China, China? through Maybe

Matthew Crawford

talking right lot lot talk our know, people a recognize but prudently XXXX, -- I'm I I where a There it play our investments occur And of a now, expecting quoting some some yet are out are scaled volume we related -- But investment, or having think lot that we'll of vast there, as demand. a when majority business, the a mostly lot say, opportunities see OEs that a it if would awards. seen, to end prudent how Steve. of very robust nameplates. the those will still there's there. lot occur, It's the think, volumes about lot where activity. to be quoting Well, the some remains we've will and activity. our said to still that, say -- be have there, you in will to landed non-Chinese of I consolidation of occur up. of different that I very about We we activity been to about it

things So about about at we're trying think thinking to be being quote. we're asked to the pricing pretty volumes -- not or savvy pretty I way

in answer would So the too to question. early I it's your story say

activity some First, shame it it'll business. how these be quote is marketplace. because brand Chinese more see I -- And think of to than of because in the if some lot a a secondly, launched well do

Steve Barger

Yes. I about to think mean Are how that as similar can returns international OEMs? do versus programs for risk the And customer you domestic taking really the goes -- to do the you you historical focused mix? follow-up. on generate remaining there

Matthew Crawford

No.

making moves The western opportunity. OEs as been a it's mean Traditionally, market. certainly a very mainstream you pressured. they Chinese are and there. the think it's aggressive tremendous I are I investments know, into being very

undeniably I think that's changing.

the even thing, to well that price lower think also their compliant. to OEs by cars secular standards. we've products, at another will said I be ourselves of I part I do regulate one positioned positioning what different of we -- likely, think our if but It's this points thing price to ourselves be that, Beijing standard some emissions for be it's point. for Having sell to a the these thing think

to the day, battle of is most real this we're and partner compliance with Western build that the standards trying aggressively out meet trying brands. on ground people those business are to every sort competitive So to playing a and

Steve Barger

there? those backlog Understood. -- Switching are seeing grow new And Engineered, seeing is on how you said sets are you increases. I to bookings? you Where what product pricing think there were backlog

Pat Fogarty

-- this of in was our the U.S. with; in Where come has markets, than business, the that in type of melting Steve, historically which which is of we very saw margins side equipment higher equipment familiar business. hardening this Pat. we're been primarily lines, generally product obviously at is the furnace equipment increase levels channel our booking the primarily side

So to over this be we're we've through what optimistic backlog that margins at the we'll last burn higher able quarters. seen several than

Steve Barger

these multiple sometimes Engineered take year? you the through quarters to be get out. can margins sequential drive we that know And thinking I in can improvement some products of Should

Pat Fogarty

that that's think plan. -- I is the

Matthew Crawford

to And And as also that's out, I backlogs. the related think Pat pointed mix. Steve, the

Steve Barger

last waiting or how thinking cash come Right. $XX this Is you're cash? of question. Is you like. the looking use flow, letting M&A next it If just in sounds minus, sit, million together year, about And are it doesn't this for for Plus deleveraging? this free deal?

Pat Fogarty

deleveraging Well, the the us of do will availability as have But be my deleverage. deleveraging action, flow we opening #X our mentioned to remarks. is transactions, to clearly but allows -- always course I free in used cash

Matthew Crawford

Yes. Steve, want the I deleveraging, on before do and a hope focused out. we're to -- year as I we would emphasize deal I while Pat or still is said did, two that to modest

Operator

comes next Marco Stonegate Capital the question Rodriguez line Our from of with Partners.

Marco Rodriguez

wondering was Components. little could bit if I you about talk more Assembly a

information want correctly sure Just I'm to here. the all make getting

had, you're about fiscal that in incremental prior China X in heard correct? talked new launching and are I've fiscal You products And those 'XX. adding online million Is that $XXX about in in calls, and are today, you in the XX on if $XXX correctly new coming were of products 'XX the call an plants 'XX? million Mexico revenues about that talking adding incremental an

Matthew Crawford

yes. is, answer The

a the $XXX of it. I a accretive which think was, extent, mentioned net basis. Not large big all, on chunk Pat a but million, or to

expected activity, going mix. where million the once that market is of Once like seen seen demand our again, for conservative to in seen real on felt confident we there. terms remains China. we that because customer remains we've believe point number. reasonably we given in strategically, be said, demand. more still strong number are the one are of be what's But again, $XXX was how we quoting out we It we've to We that Unquestionably, at us

-- we're we're China walking the to building backing a if number. from has happened feedback. starting challenge not and made won't to -- order away little to has not time more difficult. We're book build anything I clearly, trying you say So sort away real that it. the we're actually But of give from But

Pat Fogarty

I Mexico, In plant It's diverse It's winning next it's reduces diversification Marco. we months. XX of -- or -- operations. over I'd $XXX one more to thing, not group obviously, in expect continuing add that just activity so million of mentioned launch new XX earlier, business revenues the within which just in China, across that that spreads and orders. isolated very risk, and a continued new launch Yes. the isolated the incremental not product

it's exciting an segment. that time So for

Marco Rodriguez

the very pretty new different Actually, helpful. a diverse product number that's And then areas. terms across of launches, in

expectations Components expect each it to do little do to you of you ramp Or to revenue, quarter, sequentially? normal Your more revenues follow single bit a expect your seasonality? of Assembly

Matthew Crawford

annual, mentioned but the I general, not Pat I'll comment, to And can quarter say but comments on tend like meat by comment to forward in did, to I the I we of as think my looking certainly trying to quarter to we're that -- We ramp. we're Pat let we like forecast. second stick the that, in our and that, that. half into getting

Marco Rodriguez

here. then housekeeping of items Got you. a And couple

the charges on some expenses. Just operate in of -- the the

a million $XXX,XXX? it press the closures, have goods of expense mentioned plant But at $X.X the prior. $X.X the call you cost in which Where's You million for discussed additional charge. you a release, guys onetime

Pat Fogarty

It's corporate.

Marco Rodriguez

also related the closures? Is plant you. to Got that

Pat Fogarty

expenses to as severance costs employee-related It's the onetime we've reduce actively seeking been across No. board.

Marco Rodriguez

you. Got

kind a decline to sequentially, And you putting see the a your you this that line, SG&A into of, reduction an had increase about expenses. Okay. on perspective, point quarter, sequentially. place? least at historical normally Is the in your strategies this of earlier, But then from a cost bit you're

Pat Fogarty

Exactly. Yes.

Marco Rodriguez

done with expenses that And of SG&A that you you kind on items? impact might the there those year expect Or types side the lower Okay. are other are as of progresses? activities

Pat Fogarty

the the expenses But continue of the and would quarter our I I on what that. continue year. is rest sales do where of use. indicative first think was to we net for Obviously, I focus percentage first be will the should to of quarter think controlling we

Marco Rodriguez

you've of been terms goals forthcoming what expectations, pretty are. those operation And the flow cash with from you. then Got in

it drill terms cycle Obviously, way down into the maybe normal in the that of changes kind from one has conversion there's pretty cash other? acquisitions. for First to quarter wanted influenced the capital in impacts the so the of but kind itself last working or some seems or year there increasing. of Just been usage,

Just if targeting sort going that activities payables conversion you're kind inventories of be and cycle. to how any wondering receivables of to you're about improve on that cash of thinking or or kind

Pat Fogarty

Yes.

As year. I course $XX and expect that mentioned, we cash million We, the the basis, to we expect $XX of achieve. operating throughout of to an ongoing goals million on of capital units provide flow with each manage our our them working

normal cash managing capital relative working a I keeping nothing possible the initiative in flow, So say, of It's course new of lowest our at any ongoing initiatives. level. would to its unique

Operator

you. turn would I over the are further to Mr. at Crawford time. like for back any There no questions closing this remarks. call to Thank

Matthew Crawford

nice basis thank goes think a Well, job I that much this morning. the did of in for you your during and see on very environment Great. first again, all a the I significant to we more investments the year a benefits you'll as tough think interest Once on. of begin quarter, the and support

onward. So very Thank much. upward and you

Operator

Thank you. teleconference. This today's concludes

your a have wonderful Thank your for you You participation, at time. this may and disconnect day. lines

Matthew Crawford	Chairman and CEO
Ed Crawford	President
Pat Fogarty	CFO
Bob Vilsack	Chief Legal Counsel
Edward Marshall	Sidoti & Company
Steve Barger	KeyBanc Capital Markets
Marco Rodriguez	Stonegate Capital Partners

Park-Ohio (PKOH) 11 May 192019 Q1 Earnings call transcript