Earnings call transcript Q4 2022

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Operator

Good morning. Welcome to the Park-Ohio Fourth Quarter and Full Year 2022 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 also being recorded.

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

as to get materially call that statements forward-looking Private statements started, and XXXX. we differ to that Act remind Litigation may in Reform Securities I forward-looking are today's Before to These on may projected. want everyone cause from of results the those made certain be risks subject defined uncertainties statements actual

well the relevant March of may and in earnings XX-K, press XXXX risks as the XXth, SEC. on in list A be which release uncertainties as with filed company's the found was XXXX,

Additionally, Accepted the adjusted operating continuing Accounting Principles. company of metrics income, on consolidated discuss or measures defined These basis. as the adjusted operations are may Generally and under EPS, not EBITDA performance

EPS, the common EBITDA shareholders release. recent net to to reconciliation operating adjusted EPS to and to Park-Ohio's For a refer income company's of to please operating income attributed earnings defined, adjusted as income

to CEO. will Mr. I conference Chairman, proceed, Crawford. Please President now Crawford, Matthew Mr. turn the over and

Matthew Crawford

Thank business morning. improved of XXXX. operations of growth proud achieve Revenue good all We're our continuing during helped across three annual profit accomplishments sales from operating us record and segments. XX% and you,

of to be of battling achieve inflation, we enter XXXX, XXXX challenges. this three years and a sheet, other after myriad our markets margins substantially we supply expect as As and to and well robust continue increased as versus profitability improved a balance chain,

which but cost marketplace. inflation both also substantial effort the the as much These ongoing business our structure our lifting While of complete, is of never in our heavy commercial in efforts to want complete. achieve the relates the job now is restructuring and to continue, terms, efforts it by highlight much addresses I entire team to incredible our

and allocated at we in ensure which most of many our year, capital promising the growth accretive million $XX margins. to services, approximately products will during Notably future

fasteners, engineered for Rubber in forging and improved our capabilities, highlight highly would increased business. large I expanded Here capacity capacity

which add associates added in In capabilities reduced will continues have customers. both But addition, during and to small, accretive we challenge. some skilled and stabilization but and a seen and remain, modest business be have inefficiencies. begun of the strategic Technologies, overtime period new this retaining still Supply to see two and other we particular, attracting the to to acquisitions Challenges benefits

in light-weighting, the to due the of largely Products Aluminum announcing decision auto business. also within difficult We're a reshoring, our opportunities This occur potential electrification meaningfully front industry. begun has them, to sale given the which was and of substantial

business and demonstrating since have COVID, While have invest to other struggled Despite profitable these 'turn the has be the we opportunities. the to are business, our impressive in opportunities there it which chosen stabilized and corner' growth performance in recently. improved of our positives, we've seen beginning to caused investments

As excited trends a few we're we seeing look business. XXXX and into our about beyond, we're in particularly

productivity desperately as supply or Engineered consumer large Group. may availability their improve as and our evidenced credit, due cost in increased by to many to even First, Products restock manufacturing their or of customers our chain dampen demand need of backlogs capacity

Second, we've by many seen evidence of our of customers. reshoring

foreign While recently by reduce a have intended our has we suppliers. storyline customers reliance orders years, this received their been to on for

technology, cars, to benefit Third, electric meaningfully. We business the has whether furnace XX green anticipate energy or our we months wind European energy, continue last will the electric transition during benefited it's globally.

forging many areas spending the defense which infrastructure government industries capacity accelerate will we are for steelmaking, like improved and basic benefit. need and in Lastly, where will in

making making including and a firm joined all that want and new we've the recently have of we're While our a with years, team, thank our people and had challenging pleased couple many are we're the of talented big to difference. progress

Pat. to over With I'll turn it that,

Patrick Fogarty

you, Thank Matt.

we achieve we're sales of chain for operating earnings in businesses and year-over-year in and and XXXX, income XXXX. believe sales improved in able supply positioned During despite challenges significant inflationary majority to our are and the further improvement growth

the sales billion, first, up XXXX from three we record following; of in driven in consolidated $X.X of business operations net segments. achieved continuing highlights XX% growth by included our Key all year-over-year,

operating Excluding We year adjusted discontinued throughout adjusted operations, year significant every to product of more increase implemented was costs increases offset our in $X.XX compared full $X.XX, the business. and XXX% price EPS EPS to inflation an than of customer higher in XXXX.

these improve actions year. margins operating the will expect in current We

segments, our We facility four plants. which in substantially completed activities manufacturing consolidation Product and impacted Engineered Components Assembly our

up and mixing started Drop facility hammer, product also Canton installed which our Forge in facility. several relocated assets and including rubber now a XX,XXX-pound forging a We lines new operating related is

We to expect operating contribute in XXXX. also actions will improved margins these

In other cash connection activities, sold we real the of for million. during estate assets year $XX consolidation with and proceeds the

million. years proceeds cash totaled gains $XX past assets Over two $XX the in combined, from of our resulting million, sales

support two our accelerate of proprietary our initiative expand in Technologies and in and to growth Supply supply and self-piercing in products of clinch Fastener industrial business our We acquisitions global business. MRO completed segment strategic our our the to Manufacturing

with to made million, Pursuant the And XXth, representing purchase decision subject portion the including The our a on and to we and is price. sale fourth Products promissory conditions, we $XX Aluminum the of final a various the third-party the signed final memorandum million the to agreement. finally, December a a exit MOU, amount business. of strategic execution note of we business acquire during quarter, the of a $XX of sale business a in to understanding received

all net in XXXX $X.X to $X.X fourth XX% in with compared up and our in billion, Now, were segments. billion ago, quarter I'll year a three year-over-year higher operations sales results review Consolidated full continuing XXXX our business sales from detail. of year

higher was while of the was by XX% new customer XX% remaining that estimate of from increases We to demand the price increase during in achieved the driven year. programs, customer volume the due growth impact overall

excludes to consolidation share. and significantly closure to compared costs, XXXX in items share per $X.XX was which the for share. primarily non-recurring share, per diluted improved $X.XX year Adjusted per year-over-year of plant per related EPS $X.XX earnings EPS one-time adjusted to GAAP

was costs, XXXX closure XX.X% higher foreign to margin primarily in expenses and impact. XX.X% XXXX. SG&A gross plant higher employee-related currency to levels, exchange due sales XXXX costs, Excluding higher to unfavorable in the were compared

was adjusted of $XX or operating $XX XXXX. sales XXXX X.X% Our X.X% of in income sales or million compared to million

improvement was year-over-year Significant each in segment, notably business improved segment, in which our Engineered operating $XX income Products million. delivered in by most

These compared has million in to expense in Interest operations. each rates discontinued exclude approximately increase to $XX the higher XXXX. allocated million higher to and million XXXX, with in due $XX outstanding amounts $X.X borrowings that been year interest was

tax which $XXX,XXX of million. GAAP and of a research income an income in year Federal provision was during the year. planning full initiatives, The pre-tax reflects benefit a development effects credits increase tax include Our benefit positive on $XX.X of the

year For tax hand which from ended XXXX, our XX%. banking the of income cash capacity borrowing of and various range of suppressed $XX consisted liquidity our of unused to included $XXX arrangements, will rule XX% $XX availability. $XXX we We estimate on million under with million effective million of million which

sales, $X cash flow, million. quarter, million During proceeds asset from cash $X free a of was of including use the fourth

market demand capital to net excess million. investments have we strong We additional and capital approximately supply in have estimate to working be $XX calls, resulted recent working compared levels. As in discussed end chain challenges historical on the

net over we next reductions days, million net reduced quarter, the months, to flows expect working XX significant the working resulting capital in in free XX During by capital cash in and $X further fourth improvement year-over-year.

which exited reporting of for to plant which the now Mexico. financial these on Aluminum purposes, a we driven discontinued was line expenses non-cash incurred classified as loss is charges significant Products portion $XX.X losses midyear, With net product million, loss assets, in startup for for of were by related. business, our that non-recurring non-cash reported a respect and to A related we our in and idle year

business the and in $X used cash of capital For of had the million its million. activities operating $X.X expenditures year,

to three year-over-year quarter $XXX of prior segments. up year-over-year operations continuing net in compared strong now XX% driven business from our million $XXX by Moving customer to were demand fourth our year, results, the across all million of sales

tax one-time the fourth The $X.XX EPS quarter per the $X.XX GAAP per share. of quarter which loss evaluation and loss to unfavorable impacted credits the quarter EPS, fourth foreign $X.XX for of of items, a excludes adjustments $X.XX in loss $X.X recorded against share. consisting non-recurring two other million was tax allowance by together share. negatively included per diluted primarily items which a Adjusted was of previously estimates,

share. an fourth addition, diluted In impact unfavorable totaling $X.XX quarter foreign our per results currency included

sports, power daily XXXX segment up our aerospace end Supply biggest heavy-duty strong agricultural, XX% customer compared and to up the semiconductor, XXXX. increases full now results. the to in equipment, in as Technologies, $XXX were markets with end sales demand $XXX million, a sales net key were record year In the million Turning truck, year-over-year saw most industrial XX% Average markets. we civilian in for

demand customer sales increased from pricing, to addition benefited and Automotive. year current of Charter Fasteners the Southern In and acquisitions also in improved the

in in margins lower costs, impacted by Operating freight Operating points million sales were supply were and XXXX, to higher driven higher by related segment million in primarily important basis income X% totaled compared $XX approximately domestic chain XXXX, up this year-over-year mix. levels. $XX the sales XX and

period. income were quarter in in XXXX, to was quarter of net the fourth sales $XXX compared the of fourth XX% million million operating million and In each $XXX were up XXXX $XX

business, segment, sales up In programs resulting in $XXX Assembly sales which price the our this excludes new were on to million XX% inflation and product offset increased Products from for million which increased our net compared realization, costs segment year, Aluminum year. during helped $XXX other and Components in XXXX, the now launched

and to benefits million profit charges levels, $X with adjusted $X million higher sales improvement XXXX through to from the Excluding from the profit by increases, income XXXX driven operating in activities, related consolidation improvement in price business. this flow and initiatives closure compared was plant

improved quarter. sales were net $X $XX million million quarter, XX% quarter XXXX $X of fourth fourth of the adjusted and in income the $XX year-over-year to In to million the compared operating in million up

segment, driven $XXX dollars both Equipment and XXXX our and to $XXX Products XX% in In million Capital by customer strong Machine businesses. XXXX, million, were up sales Forged demand compared our Engineered Products in

full Our equipment levels. were for the $XXX bookings to of million, XXXX year of new increase X% compared an

strong. parts as be than and higher million, year XX% Our demand services December of continues $XXX new was backlog XXst aftermarket a equipment for to our and ago

up key to highest continuing Forged Machine the full and the end business, driven and by their and rail, strength year in Products markets, level gas, since were sales XXXX, defense XX% markets. recovery our of and almost In at oil, including aerospace several

and our $XX flow the other from through margin related consolidation higher a million income actions, operating compared charges the significant improvements, operational ago, plant $X by levels, year activities, initiatives. sales million to for profit of adjusted enhancement with to a year driven Excluding was plant improvement benefits consolidation implemented

will We to project. Crop complete and less of consolidation million the half than the incur costs the business this Forge first in to our of dollars year of expect $X finalize

fourth the compared quarter of million XXXX, income a sales million million of up $XXX was were of $XXX,XXX adjusted of quarter in XX% the a quarter fourth year compared and last $X year the net ago. to in operating In loss $XX to

Corporate initiatives expenses planning tax employee-related professional the were costs to and to up $X fees in XXXX due year. higher implemented during million related primarily

our finally, year-over-year to in increased from of Supply we Components by growth strong product Assembly end in increased and Products revenue in most X% And into and and revenue looking The driven from backlogs XXXX, markets XX%. expect productivity the Technologies volumes strong segment. in will pricing improved demand Engineered approximately be growth

free year-over-year plant flow, consolidations segment. implemented completed adjusted by In other expect addition, driven as and EPS benefits sales XXXX, adjusted business over margin years, growth, defined, improvement each operating cash we the and from income, EBITDA initiatives in across and improvement two the last the

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

Matthew Crawford

very you questions. much, now Thank take We'll Great. some Matt.

Operator

Instructions] Thank you. [Operator

Our Yilma Abebe JPMorgan. with proceed. first question is Please from

Yilma Abebe

morning. Thank good you and

Matthew Crawford

Yilma. morning Good

Patrick Fogarty

morning. Good

Yilma Abebe

Aluminum Good it model can the can Products if sale. some so appropriately? context going firstly, guess, forward the put contribution we it you in relative morning. revenue My first I question asset that have is what you was for us on EBITDA, XXXX

Patrick Fogarty

define of we was approximately Yes, it revenue approximately the $XX the is million. Yilma a and as $XXX million loss EBITDA

Yilma Abebe

the of it was the business business, Okay, enterprise? business there you. terms from portfolio? the in the standalone sort great. of separating within cost of the Are friction in rest of And Thank a terms

Matthew Crawford

Yilma, is Matt. this

Aluminum, Rubber Automotive Components the our some our is well and into really which General One most Our as division, grouped is of businesses. other Assembly segment two includes and companies Products. Assembly business Components Aluminum the

million the General Products, Aluminum $XXX the So, standalone is a piece which business. is

business, So, which rest of is no, incorporated it automotive the not Park-Ohio of the we inside business, retaining. deeply rest the are or of either the

Yilma Abebe

forward looking million. expectations guess XXXX, And free great. $XX Okay, I to of then in cash flow

sort free number cash apples-to-apples sort number. about million this number, when the free that flow comparable the terms $XX Is so have think from CapEx, cash in XXXX, Just of less that and you the million a to XXXX I'm is for ops getting for cash of flow of then for $XX we of year? comparison, going next right

Patrick Fogarty

cash related segment. the $XX for Products to laid as press in transaction release flow Yilma, Yes, our we've of any million excludes Aluminum out our XXXX

that'll So, least you apples-and-apples I give at an comparison. think

in to the And cash year was business. a during in flow, of cash relative then be increase the use million flow CapEx seen in to the see capital the current obviously, $XX the laid in that of then And working statement, our period. as from out there you'll Matt we've activities free cash referenced operating able

Yilma Abebe

Okay.

this as $XX that's of you million it gone plus $XX in to to million clear be comparable correct? flow see that though, for forecast to cash XXXX, XXXX, from million, Is the $XX free So, sort

Patrick Fogarty

That's correct.

Yilma Abebe

to million $XX million? $XX plus Minus

Patrick Fogarty

That's right.

Yilma Abebe

you. Thank great. maybe-- guess Okay, I

Matthew Crawford

-- would that to a just bit. would It's way. think give little I only I the the shuffle context in lost I in following

you we about range range would talked dollars revenue If has grown midpoint in months, mean the of business real that XX the XXXX, the million. over the even in $XXX of take for

made a profitable. not were at investments we time we tremendous the where very business So, in

forth. think on chains I some a a we is about So, of business supply and and as little excess look bit that the capital based a so forward up generating working lot as was shoring cash XXXX harvesting

here metabolize think opportunity To free a there's or on months lot. I some I'll more million as what over cash call $XXX growth side the stabilizes. XX flow So, is

Yilma Abebe

Thank you.

cash to bridge. come driven be is the like from the sort it in sort of increase related partly free lot that by on of of, be I A sounds think is you working a And It answered of last capital of question appears my guess, a flow. I follow-up profitability. going some revenue bit it back.

to ready, million $XX relative this us improving and capital maybe you're to free flow Thank If of cash the the in business terms is working what the in profitability? versus growth help size, forecast the you. contribution

Patrick Fogarty

would I my working the as recovery overnight. occur $XX will working I That comments, capital, in roughly mentioned we not harvesting that that Yilma, capital excess million. comment or excess Yes, cash of is the believe, to

reductions business over working occur stabilizes, think chain estimate needed months I XX take grow that that happen We in place. next next the months. supply business lead-times to year supplier to over will will capital clearly And XX that the depends our as XX as on into further segment. XX additional The to

million that's if good to use I XX every And is next of invest harvesting capital, XX% point. the XX the then working in But consider general, sales new in XX% of think the a you $XX over dollars months. starting to

Yilma Abebe

had. Thanks very much. I all That's

Matthew Crawford

Thank you.

Patrick Fogarty

Thank you.

Operator

Please proceed. Our next question Stonegate Storms Capital is with Markets. from Dave

Dave Storms

Morning, thanks gentlemen and my taking for call.

were kind six that or to looking a up there? months you Has backlogs. wanted you that mentioned of Just of know kind probably bit little start shortened at color nine backlogs. I what's seeing of the quarter on last to you're about

Matthew Crawford

we're referencing, is of No which of Equipment activity. when rest backlogs. shorter Capital non-equipment allude is about the Again, is our we're talking business, of to sort Dave, term the what business the those business, visibility. we Most what

strong. continued continues lumpy. refer The book bit -- order we general, to when to strong. can in the to be it a the continues and order be interest in stay backlogs, business the they've Capital the to Equipment order So, book But

fact megatrends, the has sector massively I some fears States United relates some the underinvested comments, of there while as And the in point of part my in the a at we're mentioned I to to again, recession, would point infrastructure may And of they're it and in. defense, to country. the I first as manufacturing underinvested been particularly that would be the looking as

So, we're and to I the investments to productivity see upgrading capacity going base. think in continue and the the

bit a trends. think general, be seeing may it positive choppy, be may it some credit, So, but in influenced we're by I

Dave Storms

related start Inflation to the So, segue question to you Is that does second rumblings into that get my other here. Act actually a a expected XXXX of good Adoption to seeing related I'm to the market. into Park-Ohio? any people hear, few? might make funds that's in visibility of to trickle to some that guys any to you to any And give sorry --

Matthew Crawford

I you where chain. least to going I I think think it's better in and word. are money how great is, the that a right and question is the had answer. you I wish would I a a supply is The be give of ton spent, answer I tell at we what there's -- don't would trickle visibility

I large -- government defense level suppliers having certain will and other to large how of invest are that contractors dollars. I'm at say these certainly certainly discussions

ourselves increasing some kind with on some very and us our between there of strategic very I capacity So, to name going them, real. household of conversations think the it's them, are support around and manufacturers equipment, for for

that some layer the Infrastructure I a to and mean, And continuing think I we're we're motivated more manufacturing. seeing that of -- by Bill on then that, American Inflation reshoring for see need top of the a the

little it into of -- our that would but I know probably I on had backlog say evidence conversations on I bit wouldn't would the a anecdotal still way. weak, that great. is more the equipment. So, call the visibility being baked trickling suggest that that visibility it's of But don't its It's the type is

Dave Storms

helpful. very Thank That's you.

Operator

Capital Please is with question from proceed. next KeyBanc Our Markets. Barger Steve

Steve Barger

Good morning. Thanks.

Matthew Crawford

Good morning.

Steve Barger

total sales note million sales a more million portion what the price provide you $XX business. that Any could the received be? said you of aluminum the Pat details for $XX the price is and on promissory can

Patrick Fogarty

can't in middle of process. really the right Steve. We're now. the Yes, I comment

in place. $XX comment the we can't of the agreement comment I the business. price a million promissory cash of note in to have portion anticipated and reiterate, But won't was a so and definitive the sale until And

Steve Barger

nicely Understood. cash But a you any is trading at the capital bonds the expect thought initial And flow. improving advantage this with deleveraging, and there I take of be great looks that? $XX like allocating is it which you million to put discount, revolver. the should some to know to

Patrick Fogarty

bonds. have historically we purchased Steve, the

sale the We flexible net to But the bonds we'll it reduce we're so. ways debt. be the there's open reduce different event expect or to to that. do opportunity do going to company de-lever we agree deleveraging and give any will to debt on be bank buyback ourselves And be the if to and proceeds a flexibility an to our

Steve Barger

it. Got

I know about but And to? Okay. closes, next that this plate? -- Matt, What your off becomes that's priority? are focus you it's but a referenced with a thinking deal yet, the not I know you done things, how turn your few once what when does

Matthew Crawford

that's opportunity And what great it, Steve. to articulate comments want No, opening the and to thanks it. did a Yes. I but question, revisit for I in

We opportunities on what of haven't some great in stopped think focusing business. the we the are

General it everything anticipate and be across we great And to is the the is reality Aluminum XXXX, And do honest opportunity. seeing just at we're into can't business, of with you, it a do can't growth with once. off. The we

into question which So, infrastructure money last spent we caller's at exciting if so about forging unique right prior the capacity, in this particularly some defense. look could of and and and where forth play you year,

adding right plays through we we fastener did like electrification the that how last capacity, we're and you into which the awesome. know business acquisition is What incremental year capacity much doing side, or on engineered

capital an of we super So, them area will as our parts at get our be business see share accretive grow that those to is to of first our of margins. feed going focus unfair continuing

haven't supply other satisfied, year and last -- we're customers on on the been it, and -- going again, was to sheet. thing that balance we So, to focused addressing back not we're chains our focused about would pivot the keeping but I say

reduce going leverage in candidly businesses. without to this well give these with ourselves our invest undue we're that sale to position or year an to and of So, the in effort continue to to amount attention an

these that, we If I'm sorry, do want kind really well or that margin people approaching trajectory with XX% of of products and grow the terms in XX% over of bodes more, can kinds XX% of more our years that to in. business a for than invest or and should couple both in it candidly, --

got to we've think I us in things do. of the front So,

In third will G&A, said an our acquisition? mentioned. things the the I've put but see for backdrop, list that within I to of continue maybe opportunity we would on an the Yes,

Steve Barger

pricing I it. actions Got And done, to lifting And guys a last it that. did is you was heavy to said reference in lot you of know inflation offset Matt, that on I when think hard year. the work

XX%, For as to price expectation the growth volume for X% XXXX? can you your of about talk what in is

Matthew Crawford

you than it's some interesting. addressed. met the would restructuring our the I Yes, areas with in quite to but side, in those general, and we've I the damaging But probably pricing exceptions, more that on really think honest. general, materially were the operations, be pricing tell in disproportionately continuing I particularly company,

think the those work lot that because a process been in of I tough work in process. So, is had. are That have markets conversations a

prior as on early raw in think have mentioned lesser been a inflationary significant I've cases costs material changes the I addressed and environment not in to permanent extent in So, labor addressed. was many calls,

a I daily think there list So, of opportunities. that no, is

to opportunities paid the what where our through we for marketplace getting identify to have not we work how recouped has where we're not because continue We costs. changed, of do

P&L But the catastrophic addressed. say the been those last our seeing where corners business were burn of have done were I the over is think not there. that we that work I XX through would those more things months, that But largely

done. So, it's moderates never piece, completely, feels like is inflation mostly until That the done. work that restructuring

Steve Barger

great That's Thank you. Understood. detail.

Operator

with proceed. Stonegate Markets. Storms we from And follow-up Capital have a question do Dave Please

Dave Storms

taking follow-up thanks for here. my Hey,

a could more the color Just us you on market. give M&A little hoping

what seeing the time to opportunistic was in external for on surge to the from? touched with seller? more Products, you, be Kind are but going a a You backdrop an of be Aluminum currently how you just a Or this good of that buyer? that's is

Matthew Crawford

level, we've an high been would Aluminum. you General a on investor General I in Aluminum. tell At Yes.

a a which business. in Candidly, OEMs lot going years, frankly, family, Our that for what enough after. good for of the sought it's to want XX, XX capacity years. do. It foundry in highly not very And is quite is there's a space direction,

got though of many -- as I reality mentioned, The opportunities. is so we've it it is -- a

some had the I want given where with felt think seeing decisions who the good buyers to we in some growth well we're to strategic capital. make we do that on And can we are as our there business well strategic allocate marketplace can. as we

I to became, obvious think, harvest it some So, an place try money. and

Dave Storms

helpful. you. very That's Thank

Operator

reached have the session. back We our to conference comments. management would to I for end the like of turn question-and-answer over closing

Matthew Crawford

what speak Great. know that Thank lot there's a but in from I in release, these though as noise we to this doing on benchmark as to finally, were to against is begin taken backside I been really feel to call that in this pre-COVID got though away hope of press has you of much. comments we're the opportunity an what we so so XXXX. COVID speak. feel very we've We

but a move hope prepared way there. certainly the business through, that and we're General go either We business will deal to Aluminum solid plan forward anticipate with

level. of of business next the will the in things we our kinds this restructuring off time any again, take in in investing or business And to didn't meantime, the terms that take

for really you time quarter the and we today look forward first thank to call. So, your Thanks.

Operator

This conclude you. Thank will conference. today's

thank time participation. this for and at your disconnect may your you You lines

Park-Ohio (PKOH) 16 Mar 232022 Q4 Earnings call transcript