ParkOhio(PKOH) - 2024 Q1 - Quarterly Results

Q1 2024 Financial Highlights & Consolidated Results ParkOhio reported strong Q1 2024 results with a 36% increase in GAAP EPS from continuing operations to $0.83 and an 18% rise in adjusted EPS to $0.85, alongside improved gross margin and EBITDA, primarily driven by record performance in the Supply Technologies segment Q1 2024 Consolidated Financial Highlights | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales (Millions) | $417.6 | $423.5 | -1.4% | | Gross Margin | 17.1% | 15.9% | +120 bps | | GAAP EPS (cont. ops) (Dollars) | $0.83 | $0.61 | +36.1% | | Adjusted EPS (cont. ops) (Dollars) | $0.85 | $0.72 | +18.1% | | EBITDA, as defined (Millions) | $37.8 | $31.7 | +19.2% | - The company's CEO highlighted improved quality of earnings and solid backlogs, particularly in equipment and forging end markets, as key drivers for the strong performance[3] - Profitability was boosted by record operating profit in the Supply Technologies segment and benefits from ongoing profit-improvement initiatives and product pricing[5] Segment Performance In Q1 2024, the Supply Technologies segment delivered record operating income and margin, driven by strong demand in aerospace and defense, while Assembly Components improved its operating margin, and Engineered Products saw a decline in sales due to lower new equipment sales despite aftermarket growth Supply Technologies Q1 2024 Supply Technologies Performance | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $196.9 | $195.8 | +0.6% | | Operating Income | $19.5 | $14.0 | +39.3% | | Operating Margin | 9.9% | 7.2% | +270 bps | - Sales growth was driven by a 28% increase in the aerospace and defense market and a 15% year-over-year increase in the fastener manufacturing business[7] - The record 9.9% operating margin was attributed to an increase in higher-margin sales, lower supply chain costs, and strong demand in the fastener business[9] Assembly Components Q1 2024 Assembly Components Performance | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $107.2 | $110.4 | -2.9% | | Operating Income | $8.6 | $7.3 | +17.8% | | Operating Margin | 8.0% | 6.6% | +140 bps | - The 18% improvement in operating income was driven by profit improvement initiatives, better product pricing, and benefits from completed plant closure and consolidation actions[10] Engineered Products Q1 2024 Engineered Products Performance | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $113.5 | $117.3 | -3.2% | | Operating Income | $3.5 | $5.0 | -30.0% | | Adjusted Op. Income | $3.8 | $7.0 | -45.7% | - Sales in the aftermarket parts and service business grew 16% year-over-year, partially offsetting lower new equipment sales[11] - New equipment backlog totaled $151 million at March 31, 2024[11] - On February 29, 2024, the company completed the acquisition of EMA Indutec GmbH to expand its global induction business[11] Liquidity and Cash Flow EBITDA increased 19% year-over-year to $37.8 million in Q1 2024, with operating cash flow from continuing operations improving to $2.3 million, and total liquidity remaining strong at $167.5 million - Operating cash flow from continuing operations was $2.3 million, an improvement from $0.2 million in Q1 2023[14] - Total liquidity at March 31, 2024, was $167.5 million, which included $61.6 million of cash on hand and $105.9 million of unused borrowing availability[15] Credit Agency Upgrade On April 10, 2024, S&P Global upgraded Park-Ohio's issuer credit rating to 'B' from 'B-', reflecting improved operating performance and expectations for continued profitability and deleveraging - S&P Global upgraded the issuer credit rating to B from B- and the issue-level rating on the Company's senior unsecured notes to B-[17] 2024 Outlook The company reaffirmed its full-year 2024 outlook, expecting mid-single-digit revenue growth driven by strong demand and a robust backlog, along with continued year-over-year improvement in both EPS and EBITDA - The company continues to expect revenue growth in the mid-single digit range year-over-year for 2024[19] - Continued year-over-year improvement in EPS and EBITDA, as defined, is also expected[19] Financial Statements This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2024, compared to the same period in 2023, including Statements of Income, Balance Sheets, Cash Flows, and Business Segment Information Condensed Consolidated Statements of Income Q1 2024 Condensed Consolidated Statements of Income | (In millions, except per share data) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net sales (Millions) | $417.6 | $423.5 | | Operating income (Millions) | $24.0 | $20.2 | | Income from continuing operations (Millions) | $10.1 | $7.6 | | Net income attributable to PKOH shareholders (Millions) | $9.6 | $5.8 | | Diluted EPS from continuing operations (Dollars) | $0.83 | $0.61 | | Dividends per common share (Dollars) | $0.125 | $0.125 | Condensed Consolidated Balance Sheets Q1 2024 Condensed Consolidated Balance Sheets | (In millions) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents (Millions) | $61.6 | $54.8 | | Total current assets (Millions) | $883.7 | $824.4 | | Total assets (Millions) | $1,402.5 | $1,340.7 | | Liabilities & Equity | | | | Total current liabilities (Millions) | $393.5 | $363.6 | | Long-term debt (Millions) | $657.3 | $633.4 | | Total liabilities (Millions) | $1,105.0 | $1,050.8 | | Total equity (Millions) | $297.5 | $289.9 | Condensed Consolidated Statements of Cash Flows Q1 2024 Condensed Consolidated Statements of Cash Flows | (In millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities (cont. ops) (Millions) | $2.3 | $0.2 | | Net cash used in investing activities (cont. ops) (Millions) | $(16.8) | $(5.1) | | Net cash provided by financing activities (cont. ops) (Millions) | $25.8 | $4.5 | | Increase (decrease) in cash and cash equivalents (Millions) | $6.8 | $(8.6) | Non-GAAP Reconciliations This section provides reconciliations for key non-GAAP financial measures used by management to evaluate performance, including Adjusted EPS from continuing operations, EBITDA, and adjustments to segment operating income Reconciliation of Adjusted Earnings Per Share (EPS) Q1 2024 Reconciliation of Adjusted Earnings Per Share | (In millions, except EPS) | Q1 2024 Earnings (Millions) | Q1 2024 Diluted EPS (Dollars) | Q1 2023 Earnings (Millions) | Q1 2023 Diluted EPS (Dollars) | | :--- | :--- | :--- | :--- | :--- | | GAAP Income from cont. ops. | $10.6 | $0.83 | $7.5 | $0.61 | | Adjustments (net of tax) | $0.2 | $0.02 | $1.3 | $0.11 | | Adjusted Earnings | $10.8 | $0.85 | $8.8 | $0.72 | Reconciliation of EBITDA, as defined Q1 2024 Reconciliation of EBITDA | (In millions) | Three Months Ended March 31, 2024 (Millions) | Three Months Ended March 31, 2023 (Millions) | | :--- | :--- | :--- | | Income from continuing operations | $10.6 | $7.5 | | Interest expense, net | $11.9 | $10.7 | | Income tax expense | $3.3 | $2.6 | | Depreciation and amortization | $8.4 | $7.7 | | Other adjustments | $3.6 | $3.2 | | EBITDA, as defined | $37.8 | $31.7 | Reconciliation of Adjusted Segment Operating Income Q1 2024 Reconciliation of Adjusted Segment Operating Income | (In millions) | As Reported Q1 2024 (Millions) | As Adjusted Q1 2024 (Millions) | As Reported Q1 2023 (Millions) | As Adjusted Q1 2023 (Millions) | | :--- | :--- | :--- | :--- | :--- | | Supply Technologies | $19.5 | $19.5 | $14.0 | $14.2 | | Assembly Components | $8.6 | $8.6 | $7.3 | $7.6 | | Engineered Products | $3.5 | $3.8 | $5.0 | $7.0 |