ParkOhio(US:PKOH)2023-05-07 15:41Financial Data and Key Metrics Changes - Consolidated net sales from continuing operations were $423 million, up 18% compared to $358 million in the first quarter of last year and up 11% sequentially from the fourth quarter of 2022 [21] - Gross margins from continuing operations improved to 15.8%, compared to 14.2% last quarter and 13.3% a year ago, marking the highest margin level since Q4 2019 [21] - GAAP EPS from continued operations was $0.61 per diluted share, more than double the $0.30 in the first quarter of last year, while adjusted EPS was $0.72 compared to $0.51 a year ago [22] - Operating income from continuing operations was $20.2 million, significantly up from $5.4 million in the first quarter of last year [84] Business Segment Data and Key Metrics Changes - In the Supply Technologies segment, net sales were $196 million, up 16% from $169 million a year ago and $181 million last quarter, with average daily sales up 17% year-over-year [5] - The Assembly Components segment saw sales increase to $110 million, a 13% rise from $98 million a year ago, with operating income significantly improving to $7.3 million from a loss of $400,000 [13] - The Engineered Products segment reported sales of $117 million, up 29% compared to $91 million a year ago, with operating income rising to $5 million from $1.8 million [24][25] Market Data and Key Metrics Changes - Strong customer demand was noted across all segments, particularly in end markets such as power sports, heavy-duty trucks, industrial and agricultural equipment, and civilian aerospace [23] - Backlog as of March 31 was $175 million, an increase of 7% compared to the end of last year, indicating consistent order levels expected throughout the year [87] Company Strategy and Development Direction - The company continues to focus on improving operating margins through price increases and operational improvements, including the launch of a new rubber mixing facility [6] - Strategic investments are being made in megatrends such as onshoring, infrastructure, defense spending, and green energy, which are expected to positively impact the company over the next few years [20] - The company is committed to its General Aluminum business, investing $8 million in the first quarter to support its long-term prospects [12][69] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about strong demand and backlogs, despite ongoing supply chain uncertainties and inflation [3][20] - The company expects revenue growth for the full year 2023 to be in the range of 5% to 10%, with a bias towards the high end of the range [7] - Management acknowledged that while supply chain issues have improved, there are still challenges related to inventory management and cost structures [43][76] Other Important Information - Interest expense totaled $10.7 million, up from $7.1 million a year ago, primarily due to higher interest rates and increased borrowings [4] - SG&A expenses increased to $45 million from $40 million a year ago, attributed to higher selling expenses and inflation [11] - The company expects free cash flow for the full year to be in the range of $30 million to $40 million, indicating positive operating cash flow [53][85] Q&A Session Summary Question: Can you talk about the inventory dynamics across the portfolio? - Management noted that while there are signs of destocking in some areas, overall demand remains strong, and they are better managing supply chain challenges [27][38] Question: What are you seeing on the pricing front now that inflation is starting to moderate? - Management indicated that there is tension in the marketplace regarding pricing, as some customers seek relief while the company continues to address labor costs and other indirect expenses [45][72] Question: How should we think about working capital this year? - Management expects to see a reduction in working capital days and aims for free cash flow to be positive, indicating improved cash management [63][78] Question: What impact do you expect from mega projects related to infrastructure and electric vehicles? - Management acknowledged increased opportunities from these projects but noted it is challenging to model their direct impact on the business [54][79]