ParkOhio(US:PKOH)2022-11-13 09:14Financial Data and Key Metrics Changes - The company achieved record consolidated sales of $436 million, a 22% year-over-year increase [9][10] - Adjusted EPS improved to $0.52 per share, compared to a loss of $0.60 per share a year ago [16] - EBITDA more than doubled year-over-year, improving to almost $29 million from $13 million a year ago [19] - Gross margins increased to 12.2% on an adjusted basis, up 50 basis points year-over-year [12] Business Line Data and Key Metrics Changes - In the Supply Technologies segment, net sales reached a record $186 million, up 21% year-over-year [21] - Assembly Components segment sales increased by 27% year-over-year to $153 million [25] - Engineered Products segment sales rose 15% to $97 million, driven by increased customer demand [29] Market Data and Key Metrics Changes - Sales in the semiconductor, power sports, heavy-duty truck, and civilian aerospace markets showed significant increases [22] - The company noted strong demand across all geographies, particularly in North America [22] Company Strategy and Development Direction - The company is focusing on capitalizing on investments made to drive value and performance [7] - There is an emphasis on restructuring efforts that have resized or closed 14 global locations without significant customer attrition [5] - The company plans to continue pursuing price increases to offset higher costs due to inflation [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about strong customer demand and anticipated restocking at production sites [6] - The ongoing Fed tightening cycle is viewed as a potential risk to demand forecasts [5] - Management expects continued improvement in free cash flow and profitability for the remainder of the year [11] Other Important Information - The company recorded an income tax benefit of $3 million, including discrete tax benefits related to increased federal R&D tax credits [15] - Liquidity at the end of the third quarter was $164 million, consisting of $54 million in cash and $110 million in unused borrowing capacity [20] Q&A Session Summary Question: Can you elaborate on the backlogs in the Engineered Products and the timing for converting those into sales? - Management indicated that record orders and backlogs are expected to push through production within six to nine months, contingent on supply chain alignment [38] Question: Are supply chain challenges, particularly freight, starting to improve? - Management noted that ocean freight constraints have stabilized, with improved pricing and availability expected to continue into the new year [40][41] Question: What is the visibility on federal R&D credits going forward? - Management stated that 80% of the current quarter's R&D credits are recurring, with ongoing initiatives to reduce the effective tax rate [45] Question: What is the target for free cash flow improvement? - Management highlighted that embedded inefficiencies in working capital due to supply chain constraints present opportunities for improvement, targeting a return to normalized working capital levels [51][53] Question: What is the company's goal for debt reduction? - Management reaffirmed a goal of achieving a debt-to-EBITDA ratio of 3x within 18 to 24 months, despite current levels being higher [54][56] Question: Are there any businesses considered for divestment? - Management emphasized a focus on capital allocation towards high-growth, high-margin businesses, while remaining open to asset sales where appropriate [57][58]