ParkOhio Announces Fourth Quarter and Full Year 2021 Results

CLEVELAND, OHIO–(BUSINESS WIRE)–Park-Ohio Holdings Corp. (NASDAQ: PKOH) today announced its results for the fourth quarter and full year 2021.

Matthew V. Crawford, Chairman and Chief Executive Officer, stated, “Our business continued to show solid revenue momentum in all segments through the end of 2021 despite significant volatility in the marketplace. Unfortunately, supply chain, inflation and labor challenges took a toll on our ability to perform as we expected, especially within our Assembly Components segment. Many operational and expense reduction initiatives completed in 2021 were offset by these costs, but we expect to see meaningful impact to our results in the first half of 2022 and anticipate near record revenue and solid profits during 2022 as a whole.”

FOURTH QUARTER AND FULL YEAR CONSOLIDATED RESULTS

In the fourth quarter of 2021, net sales were $369.9 million compared to $360.4 million in the 2020 period, an increase of 3%. Net loss attributable to ParkOhio common shareholders in the fourth quarter of 2021 was $17.8 million, or $1.48 per diluted share, compared to net income attributable to ParkOhio common shareholders in the fourth quarter of 2020 of $5.6 million, or $0.46 per diluted share. Excluding special items, adjusted EPS loss was $1.08 per diluted share in the fourth quarter of 2021 compared to income of $0.53 per diluted share in the 2020 period.

Full year 2021 net sales were $1.4 billion compared to $1.3 billion in 2020, an increase of 11%. Net loss attributable to ParkOhio common shareholders in 2021 was $24.8 million, or $2.07 per diluted share, compared to a loss of $4.5 million, or $0.37 per diluted share in 2020. Excluding special items, adjusted EPS was a loss of $1.20 per diluted share in 2021 compared to adjusted EPS income of $0.01 per diluted share in 2020.

Our adjusted EPS losses in the fourth quarter and full year 2021 of $1.08 and $1.20, respectively, were due primarily to operating losses in the General Aluminum business of our Assembly Components segment, driven by production volatility caused by the ongoing semiconductor micro-chip shortage, raw material price inflation, higher labor costs and other increased manufacturing costs. For the full year 2021, the operating losses at General Aluminum were approximately $28 million, including a goodwill write-off of $4.6 million and one-time restructuring, start-up and other costs of $4.0 million. Excluding the charges for goodwill and the other special items, the negative impacts of the fourth quarter and full year 2021 losses at General Aluminum on our adjusted EPS were $0.76 and $1.38, respectively.

FOURTH QUARTER SEGMENT RESULTS

In our Supply Technologies segment, net sales in the fourth quarter of 2021 were $152.8 million, an increase of 7% compared to the fourth quarter a year ago, due to stronger customer demand in most of our key end markets, with the largest increases in the semiconductor, heavy-duty truck, agricultural and industrial equipment, and civilian aerospace markets. Average daily sales in our supply chain business were up 7% compared to the same period a year ago. Segment operating income approximated $10 million in the fourth quarter of 2021 and 2020. On an adjusted basis, segment operating income was $0.7 million higher in the 2021 fourth quarter compared to the same period of 2020. This improvement was due to profit flow-through on higher sales levels and successful pricing initiatives, which helped drive positive financial results in spite of challenging macroeconomic factors, including global supply chain constraints and higher freight costs.

In our Assembly Components segment, fourth quarter and full year revenue continued to benefit from new business launches and continued customer focus on light-weighting products and direct inject fuel systems. Quoting activity is extremely high due to ongoing product platform changes and overall investment in light-weighting and electrification, which directly support the growth in our aluminum business. Net sales were $126.8 million in the fourth quarter 2021 compared to $131.5 million in the fourth quarter a year ago, as customer demand was volatile due to the ongoing, unpredictable impact of the chip shortage and supply chain disruptions in the automobile industry. Operating loss was $17.8 million in the 2021 fourth quarter compared to operating income of $9.7 million in the same period a year ago. On an adjusted basis, operating loss was $12.9 million in the 2021 period compared to income of $10.1 million a year ago. The operating loss in the fourth quarter of 2021 was due primarily to an operating loss at General Aluminum of $10.6 million; lower profitability in our fuel, rubber and plastic products businesses, driven by the micro-chip shortage, commodity inflation, higher labor costs, and production inefficiencies; and expenses related to plant closure and consolidation activities of $3.0 million. We expect improved results in this segment in 2022 as a result of implemented customer price increases; changes to improve plant productivity; exiting nonprofitable products; and relocating production of certain products to lower cost facilities.

In our Engineered Products segment, fourth quarter sales were up 5% compared to the fourth quarter a year ago due to stronger demand in our capital equipment business, which had its highest sales quarter since the start of the COVID-19 pandemic in early 2020. Bookings in this business were up 23% in the fourth quarter and 76% for the full year compared to the corresponding periods in 2020. Sales in our forged and machined products group were flat compared to the same period a year ago, as customer demand has been slow to recover from the COVID-19 pandemic, especially in the oil and gas, rail and aerospace markets. The segment operating loss in the fourth quarter of 2021 of $10.9 million, which was isolated in our forged and machined products business, included one-time restructuring charges of $10.8 million related to plant closure and consolidation activities. Excluding these charges, adjusted operating loss was $0.1 million, compared to adjusted operating income of $0.7 million in the fourth quarter of 2020.

During the 2021 fourth quarter, in connection with our plant closure and consolidation actions, the Company sold real estate for cash proceeds of $20.3 million and a gain on sale of $14.7 million.

CASH FLOW AND LIQUIDITY

For the full year 2021, operating cash flow was a use of $43 million, driven by increased inventory levels of $71 million due primarily to increased customer demand, elongated supplier lead times and increased raw material prices. At December 31, 2021, our total liquidity was $214 million, which included cash on hand of $54 million and $160 million of unused borrowing availability under our credit arrangements, which included $11 million of suppressed availability.

2022 OUTLOOK

For 2022, we expect revenues to be at record levels with revenue growth of approximately 15% year-over-year, driven by strong customer demand in each segment. The revenue growth is expected in most end markets in Supply Technologies, from increased volumes from previously launched products in Assembly Components, and from the strong year-end backlogs for our capital equipment and forged and machined products in Engineered Products. Although we expect significant improvement in profitability and positive adjusted net income in 2022, we are anticipating continuing macroeconomic headwinds from demand volatility and supply chain constraints, and therefore, we will not provide further guidance at this time.

CONFERENCE CALL

A conference call reviewing ParkOhio’s fourth quarter 2021 results will be broadcast live over the Internet on Wednesday, March 16, commencing at 10:00 am Eastern Time. Simply log on to http://www.pkoh.com.

ParkOhio is a diversified international company providing world-class customers with a supply chain management outsourcing service, capital equipment used on their production lines, and manufactured components used to assemble their products. Headquartered in Cleveland, Ohio, ParkOhio operates more than 120 manufacturing sites and supply chain logistics facilities worldwide, through three reportable segments: Supply Technologies, Assembly Components and Engineered Products.

This news release contains forward-looking statements, including statements regarding future performance of the Company, that are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors that could cause actual results to differ materially from expectations include, but are not limited to, the following: the ultimate impact the COVID-19 pandemic has on our business, results of…