Hawk Corp. (HWK, Financial) filed Quarterly Report for the period ended 2010-03-31.
Hawk Corp. has a market cap of $185.3 million; its shares were traded at around $23.23 with a P/E ratio of 30.6 and P/S ratio of 1.1. Hawk Corp. had an annual average earning growth of 6.2% over the past 10 years.HWK is in the portfolios of HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.
Net sales from our foreign facilities represented 31.1% of our total net sales in the first quarter of 2010 compared to 27.9% for the comparable period of 2009. The increase in our foreign facility revenues as a percent of total revenues was due primarily to the improvements in the end markets that we serve in the European and Asian markets. Sales at our Italian operation, on a local currency basis, were up 24.0% in the first quarter of 2010 compared to the first quarter of 2009, and sales at our Chinese operation, on a local currency basis, were up 94.3% in the first quarter of 2010, primarily due to improvements in the construction and agriculture markets served by those facilities.
Cost of Sales. Cost of sales was $36.2 million in the first quarter of 2010, an increase of $3.9 million, or 12.1%, compared to cost of sales of $32.3 million in the first quarter of 2009. As a percent of sales, our cost of sales represented 67.8% of our net sales in the first quarter of 2010 compared to 72.9% of net sales in the first quarter of 2009. The decrease in our cost of sales percentage was driven primarily by the positive impact that higher production volumes in the first quarter of 2010 had on our absorption of manufacturing costs, by overall cost improvements, and offset somewhat by unfavorable product mix. Of our total cost of sales increase of 12.1% in 2010, the impact of our increased sales volumes represented approximately 18.7 percentage points, an unfavorable shift in product mix represented 10.2 percentage points, and the effect of foreign currency exchange rates accounted for 2.0 percentage points. Offsetting these components, our higher absorption of manufacturing overhead and overall cost improvements favorably impacted the total cost of sales increase by approximately 18.8 percentage points.
Selling, Technical and Administrative Expenses. Selling, technical and administrative (ST&A) expenses increased $1.4 million, or 18.7%, to $8.9 million in the first quarter of 2010 from $7.5 million during the first quarter of 2009. As a percentage of net sales, ST&A was 16.7% in the first quarter of 2010 compared to 16.9% in the first quarter of 2009. The decrease in ST&A as a percentage of net sales primarily resulted from our continued successful efforts to control discretionary and personnel costs in 2010. Of our total ST&A increase of 18.7%, higher incentive compensation expense as a result of our improved profitability level in the first quarter of 2010 compared to the first quarter of 2009 represented approximately 19.0 percentage points. We also experienced an increase in our legal and professional expenses, primarily related to our Italian tax audit which has been tentatively completed, representing approximately 3.4 percentage points of the total increase. These components of the total ST&A change were offset by lower overall compensation and benefits expense which favorably impacted the total ST&A increase by approximately 1.8 percentage points.
In addition, we spent $1.1 million, or 2.0% of our net sales, on product research and development in the first quarter of 2010, compared to $1.2 million or 2.7%, of our net sales for the first quarter of 2009.
Income Taxes. We recorded a tax provision from our continuing operations of $2.1 million for the quarter ended March 31, 2010, compared to a tax provision of $0.9 million in the first quarter of 2009. Our effective rate of 35.7% in the first quarter of 2010 differs from the current U.S. statutory rate of 35.0% primarily as a result of the impact of non-deductible expenses on our worldwide taxes.
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Hawk Corp. has a market cap of $185.3 million; its shares were traded at around $23.23 with a P/E ratio of 30.6 and P/S ratio of 1.1. Hawk Corp. had an annual average earning growth of 6.2% over the past 10 years.HWK is in the portfolios of HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.
Highlight of Business Operations:
Our sales to the construction and mining market, our largest, were up 54.6% in the first quarter of 2010 compared to the first quarter of 2009 as a result of an expansion of activity primarily in the mining market as customers replenished inventory levels. Sales to our agriculture market were up 14.0% in the first quarter of 2010 compared to the first quarter of 2009, primarily as a result of improved market conditions, especially in the United States and Europe. Sales to our truck market increased 23.9% in the first quarter of 2010 compared to the first quarter of 2009, due to increased freight volumes being shipped with existing vehicles. Sales in our friction direct aftermarket that we service through the VelveTouch® and Hawk Performance® brand names increased 10.5% in the first quarter of 2010 compared to the first quarter of 2009. In addition, sales of our performance automotive brake product, which are part of this market, were up 28.4% in the first quarter of 2010 compared to the first quarter of 2009, primarily as a result of new product introductions. Although a small percentage of our total net sales, sales to the alternative energy market were up 460.7% in the first quarter of 2010 compared to the first quarter of 2009 as shipments of units in this product line continued to increase. Our aircraft and defense markets were down 29.1% in the first quarter of 2010 compared to the first quarter of 2009 due to a decrease in demand in our defense market offset by a modest increase in our aircraft market.Net sales from our foreign facilities represented 31.1% of our total net sales in the first quarter of 2010 compared to 27.9% for the comparable period of 2009. The increase in our foreign facility revenues as a percent of total revenues was due primarily to the improvements in the end markets that we serve in the European and Asian markets. Sales at our Italian operation, on a local currency basis, were up 24.0% in the first quarter of 2010 compared to the first quarter of 2009, and sales at our Chinese operation, on a local currency basis, were up 94.3% in the first quarter of 2010, primarily due to improvements in the construction and agriculture markets served by those facilities.
Cost of Sales. Cost of sales was $36.2 million in the first quarter of 2010, an increase of $3.9 million, or 12.1%, compared to cost of sales of $32.3 million in the first quarter of 2009. As a percent of sales, our cost of sales represented 67.8% of our net sales in the first quarter of 2010 compared to 72.9% of net sales in the first quarter of 2009. The decrease in our cost of sales percentage was driven primarily by the positive impact that higher production volumes in the first quarter of 2010 had on our absorption of manufacturing costs, by overall cost improvements, and offset somewhat by unfavorable product mix. Of our total cost of sales increase of 12.1% in 2010, the impact of our increased sales volumes represented approximately 18.7 percentage points, an unfavorable shift in product mix represented 10.2 percentage points, and the effect of foreign currency exchange rates accounted for 2.0 percentage points. Offsetting these components, our higher absorption of manufacturing overhead and overall cost improvements favorably impacted the total cost of sales increase by approximately 18.8 percentage points.
Selling, Technical and Administrative Expenses. Selling, technical and administrative (ST&A) expenses increased $1.4 million, or 18.7%, to $8.9 million in the first quarter of 2010 from $7.5 million during the first quarter of 2009. As a percentage of net sales, ST&A was 16.7% in the first quarter of 2010 compared to 16.9% in the first quarter of 2009. The decrease in ST&A as a percentage of net sales primarily resulted from our continued successful efforts to control discretionary and personnel costs in 2010. Of our total ST&A increase of 18.7%, higher incentive compensation expense as a result of our improved profitability level in the first quarter of 2010 compared to the first quarter of 2009 represented approximately 19.0 percentage points. We also experienced an increase in our legal and professional expenses, primarily related to our Italian tax audit which has been tentatively completed, representing approximately 3.4 percentage points of the total increase. These components of the total ST&A change were offset by lower overall compensation and benefits expense which favorably impacted the total ST&A increase by approximately 1.8 percentage points.
In addition, we spent $1.1 million, or 2.0% of our net sales, on product research and development in the first quarter of 2010, compared to $1.2 million or 2.7%, of our net sales for the first quarter of 2009.
Income Taxes. We recorded a tax provision from our continuing operations of $2.1 million for the quarter ended March 31, 2010, compared to a tax provision of $0.9 million in the first quarter of 2009. Our effective rate of 35.7% in the first quarter of 2010 differs from the current U.S. statutory rate of 35.0% primarily as a result of the impact of non-deductible expenses on our worldwide taxes.
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