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(Exact name of registrant as specified in its charter)
iOhio
i34-1867219
(State
or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
i6065 Parkland Boulevard,
iCleveland,
iOhio
i44124
(Address
of principal executive offices)
(Zip Code)
(i440) i947-2000
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address
and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
iCommon Stock, Par Value $1.00 Per Share
iPKOH
iThe
NASDAQ Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ☑iYes☐
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑iYes☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”“accelerated filer,”“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
iAccelerated
filer
☑
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging growth company
i☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountings standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes i☑
No
Number of shares outstanding of registrant’s Common Stock, par value $1.00 per share, as of October 31, 2022: i12,822,128 shares.
The condensed consolidated
financial statements include the accounts of Park-Ohio Holdings Corp. and its subsidiaries (collectively, “we,”“our” or the “Company”). All intercompany accounts and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three- and nine-month periods ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The balance sheet at December 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
iThe
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 2 — iNew
Accounting Pronouncements
i
Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which was issued in response to concerns about structural risks of interbank offered rates, and, particularly, the risk of cessation of the London Interbank Offered Rate. The guidance is effective upon issuance
and may be adopted on any date on or after March 12, 2020. However, the relief is temporary and generally cannot be applied to contract modifications that occur after December 31, 2022 or hedging relationships entered into or evaluated after that date. This standard is not expected to have a material impact once adopted.
No other recently-issued ASUs are expected to have a material impact on our results of operations, financial condition or liquidity.
NOTE 3 - iRevenue
iWe
disaggregate our revenue by product line and geographic region of our customer as we believe these metrics best depict how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors. See details in the tables below.
For
over time arrangements, contract liabilities primarily relate to advances or deposits received from the Company’s customers before revenue is recognized. These amounts, which totaled $i48.9 million and $i51.7
million at September 30, 2022 and December 31, 2021, respectively, are recorded in Accrued expenses and other in the Condensed Consolidated Balance Sheets.
For over time arrangements, contract assets primarily relate to revenue recognized in advance of billings to customers under long-term contracts accounted for under percentage of completion. These amounts, which totaled $i46.1
million and $i55.0 million at September 30, 2022 and December 31, 2021, respectively, are recorded in Prepaid and other current assets in the Condensed Consolidated Balance Sheets.
NOTE 4 — iSegments
i
Our
operating segments are defined as components of the enterprise for which separate financial information is available and evaluated on a regular basis by our chief operating decision maker to allocate resources and assess performance.
For purposes of measuring business segment performance, the Company utilizes segment operating income, which is defined as revenues less expenses identifiable to the product lines within each segment. The Company does not allocate items that are non-operating; unusual in nature; or corporate costs, which include but are not limited to executive and share-based compensation and corporate office costs. Segment operating income reconciles to consolidated income before income taxes by deducting
corporate costs; Other components of pension income and other postretirement benefits expense, net; and interest expense, net.
Other
components of pension income and other postretirement benefits expense, net
i2.7
i2.4
i8.3
i7.3
Interest
expense, net
(i9.6)
(i7.6)
(i25.7)
(i22.4)
Income
(loss) before income taxes
$
i0.1
$
(i10.2)
$
i5.2
$
(i11.2)
/
NOTE 5 —
iPlant Closure and Consolidation
In the three and nine months ended September 30, 2022, the Company recorded expenses totaling $i1.7 million
and $i7.9 million, respectively, in its Assembly Components segment in connection with its plant closure and consolidation and other activities. For the three months ended September 30, 2022, expenses of $i1.7 million
were included in Cost of sales. For the nine months ended September 30, 2022, restructuring expenses of $i7.6 million were included in Cost of sales and $i0.3 million
were included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. The Company expects to incur additional restructuring costs of approximately $i0.5 million in this segment in the remainder of 2022.
In the three and nine months ended September 30,
2022, the Company recorded expenses totaling $i1.4 million and $i2.8 million, respectively,
in its Engineered Products segment in connection with plant closure and consolidation activities. The expenses are included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations, and consisted of severance of $i0.0 million and $i0.2 million,
respectively, and other restructuring activities of $i1.4 million and $i2.6 million, respectively. The Company expects
to incur additional costs of approximately $i4.0 million related to the initiatives in this segment in the remainder of 2022.
In connection with its plant closure and consolidation initiatives, during the nine months ended September 30, 2022, the Company sold real estate within its Engineered Products segment for
cash proceeds of $i3.6 million, resulting in a gain of $i2.5 million, and within the Assembly Components segment for cash proceeds of $i0.4 million,
resulting in a gain of $i0.4 million.
In the three and nine months ended September 30, 2021, the Company recorded expenses totaling $i1.8 million
and $i3.1 million, respectively, in its Assembly Components segment in connection with actions taken to close and consolidate its extrusion operations in Tennessee and its fuel operations in Michigan, and to complete other cost-reduction actions in this
segment. The expenses included in Cost of sales in the Condensed Consolidated Statements of Operations were comprised of facility-related costs related to these initiatives of $i1.8 million and $i2.8 million,
respectively. For the nine months ended September 30, 2021, expenses also included $i0.3 million, which were included in Selling, general and administrative expenses in the Condensed Consolidated Statement of operations.
In the three and nine months ended September 30, 2021, the Company
recorded expenses totaling $i0.6 million and $i1.9 million, respectively, in its Engineered Products segment in connection with plant closure and consolidation activities. The expenses are included
in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.
NOTE 6 — iAcquisitions
In July 2022, the Company acquired Charter Automotive
(Changzhou) Co. Ltd. (“Charter”) for $i9.3 million, net of cash acquired. Charter, which is included in our Supply Technologies segment, is headquartered in Changzhou, China and is strategic to our existing fastener manufacturing business, will accelerate the global growth of the Company's proprietary products to Electric Vehicle and other auto-related platforms.
The
allocation of the purchase price of Charter is subject to finalization of the Company's determination of the fair values of the assets acquired and the liabilities assumed as of the acquisition date, and could be materially different than the estimates presented below. The final allocation will be completed no later than one year after the acquisition date. iBelow is the estimated purchase price allocation
related to the acquisition of Charter; the total purchase price is net of cash acquired.
(In millions)
Accounts receivable
$
i2.6
Inventories
i3.0
Property,
plant and equipment
i4.3
Other current assets
i0.9
Accounts
payable and accrued expenses
(i0.4)
Deferred income tax liability
(i1.1)
Total
purchase price
$
i9.3
In August 2022, the Company acquired Southern Fasteners & Supply, Inc. (“Southern Fasteners”) for $i18.7
million, net of cash acquired. The purchase price included cash of $i16.7 million paid at closing plus a $i2.0
million note that will be paid to the seller over the next two years. Southern Fasteners, which is included in our Supply Technologies segment, is headquartered in Winston-Salem, North Carolina. Southern Fasteners provides commercial fasteners and industrial supplies to a diverse base of Maintenance, Repair and Operations (“MRO”) and Original Equipment Manufacturing (“OEM”) customers throughout the United States and specializes in the design of customized inventory programs for its customers. Southern Fasteners complements Supply Technologies’ continued efforts to grow the initiatives centered around industrial supply and MRO products to our global OEM customer base.
The allocation of the purchase price of Southern Fasteners is subject to finalization of the Company's determination of the
fair values of the assets acquired and the liabilities assumed as of the acquisition date, and could be materially different than the estimates presented below. The final allocation will be completed no later than one year after the acquisition date. Below is the estimated purchase price allocation related to the acquisition of Southern Fasteners. The total purchase price is net of cash acquired and includes the $i2.0 million of notes payable to the seller.
iThe Company estimates warranty claims that may be incurred based
on current and historical data of products sold. Actual warranty expense could differ from the estimates made by the Company based on product performance.iThe following table presents changes in the Company’s product warranty liability for the three and nine months ended September 30, 2022 and 2021:
iThe Company’s tax provision for interim periods is determined using an estimate of its annual
effective rate, adjusted for discrete items, if any, in each period.
In the three months ended September 30, 2022, income tax benefit was $i3.0
million on pre-tax income of $i0.1 million. The overall benefit included a discrete benefit of $i2.4 million
due primarily to changes in estimates related to prior year federal research and development credits, Global Intangible Low-Taxed Income (“GILTI”), Foreign-Derived Intangible Income (“FDII”) and foreign tax credits. In the three months ended September 30, 2021, income tax benefit was $i2.8 million, representing an effective income tax rate of i27%.
This rate is higher than the U.S. statutory rate of 21% due primarily to the additional tax benefit recorded as result of stock compensation that vested and state and local taxes during the quarter.
In the nine months ended September 30, 2022, income tax benefit was $i5.7 million on pre-tax income of $i5.2 million.
The overall benefit included discrete tax benefits totaling $i6.5 million related primarily to changes in estimates related to prior year federal research and development credits, GILTI, FDII and foreign tax credits. In the nine months ended September 30, 2021, income tax benefit was $i3.7 million,
representing an effective income tax rate of i33%. This rate is higher than the U.S. statutory rate of 21% primarily due to the additional benefit recorded as result of the net operating loss carryback claim under the Coronavirus Aid, Relief, and Economic Security Act and the composition of earnings.
Less:
current portion of long-term debt and short-term debt
(i10.6)
(i10.7)
Less:
unamortized debt issuance costs
(i3.3)
(i3.9)
Total
long-term debt, net
$
i674.4
$
i591.5
/
Park-Ohio's
Seventh Amended and Restated Credit Agreement (the “Credit Agreement”) provides for a revolving credit facility in the amount of $i405.0 million, including a $i40.0
million Canadian revolving subcommitment and a European revolving subcommitment in the amount of $i30.0 million. Pursuant to the Credit Agreement, Park-Ohio has the option to increase the availability under the revolving credit facility by an aggregate incremental amount up to $i70.0
million. The Credit Agreement matures on November 26, 2024. As of September 30, 2022, we had borrowing availability of $i78.8 million under the Credit Agreement.
We had outstanding bank guarantees and letters of credit under the Credit Agreement of approximately $i44.4
million at September 30, 2022 and $i39.7 million at December 31, 2021.
In 2017, Park-Ohio completed the issuance, in a private placement, of $i350.0
million aggregate principal amount of i6.625% Senior Notes due 2027 (the “Notes”). The Notes are unsecured senior obligations of Park-Ohio and are guaranteed on an unsecured senior basis by the i100%
owned material domestic subsidiaries of Park-Ohio.
In 2015, the Company entered into a finance lease agreement (the “Lease Agreement”). The Lease Agreement provides the Company up to $i50.0 million for finance leases. Finance lease obligations
of $i13.0 million were borrowed under the Lease Agreement to acquire machinery and equipment as of September 30, 2022.
In 2015, the Company, through its Southwest Steel Processing LLC subsidiary, entered into a financing agreement with the Arkansas Development Finance Authority, which matures in September 2025. The financing agreement provides the
Company the ability to borrow up to $i11.0 million
for expansion of its manufacturing facility in Arkansas. The Company had $i4.7 million of borrowings outstanding under this agreement as of September 30, 2022, which is included in Other above.
ii
The
following table represents fair value information of the Notes, classified as Level 1 using estimated quoted market prices.
A
summary of restricted share activity for the nine months ended September 30, 2022 is as follows:
2022
Time-Based
Performance-Based
Number
of Shares
Weighted Average Grant Date Fair Value
Number of Shares
Weighted Average Grant Date Fair Value
(In whole shares)
(In whole shares)
Outstanding - beginning of year
i655,093
$
i24.62
i50,000
$
i32.55
Granted(a)
i338,265
i15.98
i—
i—
Vested
(i215,305)
i23.55
i—
i—
Canceled
or expired
(i14,581)
i23.16
i—
i—
Outstanding
- end of period
i763,472
$
i21.12
i50,000
$
i32.55
(a)
- Included in this amount are i12,500 restricted share units.
/
Stock-based compensation is included in Selling,
general and administrative expenses in the Condensed Consolidated Statements of Operations. Total stock-based compensation expense was $i2.0 million and $i1.7
million for the three months ended September 30, 2022 and 2021, respectively. Total stock-based compensation expense was $i5.4 million and $i4.7
million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, there was $i9.8 million of unrecognized compensation cost related to non-vested stock-based compensation, which cost is expected to be recognized over a weighted-average period of i1.9
years.
NOTE 12 — iCommitments and Contingencies
The Company is subject to a variety of claims, suits, investigations and administrative proceedings with respect to commercial, premises liability, product
liability, employment, personal injury and environmental matters arising from the ordinary course of business. iThe Company records a liability for loss contingencies in the consolidated financial statements when a loss is known or considered probable and the amount can be reasonably estimated. Our provisions are based on historical experience, current information and legal advice, and they may be adjusted in the future based on new developments. Estimating probable losses requires the analysis of multiple forecasted factors that often depend
on judgments and potential actions by third parties. Although it is not possible to predict with certainty the ultimate outcome or cost of these matters, the Company believes they will not have a material adverse effect on our consolidated financial statements.
Our subsidiaries are involved in a number of contractual and warranty-related disputes. We believe that appropriate liabilities for these contingencies have been recorded; however, actual results may differ materially from our estimates.
In addition to the routine lawsuits and asserted claims noted above, we are also a co-defendant in i99 cases
asserting claims on behalf of i162 plaintiffs alleging personal injury as a result of exposure to asbestos. In every asbestos case in which we are named as a party, the complaints are filed against multiple named defendants. Historically, we have been dismissed from asbestos cases. We intend to vigorously defend these cases and believe we will continue to be successful in being dismissed from such cases.
While it is not possible to predict the ultimate outcome of asbestos-related lawsuits, claims
and proceedings due to the unpredictable nature of personal injury litigation, and although our results of operations and cash flows for a particular period could be adversely affected by asbestos-related lawsuits, claims and proceedings, management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial condition, liquidity or results of operations.
NOTE 13 — iPension
and Postretirement Benefits
i
The components of net periodic benefit (income) expense costs recognized for the three and nine months ended September 30, 2022 and 2021 were as follows:
iThe components of and changes in accumulated
other comprehensive loss for the three and nine months ended September 30, 2022 and 2021 were as follows:
Certain
restricted stock awards are anti-dilutive and therefore excluded from the computation of diluted earnings per share. Anti-dilutive shares were i0.1 million and i0.2
million for the three months ended September 30, 2022 and 2021, respectively, and i0.2 million and i0.1 million
for the nine months ended September 30, 2022 and 2021, respectively.
NOTE 16 — iSubsequent Event
On November 4, 2022, the
Company's Board of Directors declared a quarterly dividend of $i0.125 per common share. The dividend will be paid on December 2, 2022 to shareholders of record as of the close of business on November 18, 2022 and will result in a cash outlay of approximately $i1.6
million.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our condensed consolidated financial statements include
the accounts of Park-Ohio Holdings Corp. and its subsidiaries (collectively, “we,”“our,” or the “Company”). All significant intercompany transactions have been eliminated in consolidation.
EXECUTIVE OVERVIEW
We are 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. We operate through three reportable segments: Supply Technologies, Assembly Components and Engineered Products.
Supply
Technologies provides our customers with Total Supply Management™, a proactive solutions approach that manages the efficiencies of every aspect of supplying production parts and materials to our customers’ manufacturing floor, from strategic planning to program implementation. Total Supply Management™ includes such services as engineering and design support, part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking, just-in-time and point-of-use delivery, electronic billing services and ongoing technical support. Our Supply Technologies business services customers in the following principal industries: heavy-duty truck; sports and recreational equipment; aerospace and defense; semiconductor equipment; electrical distribution and controls; consumer electronics; bus and coaches; automotive, agricultural and construction equipment; HVAC; lawn and garden; plumbing; and medical.
Assembly
Components manufactures products oriented towards fuel efficiency and reduced emission standards. Assembly Components designs, develops and manufactures aluminum products and highly efficient, high pressure direct fuel injection fuel rails and pipes; fuel filler pipes that route fuel from the gas cap to the gas tank; flexible multi-layer plastic and rubber assemblies used to transport fuel from the vehicle's gas tank and then, at extreme high pressure, to the engine's fuel injector nozzles. Our product offerings include gasoline direct injection systems and fuel filler assemblies, and industrial hose and injected molded rubber and plastic components. Additional products include cast and machined aluminum engine, transmission, brake, suspension and other components, such as pump housings, clutch retainers/pistons, control arms, knuckles, master cylinders, pinion housings, brake calipers, oil pans and flywheel spacers. Our products are primarily used in the following industries:
automotive, including automotive and light-vehicle; agricultural equipment; construction equipment; heavy-duty truck; and marine original equipment manufacturers (“OEMs”), on a sole-source basis.
Engineered Products operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of highly-engineered products, including induction heating and melting systems, pipe threading systems and forged and machined products. Engineered Products also produces and provides services and spare parts for the equipment it manufactures. The principal customers of Engineered Products are OEMs, sub-assemblers and end users in the following industries: ferrous and non-ferrous metals; silicon; coatings; forging; foundry; heavy-duty truck; construction equipment; automotive; oil and gas; locomotive and rail manufacturing; and aerospace and defense.
Sales
and operating income for these three segments are provided in Note 4 to the condensed consolidated financial statements, included elsewhere herein.
Selling, general and administrative (“SG&A”)
expenses
43.4
45.1
(1.7)
(3.8)
%
SG&A expenses as a percentage of net sales
10.0
%
12.6
%
Operating
income (loss)
7.0
(5.0)
12.0
*
Other components of pension income and other postretirement benefits expense, net
2.7
2.4
0.3
12.5
%
Interest
expense, net
(9.6)
(7.6)
(2.0)
26.3
%
Income (loss) before income taxes
0.1
(10.2)
10.3
*
Income
tax benefit
3.0
2.8
0.2
7.1
%
Net
income (loss)
3.1
(7.4)
10.5
*
Net (income) loss attributable to noncontrolling interest
(0.4)
0.2
(0.6)
*
Net income (loss) attributable
to Park-Ohio Holdings Corp. common shareholders
$
2.7
$
(7.2)
$
9.9
*
Income (loss) per common share attributable to Park-Ohio Holdings Corp. common shareholders:
Basic
$
0.22
$
(0.60)
$
0.82
*
Diluted
$
0.22
$
(0.60)
$
0.82
*
*Calculation
not meaningful
Net Sales
Net sales increased 21.6% to $435.8 million in the third quarter of 2022 compared to $358.5 million in the same period in 2021. This increase was primarily due to higher customer demand and increased net price realization in all three of our business segments.
The factors explaining the changes in segment net sales for the three months ended September 30, 2022 compared to the corresponding 2021 period are contained within the “Segment Results” section below.
Cost of Sales & Gross Margin
Cost of sales increased 21.0% to
$385.4 million in the third quarter of 2022 compared to $318.4 million in the same period in 2021. The increase incost of sales was primarily due to the increase in net sales for the 2022 period compared to the corresponding period in 2021, as well as the factors listed below that impacted gross margin.
Gross margin was 11.6% in the third quarter of 2022 compared to 11.2% in the same period in 2021. The higher margin in the 2022 was driven by increased net price realization and profit flow-through from higher volumes, which more than offset the ongoing impact of inflation, higher labor costs and supply chain constraints. The third quarter of 2022 included expenses of $2.5 million related to plant closure and consolidation and other actions to improve profitability. The third quarter of 2021 included expenses of $1.8 million related to
plant closure and consolidation actions.
SG&A expenses decreased to $43.4 million in the third quarter of 2022 compared to $45.1 million in the comparable period in 2021, a decrease of 3.8%. The decrease in SG&A expenses is primarily attributable to the lower personnel related expenses. As a percentage of net sales, SG&A expenses were 10.0% in third quarter of 2022 compared to 12.6% in the comparable period in 2021. The improvement in SG&A expenses as a percentage of net sales was also driven
by the impact of fixed SG&A expenses over the higher revenue base in the 2022 quarter compared to the same quarter a year ago. SG&A expenses in the 2022 period included $1.9 million of charges related to plant closure and consolidation, severance and other actions to improve future profitability and $0.4 million of acquisition-related costs. The third quarter of 2021 included $2.5 million of expenses related to plant closure and consolidation and other costs.
Other Components of Pension Income and Other Postretirement Benefits Expense (“OPEB”), Net
Other components of pension income and OPEBexpense, net was $2.7 million in the three months ended September 30, 2022 compared to $2.4 million in the corresponding
period in 2021. This increase was driven by estimated higher returns on plan assets and lower actuarial loss in the 2022 period compared to the same period a year ago.
Interest Expense, Net
Interest expense, net was $9.6 million in the third quarter of 2022 compared to $7.6 million in the 2021 period. The increase was due to higher average outstanding borrowings and higher interest rates during the 2022 period.
Income Tax Benefit
In the three months ended September 30, 2022, income tax benefit was $3.0 million on pre-tax income of $0.1 million. The overall benefit included a discrete benefit of $2.4 million
due primarily to changes in estimates related to prior year federal research and development credits, Global Intangible Low-Taxed Income (“GILTI”), Foreign-Derived Intangible Income (“FDII”) and foreign tax credits. In the three months ended September 30, 2021, income tax benefit was $2.8 million, representing an effective income tax rate of 27%. This rate is higher than the U.S. statutory rate of 21% due primarily to the additional tax benefit recorded as result of stock compensation that vested and state and local taxes during the quarter.
Other
components of pension income and other postretirement benefits expense, net
8.3
7.3
1.0
13.7
%
Interest expense, net
(25.7)
(22.4)
(3.3)
14.7
%
Income
(loss) before income taxes
5.2
(11.2)
16.4
*
Income tax benefit
5.7
3.7
2.0
54.1
%
Net
income (loss)
10.9
(7.5)
18.4
*
Net (income) loss attributable to noncontrolling interests
(1.1)
0.5
(1.6)
*
Net income (loss) attributable
to Park-Ohio Holdings Corp. common shareholders
$
9.8
$
(7.0)
$
16.8
*
Income (loss) per common share attributable to Park-Ohio Holdings Corp. common shareholders:
Basic
$
0.81
$
(0.58)
$
1.39
*
Diluted
$
0.80
$
(0.58)
$
1.38
*
*Calculation
not meaningful
Net Sales
Net sales increased 20.1% to $1,282.8 million in the first nine months of 2022 compared to $1,068.1 million in the same period in 2021. This increase was primarily due to higher customer demand and increased net price realization in all three of our business segments.
The factors explaining the changes in segment net sales for the nine months ended September 30, 2022 compared to the corresponding 2021 period are contained in the “Segment Results” section below.
Cost of Sales & Gross Margin
Cost of sales increased 20.6%
to $1,128.9 million in the first nine months of 2022 compared to $936.1 million in the same period in 2021. The increase incost of sales was primarily due to the increase in net sales described above.
Gross margin was 12.0% in the first nine months of 2022 compared to 12.4% in the corresponding period in 2021. The margin decline was due to charges of $8.4 million in the 2022 period related to plant closure can consolidation and other actions to improve future profitability, compared to similar charges of $2.9 million in the 2021 period.
SG&A
Expenses
SG&A expenses were $134.2 million in the first nine months of 2022, compared to $128.1 million in the same period in 2021, an increase of 4.8%. As a percentage of net sales, SG&A expenses were 10.5% in first nine months of 2022 compared to 12.0% in the comparable period in 2021. The improvement in SG&A expenses as a percentage of net sales was driven by the impact of fixed SG&A expenses over the higher revenue base in the 2022 period compared to the same period a year ago, which more than offset higher selling expenses as a result of higher sales levels, higher costs due to ongoing inflation, and expenses related to plant closure and consolidation. SG&A expenses in the 2022 period included $4.5 million of expenses related to plant closure and consolidation, severance and other costs and $0.7 million of acquisition-related expenses. SG&A expenses in the 2021 period
included expenses of $4.1 million for plant closure and consolidation, severance and other costs and $0.4 million of acquisition-related costs.
Gain on Sale of Assets
During the second quarter of 2022, in connection with the plant closure and consolidation initiatives, the Company sold real estate within the Engineered Products segment for cash proceeds of $3.6 million, resulting in a gain of $2.5 million, and within the Assembly Components segment for cash proceeds of $0.4 million, resulting in a gain of $0.4 million.
Other Components of Pension Income and OPEB, Net
Other components of pension income and
OPEBexpense, net was $8.3 million in the first nine months of 2022 compared to $7.3 million in the corresponding period in 2021. This increase was driven by estimated higher returns on plan assets and lower actuarial loss in the 2022 period compared to the same period a year ago.
Interest Expense, Net
Interest expense, net was $25.7 million in the first nine months of 2022 compared to $22.4 million in the 2021 period. The increase was due primarily to higher average outstanding debt balances and higher interest rates in the 2022 period compared to the same period a year ago.
Income Tax Benefit
In the nine
months ended September 30, 2022, income tax benefit was $5.7 million on pre-tax income of $5.2 million. The overall benefit included discrete tax benefits totaling $6.5 million related primarily to changes in estimates related to prior year federal research and development credits, GILTI, FDII and foreign tax credits. In the nine months ended September 30, 2021, income tax benefit was $3.7 million, representing an effective income tax rate of 33%. This rate is higher than the U.S. statutory rate of 21% primarily due to the additional benefit recorded as result of the net operating loss carryback claim under the Coronavirus Aid, Relief, and Economic Security Act and the composition of earnings.
SEGMENT
RESULTS
For purposes of business segment performance measurement, the Company utilizes segment operating income, which is defined as revenues less expenses identifiable to the product lines within each segment. The Company does not allocate items that are non-operating or unusual in nature or are corporate costs, which include but are not limited to executive and share-based compensation and corporate office costs.
Net sales increased 20.7% in the three months ended September 30, 2022 compared to the 2021 period due primarily to higher customer demand in many of the
Company's key end markets, with the largest increases in semiconductor, power sports, heavy-duty truck and civilian aerospace, as well as due to increased net price realization.
Segment operating income was flat and segment operating income margin decreased 110 basis points in the 2022 period compared to the same period a year ago. The decrease in margin was driven primarily by higher supply chain costs including premium freight.
Nine months ended September 30:
Net sales increased 13.7% in the nine months ended September 30, 2022 compared to the 2021 period due primarily to higher customer demand in many of the
Company's key end markets, with the largest increases in heavy-duty truck, semiconductor, industrial and agricultural equipment and civilian aerospace, as well as due to increased net price realization.
Segment operating income increased by $2.2 million driven by profit flow-through from higher sales. Segment operating income margin was 40 basis points lower in the 2022 period compared to the same period a year ago due to higher supply chain costs.
Net sales increased 27.3% in the three months ended September 30, 2022 compared to the 2021 period due primarily to higher customer demand driven by fuel-related products launched in 2021 and increased net price realization. In addition, sales in the 2021 period were negatively impacted by the semiconductor micro-chip shortage and supply chain disruptions in the automobile industry.
Segment operating loss was $2.0 million in the 2022 period compared to $8.9 million in the 2021 period. The improvement in segment operating results in the 2022 period was driven by profit flow-through from the higher sales levels and benefit of profit improvement initiatives in the last two years, both of which together more than offset the negative
impacts of
inflation in the current year. In addition, the loss in the 2022 period included expenses of $1.7 million related to restructuring charges and related expenses, compared to similar expenses of $3.4 million in the 2021 period.
Nine months ended September 30:
Net sales increased 31.0% in the nine months ended September 30, 2022 compared to the 2021 period due primarily to higher customer demand driven by fuel-related products
launched in 2021; increased net price realization; and the pass-through of higher aluminum and rubber compound prices in the 2022 period. In addition, sales in the 2021 period were negatively impacted by the semiconductor micro-chip shortage and supply chain disruptions in the automobile industry.
Segment operating loss was $7.5 million in the 2022 period compared to $8.6 million in the 2021 period. The improvement in segment operating results in the 2022 period was driven by profit flow-through from the higher sales levels and benefit of profit improvement initiatives in the last two years, both of which together more than offset the negative impacts of inflation in the current year. In addition, the loss in the 2022 period included expenses of $7.9 million related to restructuring charges and related expenses, compared to similar expenses of $4.7 million in the 2021 period.
Net sales were 14.9% higher in the 2022 period compared to the 2021 period. The increase was due to stronger demand in the 2022 period in both our capital equipment products business and our forged and machined products business as key end markets
continue to recover from the COVID-19 pandemic.
Segment operating income in the 2022 period increased $5.2 million and segment operating income increased by 530 basis points compared to the corresponding 2021 period. The profit improvement in the 2022 third quarter compared to the prior year period was driven by the higher sales levels, operational improvements, and benefits of profit improvement actions.Expenses related to plant closure and consolidation were $1.4 million and $0.6 million in the third quarter of 2022 and 2021, respectively.
Nine months ended September 30:
Net sales were 16.6% higher in the 2022 period compared to the 2021 period. The increase was due to stronger demand in
the 2022 period in both our capital equipment products business and our forged and machined products business as key end markets continue to recover from the COVID-19 pandemic.
Segment operating income in the 2022 period increased $16.0 million and segment operating income increased by 560 basis points compared to losses in the corresponding 2021 period. The profit improvement in 2022 period compared to the prior period was driven by the higher sales levels, operational improvements, and benefits of profit improvement actions.Expenses related to plant closure and consolidation were $2.8 million and $1.9 million in the first nine months of 2022 and 2021, respectively.
Liquidity
and Capital Resources
The following table summarizes the major components of cash flow:
In the first nine months of 2022, we had cash usage of $31.4 million compared to $25.9 million in the same period of 2021. The usage of cash was driven by higher working capital levels in the nine months ended September 30, 2022 compared to the same period a year ago. In the 2022 period, working capital increased $67.2 million,
compared to $45.1 million in the 2021 period, with the higher amount in 2022 driven by an increase in inventories of $52.7 million resulting from higher sales levels and supply chain constraints and an increase in accounts receivable of $35.5 million resulting from higher sales.
Investing Activities
Capital expenditures were $23.7 million in the nine months ended September 30, 2022 and were primarily to provide increased capacity for future growth in our Engineered Products and Assembly Components segments, for facility consolidation in our Engineered Products segment and to maintain existing operations. Additionally, the Company sold real estate for total proceeds of
$4.0 million and made two acquisitions, which utilized cash of $21.9 million.
Capital expenditures were $24.9 million in the nine months ended September 30, 2021 and were primarily to provide increased capacity for future growth in our Engineered Products and Assembly Components segments and to maintain existing operations. Also in the 2021 period, the Company acquired NYK Component Solutions Limited ("NYK") for $5.4 million.
Financing Activities
During the nine months ended September 30, 2022, we had net debt borrowings of $85.1
million to fund our higher working capital levels and complete two acquisitions. In addition, in the nine months ended September 30, 2022, we made cash dividend payments to shareholders totaling $4.8 million.
During the nine months ended September 30, 2021, we had net debt borrowings of $71.8 million and paid dividends to shareholders of $4.7 million. The borrowings were used to fund our higher working capital levels and the acquisition of NYK.
We do not have off-balance sheet arrangements, financing or other relationships with unconsolidated entities or other persons, other than the letters of credits disclosed in Note 10 to the condensed consolidated financial statements, included elsewhere herein.
Liquidity
Our
liquidity needs are primarily for working capital, capital expenditures, dividends and acquisitions. Our primary sources of liquidity have been funds provided by operations, funds available from existing bank credit arrangements and the sale of our debt securities. Our existing financial resources (working capital and available bank borrowing arrangements) and anticipated cash flow from operations are expected to be adequate to meet anticipated cash requirements for at least the next twelve months and the foreseeable future thereafter, including but not limited to our ability to maintain current operations and fund capital expenditure requirements, service our debt, pursue acquisitions, pay dividends and repurchase common shares.
As of September 30, 2022, we had total liquidity of $163.6 million, which included $53.7 million of cash and cash equivalents and $109.9 million of unused borrowing availability under our credit agreements, which included $23.6 million of suppressed availability.
The Company had cash and cash equivalents held by foreign subsidiaries of $43.1 million at September 30, 2022 and $44.2 million at December 31, 2021. We do not expect restrictions on repatriation of cash held outside
the U.S. to have a material effect on our overall liquidity, financial condition or results of operations for the foreseeable future.
The Company has two components to its assertion regarding reinvestment of foreign earnings outside of the United States. First, for all foreign subsidiaries except RB&W Corporation of Canada (“RB&W”), all earnings are permanently reinvested outside of the United States. Second, for RB&W, dividend distributions may be made, but only to the extent of current earnings in excess of cash required to fund its business operations; all accumulated earnings are permanently reinvested.
Senior Notes
In
April 2017, Park-Ohio Industries, Inc. (“Park-Ohio”), the operating subsidiary of Park-Ohio Holdings Corp., completed the sale, in a private placement, of $350.0 million aggregate principal amount of 6.625% Senior Notes due 2027 (the “Notes”). The net proceeds from the issuance of the Notes were used to repay in full our previously outstanding 8.125% Senior Notes due 2021 and our outstanding term loan, and to repay a portion of the borrowings then outstanding under our revolving credit facility.
Credit Agreement
Park-Ohio’s Seventh Amended and Restated Credit Agreement (as amended, the “Credit Agreement”) provides for a revolving credit facility in the amount of $405.0 million, including a $40.0 million Canadian revolving subcommitment and a European revolving subcommitment in the
amount of $30.0 million. Pursuant to the Credit Agreement, Park-Ohio has the option to increase the availability under the revolving credit facility by an aggregate incremental amount up to $70.0 million. The Credit Agreement matures on November 26, 2024.
Finance Leases
In August 2015, the Company entered into a Capital Lease Agreement (the “Lease Agreement”). The Lease Agreement provides the Company up to $50.0 million for finance leases. Finance lease obligations of $13.0 million were borrowed under the Lease Agreement to acquire machinery and equipment as of September 30,
2022.
Covenants
The future availability of bank borrowings under the revolving credit facility provided by the Credit Agreement is based on (1) our calculated availability under the Credit Agreement and (2) if such calculated availability decreases below $50.625 million, our ability to meet a debt service ratio covenant. If our calculated availability is less than $50.625 million, our debt service coverage ratio must be greater than 1.0. At September 30, 2022, our calculated availability under the Credit Agreement was $78.8 million; therefore, the debt service ratio covenant did not apply.
Failure to maintain calculated availability of at least $50.625 million and meet the
debt service ratio covenant could materially impact the availability and interest rate of future borrowings. Our debt service coverage ratio could be materially impacted by negative economic trends, including the negative trends caused by the COVID-19 pandemic. To make certain permitted payments as defined under the Credit Agreement, including but not limited to acquisitions and dividends, we must meet defined availability thresholds ranging from $37.5 million to $50.625 million, and a defined debt service coverage ratio of 1.15.
As our calculated availability under the Credit Agreement was above $50.625 million, we were also in compliance with the other covenants contained in the revolving credit facility as of September 30, 2022. While we expect to remain in compliance throughout 2022, declines in sales volumes in the future, including
any declines caused by the COVID-19
pandemic, could adversely impact our ability to remain in compliance with certain of these financial covenants. Additionally, to the extent our customers are adversely affected by declines in the economy in general, including the decline caused by the COVID-19 pandemic, they may be unable to pay their accounts payable to us on a timely basis or at all, which could make our accounts receivable ineligible for purposes of the revolving credit facility and could reduce our borrowing base and our ability to borrow under such facility.
Dividends
The
Company paid dividends to shareholders of $4.8 million during the nine months ended September 30, 2022. On November 4, 2022, the Company's Board of Directors declared a quarterly dividend of $0.125 per common share. The dividend will be paid on December 2, 2022 to shareholders of record as of the close of business on November 18, 2022 and will result in a cash outlay of approximately $1.6 million. Although we currently intend to pay a quarterly dividend on an ongoing basis, all future dividend declarations will be at the discretion of our Board of Directors and dependent upon then-existing conditions, including our operating results and financial condition, capital requirements, contractual
restrictions, business prospects and other factors that our Board of Directors may deem relevant.
Seasonality; Variability of Operating Results
The timing of orders placed by our customers has varied with, among other factors, orders for customers’ finished goods, customer production schedules, competitive conditions and general economic conditions. The variability of the level and timing of orders has, from time to time, resulted in significant periodic and quarterly fluctuations in the operations of our businesses. Such variability is particularly evident in our capital equipment business, included in the Engineered Products segment, which typically ships large systems at a relatively lower pace than our other businesses.
Critical
Accounting Policies
Our critical accounting policies are described in "Item. 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations," and in the notes to our consolidated financial statements for the year ended December 31, 2021, both contained in our Annual Report on Form 10-K for the year ended December 31, 2021. There were no new critical accounting policies or updates to existing critical accounting policies as a result of new accounting pronouncements in this Quarterly Report on Form 10-Q.
The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the condensed consolidated financial
statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The words “believes”, “anticipates”, “plans”, “expects”, “intends”, “estimates” and similar expressions are intended to identify forward-looking statements.
These 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 operations, financial position and liquidity, including, without limitation, supply chain issues such as the global semiconductor micro-chip shortage and logistic issues; our substantial indebtedness; the uncertainty of the global economic environment, including any recession; general business conditions and competitive
factors, including pricing pressures and product innovation; demand for our products and services; the impact of labor disturbances affecting our customers; raw material availability and pricing; fluctuations in energy costs; component part availability and pricing; changes in our relationships with customers and suppliers;
the financial condition of our customers, including the impact of any bankruptcies; our ability to successfully integrate recent and future acquisitions into existing operations; the amounts and timing, if any, of purchases of our common stock; changes in general economic conditions such as inflation rates, interest
rates, tax rates, unemployment rates, higher labor and healthcare costs, recessions and changing government policies, laws and regulations, including those related to the current global uncertainties and crises, such as tariffs and surcharges; adverse impacts to us, our suppliers and customers from acts of terrorism or hostilities, including the evolving situation with Russia and Ukraine; public health issues, including the outbreak of COVID-19 and its impact on our facilities and operations and our customers and suppliers; our ability to meet various covenants, including financial covenants, contained in the agreements governing our indebtedness; disruptions, uncertainties or volatility in the credit markets that may limit our access to capital; potential disruption due to a partial or complete reconfiguration of the European Union; increasingly stringent domestic and foreign governmental regulations, including those affecting the environment or import and export controls
and other trade barriers; inherent uncertainties involved in assessing our potential liability for environmental remediation-related activities; the outcome of pending and future litigation and other claims and disputes with customers; our dependence on the automotive and heavy-duty truck industries, which are highly cyclical; the dependence of the automotive industry on consumer spending; our ability to negotiate contracts with labor unions; our dependence on key management; our dependence on information systems; our ability to continue to pay cash dividends, and the timing and amount of any such dividends; and the other factors we describe under “Item 1A. Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31,
2021. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. In light of these and other uncertainties, the inclusion of a forward-looking statement herein should not be regarded as a representation by us that our plans and objectives will be achieved.
Item 3.
Quantitative and Qualitative Disclosure About Market Risk
We
are exposed to market risk, including changes in interest rates. As of September 30, 2022, we are subject to interest rate risk on borrowings under the floating rate revolving credit facility provided by our Credit Agreement. A 100-basis-point increase in the interest rate would have resulted in an increase in interest expense on these borrowings of approximately $2.3 million during the nine-month period ended September 30, 2022.
Our foreign subsidiaries generally conduct business in local currencies. We face translation risks related to the changes in foreign currency exchange rates. Amounts invested in our foreign operations are translated in U.S. dollars at the exchange rates in effect at the balance
sheet date. The resulting translation adjustments are recorded as a component of Accumulated other comprehensive loss in the Shareholders' equity section of the accompanying Condensed Consolidated Balance Sheets. Sales and expenses at our foreign operations are translated into U.S. dollars at the applicable monthly average exchange rates. Therefore, changes in exchange rates may either positively or negatively affect our net sales and expenses from foreign operations as expressed in U.S. dollars.
Our largest exposures to commodity prices relate to metal and rubber compound, which have fluctuated widely in recent years. During the nine months ended September 30, 2022, we entered into agreements to hedge foreign currency. The agreement will not have a material impact on the results of the
Company. We have no other commodity swap agreements or forward purchase contracts.
Item 4.
Controls and Procedures
Evaluation of disclosure controls and procedures.
Under the supervision of and with the participation of our management, including our chief executive officer and chief financial officer,
we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on that evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.
Changes in internal control over financial reporting.
During the quarter ended September 30,
2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We are involved in a variety of claims, suits, investigations and administrative proceedings with respect to commercial, premises liability, product liability, employment, personal injury and environmental matters arising from the ordinary course of business. While any such claims, suits, investigations and proceedings involve an element of uncertainty, in the opinion of management, liabilities, if any, arising from currently pending or threatened litigation are not expected to have a material adverse effect on our financial condition, liquidity or results of operations.
In addition to the routine lawsuits and asserted claims noted above, we were a party to the lawsuits and legal proceedings described below as of September 30,
2022:
We were a co-defendant in 99 cases asserting claims on behalf of 162 plaintiffs alleging personal injury as a result of exposure to asbestos. These asbestos cases generally relate to production and sale of asbestos-containing products and allege various theories of liability, including negligence, gross negligence and strict liability, and seek compensatory and, in some cases, punitive damages.
In every asbestos case in which we are named as a party, the complaints are filed against multiple named defendants. In substantially all of the asbestos cases, the plaintiffs either claim damages in excess of a specified amount, typically a minimum amount sufficient to establish jurisdiction of the court in which the case was filed (jurisdictional minimums generally range from $25,000 to $75,000), or
do not specify the monetary damages sought. To the extent that any specific amount of damages is sought, the amount applies to claims against all named defendants.
There are four asbestos cases, involving 20 plaintiffs, that plead specified damages against named defendants. In each of the four cases, the plaintiff is seeking compensatory and punitive damages based on a variety of potentially alternative causes of action. In two cases, the plaintiff has alleged three counts at $3.0 million compensatory and punitive damages each; one count at $3.0 million compensatory and $1.0 million punitive damages; one count at $1.0 million. In the third case, the plaintiff has alleged compensatory and punitive damages, each in the amount of $20.0 million, for three separate causes of action, and $5.0 million compensatory damages for the fifth cause of action. In the fourth case, the plaintiff has
alleged compensatory and punitive damages, each in the amount of $10.0 million, for ten separate causes of action.
Historically, we have been dismissed from asbestos cases on the basis that the plaintiff incorrectly sued one of our subsidiaries or because the plaintiff failed to identify any asbestos-containing product manufactured or sold by us or our subsidiaries. We intend to vigorously defend these asbestos cases, and believe we will continue to be successful in being dismissed from such cases. However, it is not possible to predict the ultimate outcome of asbestos-related lawsuits, claims and proceedings due to the unpredictable nature of personal injury litigation. Despite this uncertainty, and although
our results of operations and cash flows for a particular period could be adversely affected by asbestos-related lawsuits, claims and proceedings, management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial condition, liquidity or results of operations. Among the factors management considered in reaching this conclusion were: (a) our historical success in being dismissed from these types of lawsuits on the bases mentioned above; (b) many cases have been improperly filed against one of our subsidiaries; (c) in many cases the plaintiffs have been unable to establish any causal relationship to us or our products or premises; (d) in many cases, the plaintiffs have been unable to demonstrate that they have suffered any identifiable injury or compensable loss at all or that any injuries that they have incurred did in fact
result from alleged exposure to asbestos; and (e) the complaints assert claims against multiple defendants and, in most cases, the damages alleged are not attributed to individual defendants. Additionally, we do not believe that the amounts claimed in any of the asbestos cases are meaningful indicators of our potential exposure because the amounts claimed typically bear no relation to the extent of the plaintiff's injury, if any.
Our cost of defending these lawsuits has not been material to date and, based upon available information, our management does not expect its future costs for asbestos-related lawsuits to have a material adverse effect on our results of operations, liquidity or financial position.
There have been no material changes in the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Investors should not interpret the disclosure of any risk factor to imply that the risk
has not already materialized.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
The table below summarizes the information regarding our repurchases of the Company's common stock during the quarter ended September 30, 2022.
Period
Total
Number of Shares Purchased
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans (1)
Maximum Number of Shares That May Yet Be Purchased Under the Plans or Program (1)
(1)On
March 11, 2020, we announced a share repurchase program whereby we may repurchase up to 1.0 million shares of our outstanding common stock.
(2)Consists of an aggregate total of 10,809 shares of common stock we acquired from recipients of restricted stock awards at the time of vesting of such awards in order to settle recipient withholding tax liabilities.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
