20th December 2005 - Hawk Announces 2006 Full Year Guidance

Hawk Corporation announced today its guidance for 2006. Net sales for the full year 2006 are expected to be between $298.0 million to $300.0 million, an increase of 11.6% to 12.4% over net sales of $267.0 million expected to be reported for the full year 2005. Hawk expects a majority of its markets to perform better than 2005 year levels, particularly construction and mining equipment, heavy-duty truck and fluid power. Additionally, we expect that new business awards in our three business segments, increased sales to the friction products aftermarket, as well as the continued growth of our international operations will positively impact our revenues.

As a result of the anticipated increase in net sales in 2006, Hawk expects its income from operations to increase to a range of $24.0 million to $25.0 million in 2006, or 55.8% to 62.3%, from adjusted income from operations of approximately $15.4 million expected for the full year 2005. Adjusted income from operations in 2005 excludes plant restructuring charges of $5.3 million related to the move of a friction products facility to Tulsa, Oklahoma and employee severance costs and other net costs of $0.7 million relating to a pension curtailment and loan forgiveness costs (see Table 1). We are not forecasting plant restructuring charges, relating to the relocation of the Tulsa facility and employee severance expense, or other non-recurring costs to impact our 2006 income from operations. Our 2006 forecast also gives effect to diminishing levels of start-up costs in the first and second quarter of 2006. We expect our consolidated depreciation and amortization expense for 2006 to be approximately $13.0 million.

Hawk's effective tax rate is expected to be approximately 42.0% for the full year 2006. The expected improvement in our effective tax rate for 2006 compared to 2005 will result primarily from our anticipated ability to generate domestic pre-tax earnings. The pre-tax earnings of the Company's international operations are expected to remain strong in 2006.

As a result of the above factors, Hawk expects earnings per share for 2006 to be in a range of $0.80 to $0.90 cents per diluted share on approximately 9.4 million fully diluted shares.

Ronald E. Weinberg, Hawk's Chairman and CEO, stated, "With strong demand continuing from our core customer base, new product introductions during the year and the continuing integration of our new Tulsa facility, we look forward to 2006 being an excellent year. We have made significant progress with the integration of our new Tulsa friction products facility in 2005 and expect it be a positive contributor to our earnings growth in 2006. As a realistic assessment of the operating improvement curve of our new Tulsa facility we have forecasted the continued effect of start-up costs in our operating results for the first quarter of 2006, and to a much lesser extent in the second quarter of 2006." Mr. Weinberg continued, "We continue to experience marketing and operating momentum throughout the Company enabling us to take advantage of our world class position and drive significant improvement in our operating results in 2006. In order to maintain our technological advantage and support our expected sales growth in the marketplace, we expect our capital expenditures in 2006 will be approximately $15.0 million. Through our 2006 guidance, we are affirming our commitment to new product introduction for both our original equipment and aftermarket friction product customers and our world class manufacturing and technology development in our friction products, powder metal and performance racing businesses."

2005 fourth quarter results

We expect our net sales for the fourth quarter of 2005 to be approximately $61.2 million. Adjusted loss from operations in the fourth quarter of 2005 is expected to be approximately $2.0 million. The adjusted loss from operations excludes restructuring charges of approximately $1.1 million incurred during the quarter relating to the move of a friction products facility to Tulsa (see Table 2). The move of the facility was completed during the fourth quarter of 2005.

This fourth quarter expectation revises our current full year 2005 revenue guidance to $267.0 million from the previous guidance of $270.0 million to $273.0 million. Our full year 2005 adjusted income from operations will be approximately $15.4 million, a reduction from our previous guidance of $21.5 million to $21.8 million. Both guidance targets were negatively impacted primarily by the start-up costs experienced by our new Tulsa facility.

Mr. Weinberg stated, "We incurred a greater degree of start-up costs in Tulsa than anticipated, but I am pleased with the degree of focus our operating team is bringing to bear on the issues. We believe we have made a realistic assessment of our expectations for the full year 2005. We believe we are on track to deliver a world-class friction products manufacturing facility in 2006 which will provide our customers with more efficient production capabilities and lower manufacturing costs."

The Company

Hawk Corporation is a leading worldwide supplier of highly engineered products. Its friction products group is a leading supplier of friction materials for brakes, clutches and transmissions used in airplanes, trucks, construction equipment, farm equipment and recreational vehicles. Through its precision components group, the Company is a leading supplier of powder metal and metal injected molded components for industrial, consumer and medical applications, including pump, motor and transmission elements, lawn and garden and telecommunication equipment. The Company's performance racing group manufactures clutches and gearboxes for motorsport applications and performance automotive markets. Headquartered in Cleveland, Ohio, Hawk has approximately 1,800 employees and 17 manufacturing, research, sales and administrative sites in 6 countries

Source: Hawk Corporation Press Release