Hawk Corp. Sued by Shareholder Over $413 Million Carlisle Cos. Buyout Plan
Hawk Corp., the maker of brakes, clutches and other friction products that’s being bought by Carlisle Cos., was sued by an investor who claims stockholders will be shortchanged in the $413 million deal.
Hawk, based in Cleveland, said in an Oct. 15 statement that it would be acquired by Carlisle, a construction materials maker with headquarters in Charlotte, North Carolina, for $50 a share in cash.
“The proposed transaction comes at a time when the company’s stock price is on a strong upswing” and “insiders are well aware of the company’s intrinsic value and that Hawk shares are significantly undervalued,” shareholder Timothy B. Hardy said in a Delaware Chancery Court lawsuit filed late yesterday in Wilmington.
The companies said in the statement that the buyout will expand Carlisle’s line of products and help it in emerging markets including China, India and Brazil.
Hardy asked a judge to grant the lawsuit class-action, or group, status on behalf of all outside stockholders; to halt the transaction as it stands; and to award damages and legal fees and expenses.
Officials of Hawk and Carlisle didn’t immediately return phone messages seeking comment on the lawsuit.
Hawk, with $172.4 million in sales last year, fell 3 cents to $49.85 at 4:15 p.m. in NYSE Amex trading. Carlisle, with $2.38 billion in 2009 revenue, fell 29 cents to $34.40 in New York Stock Exchange composite trading.
The case is Hardy v. Hawk Corp., CA5925, Delaware Chancery Court (Wilmington).
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On Nov. 9th Hawk reported net income increased 268.8% in first 9 months of 2010.
CLEVELAND, OH -- (MARKET WIRE) -- 11/09/10 -- Hawk Corporation (NYSE Amex: HWK) announced today that sales for the third quarter ended September 30, 2010 were $70.1 million, an increase of $26.6 million, or 61.1%, from $43.5 million in the comparable prior year quarter. Net sales for the nine months ended September 30, 2010 were $185.2 million, an increase of 46.1%, from $126.8 million in the comparable prior year period. The economic recovery, market share gains and new product introductions have been the principal drivers of the revenue increases. Sales in all of the Company's end markets, with the exception of defense, showed growth during the quarter. Sales to the defense market were down during the third quarter of 2010 compared to 2009, as the Company's largest defense customer continued to realign its inventory levels during the period.
Income from operations for the third quarter ended September 30, 2010 was $12.5 million, an increase of $6.4 million, or 104.9%, from $6.1 million in the prior year period. Income from operations was favorably impacted by the sales volume increase and the absorption of manufacturing costs as a result of higher production volumes in all of Hawk's manufacturing facilities. This increase was partially offset by the effect of foreign currency exchange rates and product mix during the quarter. For the nine month period ended September 30, 2010, the Company reported income from operations of $31.9 million, an increase of $20.1 million, or 170.3%, from $11.8 million in the comparable prior year period.
For the third quarter 2010, the Company reported net income of $8.4 million, or $1.03 per diluted share, an increase of $4.6 million compared to $3.8 million, or $0.45 per diluted share, in the third quarter of 2009. For the nine months ended September 30, 2010, the Company reported net income of $17.7 million, or $2.16 per diluted share, an increase of $12.9 million, or 268.8%, compared to $4.8 million, or $0.55 per diluted share, during the comparable prior year period.
Working Capital and Liquidity
Cash and short-term investments decreased $9.8 million to $73.3 million as of September 30, 2010, compared to $83.1 million as of December 31, 2009. The decrease in cash and short-term investments was due primarily to the repurchase of $20.0 million of the Company's senior notes and $7.2 million of the Company's common stock during the nine months ended September 30, 2010. There were no repurchases of senior notes or of the Company's common stock during the three months ended September 30, 2010. As a result of the significant sales and production volume increases during the period, the Company experienced an increase in its accounts receivable, accounts payable and inventory levels at September 30, 2010. The Company believes that the quality of its accounts receivable and inventory remains strong. During the nine months ended September 30, 2010, the Company spent $3.8 million on capital expenditures compared to $6.9 million during the comparable period of 2009. Depreciation was $5.5 million for the nine months ended September 30, 2010 compared to $5.3 million for the nine months ended September 30, 2009.
The Company continues to experience strength in demand coming from the majority of its end markets, especially construction and mining, and as a result is now expecting its 2010 full year net sales to be $251.3 million, representing an approximately 45.6% increase over 2009 net sales of $172.4 million. Previous guidance provided by the Company called for net sales to be in a range of between $241.0 million and $246.0 million.
Based on this increased net sales expectation, the Company is also increasing its guidance for 2010 full year operating income to $40.4 million, representing an approximately 139.5% increase over 2009 operating income of $16.7 million. Previous guidance for operating income provided by the Company was a range of between $36.0 million and $39.0 million.