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Timken Posts Record First Quarter, Raises Full-Year Outlook
04/27/2012 - The Timken Co. reported record sales of $1.4 billion in the first quarter of 2012, an increase of 13% over the same period a year ago. The company also generated record income of $155.7 million, or $1.58 per diluted share, compared with $112.7 million, or $1.13 per diluted share, a year ago.
The Timken Co. reported record sales of $1.4 billion in the first quarter of 2012, an increase of 13% over the same period a year ago. The increase reflects stronger demand across most of the company's end markets, pricing, mix, and the impact of acquisitions.
The company generated record income in the first quarter of $155.7 million, or $1.58 per diluted share, compared with $112.7 million, or $1.13 per diluted share, during the same period a year ago. The increase in first-quarter earnings reflects the benefits of improved pricing, demand, mix, and the impact of acquisitions, partially offset by higher selling and administrative expenses.
"Our record performance, as well as our confidence in our improved full‑year earnings outlook, stands as further testimony to the company's ability to execute at a structurally higher level of performance," said James W. Griffith, Timken President and Chief Executive Officer. "Around the globe, our company is operating very well, leveraging momentum we see in our target markets, earning new business through our expanded product and services portfolio, and successfully driving those gains to the bottom line."
At quarter-end, total debt was $505 million, or 18.7% of capital. As of March 31, 2012, the company had cash of $359 million, resulting in $146 million of net debt, compared with a net debt position of $47 million as of Dec. 31, 2011. The change reflects strong cash flow from earnings, which was more than offset by working capital requirements of approximately $110 million to support increased demand, as well as discretionary pension contributions of $94 million.
Among recent developments, the company:
• Broke ground on a $225 million expansion at its Faircrest Steel Plant in Canton, Ohio, after securing a new five-year basic labor agreement with members of the United Steelworkers of America
• Raised the quarterly dividend by 15% to 23 cents per share
• Announced an increased share repurchase program for up to 10 million common shares through 2015, with 500,000 shares purchased in the first quarter
• Earned recognition, for the second year, as one of the World's Most Ethical Companies by the Ethisphere Institute
• Received approximately $80 million in distributions under the Continued Dumping and Subsidy Offset Act (CDSOA) in April from amounts previously withheld for anti-dumping cases, and expects to receive approximately $30 million in further distributions in the second quarter.
Steel Segment Results – Sales for Steel, including inter-segment sales, were $535.5 million in the first quarter, an increase of 11% from $481.5 million for the same period last year. The results reflect increased pricing and favorable mix driven by strengthening demand in the oil and gas markets, partially offset by lower shipments to the industrial and mobile on-highway sectors. Raw-material surcharges increased approximately $5 million from the first quarter last year.
First-quarter EBIT was $88 million, or 16.4% of sales, up 48% from $59.3 million, or 12.3% of sales, for the same period a year ago. EBIT performance benefited from improved pricing and mix, partially offset by lower volume, and higher material and labor costs.
Outlook – Timken now expects sales growth of 7 to 10% in 2012, with Steel sales up 5 to 10%, driven by demand in the energy markets as well as pricing.
Timken projects 2012 annual earnings to range from $6.10 to $6.40 per diluted share, reflecting improved operating performance and the one-time benefit of CDSOA receipts expected in the second quarter totaling approximately 70 cents per share.
The company expects to generate approximately $565 million in cash from operations, which includes discretionary pension and VEBA trust contributions of approximately $220 million, net of tax. Free cash flow is projected to be $140 million after making capital expenditures of about $335 million and paying roughly $90 million in dividends.
In addition, the company anticipates receiving a total of approximately $70 million, net of tax, in CDSOA distributions. Excluding the discretionary pension and VEBA trust contributions, and CDSOA receipts, the company forecasts free cash flow of approximately $290 million in 2012.
The Timken Company supplies innovative friction management and mechanical power transmission products and services that help machinery perform more efficiently and reliably. The company had sales of $5.2 billion in 2011 and approximately 21,000 people operating from locations in 30 countries.
