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Timken Posts Record Sales in Second Quarter
07/23/2004 - The Timken Co. reported net income of $25.3 million on record sales of $1.1 billion for the second quarter of 2004.
The Timken Co. reported net income of $25.3 million on record sales of $1.1 billion for the second quarter of 2004.
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Timken’s Steel Group Results For the second quarter, Steel Group sales were a record $330 million, up 29% from $257 million last year, reflecting strong demand from both automotive and industrial customers. Double-digit increases occurred in nearly all market sectors. Approximately half of the top-line growth resulted from surcharges and price increases to offset rising raw material costs. EBIT was $3.0 million, compared to a loss of $2.7 million last year, while EBIT margin improved to 0.9 percent from a negative 1.1% a year ago. Productivity and volume increases contributed positively to results. Second quarter results were negatively affected by the shutdown of the Faircrest steel plant for approximately 10 days for a clean up of low-level radioactive material that was detected in scrap material. There was no exposure to the environment, employees or products. Excluding the approximately $7.7 million impact of the Faircrest plant shutdown, margins would have been 3.2%. The company expects to recover all the costs associated with the Faircrest plant shutdown, except for $4 million of insurance deductibles. For the first half, Steel Group sales were up 20% over the first half of last year. EBIT for the first half was $5.8 million - or 0.9% of sales compared to 0.7% of sales in the first half of 2003. Excluding the impact of Faircrest, EBIT margin would have been 2.1%. |
Second Quarter Results—Net income of $25.3 million ($0.28 per diluted share) compares to net income of $3.9 million ($0.05 per diluted share) a year ago. Excluding costs associated primarily with the integration of the Torrington acquisition, adjusted earnings per diluted share were $0.33, or 83% higher than last year. This was above previous company estimates of $0.27 to $0.32 per diluted share, excluding special items. The company had $7.6 million of pretax expense in the second quarter of 2004, compared to $17.9 million of pretax expense a year ago, primarily related to the Torrington integration.
Both reported and adjusted earnings per diluted share for the second quarter of 2004 included a negative effect of $0.05 per share, resulting from the approximately $7.7 million pretax impact of clean-up costs and estimated business interruption losses due to an unplanned shutdown of the Faircrest steel plant.
Record sales of $1.1 billion represent a 14% increase from the prior year. Sales increases in all three of the company's business groups drove strong earnings performance in the quarter.
"It was another record sales quarter for The Timken Company," said James W. Griffith, President and CEO. "Industrial markets strengthened noticeably in the second quarter, buoying sales across all parts of the company. Our results reflect both this increased demand and improved execution."
Six Month Results—Sales of $2.2 billion represent an increase of 22% from the prior year. Adjusted on a pro forma basis with Torrington included for the full six months of 2003, sales were up 13%. Timken completed its $840 million strategic acquisition of The Torrington Co. on February 18, 2003. Earnings per diluted share for the first six months were $0.60 in 2004, versus $0.19 in 2003.
Excluding special items, earnings per diluted share in the first half of 2004 were $0.64, versus $0.37 in 2003. Special items in 2004 included $14.6 million of pretax expense, primarily related to the Torrington integration. This was partially offset by $7.7 million of pretax income received under the Continued Dumping and Subsidy Offset Act.
For the first half of 2004, the company achieved pretax integration savings of $35 million, primarily through purchasing synergies and workforce reductions. The company is on track to achieve its target of $80 million of pretax integration cost savings in 2005.
Total debt at June 30, 2004 was $852 million. After deducting cash and cash equivalents, net debt was $784 million, or 41.2% of capital. Net debt was higher than the 2003 year-end level of $706 million due to cash contributions to pension plans and seasonal working capital requirements. The company expects the ratio of net debt to capital at the end of this year to be lower than last year's level of 39.3%.
Outlook—The company expects improved performance in 2004 relative to last year across all three of its business groups, driven by the sustained recovery anticipated in global markets. The company is increasing its earnings estimates for the year. The company expects earnings per diluted share, excluding special items, to be $0.25 to $0.30 for the third quarter of 2004 and $1.15 to $1.25 for the year.
The Timken Co. is a leading global manufacturer of highly engineered bearings and alloy steels and a provider of related products and services with operations in 27 countries. A Fortune 500 company, Timken recorded 2003 sales of $3.8 billion and employed approximately 26,000 at year-end.
