Timken Reports 1st Quarter Results
04/27/2007 - Timken reports income from continuing operations of $41.6 million on sales of $1.28 billion during the first quarter of 2007.
The Timken Co. reported income from continuing operations was $41.6 million on sales of $1.28 billion during the first quarter of 2007.
First Quarter Results—The $41.6 million income from continuing operations ($0.44 per diluted share) compares to $57.1 million income from continuing operations ($0.61 per diluted share) in the year-ago first quarter. Sales of $1.28 billion reflect an increase of 2% over the same period a year ago.
The company says the decline in income compared to last year’s first quarter was due predominately to increased restructuring costs. In addition, the company’s tax rate in the quarter was higher, primarily due to losses caused in part by restructuring activities in certain foreign jurisdictions where no tax benefit could be recorded.
Excluding special items, income from continuing operations was $0.66 per diluted share, up 6% from $0.62 in the year-ago first quarter. Special items included restructuring and rationalization charges totaling $27.0 million of pretax expense, compared to $4.8 million in the prior-year period.
Management Comments—“Our first-quarter results rebounded following the challenges we encountered during the second half of 2006,” said James W. Griffith, Timken’s President and CEO. “We are confident that our strategic initiatives, including Automotive restructuring and targeted Industrial capacity additions, will combine with continued strong Steel performance to deliver improved results in 2007.”
First Quarter Activities—During the quarter, the company announced a $60 million expansion for special small-bar steel capabilities, further differentiating its product portfolio, and commissioned a new induction heat-treat line focused on steel products for the energy and industrial sectors. The company also announced advanced programs to improve Automotive Group performance, including announcement of the closure of its Sao Paulo, Brazil, bearing production facility by the end of the year.
The company also grew sales in Asia by 17% during the first quarter, and made progress on capacity additions in both China and India.
Total debt at March 31, 2007, was $668.5 million (30.5% of capital). Debt was higher than the 2006 year-end level of $597.8 million (28.8% of capital) due to seasonal working capital requirements. Net debt at March 31, 2007, was $567.7 million (27.2% of capital). The company expects to end 2007 with lower net debt and leverage than last year, providing additional financial capacity to pursue strategic investments.
Steel Group Results—Steel Group sales (including inter-segment sales) were a record $390.3 million, reflecting a 4% increase compared to sales of $375.4 million for the comparable year-ago period. The company says the increase was driven by higher demand in the energy and service center sectors, which was partially offset by lower demand in automotive-related sectors. The Steel Group also benefited from price increases and surcharges to help recover continued high raw material costs.
First-quarter EBIT was a record $61.8 million, an 8% increase compared to $57.0 million in the prior-year period. The company says performance was driven by improved product mix, pricing, capacity utilization, and productivity, which were partially offset by higher raw material costs.
