Open / Close Advertisement

Timken Reports 3rd Quarter Results

10/26/2006 -  

Oct. 26, 2006 — The Timken Co. reported net income of $46.5 million on sales of $1.27 billion for the third quarter, and net income of $187.2 million on sales of $4.0 billion for the first nine months of 2006.

Steel Group third-quarter sales were $442.6 million, a 3% increase from $427.9 million in the same period a year ago. Sales were driven by increased pricing, surcharges and higher demand in the service center, aerospace and energy segments, and were negatively impacted by lower automotive demand.

Third-quarter EBIT was $63.0 million, compared to $49.7 million for the same period last year. Strong results are attributed to price increases, surcharges, better sales mix and improved manufacturing productivity.

During the quarter, the Steel Group announced an investment in a new induction heat-treat line that will increase Timken's capacity and ability to provide differentiated products to more customers in important global energy markets. In addition, the group recently announced its intention to exit its European seamless steel tube manufacturing operation as part of its strategy to strengthen its business portfolio.

For the first nine months of 2006, Steel Group sales were $1.4 billion, a 3% increase over the first nine months of last year. EBIT for the first nine months of 2006 was $209.6 million compared to EBIT of $170.2 million in the first nine months of 2005.

Third Quarter Results—The $46.5 million net income ($0.49 per diluted share) compares with net income of $39.8 million ($0.43 per diluted share) in last year's third quarter. Sales of $1.27 billion reflect a slight increase over sales of $1.26 billion for the same period a year ago. Strong sales in industrial markets were largely offset by significant declines in automotive markets.

Excluding special items, earnings per diluted share would be $0.57 compared to $0.58 for the same period in 2005. Special items included manufacturing restructuring and rationalization charges that totaled $7.1 million of pretax expense, compared to $28.3 million in the same period a year ago.

"Our industrial and steel businesses performed well in the third quarter with industrial markets continuing to drive strong demand for our products," said James W. Griffith, President and CEO. "Dramatic volume reductions are posing significant challenges across the North American automotive market. We are taking actions to adapt to the decline in demand and will continue to pursue structural changes to bring our Automotive business to profitability."

Nine Month Results—Net income of $187.2 million compares to net income of $165.4 in the first nine months of 2005. Earnings per diluted share increased to $1.99 from $1.79 in the same period a year ago. Sales of $4.0 billion reflect an increase of 3% from the same period in the prior year, driven by strong industrial markets.

Special items totaling $32.9 million of pretax expense (compared to $33.1 million in the same period a year ago) included manufacturing, restructuring and rationalization charges and the impact of asset dispositions. Excluding special items, earnings per diluted share would have been $2.19, which compares with adjusted earnings per share of $1.99 during the same period in 2005. The increase is attributed to continued strong industrial market demand.

As of Sept. 30, 2006, Timken’s total debt was $752.8 million (30.7% of capital). Net debt at Sept. 30, 2006, was $698.7 million (29.2% of capital) compared to $655.6 million (30.5% of capital) as of Dec. 31, 2005. Year-to-date, the increase in net debt was primarily due to capital expenditures to support the company's growth initiatives, pension contributions and seasonal working capital requirements. The company anticipates ending the year with lower net debt and leverage, compared to Dec. 31, 2005.

Outlook—Based on third-quarter performance, Timken is estimating 2006 earnings per diluted share, excluding special items, of $2.65 to $2.75. In 2005, the company earned $2.53 per diluted share, excluding special items.