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Timken Reports 3rd Quarter Results

11/04/2004 - The Timken Co. announced net earnings of $17.5 million on sales of $1.1 billion for the third quarter, and net income of $71.3 million on sales of $3.3 billion for the first nine months of 2004.

The Timken Co. announced net earnings of $17.5 million on sales of $1.1 billion for the third quarter, and net income of $71.3 million on sales of $3.3 billion for the first nine months of 2004.

Timken’s Steel Group Results

For the third quarter, Steel Group sales were a record $355 million, up 50% from $237 million last year. Approximately $50 million of the sales increase resulted from increased demand, with the balance due to price increases and surcharges to recover continuing high costs for scrap, alloys and energy. The strongest market sectors for the group were aerospace, oil production and industrial.

EBIT was $16.8 million, compared to a loss of $5.6 million last year, while EBIT margin improved to 4.7% from a negative 2.4% a year ago. Productivity and volume increases contributed positively to results. Continued price increases are expected to improve earnings in 2005.

For the first nine months, Steel Group sales were up 29% over the first nine months of last year. EBIT for the first nine months was $22.5 million — or 2.3% of sales — compared to a negative 0.2% of sales for the same period last year.

Third Quarter Results—Net income, $17.5 million ($0.19 per diluted share), compares to a net loss of $1.3 million ($(0.01) per diluted share) in the third quarter of 2004. Excluding special items, adjusted earnings per diluted share were $0.27, compared to $0.04 last year. This was consistent with prior company estimates of $0.25 to $0.30 per diluted share, excluding special items. These special items, which related primarily to the Torrington integration, included $11 million of pretax expense in the third quarter of 2004, compared to $8 million of pretax expense a year ago.

Sales of $1.1 billion represent a 17% increase compared with the prior year.

Comments—"The continuing strength of this economic upturn was evident in the third quarter," said James W. Griffith, President and CEO. "We are benefiting from operational improvements made over the past year and synergies of the Torrington acquisition. We have been challenged by the speed of the upturn in market demand and unprecedented high raw material costs, but are actively addressing these issues to improve customer service and leverage the increased volume."

Nine Month Results—Net income of $3.3 billion ($0.79 per diluted share) compares to net income of $2.8 billion ($0.17 per diluted share) for the first nine months of 2003. Excluding special items, earnings per diluted share were $0.91, versus $0.40 in 2003. Special items in 2004 included $25.8 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.

Sales, $3.3 billion, represent a 20% increase from the prior year. Timken completed its $840 million acquisition of The Torrington Co. on February 18, 2003. Adjusted on a pro forma basis including Torrington for the full nine months of 2003, sales were up 14%.

The company achieved pretax integration savings of $56 million through purchasing synergies, workforce consolidation and other integration actions. Based on the annualized savings of $75 million, the company remains on track to achieve its $80 million target in 2005.

Total debt at September 30, 2004 was $914 million. After deducting cash and cash equivalents, net debt was $861 million, or 42.9 percent of capital. Net debt was higher than the June 30, 2004 level of $784 million due to cash contributions to pension plans and working capital requirements. The company expects the ratio of net debt to capital at year-end to be lower than last year's level of 39.3 percent.

Outlook—Timken expects demand to remain strong in all of its business groups and to continue benefiting from operating improvements. The company's earnings estimate for the full year, excluding special items, is $1.20 to $1.25 per diluted share, compared to the previous estimate of $1.15 to $1.25.

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.