CANTON, Ohio, Apr 22, 2004 /PRNewswire-FirstCall via COMTEX/ -- The Timken Company (NYSE: TKR) today reported record sales of $1.1 billion for the first quarter of 2004, an increase of 31 percent from the prior year. Adjusted to include pro forma results for Torrington for the full first quarter of 2003, sales were up 11 percent. Sales were higher across all three business groups, Automotive, Industrial and Steel, compared to the first quarter of 2003. Timken completed its $840 million strategic acquisition of The Torrington Company on February 18, 2003.
Timken reported $0.32 per diluted share, more than double the $0.15 per diluted share from a year ago. Excluding special items, adjusted earnings per share were $0.31, or 63 percent higher than the $0.19 last year. This compared favorably to previous company estimates of $0.25 to $0.30 per diluted share, excluding special items. Special items in 2004 totaled $0.7 million of pretax income, with $7.7 million of income received under the Continued Dumping and Subsidy Offset Act (CDSOA) virtually offset by integration expenses related to Torrington. In the first quarter of 2003, special items were $3.6 million of pretax expense.
"We have seen a broad-based improvement across our three business groups," said James W. Griffith, president and CEO. "Improving markets, coupled with actions taken in 2003 to strengthen the businesses, are hitting the bottom line."
Stronger demand in industrial markets benefited both the Industrial and Steel Groups. "We are in a good position to leverage this economic upturn," Mr. Griffith said. "Changes to surcharge mechanisms were effective in partially offsetting unprecedented increases in scrap steel prices and allowed the Steel Group to return to profitability. Automotive Group margins were better than last year, reflecting stronger volume and manufacturing improvements."
"We are reporting record sales, but are still well below record earning levels," said Mr. Griffith. "We are encouraged by the growing strength of the global economy, but still face an increasingly competitive environment, and we will continue to take aggressive action to improve performance."
For the quarter, the company achieved pretax integration savings of $17 million, driven by leveraging the combined purchasing of Torrington and Timken. The company is on track to achieve its target of $80 million of pretax integration savings during 2005.
Total debt at March 31, 2004 was $812.3 million, 42.3 percent of capital. Debt was higher than the 2003 year-end level of $734.6 million due to cash contributions to domestic pension plans and seasonal working capital. The company expects its leverage to be lower at the end of this year compared to last year.
Automotive Group Results
For the first quarter, Automotive Group sales were $415.6 million, up 39 percent from $298.1 million in the first quarter of last year. Including pro forma results for Torrington, sales were up 8 percent.
Strong demand in North American light truck and medium/heavy truck sectors drove the sales increase. Light truck production was up approximately 3 percent, due to recent product introductions, while medium/heavy truck production was up approximately 36 percent. Partially offsetting this increase was a 6 percent decrease in passenger car production.
Earnings before interest and taxes (EBIT) were $18.3 million, compared to $8.9 million last year. EBIT margin of 4.4 percent improved from 3.0 percent a year ago. The EBIT improvement was the result of leveraging strong sales, combined with manufacturing integration cost savings. Cost-saving actions included a workforce reduction in excess of 750 positions during the second half of 2003, improved European operations and integration activities.
Industrial Group Results
For the first quarter, Industrial Group sales were $410.6 million, up 35 percent from $305.2 million last year. Including pro forma results for Torrington, sales were up 11 percent. Most market segments saw double-digit sales percentage increases over last year's levels. Distribution sales showed some improvement due to strengthening end markets, while distributors reduced inventory levels of some of the company's products.
EBIT was $35.8 million, compared to $17.8 million last year. EBIT margin of 8.7 percent improved from 5.8 percent a year ago. The increase was attributed to improved volume, integration and other cost reduction initiatives.
Steel Group Results
For the first quarter, Steel Group sales were $309.3 million, up 12 percent from $275.8 million last year. Strong demand from both automotive and industrial customers drove record shipments. In addition, top-line growth benefited from surcharges to offset rising raw material costs.
EBIT was $2.7 million, compared to $6.5 million last year. EBIT margin of 0.9 percent was below the 2.4 percent EBIT margin a year ago. The group had record sales for the quarter along with record high raw material costs. A significant portion of these costs is being recovered with recent surcharge provisions and price increases. This was the first profitable quarter since the second quarter of 2003. Productivity improvements and volume also contributed positively.
Outlook
The company continues to expect improved performance in 2004 across all three segments. The company expects earnings per diluted share, excluding special items, to be $0.27 to $0.32 for the second quarter and $1.00 to $1.10 for the year.
North American light vehicle production is expected to be up slightly and medium/heavy truck production should continue to be very strong relative to last year. Automotive Group profitability is expected to continue to be better than 2003, as the benefits of cost reduction efforts impact performance. The company continues to see growing demand in global industrial markets, which should favorably impact results. Steel Group profitability is expected to be challenged by continued high raw material and energy costs, but improved volume coupled with surcharge mechanisms and price increases should allow the Group to remain profitable for the year.
Conference Call Information
The company will host a conference call for investors and analysts today to discuss financial results.
Conference Call: Thursday, April 22, 2004
10 a.m. Eastern Time
All Callers: Live Dial-In: (706) 634-0975
(Call in 10 minutes prior to be included)
Replay Dial-In: (706) 645-9291
Replay Passcode: 6388595
Live Web cast: www.timken.com
The Timken Company (NYSE: TKR, www.timken.com) is a leading global manufacturer of highly engineered bearings and alloy steels and a provider of related products and services with operations in 29 countries. The company recorded 2003 sales of $3.8 billion and employed approximately 26,000 at year-end.
Certain statements in this news release (including statements regarding the Company's forecasts, beliefs and expectations) that are not historical in nature are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, the statements contained in the paragraph under the heading "Outlook" are forward-looking. The Company cautions that actual results may differ materially from those projected or implied in forward-looking statements due to a variety of important factors, including: uncertainties in both timing and amount, if any, of actual benefits realized through the integration of Torrington with Timken's operations and the timing and amount of the resources required to achieve those results; and the impact on operations of general economic conditions, higher raw material and energy costs, the cyclicality of the Company's business, fluctuations in customer demand and the Company's ability to achieve the benefits of its ongoing programs, including the implementation of its manufacturing transformation and rationalization activities. These and additional factors are described in greater detail in the Company's Prospectus Supplements dated February 11, 2003 and October 15, 2003 relating to the offerings of the Company's common stock, in the Company's Annual Report on Form 10-K for the year ended December 31, 2003, and in the Company's 2003 Annual Report, page 58. The Company undertakes no obligation to update or revise any forward-looking statement.
Media Contact: Denise L. Bowler, Manager - - Communications Planning and Integration, (330) 471-3485, or www.timken.com/medi .
Investor Contact: Kevin R. Beck, Manager - Investor Relations, (330) 471-7181
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SOURCE The Timken Company