CANTON, Ohio, July 22 /PRNewswire-FirstCall/ -- The Timken Company (NYSE: TKR) today reported record sales of $1.1 billion for the second quarter of 2004, up 14 percent 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."
Timken reported earnings of $0.28 per diluted share, up from $0.05 a year ago. Excluding costs associated primarily with the integration of the Torrington acquisition, adjusted earnings per diluted share were $0.33, or 83 percent 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.
For the first half, sales were $2.2 billion, an increase of 22 percent from the prior year. Adjusted on a pro forma basis with Torrington included for the full six months of 2003, sales were up 13 percent. Timken completed its $840 million strategic acquisition of The Torrington Company 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 percent 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 percent.
Automotive Group Results
For the second quarter, Automotive Group sales were $404 million, up 7 percent from $377 million in the second quarter of last year. Strong demand and increased penetration in the light truck and medium/heavy truck sectors in both North America and Europe accounted for most of the growth. North American light truck production in the second quarter was up approximately 5 percent, while medium/heavy truck production was up approximately 27 percent. Partially offsetting this increase was a 6 percent decrease in North American passenger car production.
Earnings before interest and taxes (EBIT) for the second quarter were $6.6 million -- down from $7.0 million the prior year. Despite higher production levels and improved operating efficiency, Automotive Group EBIT margin of 1.6 percent was negatively impacted by higher material costs. The company expects to continue to aggressively pursue recovering these costs through surcharges and price increases.
For the first half of 2004, Automotive Group sales were up 22 percent from the first half of last year. Including pro forma results for Torrington, sales were up 8 percent. EBIT for the first half was $24.9 million -- or 3.0 percent of sales compared to 2.4 percent in the first half of 2003.
Industrial Group Results
For the second quarter, Industrial Group sales were $438 million, up 12 percent from $390 million last year. Sales to most market sectors grew 10 percent or more over last year's levels, with sales to construction and agriculture customers reflecting the strongest gains. Sales in all geographic regions also improved.
EBIT was $49.3 million, compared to $30.6 million last year, while the EBIT margin improved to 11.3 percent from 7.8 percent a year ago. Increased volumes, lower operating costs and improved pricing all contributed to the EBIT improvement.
For the first half of 2004, Industrial Group sales were up 22 percent from a year ago. Including pro forma results for Torrington, sales were up 12 percent. EBIT for the first half of 2004 was $85.1 million -- or 10.0 percent of sales compared to 7.0 percent in the first half of 2003.
Steel Group Results
For the second quarter, Steel Group sales were a record $330 million, up 29 percent 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 percent a year ago. Productivity and volume increases contributed positively to results.
The 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 percent. 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 percent over the first half of last year. EBIT for the first half was $5.8 million - or 0.9 percent of sales compared to 0.7 percent of sales in the first half of 2003. Excluding the impact of Faircrest, EBIT margin would have been 2.1 percent.
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.
Conference Call Information
The company will host a conference call for investors and analysts today to discuss financial results.
Conference Call: Thursday, July 22, 2004
2 p.m. Eastern Time
All Callers: Live Dial-In: (706) 634-0975
(Call in 10 minutes prior to be included)
Replay Dial-In Through July 29, 2004: (706) 645-9291
Replay Passcode: 8354927
Live Web cast: http://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; the Company's ability to mitigate the impact of higher material costs through surcharges and/or price increases and the possible loss of business that could result; 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, in the Company's 2003 Annual Report, page 58, and in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004. The Company undertakes no obligation to update or revise any forward-looking statement.
For Additional Information: Denise L. Bowler, Manager - Associate & Financial Communications, (330) 471-3485
Investor Contact: Kevin R. Beck, Manager - Investor Relations, (330) 471-718
SOURCE The Timken Company
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