CANTON, Ohio, Oct. 25 /PRNewswire-FirstCall/ -- The Timken Company today announced sales of $1.1 billion for the third quarter of 2004, up 17 percent compared with the prior year. Earnings in the third quarter were $0.19 per diluted share, compared with a loss of $0.01 a year ago. 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.
"The continuing strength of this economic upturn was evident in the third quarter," said James W. Griffith, president and chief executive officer. "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."
For the first nine months, sales were $3.3 billion, an increase of 20 percent from the prior year. Timken completed its $840 million acquisition of The Torrington Company on February 18, 2003. Adjusted on a pro forma basis including Torrington for the full nine months of 2003, sales were up 14 percent. Earnings per diluted share for the first nine months were $0.79 in 2004, compared with $0.17 in 2003.
Excluding special items, earnings per diluted share in the first nine months of 2004 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.
For the first nine months of 2004, 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.
Automotive Group Results
For the third quarter, Automotive Group sales were $371 million, up 7 percent from $347 million in the third quarter of last year. Sales in light vehicle applications were up from last year due to new product launches, despite a 1 percent reduction in North American light vehicle production and a flat European market. Medium and heavy truck demand continued to be strong, driven by a 38 percent increase in North American vehicle production.
The Automotive Group had a third-quarter loss before interest and taxes of $7.1 million, compared with a loss of $8.5 million the prior year. Despite higher sales and continued productivity improvements, results were negatively affected by rising raw material costs. The group recovered a portion of raw material cost increases through surcharges and pricing programs and is aggressively pursuing further recovery.
For the first nine months of 2004, Automotive Group sales were up 17 percent from the first nine months of last year. Including pro forma results for Torrington, sales were up 7 percent. EBIT for the first nine months was $17.8 million - or 1.5 percent of sales - compared with 0.7 percent a year ago.
Industrial Group Results
For the third quarter, Industrial Group sales were $414 million, up 7 percent from $387 million last year. The Industrial Group recorded strong sales increases across most market sectors, with the strongest growth in construction, agriculture and rail.
EBIT was $45.2 million, compared to $35.1 million last year, while the EBIT margin improved to 10.9 percent from 9.1 percent a year ago. Increased volumes, lower operating costs and improved pricing all contributed to the EBIT increase. The group continues to focus on adding capacity and improving sales mix to meet strong demand for industrial products.
For the first nine months of 2004, Industrial Group sales were up 17 percent from a year ago. Including pro forma results for Torrington, sales were up 10 percent. EBIT for the first nine months of 2004 was $130.3 million - or 10.3 percent of - sales compared to 7.7 percent in the first nine months of 2003.
Steel Group Results
For the third quarter, Steel Group sales were a record $355 million, up 50 percent 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 percent from a negative 2.4 percent 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 percent over the first nine months of last year. EBIT for the first nine months was $22.5 million - or 2.3 percent of sales - compared to a negative 0.2 percent of sales last year.
Third Quarter and Nine Month Net Sales As Reported and Pro Forma
The table here summarizes the company's sales for the third quarter and year to date on a reported and pro forma basis for Torrington.
Outlook
The company 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.
Conference Call Information
The company will host a conference call for investors and analysts today to discuss financial results.
Conference Call: Monday, October 25, 2004
11 a.m. Eastern Time
All Callers: Live Dial-In (706) 634-0975
(Call in 10 minutes prior to be included.)
Replay Dial-In Through October 31, 2004: (706) 645-9291
Replay Passcode: 1031989
Live Webcast: 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 June 30, 2004. The Company undertakes no obligation to update or revise any forward-looking statement.
Media Contact:
Denise L. Bowler, Manager - Associate & Financial Communications, (330) 471-3485, http://www.timken.com/media
Investor Contact:
Kevin R. Beck, Manager - Investor Relations, (330) 471-718
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