CANTON, Ohio, Feb 01, 2005 /PRNewswire-FirstCall via COMTEX/ -- The Timken Company (NYSE: TKR) today reported record 2004 sales of $4.5 billion, a 19 percent increase from the prior year. Timken achieved 2004 net income of $135.7 million or $1.49 per diluted share, up from $36.5 million or $0.44 per diluted share in 2003. Adjusted net income, which excludes the impact of special items, was $122.3 million or $1.35 per diluted share in 2004, compared to $56.0 million or $0.67 per diluted share in 2003.
Commenting on 2004 results, James W. Griffith, president and CEO, said: "The strategic actions we have taken to improve our competitiveness enabled us to capitalize on the global industrial recovery and deliver improved performance. We achieved record sales and strong earnings growth over last year despite unprecedented high raw material costs. The rapid improvement in industrial market demand for our products that buoyed our performance in 2004 is continuing. Our momentum remains strong as we enter 2005, and we will be taking steps to further improve margins, customer service and productivity in the face of these strong markets."
In 2004, the company:
Leveraged higher volume from the industrial recovery and implemented surcharges and price increases to recover high raw material costs. Including pro forma results for Torrington for the full year of 2003, sales were up 15 percent;
Continued the successful integration of Torrington, achieving pretax savings of approximately $80 million in 2004, one year ahead of the original target of 2005. The savings resulted from purchasing synergies, workforce consolidation and other integration actions;
Continued expansion in emerging markets. Completed construction of a joint-venture plant in Suzhou, China - the company's fourth bearing plant in that country. Acquired the remaining interest in a bearing joint venture in Wuxi, China;
Divested certain non-strategic assets and completed two small acquisitions, enhancing industrial product and service capabilities;
Ended the year with total debt at $779 million. After deducting cash and cash equivalents, net debt was $728 million, compared to $706 million at the end of 2003. However, net debt to capital of 36.5 percent was lower than the 39.3 percent ratio at the end of 2003 as earnings strengthened the company's equity base.
The 2004 reported income includes the following special items that are excluded from adjusted results:
$44.4 million of pretax income received under the Continued Dumping and Subsidy Offset Act (CDSOA), which requires that tariffs collected on dumped imports be directed to the industries harmed;
$6.3 million pretax income related to the sale of real estate and dissolution of operations in Duston, England;
$30.3 million of pretax charges related to the integration of Torrington;
$10.2 million pretax impairment charge in our Steel Group related to a facility closure; and
$6.9 million of pretax expense primarily associated with the sale of assets and businesses.
Additionally, the company recognized a non-recurring benefit from tax planning strategies in the fourth quarter, which decreased the annual reported tax rate to 32 percent. The adjusted tax rate and assumed rate going forward remains at 38 percent.
The impact to net income of all of the special items was $13.3 million of income.
Fourth quarter results
For the quarter ended December 31, 2004, sales were a record $1.2 billion, an increase of 16 percent from a year ago. Earnings per diluted share for the fourth quarter were $0.71, compared to $0.25 in the same period a year ago. Fourth quarter performance was driven by strong volume, operating performance and material cost recovery. Excluding special items, the company reported adjusted earnings per diluted share of $0.44, versus $0.26 per diluted share a year ago.
Automotive Group Results
In 2004, Automotive Group sales increased 13 percent to a record $1.6 billion. Adjusted to include pro forma results for Torrington for the full year of 2003, sales were up 7 percent. Sales grew due to increased light vehicle content from new products, medium and heavy truck market demand and favorable currency translation. Automotive Group earnings before interest and taxes (EBIT) in 2004 were $15.9 million, compared to $15.7 million in 2003. Profit improvement from sales growth and strong operating performance in 2004 was offset by high raw material costs.
In the fourth quarter of 2004, the Automotive Group recorded sales of $391.6 million, a 5 percent increase from a year ago. The Automotive Group recorded a loss of $1.9 million in the fourth quarter of 2004, compared to EBIT of $8.3 million for the same period a year ago. The Group was negatively impacted by rising raw material costs, but continued to make progress in recovering these cost increases.
Industrial Group Results
Industrial Group 2004 sales increased 14 percent from the prior year to a record $1.7 billion. Adjusted to include pro forma results for Torrington for the full year of 2003, sales were up 10 percent. The increase was driven by higher demand, increased prices and favorable foreign currency translation. Many end markets recorded substantial growth, with the strongest increases in construction, agriculture, rail and general industrial equipment. The Industrial Group also benefited from growth in emerging markets, especially China.
Industrial Group 2004 EBIT was $177.9 million, compared to $128.0 million in 2003. EBIT growth was due to leveraging increased volume, continued operating cost improvements and price increases.
Industrial Group sales in the 2004 fourth quarter increased to $449.0 million, up 7 percent from the prior year with continued market strength. EBIT was $47.6 million, compared to $44.5 million a year ago, reflecting strong demand and higher productivity.
Steel Group Results
Steel Group 2004 sales, including inter-segment sales, were a record $1.4 billion, up 35 percent from 2003. The sales growth reflected record shipments as well as surcharges and price increases driven by higher raw material costs. Demand increased in all end markets, led by strong industrial market growth. The group dramatically improved profitability, achieving EBIT of $54.8 million in 2004, versus a loss of $6.0 million in 2003. The improvement was due to volume, raw material surcharges and price increases.
In the fourth quarter of 2004, Steel Group sales, including inter-segment sales, were $388.6 million, a 51 percent increase from the prior year driven by strong demand as well as surcharges and price increases to recover costs. Fourth-quarter EBIT was $32.2 million, compared to a loss of $4.2 million a year ago. Sales volume, cost recovery, capacity utilization and productivity drove the improved results.
The company expects continued improvement in 2005 with estimated earnings per diluted share, excluding special items, of $1.70 to $1.85 for the full year and $0.38 to $0.43 for the first quarter. As a result of strategic actions, including the Torrington acquisition, the company has a more diversified product portfolio and increased capacity to capitalize on strong markets. Global industrial markets are expected to continue to grow, supporting strong performance in the Industrial and Steel Groups. North American light vehicle production is expected to be down slightly, while medium and heavy truck production is expected to grow but at a lower rate. All three business groups should see improved performance due to productivity, price increases and surcharges, which should recover a significant portion of material cost increases.
The company will host a conference call for investors and analysts today to discuss financial results.
Conference Call: Tuesday, February 1, 2005
2:00 p.m. Eastern Time
All Callers Live Dial-In: 706-634-0975
(Call in 10 minutes prior to be included)
Replay Dial-In through February 7, 2005: 706-645-9291
Conference ID: 3243197
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 27 countries. The company reported record sales of $4.5 billion in 2004 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; the Company's ability to respond to the rapid improvement in the industrial markets; and the impact on operations of general economic conditions, higher raw material and energy costs, 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 September 30, 2004. The Company undertakes no obligation to update or revise any forward-looking statement.
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